[Skynet]

Issue: I work for a NFP Foundation. The company is on Fiscal Year ending June 30, 2017. The books have been closed and consolidated financial reports and audit reports have been issued.

Our current fiscal year starts from July 2017 to Jun 2018.

I recently found out that a donated vehicle valuing $9,541 was was not recorded in the last fiscal year. The books have already been closed. I didn’t find out about it until last week. The vehicle was received in Feb, 2017 so 4.5 months of depreciation was not recorded.

How do i record this in the books correctly in the current fiscal year? I know you need to adjust the accumulated depreciated to bring the vehicle to its net value after depreciation. I would appreciated if journal entries were provided.

Thank you.

[Andyred04]

In my personal, non-formal opinion, I would record the following:

Vehicle 9,541
Net Assets 9,541

To record vehicle contribution not picked up in PY. This hits net assets since it would have hit contributions in the PY and closed to net assets.

Net Assets xx
Acc. Dep. xx

To record 4.5 months of depreciation on contributed vehicle from mid-February to year-end. (Omitted numbers since adj. to Acc. Dep. would be based on useful life and method)

Continue depreciating the asset just as if placed in service when received. Make sure you overly document your process and let your tax preparers and auditors know what you did as this will require a prior period adjustment in order for net assets to roll.

FAR: 80 (Gleim, Ninja Notes, Ninja MCQs)
REG: 87 (Gleim, Ninja Notes, Ninja MCQs)
BEC: 87 (Gleim, Ninja Notes, Ninja MCQs)
AUD: 8/27/16

PA Candidate

[Skynet]

@Andrew –

For the recording the fixed Asset it would be

6/30/2017
Debit: Fixed Asset
Credit: Inkind Donation

However, after this I'm not sure because the books for the last fiscal year have been closed. I'm not sure how to adjust it to reflect the actual net value of the fixed asset for the current year.

The fixed asset itself is not material.

Can you explain what you mean my debiting the net asset account?

Thanks.

[Recked]

For a corporate application in the prior year you would have debit depr expense which goes to net income and eventually closed out into Retained Earnings.
So I would assume you just accrue the accumulated depreciation and offset to retained earnings, or fund balance or whatever you NFP guys use. Hippies and tree huggers.

Debit Fund Balance (For the missed depreciation)
Credit Accum Depr (To record the missed depreciation)

Totally unqualified to offer any kind of opinion on NFP books. I only do tax returns for a couple of these and they are de minimis in nature, and more along the lines of favors/giving back to the community. Most of mine can get away with postcard filing, but they need returns for various “reasons”, like funding or grants.

[Andyred04]

The reason I'm hitting Net Assets (retained earnings) in both entries is because hitting the income statement would violate revenue recognition rules. You (technically) recognized the revenue in the prior fiscal year when the asset was contributed. Therefore, since you missed it before closing the books, you have to adjust your balance sheet to reflect it. Increase your fixed asset account for the vehicle & accumulated depreciation for the depreciation expense you missed last fiscal year. The “plug” therefore would be net assets (retained earnings) for the difference between the revenue (contribution) and the expense (deprecation). Since this will throw off your net assets (retained earnings) from your PY audit report & tax return, your accountants will plug a prior period adjustment.

I hope this helps!

FAR: 80 (Gleim, Ninja Notes, Ninja MCQs)
REG: 87 (Gleim, Ninja Notes, Ninja MCQs)
BEC: 87 (Gleim, Ninja Notes, Ninja MCQs)
AUD: 8/27/16

PA Candidate

[Anonymous]

You could also make a copy of the company file, enter the missing transactions(s), then compare the year-ends to figure out the adjusting entry that way.

[Author]

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