Lesson: Educational Not-For-Profit Service Revenue

Instructor: Nick Palazzolo

In this lesson, dive into the intricacies of revenue recognition for educational not-for-profits with Nick Palazzolo, CPA. He demystifies the accounting treatment for various scenarios including canceled classes, scholarships, and tuition waivers. You'll grasp the general formula for tuition revenue and understand how to calculate gross revenue in the context of canceled classes. Explore how educational institutions classify revenues, including those without donor restrictions and the usage of donor-restricted resources. Nick further elucidates how discounts, such as those for employees' family members, are reflected in the financial statements as allowances that reduce revenue. This lesson is a deep dive into the revenue streams and unique financial reporting challenges faced by educational not-for-profits.

Updated: Oct. 20, 2021 Create an account

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Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Educational, not for profit accounting. We'll see questions here. Oh, well, okay. You collected a million dollars in student tuition, but, you know, you got canceled classes, or, you know, maybe you give them scholarships. How do you account for the scholarships?

Or, you know, someone gets a free ride. So how do you account for all of that? Well, the general formula for tuition revenue, if there are cancelled classes to account for, we have the assessed student tuition and fees minus canceled classes gives us our gross revenue from tuition and fees. Nothing crazy, right? Nothing crazy if we think we're going to make a million dollars.

But $200,000 worth of classes are canceled. Well, we only have $800,000 of gross revenue. Educational institution revenues are increases in net assets without donor restrictions and all donor restricted resources that were expended during the period. These are going to be student tuitions and fees, government aid, grants and contracts, gifts and private grants. So these are all the ways that we can bring in money, right?

All those ways. So what about scholarships, tuition waivers and similar reductions? Maybe your parent works at the university, so you get a discount. These are all considered expenditures and separately displayed as an allowance for reducing revenue. Lots of different points to keep in mind.

Nothing too crazy.

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Financial Statements: Nongovernmental, Not-for-profit Entities

Module: 2 Concepts, 27 Lessons

Non-For-Profit: Statement of Financial Position Overview and Objectives

1:47

Review of Non-For-Profit Entities

2:35

Introduction to the Statement of Financial Position

2:32

Examples of Non-For-Profit Organizations