Non Profit Accounting for Dummies

Critical review of  Non Profit Accounting for Dummies

Accounting and proper book keeping plays an important role in any nonprofit organization. Like any for profit organization, a nonprofit organization is subject to evaluation and monitoring by a large assortment of entities like public watchdogs, governemnt, investors, donors, bankers and even  creditors. IRS is also very keen on proper maintaninencae of books of accounts for nonprofit organizations that are tax exempt [501 (c)(3)].

Given this, directors must increasingly adapt and learn how to prepare essential financial documents like statement of activities(Income statement), statement of financial position (balance sheet),  Cash flow statement and statement of functional expenses.

Being accountable is what is expected and being a accounting dummy is no longer an excuse acceptable to IRS. This has left many nonprofit members lurking to learn the nuisances of nonprofit accounting and book keeping.

Non Profit Accounting for Dummies, by Sharon Farris is an attempt to address this need. Sharon is an accountant and grant consultant and has served several large organizations of repute including U.S. Department of Education, United Way, Alabama Council for Developmental Disabilities,  Board of Education andSheriff’s Offi ce  in montgomerry , Council on Aging, Alabama A&M University and many others. Given her vast experience , no one can question her authority to write a book on this topic.

Now for the book itself:

Non Profit Accounting for Dummies is divided into 5 broad categories:

1) Accounting and Bookkeeping Nonprofit Style

2) How to Balance Nonprofit Books

3) Accounting for Nonprofit Situations

4) Wrapping Up the Books

5) Other tips and advices

The book spread over 365 pages of sheer information is a valuable kit for any dummy manager or director who wants to equip himself with the nuisances of managing books of a nonprofit organization.

Not meant to under mine the value proposition of this book, i will concetrate on what it lacks, in my opinion.

Non Profit Accounting for Dummies: What it lacks ?

1) The introduction part of the book is not properly organized. The book does not start from scratch. It introduces accounting terminologies too fast and without explaining their meaning. Many newbies can quit or get lost in the very first part, missing out on all great things that come later on in the book.

2) The initial part of the book is presented too academically. It talks about some aspects which are tought to account students but which have little practical implications. The academic explanation is at the cost of missing out on practical aspects.

3)  Non Profit Accounting for Dummies does not explain how to put an accounting system in place – something that begins with vouching, jounralising and then moving on to classifying and summarising.  I dont see a reason why Sharon should begin by discussing financial statements, which comes at the fag end of all accounting activities. Similarily discussing accounting standards and auditing standards in the introductory chapter for dummies adds to the complexities.

4) The book deals primairly with manual accounting methods. It names the popular accounting software, but does not delve into their usage. This makes it suitable only for very small organizations with a handful of annual transactions an year.

I found this book extremely helpful save for these beginning blunders.