Nonprofit Nonprofit Financial Management

Question 1

What IRS form must most US public charities file annually?

Accepted Answer

Form 990

Answer

Form 1023

Answer

Form W-2

Answer

Form 1099

Question 2

What is the difference between restricted and unrestricted funds in a nonprofit?

Accepted Answer

Restricted funds must be used for donor-specified purposes; unrestricted funds can be used at the organization's discretion

Answer

Restricted funds come from grants; unrestricted funds come from individual donors

Answer

Restricted funds are held in endowments; unrestricted funds are operating funds

Answer

Restricted funds require board approval; unrestricted funds do not

Question 3

What is an operating reserve in nonprofit financial management?

Accepted Answer

Unrestricted funds set aside to cover short-term operational needs or unexpected shortfalls

Answer

A bank account for restricted grants

Answer

Funds designated for capital improvements

Answer

Endowment funds invested for long-term growth

Question 4

What financial statement summarizes a nonprofit's assets, liabilities, and net assets at a specific point in time?

Accepted Answer

Statement of Financial Position

Answer

Statement of Activities

Answer

Statement of Cash Flows

Answer

Statement of Functional Expenses

Question 5

What is the purpose of the Statement of Functional Expenses for nonprofits?

Accepted Answer

To show how expenses are allocated across program, management, and fundraising functions

Answer

To report total revenue earned during the year

Answer

To list all restricted grant expenditures

Answer

To summarize payroll taxes paid to the IRS

Question 6

What is cash basis accounting in the context of a nonprofit?

Accepted Answer

Recording revenues and expenses when cash is received or paid

Answer

Recording revenues when earned and expenses when incurred

Answer

Tracking only restricted fund transactions

Answer

Using an endowment fund for daily operations