Statement of Activities Categories

What are the broad categories of supporting service costs required to be reported on a Statement of Activities for a not-for-profit entity?

Multiple Choice

a. Fundraising expenses and operating expenses.

b. Program services expenses and administrative services expenses.

c. Fundraising expenses and supporting services expenses.

d. Fundraising expenses and administrative expenses.

e. Operating expenses and administrative expenses.

Answer:

On a Statement of Activities for a not-for-profit entity, the broad categories of supporting service costs required to be reported are program services expenses and administrative services expenses.

Program services expenses refer to the costs associated with providing the organization's mission-related activities or services. Administrative services expenses, on the other hand, are the costs related to the management and general operation of the organization.

In addition to these categories, not-for-profit entities are also required to report fundraising expenses separately on the Statement of Activities. Fundraising expenses are those associated with soliciting and receiving contributions, grants, and donations.

It is important to note that these categories of expenses must be reported separately in order to provide transparency and accountability to stakeholders, such as donors and grantors. By presenting these expenses in separate categories, stakeholders can see how much of the organization's resources are being used for program services versus administrative and fundraising activities.

Overall, the reporting of program services expenses, administrative services expenses, and fundraising expenses on the Statement of Activities is a critical component of a not-for-profit entity's financial reporting. It ensures that the organization is operating in a transparent and accountable manner, using its resources effectively and efficiently.