What is Endowment Accounting?

Accounting Foundation is a process of monitoring, categorization and recording financial transactions that include investment funds with a limited non -profit organization donor. Usually uses the same standards and processes as regular financial accounting, but applies it to assets that have specific limitations that affect how they are processed and performed in books. The most important task in the Endowment Accounting is to ensure that the funds that the donor have limited are still used according to the donor's wishes, no matter how much time has passed.

Some types of non -profit organizations receive gifts that limits the donor to a specific purpose. Most of the jurisdictions that recognize the special status of non -profit organizations also legally allow donors to specify how the gift should be used. If the non -profit organization violates an agreement on the use of a gift in a specific manner, the donor may require the return of TDárek.

Universities, Cultural Institutions and NábaHoženi organizations put certain donor donations on an account called Endowment Fund. Common types of Endowment Funds are scholarships, academic chairs, construction funds and general investment funds. Some foundations allow the institution to use security until the fund is exhausted, such as the scholarship fund. Other types of Endowment Funds do not allow the institution to spend the principal. Instead, the institution may be entitled to invest donations and use interest for operating costs or any other permissible purpose.

The fact that each gift may come up with the limitation that the institutions must monitor that the accounting of the foundation must integrate special procedures to ensure that the funds are used correctly. Generally recognized accounting standards require institutions to separate the foundation funds to permanently limited assets and temporarily limited assets. Permanently limited assets are gifts that do not allow the principal to spend.Temporary limited assets have either a limit to restrictions or allow the institution to use the principal at a certain point.

Another peculiarity of endowment accounting comes from the fact that many non -profit organizations are exempt from government taxes. The process of monitoring the endowment assets in the accounting system must justify the use of assets and income for purposes that are permitted by the Jurisdiction Tax Act. Incorrect use of Endowment Funds may endanger the non -profit status of the institution, while it cannot properly manage the system of accounting of the foundation can lead to legal and tax liability.