When a Nongovernmental Not-For-Profit Organization Spends Money for the Purpose

question 38

Multiple Choice

When a nongovernmental not-for-profit organization spends money for the purpose for which an external donor intended,then the expense is reported as a:

• A) Decrease in temporarily restricted net assets.
• B) Decrease in unrestricted net assets.
• C) Decrease in permanently restricted net assets.
• D) Decrease in current-restricted fund balance.

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Definitions:

EBIT

Earnings Before Interest and Taxes, a financial metric indicating a company's operating profitability by excluding interest and taxes from earnings.

Interest Expense

The cost incurred by an entity for borrowed funds; interest expenses are a non-operational cost affecting the company’s net income.

Times Interest Earned Ratio

A financial metric used to evaluate a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Operating Costs

Operating costs are the expenses associated with the day-to-day operations of a business, including costs for rent, utilities, payroll, and raw materials.