Food for All (FFA)is a Non-Profit Organization That Has Grown

question 29

Essay

Food for All (FFA)is a non-profit organization that has grown to be quite large in the area.FFA operates 25 food banks in multiple locations throughout the province and has moved to a decentralized organizational structure.All of the funding is received by the head office and then each location is allocated a fixed amount of funds that can be used over the year for local expenses.Local expenses are at the discretion of the local managers.The Board has decided to change its method of accounting to keep better track of costs at these various locations and better manage the budget.The Board has decided to implement a new budgeting and encumbrance accounting system.
Required:
1.In October,20X9,FD issued a purchase order for $35,000 to have printed and delivered 100,000 pamphlets to be distributed to households over the next 6 months.In December,20X9,the pamphlets were received along with an invoice for $33,900.Prepare the journal entries to record the journal entries for October and December,20X9 using encumbrance accounting.
2.Identify when encumbrance reporting would be appropriate.Comment as to whether or not encumbrance reporting is appropriate for FFA.

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Definitions:

Contribution Margin Ratio

A metric used to assess a product's profitability, calculated by subtracting variable costs from sales revenue and dividing by sales revenue.

Break-even Point

The point at which total costs equal total revenue, meaning that a business is neither making a profit nor incurring a loss.

Net Loss

The amount by which expenses exceed revenues over a specific period, indicating a negative financial performance.

Break-even Point

The financial stage at which total revenues equal total expenses, indicating that a business is neither making a profit nor incurring a loss.