Recording Revenue and Related Expense Transactions The Shannon Community Kitchen provides hot meals to homeless and low-income individuals
QUESTION
Assignment Content
ANSWER
Recording Revenue and Expense Transactions for Shannon Community Kitchen
Introduction
Accurate and transparent financial record-keeping is essential for nonprofit organizations like the Shannon Community Kitchen, which provides hot meals to homeless and low-income individuals and families. This essay focuses on the recording of revenue and expense transactions during the 2020 fiscal year for the Kitchen. By following proper accounting procedures, the organization can ensure accountability and effectively manage its resources.
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Recording Revenue and Related Expense Transactions The Shannon Community Kitchen provides hot meals to homeless and low-income individuals
The Kitchen received cash donations without donor restrictions amounting to $25,000. These funds can be used at the organization’s discretion to support its programs and operations. Additionally, a local philanthropist contributed $3,000 specifically designated for the purchase of Thanksgiving dinner foodstuffs. To record these transactions, the following journal entries are made:
Cash $25,000
Donations Receivable $25,000
Cash $3,000
Contributions Receivable $3,000
Donation of Fresh Produce
A local grocery store donated fresh produce with a fair value of $100. As the produce was immediately utilized in meal preparation, the fair value of the donated produce becomes part of the program expense rather than recorded as revenue. The journal entry is as follows:
Program Expense $100
Donated Fresh Produce $100
Volunteer Contribution
Volunteers from a local university contributed 100 hours to the preparation and serving of meals. The estimated fair value of their labor is $750. Although not recorded as revenue, this volunteer labor can be recognized as an in-kind contribution. The journal entry is as follows:
In-Kind Contribution $750
Volunteer Services $750
Federal Grant
The Kitchen received a $5,000 federal grant designated for the purchase of institutional kitchen appliances. This grant represents revenue with donor restrictions, meaning it can only be used for the intended purpose. The journal entry to record the grant is as follows:
Cash $5,000
Grants Receivable $5,000
Thanksgiving Dinner Expenses
During the Thanksgiving period, the Kitchen incurred $4,100 in expenses for purchasing foodstuffs necessary for the preparation of the Thanksgiving dinner. These expenses directly relate to the Kitchen’s program activities. The journal entry to record the expenses is as follows:
Program Expense $4,100
Cash $4,100
Conclusion
Accurate record-keeping of revenue and expense transactions is crucial for the financial management of nonprofit organizations like the Shannon Community Kitchen. By properly recording these transactions through journal entries, the Kitchen ensures transparency and accountability. This allows the organization to effectively utilize its resources, fulfill donor intentions, and provide essential services to the homeless and low-income individuals and families it serves.
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