1. Lesson 6: Core Concepts of Accounting
Justin Marlowe
PBAF 522 – Public Financial Management and Budgeting
Autumn 2015

2. Key Takeaways
Cash basis accounting produces a different financial picture than accrual accounting
A revenue is any inflow of resources that’s related to delivery of a service; an expense is any resource that’s used up while delivering a service;
An expenditure is any expense that produces revenue; all expenditures are expenses, but not all expenses are expenditures 
Some organizations are “revenue-centric” or “top line” focused; other organizations are net asset or “bottom line” focused
All transactions affect the fundamental equation of accounting differently

3. More Practice Transactions: The non-profit Starving Artist Center (SAC)
On January 4, SAC ordered $10,000 of art supplies.
On January 12, 2011 SAC received the art supplies ordered at the beginning of the year. 50% was paid in cash.
Employees at SAC earned a total of $100,000 during the 2011 fiscal year and SAC paid $120,000 to its workers.
During the 2011 fiscal year, SAC received $100,000 in cash donations and $50,000 in pledges. Historically, 10% of SAC’s pledges have been uncollectible.
On December 12, 2011 SAC made a payment of $50,000 related to its long term debt. $2,000 of this payment was interest.
From January 1 to December 31, 2011 SAC used $18,000 of art supplies.
On December 31, 2011 SAC wrote off $2,500 of pledges that had not been collected within the past two years.
One January 30, 2011, SAC purchased a new reprographic machine for $5,000. During the fiscal year, SAC’s plant property and equipment depreciated $20,000.