Last updated: 10/12/00
- Accounts Payable: Total unpaid invoices received from vendors for products and services received.
- Accounts Receivable: Total unpaid invoices issued to customers and members for products and services provided.
- Accrual Accounting: A system of accounting, generally acknowledged as appropriate for businesses and non-profit organizations, which recognizes revenues and associated expenses in the accounting period in which the revenues were earned. An example of interest to Divisions is that revenues for conferences and other similar events are recognized in the accounting period in which they take place, even though registrations and exhibits may have been paid in a previous period.
- Adjusting Entry: An entry that records economic activity that has taken place but has not yet resulted in a transaction or other recordable event. Usually done at the end of the month (also see Reversing Entry).
- Allocation Budgeting: A system of budgeting familiar to most academic librarians, where a parent institution allocates a certain amount for the use of a unit, such as the library, and the budget officer in the unit is responsible for keeping expenses within the allocation.
- Asset: ALA assets are divided into three headings on the balance sheet. Current Assets is cash, accounts receivable, inventories, prepaid expenses and like items. All the assets listed under current assets are generally expected to be converted into cash within one year. Property and equipment, net of accumulated depreciation. The value ALA has recorded for all equipment and buildings. Long-term investments. The cash and other investments of the endowment fund or other restricted cash such as AACR2 fund.
- Audit: An independent process of reviewing, verifying and examining financial records for the purpose of expressing an opinion on the financial statements.
- Balance Sheet: A financial statement reporting all of ALA’s assets, liabilities and fund balances as of a specific date, with a comparison to the prior year. This report is available only for ALA as a whole and not for its Divisions.
- Board Designated Endowment Fund (Future Fund): ALA resources set aside for Board designated purposes.
- Capital Expenditure: A purchase of equipment or property exceeding a certain dollar amount – at ALA, $1,000.
- Capital Gain: Refers to any profit realized upon the sale of an asset such as a security, mutual fund, portfolio, etc.
- Cash Accounting: A system of accounting, generally used by most people for their personal finances, which recognizes revenues at the time they are received and expenses at the time they are paid.
- Contribution: An unconditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner.
- Deferred Revenues: Cash received for items such as membership dues, periodical subscriptions and/or registration fees, a portion of which has been paid for the providing of all or part of those goods or services after the current financial reporting period. Some of these revenues have not yet been earned; therefore they are deferred to another period when services or goods are provided. Conference revenues are an example.
- Depreciation: A non-cash expense item related to the wearing out of equipment and property (purchased as a capital expenditure) over its assigned useful life. At ALA, this life varies from 3 – 20 years depending on what the item is. For example, a computer, with an estimated life of 3 years, purchased for $5,000, will be partly expensed (depreciated) in each of four years (16.6%, 33.3%, 33.3%, and 16.7%). This practice reduces the expenses during the fiscal year in which the equipment was purchased while increasing the assets. At ALA, assets belong to ALA; depreciation is paid by the unit using the equipment.
- Direct Charges: Expenses that can be specifically related to an activity and/or unit.
- Division Fund: ALA’s category of funds devoted to maintaining the financial activities of ALA divisions.
- Endowment Fund (Long-term Investment): An established fund of cash, securities, or other assets to provide income for the maintenance of a not-for-profit organization. The use of the assets of the fund may be permanently restricted, temporarily restricted, or unrestricted. Endowment funds generally are established to provide a permanent endowment, which is to provide a permanent source of income. The principle of a permanent endowment must be maintained permanently ie., not used up, expended, or otherwise exhausted and is classified as permanently restricted net assets.
An endowment may also be in the form of a term endowment, which is to provide income for a specified period. The principal of a term endowment must be maintained for a specified term and is classified as temporarily restricted net assets.
An organization’s governing board may earmark a portion of its unrestricted net assets as a board-designated endowment (sometimes called funds functioning as endowment or quasi-endowment funds) to be invested to provide income for a long but unspecified period. The principal of a board-designated endowment, which results from an internal designation, is not donor restricted and is classified as unrestricted net assets. - Exempt Staff: Staff, usually supervisory, who are not paid for overtime work. Defined by US Law.
- Expense: The term for a financial transaction resulting in a decrease in assets (e.g., accrued expense) with a corresponding decrease in the Association’s net worth. An expense results from the purchase of goods or services. The outlay of cash is not necessary when the expense is reported.
- Fund Accounting: A method of accounting used in the non-profit sector that ensures the observance of limitations and restrictions.
- Fund Balance (Net Asset Balance): The net worth of the Association; also broken out to show each fund’s (or division’s, activity, etc.) share of the net worth of ALA. The fund balance represents the difference between the assets and liabilities. It should be understood that the fund balances shown on our financial reports are not only cash. Rather they are made up of cash plus other assets minus liabilities plus the excess (or deficiency) of revenue over expense.
- Future Fund: See Board Designated Fund on page 1.
- General Fund: ALA’s category of funds devoted to general operations of the Association excluding division, round table, special activity, plant and endowment activities.
- Inventory: There are two types of inventories:
- Physical, or the actual amount of goods (publications, poster, etc.) on hand, and
- The inventory as maintained on continuous records that show the balance on hand and how it has been affected by the receipt and issue of the inventoried items. These records are periodically adjusted to agree with the physical count. Inventories are translated into dollar amounts that appear as assets on the balance sheet. As the inventoried items are used up, the inventory account is reduced and costs are recorded for the period.
- Journal: Chronological record of business transactions showing the changes to be recorded as a result of each transaction.
- Journal Entry: Entering of a transaction in a journal based on information from some source document, i.e. receipt, check, invoice.
- Ledger: Complete collection of all balance sheet (assets, liabilities and owner’s equity) earnings (revenues and expenses) statement accounts.
- Liability: An unpaid financial obligation; also deferred revenues.
- Long-Term Investments: Assets (investments) held for an extended period of time – usually 5 years and longer – in order to meet the needs of an established or anticipated long developing goal.
- Non-Exempt Staff: Staff, usually support staff, who are paid for overtime work. Defined by US Law.
- Not-For-Profit Organization: An entity that possesses the following characteristics that distinguish it from a business enterprise:
- Contributions of significant amounts of resources from resource providers who do not expect commensurate of proportionate pecuniary return,
- Operating purposes other than to provide goods or services at a profit, and
- Absence of ownership interests like those of business enterprises. Not-for-profit organizations have those characteristics in varying degrees.
- Operating Fund: ALA’s term to denote all funds other than plant funds and endowment funds. These include the general fund, division funds, and special funds.
- Overhead: An accounting term used to denote expenses that cannot, by their nature, be specifically related to an activity. Also called indirect expense or costs.
- Permanent Restriction: A donor-imposed restriction that stipulates that resources be maintained permanently but permits the organization to use up or expend part or all of the income (or other economic benefits) derived from the donated assets.
- Permanently Restricted Net Assets: The part of the net assets of a not-for-profit organization resulting from the following:
- Contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization,
- Other asset enhancements and diminishments subject to the same kinds of stipulations, and
- Reclassifications from (or to) other classes of net assets as a consequence of donor-imposed stipulations.
- Plant Fund: Includes the ALA building, furniture, equipment, rental space, and other similar related income and expense.
- Posting: The transfer of entries made in a journal to a ledger.
- Prepaid Expense: Cash disbursed in payment of goods or services not yet received. Also called deferred expense.
- Project: A sub-unit of a larger unit set up to record revenue and or expense activities (ex. the Fun Run is a project under Annual Conference unit #221).
- Principal: A base amount of funds used to invest for the purpose of generating income in the form of interest, dividends, value, etc.
- Promise to Give: A written or oral agreement to contribute cash or other assets to another entity. A promise to give may be either conditional or unconditional.
- Realized Gain/Loss: Refers to the gain/loss in the value of a security, fund, portfolio, etc., after the sale/liquidation of all or a portion of the same.
- Restricted Support: Donor-restricted revenues or gains from contributions that increase either temporarily restricted net assets or permanently restricted net assets.
- Revenue: Income produced from the sale of goods, rendering of services, or other earning activities of an organization (dues, sales of services, ticket sales, fees, interest, dividends, rent, etc.). The resultant cash need not be received when the revenue is reported.
- Revenue-driven Budgeting: A system of budgeting where the amount of revenue drives the amount that can be expended. If there is a budgetary imbalance, the budget officer can seek to increase revenues or to decrease expenses. Budget monitoring is used to anticipate the need for adjustments in revenues or expenses.
- Reversing Entry: Journal entries made on the first day of the next accounting period (usually the beginning of the month) to reverse the effects of the adjusting entries to which they relate.
- Special Funds: ALA category of funds that includes round tables, awards, grants and other special activities and projects.
- Spending/Operating Account: An account set up to capture and settle the operating expenses generated by individual Scholarships, Awards, and Divisions within the Endowment Fund.
- Temporarily Restricted Net Assets: The part of the net assets of a not-for-profit organization resulting from the following:
- Contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the organization pursuant to those stipulations,
- Other asset enhancements and diminishments subject to the same kinds of stipulations, and
- Reclassifications to (or from) other classes of net assets as a consequence of donor-imposed stipulations, their expiration by passage of time, or their fulfillment and removal by actions of the organization pursuant to those stipulations.
- Temporary Restriction: A donor-imposed restriction that permits the donee organization to use up or expend the donated assets as specified and is satisfied either by the passage of time or by actions of the organization.
- Total Return: Refers to the combination of all interest, dividends, capital gains and losses of a fund over the fund’s beginning price or value.
- Transfers: The movement of expenses from one fund to another, usually as a result of an activity or service performed by one unit for the other.
- Unrealized Gain/Loss: Refers to the gain/loss in the value of a security, fund, portfolio, etc., prior to the sale/liquidation of all or a portion of the same.
- Unrestricted Net Assets: The part of net assets of a not-for-profit organization that is neither permanently restricted nor temporarily restricted by donor-imposed stipulations.
- Unrestricted Support: Revenues or gains from contributions that are not restricted by donors.
- Yield: Refers to the interest generated for a given period of time of a fund over the current price or value of a fund.