Frequently Asked Questions
1. Can ‘Not-for-Profits’ make a Profit ?
2. What are provisions ?
3. How do I calculate Long Service Leave ?
4. Need help to determine if your staff are Contractors or Employees?
1. Can ‘Not-for-Profits’ make a Profit ?
The answer is Yes, non profit organization can make/retain profits (surplus) it is the clause in the Constitution of your non profit Organization/Entity that prevents the profits being distributed to individuals or directors of the organization.
Any surplus rolls forward to the next year into the organizations “Equity” account – (Accumulated Funds account), forming part of the organizations Net Worth.
Your funders may wish you to expend all monies granted to you in the period so that there is no Surplus/Deficit (Profit/Loss), as per your service agreement in providing the agreed services to your community.
2. What are provisions ?
Provisions are an amount that are recorded as a Liability on the Balance sheet, they represents a future obligation to pay.
An example would be Annual Leave Provision, for example; staff that have only taken two weeks annual leave in the year, when they are entitled to four weeks annual leave.
The organization records the value in dollar terms on the balance sheet to represent the amount that will need to be paid in a future period.
Journal Entry:
| DB: Salary and Wages | $1500.00 | (Profit and Loss) | |
| CR: Provision for Annual Leave | $1500.00 | (Balance Sheet) |
3. How do I calculate Long Service Leave ?
The Industrial Relations Website has a calculation tool, that is very user- friendly, and you can print off the calculations as your worksheets for audit purposes.
4. Need help to determine if your staff are Contractors or Employees?
On the ATO website under the Business section is a link to "pay staff". Under Employee/Contractor decision tool print off the schedule as your evidence of your decision.