 In this presentation, we will take a look at the objectives of our practice problem for a not-for-profit organization. Get ready because here we go with zero. Here we are in our not-for-profit organization dashboard. Now the file I'm looking at already has the end product within it. We already have the data in it. Within the practice problem, we're going to start from scratch and we're going to enter this data into the system. Our goal here is to look at the end product, what our objective will be. Therefore, if you start this not-for-profit organization from scratch, it's not yet going to have any data in it. That's okay. Also, note that if you want to navigate around or practice the navigation around, you can then open zero's demo files. You can select the dropdown and you could go into the demo file so that when I look at reports in here for the not-for-profit organization, our objective, our goal, we can at least practice navigating and go to similar reports on your side even though the numbers will not be the same and just practice the navigation process. Then we will go back into this and we'll start from scratch and we will put this thing together from scratch. One of the best tools to practice navigating is actually looking at this on Excel or within Excel because if you see it in Excel, it's a two-dimensional space and you can kind of compare and contrast things. You can see things more clearly that are going to be connected together. Even if you don't fully understand Excel, you don't need to know Excel to work through this course. We are going to enter it into the system as well, but if you see it in Excel, we can see the actual journal entry and then we'll do that in a step-by-step process. We'll take one little transaction at a time. We'll actually look at the transaction within Excel and then we'll jump over here into zero and see what the challenges are within zero. The not-for-profit organization has some unique challenges as compared to a for-profit organization. Let's take a look at some of those. I'm going to be opening up our Excel worksheet, so I'm going to go to Excel. I'm going to open up this example file. You should have a copy of this Excel worksheet so you can analyze it. I know it's a little bit overwhelming, but again, don't worry about it too much because we're just going to take one transaction at a time and just use this as an example to lead us into what our objective will be along the way as we enter this into the zero software. Note that if you think about this, each transaction within Excel typically will have a journal entry, meaning two accounts will be affected. Again, we'll take a look at each transaction at a time and think about the two accounts that will be affected just to get an idea of what's going to be in place. Then we're going to jump into the zero software where we will typically not be using journal entries, but forms. Notice that's a step away from the actual what's going to happen. In other words, these two accounts are what's going to happen on the financial statements. The form is going to be affecting at least two accounts typically. We want to get an idea of what each form is going to be doing, what's it going to be doing to the financial statements. In Excel, we can take these transactions and basically post them to our chart of accounts and create basically a trial balance. This would be the typical kind of thing that would happen in financial accounting if you learn financial accounting. This would be like the back end of the zero database system. Then we would post all these transactions and then basically have a chart of accounts in terms of debits and credits, which I won't get into the debits and credits, but we would have our chart of accounts. Then we would take our chart of accounts and that's the building blocks that the system uses to make the financial statements the end result. What we're looking for, that end result, including something similar to a balance sheet, we'll call it a statement of financial position for a not-for-profit organization and then the something similar to an income statement or statement of activities. That's going to be the general process. Now, when we create these reports, note that we have a little bit of a distinction right here, a little bit of a problem because if we go into the not-for-profit organization, because there's not a profit motive, we have some needs above and beyond or that are different than a for-profit organization. Oftentimes, they rename things a little bit, I'm almost just to confuse us, it seems like, but we'll have different names that sometimes are going to be very similar to the other name, right? So that means like, for example, the balance sheet up top here, we could see that it's going to be called the statement of financial positions, basically a balance sheet. So that's one thing we'll have to deal with within the zero system, it's simply renaming and we can do that. That's not a problem. Then we have the standard balance sheet that's going to be pulling over this information from our trial balance. That'll be assets, liabilities, and then this bottom line is not equity, but net assets. So that's another thing. It's a little bit different than a for-profit organization. That's something we'll have to deal with within the zero system. And then within the equity section, we also note that we don't have just a normal equity account or retained earnings. We've got with donor restrictions and without the donor restrictions. So for a for-profit, just like for a for-profit, the not-for-profit here, this equity section or net assets means assets minus liabilities equals the total equity. So it's kind of like the book value of the company. So or the not-for-profit organization. Same for a not-for-profit organization. If it was a for-profit organization, we'd still have to break these out in some fashion. If it was a partnership, for example, we would have two capital accounts at least or more for the partners. If it was a corporation, we would have retained earnings in some capital contributions, common stock and whatnot. And then if it's a not-for-profit, we have to break out whether these net assets are restricted, meaning they have something that's targeted for them already or not. And that's going to be the challenge we have with our not-for-profit to break these out. Then we have the statement of activities, which is basically the income statement. And you could say this one is a little bit more challenging even, because what we need to do with this statement is we need to take our numbers that normally aren't like I would say more of a two-dimensional function one column over here and bring them into a two-column format. We've got the with donor restrictions and without donor restrictions. So we actually have to track items of our income statement in two columns. Now, if you think about how would you do that from just a journal entry standpoint, on a trial balance, we actually make two different accounts, contributions with restrictions, contributions, without restrictions. And then on the income statement or statement of activities, we can have one account, for example, contributions, which is then broken out by column with restrictions, without restrictions. So is there a tool within zero that we can use to do that easily? There is, that's going to be our class feature. So we're going to be able to kind of break that information out, and that's going to be one of our objectives that we will be doing. Another objective we have is we also want to be breaking out our expenses by function, what they're used for, such as programs, and such as admin and fundraising. And we also want to break out their nature, which is what we would normally think of as expenses. So up top here is a worksheet breaking out expenses by their expense categories, their nature, and then by function, which is going to be programs, management services, admin, whatever, and fundraising type of activities. So that's another thing that we need. We need to be able to break that out, because people that read these financial statements want to know how much of the expenses went to the actual programs, and how much of the expenses went to the admin, and that kind of information. That's important for a fundraising type of or not-for-profit organization. So that's another objective. We also have the objective here for not-for-profit that we need to provide this information to people that as to make decision-making as easy as possible, and often people that are on the boards of a not-for-profit may not be really familiar with financial statements or work with them a lot, possibly. And therefore, we want to make it digestible as well. So we also want to make a report where we could say, here's the statement of activities. We got the expenses broken out in one format here. If you want to see more detail on it, we can give you more detail on it. We also have the restricted items and unrestricted items, which these two items could also use more detail. We could expand. We could say, well, what kind of restrictions do you have? And that's going to be some of the objectives we're going to have in a not-for-profit, which is a little bit more challenging than a for-profit in some ways. So let's think about the tools that Xero has to help us with that. And I'll just take a look at the end reports that we make. It will be customizing these reports. You can look at the standard reports just to look at a report in the demo file as we go through here. If I go to the accounting dropdown, then I'm going to say that we have the normal balance sheet, the normal income statement. And then we're going to be creating basically an income statement worksheet and the restricted items worksheet, and so on and so forth. I'm going to go into the reports here. Now, these reports, these alterations of the reports, these altered reports that we will make, we're going to be making it from a standard balance sheet, standard income statement, and we're going to save them in this custom reports field. So you can follow along and just open the standard balance sheet and income statement and just visualize how we'd be basically making some adjustments. And then we'll go through that in a very systematic step-by-step process as we go through the course. So I'm going to go to the custom tab and this is the end result. These are the reports we will be making. We'll be making a worksheet reports that we can use to help check our numbers and then presentation reports, which will be what we will use to provide to the users of the financial. So for example, we have our statement of financial position. This will be similar to the balance sheet. So if you hit your dropdown in your demo company and go down to the balance sheet, you can make your comparison. I'm going to go over here and we're going to open this up. This will be one of the end result reports that we'll help to, we'll work on generating and making as we do the data input process. As we do the data input process, zero will basically be making this type of report. It'll be doing exactly what we looked like, what we saw on the financial, on our worksheet over here. It'll be basically making journal entries as we entered data forms like invoices and whatnot. It'll be actually recording journal entries. This would be like a check or an expense type of transaction. It'll then be generating these reports. So here's the statement of financial position. I'm going to hold down control and scroll up just a little bit. Bring us up to that one, two, five. When you're on the reports, I like to be at around one, two, five of the scrolling. But when you're on data input forms, you generally want to be back down to 100 so that zero doesn't do anything kind of funny. Sometimes things get messed up if you're zoomed in on something other than a report. So then I'm going to scroll down and we got, as you can see, our assets. Notice the name change. So we changed the name from the balance sheet. We just created this from a balance sheet and made a custom report from it. We've got our assets here and we've got our liabilities. And then down here, we still have this kind of issue with the equity. It's difficult to rename this because this is going to be an actual name within the zero system. So that one's going to be a little bit difficult for us to adjust. However, we still can, but we'll have to export it to Excel and make that final adjustment. But we also have this grouping down here. We've changed the retained earnings to basically net assets unrestricted. Net assets restricted. So you can see we can do that well in zero. So that works fine. So that's going to be our statement of financial position. Looks a lot like a normal balance sheet. So not too much customization there. We're going to go to the right, right click. Now this is something I'm going to be doing a lot as we go. Really great tool for online features, nets that you can duplicate the tab. So to do that, you want to go up to the tab, I'm hovering over the tab, right click on that tab and then duplicate that tab. And that allows me to have two statements open. So now I have this statement on the right. I'm going to go back to the left and I'm going to open up another statement. So I'm going to go to the accounting dropdown. I'm going to go to the reports and then I'm going to go to the custom reports and take a look at our other statements. Now the other main statement, kind of like the income statement is the statement of activities. So let's take a look at that one. You could follow along in the demo file, go into the business, I'm sorry, accounting and go into the income statement. So we're going to go into the statement of activities and check out this one. Now this one's going to be, takes a little bit more alteration within the system. And like I said, the flexibility of zero to deal with that alteration and make a nicely formatted report without the need to export it to Excel and do more formatting is really better than comparable software. This is a high point for zero. So obviously we can rename it up top. If we then go back down, now we have the income statement. We just basically took the total income instead of having one column. We've now broken it out into the unrestricted and restricted. And so, and we did this with the use of basic classifications and the edit layout tool down below. So we'll work with that as we go, great tools. So there we have these two. This is going to be unrestricted and these are going to be restricted items for the income statement. We'll talk more about exactly what those mean as we go and when we would generate these reports what kind of things would generate us putting this information to restricted or unrestricted as well as the tool which is going to be the tracking feature. So then we have the expenses. Note the expenses here are by nature and that's kind of the default setting for zero. So this is going to be the normal type of expenses. We will then break them out by function by their category. So in other words, right here in unrestricted we can further break this out now. So you can imagine then talking to someone that's in a not-for-profit and we'd say, you know, here's the balance sheet or basically the balance sheet and here's the income statement, statement of activities and then this will give the general information. Then you can imagine the next question might be, well, how much of these expenses are going to be broken out per program? How much of them are going to the programs and how much of them are going to the general and admin? Because that's important for not-for-profit because we want to see if they're efficient working well putting the money to the actual programs. Well, then we would have to break out this report. We'd say, okay, let's break out this unrestricted report and give the detail on it. To do that, I'm going to make another report up top. I'm going to right click on the tab up top. I'm going to duplicate this report. We're going to go back to the tab to the left and then I'm going to hit the accounting drop down again. I'm going to go back into our reports. I'm going to go into the custom reports again. Custom reports. And then I'm going to go to the restricted, I'm sorry, the expenses by nature and function. Now this is a report we actually generated from an income statement. So you can open up a standard income statement again or just keep looking at the standard income statement and think about how we're going to adjust this report to make the expenses by nature. So we're going to take a standard income statement and then break it out by class or by category. So we'll make these categories which will then categorize this information and these are going to be the program. So we can say, all right, here's the total program that went to the program and here's the admin and the fundraising and here's the total. Now we're going to do that with the use of the categories and we're going to be breaking them out with the help of these percentages. So we would have to come up with some percentages to help us to do this breakout. We'll talk about how to get to the percentages and once we have the percentages, how we can then use the categories to break out this information. But you can see this report then being constructed from basically an income statement would be a little bit overwhelming if we were to include it in our statement report over here. In other words, we could make this income statement report basically income statement, statement of activities report also include the subcategories of the unrestricted to have all those columns in here but that would be a little bit overwhelming. So notice it's nice to have the unrestricted here and then give them more data of the expense breakout report and something like this. So then if we go back to the first tab then you can imagine the next question which might be, well, what are these restricted items? What type of restrictions do we have and what are the rules for, you know, what are those restrictions? So then we can make that report. I'm going to go back to the first tab. I'm going to right click on it and duplicate that tab again and then let's go back on down to the reports. So I'm going to go to the accounting dropdown. This is going to be another variant. This next report I'm going to go to the reports, another variant of the income statement. So we're just taking the income statement. I'm going to go to customize reports and we're now going to customize it for this report which is going to be the restricted item detail report. So now we're going to go into the restricted item detail which will allow us to get more detail on this report. This all seems a little overwhelming possibly but just note it's fairly easy alterations to make these reports once we enter the data and the data input will be much the same for a for-profit organization will use similar forms for it. So then we can say, all right, here's, if we go back to this report, here's our restricted items and then the detail for that, here's the types of restrictions. Government, long-term project and the time restrictions, that adding up to the 234-656 which ties out going back to the income statement, the 234-656. So as we see it here, if you look at all the information that we kind of need to be given to someone or to be reporting on, it could be kind of, it could be overwhelming but also note that if we were, we could include all of that information on this report by having this column and then four other sub columns in it for the programs and the admin and then this one and the three other columns related to the types of restrictions there are which would really be overwhelming to anybody. So our goal then would be to break these down and to be able to say, okay, here's these two columns. If you want more detail on them, here's another report that gives them more detail on them. So the question now then is of course, when we go through the process, we're gonna be using forms to enter this data into the system. The system's gonna be generating basically a basic balance sheet and income statement. We'll take that balance sheet and income statement and then alter it to reports such as these with the use of the editing feature down here and also with the use of the categorization features that we'll have within zero. So that's gonna be some of our objectives. We'll start off by some navigation. We'll go into some navigation of the system. We'll talk about some of the forms that will be used to enter the data. We do have a long course on zero that's a for-profit organization that goes into the data input process in a bit more detail. So if you want just the normal data input process and spend more time on navigation of that type of thing, you might wanna look at the for-profit organization. It's gonna be similar in terms of the navigation. So but we will review that and then we'll dive right into the practice problem here and we'll just put in a month's worth of data for the not-for-profit organization to actually generate these reports. That's gonna be it for now, let's get out of here.