Specialised and not-for-profit accounting

Specialised Accounting

Specialised accounting refers to the accounting methods tailored for specific types of businesses or industries which are different from general purpose entities.
This type includes accounting for agriculture, retail, construction, extractive industries, or service industry among others.
The accounting requirements differ significantly due to the unique nature of operations and regulations specific to each one.
One of the key elements of specialised accounting is the cost tracing which involves assigning costs directly to cost objects such as products or departments that created the cost.
In retail businesses, specialised accounting may require the use of retail methods of inventory valuation like Retail Inventory Method (RIM).

Not-for-profit accounting is specifically designed to cater to not-for-profit organisations like charities, non-governmental organisations, clubs etc.
Such organisations operate differently from profit-driven entities as they do not have owners or shareholders but have donors, sponsors, or members who contribute resources.
Not-for-profit organisations maintain records of the funds received and how they have been utilised in meeting their objectives.
Major aspects include fund accounting, donor restrictions and grant accounting.
Fund accounting is used to segregate funds into bins according to the source of the fund and restrictions attached. These can be unrestricted, temporarily restricted, or permanently restricted.

Reporting in not-for-profit organisations involves the preparation of a Statement of Financial Position, Statement of Activities, and Statement of Cash Flows.
The statement of financial position corresponds to a balance sheet in for-profit accounting but is tailored to not-for-profit organisations.
The statement of activities is similar to an Income Statement but is adapted to show how funds have been utilised for various activities and split between core programming, administration, and fundraising costs.
Important concepts include in-kind contributions where goods or services are donated instead of cash and must also be accounted for in the financial statements.

Both specialised and not-for-profit accounting are subject to regulatory oversight. For not-for-profit organisations, this is often from a country’s charity commission or a similar body.
Knowledge of the applicable accounting standards such as IFRS, UK GAAP, and other relevant industry specific standards is key to accurate financial reporting.

Remember to review plenty of examples and practise applying these methods and regulations to various scenarios to fully grasp them.