EXCESS OF REVENUE OVER EXPENSES in the not-for-profit sector. There is a common misconception that not-for-profit organizations are not allowed to have a financial cushion as they are 'not-for-profit'. In this context it is useful to remember that not-for-profit organizations are also 'not-for-loss' organizations. An organization cannot sustain losses over the long term without ceasing to operate or going bankrupt. Excess of revenue over expenses is the planned financial position that there will always be a sufficient amount of funds on hand to continue to run the not-for-profit entity for some period without additional funding; usually 3-4 months.
GEARING is the proportion of the capital employed of a company that is financed by lenders rather than shareholders.
CLOSING ENTRY is a journal entry at the end of a period to transfer the net effect of revenue and expense items from the income statement to owners equity.
Enter a term, then click the entry you would like to view.