Accounting

An allowance for doubtful accounts is considered a “contra asset,” because it reduces the amount of an asset, in this case the accounts receivable. The allowance, sometimes called a bad debt reserve, represents management’s estimate of the amount of accounts receivable that will not be paid by customers. If actual experience differs, then management adjusts its estimation methodology to bring the reserve more into alignment with actual results.

Sometimes in a revenue transaction, a unit provides a good or a service and permits the customer to defer payment to a future date. In this scenario, when revenue is earned but payment is not yet received, an account receivable (A/R) should be recorded and managed. Accounts receivable are considered assets, because they represent a future resource (usually cash) to the university. Proper stewardship of A/R, like any asset of the university, is an expectation of the unit and the responsible employee.

The typical entry to record this activity is:

External Organization or "Agency" funds are not university funds, and should not be recorded as revenue. Agency transactions are processed through the university accounting records as a means of assisting informally organized groups related to the university (e.g., student clubs). Agency activity is excluded from the university’s statement of activities, and agency balances are considered a liability. University Policy 3.16, External Organization Accounts is currently being updated to provide additional information.

Various university units sell goods or provide services to other university units. This results in “revenue” to the internal services unit that is not true revenue to the university (no new resources are being provided from an external source). Therefore, these sales must be offset by the interdepartmental expenses charged to the university units – in total, interdepartmental revenues and expenses should net to zero.

Many institutions have an "other" category to reflect any exchange revenues not considered elsewhere. Examples are miscellaneous rentals and sales, miscellaneous fees, and items that are not material enough to warrant separate disclosure.

The sales and services of educational activities category includes (1) revenues that are related to the conduct of instruction, research, and public service, and (2) revenues of activities that exist to provide instructional and laboratory experience for students and that create goods and services that may be sold to students, faculty, staff, and the general public.

An auxiliary enterprise is a non-academic entity that exists predominantly to furnish goods or services to students, faculty, or staff, and that charges a fee directly related to, although not necessarily equal to, the cost of the goods or services. The general public may be served incidentally by some auxiliary enterprises.

Interest Income, Dividends, Realized and Unrealized Gains and Losses

A gift/contribution is an unconditional transfer of cash or other assets to the university in a voluntary, nonreciprocal transfer by another entity. Several components of this definition merit further definition: