501(c)(3). The section of the United States Internal Revenue Code that establishes the requirements for tax-exempt status for charitable organizations. This term is often used to refer to an organization that has tax-exempt status. 

Accrual-basis accounting. A method of accounting in which revenues are counted when they are earned, regardless of when they are collected, while expenses are recorded on a matching basis when they are incurred. Using this method, an unconditional pledge of a gift is a transaction recorded when the pledge is made, rather than when the gift is received. A bill is a transaction for payment and is recorded when the bill is received, not paid. 

Accrual accounting provides a window of understanding into the impact of future cash receipts or payments and the effect of these transactions upon the financial position of the institution. This future-looking method can require the transactions to be cancelled at a later date such as when a pledge is no longer expected to be received. Pledges over a many-year period are recorded at less than full value under accrual accounting. 

Article from: Spring 2012

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