The terminology used when discussing accounting for independent schools is a bit more complex than general accounting. Even though there’s some overlap, there is also school-specific verbiage used specifically in the educational environment.
With an understanding of the specific accounting terminology used for independent schools, you can more accurately understand the unique financial situation both as a student and as a staff or board member of the school. Utilizing a payment solution specializing in educational services can help bridge the gap when accounting specifically for a private or public school.
Financial Management and Statements
Typically speaking, accounting terminology associated with the financial management and statements of independent schools focuses on more broadly used general terminology in the world of accounting. However, some terms such as financial aid or endowment have more specific applications in the world of schooling. Here are some of the most common financial management related terminology that is often used:
- Accounting – The recording and documenting financial information in an analytical manner.
- Accrued Expenses – All applicable costs that are due, but not yet paid.
- Balance Sheet – For independent schools, a balance sheet lists the school’s total assets and liabilities. Ideally, this will provide a picture of the school’s overall net worth at a specific time.
- Budget – A specialized financial plan that illustrates the expected revenue and expenses for the school over a period of time.
- Cash Flow – A reported basis of incoming cash against outgoing expenses that the school can expect during a specific time period.
- Deferred Revenue – Expected revenue that has not yet been earned but is expected.
- Endowment – A specialized fund created to help support the school’s goals both financially and otherwise.
- Financial Aid – Pertains to grants of loans that are typically awarded to students in an effort to help them cover the cost of tuition and other fees when attending the school.
- Gift Revenue – Any donations or other contributions from donors intended to assist the school financially or otherwise.
- Income Statement – A school’s overall report of incoming revenue and outgoing expenses calculated to determine net income or losses during a specific time period.
- Tuition – The cost charged to a student to receive instruction or teaching from the school for a specific course of program.
Some of these terms also apply to general accounting or financial situations. However, there is often enough overlap between the two to easily discern the meaning in either setting.
Revenue and Expenses
In any financial accounting scenario, there’s bound to be discussion of the revenue and expenses for any organization. Independent schools and most education institutions for that matter. While specialized payment solutions for independent schools can assist with handling the accounting of an educational institution, it’s still important to know the associated terminology. These are some of the more frequently used revenue and expense related accounting terms:
- Academic Expenses – Any costs accrued for maintaining educational programs. This can include textbooks, supplies, and curriculum materials.
- Administrative Expenses – All costs that come from managing school operations such as travel costs and legal fees.
- Auxiliary Revenue – Additional income earned from ancillary services provided by the school such as learning material and book sales, cafeterias, sporting event sales, dormitory rent.
- Endowment Income – Income earned from school endowment funds which are outside investments that promote the schools goals and objectives.
- Facility Expenses – Costs that come from maintaining the school properties and surrounding areas. This often includes maintenance, repairs, and even lawn care.
- Financial Aid Expenses – There are costs involved with providing financial aid to students including both scholarships and grants.
- Fundraising Expenses – All upfront costs incurred by holding fundraising initiatives. This is usually event fees and marketing costs for hosting the fundraisers themselves.
- Gift Revenue – Donations and other contributions from donors are considered gift revenue.
- Government Grants – Any funding provided by local, state, or federal governments that are typically intended for a specific purpose.
- Investment Income – All income received via investments the school has made. This can include bonds and stocks as well.
- Private Grants – Sometimes a school may receive private grants from outside entities. This can be for the school as a whole, or individually for student use.
- Tuition Revenue – A primary income source for schools, which is the fee that is charged to students attending the school.
There are many ways in which a school can generate revenue,including tuition recurring payments. It’s important for independent schools to use quality payment platform solutions that allow for detailed and accessible reporting, as well as ease-of-use transaction capabilities for handling payments from its students.
Compliance and Regulatory Terminology
Finally, most schools whether they are public or private educational institutions will need to adhere to specific compliance and regulatory requirements. This comes with its own unique verbiage and terminology that is used when discussing anything related to such regulations. There are two regulatory bodies that anyone dealing with accounting for any school system will want to be aware of: The GASB and the FASB.
The GASB (Governmental Accounting Standards Board) maintains specific standards for state and local governments, primarily pertaining to the public school system. Independent schools do not have to adhere to the GASB guidelines, however, it may be a requirement to be eligible for specific government grants on contracts.
As for the FASB (Financial Accounting Standards Board), the organization focuses on standards specifically for non-governmental entities across the country. It’s recommended that private schools strive to adhere to FASB standards and regulations.
There are other compliance-specific terminology commonly used when dealing with independent schools as well:
- Endowment Management Requirements – There are strict rules and regulations when dealing with endowment funds specifically, which independent schools must comply with.
- Financial Reporting Requirements – Both public and private schools must keep detailed financial reports to submit to regulatory agencies and shareholders.
- Labor and Employment Laws – Like most organizations, even schools must comply with local, state, and federal labor laws including minimum wage and upholding workplace safety.
- Non-Profit Organization Requirements – Any non-profit organization, including some schools, must meet certain requirements to keep its non-profit status. This includes proper reporting.
- Tax Compliance – All independent schools must still follow local, state, and federal tax codes and laws including filing returns and paying due taxes.
