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PP AA RR TT II CC II PP AA NN TT CC OO UU RR SS EE MM AA TT EE RR II AA LL SS
Accounting for MFIs: Fundamentals of Accounting for
Microfinance Managers
C O N S U L T A T I V E G R O U P T O A S S I S T T H E P O O R E S T
NOTE These are participant course materials of the main technical messages and concepts delivered in this course. It isnot intended to serve as a substitute for the full course materials delivered through the Skills for MicrofinanceManagers training series. Users interested in attending a training course should directly contact CGAP hubs andpartners for course dates and venues or visit the CGAP Web site at www.cgap.org/html/mfis_skills_microfinance_manag.html.CGAP would like to thank those who were instrumental to the development and design of the original course that led tothis participant summary: Michael Goldberg, Ruth Goodwin-Groen, Lorna Grace, Brigit Helms, Jennifer Isern, JoannaLedgerwood, Patricia Mwangi, Bridge Octavio, Janis Sabetta and all CGAP training hubs and partners. Copyright 2001,The Consultative Group to Assist the Poorest (CGAP).
Contents
Overview and Goals ............................................................................................. 4Overview ........................................................................................................... 4Goals of the Course ............................................................................................. 4
What is Accounting?.............................................................................................. 5Basic accounting principles for MFIs: ...................................................................... 5Double-Entry Accounting ...................................................................................... 6Conservatism and Prudence .................................................................................. 6Materiality.......................................................................................................... 7Realization ......................................................................................................... 7Matching............................................................................................................ 7
Financial Statements........................................................................................... 10Balance Sheet................................................................................................... 10Income Statement............................................................................................. 14Cash Flow Statement ......................................................................................... 18Portfolio Report................................................................................................. 19
The Accounting Cycle ......................................................................................... 24Step 1: Classifying Transactions .......................................................................... 25Step 2: Journalizing........................................................................................... 27Step 3: Posting ................................................................................................. 30Step 4: Trial Balance ......................................................................................... 33Step 5: Accounting Adjustments .......................................................................... 35
Step 6: Closing Entries....................................................................................... 37Step 7: Draft Financial Statements....................................................................... 38Step 8: Closing ................................................................................................. 38
Decision Making Tools......................................................................................... 39Management Information Systems....................................................................... 39
Internal Controls................................................................................................. 44Internal Controls ............................................................................................... 44Sources of Risk ................................................................................................. 44External Audits ................................................................................................. 45
Glossary of Terms for Financial Statements ........................................................ 46Balance Sheet................................................................................................... 46Income Statement............................................................................................. 53
Bibliography........................................................................................................ 58
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 4
Overview and Goals !!!!
Overview
International best practice for microfinance suggests that good financial analysis is the
basis for successful and sustainable microfinance operations. Quality financial analysis
depends on the quality of recorded information to be analyzed. This information comes
largely from the accounting system, so accounting information is fundamental for achieving
sustainability.
Goals of the Course
• To understand how financial statements are created
• To obtain basic knowledge ofo Underlying accounting principleso How the results of accounting can assist a manager to identify and analyze
problems
• To process accounting transactions
• To create financial statements that account for loan losses, interest revenue, and
donor funds
• To generate useful information for an MFI using accounting data
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 5
What is Accounting? !!!!
Accounting
• Is the process of recording, classifying, and summarizing economic events
• Leads to the preparation of financial statements
• Provides essential information that allows the manager to choose actions that will
redirect the enterprise’s activities to be more consistent with the mission and
objectives of the business plan
Basic accounting principles for MFIs:
• Double entry
• Conservatism and prudence
• Materiality
• Realization
• Matching
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 6
Double-Entry Accounting
Assets = Liabilities + Equity
• Any given transaction will affect a minimum of two accounts within assets,
liabilities, or equity.
• If the accounting equation is to remain in balance, any change in the assets must
be accompanied by an equal change in the liabilities or equity, or by an equal but
opposite change (increase or decrease) in another asset account.
Revenue or expense items record non-stock transactions. Non-stock (or flow)
transactions begin within a reporting period and expire at the end of the period.
Ultimately, the revenue and expense accounts are netted out to result in a final profit or
loss. This profit or loss is then transferred to the Balance Sheet as equity, thereby
ensuring that the Balance Sheet balances.
Conservatism and Prudence
Conservatism means recording financial transactions such that assets, revenues, and
gains are not overstated and liabilities, expenses and losses are not
understated. It is intended to result in the fair presentation of financial results.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 7
Materiality
Each material item should be presented separately in the financial statements. Material
items are those that may influence the economic decision of a user.
Realization
Realization requires that revenue be recognized in the accounting period it is earned,
rather than when it is collected in cash. It defines the point at which revenue is
recognized.
Matching
Organizations incur expenses to earn revenues. Expenses should be reported on the
Income Statement during the same period as the revenues they generate.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 8
Financial Accounting versus Managerial Accounting
Financial Accounting Managerial Accounting
Presents a summary view of the
financial results of past operations for a
wider audience
Tracks and presents projected and
historical operations, at a detailed level,
intended for use by managers
External
Summary
Historical Only
Standardized Format
Annual
Final, Precise
End (e.g., Independent Audit)
Reporting and Disclosure
Internal
Detailed
Historical and Projected
Open Formats
Daily/Weekly/Monthly/Quarterly/etc..
Ongoing, Flexible
Means (management tool)
Analysis and Action
Source: Tony Sheldon, SEEP Training Notes, 1997.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 9
Three key accounting issues relevant to MFIs:
Cash versus AccrualAccounting
Accounting forInterest Revenue
Accounting for Grantsand Concessional
Funds
Cash Accrual Cash Accrual GrantsConcessional
Loans
Revenue is notreported untilcash is receivedand expenses arenot reported untilcash is disbursed.
Recognizestransactionswhen they takeplace whether ornot cash changeshands.
According to IAS,financial state-ments should useaccrual account-ing. It alsorecognizes thatsome situations,such as thecollectability ofdoubtfulreceivables,require “theexercise ofprudence.”
Records interestrevenue whencash is received.
This is the mostconservative orprudent methods– when interest ispaid with eachinstallment of theloan. However, ifinterest is paidup-front, itoverstates therevenues of theMFI.
Records interestrevenue when itfalls due ratherthan when it isreceived in cash
Not included inprofits orretained earningsfrom operations
Recordedseparately belowthe operatingprofit/(loss) onIncomeStatement
Transferred toBalance Sheet asdonated equity
Loans made tothe MFI at lessthan market rateof interest
Recordedseparately fromcommercial loans(in order toidentify ‘subsidy’)
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 10
Financial Statements !!!!
MFIs commonly use four types of financial statements:
• Balance sheet
• Income statement
• Cash flow statement
• Portfolio report
Balance Sheet
A balance sheet is a summary of the financial position at a specific point in time. It
presents the economic resources of an organization and the claims against those
resources.
Assets Liabilities Equity• Represent what is owned
by the organization orowed to it by others
• Are items in which anorganization has investedits funds for the purpose ofgenerating revenue.
• Represent what is owed bythe organization to others.
• Represents the capital ornet worth of theorganization.
• Includes capitalcontributions of members,investors or donors,retained earnings, and thecurrent year surplus.
Assets = Liabilities + Equity
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 11
Sample Balance SheetAccounting
PeriodAssets
1. Cash and due from banks2. Reserves in central bank3. Short-term investments in money market instruments4. Loan portfolio5. (Loan loss reserve)6. Other short-term assets7. Long-term investments8. Net fixed assets9. Total assets
Liabilities
10. Savings accounts: forced11. Savings accounts: voluntary12. Time deposits13. Loans: commercial banks14. Loans: Central Bank15. Loans: subsidized16. Other short-term liabilities17. Other long-term liabilities18. Total liabilities
Equity
19. Paid-in equity from shareholders plus members20. Donated equity—prior years, cumulative21. Donated equity—current year22. Prior years retained earnings/losses23. Current year retained earnings/loss24. Other capital accounts25. Total equity
26. TOTAL LIABILITIES AND EQUITY
Source: Format for Appraisal of Microfinance Institutions, CGAP Secretariat, July 1999.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 12
Balance SheetAccount Comments About UsageAssets1. Cash and due from banks Cash on hand, sight deposits, checking accounts or other instruments paying little or no
interest
2. Reserves in Central Bank Relevant only for licensed financial intermediaries
3. Short-term investments in money marketinstruments
Interest-bearing deposits and investments in financial instruments, where the principalpurpose is liquidity management
4. Loan portfolio Total outstanding balances of loans to clients, including loans past due but not written off
5.(Loan loss reserve) A negative asset account: set-aside for estimated future losses on problem loans thathave not yet been written off
6. Other short-term assets Accounts receivable, accrued interest on loan portfolio, etc.
7. Long-term investments Other long-term, illiquid assets that earn returns
8. Net fixed assets Land, building, equipment, net of accumulated depreciation
9. Total assets
Liabilities10. Savings accounts: compulsory Compulsory savings required as part of the credit methodology
11. Savings accounts: voluntary Liquid deposits from the general public
12. Time deposits Certificates of deposit from the general public
13. Loan: commercial Loans to the MFI at market rates from banks or other financial institutions
14. Loans: Central Bank Rediscount or other special lines of credit from the Central Bank
15. Loans: subsidized Concessional loans from donors, etc.
16. Other short-term liabilities Accounts payable, accrued interest to be paid on loans and deposits. Etc.
17. Other Long-term liabilities Long term loans for property, etc.
18. Total liabilities
Equity19. Paid-in equity from shareholders Equity contribution of owners of stock20. Donated equity--prior years, cumulative Equity received through cash donations from sources that do not receive stock
21. Donated equity--current year All Cash Grants/Donations (from Income Statement)
22. Prior years retained earnings/losses, notincluding cash donations
Accumulated earnings from prior periods only
23. Current year profit/loss Current year operating profit/(loss) (from Income Statement)
24. Other capital accounts Any special reserves or other capital accounts
25. Total equity
26. TOTAL LIABILITIES AND EQUITY
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 13
Effects of Transactions on the Balance SheetA demonstration of how double-entry works
The effect of the following transactions on the Balance Sheet is shown by drawing an up
arrow (!) to show an increase in the accounts affected and by a down arrow (") to
show a decrease.
Assets Liabilities Equity
Transaction Cash
CurrentLoans
Outstanding
LoansPastDue
Invest-ments
FixedAssets
Short-term
BorrowingClient
Savings
Long-termDebt
Restricted/DeferredRevenue Equity
1. Purchase land on credit ↑↑↑↑ ↑↑↑↑2. Disburse loan to client ↓↓↓↓ ↑↑↑↑3. Purchase motorcycles
for staff - pay half cash;half short-term credit
↓↓↓↓ ↑↑↑↑ ↑↑↑↑
4. Purchase office furnitureon short-term credit
↑↑↑↑ ↑↑↑↑5. Take loan from bank at
commercial rate ofinterest (> 1 year)
↑↑↑↑ ↑↑↑↑
6. Purchase a Treasury Billfor cash
↓↓↓↓ ↑↑↑↑7. Client withdraws
savings↓↓↓↓ ↓↓↓↓
8. A current loan becomespast due
↓↓↓↓ ↑↑↑↑Source: Joanna Ledgerwood and Kerri Moloney. Accounting: Study Guide. Calmeadow, Toronto, Canada, 1996.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 14
Income Statement
An income statement reports the organization’s financial performance over a specified
period of time. It summarizes all revenue earned and expenses incurred during a
specified accounting period. An institution prepares an income statement so that it can
determine its net profit or loss (the difference between revenue and expenses).
Revenue Expenses
Refers to money earned by an organization for
goods sold and services rendered during an
accounting period, including
• Interest earned on loans to clients• Fees earned on loans to clients• Interest earned on deposits with a bank,
etc.
Represent costs incurred for goods and services
used in the process of earning revenue. Direct
expenses for an MFI include
• Financial costs• Administrative expenses• Loan loss provisions
An income statement
• Relates to a balance sheet through the transfer of cash donations and net profit (loss) as well as
depreciation, and in the relationship between the loan loss provision and the reserve.
• Uses a portfolio report’s historical default rates (and the current reserve) to establish the Loan
Loss Provision.
• Relates to a cash flow statement through the net profit/loss as a starting point on the cash
flow (indirect method).
• Starts at zero for each period (in contrast to the Balance Sheet which is cumulative since the
beginning of the organization’s operation).
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 15
Sample Income StatementAccounting
Period
Operating Income
1. Interest and fee income from loans2. Income from other finance-related services3. Income from investments4. Total operating income
Operating Expenses
5. Interest and fee expense6. Loan loss provision expense7. Administrative expense – personnel8. Other administrative expenses9. Total operating expenses10. NET OPERATING PROFIT (LOSS)
Nonoperational Income and Expenses
11. Cash donations12. Other non-operational income13. Total non-operational expenses14. TOTAL CONSOLIDATED PROFIT/LOSS
Source: Format for Appraisal of Microfinance Institutions, CGAP Secretariat, July 1999.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 16
Income StatementAccount Comments About UsageOperating Income1. Interest and fee income from loans All income on loans made to clients2. Income from other finance-related services(indicate which)
For example, fees from savings accounts
3. Income from investments Interest from bank accounts or investments in money market instrumentsused primarily for liquidity management
4. Total Operating IncomeOperating Expenses5. Interest and fee expense Interest and fee expenses for all loans, deposits, or other liabilities funding
the financial service operation6. Loan loss provision expense Cost of creating/maintaining the loan loss reserve7. Personnel expense All staff and consultant costs, including payroll taxes and fringe
benefits(preferably on an accrual basis, especially in the case of majorfuture benefits like severance pay obligations)
8. Other administrative expenses Broken out into no more than ten categories (e.g. rent, transportation,supplies, utilities, fees, depreciation, other)
9.Total Operating Expense10. NET OPERATING PROFIT (LOSS)Nonoperational Income* and Expenses11. Cash donations All cash grants/donations. Do not include in-kind donations of goods and
services.12. Other nonoperational income (If any) Income from investments which play no role in the delivery of financial
services, income from non-financial services, sale of land, consultancies,etc.
13. Non-operational expense (if any) Any expenses not related to the MFI’s financial services business, such asan evaluation or impact study mandated by a donor
14. TOTAL CONSOLIDATED PROFIT (LOSS) Net operating profit (loss) plus non-operational income, minus non-operational expenses
*All income that does not come from financial service operations.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 17
Comparison of Balance Sheet and Income Statement
A Balance Sheet is a snapshot of the
organization's financial position at a
specific point in time. All amounts are
cumulative since the organization
began.
An Income Statement portrays the
events that have occurred between the
dates of two consecutive balance
sheets.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 18
Cash Flow Statement
A cash flow statement shows where an institution’s cash is coming from and how it is
being used over a period of time.
A cash flow statement
• Classifies the cash flows into operating, investing and financing activities.
o Operating activities: services provided (income-earning activities).
o Investing activities: expenditures that have been made for resources intended to
generate future income and cash flows.
o Financing activities: resources obtained from and resources returned to the
owners, resources obtained through borrowings (short-term or long-term) as
well as donor funds.
• Can use either
o The direct method, by which major classes of gross cash receipts and gross cash
payments are shown to arrive at net cash flow (recommended by IAS)
o The indirect method, works back from net profit or loss, adding or deducting
noncash transactions, deferrals or accruals, and items of income or expense
associated with investing and financing cash flows to arrive at net cash flow.
Note: The Balance Sheet and Income Statement are accounting reports. The figures can be influenced by management’s choices
regarding accounting policies. A Cash Flow Statement cannot be changed by any accounting policy.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 19
Portfolio ReportA portfolio report provides information about the lending and savings operations of anMFI. It provides timely and accurate data about the quality of the portfolio. It usuallyalso includes other key portfolio performance indicators (e.g., outreach).
• Information usually includes
o Number and value of loans outstanding end of period
o Total value and number of loans disbursed during the period
o Average outstanding balance of loans
o Value of outstanding loan balances in arrears, value of payments in arrears
o Value of loans written off during period
o Portfolio aging analysis
o Information on loan terms, loan officers, savings accounts and balances, etc.
• Portfolio quality ratios can be calculated from portfolio information. This information
together with the aging analysis can give a picture of the health of the portfolio and
can also give valuable insight into an MFI's sustainability.
• Relates to income statement in that it is the portfolio that generates the income for
the MFI.
• Relates to the balance sheet in that it provides information on the value of the
outstanding loan portfolio and value of loans written off during the period.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 20
• Relates to the balance sheet and income statement in that the portfolio data is
used as an input to calculate the loan loss reserve on the balance sheet, from
which the amount of loan loss provision on the income statement is calculated.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 21
Relationships Between Financial Statements
Previous Year
Balance Sheet
Current Year
Balance Sheet
Current Year
Cash Flow
Non-CashItems
Profit/Loss
Current Year
Income
Statement
Profit/LossDonations
Loan Loss
Depreciation
Changes
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 22
How does “Accounting for MFIs” treat donor funds andthe equity account?
Income Statement • Donor funds are treated "below the line."
• Donor money is recorded after net operating profit.
Balance Sheet There are three separate sources of equity from the Income
Statement:
• Retained earnings/losses, current year
• Donations, current year
• Other capital accounts, including net nonoperational income
This is important because it allows you to see over time the proportion of equity that is
generated from the MFI itself versus the amounts contributed by donors.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 23
Three Ways in Which MFIs Treat Cash Donations
Goals: 1. Grants are separated from operating income
2. Grants are fully disclosed in equity
Most transparent
treatment of grants
and equity
A. Current year’s grants and donations are first recorded in the Income
Statement, below Operating Profit/Loss, but the restricted grants or donations
for which the conditions had been met, are divided according to purpose: e.g.,
Operations, Loan Fund or Fixed Assets. The grants and donations are then
transferred according to their purposes on the Balance Sheet, separated from
the Operating Profit/Loss.
Less transparent than
A above
B. Current year’s grants and donations are first recorded in the Income
Statement below Operating Profit/Loss. (This would include the total amount of
unrestricted grants and the portion of restricted grants or donations for which
the conditions had been met that year.) These grants and donations are then
transferred as one amount on the Balance Sheet, separate from the Operating
Profit/Loss.
Least transparent
and not compliant
with IAS 20
C. Current year’s unrestricted grants and donations and the funds for operations
are recorded in the Income Statement below the Operating Profit/ Loss. They
are then transferred to the Balance Sheet, separate from the Operating
Profit/Loss. That year’s grants or donations restricted for Loan Fund or Fixed
Assets are recorded directly into equity on the Balance Sheet.
Note: A and B comply with IAS 20 "income" approach. C needs modification to comply with IAS 20 "capital" approach.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 24
The Accounting Cycle !!!!
The eight steps of the accounting cycle describe the accounting for an economic
transaction, from the time it occurs until it is ultimately reflected in the financial
statements.
6. CLOSING ENTRIES
1. TRANSACTION OCCURS
2. JOURNALIZINGTransactions are entered in a
general journal.
3. POSTINGJournal entries are transferred to
ledger accounts.
4. TRIAL BALANCEAccounts are verified,
totaled and balanced.5. ACCOUNTINGADJUSTMENTS
Adjustments are made
in order to prepare
financial statements.
7. DRAFT FINANCIAL STATEMENTSBalance Sheet, Income Statement, and
Cash Flow Statement are prepared.
Clear and close revenue and expense
accounts, transfer to statements.
8. CLOSINGBooks are prepared for
next cycle.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 25
Step 1: Classifying Transactions
A chart of accounts
• Provides the structure for recording and reporting of all financial transactions for
the institution.
• Classifies and determines what financial transactions can be tracked for managerial
purposes and reported in the financial statements.
• Transactions are organized as either asset, liability, equity, revenue (income) or
expense accounts.
Determinants
• The structure and level of detail of the chart of accounts will determine the type of informationmanagement will be able to access and analyze in the future.
• Management must design the chart of accounts and be clear about what it needs. In particular, itis fundamentally important to be able to differentiate between the grant income given by donorsfrom the operational income earned from the MFI’s products and services. Operational income isthe basis for financial analysis, not grant income, and the importance of accurately tracking itcannot be overstated.
• Different end users of the information generated have different needs. Internal management andauditors, tax code, donors, and regulatory demands all influence how the chart of accounts is setup.
• Some charts of accounts and report formats may be legislated and therefore MFIs are obligatedto follow the mandated requirements in these countries.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 26
Sample Chart of Accounts
Assets Liabilities Equity101 Cash 201 Short-term borrowing 301 Paid in equity102 Reserves 202 Client savings 302 Donated equity prior year103 Short term investments 203 Long-term debt (commercial) 303 Donated equity current year104 Loan portfolio 204 Long-term debt (concessional) 304 Prior year profit/loss105 Loan loss reserve 205 Restricted/deferred revenue 305 Current year profit/loss106 Other current assets 306 Other capital accounts114 Long-term investments115 Property116 Fixed assets117 Accumulated depreciation118 Other assets
Revenue Expenses401 Interest on current and past due loans 501 Interest paid on short-term borrowing402 Interest on restructured loans 502 Interest paid on client savings403 Interest on investments 503 Interest paid on long-term debt404 Loan fees on loans 505 Provision for loan losses405 Late fees on loans 510 Salaries and benefits410 Donations—unrestricted 512 Communications
513 Courier/postage514 Rent515 Utilities516 Equipment517 Equipment leasing518 Depreciation519 Bank charges520 Advertising and promotion521 Insurance522 Supplies523 Maintenance524 Travel and accommodation525 Legal fees526 Professional development (training)527 Computer software528 Printing529 Fees/dues530 Miscellaneous
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 27
Step 2: Journalizing
All economic transactions are entered into the accounting system by means of a journal
entry.
GENERAL JOURNAL
A general journal is a
• Daily diary of transactions
• Listing of all transactions in chronological order
• Book of original entry
• Record of debits and credits entered in columns, the left column for recording
debits and the right column for recording credits
Sample Headings in a General Journal
Date Account Title and Explanation Ref Num Debit Credit
JOURNAL ENTRY
A journal entry
• Is used to enter transactions into the accounting system
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 28
• Records how each transaction affects either an asset, liability, equity, revenue
and/or expense account.
• Has three elements (T-account):
o Title: name of the asset, liability, equity, revenue or expense account
o Increases in the left side of the equation (assets) are recorded as debits
o Increases in the right side (liabilities or equity) are recorded as credits
Sample T-Account
Account Title
Debit Credit
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 29
Effect of Accounting Transactions on the Balance Sheet
Assets
Debit Credit
Increase
Normal Balance
Decrease
Liabilities and Equity
Debit Credit
Decrease Increase
Normal Balance
Effect of Accounting Transactions on the Income Statement
Revenues
Debit Credit
Decrease Increase
Normal Balance
Expenses
Debit Credit
Increase
Normal Balance
Decrease
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 30
Step 3: Posting
After journalizing, the next step in the accounting cycle is to make entries in the general
ledger.
Posting is the process of copying journal entry
information from the General Journal to the
General Ledger.
GENERAL JOURNAL
The General Journal is a chronological record of transactions.
Sample General Journal
Date Account Title and Explanation Ref. Debit Credit
July 1 Fixed Assets- Computer 116 4,000Cash 101 4,000(purchased computer on cash)
3 Fixed Assets- Motorcycles 116 15,000Cash 101 4,000Short-term Liabilities 204 11,000(purchased motorcycles on cash & credit)
31 Cash 101 51,000Savings Accounts - Forced 201 51,000(collect savings)
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 31
GENERAL LEDGER
In contrast, the General Ledger is a record of transactions organized by account number
beginning with the asset accounts and ending with expense accounts
Cash Account No. 101Date Explanation Debit Credit Balance
358,196July 1 purchased computer 4,000 354,196
3 purchased motorcycles 4,000 350,19631 collected savings 51,000 401,196
Fixed Assets Account No. 116Date Explanation Debit Credit Balance
230,504July 1 purchased computer 4,000 234,504
3 purchased motorcycles 15,000 249,504
Ledger accounts represent the accumulation in one place of all information about
changes in an asset, liability, equity, revenue, or expense item.
Each ledger account is identified by its account name and number as stated on the Chart
of Accounts.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 32
OPENING BALANCES
Ongoing balances are carried forward from period to period and represent the balance
on account on the balance sheet and on the income statement. Each debit and credit
entry in the cash account represents a cash receipt or a cash payment (identified by
journal entries). The amount of cash owned by the organization at a given point in time
(e.g., August 9) is the account balance for that date. The account balance equals the
difference between the total debits and the total credits in the account.
• Balance Sheet accounts are a summary of the organization’s assets, liabilities, and
equity since the beginning of the MFI’s operations.
• Income Statement accounts reflect revenue and expenses over a specified period of
time and therefore are not carried over across accounting period to accounting
period.
The Cash Ledger, Account 101, is used to record all cash and bank transactions. It is the
most important account for MFIs because:
• The number of cash transactions in MFIs is large.
• The chances of committing fraud are higher than with other assets.
• Timely payments are important to the MFI's reputation and financial position.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 33
CASH ACCOUNT AND BANK RECONCILIATION
On a periodic basis (usually monthly) the bank account statement should be
reconciled with the accounting records. This control function allows MFIs to identify
differences between cash and bank balances. These differences may be due to
timing, such as outstanding (unpresented) checks or outstanding (in-transit)
deposits, or to an origination error. This is done by taking the closing cash balance
reported on the bank statement and subtracting any outstanding checks and
adding deposits.
Regular preparation and review of bank reconciliation is a key internal
control function.
Step 4: Trial Balance
A trial balance is used to verify that the debits and credits are in balance (once all
journal entries have been made and posted in the General Ledger).
The trial balance is prepared by:
1. Taking the account balances from the General Ledger
2. Listing the accounts having debit balances in one column and those having credit
balances in the other column
3. Totaling the debit balances
4. Totaling the credit balances
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 34
5. Comparing the sum of the debit balances and the sum of the credit balances. (The
sums should be equal in order for the ledger accounts to be in balance.)
A trial balance is a first test of accurate posting in the ledgers. However it does not mean
that the ledger accounts are free from error. Some errors cannot be detected in a balanced
trial balance.
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Step 5: Accounting Adjustments
Once the Trial Balance is completed and balanced, adjustments are made to record
transactions that have not previously been recorded. Examples of these include adjusting
for loan losses, depreciation and accruals.
LOAN LOSS RESERVES, PROVISIONS, AND LOSSES OR WRITE-OFFS
Loan Loss Reserve Loan Loss Provision Loan Losses or Write-Offs• An account that
represents an estimateof the amount ofoutstanding principalthat the MFI does notexpect to recovereventually
• Negative asset on thebalance sheet thatreduces the outstandingportfolio. (An alternativepresentation is to show itas a liability.)
• Amount expensed on theincome and expensesstatement.
• Increases the loan lossreserve
• Occur as an accountingentry.
• Do not mean that loanrecovery should notcontinue to be pursued.
• Decrease the reserveand the outstandingportfolio.
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Accounting for Loan Loss Provisions and Write-Offs
A loan loss reserve indicates the possibility that an asset in the Balance Sheet is not 100% realizable. The loss of
value of assets may arise through wear and tear such as the depreciation of physical assets, loss of stocks, or
unrecoverable debts.
Loan loss provisions expense this anticipated loss of value in the portfolio gradually over the appropriate periods
in which that asset generates income, instead of waiting until the actual loss of the asset is realized.
Provisions are only accounting estimates and entries, and they do not involve a movement of cash, like saving for
a rainy day.
Loan loss provisions charged to a period are expensed in the Income Statement. The corresponding credit
accumulates over time in the Balance Sheet as reserves shown as a negative asset:
The accounting transaction is:
Dr Loan loss provision
Cr Loan loss reserve
Loan losses or write-offs occur when it is determined that loans are unrecoverable. Because the possibility that
some loans would be unrecoverable has been provided for in the accounting books through reserves, loan losses
are written off against loan loss reserves and are also removed from the outstanding portfolio.
The accounting transaction is:
Dr Loan loss reserve
Cr Outstanding loans
Write-offs do not affect the net portfolio outstanding unless an increase in the loan reserve is made.
When write-offs are recovered, they are booked in the Income Statement as miscellaneous income.
Source: Joanna Ledgerwood. Financial Management Training for Microfinance Organizations, Calmeadow, 1996.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 37
DEPRECIATION
When a capital asset is purchased, the entire cost is not immediately recorded on the
Income Statement as an expense. It is depreciated over time so that each year, an
amount equal to the portion of its useful life is expensed. This entry must be made at the
end of each accounting period.
ACCRUALS
Accruing revenue refers to recording revenue that has not yet been received. Accruing
expenses refers to incurring and recording an expense that has not been paid for.
Step 6: Closing Entries
Close revenue and expense accounts at the end of each accounting period by transferring
their balances to the current year profit/loss account. Closing entries
• Are prepared after the final Trial Balance is completed.
• Leave revenue account with zero balance by debiting the account and crediting the
current year profit/loss account.
• Leave expense account with zero balance by crediting the account and debiting the
current year profit/loss account.
The net effect on the current year profit/loss account is equal to the net operating
profit/loss for the period as recorded in the Income Statement.
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The final step is to transfer the amounts from the final Trial Balance to the financial
statements. In addition to the operating profit / loss, the donations for that year get
transferred separately to the Balance Sheet from the income statement.
Step 7: Draft Financial Statements
The Balance Sheet, the Income Statement and the Cash Flow Statement are prepared.
Step 8: Closing
Books are prepared for the next cycle.
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Decision Making Tools !!!!
To make decisions, management and shareholders need both the financial statements
themselves and various other reports, particularly reports that present the activity of the
loan portfolio. Furthermore, various indicators can be calculated to facilitate analysis of the
MFI and aid decision making.
Management Information Systems
A management information system is a "series of processes and actions
involved in capturing raw data, processing the data into usable information, anddisseminating the information to users in the form needed.”
Waterfield, Charles and Ramsing, Nick. Management Information Systems for Microfinance Institutions: A Handbook. Technical Tool Series
No. 1. Washington, DC: Consultative Group to Assist the Poorest, 1998.
An accounting system and a portfolio tracking system are the primary components of the
management information system. Together, the financial statements, management
reports, and indicators constitute the output of the MIS.
Good information provided in a useful form on a timely basis empowers all stakeholders
in the institution to participate meaningfully. An MFI must determine its information needs
through identifying the users of information and evaluating the needs of each group of
users.
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Indicators for Financial Analysis
An MIS is created to generate information for decision making, the bestinformation for that purpose is in the concise form of a financial or management
indicator.Waterfield and Ramsing, p. 39.
Indicators generally compare two or more pieces of data, resulting in a ratio that provides
more insight than do individual data points.
Loan Portfolio Quality Analysis
• Delinquency rate—portfolio at risk
• Portfolio aging
• Loan loss rate
Efficiency
• Number of active loan clients per staff member
• Number of active loan clients per loan officer
• Outstanding portfolio per loan officer
• Number of clients per branch office
• Yield on portfolio
• Administrative efficiency
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• Operating efficiency
• Personnel costs as a percentage of administrative costs
Profitability
• Adjusted return on assets
• Adjusted return on equity
• Operational self-sufficiency
• Financial self-sufficiency
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Efficiency Ratios
Staff Productivity Ratios • Number of active loan clients per staff
member
• Number of active loan clients per loan officer
• Number of active loan clients per branch
• Gross portfolio outstanding per loan officer
Financial Productivity Ratio
Yield on Portfolio = Interest and fee income from loansAverage net portfolio outstanding
Cost-Efficiency Ratios
Operating Efficiency = Total operating expenses + In-kind donationsAverage net portfolio outstanding
Administrative Efficiency =
Personnel + Other administrative expenses + In-kind donations Average net portfolio outstanding
Personnel Expense Ratio Personnel expenses + In-kind personnel donations Total administrative expenses + Total in-kind
donations
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Profitability Performance Indicators
Term Formula DefinitionAdjusted Operating Profit Operating income – Adjusted operating
expensesMFI’s profit
Adjusted Return on Assets Adjusted operating profitAverage total assets
How productively the MFI hasemployed its assets
Adjusted Return on Equity Adjusted operating profitAverage equity
Return on the equity capital of theMFI
Operational Self-Sufficiency Operating income Operating expenses
Degree to which operating incomecovers operating expenses
Financial Self-Sufficiency Operating income Adjusted operating expenses
Degree to which operating incomecovers the adjusted operatingexpenses
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 44
Internal Controls !!!!
Internal Controls
Internal controls
• Preserve the safety of assets,
• Improve quality of customer service,
• Ensure reliability of financial information,
• Ensure staff adherence to policy and guidelines.
Sources of Risk
• Delinquency / Credit risk
• Fraud
• Liquidity risk
• Operating risk
• Security risks
• Risk of computerization
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 45
External Audits
An external audit is a formal, independent review of an entity’s financial statements,
records, transactions, and operations, performed by professional accountants, in order to
• Lend credibility to financial statements and other management reports
• Ensure accountability for investor funds
• Identify weaknesses in internal controls and systems
Scopes differ significantly, according to the objectives of each audit.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 46
Glossary of Terms for Financial Statements !!!!
Balance Sheet
A Balance Sheet is a summary (or snapshot) of an organization's financial position at a
specific point in time; therefore it is static. It presents the institution’s stock of assets
(such as cash, loan portfolio, investments or fixed assets), liabilities (such as loans or
accounts payable), and equity capital (net worth, or difference between assets and
liabilities). All amounts are cumulative since the organization began. On a Balance Sheet,
Assets equal Liabilities plus Equity.
Why is it called a "Balance" Sheet? What elements must balance on aBalance Sheet?
All assets of the organization are funded either by outside parties (liabilities) orby investors, including donors or other interested parties (equity or net worth).The total amount of assets therefore must equal the funding sources. The two
sides of the Balance Sheet are two views of the same resources of theorganization: the organization's assets on one side and the funding sources for
those assets on the other.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 47
ASSETS
Assets represent what is owned by the organization or owed to it. They are those items in
which an organization has invested its funds for the purpose of generating future income.
On the Balance Sheet, assets are always equal to the sum of liabilities plus equity.
Assets are divided in order of liquidity into short-term or current assets and long-term
assets including fixed assets.
Current assets Cash and marketable securities, accounts receivable, and inventories
that in the normal course of business will be turned into cash within
a year
Cash and bank current
accounts
All balances available to the organization on a demand basis such as
cash, and funds on deposit in non-interest bearing accounts.
Reserves in central bank Funds held on deposit at the central bank as required by some bank
superintendencies; the amount is generally determined as a
percentage of assets or liabilities held by the MFI. Cash reserves are
applicable only to regulated financial institutions.
Short-term investments Funds on deposit with a financial institution, with a term of less than
one year, that earn revenue for the MFI.
Total or Gross loan portfolio
outstanding
Assets composed of the total amount of loans remaining to be paid
at a point in time, that is, the total amount owed to an institution by
its borrowers. It includes loans outstanding that are current, with no
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late payments or defaults, and the total amount of loans outstanding
that have an amount past due. Past due is typically defined as when
a payment is one day late.
Net loans outstanding or Net
loan portfolio outstanding
All loans disbursed and not yet repaid or written off, minus the loan
loss reserve. The net loans outstanding figure reflects only the
principal due and does not include interest expected to be received.
Loan loss reserve Amount set aside to recognize probable future loan losses on the
loan portfolio so that the true value of the loan portfolio is fairly
stated. To create or increase the loan loss reserve, a loan loss
expense (referred to as the loan loss provision) is recorded on the
Income Statement as an expense. The amount of loan loss provision
is then recorded on the Balance Sheet as the negative asset—loan
loss reserve. This negative asset reduces the net outstanding loan
portfolio. Actual loan losses, or write-offs, affect the Balance Sheet
only (and not the Income Statement) as a reduction of the loan loss
reserve and the total loan portfolio.
Other short-term or current
assets
Items that do not appear in the foregoing, such as
• Accrued interest—interest that has come due and is
recorded but has not yet been received
• Accounts receivable—amounts owed to the MFI for services
already rendered or products already delivered
• Prepaid expenses—for example, rent or insurance premiums
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paid in advance for the upcoming period
Long-term investments investments not intended as a ready source of cash, such as stocks,
bonds, promissory notes, and land that will be held for more than
one year or one cycle.
Fixed assets includes property, plant, and equipment; they represent assets that
are not readily redeemable for cash. Examples are land, buildings,
machinery, equipment, furniture, automobiles.
• Cost—property and equipment (fixed assets) are recorded
at cost or current market value at acquisition.
• Accumulated depreciation—an annual, noncash expense
that is determined by estimating the useful life of each
asset. Depreciation represents a decrease in the value of
property and equipment to account for the portion of their
useful life that is used up during each accounting period.
Annual depreciation is recorded on the income statement as
an expense that increases the accumulated depreciation on
the balance sheet by the same amount. Like the loan loss
reserve, accumulated deprecation is a negative asset.
• Net fixed assets—the cost or recorded market value of
property and equipment less accumulated depreciation.
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LIABILITIES
Liabilities represent what is owed by the MFI to others either in the form of a loan that has
been extended to it or obligations for the MFI to provide goods and services in the future.
Forced savings accounts Compulsory client savings that have been deposited in the MFI that
the MFI must return, generally when the loan has been repaid or
when the client leaves the MFI. Forced savings may or may not incur
an interest cost for the MFI. If forced savings are held by another
financial institution, they will not appear anywhere on the MFI’s
financial statements.
Voluntary savings accounts Client savings that have been deposited voluntarily with the MFI that
the MFI must return. Although a liability for the MFI, voluntary
savings are different from borrowed funds because there is no due
date or amortization schedule. Voluntary savings generally incur an
interest cost for the MFI. If interest is not paid out to the client, it is
sometimes accrued and increases the liability of the MFI to the client.
Time deposits Amounts deposited with the MFI for a specified period of time. The
rate of interest paid generally increases as the length of the deposit
increases.
Commercial bank loans Outstanding amount that the MFI owes a bank or other lender for
which it is paying a market rate of interest. The loans could be short-
term or long-term. Long-term debt is that portion which is due in
over one year’s time.
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Central bank loans Outstanding amount that the MFI owes the central bank for which it
is paying interest, often discounted.
Subsidized, concessional, or
soft loans
Outstanding amount that the MFI owes to a lender (typically from a
donor or government) for which it is paying the lender a rate of
interest below the rate the MFI could have obtained from commercial
sources.
Other short-term liabilities Outstanding amounts that the organization owes to a bank, other
lenders, or other organization (such as past due rent) that are due
within one year or less. Also includes accrued expenses and
unearned/deferred income.
Restricted or deferred
revenue (short-term or long-
term)—
Funds received but restricted for use in future years or for specific
activities are classified as a liability on the Balance Sheet because
they must be returned to the funding organization if the specified
programs are not carried out. Restricted funds are not recorded as
earned until the service or product that they are funding is delivered.
When the organization receives restricted funds, it incurs an
obligation (liability) to provide the services described in the grant
agreement. As the organization provides the services (such as loans
to microentrepreneurs in a certain region), it incurs expenses.
Deferred revenue is then recognized as grant revenue and used to
cover those expenses.
Other long-term liabilities Outstanding amounts that the organization owes to a bank, other
lenders, or other organizations that are due more than one year from
the date of the financial statements.
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EQUITY
Equity is also referred to as capital or net worth. Unlike liabilities, the equity of an
organization does not have to be repaid. It therefore represents the value or "net worth"
of the MFI. Equity is equal to the amount of assets less liabilities. It represents the link
between the balance sheet and the income statement in that the current year profit/loss
from the income statement flows into the equity section of the balance sheet at the end of
each period.
Paid in equity from
shareholders
Amount of funds contributed by shareholders to the MFI.
Donated equity, prior years,
cumulative
Cumulative amount of donations received by the MFI.
Donated equity, current year Donations to the MFI in the current year.
Prior years' profit/loss Amount of profit (or loss) accumulated in previous years since the
formation of the organization. This may also be referred to as
retained earnings or earned surplus.
Current year operating
profit/loss
Amount of income (or loss) generated in the current year. Total
operating expenses are subtracted from total operating income to
arrive at the operating profit.
Other capital accounts Other special funds or reserves such as nonrefundable contributions
from clients and/or statutory reserves required by law. Should also
include the difference between nonoperational income and expenses.
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Income Statement
The Income Statement is also known as the Profit and Loss Statement or the Operations
Statement. It is a summary of the income, expenses and net profit or loss (the difference
between income and expenses) for a period of time—say, January 1 to December 31,
2001.
INCOME
In accounting terms, revenue refers to money earned by the organization for goods sold
and services rendered during a given period. When an organization renders services to its
clients, it usually receives income in the form of cash or an account receivable.
OPERATING INCOME
Operating Income is produced by an institution’s core business. For a microfinance
organization operating income includes interest earned on loans to clients; fees earned on
loans to clients; interest earned on funds on deposit with a bank, and so forth.
Interest income from loans Amount received from clients for borrowing money from the MFI for
a specified period of time. The interest rate is stated as a percentage
of the loan amount. Interest received refers to the interest that has
been paid by the borrower. Interest earned but not received refers to
the interest that the borrower owes the MFI but has not yet paid.
Note: The principal amount of the loan repaid is not included in income.
Only the Balance Sheet accounts are affected by the principal portion of a
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loan repayment; that is, total loan portfolio decreases and cash increases.
The only time the Income Statement is affected by the principal portion of
a loan is when a loan which has been written off is repaid.
Fee income from loans Amount charged to clients for (services associated with) loans
disbursed by the MFI, usually in addition to the interest charged.
They may be stated as a percentage of the loan amount or a flat
amount. These fees or service charges are often charged up front.
There are also penalty fees for late or partial payment and these are
charged once a payment is missed.
Income from investments Amount of interest earned by the organization on its investments
such as interest-bearing deposit accounts, term deposits, treasury
bills, and so on.
EXPENSES
Expenses represent the costs incurred for services used in the process of earning revenue.
They are often referred to as the "cost of doing business" since they represent the costs
that are necessary for the organization to generate revenue and thus remain in operation.
Direct expenses for a microfinance organization include financial costs, operating expenses
and loan loss provisions.
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OPERATING EXPENSES
Expenses that are specific to delivery of the core business (credit and savings activities) for
a specified time period. For a single-purpose MFI, all costs should be included. For multi-
purpose institutions, all direct costs of financial operations and an appropriate portion of
the institution’s overhead should be included.
Interest expense: client
savings
Payments made to clients who deposit savings in the organization
(either voluntary or forced).
Interest and fee expense Interest paid to banks and other financial institutions for money that
they have loaned to the MFI.
Note: Principal repayment of a bank loan is not included as a financial cost.
Loan loss provision expense Based on the historical default rate and the current outstanding loan
loss reserve, the loan loss provision is the (non-cash) amount
expensed in a period to increase the loan loss reserve to an
adequate level to cover probable defaults of the loan portfolio.
Although the loan loss provision is a non-cash expense, it is treated
as a direct expense for an MFI.
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ADMINISTRATIVE EXPENSES
Expenses that are considered a subset of operating expenses.
Personnel: Salaries and
benefits
Payment from the MFI to its staff for services rendered; usually the
largest operating expense for an MFI.
Rent Payments made for lease of land and/or buildings for the purposes of
loan fund management over a specified time period.
Transportation and travel Payment for transportation, room and board, etc., of staff members
working on behalf of the organization.
Depreciation An annual, non-cash expense that is determined by estimating the
useful life of each asset. Using the most common method, called
straight-line depreciation, an asset with an estimated useful life of
five years would have one-fifth of its purchase price reflected as an
expense in each of the five years. The depreciation expense
increases the accumulated depreciation account on the balance sheet
(similar to the loan loss provision [expense] and the loan loss
reserve [negative asset] respectively).
Plus All other expenses related to the MFI’s operations, such as office
materials/supplies, publications/publicity, telephone and postage,
insurance, utilities, staff training, board meeting expenses, legal
services/other service fees, bank charges, repair and maintenance,
courier and delivery, loss on currency conversion, taxes, etc.
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NET OPERATING PROFIT/LOSS OR NET INCOME FROM OPERATIONS
Income that is a direct result of the MFI’s lending and savings activities net of the expenses
directly related to these activities.
NONOPERATIONAL INCOME AND EXPENSES
Income not produced by the core business (e.g., donations); expenses not incurred by the
core business.
CASH DONATIONS
Funds donated to the MFI that year (for which the conditions, if any, have been met), to
cover operating expenses, loan fund capital, and so on.
OTHER NONOPERATIONAL INCOME AND EXPENSES
Other revenue earned by the MFI for services provided other than credit and savings, such
as training fees, and expenses incurred in providing these services.
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Bibliography !!!!
Following are additional recommended readings on accounting.
Christen, R.P. Banking Services for the Poor: Managing for Financial Success: An Expanded and Revised
Guidebook for Microfinance Institutions. Cambridge, MA: Accion International, 1997 (ISBN 958-96092-
0-1).
Disclosure Guidelines for Financial Reporting by Microfinance Institutions. Washington, DC: Consultative
Group to Assist the Poorest, 2001. Available at http://www.cgap.org/html/p_technifsg.html.
Epstein, Barry, and Ali Mirza, Abbas. Wiley IAS 2001: Interpretation and Application of International
Accounting Standards 2001. New York: John Wiley and Sons, 2001. See
http://www.ids.ac.uk/cgap/static/2043.htm.
External Audits of Microfinance Institutions: A Handbook. Technical Tool Series No. 3. Volume 1, For Audit
Clients: Boards, Managers, Donors, Creditors, and Investors. Washington, DC: Consultative Group to
Assist the Poorest, (1998). Available at http://www.cgap.org/html/p_technical_guides03v1.html.
External Audits of Microfinance Institutions: A Handbook. Technical Tool Series No. 3. Volume 2, For
External Auditors. Washington, DC: Consultative Group to Assist the Poorest, 1998. Available at
http://www.cgap.org/html/p_technical_guides03v2.html.
Financial Ratio Analysis of Microfinance Institutions. Small Enterprise Education and Promotion Network
(SEEP)/Calmeadow, 1995 (ISBN 0-9637044-8-6).
Format for Appraisal of MFIs. Washington, DC: Consultative Group to Assist the Poorest. Available at
http://www.cgap.org/html/p_technical_guides04.html.
CGAP Participant Course Materials: Accounting for MFIs—Fundamentals of Accounting for Microfinance Managers • 59
Helms, Brigit S. Cost Allocation for Multiservice Microfinance Institutions. Occasional Paper No. 2.
Washington, DC: Consultative Group to Assist the Poorest, 1998. Available at
http://www.cgap.org/html/p_occasional_papers02.html.
IASC International Accounting Standards. London: International Accounting Standards Board, 2001.
Ledgerwood, J. Financial Management Training for Microfinance Organizations, Calmeadow, 1996.
Ledgerwood, J. Microfinance Handbook: An Institutional and Financial Perspective. Washington DC:
Sustainable Banking with the Poor, World Bank, 1998 (ISBN 0-8213-4306-8).
Tracy, John A. Accounting for Dummies. Second ed. IDG Books Worldwide, Inc., 2001 (ISBN 0-7645531-
4-3).
Waterfield, Charles and Ramsing, Nick. Management Information Systems for Microfinance Institutions: A
Handbook. Technical Tool Series No. 1. Washington, DC: Consultative Group to Assist the Poorest,
1998.
Recommended