Certification Examination Practice

Illinois Nonprofit Financial Manager Certification Examination Practice Questions And Correct Answers (Verified Answers) Plus Rationales 2026 Q&A | Instant Download Pdf

• According to GAAP, which financial statement best reflects a nonprofit’s

liquidity?

• Statement of Activities
• Statement of Cash Flows
• Statement of Financial Position
• Notes to Financial Statements

Rationale: The Statement of Financial Position shows assets and liabilities,

which indicate liquidity.

• What is the primary purpose of fund accounting in nonprofits? 1 / 4

• Maximize profit
• Track restrictions on resources
• Prepare for audits
• Reduce tax liability

Rationale: Fund accounting exists to track donor restrictions and fund

purposes.

• Which contribution is considered “without donor restrictions”?
• Funds restricted to capital projects
• Funds restricted to scholarships
• General operating donation
• Temporarily restricted grant

Rationale: General donations have no external donor restrictions.

• Which IRS form must most U.S. nonprofits file annually?
• Form 990-EZ only
• Form 1023
• Form 990
• Form W-9

Rationale: Form 990 is the primary annual information return for

nonprofits.

• / 4

• A nonprofit receives a $20,000 pledge payable next year. How is it

recorded?

• No entry until cash arrives
• Contribution revenue with receivable
• Deferred income
• Liability

Rationale: GAAP requires recognizing unconditional pledges as revenue

and receivable when pledged.

• Which is an example of a temporarily restricted contribution?
• Unrestricted operating gift
• Gift restricted for FY2027 programs
• Gift restricted permanently
• Endowment earnings

Rationale: Time-restricted gifts are temporary restrictions.

• What must be done when a donor restriction is satisfied?
• Reverse revenue
• Reclass to without donor restrictions
• Report as a liability
• Do nothing

Rationale: Net assets must be reclassified when restrictions are fulfilled. 3 / 4

• Which budget type adjusts automatically based on activity levels?
• Static
• Flexible
• Incremental
• Capital

Rationale: Flexible budgets adapt to changes in volume and operations.

• A nonprofit receives donated professional services. When must they be

recorded?

• Never
• Only if cash equivalent
• If they require specialized skills and are provided by qualified individuals
• Only if material

Rationale: GAAP requires recognition when specialized skills are provided

and would otherwise be purchased.

• Which internal control helps ensure separation of duties?
• Single-person authorization
• Different staff handle custody, recording, and approval
• CEO approves all transactions
• / 4