Accounting for Not for Profit Organizations

Accounting Not for Profit Organizations

Meaning of Not for Profit Organisations

Not for Profit Organisations are the organisations which are set up to serve the society and public in large to promote education, culture, religion and sports in the country. For example schools, charitable hospitals, sports club, literary societies etc.

Financial Statements of Not for Profit Organisations

Financial Statements of Not for Profit Organisations include the following:

(i) Receipt & Payment Account,

(ii) Income & Expenditure Account and

(iii) Balance Sheet

Meaning of Receipt & Payment Account

Receipt & Payment Account is a summary of Cash Book which is prepared at the end of the year showing all cash receipts and cash payments during the year.

Features of Receipt & Payment Account

(i) Receipt & Payment Account is a summary of Cash Book. It records all receipts of Cash and Bank in the debit side and all payment of Cash and Bank in the credit side.

(ii) Receipt & Payment A/c includes all receipts and payments whether they are of capital nature or revenue nature.

(iii) Non-cash expenses such as depreciation on fixed assets and outstanding expenses are not shown in Receipts & Payment Account.

Receipt and Payment Account

for the year ended …………

Receipts	Amt.	Payment	Amt.
To Balance b/d To all receipts whether capital or revenue in nature and related to any year		By all payments whether capital or revenue in nature and related to any year By Balance c/d

Meaning of Income & Expenditure Account

Income & Expenditure Account is like Profit & Loss Account of ‘For Profit Organizations’, which is prepared at the end of the year to calculate excess of income over expenditures (surplus) or excess of expenditures over income (deficit).

Features of Income & Expenditure Account

(i) Income & Expenditure Account is prepared on accrual basis which records items of revenue nature only.

(ii) Income & Expenditure Account is prepared with the help of Receipt & Payment Account and additional information of outstanding and prepaid expenses etc.

(iii) The result of Income & Expenditure Account is Surplus (excess of incomes over expenditures) or Deficit (excess of expediter over incomes) which is adjusted with Capital Fund.

Income and Expenditure Account

for the year ended …………

Expenditure	Amt.	Income	Amt.
To revenue payments and related to current year only To excess of income over expenditure (surplus- balancing figure)		By revenue receipts and related to current year only To excess of expenditure over income (deficit- balancing figure)

Treatment of items of Receipt side

S.No.	Items	Nature of receipt	Treatment
1.	Subscription	Revenue	Shown in Income & Expenditure A/c
2.	Life membership fees	Capital	Balance Sheet (Liabilities)
3.	Special purpose donation	Capital	Balance Sheet (Liabilities)
4.	Small amount donation	Revenue	Shown in Income & Expenditure A/c
5.	Big amount donation	Capital	Balance Sheet(Liabilities)
6.	Legacy	Capital	Balance Sheet(Liabilities)
7.	Entrance fees	Revenue	Shown in Income & Expenditure A/c
8.	Government grant	Revenue	Shown in Income & Expenditure A/c
9.	Sale of old newspapers	Revenue	Shown in Income & Expenditure A/c
10.	Sale of old magazines	Revenue	Shown in Income & Expenditure A/c
11.	Sale of old assets	Capital	Balance Sheet (profit or loss on sale is treated in Income & expenditure A/c)
12.	Sale of old sports material	Revenue	Shown in Income & Expenditure A/c

Calculation of current year subscription:

Particulars	Amt.
Total Subscription received during the year Add: Subscription in arrear at the end xxxx Subscription in advance in the beginning xxxx Less: Subscription in arrear in the beginning xxxx Subscription in advance at the end xxxx	xxxxx xxxx (xxxx)
Total Subscription to be shown in Income & Expenditure Account	xxxx

Subscription Account

Particulars	Rs.	Particulars	Rs.
To Balance b/d (subscription –in-Arrear) To Income &Expenditure A/c (Balancing Figure ) To Balance c/d (Subscription-in-advance)	xxx xxx xxx	By Balance b/d (Subscription-in-Advance) By Receipt & Payment A/c (Total Subscription received during the year) By Balance c/d (Subscription-in-Arrear)	xxx xxx xxx
	xxx		xxx

Treatment of Consumable Items e.g. Stationery, Sports Material, Postage Stamps etc.

Particulars	Amt.
Total amount paid for stationery during the year Add: Stock of stationary in the beginning xxxx Creditors of stationary at the end xxxx Advance paid for stationary in the beginning xxxx Less: Stock of stationary at the end xxxx Creditors of stationary in the beginning xxxx Advance paid for stationary at the end xxxx	xxxxx xxxx (xxxx)
Stationary consumed to be shown in Income & Expenditure Account	xxxx

Calculation of current year expense

Particulars	Amt.
Total expense paid during the year Add: Outstanding expense at the end xxxx Prepaid expense in the beginning xxxx Less: Outstanding expense in the beginning xxxx Prepaid expense at the end xxxx	xxxxx xxxx (xxxx)
Expense to be shown in Income & Expenditure Account	xxxx

Treatment of Funds created for specific purpose

Balance Sheet

as on ………..

Liabilities	Amt.	Assets	Amt.
Specific Fund(opening balance) xxx Add : Donation for Specific Fund xxx Add : Interest on Specific Fund xxx Investment (including accrued Interest) Less : Expenses paid for specific purpose (see note) (xxx)	xxx	Specific Fund Investment Accrued Interest on Specific Fund Investment	xxx xxx

Note: If specific purpose is to create an asset e.g. Building, then expenses incurred will be shown as an asset in the assets side