2. 1. Description
2
Other names:
Not-for profit organizations
Non-trading organizations
Non-commercial organizations
They include clubs, associations, schools, churches,
hospitals, professional institutes, etc.
3. 2. Characteristics:
3
Formed to render services to their members and community and
not for profit maximization.
Most of their revenue is derived from membership dues, eg
subscriptions and entrance fees
Their accounting emphasis is on the stewardship over resources
and on the way the organisation performs its obligations.
The operations of the organisation are controlled by the budget.
The budget provides a financial framework and guidelines for the
organisation to plan its operations.
They can be small and manned by unqualified personnel.Their
books are, often, incomplete and defective.
4. Financial Statements:
4
Receipts and PaymentsAccount (for small organization with
no assets or liabilities)
Income and ExpenditureAccount
Balance sheet
Trading and Profit and Loss account for activities like bar,
canteen , etc
5. Terms Comparison:
Profit making firms Non-profit making firms
5
Cash book
Trading and P & L a/c
Net profit
Net loss
Capital
Balance sheet
Receipts and Payments account
Income and Expenditure a/c
Surplus of Income over
Expenditure
Excess of Expenditure over
Income
Accumulated fund
Balance sheet
6. Receipts and Payments account:
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A summarized form of cash book
It shows all items of receipts and payments
Dr side shows opening cash balance & Receipts
Cr side shows payments & closing cash balance
No distinction made between capital and revenue items.
For small organization No Balance sheet is normally
required.
It serves a great practical significance to the members as it
discloses collections: subscriptions , donations; cash position
of the entity; disbursement
7. Income and Expenditure account
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Follows all the basic rules of P & L a/c.
Expenses are debited and income credited.
Capital items excluded.
Follows accrual concept: all revenue items relating to the
accounting period under consideration are included
regardless whether actually paid or received.
The balance of the account represents excess of income over
expenditure or vice versa.
8. Accumulated Fund
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In effect a capital account
Accumulated fund = Assets – Liabilities
Excess of income over expenditure is added to accumulated
fund.
Excess of expenditure over income is deducted from
accumulated fund.
9. Profit or loss for special purposes – Fund
Raising Activities
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A separate activity is undertaken to make profit to help
finance the main purpose of the organisation. E.g. running a
bar, a refreshment counter, discos or dances.
A separateTrading and Profit and Loss account is prepared
for such activity and the balance is transferred to main
account.- Income and expenditure a/c.
10. Treatment of Certain Accounts
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Outstanding subscription: In practice they are not
brought into books as assets due to prudence concept. In
examinations they are brought into books unless told
otherwise.
Life membership:
On receipt: Dr Bank a/c & Cr: Life Membership a/c
(liability a/c)
At the end of the year an appropriate amount, as decided by
the committee, is transferred to the Income and Expenditure
a/c.
11. Treatment of Certain Accounts
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Practically, if life membership amounts are small and regular
in nature they may be treated as income in the year of
receipt.
Donations: shown as income in the year of receipt.
Entrance fees: Included as income in the year of receipt.
Legacies: money to be received by a club under the will of
and at the death of a person. Normally added to the
Accumulated fund.
Investments: Income from the investments is treated as
income for the year.
12. 12
1st January 2008 balances :
Cash at Bank 200.00
Snack Bar Inventory 800.00
Club House Buildings 12,500.00
During the year ended 31st December 2008 the following transactions took place
Receipts Payments
Subscription 2008 3,500 Rent and Rates 1,500.00
Subscription 2009 380 Extension to Club house 8,000.00
Snack Bar Income 6,000 Snack Bar Purchases 3,750.00
Visitors Fees 650 Secretarial Expenses 240.00
Loan from Bank 5,500 Interest on loans 260.00
Competition Fees 820 Snack Bar expenses 600.00
Games Equipment 2,000.00
Notes:
The snack bar inventory on 31st December 2008 was P900
The games equipment should be depreciated by 20%.
a) Required prepare Finacial Statements
13. 13
Income and Expenditure Statement for year Ended 31st December 2008
Income
Subsccribtion Fees 3500
Visitors Fees 650
Competion Fees 820
Bar Income 1750
6720
Expenditure
Rent and Rates 1500
Secreatarial Expenses 240
Interest on Loan 260
Depreciation 400
2400
Surplus Income O/Exp 4320
14. 14
Club House 20,500.00
Games Equip (2000-400) 1,600.00
22,100.00
Current Assets
stock 900.00
Bank 700.00
1,600.00
23,700.00
Current Liabilities
Subscription 380.00
Bank Loan 5,500.00
Accumulated Fund (200+800+12500) 13,500.00
Surplus Inocme Over Ex 4,320.00
17,820.00
23,700.00
Balance Sheet as at 31st dec 2008
15. 15
Workings
Trading Account for the Bar
Sales 6,000.00
Opening Stock 800.00
Purchases 3,750.00
Closing Stock (900.00)
3,650.00
Gross Profit 2,350.00
Bar Expenses 600.00
1,750.00
16. 16
MRC Club Receipt and Payments for the year ended 31st July 2009
Receipts
Cash and Bank 210.00
Sales of Competetion Prizes 437.00
Members subscription Account 1,987.00
Donations 177.00
Refund of rent 500.00
Balance c/d 13.00
3,324.00
Payments
Secreatarial Expenses 163.00
Rent 1,402.00
Visiting Speakers expenses 1,275.00
Donations to charities 35.00
Prizes for competitions 270.00
Stationery and Printing 179.00
3,324.00
17. 17
The following valuations took place
Equipment (Cost 1420) 975 780
Subscription in Arrears 65 85
Subscription in Advance 10 37
Owing to Suppliers of Competition Prizes 58 68
Inventory of Competion Prizes 38 46
REQUIRED
1) Accumulated Fund for 1st August 2008
2) Subscription Account
3) Competition Account
4) Financial Statements
18. 18
1 ) Opening Balance Sheet
Equipment 975
Inventory of Prizes 38
Arrears of Subscription 65
Cash and Bank 210
1,288
Subscription Advance 10
Owing To Prize Suppliers 58
68
1,220
Subscription Account
2) Arrears b/d 65 Advances b/d 10
Subscription Paid 1,987
Income and Exp Acc 1,980
Advances b/d 37 Arrears c/d 85
2,082 2,082
3) Competition Account
Inventory b/d 38 Accounts Payable 58
Cash Paid For Prizes 270 COST Of Prizes 272
Accounts Payable c/d 68 Inventory c/d 46
376 376
19. 19
4 Income and Expenditure Account for the year ended 31st July 2009
Income
Subscription Account 1,980
Ticket Sales less Cost (437-272) 165
Donations 177
2,322
Expenditure
Rent( 1402-500_) 902
Secretarial Expenses 163
Stationery Expenses 179
speakers 1,275
Donations to charities 35
Depreciation (975-780) 195
2,749
Excess Exp over Income (427)
20. 20
Balance Sheet
Equipment at Cost (1420-640) 780
Current Assets
Inventory 46
Arrears of Subscrip. 85
131
911
Current Liabilities
Acc Pay Prizes 68
Advance subscrip 37
Bank Overdraft 13
118
Accumulated fund 1,220
Excss Exp over Income (427)
793
911
