Study Note 3, Page 114-142

ACCOUNTING FOR NON-PROFIT SEEKING ORGANISATIONS
STUDY NOTE – 3
This study note includes -
● Final Accounts and Balance Sheet of Non-Profit Seeking Concerns
3.1. FINAL ACCOUNTS AND BALANCE SHEET OF NON-PROFIT

SEEKING CONCERNS
Certain concerns like Clubs, Charitable Institutions, Medical Association, Societies, etc. do not
intend to earn profit. They render service to the society or to their members. Their members do
not get any share of profit or dividend. These concerns are known as non-profit concerns as
their transactions arc service-based but not profit-based.
Their annual accounts are regularly prepared to convey their financial affairs to their mem-
bers or others like (govt. etc.) for seeking financial grants. If the size of the concern is small,
the accounting records are usually kept under single entry system. Complete double entry
system is followed only in big concerns. In any case they all prepare — (A) Receipts & Pay-
ments Account for a financial period; (B) Income & Expenditure Account for a financial
period and (C) Balance Sheet at the end of the financial period.
A. Receipts & Payments Account
1. It is an Account which contains all Cash and Bank transactions made by a non-
profit organization during a particular financial period.
2. It starts with the opening balances of Cash and Bank. All Cash Receipts both capital &
revenue during the period are debited to it.
3. All Cash Payments both capital & revenue during the period are credited to this Ac-
count. It ends with the closing Cash and Bank Balances.
4. While recording the Cash and Bank transactions all entries are made on Cash Basis.
5. It is a summary of Cash Book.
6. It follows Real Account
114 FINANCIAL ACCOUNTING

PROFORMA RECEIPTS & PAYMENTS ACCOUNT
In the Books of ...........
Receipts & Payments Account for the year ended........
Dr. Cr.
Receipts Amount Amount Payments Amount Amount
Rs. Rs. Rs. Rs.
To Balanceb/d By Sundry
Cash in hand xxx Payments xxx
Cash at Bank xxx (Both Capital &
Revenue )
To Sundry Receipts xxx By Balancec/d
(Both Capital &Revenue ) Cash in hand xxx
Cash at Bank xxx
xxx xxx
B. Income & Expenditure Account
1. It follows Nominal Account.
2. All expenses of revenue nature for the particular period are debited to this Account
on accrual basis.
3. Similarly all revenue incomes related to the particular period are credited to this ac-
count on accrual basis.
4. All Capital incomes and Expenditures are excluded.
5. Only current year’s incomes and expenses are recorded. Amounts related to other
periods are deducted. Amounts outstanding for the current year are added.
6. Profit on Sale of Asset is credited. Loss on Sale of Asset is debited. Annual Depre ciation
on Assets is also debited.
7. If income is more than expenditure, it is called a Surplus, and is added with Capital or
General Fund etc. in the Balance Sheet.
8. If expenditure is more than in come, it is a deficit, and is deducted from Capital or

General Fund etc. in the Balance Sheet.
FINANCIAL ACCOUNTING 115

PROFORMA INCOME & EXPENDITURE ACCOUNT

In the Books of ...........
Income & Expenditure Account for the year ended........
Dr. Cr.
Expenditure Amount Amount Income Amount Amount
Rs. Rs. Rs. Rs.
To Revenue Expenses xxx By Revenue
Incomes xxx
To Surplus ( Excess of By Deficit
Income over ( Excess of
Expenditure Expenditure
over Income xxx
xxx xxx
C. Balance Sheet
The Balance Sheet is prepared in the similar way as followed in a Trading concern. The
marshalling of the assets and liabilities may be made in order of liquidity or in order of
permanence.
Calculation of opening capital Fund : ( If not mentioned)
Opening Capital Fund = Openeng Assets - Opening Liabilites.

Distinction between Receipts & Payment Account and Income & Expenditure Account
Receipts & Payments Account Income & Expenditure Account

1 It is a summarised Cash Book. It closely resembles the Profit & Loss
Account of a Trading concern.
2. Receipts are debited and Payments are Incomes are credited and Expenditures
credited. are debited.
3. Transactions are recorded on Cash Transactions are recorded on Accrual
basis. basis
4. Amounts related to previous period or Transactions are recorded on accrual
future period may remain basis. All amounts not related to the
included. Outstanding amount for current period are excluded.
current year is excluded. Outstanding amounts of current period
are added.
5. It records both Capital and Revenue It records of Revenue transactions
transactions. only.
6. It serves the purpose of a Real Account. It serves the purpose of a Nominal
Account.
7. It starts with opening Cash and Bank It does not record such balances,rather
Balances and ends with closing Cash its final balance shows a surplus or a
and Bank Balances. deficit for the period.
8. It does not record notional loss or non- It considers all such expenses for
cash expenses like bad debts, matching against revenues
depreciations etc.
9. Its closing balance is carried forward to Its closing balance is transferred to
the same account of the next accounting Capital Fund or General Fund or
period. Accumulated Fund in the same
period’s Balance Sheet.
10. It helps to prepare an Income & It helps to prepare a Balance Sheet.
Expenditure A/c.
Some Important Considerations
1 Capital Fund : It is also called “General Fund” or “Accumulated Fund.” It is actually

the Capital of a non-profit concern. It may be found out as the excess of assets over
liabilities. Usually “Surplus” or “Deficit” during a period is added with or deducted
from it. A portion of Capitalised incomes like donations may be added with it.
2. Special Fund: It may be created out of special donation or subscription or out of a por-
tion of the “Surplus”. For example a club may have a “Building Fund”. It may be used
for meeting some specific expenses or for acquiring an asset. If any income is derived
out of investments made against this fund or if any profit or loss occurs due to sale of
such investments, such income or profit or loss is transferred to this fund.

Other Treatments
(a) If the Special Fund is used to meet an expense
Special Fund A/c Dr.
To Bank A/c (amt. of expense)
The balance of the Fund is shown as a liability.
If the balance is transferred to Capital Fund, the entry will be—
To Capital Fund A/c (Balance of Special Fund )
(b) If the Special Fund is used to purchase an asset
Asset A/c Dr.
To Bank A/c (Cost of the asset )
To Capital Fund A/c (Special Fund closed)
3. Donations
(a) Donation received for a particular purpose should be credited to Special Fund. For
example, Donation received for Building should be credited to Building Fund A/c.
(b) For other donations received the by-laws or rules of the concern should be followed.
(c) If there is no such rule, donations received of non-recurring nature should be credited to
Capital Fund. Recurring donations received should be credited to Income & Expendi-
ture Account.
(d) Donation paid by the concern should be debited to Income & Expenditure Account.
4. Legacy received : It is to he directly added with Capital Fund after deduction of tax,( if
any). It is a kind of donation received according to the will made by a deceased person.
5. Entrance Fees or Admission Fees
(a) The rules or by-laws of the concern should be followed.
(b) If there is no such rule, Admission or Entrance Fees paid once by members for acquiring
membership should be added with Capital Fund.
(c) If such fees are of small amounts covering the expenses of admission only, the fees may
be credited to Income & Expenditure Account.
6. Subscriptions
(a) Annual subscriptions are credited to Income & Expenditure Account on accrual basis.
(b) Life membership subscription is usually credited to a separate account shown as a liabil-
ity. Annual Subscription apportioned out of that is credited to Income & Expenditure
Account and deducted from the liability. Thus the balance is carried forward till the
contribution by a member is fully exhausted. If any mem ber dies before hand, the bal-
ance of his life Membership contribution is trans ferred to Capital Fund or General Fund.

Illustration 1 :
Special Points : (a) Preparation of Income & Expenditure Account and calculation of
Closing Capital Fund; (b) Loss on Sale of Asset; (c) Donation to a Specific Fund.
The following is the Receipts and Payments Account of a Club for the year ended 31st De-
cember. 2007 Receipts Cash in hand (1.1.07) Rs. 1,000; Cash at Bank (1.1.07) Rs. 4,000;
Donation for Building
Rs. 10,000; Sale of Furniture (Balance on 1.1.07 Rs. 100) Rs. 80; Sale of Newspapers Rs. 200;
Subscriptions Rs. 20,000.
Payments : Sports Materials Rs. 2,500; Salaries Rs. 3,250; Furniture Rs. 1,600;Newspapers
Rs. 500
Building Fund Investment Rs. 10,000; Tournament Expenses Rs. 11,000; Postage Rs. 200;
Cash in hand (closing balance) Rs. 1,030;Cash at Bank (Closing Balance) Rs. 5,200.
The following adjustments are to be made
Of the Subscriptions collected Rs. 2,000 was outstanding for 2006; (ii) on 1.1.07 Stock of
Raw Materials was Rs. 500 and 31.12.07 it was Rs. 700.
Prepare the Income and Expenditure Account for the year ended 31st December,2007
and show the Capital Fund of the Club as on that date.
Solution:
Dr . Income & Expenditure Account for the year ended 31.12.2007 Cr.
Rs. Rs. Rs. Rs.
To Salaries 3,250 By Subscription 20,000
,, Purchase of Newspapers 500 Less :Received
for last year 2,000 18,000
,, Tournament Expenses 11,000 By Sale of old
Newspapers 200
,, Postage 200
,, Use of Sports Materials
Opening Stock 500
Add: Purchase 2500
3,000
Less : Closing Stock 700 2,300
,,Loss on Sale of Furniture
[100 — 80] 20
,,Surplus (Excess of Income
over Expenditure) 930
18200 18,200

Statement Showing Capital Fund as on 31.12.07
Amount Amount
Rs. Rs.
Assets as on 1.1.07
Cash in hand 1,000

Cash at Bank 4,000
Furniture 100
Sports Materials Subscriptions 500
Outstanding for 2006 2000 7,600
Less : Liabilities on 1.1.07 Nil
Capital Fund on 1.1.07 7600

Add : Surplus for the year
ended on 31.12.07 930
Capital Fund on 31.12.07 8,530
Notes
(a) Donation Received for Building should be credited to Building Fund Account
(b) Both opening and closing stocks of Sports Materials as given. So the use or consumption
of sports materials during the year has been debited to I & E Account.
Illustration 2 : The Dreamers’ Club makes up its accounts to 31st December in each year. On
31st December, 2007 the cashier of the club absconded leaving behind no information or
cash. An examination of the records showed that the books had not been written up for a
considerable time and it was decided to reconstruct the figures from 1.1.2007.
A summary of the Bank Account for the year showed that :
Receipts Amt. Rs. Payments Amt. Rs.

Balance on 1.1.2007 420 Rent & Rates 460
Bank Deposits 42,610 Insurance 40
Light & Heat 156
Bar Purchases 35,067
Telephone 59
Cash Withdrawn 5,848
Balance as on31.12.07 1,400
43,030 43,030

The following information is also obtained :
I. The Barman places takings in the bank night safe on his way home for crediting to the
club account. The bartakings totalled Rs. 44,610 for the year. The treasurer had no ac-
cess to bar takings.
2. The receipt counterfoils for members subscriptions totaled Rs. 3,050 for the year.
3. A summary of expenditure for petty cash and wages revealed Glasses, crockery main
tenance— Rs. 1,310; Wages—Rs. 2,650; Sundry Expenses—Rs. 475
4. Outstanding or Prepaid Amounts were :
31.12.06 31.12.07
Prepaid Rates Rs. 26 Rs. 28
Outstanding Expenses Rs. 64 Rs. 100
The Bar Stock on 1.1.2007 was Rs. 3,607 and 31.12.07 Rs. 2,916. Opening Cash with the
Cashier at the beginning of the year 2007 was Rs. 35 only.
Prepare an Income & Expenditure Account of the club for the year ended 31.12.2007.
Working Notes:
1. Cash Defalcation by Cashier :
Dr. Cash Account Cr.
Particulars Amount Particulars Amount

Rs. Rs.
To Balance b/f 35 By Bank [Difference in 2,000
Subscriptions 3,050 deposited amount 44,610 —
Bank (Withdrawals from Bank) 5,848 42,610)
Glasses, Crockery etc. 1,310
Wages 2,650
Sundry Expenses 475
Defalcation of 2,498
Cash (Balance Figure)
8,933 8,933

2.Rent & Rates Rs.
Paid from Bank 460

+ Prepaid as on 31.12.06 (relating to current year) 26
486
— Prepaid Rates as on 31.12.07(relating to next year) 28
458
Dr. Bar Trading Account for the year ended 31.12.07 Cr.
Particulars Amt. Rs. Particulars Amt. Rs.
To Opening Stock 3,607 By Bar takings 44,610
To Purchases 35,067
To Income & By Closing Stock 2,916
Expenditure A/c 8,852
Profit of the bar transferred
47,526 47,526
Dreamers’ Club
Dr. Income and Expenditure Account for the year ended 31.12.2007 Cr.
Particulars Amount Amount Particulars Amount Amount

Rs. Rs. Rs. Rs..
To Rent & Rates [Note 2] 458 By Subscriptions 3,050
“ Insurance 40 By Bar Trading A/c 8,852
(Profit from Bar )
Light & Heat 156
Telephone Charges 59
“ Glass and Crockery 1,310
Maintenance
“ Wages 2,650
“ Sundry Expenses 475
Add Outstanding for ‘07 100
575
Less : Outstanding for ‘06 64 511
‘’ Defalcation of Cash 2,498
“ Surplus (Excess of Income 4,220
over expenditure)
11,902 11,902

Illustration 3 :
(a) Preparation of Receipts & Payments Account and Balance Sheet from Income &
Expenditure Account and other information; (b) Opening Cash balance not given
Joggers Club
Income & Expenditure Account for the year ended 31.12.2007
Dr. Cr.
Expenditure Amt. Rs. Income Amt. Rs.
To Salaries 47,500 By Subscriptions 75,000
“ General Expenses 5,000 “ Entrance Fees 2,500
“ Audit Fees 2,500 “ Contribution for
Annual Dinner 10,000
“ Secretary’s Honorarium 10,000 “ Profit on Annual Sports 7,500
“ Printing & Stationery 4,500
“ Annual Dinner Expenses 15000
“ Interest and Bank Charges 1,500
Depreciation on Sports
“ Equipments 3,000
“ Surplus (excess of income 6,000
over expenditure)
95,000 95,000
The account had been prepared after the following adjustments : Subscriptions outstanding
at the end of 2006—Rs. 6,000; Subscriptions received in advance on 31.12.2006—Rs. 4.500;
Subscriptions received in advance on 31.12.2007—Rs. 2,700; Subscriptions outstanding on
31.12.2007—Rs. 7,500
Salaries outstanding at the beginning of ‘07 and at the end of ‘07 were respectively Rs. 4,000
and Rs. 4,500. General expenses include insurance prepaid to the tune of Rs. 600. Audit Fee
for 2007 is as yet unpaid. During 2007 Audit Fees for 2006 amounting to Rs. 2,000 was paid.
The club owned a football ground valued at Rs. 1,00,000. It had Sports Equipments of Rs.
26,000 on 1.1.2007. On 31.12.2007 such Sports Equipments after depreciation amounted to
Rs. 27,000. In 1994 the club raised a bank loan of Rs. 20,000 which remained outstanding
throughout 2007. On 31st December, 2007Cash in hand amounted to Rs. 16,000.
Prepare the Receipts & Payments Account for the year ended 2007 and a Balance Sheet as
on 31.12.2007.

Solution :
Working Note :
1. Subscription Received in Cash
Dr. Subscription Account Cr

Rs Rs.
To Subscription receivable A/c By Subscription received in
(Opening Balance as on 1.1.07 6,000 Advance A/c (Opening
Balance as on 1.1.07 4,500
To Income & Expending A/c By Bank A/c (received during
(Income for the year given) 75,000 the year-balancing figure 71,700
To Subscription received in advance
Closing balance as on 31.12.07 2,700 By Subscription receivable
closing balance as on 31.12.07 7,500
83,700 83,700
2. Purchase of Sports Equipment

Dr. Sports Equipments Account Cr.
Rs. Rs
To Balance b/d 26,000 By Depreciation 3,000
To Cash (Purchases Balance Figure) 4000 “ Balance c/d 27,000
30,000 30,000
3. Salaries Paid by Cash

Dr. Salary Account Cr.

Rs. Rs.
To Cash A/c (Balancing figure- By Outstanding salary A/c
paid during the year) 47,000 (as on 1.1.07) 4,000
To Outstanding salary A/c By Income & expenditure
(as on 31.12.07 4,500 A/c (given) 47,500
51,500 51,500

4. Capital Fund on 1.1.2007
Balance Sheet as at 1.1.2007
Liabilities Amount Assets Amount
Rs. Rs.
Outstanding Audit Fees 2,000 Cash in hand 13,900

Outstanding Salaries 4,000 [Balance Figure]
Subscription Received in Adv. 4,500 Outstanding Subscription 6,000
Bank Loan 20,000 Sports Equipments 26,000
Capital Fund (Excess of Football Ground 1,00,000
Assets over Liabilities) 1,15,400
1,45,900 1,45,900
Joggers Club
Dr. Receipts & Payments Account for the year ended 31.12.2007 Cr.
Receipts Amount Payments Amount
Rs. Rs.
To Cash in hand 13,900 By Salaries [Note 3] 47,000
“ Subscription [Note 1] 71,700 “ General Expenses (5,000 + 600) 5,600
“ Entrance Fees 2,500 “ Audit Fees (2006) 2,000
“ Contribution to Annual 10,000 “ Sports Equipments 4,000
“ Dinner “ Secretary’s Honorarium 10,000
“ Profit on Annual Sports 7,500 “ Printing & Stationery 4,500
“ Annual Dinner Expenses 15,000
“ Interest and Bank Charges 1,500
“ Cash in hand 16,000
1,05,600 1,05,600

Balance Sheet as on 31.12.2007

Liabilities Amount Amount Assets Amount Amount
Rs. Rs. Rs. Rs.
Outstanding Salaries 4,500 Cash in hand 16,000

Outstanding Audit Fees 2,500 Insurance Paid in Adv. 600
Prereceived Subscription 2,700 Accrued Subscription 7,500
Bank Loan 20,000 Sports Equipment 26000
Accumulated Fund : Add : Purchase 4000
Opening Balance 1,15,400 30,000
Add: Surplus 6,000 1,21,400 Less : Depreciation 3,000 27,000
Football Ground 1,00,000
1,51,100 1,51,100
Ilustration 4 :
The Accountant of City Club furnished the following information about the Receipts and
Payments of the club for the year ended 31st March, 2008 :
Receipts Rs. Payments Rs.
To Subscriptions 62,130 By Premises 30,000
“ Fair Receipts 7,200 “ Rent 2,400
“ Variety show Receipts (net) 12,810 “ Rates and Stationery 3,780
“ Interest 690 “ Printing & Stationery 1,410
“ Bar Collections 22,350 “ Sundry Expenses 5,350
“ Wages 2,520
“ Fair Expenses 7,170
“ Honorarium to Secretary 11,000
“ Bar Purchases (Payment) 17,310
“ Repairs 960
“ New Car (less proceeds of old car
Rs.9,000) 37,800

The following additional information could be obtained :
1.4.07(Rs.) 31.3.08 (Rs.)
Cash in hand 450 NIL

Bank Balance as per Cash Book 24,420 10,350
Cheque issued for Sundry Expenses not presented 270 90
to the bank (entry has been duly made in the Cash
book)
Subscriptions Due 3,600 2,940
Premises at cost 87,000 117,000
Provision for Depreciation on Premises 56,400
Car at cost 36,570 46,800
Accumulated Depreciation on Car 30,870
Bar Stock 2,130 2,610
Creditors for Bar Purchases 1,770 1,290
Annual Honorarium to Secretary is Rs. 12,000 Depreciation on Premises is to be provided at
5% on written down value. Depreciation on new car is to be provided at 20%.
You are required to prepare Receipts and Payments Account and Income and Expenditure
Account for the year ended 31.3.08.
Solution :
Working Notes :
Rs.
(1) Depreciation on New Car :
Net Amount 37,800
Add : Sale proceeds of Old Car 9,000
Actual Cost 46,800
Less : Depreciation @ 20% 9,360
37,440
(2) Profit on sale of Old Car :
Sale proceeds 9000
Less: Written Down Value : Cost - 36,570
Provision for Depreciation - 30,870
5700
Profit on Sale 3300

(3)Cheques issued for Sundry Expenses not presented to the Bank need not be considered as
Bank Balance as per Cash Book is given and the entry for the expenses have been duly made
in the Cash Book.
(4) Calculation of Bar Parchases

Dr. Creditors for Bar Purchases Account Cr
Particulars Rs Particulars Rs
31.3.08 To cash Payment for 1.4.07 By Balance b/d 1,770
Bar Purchases 17,310
31.3.08 To Balance c/d 1,290 31.3.08 By Purchases
(Balance Figure) 16,830
18,600 18,600
(5)
Dr. Bar Trading Account for the year ended 31.03.08 Cr
Particulars Rs Particulars Rs
To Opening stock 2,130 By Bar collections 22,350
To Bar Purchases 16,830 By Close stock 2,610
To Income & Expenditure A/c
profit from Bar transfered 6,000
24,960 24,960
City Club
Dr Receipts and Payments Account for the year ended 31 March, 2008 Cr.
Rs. Rs.
ToBalance b/d : By Premises 30,000
“ Cash in hand 450 “ Rent 2,400
“ Cash at Bank 24,420 “ Rates & Taxes 3,780
“ Subscriptions 62,130 “ Printing & Stationery 1,410
“ Sundry Expenses 5,350
“ Fair Receipts 7,200 “ Wages 2,520
“ Variety Show Receipts (Net) 12,810 “ Fair Expenses 7,170
“ Interest 690 “ Honorarium to Secretary 11,000
“ Bar Collections 22,350 “ Payments for Bar Purchases 17,310
“ Sale Proceeds of Old Car 9,000 “ Repairs 960
“ Cost of New Car 46,800
“ Balance c/d : Cash at Bank 10,350
1,39,050 13,9050

City Club
st
Income and Expenditure Account for the year ended 31 March, 2008
Dr. Cr
Rs. Rs. Rs. Rs.
ToRent 2,400 By Subscription 62,130

Rates & Taxes 3,780 Add: Amount Due
On 31.3.08 2,940
“ Printing & Stationery 1,410 65,070
“ Wages 2,520 Less: Amount Due
“ Honorarium to Secy. 11000 On 31.3.07 3,600 61470
“ Add: O/S on 31.3.08 1000 12,000 “ Profit on Sale of
“ Sundry Expenses 5,350 Old Car [Note 1] 3300
“ Repairs 960 “ Profit from Bar
“ Depreciation : [Note 5] 6000
On Car [Note 1] 9360 “ Variety Show
On Premises
[5% of 60600] 3030 12,390 Receipts (net) 12810
“ Income from Fair :
“ Surplus (Excess of Receipts 7200
Incomes over Less : Expenses 7170 30
Expenditure, transfer 43,490 “ Interest 690
to Capital Fund)
84,300 84,300
Ilustration 5 :
Progressive Education Society submits to you the following Receipts & Payments Account
and Income & Expenditure Account for the year ended 31st March, 2008.

Dr. Receipts and Payments Account for the year ended 31.3.08 Cr.
Receipts Amt. Rs Payments Amt. Rs.
To Balance b/d 450 By Printing Charges 75
“ Interest : 2006-07 100 “ Advertisement 141
2007-08 150 250 “ Salary to staff 1,300
“ Tuition Fees : (including payment
2007-08 1000 for 2006-07)
2008-09 100 1,100 “ Rent 520
“ Entrance Fees : “ Miscellaneous Expenses 110
2007-08 420 “ Furniture Purchased 670
“ Membership Fees : “ Balance c/d 1,374
2006-07 300
2007-08 1150
2008-09 390 1,840
“ Miscellaneous Income 130
4,190 4,190
Dr. Income and Expenditure Account for the year ended 31.3.08 Cr.
Expenditure Rs. Income Rs.
To Printing Charges 80 By Tuition Fees 1100
“ Advertisement 150 “ Membership Fees 1150
“ Rent 600 “ Miscellaneous Income 130
“ Salary to Staff 1200 “ Interest 160
“ Miscellaneous Expenses 110
“ Excess of Income over
Expenditure 400
2540 2540

You are asked to prepare the Balance Sheet of the Society as on 31st March , 2007 and 31st
March , 2008 :
Additional information :
As on 31st March , 2007, the society had :
Investment Rs. 4000; Furniture Rs. 2000; Library Books : Rs.1,500
Working Note :
A. For the Balance Sheet as on 31.3.2007
i) Salary to staff
Rs.
Payment as per R & P A/c (including payment for 2007-08) 1300
Less: Payment for 2007-08 as per Income & Expenditure A/c 1200
Outstanding on 31.3.2008 100
ii) Membership Fees of 2006-07 received in 2007-08 Rs. 300
Membership Fees Receivable (or due to be received) on 2007 = Rs. 300
iii) Interest Rs. 100 for 2006-07 received in 2007-08
Outstanding Interest Receivable Rs. 100
B. For the Balance Sheet as on 31.3.2008
i) Outstanding/prepaid Expenses
Amount payable Amount paid Prepaid Outstanding to
as per I & E A/c as per R & P A/c be paid
Rs. Rs. Rs. Rs.
Printing Charges 80 75 — 5
Advertisement 150 141 — 9
Rent 600 520 — 80

ii) Acerued income / Income Received in advance :

Amount payable Amount paid Received Accrued
as per I & E A/c as per R & P A/c in advance income
Rs. Rs. Rs. Rs.
Tuition Fees 1,100 1000 — 100

— 100 (2008-09) 100 —
Membership Fees 1,150 1150 — —
— 390 (2008-09) 390 —
Interest 160 150 — 10
iii) Entrance Fees Rs. 420 recorded in R & P A/c but not in I & E A/c Entrance Fees
Capitalised Rs. 420
Solution :
Progressive Education Society
Liabilities Amount Assets Amount

Rs. Rs.
Capital Fund 8,250 Furniture 2,000

(Excess of Assets over Liabi.) Investments 4,000
Outstanding Salary 100 Library Books 1,500
Interest Receivable 100
Membership Fees Receivable 300
Cash 450
8,350 8,350


Rs. Rs. Rs. Rs.
Capital Fund 8250 Furniture 2000
Add : Surplus 400 Add : Purchase 670 2670
Entrance Fees
Capitalised 420 9070 Investments 4000
Incomes Received in Library Books 1500
Advance :
Tuition 100 Interest Receivable 10
Membership Fees 390 490 Tuition Fees
Receivable 100
Outstanding
Liabilities for : Cash 1374
Printing Charges 5
Advertisement 9
Rent 80 94
9654 9654
Ilustration 6 :
Preparation of R & P A/c, I & E A/c and Balance Sheet for the initial/starting year of a club
from information given.
The following information were obtained from the books of Delhi Club as on 31.3.2008 at the
end of the first year of the club. You are required to prepare Receipts and Payments Account,
Income and Expenditure Account for the year ended 31.3.2008 and a Balance Sheet as at
31.3.2008 on mercantile basis :
i) Donations received for Building and Library Room Rs. 2,00,000.
ii) Other revenue income and actual receipts :

Revenue Income Actual Receipts

Rs. Rs.
Entrance Fees 17,000 17,000

Subscription 20,000 19,000
Locker Rents 600 600
Sundry Income 1,600 1,060
Refreshment Account — 16,000
iii) Other expenditure and actual payments :

Revenue Expenditure Actual Payments
Rs. Rs.
Land (Cost Rs. 10,000) — 10,000
Furniture (Cost Rs. 1,46,000) — 1,30,000
Salaries 5,000 4,800
Maintenance of Playgrounds 2,000 1,000
Rent 8,000 8,000
Refreshment Account — 8,000
Donation to the extent of Rs. 25,000 were utilised for the purchase of Liabrary Books, bal-
ance was still un utilised. In order to keep it safe, 9% Govt. Bonds of Rs. 1,60,000 were
purchased on 31.3.2008. Remaining amount was put in the Bank on 31.3.2008 under the
term deposit. Depreciation at 10% p.a. was to be provided for the whole year on Furniture
and Library Books.
Please note that :

1. This is the first year. The Club has no Capital Fund at the beginning.
2. Donation must be capitalized as it has been made towards Building and Library
Room.
3. The Investments in 9% Govt. Bonds have been made on the closing day of the year.
So no interest has accrued.

Solution :
Delhi Club
Dr. Receipts and Payments Account for the year ended 31 March, 2008 Cr.

Rs. Rs.
To Donations for Building By Land 10,000
and Library Room 2,00,000 “ Furniture 1,30,000
“ Entrance Fees 17,000 “ Salaries 4,800
“ Subscription 19,000 “ Maintenance of
Playgrounds 1,000
“ Locker Rents 600 “ Rent 8,000
“ Sundry Incomes 1,060 “ Payments for Refreshments 8,000
“ Receipts from
Refreshment “ Library Books 25,000
Account 16,000 “ 9% Govt. Bonds 1,60,000
“ Balance c/f :
Overdraft 1,08,140 “ Term Deposit with Bank 15,000
3,61,800 3,61,800

Dr. Income and Expenditure Account for the year ended 31 March, 2008 Cr
Rs. Rs. Rs. Rs.
ToSalaries 4,800 By Entrance Fees 17,000
Add:- Outstanding 200 5000 Less:- Capitalised —— 17,000
“ Maintenance of
Playground 1,000 “ Locker Rent 600
Add:- Outstanding 1,000 2,000
“ Rent 8,000 “ Sundry Incomes 1,060
Add: Accrued 540 1,600
“ Depreciation on:- “ Net Income from
Refreshment:
Furniture @ 10%p.a. 14,600 Receipts 16,000
Library Books@10%p.a 2,500 17,100 Less:- Payment 8,000 8,000
‘ Surplus (Excess of Subscriptions 19,000
Income over Add: Receivable
Expenditure) 15,100 On 31.3.08. 1,000 20,000
47,200 47,200

Balance Sheet as on 31.3.2008
Rs. Rs. Rs. Rs.
Capital Fund Land 10,000

Opening Balance Nil Furniture 1,46,000
Add : Surplus 15,100 15,100 Less:Depreciation 14,600 1,31,400
Building &
Library Fund 2,00,000 Library Books 25,000
Creditors for Furniture 16,000 Less:- Depreciation 2,500 22,500
Creditors for Term Deposit
Liabilities for: with Bank 15,000
Salaries 200 9% Govt. Bonds 1,60,000
Maintenance of
Playground 1,000
Bank Overdraft 1,08,140 Subscription 1,000
ReceivableAccrued
Sundry Income 540 1,540
3,40,440 3,40,440

EXERCISE
Problem 1 :
A summary of Receipts and Payments of Bakers Club for the year ended 31st March, 2008

To Opening Balance 3,000 By Salaries & Rent 1,500
“ Subscription 20,000 “ Electric Charges 300
“ Donations 5,000 ‘’ Sports Expenses 1,000
“ Entrance Fees 1,000 “ Sports goods purchase 9,000
“ Interest 100 ‘‘ Books purchase 5,000
“ Charity show Receipts 2,400 “ Miscellaneous Expenses 700
“ Charity show Expenses 2,000
“ Investment 8,000
“ Closing balance 4,000
31,500 31,500
Following information are available at the end of the year :

(i) Of the total subscriptions received Rs. 500 for 2006-07 and Rs. 600 for 2008-09 but
Rs. 100 is due for 2007-08.
(ii) The total sum received on Entrance fees is to be transferred to Capital Fund.
(iii) Salary is remaining due to be paid Rs. 300.
(iv) Interest is receivable Rs. 500.
The club had the following assets on the opening day of the year Sports goods Rs. 3,000;
Books Rs. 2,000; Investment Rs. 6,000.
As on 31.3.08 : spors goods valued at Rs. 10,000.
From the above information prepare an Income and Expenditure Account for the year ended
31.3.08 and Balance sheet as on that date.
(Ans & Hints : Surplus Rs. 14,200. Balance sheet come Rs. 35,600)
Opening capital Fund Rs.14,500

Problem 2.
Receipts and Payments Account Monster Club for the year ended 31st March, 2008.
Dr. Cr.
To Cash in hand 50 By Salaries 2,400
“ Cash at Bank 565 “ Rent 720
“ Subscription “ Postage 30
“ (including Rs. 150 for 06-07 “ Printing & Stationery 255
“ and Rs. 100 for 08-09) 4,550 “ Electricity charges 300
“ Interest on Investments 2,000 “ Meeting Expenses 150
“ Bank Interest 25 “ Purchase of library books 1,000
“ Sale of Furniture 200 “ Investment in bonds 1,000
“ Cash in hand 155
“ Cash at Bank 1,380
7,390 7,390
The following additional information is supplied to you—
1. On 1st April. 2007 the club had the following assets and liabilities : (a) Invest
ments Rs.40,000; (b) Furniture Rs. 3,000; (c) Library Books Rs. 5,000; (d) Liability
for Rent Rs.60 and Salary Rs. 200.
2. On 31st March, 2008 Rent Rs. 80 and Salary Rs. 300 were in arrear.
3. The book value of furniture sold was Rs. 250.
4. The club has has 45 members with an annual subscription of Rs. 100 each.
Prepare the Income & Expenditure Account of the Club for the year ended 31st March, 2008
and the Balance Sheet as on that date.
(Ans: SurplusRs.2,500; Total of Balance Sheet on 31.3.08. Rs. 51,485]
Capital Fund (as on 1.4.07) Rs. 48,505.
Problem 3.
The following particulars relate to International Club for the year ended 30.608. You are
required to prepare therefrom an Income and Expenditure Account for the year and a Bal-
ance Sheet as on 30.6.08.

Dr. Cash Book Cr.

Rs.. Rs.
To Balance b/d 2,350 By Salaries 1200
“ Entrance Fees 300 “ Electricity 120
“ Subscription “ Newspapers and Journals 525
2006-07 50 “ Fixed deposits 2,500
2007-08 3,500 “ Utensils 200
2008-09 75 3,625 “ Payment to creditors 1,000
“ Profit from Refreshment 100 “ Balance carried c/d 1,150
“ Locker Rent 200

“ Sundry Income 120
6,695 6,695
Entrance fees to be Capitalised.
The assets and liabilities on 1st July 2007 were Utensils. Rs. 800 Furniture Rs. 2.500:Consum-
able stores Rs. 350 and Creditors Rs. 1,200.
On 30.6.08 value of consumable stores was Rs. 700; creditors amounted to Rs. 550: the sub-
scriptions outstanding were Rs. 75 for 2007-08 toRs. 100 for 2006-07 and the interest ac-
crued on fixed deposit was Rs, 25.
(Ans: Surplus 2,050 ; Capital Fund on 1.7.07 Rs. 4,950; Total of Balance Sheet on 30.06.08
Rs.7,925)
Consumable stors Purchased during the year Rs. 350; Consumable stores used during year
Rs. 100
Problem 4.
From the following particulars related to Anand Charitable Hospital, prepare an Income
and Expenditure Account for the year ended 30th June, 08 and a Balance Sheet on that date.

Receipts & Payments Account for the year ended 30.6.08
Dr. Cr.

Balance in hand on 1.7.07 7,130 Payments for Medicines 30,590
Subscriptions 48,000 Honorarium to Medical staff 9,000
Donations 14,500 Salaries to House Staff 27,500
Interest on Investment @ 7% 7,000 Petty Expenses 460
Proceeds from Annual Day 10,450 Equipment Purchase 15,000
Expenses for Annual Day 751
Closing Balance (30.6.08) 3,779
87,080 87,080
Additional information :
On 30.6.07(Rs.) On 30.6.08 (Rs.)
Subscription Receivable 240 280
Subscription Received in Advance 64 100
Stock of Medicines 8,810 9,740
Value of equipment 21,200 31,600
Buildings 40,000 38,000
Outstanding liability to Medicine suppliers 10,000 8,000
(Ans: Deficit Rs. 6,517; Capital Fund on 1.7.07 Rs. 1,67,316; Total of Balance Sheet on 30.6.08
Rs, 1,83,399; Medicine consumed during the year Rs.27,660)

Problem 5.
D Literary Society showed the following position on 31st December. 2007 Balance Sheet as
at 31st December, 2007
Liabilities Rs. Assets Rs.
Capital Fund 79,300 Electrical Fittings 15,000
Outstanding Expenses 700 Furniture 5,000
Books 40,000
Investment in
Securities 15,000
Cash at Bank 2,500
Cash in hand 2, 500
80,000 80,000
Receipts and Payments Account for the year ending on 31st December, 2007
To Balance b/d By Electric Charges 720
Cash at Bank 2,500 ‘’ Postage & Stationery 500
Cash in hand 2,500 Telephone charges 500
Entrance Fees 3,000 Books Purchased (1.1.07) 6,000
Membership Subscriptions 20,000 Outstanding Expenses 700
Sale proceeds of Old Rent Account 8,800
Newspapers 150 Investment in Securities
Hire of lecture Hall 2,000 (1.7.07) 4,000
Interest on Securities 800 Salaries A/c 6,600
Balance c/d : Cash at Bank 2,000
Cash in hand 1,130
30,950 30,950
You are required to prepare an Income & Expenditure Account for the year ending on
31.12.2007 and a Balance Sheet on that date after incorporating the following adjustments
(i) Membership subscriptions included Rs. 1.000 received in advance.
(ii) Provide for outstanding Rent Rs. 400 and Salaries Rs. 300.
(iii) Books to be depreciated @ 10% including additions. Electrical Fittings and
Furniture are also to be depreciated at the same rate.
(iv) 75% of the Entrance Fees are to be capitalised.
(v) Interest on Securities to be calculated at 5% p.a.
[Ans: Deficit Rs. 1670; Total ol Balance Sheet an 31.12.07 As. 81,580]

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ACCOUNTING FOR NON-PROFIT SEEKING ORGANISATIONS

This study note includes -

● Final Accounts and Balance Sheet of Non-Profit Seeking Concerns

3.1. FINAL ACCOUNTS AND BALANCE SHEET OF NON-PROFIT

A. Receipts & Payments Account

5. It is a summary of Cash Book.

6. It follows Real Account

114 FINANCIAL ACCOUNTING

B. Income & Expenditure Account

1. It follows Nominal Account.

4. All Capital incomes and Expenditures are excluded.

8. If expenditure is more than in come, it is a deficit, and is deducted from Capital or

FINANCIAL ACCOUNTING 115

PROFORMA INCOME & EXPENDITURE ACCOUNT

Calculation of opening capital Fund : ( If not mentioned)

Opening Capital Fund = Openeng Assets - Opening Liabilites.

116 FINANCIAL ACCOUNTING

Receipts & Payments Account Income & Expenditure Account

Some Important Considerations

1 Capital Fund : It is also called “General Fund” or “Accumulated Fund.” It is actually

FINANCIAL ACCOUNTING 117

118 FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING 119

Statement Showing Capital Fund as on 31.12.07

Cash in hand 1,000

Capital Fund on 1.1.07 7600

Receipts Amt. Rs. Payments Amt. Rs.

120 FINANCIAL ACCOUNTING

1. Cash Defalcation by Cashier :

Dr. Cash Account Cr.

Particulars Amount Particulars Amount

FINANCIAL ACCOUNTING 121

2.Rent & Rates Rs.

Paid from Bank 460

Particulars Amount Amount Particulars Amount Amount

122 FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING 123

Particulars Amount Particulars Amount

2. Purchase of Sports Equipment

To Balance b/d 26,000 By Depreciation 3,000

To Cash (Purchases Balance Figure) 4000 “ Balance c/d 27,000

3. Salaries Paid by Cash

Particulars Amount Particulars Amount

124 FINANCIAL ACCOUNTING

Outstanding Audit Fees 2,000 Cash in hand 13,900

FINANCIAL ACCOUNTING 125

Balance Sheet as on 31.12.2007

Outstanding Salaries 4,500 Cash in hand 16,000

126 FINANCIAL ACCOUNTING

Cash in hand 450 NIL

FINANCIAL ACCOUNTING 127

(4) Calculation of Bar Parchases

128 FINANCIAL ACCOUNTING

ToRent 2,400 By Subscription 62,130

FINANCIAL ACCOUNTING 129

130 FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING 131

ii) Acerued income / Income Received in advance :