CHAPTER 1: Financial Statements Of Not For Profit Organization

Learning Objectives
The study of this Chapter would enable you to understand:
➢ Meaning and Concept of Not – for – Profit Organisation
➢ Characteristics or features of Not – for – Profit Organisation
➢ Difference between Not – for – Profit Organisation and Profit Earning Organisation
➢ Meaning and Features of Receipts and Payments Account
➢ Difference between Receipts and Payments Account and Cash book
➢ Meaning and Features of Income and Expenditure Account
➢ Difference between Income and Expenditure Account and Profit and Loss Account
➢ Difference between Receipts and Payments Account and Income and Expenditure Account
➢ Preparation of Balance Sheet
➢ Fund Based Accounting
➢ Preparation of Income and Expenditure Account and Balance sheet from Receipts and
Payments Account with additional information

MEANING AND CONCEPT OF NOT – FOR – PROFIT – ORGANISATION

Enterprises are profit – earning entities since their main objective is to earn profit. In contrast to these entities,
there are also Not– for - Profit Organisations whose main objective is not to earn profit but to serve the society
and its members.
Not – for - Profit Organisations, also known as Non -Profit Organisations are set up with the objective to
further cultural, educational, health, religious, public services to public and / or members, etc. not with the
purpose of earning profit.
Examples of Non –Profit organisations are: Schools; Colleges; Public hospitals (Govt.); Literary societies;
Societies for promotion of Sports, Arts and Culture; Social welfare organisations; Clubs; etc.
Non - Profit Organisations require Funds for their activities (Operations) which are normally sourced through
its members in the form of Donations; Membership Fees and Subscriptions.
The members of Non - Profit Organisations are called as Trustees or Managing Committee.
The Funds received by Non - Profit Organisation includes the following:
a) Donations; b) Membership Fee or Entrance Fee; c) Subscription; d) Loans and e) Grants (From Government
and / Institutions).
Difference between Non - Profit Organisations and Profit Earning Organisation
Basis Non - Profit Organisations Profit Earning Organisation
(Business Firm)
1. Purpose for which set - up It is set - up with a purpose to further Purpose is to earn profit
cultural, educational, religious,
professional or public service.
2. Sources of Funds They are raised by way of They are raised as Capital by the
Membership Fee, Subscription, proprietor, partners (in the case of
Donations and Surplus from Partnership Firms) and Share
Operations. In the Balance Sheet, it Capital or borrowed funds (in the
is shown as General Fund or Capital case of Companies). Profits not
fund or Corpus Fund or Accumulated distributed to partners and
Fund. Shareholders are shown as
Reserves.
 3. Financial Statements
4. Surplus / Profit
5. Distribution of Surplus /
Profit
Financial statements includes: i)
Receipts and Payments Account, ii)
Income and Expenditure Account
and iii) Balance Sheet.
Balance of the income and
Expenditure Account is either
Surplus or Deficit.
Profits are not distributed among its
members.
Financial statements includes:
i) Trading Account; ii) Profit and
Loss Account and iii) Balance
Sheet.
Balance of the Profit and Loss
Account is either Net Profit or Net
Loss.
Profits are distributed among its
members.

Financial Statements of Not - for - Profit Organisation: Not-for-Profit Organisation prepares annual or final
accounts showing the financial transactions of the organisation for its members and to comply with statutory
requirements (i.e. Legal requirements).
Financial Statements or Final accounts of a Not-for-Profit Organisation include:
1. Receipts and Payments Account
2. Income and Expenditure Account and
3. Balance Sheet

1. Receipts and Payments Account: Receipts and Payments account is a summary of cash and bank
transactions of not–for–profit organisations prepared at the end of each financial year (Accounting period)
shown under appropriate heads of accounts.
It is a real account in nature. The receipts and payments account begins with the opening balances of cash and
bank and ends with closing balances of cash and bank. All cash receipts are shown on the debit side and all cash
payments are shown on the credit side of this account.
All cash receipts and cash payments whether of capital or revenue nature will be recorded in the receipts and
payments account. They may relate to the current year or the previous years or the subsequent years. It means
that irrespective of the period for which the amount is received or paid, it is recorded if cash is received or paid
during the year.
Note: Adjustments for Outstanding expenses; Prepaid expenses; Accrued income or Income received in
advance; Bad debts and Non–cash items such as depreciation are not shown in receipts and payments
account since it is prepared on cash basis of accounting, i.e. Transactions and events which have been
received or paid in cash are shown in the account.

➢ Limitations of Receipts and Payments Account:

i) It doesn’t show expenses and incomes for the accounting period besides it shows the expenses and incomes
of earlier and following periods.
ii) It doesn’t show whether the Not-for-Profit Organisation is able to meet its day-to-day expenses out of its
income or not.
• Capital (Receipts / Expenditure) & Revenue (Receipts / Expenditure)

✓ Capital Receipts: Capital receipts are those receipts which are not revenue receipts or are receipts for the
purpose specified by the donor.
 Examples: Life Membership Fee; Corpus Donations; Building Fund; Receipts from sale of Fixed Assets;
Legacies; Specific donations; Special funds; Tournament fund; Prize fund; etc.

✓ Capital Expenditure: Capital expenditure is an expenditure the benefit of which extends beyond one
accounting period, i.e. it spreads over more than one accounting period. It results in the acquisition of assets
which in the case of Not-for-Profit Organisations, are used for the furtherance of its activities.
Examples: The cost of land and building and any additions thereto. Purchase of sports equipment; Purchase
of books for library; etc.

✓ Revenue Receipt: Revenue receipts are those receipts which are received / earned as an income by the Non-
Profit Organisation from their activities / operations.
Examples: Entrance Fee; Subscription for the year from members; General Donations; Rent Received; Sale
of old Newspapers; Interest on investment; Interest on fixed deposit; Sale of (old) sports materials;
Collection or receipts relating to: a) Tournament; b) Sports; c) Matches; d) Entertainments; e) Dinner; etc.

✓ Revenue Expenditure: Revenue expenditure is that expenditure benefit of which expires within the
accounting period. In the context of Not-for-Profit Organisations, revenue expenditure means expenditure
incurred for social or charitable activities for which it is set up but excluding the capital expenditure.
Examples: Salaries to staff; Rent; Educational grants; Honorariums paid; Sports material used; Insurance;
etc.

❖ Steps in preparation of receipts and payments account

Following are the steps involved in the preparation of receipts and payments account:
(i) Record the opening balance of cash in hand and favourable bank balance on the debit side of receipts and
payments account. If there is bank overdraft, it must be recorded on the credit side.
(ii) Actual cash receipts during the year are recorded on the debit side and actual cash payments during the year
are recorded on the credit side.
(iii) While recording cash receipts and payments, no distinction needs to be made between revenue and capital
items. Similarly, no distinction needs to be made whether the amount received or paid relates to the current
period, previous period or future period.
(iv) If the total of the debit side is more than the credit side, the balancing figure will appear on the credit side.
It represents the closing balance of cash or bank.
(v) If the total of the credit side is more than the debit side, the balancing figure will appear on the debit side. It
represents bank overdraft.
➢ Format of Receipts and Payments Account

In the books of..........

Receipts and Payments Account
For the year ended 31st March 20……….
Dr. Cr.
Receipts Payments

To Opening Balance of Cash in Hand By Electricity Charges / Lighting Charges

To Opening Balance of Cash at bank By Taxes paid

To Subscriptions / Members Subscription By Salaries / Staff salary

For Previous Year By Salaries of Nurses
For Current Year By Salaries and Wages
For Next Year By Wages and Salaries
By Salaries to doctors
(Polio eradication project)

To Specific Subscriptions / Subscriptions for specific-

purpose
To Subscription for annual dinner
To Collection for special dinner
To Subscription for tournament
To Donations / General Donations
To Specific Donations
To Donations for Building and Library room
To Donations for Building fund
To Donations (Medical Camp)
To Donations (Billiards Table)
To Entrance Fees / Admission Fees
To Rent received for club hall / Rent Received
To Interest received on investments / Interest on
investments
To Interest received / Interest received from bank
To Interest on % Fixed deposit
By Honorarium to secretary / Coaches
By Printing & Stationery / Printing
By Petty cash expenses / Petty expenses
By Insurance premium paid / Insurance
By Rent
By Postages / Postage and Courier / Postage
Charges
By Newspapers and Magazines / Journals /
Periodicals
By Investments / Investments Purchased /
General Investments
By Stationery
By Entertainment Expenses
By Miscellaneous Expenses / Miscellaneous
Payments
By Purchase of land
By Purchase of furniture
By Wages
By Maintenance of playground / Ground
maintenance Fees / Repair of ground

To Lockers rent By Refreshment payments

To Refreshment receipts / Sale of refreshments By Library books / Books Purchased

 Receipts Payments

To Government Grants By Purchases of Government Bonds

To General Grants By Term deposits with banks
To Grant for Specific Purpose** By Charity given
To Government Grants (Young talent search and
By Match expenses
development)**
To Government Grants (Pulse polio / Polio eradication
By Honorarium
project)**
To Government grants for purchase of books** By General expenses / General charges
To Donations for Tournament** By Sports material purchased

To Donations for Match** By Purchase of Fixed Assets

To Sale of old newspapers / old Magazines / Waste
By Defence Bonds
paper
To Sale of Grass By Bicycles
To Sale of Investments By Board, Laundry and Domestic help

To Sale of old furniture By Rates and Taxes

To Sale of old sports materials / Sale of used sports By Cost of car

materials / Sale of Ball,
Bat etc
To Sale of old materials By Expenses of car
To Sale of sports equipment By Drugs and incidental expenses
To Sale of Fixed Assets By Office expenses

To Sale of Drama tickets / Proceeds from Drama By Sports Equipment

tickets / Sale of dramatics (Play tickets)
To Sale of science equipment By Telephone charges
To Receipts from entertainment / Proceeds from By Travelling expenses / Conveyance
entertainment expenses
To Surplus from entertainment / Surplus from
By Fixed Deposits
entertainment event / Surplus from cultural programme
By Tournament Expenses / Expenses on
To Fees from non-members
Tournament
To Life membership fees* By Building
By Project expenses (Young talent search
To Subscriptions for Governor's Party**
and development)
To Match Fund / Receipts for match fund / Match
By Sundry expenses
fund receipts
To Endowment Fund By Lecturer's Fees
 Receipts Payments

To Profit on entertainment By Upkeep of grounds / Upkeep of fields

To Hire of ground / Court By Audit fees
To Legacies / Legacy Donation - (General) By Expenses on teams
To Legacies / Legacy Donation - (Specific)** By Rates and insurance

To Income from concerts By Secretary's Honorarium

To Income from lectures By Bat, ball etc.
To Dividends By Repair expenses / Repairs and Renewals
To Miscellaneous Receipts / Miscellaneous income By Billiard Table
To Proceeds of Seminar By Paper, ink etc
By Drama expenses / Dramatics (Play)
To Proceeds from charity show / Charity show proceeds
Expenses
To Sundries income / receipts By Advertisements
To Receipts on account of specific fund By Municipal Taxes
To Grant-in-aid By Medicines (Polio eradication project)
To Tournament fund receipts By Seminar expenses
To Tournament fee By Interest
To Donation received for pavilion By Doctor's Honorarium

To Prize fund receipts By Maintenance Expenses

To Exhibition fund receipts By Equipment

To Club annual day collections By Expenses on Charity show / Show

To Balance C/d (Closing Balance – Bank overdraft) By Prize distributed

By Repayment of Loan

By Marking and repairing of Tennis court

By Construction of new court

By Tournament Fund investments

By Creditors for Sports Equipment /
Medicines / Stationery / Materials
By Scholarship to needy students
By Gardening expenses

By Special dinner expenses

By Bank charges
 Receipts Payments
By Laboratory expenses

By Exhibition expenses

By Grass seeds

By Rent and rates / Rent and Taxes /

Rent, Rates and Taxes
By Meeting Expenses

By Balance C/d (Closing Balance)

Cash in hand
Cash at bank

2. Income and Expenditure Account: Not-for-Profit Organisation are not setup for the purpose of earning
Profit. Therefore, they don’t prepare Profit and Loss Account. Instead, they prepare Income and Expenditure
Account at the end of the accounting period to determine Surplus or Deficit by matching its Revenue receipts
with Revenue Expenses.
Income and expenditure account is a summary of income and expenditure of a not–for–profit organisation
prepared at the end of an accounting year. It is prepared to find out the surplus or deficit pertaining to a
particular year.
It is a nominal account in nature in which items of revenue receipts and revenue expenditure, relating to the
current year alone are recorded. It is prepared following the accrual basis of accounting.
It is just like preparing a profit and loss account. In this account, incomes are shown on the credit side whether
they have been received or not and expenses are shown on the debit side whether they have been paid or not.
Apart from cash items, non-cash items such as income accrued but not received (Subscriptions outstanding),
loss or gain on sale of fixed assets, depreciation, outstanding expenses, prepaid expenses, etc. will also be
recorded.
Capital Receipts (incomes) / Capital Expenditures are not considered while preparing Income and Expenditure
Account.
It helps to enable the members to know the working of the organisation and to know whether its income is
sufficient to meet its expenses. It can be prepared from a given receipts and payments account.
Note: The difference between the two sides is either Surplus or Deficit.
Surplus: When total of credit is more than the total of debit side. (i.e. Income side is greater than the
expenditure side)
Deficit: When total of debit is more than the total of credit side. (i.e. Expenditure side is greater than the income
side).
➢ Format of Income and Expenditure Account.

In the books of..........

Income and Expenditure Account
For the year ended 31st March 20……….
Dr. Cr.
Expenditure Income

To Salaries By Subscriptions / Members Subscriptions

To Wages By Donations / General Donations

To Rent By Entrance Fees / Admission Fees / Fees
To Rent and rates By Rent received from club hall
To Insurance / Insurance Premium By Interest received on investments /
Interest on investments
To Audit Fees By Locker Rent
To Printing and Stationery By Refreshment Receipts
To Postage and Telegram By Government Grants

To Postages / Postage and Courier / Postage By Sale of old Newspapers / Sale of waste
Charges papers
To Stationery / Stationery Purchased By Profit on sale of Fixed Assets
To Honorarium By Receipts and Payments, A/c
To Honorarium to secretary / Coaches By Income & Expenditure
To Doctor's Honorarium By Profit on Entertainment
To Telephone Expenses By Accrued interest on fixed deposit /
investments
To Repairs / Repairs and Renewals By Hire of ground
To Depreciation By Sale of old bats, balls etc
To Loss on sale of Fixed Assets By Interest received from bank
To Sports / Medicine / Stationery / Materials By Sale of drama tickets / Proceeds of
used (Consumed) drama tickets
To Electricity Charges / Lighting Charges By Proceeds from Seminar / Profit from
Seminar
To Salaries / Staff salary By Current year Outstanding Subscriptions
To Salaries of Nurses (Add with current year Subscriptions)
To Salaries and Wages By Previous year Outstanding Subscriptions
To Wages and Salaries (Less with current year Subscriptions)
To Salaries to doctors (Polio eradication By Subscriptions Received in Advance at
project) the beginning of the year (Add with current
year subscription)
By Subscription Received in advance at the
end of the year (Less with current year
Subscriptions)
 Expenditure Income

To Petty cash expenses / Petty expenses By Proceeds from charity show

To Newspapers and Magazines / Journals / By Sundries income / receipts
Periodicals
To Entertainment Expenses By Miscellaneous Receipts / Miscellaneous
income
To Miscellaneous Expenses / Miscellaneous By Legacies / Legacy Donation -
Payments (General)
To Maintenance of playground / Ground By Deficit (Excess of expenditure over
maintenance Fees / Repair of ground income)
To Refreshment payments
To Library books / Books Purchased
To Charity given
To Match expenses
To General expenses / General charges
To Board, Laundry and Domestic help

To Rates and Taxes

To Expenses of car
To Drugs and incidental expenses
To Office expenses
To Travelling expenses / Conveyance
expenses
To Tournament Expenses / Expenses on
Tournament
To Sundry expenses
To Lecturer's Fees
To Upkeep of grounds / Upkeep of fields
To Expenses on teams
To Rates and insurance
To Drama expenses / Dramatics (Play)
Expenses
To Advertisements
To Municipal Taxes
To Taxes
To Seminar expenses
To Interest / Interest on loan
 Expenditure Income
To Maintenance Expenses
To Expenses on Charity show / Show

To Prize distributed
To Marking and repairing of Tennis court

To Scholarship to needy students

To Gardening expenses
To Bank charges
To Laboratory expenses
To Exhibition expenses
To Grass seeds

To Meeting Expenses
To Books and Periodicals
To Governor's Party Expenses
To Rent and Taxes
To Rent, Rate and Taxes
To Sports Material Written off

To Postage and Telephone

To Deficit on specific donations

To Bad Debts / Bad Debts Written off

To Surplus ( (Excess of income over

expenditure)

IMPORTANT NOTE
✓ It should be noted that income and Expenditure Account doesn’t have any opening
balance. Closing balance is either Surplus or Deficit which is transferred to Capital
Fund which is also known as General Fund / Corpus Fund / Accumulated Fund on the
liability side of the Balance Sheet.

✓ Income and Expenditure Account records only the Revenue receipts and payments
pertaining to the current accounting period, however income and expenditure relating
to the preceding (Previous) or succeeding (Next) accounting periods are excluded
while preparing the Income and Expenditure Account.
❖ Difference between Income and Expenditure Account and Profit and Loss Account
Basis Income and Expenditure Account Profit and Loss Account
1. Object Object of income and Expenditure Object of Profit and Loss Account is
Account is to determine Surplus i.e. to determine Net Profit earned or Net
excess of income over expenditure or Loss incurred.
deficit, i.e. excess of expenditure over
income
2. Prepared by It is prepared by Not for profit It is prepared by business enterprises
organisations
3. Method It is prepared from the Trial Balance, It is prepared from the Trial Balance
where complete set of books of and other information
accounts are maintained or from the
Receipts and Payments Account and
other information, where complete set
of books of accounts are not maintained
4. Balance The balance in the account is termed as The balance in the account is termed
Surplus or Deficit as Net Profit or Net Loss

➢ Difference between Receipts and Payments Account and Income and Expenditure Account
Basis Receipts and Payments Account Income and Expenditure Account
1. Purpose Purpose of the account is to show Purpose of the account is to show net
difference between two sides showing result of activities undertaken during
cash and bank balances at the end the year resulting in surplus or deficit
2. Nature It is a classified summary of cash It is like a Profit and Loss Account
transactions showing receipts and (Nominal Account).
payments under different heads for the
period (Real Account)
3. Form Debit side of this account records Debit side of the account records
receipts and credit side records expenses and losses and credit side
payments. records income and gains.
4. Balance Balance in the beginning is cash in hand There is no balance in the beginning.
and bank balance in the beginning and Balance at the end is either surplus or
balance at the end is cash in hand and deficit, which is transferred to capital
bank balance at the end. fund
5. Capital and It records Receipts and Payments during It records income and expenditure of
Revenue items the year of both capital and revenue only revenue relating to the current
nature. accounting period.
6. Contents It shows Receipts and Payments during It shows income and expenditures of
the year whether they relate to past, the current year alone.
current or succeeding (next) year.
7. Adjustments It is based on cash system of accounting. It is based on accrual system of
Hence, no adjustments are made. accounting. Hence, adjustments are
made for prepaid expenses,
outstanding expenses, accrued income
and income received in advance.
8. Depreciation It does not record non - cash items, It records non-cash items,
eg. Depreciation. eg. Depreciation
✓ Difference between Receipts and Payments Account and Cash Book
Basis Receipts and Payments Account
1. Basis It is a summary of cash book and is
prepared from the cash book.
2. Period Receipts and Payments account is
prepared at the end of accounting
year.
3. Date Transactions are not shown date wise but
are shown in summarised form, i.e.;
summarising transactions of one nature
together
4. Institutions It is prepared by the Not-for-Profit
Organisation.
5. Side Under it, there are receipts and
payments sides instead of debit and
credit side.
6. Ledger Folio There is no column for Ledger Folio.
Cash Book
It records each transactions of receipt t
and payment separately.
Cash book is maintained on daily
basis.
Transactions are recorded date wise
in the cash book.
It is prepared by all organisations be
it Not-for-Profit-Organisation or an
enterprise.
Cash book is divided into debit and
credit side.
Cash book has a separate column for
Ledger Folio.

❖ Outstanding Expenses and Prepaid Expenses

1. Outstanding Expenses: Any expenses that remains unpaid at the end of the current year is
known as Outstanding Expenses. Outstanding Expenses for the current year needs to be added
with the respective expenses on the debit side of Income and Expenditure Account since the
expense has already been incurred. Similarly any amount of current year outstanding paid during
the next year then it should be deducted from the respective payment i.e. expenses. Outstanding
Expenses will be shown on the Liability side of Balance Sheet.

2. Prepaid Expenses: Any expenses paid during the current year which includes a portion of
expenses payable for the next year is known as Prepaid Expenses. Prepaid Expenses amount has
to be deducted from the respective expenses made during the current year on the debit side of
Income and Expenditure Account. Prepaid Expenses will appear on the Asset side of the Balance
Sheet.

➢ Accrued Income and Income Received in Advance

1. Accrued Income: Any income which is earned during the current accounting year but not
received i.e. realised during the year is known as Accrued income. Accrued income for the
current year needs to be added along with the respective income on the credit side of Income and
expenditure account and the amount of Accrued income will appear on the Asset side of the
Balance Sheet.
2. Income Received in Advance: Sometimes earned revenue that belongs to a future accounting
period is received in the current accounting period, such income is considered as income received in
advance. It is also known as Unearned Income and is received before the related benefits are
provided.
This revenue is not related to the current accounting period, for example, Rent received in advance,
Commission received in advance, etc.
It is a personal account and shown on the liability side of a balance sheet.
➢ Accounting Treatment of Important items of Income and Expenditure Account
1. Entrance Fee / Admission Fee: Entrance Fee or Admission Fee is the amount paid by a person at the time
of becoming a member of a Not-for-Profit Organisation. Entrance Fee or Admission Fee is a revenue receipt
and therefore, is accounted as an income and credited to Income and Expenditure Account.

2. Life Membership Fee: Life Membership Fee is accounted as a Capital Receipt and added to Capital Fund in
the liabilities side of the Balance Sheet. It is not accounted as income because a life member pays membership
fee once and avails services all through his life.

3. Special Receipts: Special Receipts means receipts of amount for special occasions. For example, contributions
received for annual dinner. Such contributions are credited to separate account (Annual Dinner Account in this
case) and expenses against these receipts are debited to it. The balance is transferred to the Income and
Expenditure Account.

4. Donations: A charitable institution often receives donations. Donation received may be a general donation or
a specific donation.
(i) General Donation: General Donation is the donation in which the donor does not specify any condition for its
use. The amount of general donation is accounted as an income and credited to Income and Expenditure Account.
(ii) Specific Donation: In case the donor specifies the purpose for which the donation can be used, it is a Specific
Donation. For example, a donor donates Rs. 10,00,000 for a library. It means the donation received can be used
only for library, i.e., it is a specific donation. Specific donation is capitalised and is shown in the liabilities side
of the Balance Sheet.

IMPORTANT NOTE
Entrance/admission fees and general donations are shown as revenue receipts. Hence, they are credited to income
and Expenditure Account.

5. Legacy: Legacy is the amount received as donation by a Not-for-Profit Organisation under WILL of a deceased
person. The donor may or may not specify conditions for its use. In case, no condition is specified, it is accounted
as 'General Donation'. And if a condition is specified, it is accounted as 'Specific Donation'. It is accounted for in
the books of account as follows:
(i) General Donation: It is accounted as revenue receipt and thus, is credited to Income and Expenditure
Account.
(ii) Specific Donation: It is accounted as capital receipt and is credited to a specific 'Fund Account' maintained
for the purpose (e.g. Prize Fund). It is shown in the liabilities side of the Balance Sheet. It being a fund, principles
of Fund Based Accounting are applied, i.e., income relating to such fund is credited to the fund while expenses
are debited.

6. Grant: Grant received is a capital receipt and is shown in the Balance Sheet since it is received for a particular
purpose say to buy assets or to meet expenses say salaries. In the event of receipt of fund, Fund Based Accounting
is applied.

7. Sale of Used Sports Materials: Stock of Sports Material is shown in the assets side of the Balance Sheet.
Sports material consumed during the year is debited to Income and Expenditure Account and balance amount is
carried forward in the Balance Sheet.
In case, old sports material that was debited to Income and Expenditure Account is sold, the sale proceeds are
credited to Income and Expenditure Account, i.e., is shown as income.
In case, old sports material appears in the Balance Sheet and is sold, gain (profit) if any on sale of old sports
material (Sale Proceeds - Book Value) is credited to Income and Expenditure Account, i.e., is shown as income.
If the sale of old sports material results in a loss (Book Value - Sale Proceeds), it is debited to Income and
Expenditure Account.

8. Sale of Old Assets: Sale of an asset may result in gain (profit), if sale value is more than the book value; or
loss, if sale value is less than the book value; or neither profit nor loss, if sale value is equal to the book value.
Book Value of an asset as on the date of sale is determined after charging depreciation up to the date of sale. Sale
Value is credited to the Asset Account while gain (profit), if any, is credited or loss, if any, is debited to the
Income and Expenditure Account.

9. Sale of Old Newspapers: Amount paid for newspapers, magazines, periodicals, etc., is debited to Income and
Expenditure Account, it being a revenue expense. Thus, amount realised from sale of old newspapers, magazines,
periodicals, etc., is credited to Income and Expenditure Account.

10. Subscriptions: It is the amount paid by the members periodically (quarterly or half-yearly or yearly) so that
their membership remains alive. It is a source of income of Not-for-Profit Organisation.
Subscription received whether they relate to current, previous or next period, is shown in the debit side of the
Receipts and Payments Account.
Subscriptions relating to the current year whether received or not, are shown in the crédit side of the Income and
Expenditure Account.
Subscriptions not received, i.e., outstanding are shown in the assets side of the Balance Sheet. Subscriptions
received in advance for the following years are shown in the liabilities side of the Balance Sheet. Amount of
subscriptions to be shown in the Income and Expenditure Account is calculated as follows:

TABLE SHOWING CALCULATION OF SUBSCRIPTIONS FOR THE CURRENT YEAR

Particulars Rs.

Subscriptions received during the year (whether in respect of previous,

current or future period) as shown in Receipts and Payments A/c ...

Add: Subscriptions outstanding at the end of the year ...

Subscriptions received in advance in the beginning of the year ... ...

Less: Subscriptions outstanding in the beginning of the year ... ...

Subscriptions received in advance at the end of the year ... ...

Subscriptions to be shown in the Income and Expenditure A/c ...

In Account Form:

Dr. SUBSCRIPTIONS ACCOUNT Cr.

Particulars Rs. Particulars Rs.

To Outstanding Subscriptions A/c By Advance Subscriptions A/c

(Outstanding subscriptions in the (Advance subscriptions in the beginning)

beginning)

To income and Expenditure, A/c By Bank A/c (Subscriptions received

(Balancing Figure) during the current year)

To Advance Subscriptions A/c By Outstanding Subscriptions, A/c

(Advance subscriptions at the end). (Outstanding subscriptions at the end)

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30.06.2021

Chapter 1: Accounting For Not for Profit Organization

Accounting Period: 01.04.2019 – 31.03.2020

Friends Club Delhi

Receipts and payments Account for the year ended 31st March 2020

Dr Cr
Receipts Amt Rs. Payments Amt Rs.
To Balance b/d 44,000 By Electricity charges 34,400
To Subscriptions 3,76,000 By Taxes 5,000
To Donations 80,000 By Salaries & wages 2,15,000
To Entrance fees 43,000 By Honorarium to 25,000
To Rent realized from club 52,500 secretary 3,500
hall 29,500 By Printing & 9,000
To interest on investment Stationery 3,100
By Petty expenses 3,30,000
By Insurance
premium
6,25,000 By balance c/d 6,25,000
Cash in hand (bal fig)

Dr – Rs. 6,25,000

Cr – Rs. 2,95,000

Difference amt – Rs. 3,30,000 – Closing balance of cash in hand

2)
Oldmen Recreation Club
Receipts and payments Account for the year ended 31st March 2020

Dr Cr
Receipts Amt Rs. Payments Amt Rs.
To Balance b/d By Match expenses 6,000
Cash in hand 20,000 By Salaries 75,600
Cash at bank 50,000 70,000 By Rent paid 4,800
To Subscriptions By Electricity 7,600
2018 – 19 7,000 expenses 30,000
2019 – 20 1,21,600 By Books Purchased 20,000
2020 – 21 5,200 1,33,800 By 10% Investments 25,600
By balance c/d 1,23,950
To Donation for building 70,000 Cash in hand
To Donation for Match 14,000 Cash at bank
To Entrance fees 4,000
To Interest on investment 1750
2,93,550 2,93,550
Dr – Rs. 2,93,550

Cr. Rs. 1,69,600

Difference Rs. 1,23,950

Investment Amt – Rs. 30,000 (1.9.2019)

01.04.2019 – 31.03.2020 [7 Months – interest = 50 x 5/1 x 7/1 = Rs. 1750]

Subscriptions – Receipts (Details for CY (1.4.19 – 31.3.20) ; PY (1.4.18 – 31.3.19) ; NY (1.4.20 –

31.3.21) NNY (01.04.21 – 31.3.22))

Note: CY – Current Year

NY – Next Year

PY – Previous Year

NNY – Next to Next Year

01.07.2021

Accountants Club
Receipts and payments Account for the year ended 31st March 2020

Dr Cr
Receipts Amt Rs. Payments Amt Rs.
To Balance b/d By Rent 6,000
Cash in hand 500 By insurance premium 6,000
Cash at bank 1000 1500 By Sports material 4,000
To Subscription 10,000 purchased
To Entrance fees 10,000 By Newspapers and 1,200
To Life membership fees 10,000 Periodicals
To General Donations 10,000 By Furniture 10,000
To Locker Rent 4,000 By Salaries 14,500
To interest on 10% General 10,000 By Charity show 4,000
fund investment expenses 36,000
To Sale of old news papers 100 By Balance c/d
To proceeds from charity 25,900 Cash in hand 32,000
show 200 Cash at bank 4,000
To Sale of sports material
81,700 81,700
Dr – Rs. 81,700

Cr – Rs.77,700

Difference amt – Rs. 4,000

Outstanding – Added

Prepaid – Deduct Treatment for the Current Year

Accrued – Added

Advance – Deducted
Outstanding – Deduct

Prepaid – Add Treatment for the Previous Year

Accrued – Deduct

Advance – Add

02.07.2021

Fund Based Accounting

Donations: – 1. General Donations

2. Specific donations – eg. Donation for Building; Donation for matches; Donation
for pavilion

Funds: 2 Types 1) General Fund & 2) Specific fund

1) General fund / Capital fund / corpus fund

2) Specific fund: eg) Sports funds; Tournament funds; Match fund; Building fund; Pavillion fund;
Prize funds

All specific funds will be recorded in the Liability side of Balance sheet

However, any amount (Expenses) that exceeds the amount of the available fund should be
shown on the debit side of Income & Expenditure A/c.

Case 1

Eg. Match Fund – Rs. 1,50,000

During the year 01.04.2020 – 31.03.2021 = Received Donation for Match Rs. 2,50,000

Match Fund : Rs. 1,50,000

Add: Donation for Match: Rs. 2,50,000

Rs. 4,00,000

Less: Match expenses: Rs. 2,00,000

Final Match fund Amt – Rs. 2,00,000

Case 2

Match Fund – Rs. 1,50,000

01.04.2020 – 31.03.2021 = Received Donation for Match Rs. 2,50,000

Match Fund – Rs. 1,50,000

Add: Donation for Match – Rs. 2,50,000

Rs. 4,00,000

Match expense – Rs. 4,10,000

Match Fund – Rs. 1,50,000

Add: Donation for Match – Rs. 2,50,000

Rs. 4,00,000

Less: Match expenses: Rs. 4,00,000

Final Match fund Amt – Nil

Balance Rs. 10,000 will be shown on the debit side of Income & Expenditure A/c

Note: 1. If any amount from the specific fund is invested under any schemes, then the amount so
invested must be shown on the Asset side of the balance sheet.

2. The investments made will fetch some returns in the form of interest (Interest on investment)
such interest amount should be taken to the liability side of balance sheet and must be added along
with specific fund amt. and later deduct the expenses if any.

Eg. Match Fund – Rs. 1,50,000

01.04.2020 – 31.03.2021 = Received Donation for Match Rs. 2,50,000

Match Fund – Rs. 1,50,000

Add: Donation for Match – Rs. 2,50,000

Rs. 4,00,000

Given: 10% Investment of Match fund Rs. 3,00,000 (01.10.2020)

3,00,000 x 10/100 x 6/12 = Rs.15,000

Interest on 10% Match fund investment – Rs. 15,000

Actual Amt to be received – Rs. 30,000

Received Amt – Rs. 25,000

Receivable Amt = Rs. 5,000 – Accrued interest

Match expense – Rs. 4,10,000

Liability Rs. Assets Rs.

Match Fund 1,50,000 10% Match fund investments 3,00,000

Add: Donation for match 2,50,000

4,00,000

Add: Interest on MFI 15,000

4,15,000

Less: Match expenses 4,10,000

Final Match fund Amt – 5,000

03.07.2021

8) Balance sheet as at ……

Liabilities Amount Assets Amount

Rs. Rs.
Tournament Fund 80,000 66,000
Less: Tournament Expenses 14,000

9) Balance sheet as at ……

Liabilities Amount Assets Amount

Rs. Rs.
Tournament Fund 50,000 55,000
Add: Receipts from Tournament Tickets 20,000
70,000
Less: Tournament Expenses 15,000

Note: In NPO Final Accounts preparation includes Preparation of Income & Expenditure A/c and
Balance sheet

10) Case 1

Dr. Income and Expenditure Account Cr

Expenditure Amount Income Amount

Rs. Rs.
To Match Expenses 15,000

Balance sheet as at ……

Liabilities Amount Assets Amount

Rs. Rs.
Prize Fund 50,000 38,000
Less: Prizes Awarded 12,000
Case 2:

Dr. Income and Expenditure Account Cr

Expenditure Amount Income Amount
Rs. Rs.
To Prizes Awarded 19,000

Balance sheet as at ……
Liabilities Amount Assets Amount
Rs. Rs.
Match Fund 1,00,000 68,000 Investment of Match 60,000
Add: Interest on 3,000 fund investments
Match fund investments
1,03,000
Less: Match Expenses 35,000

Case 3: Everything remains constant as per case 2 except your Match expenses
Match expenses – Rs. 1,04,000
Dr. Income and Expenditure Account Cr
Expenditure Amount Income Amount
Rs. Rs.
To Prizes Awarded 19,000
To Match expenses 1,000

Balance sheet as at ……
Liabilities Amount Assets Amount
Rs. Rs.
Match Fund 1,00,000 68,000 Investment of Match 60,000
Add: Interest on 3,000 fund investments
Match fund investments
1,03,000 -
Less: Match Expenses 1,03,000
05-07-2021

Balance sheet of Aisko Club as at 31st March 2019 (Extract)

Liabilities Amount Assets Amount
Rs. Rs.
Tournament fund 150000 1,62,000 Tournament fund 1,50,000
Add: Income from 18000 - investments
Tournament fund investments Accrued interest 6000

1,68,000
Add: Accrued interest
6,000

1,74,000
Less: Tournament expenses
12,000

Outstanding amount for the current year – Add

Previous year outstanding amount received during the year – Subtract
Advance amount received during the current year – Subtract
Advance amount received during the previous year for the purpose of current year – Add
Prepaid Expenses of the current year – Subtract
Accrued income of the current year – Add

Note: If the item belongs to an Receipt category show them on the asset side of balance sheet
and if it is a payment in nature show them on the liability side of the balance sheet.

13) Balance sheet of as at 31st March 2021(Extract)

Liabilities Amount Assets Amount

Rs. Rs.
Match Fund 80,000 77,380 Match fund 72,000
Add: Interest on match 2,880 investment
Fund investments 82,880 Match fund bank 3,500
Less: Match expenses 5,500 balance