05/15/2024

Accounting for Not-

for-Profit
Organisations

Introduction
• Non-profit making organizations such
as clubs, societies and associations
usually do not have a professional and
full-time accountant, the preparation
of final accounts for these
organization is quite different from
before.

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Accounting terms in non-

profit making organizations
Terms used Corresponding terms in
commercial business
Accumulated fund Capital

Receipts and payments account Cash book

Income and expenditure account Profit and loss account

Surplus of income over expenditure Net profit

Deficit of expenditure over income Net loss

Receipts and payment

account
• It is summary of bank and cash
transactions
Receipt and payment account for the year ended 31 Dec XXXX

Receipts Tshs Payments Tshs

Bank balance 1.1XX X Sports stadium expenses X
Cash balance 1.1.XX X Wages X
Membership fees X Purchase of tea and drink X
Sales of fixture X Sundry expenses X
Receipts from tea or drink X Bank balance 31.12.XX X
Cash balance 31.12.XX X
X X

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Preparation of final
accounts
1. Bar Statement of Profit or Losss
and other Comprehensives Income –
to compute the bar profit (one of
the income of non-profit making
organization and include in I&E)
2. Income and expenditure account
(I&E) – to compute the surplus or
deficit of the organization for one
year
3. Balance sheet – to show the financial
position of the organization
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Bar Statement of
Profit of Loss and
other Comprehensive
Income

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Bar Statement of Profit or Losss

and other Comprehensives Income
• It may be called Bar Trading and Profit
and loss account
• Bar sales, bar purchases and expenses
related to the bar operation will also be
included

XXXX Sport club

Bar Statement of Profit or loss and…for the year ended XXXX
Tshs Tshs
Sales (wk1)
X
Less : COGS
Opening stock X
Add: Purchases (wk2) X
Less: Closing stock X X
Gross Profit
X Expenses related bar trading only
Less: Expense
Barmen wages (wk3) X
Barmen commissions X
Bar expenses X
Depreciation of Bar equipment X X
Net profit to I&E X
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wk1
Total Debtors
Bal b/f X Cash X
Sales (bal.fig.) X Bal c/f X
X X

wk2
Total Creditors
Bank X Bal b/f X
Bal c/f X Purchases (bal. Fig.) X
X X

wk3
Expense/income incurred = cash paid/received + prepaid last
year – accrued last year – prepaid
this year + accrued this year

Income and
Expenditure Account

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Income and Expenditure

Account
XXXX Sport Club
Income and Expenditure account for the year ended XXXX

Expenditure Income

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XXXX Sport Club

Income and Expenditure Statement for the year ended XXXX
Tshs Tshs
Income
Income received X
Subscriptions – Annual subscriptions X
- Life membership fees X
- Joining fees/Entrance fees X
Profit on fund raising activities
( Related Proceeds – Related Expenditure ) X
Profit on disposal X
Donations/Subsidies received X
X
Expenditure
Expenses incurred X

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Tshs Tshs
Subscriptions/bad debt written off X
Loss on fund raising activities
(Expenditure- proceed) X
Loss on disposal X
Depreciation X
Bar loss (Bar statement of profit..) X X
Surplus/ (deficit) X

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Balance Sheet

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Balance Sheet as at 31 Dec XXXX

Cost Dep. Net
Non-current Assest Tshs Tshs Tshs
Plant & Machinery X X X
M.V. X X X
X X X
Current Assets
Bar Stock X
Subscription in arrears X
Prepayment X
Bank X
Cash X
X
Less:Current Liabilities
Creditors – Bar purchases X
Subscription in advance X
Accrued expenses X
Working Capital X
X

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Tshs Tshs
Tshs
Accumulated Fund
Balance as at opening date X
Add/Less: Surplus/(Deficit) of I&E X
Add :Life membership fees (when life
members die) X
: Material donations/legacies received X
X
Life Membership Fund X
Entrance Fees/Joining Fees X
Other Fund (e.g. Training /Building Fund) X
X
Non-current Liabilities X
X

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Fund Raising Activities

• The profit or loss on the fund raising activities
must be computed before transferring to income
and expenditure account
Example

Receipt and payment account

Receipts Payments
Proceeds of dance party 9,500 Printing of dance party tickets 500
Receipts from refreshment 5,000 Purchase of refreshments 4,500
Sundry expenses of dance party1020

Additional information:
The opening stock of refreshments was valued at Tshs3,200 and the
closing stock of refreshments was valued at Tshs2,400

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Ans:
Income and expenditure
Income
Profit from dance party
(9500-500-1020) 7,980

Expenditure
Loss from the sale of refreshment
(3,200+4,500-2,400-5,000) 300

The related revenue and expense are group together

to compute profit or loss on some activities

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Donations
• Donations/Subsidies received
– Ordinary donations/subsidies
Dr Bank
Cr Donations/Subsidies With the amount received

Dr Donations/subsidies
Cr Income and expenditureTransferring to income and expenditure

– Large donations/legacies
For general purposes Dr Bank
Cr Accumulated fund

For specific purposes Dr Bank

Cr special fund(e.g. training fund,
Building fund) 19

• Donations to other charities

– For general purposes
• Dr Donation to XXX With the amount paid

• Cr Bank
– For special purposes
• Dr Income and Expenditure Transferring to I&E as
an expense
• Cr Donation to XXX

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Subscriptions
• Annual Subscription
• Life membership fund
• Entrance fees/joining fees

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Annual Subscriptions
• Example 1
Receipt and Payments account for the year ended 31 Dec 2016
Receipts
Subscriptions from members for
2015 110,000
2016 2,472,000
2017 80,000
2,662,000

Additional information:
Subscription in arrears at 31 Dec 2016 = Tshs. 132,000
Subscription in advance at 1 Jan 2016 = Tshs 60,000

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Ans:
Income and Expenditure account for the year ended 31 Dec 1996

Income Tshs
Subscriptions (2,472,000+60,000+132,000) 2,664,000

Subscription= Cash received from members+Opening

prepayment-opening accrued + closing accrued-
closing prepaid

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• Example 2
Receipt and Payments account for the year ended 31 Dec 2016
Receipts
Subscriptions from members for
2015 100,000
2016 2,472,000
2017 80,000
2,562,000
Additional information:
1. 1 Jan 2016 31 Dec 2016
Subscription in arrear Tshs110,000 Tshs132,000
Subscription in advance Tshs 60,000 Tshs 80,000
2. The club has a policy of writing off any subscription that
are outstanding for more than one year

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Ans:
Income and Expenditure account for the year ended 31 Dec 1996

Income Tshs Tshs

Subscriptions (2,472,000+60,000+132,000) 2,664,000

Expenditure
Subscription written off (110,000-100,000) 10,000

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Example 3

The financial year end of the club is 31 December, but

The subscriptions are payable in advance on 1 October each
Year. The subscriptions received on 1 October 2015 were
Tshs 8,000,000 and 1 October 2016 were Tshs 12,000,000 without
any subscription in arrears.

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Ans:
Income and Expenditure account for the year ended 31 Dec 1996

Income Tshs

Subscriptions
from 1 Jan-30Sept2016 (Tshs8,000,000*9/12) 6,000,000
from 1 Oct-31 Dec2016 (Tshs12,000,000*3/12) 3,000,000 9,000,000

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Life membership fund

• Life membership fees are income
earned over a long period, and
therefore, they should not be
treated as income in one year.
• Usually a life membership fund would
be set up, part of it would be written
off in each year as income.

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Several points be noted

• A life membership fund can be written
off over:
– The number of years of annual subscriptions
purchased
– The estimated average life of life members
Dr Bank With the amount of the life
Cr Life membership fund membership fees received
Dr Life membership fund With the part of life
Cr Income and expenditure membership fees to be
recognized as income in the
current year 29

• Example 4
•From 1 January 2016, the club began to recruit life
members.
•On joining the club each life member has to pay a life
membership fee of Tshs.4,000,000.
•As at 31 December 2015, 20 people had been admitted
as
life members.
•In 2016, 5 people joined the club as life members
•The life membership fee is to be recognized as income
evenly
over 10 years.

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Ans:
Life membership fund

2015 Tshs’000 2015 Tshs’000

Dec 31 I&E Dec 31 cash (20*Tshs4000) 80,000
(80000*1/10) 8,000

Dec 31 Bal c/d 72,000

80,000 80,000

Income and Expenditure account for the year ended 31 Dec

2015
Income Tshs’000

8,000
Subscriptions
Balance Sheet (Extract)
2015
Tshs’000
Life membership subscription 72,000
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Ans:
Life membership fund

2015 Tshs 2015 Tshs

Dec 31 I&E Dec 31 cash (20*Tshs4000) 80000
(80000*1/10) 8000

Dec 31 Bal c/d 72000

80000 80000

2016 Tshs’000 2016 Tshs’000

Dec 31 I&E Jan 1 Bal b/d 72000
(20000*1/10)+ Dec 31 Cash (5*4000) 20000
(80000*1/10) 10000

Dec 31 Bal c/d 82000

92000 92000

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Income and Expenditure account for the year ended 31 Dec

2015 2016
Income Tshs’000 Tshs’000

8,000 10,000
Subscriptions

Balance Sheet (Extract)

2015 2016
Tshs’000 Tshs’000
Life membership subscription 72,000 82,000

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• Life membership fund can be

transferred directly to the
accumulated fund when an individual life
member dies or it can be treated
different according to the policy of the
organisation

Dr Bank With the amount of the life

Cr Life membership fund
Dr Life membership fund
Cr Accumulated fund
membership fees received
With the part of life
membership fund written off
to the accumulated fund when
a members dies 34

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• Example 5
•The life membership fund was Tshs8,000,000 as
at 1 January2016.
•In 2016, two people joined the club as life
members.
•During the year 2016, three life members died.
•It is the club’s policy to transfer the life
membership fund of Tshs. 400,000 each directly
to the accumulated fund when life members die.

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Ans:
Life membership fund
2016 Tshs 2016 Tshs’000
Dec 31 Accumulated Jan 1 Bal b/d 8000
fund (3*Tshs400) 1200 Dec 31 Cash (2*400) 800

Dec 31 Bal c/d

(19*Tshs400) 7600

8800 8800

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Entrance fees/joining
fees
• Entrance /joining fees can be included as
income in the year that they are received, or
written off over the number of years
determined by the clubs

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Write off entrance fees wholly in the year they are received
Dr Bank With the amount received
Cr Entrance fees/joining fees
Dr Entrance fees/joining fees Transferring wholly to the
Cr I&E I&E as income
Write off entrance fees over a number of years
Dr Bank With the amount received
Cr entrance fees/joining fees
Dr Entrance fees/joining fees Transferring the portion to be
Cr I&E recognized as income

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• Example 6
•The balance of the entrance fees as at 31 December 2017 was
made up of:
Year of joining Balance
2015 Tshs.1,000,000
2016 Tshs 1,500,000
2017 Tshs 3,000,000
•On joining the club, each new member has to pay an entrance
fee of Tshs 500,000
•The entrance fee is to be recognized as income evenly over four
years
•During the year of 2018, 10 new members had been admitted

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Income and Expenditure account for the year ended 31 Dec

2018
Income Tshs’000

Entrance Fees (1000+1500*1/2+3000*1/3+500*10*1/4) 4000

Balance Sheet (Extract)

Tshs’000

Accumulated fund X
Add surplus of I&E X
X

Entrance fees (1500*1/2+3000*2/3+500*10*3/4) 6500

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