Non profit organization

Name of student
S.N NAME ROLL NO.

1. Shikhar Naurohi 103

2. Ankita Yadav 104
3. Mayank tickoo 105
4. Rajveer gaur 107
5. Ankit kumar 108
6. Aarish jamal 089
Table of content
S.N topics
1 NON PROFIT ORGANISATION -meaning , feature and
difference b/w profit and non profit organisation

2 INCOME AND EXP. A/C- meaning , special feature and

format of income and exp. A/C & difference B/W income exp.
and receipt & payment A/C

3 ACCOUNTING TREATMENT OF IMP. ITEM OF INCOME AND EXP.

A/C

4 BALANCE SHEET- explanation of assets and liabilities

and formate of balance sheet

5 ILLUSTRATION
What is non profit organisation ?

nonprofit organization, also known as a non-business entity, not-for-

profit organization , or nonprofit institution, is a legal entity organized
and operated for a collective, public or social benefit, in contrast with
an entity that operates as a business aiming to generate a profit for its
owners. A nonprofit is subject to the non-distribution constraint: any
revenues that exceed expenses must be committed to the organization's
purpose, not taken by private parties.
 Feature of NPO
1. Main Aim is Service: The basic aim of non-profit organizations is to serve the
society. They are working for the benefit of the society as a whole
2. Profit is not the Criterion: Non-profit organizations are formed for some idealistic
purposes such as religious, charitable or providing education etc. Earning of profits can
never be their aim.

3. Surplus not Distributed among its Members: there may be excess of income over
expenditure or excess of expenditure over income. Unlike other business, surplus or
deficit of non-profit organizations is not distributed among its members.

4. Separate Entity: The separate entity concept is equally applicable to non-profit

organizations. Such organizations are treated as a separate entity distinct from its
members.
5. Unique Names Connoting their Working: The names of non-profit
organizations denote the nature and style of their functioning. For example, JMD
Educational Society, Shri Sai Keertan Mandli, Shri Sunder Dev Sports Club etc.

6. Management by Elected Persons: These organizations are run and managed

by elected members.

7. Major Funds from Contributions and Donations etc : Usually, non-profit

organizations are not self sufficient to run their activities with the revenue generated
from their own sources, so they depend upon the subscriptions, donations and grants
received from various government departmen
Difference b/w profit and non profit
organization
basis Profit organization Non profit organization
Meaning A legal entity, which A non-profit organization is a
operates for earning legal entity, which operates
profit for the owner, is for serving the society as a
known as For-profit or whole.
Profit organization.

Motive Profit motive Service Motive

Form of Sole proprietorship, Club, Trust, Public hospitals,
organization Partnership firm or society, etc.
company
Management Sole proprietor, partners Trustees, committees or
or directors, as the case governing bodies.
may be.
Source of revenue Sale of goods and Donation, subscription,
services. membership fee etc.
basis Profit organization Non profit organization

Commenced through Capital contributed by Funds from donation,

the owners. subscription,
government grant and
so on.

Financial Statement Income statement, Receipt & Payment A/c,

Balance Sheet and Cash Income & Expenditure
flow statement A/c and Balance Sheet.

Money earned over and Profit, is transferred to Surplus is transferred

above capital account. to capital fund.
 Income and Expenditure
Account
An income and expenditure account is a revenue
( or nominal ) account of not-for-profit ( non trading
organisations.

It is a summery of income and expenditures for a

given accounting period generally of the year .

It is equivalent to P&L A/c of business enterprises

,that is , it serves the purpose of P&L A/c .

It is prepared on accural basis .

Special Features of Income and
Expenditures A/c
(1) Nature of A/c: It is a nominal a/c .

(2)Nature of Items recorded in it: Only items of revenue nature are recorded in it . All items of
capital nature are ignored while preparing it.

(3) Omission of opening and closing balance of cash .


(4)Adjustments: This is prepared in the same manner in which a P&L A/c is
prepared. As such adjustments relating to the current year such as
depreciation, out. expenses, prepaid expenses ,etc are taken into
consideration while preparing the income and expenditure a/c .
(5) It records income and expenditures of current period : in other word , all
item relating to previous year and future years are excluded while preparing
it .
(6)Purpose : the closing bal. of the statemant reveals surplus or deficit. If
the credit side exceeds the debit, it reveals surplus and on the other hand , if
the debit side exceeds the credit, it reveals deficit. The surplus is added to
the capital fund and the deficit is deducted from it .
Basis of the Receipts & Payments A/c Income & Expenditure A/c
difference
Nature It is summary of Cash book It is like a P&L A/c of profit
seeking entity
Sides Debit side records receipts and Debit side is expenses and
Credit side records payments on Credit side income &
gains
Types of Account It is real account It is nominal account

Opening Balance It starts with opening balance of It has no opening balance

cash and bank
Closing Balance Closing cash in hand/at bank or Indicates either surplus or
overdraft at bank deficit
Capital and Records receipts and payments Income and expenditure of
Revenue items of both items only revenue nature
Period of Income All receipts and payments Income and expenditure of
& Expenses irrespective of the period the current year only
Balance Sheet No need as all items are It is a must for remaining
included capital items
Transfer of To next year R&P A/c To Capital fund in B/S
Closing Balance
(Proforma) Income and Expenditure A/c for
the year ended….
Expenditure Amount Income
Amount

To Salaries xxx By Subscription xxx

To Charities xxx By Donation received xxx
To Rent xxx By Admission fee received xxx
To Donation paid xxx By Grant received xxx
To Stationery xxx By Rent received xxx
To Loss on sale of asset xxx By Interest received xxx
To Depreciation xxx By Profit on sale of asset xxx
To Surplus xxx By Deficit xxx
( Excess of income over (Excess of expenditure over
expenditure ) income)

xxx xxx
Accounting treatment of imp. Items of
inc. and exp. a/c
ENTRANCE FEE/ADMISSION FEE : Entrance Fees or Admission
Fees is the amount that a person pays at the time of becoming a
member of a Not-for-Profit Organization. It is a revenue receipt.
Therefore, we account it as an income and credit it to Income and
Expenditure account

LIFE MEMBERSHIP FEE : The amount of life membership fee is

initially credited to a special fund account. Each year an amount
equal to annual subscription is credited to income and expenditure
account till the amount in special fund is fully exhausted.

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 Income and Expenditure
DONATIONS: The donation is the amount given to the
organization by supporters and well wishers. Sometime members of
the organization also provide donation in addition to their regular
subscription.
The donation may be general or for a special purpose such as donation
for constructing a building or donation for buying some sports items or
other assets etc.

1) General donation - It is accounted as an income and credited to Income

and Expenditure Account
.2) Specific donation - It is capitalised and is shown on the liabilities side
of the Balance Sheet .

The small and recurring donations should be credited to income and

expenditure account for the relevant period. But if the amount of
donation is large and non-recurring in nature, it should be added to
the capital fund of the organization.
 Balance sheet
Just as in profit seeking concerns a balance
sheet is to be prepared even by non-profit
organization to show the financial position
on the last date of the accounting year. It is
prepared from the balances remaining after
the transfer of all revenue incomes and
expenditures to the Income and Expenditure
account. It contains only capital items , i.e.,
assets, liabilities and the capital fund.
Assets
1. Fixed assets appearing in the previous year’s balance sheet should be
adjusted for assets purchased, sold and depreciation during the year.
Only adjusted amount will appear in the closing balance sheet.

• If some new asset has been purchased during the year, the payment for
such asset must have been shown on the credit side of receipts and
payment account. Such assets must be added to previous year’s assets
and shown on the asset side of current year’s balance sheet.

• If some asset has been sold during the year , it must be appearing on the
debit side of receipts and payment account. The book value of such
assets should be deducted from the concerned asset of the previous year.
If some depreciation is to be provided, it should be
deducted accordingly.
2. Prepaid expenses , accrued income and investments
should be shown on the asset side.
3. The closing balance of cash and bank as shown by
receipts and payment account should be shown on the
assets side. However, if there is overdraft balance of
bank, it will be shown on the liabilities side.
Liabilities
1. The loans appearing on the liabilities side of the
previous year’s balance sheet should be seen the receipts
and payments account should be scanned to find out
whether any new loan has been raised or the old loans
have been repaid.
2. If any new loan has been raised it will be found on the
debit side of the receipts and payment account. It should
also be shown on the liabilities side.
3. Outstanding expenses and the incomes received for the
next year will be shown on the liabilities side.
.

4. If there is a special receipt like donations for

building, it will be shown on the liabilities side.
5. Any excess of assets over liabilities in case of a non-
profit organization is called capital fund. It occupies
the same position which the capital account occupies
in case of profit seeking entities. First of all opening
capital fund is calculated by deducting the opening
liabilities from opening assets and then the current
year’s surplus as shown by income and expenditure
account will be added to it or the deficit, if any, will
be deducted from it. The net amount of capital fund
will be shown on the liabilities side.
balance sheet
From the following receipts and payments of friends
football club for the year ending 31st march 2017.  Prepare
income and expenditure for the year ending 31st March 2017
and the balance sheet as on that date.
additional-
(i) The club had furniture of Rs.12,000 on 1st April
2016. Ignore depreciation on furniture. 
(ii) Subscription outstanding for 2016-17 –
Rs.600
(iii) Stock of sports materials on 31.3.2017 –
Rs.100 
(iv) Capital fund as on 1st April 2016 was
Rs.23,000
In the books of Friends Food Ball Club, Income and expenditure
account for the year ended 31.03.17
what is receipt&payment A/C
Receipt and payment account functions as a
summary of cash payments and receipts of an
organisation during an accounting period. It
provides a picture of the cash position of a
Not-for-Profit organisation. It does not
differentiate between the receipts and
payments, whether they are of capital or
revenue in nature and records all cash and
bank transactions of both capital and revenue
nature.
fearures of receipt and payment
A/C
 is abridged addition of cash book - it is, in effect, a summary of cash book.

 All cash receipts during the whole year are recorded on its left hand (i.e., debit)
side. While all the cash payments during the whole year written on its right hand
(i.e., credit) side, arranged in a classified form.

 Cash receipts and cash payments of both capital and revenue nature are recorded
here.
 Only cash transactions are recorded in this account.It generally shows a debit
balance.
 In case of bank overdraft balance, however, its net balance may be credit. Again,
it may also show nil balance but such occasion is rare.
 Its closing balance indicates closing cash in hand and closing cash at bank.It is
not an account within the double entry system –

 it is a statement only.It is prepared on the last day of the accounting year.

 advatages
Total receipts and total payments under various
heads are available at a glance.
The amount of cash in hand at the year end can be
ascertained.
The correctness of cash book can be verified
through it. The total of debit side of cash book
will agree with the total of receipt side of this
account. On the other hand, the total of credit
side of cash book will agree with that of payment
of this account.