ACCOUNTING FOR NOT-FOR-

PROFIT ORGANISATION
G.VIJAYA KUMAR
GOLIVK@GMAIL.COM
9866003883
 INTRODUCTION
 Not-for-profit organizations are to serve its members and
the society in general.
 These organizations will come into existence to promote
Arts, Science and Religion.
 These organizations do not declare and pay any dividend
to its members.
 The surplus received from the activities can be utilized
to achieve pre-determined goals .
 The main source of income is from Subscriptions, fees
and donations from others.
 CAPITAL EXPENDITURE
 Capital Expenditure is that expenditure which
results in the acquisition of an Asset or which
results in increase of earning capacity
 In brief, if the benefits of an expenditure are
expected to accrue for a long time.
 REVENUE EXPENDITURE

 Any item of expenditure whose benefit expires

within a year or expenditure which merely
seeks to maintain the business or to keep assets
in good working condition is revenue
expenditure.
 Example are, Expenses incurred in the normal
course of business such as expenses of
administration etc.,
 DISTINCTION BETWEEN CAPITAL
EXPENDITURE AND REVENUE EXPENDITURE
Capital Expenditure Revenue expenditure
1. Benefit of capital expenditure for 1. Benefit of revenue expenditure
more than one accounting year. expires with in one accounting year.

2. Generally capital expenditure is 2. Revenue expenditure is of

of Non-recurring in nature recurring in nature

3. Capital expenditure is in huge 3. Revenue expenditure is in small

amounts payments

4. Capital expenditure is shown on 4. Revenue expenditure is shown on

the Asset side of the Balance sheet the debit side of the income and
expenditure account.
 DEFERRED REVENUE EXPENDITURE
 A heavy expenditure of revenue nature incurred for
getting benefits over a period of years.
 Preliminary Expenses , exceptionally heavy repairs,
heavy advertisement, expenditure incurred in moving the
business to a more convenient place etc.,
 They are spread over a period of three to five years.

 Every year, a part of such expenditure is charged to

profit & loss account and the unwritten off portion is
shown in Balance Sheet till it is completely written off.
 CAPITAL AND REVENUE RECEIPTS
 Amount received  Amount realized
by way of loan, on the sale of
sale of a fixed goods in which the
asset is capital proprietor deals.
receipt. Interest on
investments etc.,
 TYPES OF DONATIONS
 General Donations  Specific Donations
Large Amount Small Amount To be To be recorded on the
recorded To be recorded liability side of the
on the liability on credit side balance sheet for eg.,
side of B/S of I & E Account  Donations for
Buildings etc.,
 Donations for mineral
Water.
 Legacy: amount received by the
organization as per the “Will” of a person is
called legacy. It is non-recurring in nature
and to be treated as capital income, and
shown on the liability side of Balance sheet.
 Life Membership: Life membership is paid
only once in lieu of annual Subscriptions.
Hence to be treated as capital receipt and
shown on liability side of Balance Sheet.
 Entrance Fee:
 Fees paid by new members at the time of joining the
organization is known as entrance fees. There is an argument
that the fees is paid only once by members, it is clearly of non-
recurring nature and hence it should be treated as capital
receipt and it should be shown on the liability side of balance
sheet.
 However, there is another way of thinking is that the members
keep joining and leaving the organization and it is felt this is of
recurring in nature and should be treated as revenue income
and shown on the income side of I & E a/c.
 Note: If the problem is silent it is to be treated as revenue
income and if it is mentioned that the entrance fees is to be
capitalized it should be shown on the liability side of balance
sheet
 ENDOWMENT FUND
 An Endowment fund is a kind of investment fund that is
held by a non profit organization , and amounts are
withdrawn frequently from the fund in order to meet
general as well as specific needs. The fund consists of
the number of investments made a well as income earned
on such investment
 PREPARATION OF RECEIPTS AND PAYMENTS
ACCOUNT
 The Following points are to be kept in mind while
preparing the receipts and payments account.
 1. It starts with opening balance of cash and bank
balance.
 2. All receipts are recorded on the debit side and all
payments are recorded on the credit side.
 3. Irrespective of the period in which the transactions
takes place, it records all items of revenue and capital
nature which affect flow of cash, the transaction of
previous year, current year and subsequent years are
recorded.
 4. It finds out the balance of cash and bank at the end of
the period under consideration.
PROFORMA
FROM THE FOLLOWING RECEIPTS AND PAYMENTS ACCOUNT, PREPARE
INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDING 31-3-18
Receipts and payments account for the year ended 31-3-2018.
To balance b/d 60,000 By land 10,000
To Subscriptions 35,000 By Buildings 40,000
To Entrance Fees 5,000 By Furniture 10,000
To Sundry Receipts 5,000 By Sports Material 5,000
To sale of old news By General Expenses 8,000
papers 500
By Magazines 500
By Balance c/d 32,000
Total 1,05,000 Total 1,05,500

Additional Information:
1) Capitalize 50% of entrance fee
2) Subscriptions still outstanding amount to Rs.5,000
3) Depreciate sports material by 10%
 INCOME AND EXPENDITURE ACCOUNT FOR THE
YEAR ENDING 31-3-2018

To General Expense 8,000 By. Subscription 35,000

To Magazines 500 (+) out standing 5,000 40,000
To Dep. on sports. mate 500 By. Entrance Fees 2,500
By. Sundry receipts 5,000
To Surplus 39,000 By. Sale of old new paper 500
______ ______
48,000 48,000
 GVK CLUB GIVES YOU THEIR RECEIPTS AND PAYMENT
ACCOUNT AND OTHER INFORMATION. PREPARE INCOME AND
EXPENDITURE ACCOUNT FOR THE YEAR ENDING 31-3-2018
Receipts and payments account for the year ended 31-3-2018.

To balance b/d 3,800 By Salaries 20,000

To Subscriptions 90,000 By General Expenses 4,000
To Donations received for AC 80,000 By Furniture 1,55,000
To Interest on investments 10,200 By purchase of Share 20,000
To Sale of old Furniture 42,000 By Stationary 22,000
_______ By Balance c/d 5,000
Total 2,26,000 Total 2,26,000
Additional Information:
1) Outstanding subscriptions on 31-3-2018 Rs.5,000

2) Subscriptions Received in advance on 31-03-2018 Rs.500

3) Value of old furniture sold Rs.45,000

 INCOME AND EXPENDITURE ACCOUNT FOR THE
YEAR ENDING 31-3-2018

To Salaries 20,000 By. Subscription 90,000

To General Expenses 4,000 (+) out standing 5,000
85,000
(-) Received in Advance 500 84,500
To Stationary 22,000 By Interest on investments 10,200
To loss on sale of furniture
(45,000 -42,000) 3,000
To Surplus 45,700 ______
94,700 94,700
 FROM THE FOLLOWING INFORMATION PREPARE THE INCOME AND EXPENDITURE ACCOUNT:

Subscription Received 1,14,000

(Including last year subscriptions Rs.14,000 )
Outstanding subscriptions 40,000
Salaries (Including last year salaries Rs.2,400 ) 19,200
Outstanding salaries 3,200
Sundry expenses 4,000
Tournament Expenditure 8,000
Meeting expenditure 16,000
Travelling expenses 6,400
Books Purchased 18,000
News papers 8,000
Rent 9,600
Postage and Telephone etc., 13,600
Printing and stationery 4,000
Donations 6,000
Sale of old news paper 400
 INCOME AND EXPENDITURE ACCOUNT FOR THE
YEAR ENDING…………
Expenditure Amount Income Amnt
To Salaries 12,400 By Subscription 1,14,000
(-) Last years 2,400 (+) Out standing 40,000
16,800 1,54,000
(+) Out Standing 3,200 20,000 14,000 1,40,000
(-) last years
To Sundry Expenses 4,000 By Donations 6,000
To Tournament Expdr 8,000 By Sale of Newspa 400
To Meeting Expenditure 16,000
To Travelling Expenses 6,400
To News paper 8,000
To Rent 9,600
To Postage & Telegram 13,600
To Printing & Stationary 4,000
To Surplus 56,800 ________
1,46,400 1,46,400

Note:1. Purchase of books is capital Expenditure and hence not considered.

 PROBLEM ON INCOME AND EXPENDITURE AND BALANCE SHEET
 From the following receipts and payments account of Ideal Sports Club and the sub joined information
prepare Income and Expenditure account for the year ended 31 st March, 2015 and Balance sheet as on
that date.
 Receipts and payments account of Ideal Sports Club for the Year ending 31-3-2015.
Receipts Amount Payments Amount
To balance b/d 13,500 By Salaries 14,000
To subscriptions By General Exps 3,000
Year 2013-14 2,500 By Stationery 2,000
Year 2014-15 24,000 By Books 8,000
Year 2015-16 2,000 28,500 By News papers 4,000
To land Rent 8,000 By Furniture 10,000
To Income from Entertain 4,000 By Balance c/d 14,000
To Sale of Newspapers 1,000 _______
55,000 55,000

 Other Information:
 1. The Club has 50 members each paying an annual subscription of Rs. 500, subscriptions outstanding
for the year 2013-14 Rs. 2,500
 2. For the year 2014-15, salaries outstanding amounted Rs.1,000, the salaries paid during current year
include Rs.3,000 for last year.
 3. On 01-04-2014, the club owned building valued Rs. 1,00,000, furniture Rs.10,000, Books
Rs.10,000, Capital fund Rs.1,33,000.
 4. Buildings are to be depreciated @ 10%.
 INCOME AND EXPENDITURE ACCOUNT OF IDEAL SPORTS
CLUB FOR THE YEAR ENDING 31-3-2015
Expenditure Amount Income Amount
To Salaries 14,000 By. Subscription 24,000
add: Outstanding 1,000 (+) out standing 1,000 25,000
15,000
Less: last years 3,000 12,000
To general Expenses 3,000 By Land Rent 8,000
To Stationery 2,000 By Income from Entertain 4,000
To News papers 4,000 By Sale of old new paper 1,000
To Deprecation on Bldgs 10,000
To Surplus 7,000 ______
38,000 38,000
 BALANCE SHEET OF IDEAL SPORTS CLUB AS ON 31-3-2015
Liabilities Amount Assets Amount
Capital fund 1,33,000 Cash in hand 14,000
Add: Surplus 7,000 1,40,000
Subscriptions received in Books 10,000
advance 2,000 Add: Additions 8,000 18,000
Outstanding salaries 1,000 Outstanding subscriptions 1,000
Furniture 10,000
Add: Additions 10,000 20,000
Buildings 1,00,000
Less: Depreciation 10,000 90,000
________ ________
1,43,000 1,43,000
THANK YOU