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Accounts

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Published in: Accountancy
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  1. I Statements Inanc„la of Not for profit Organisations
  2. Meaning These are those organisations which are established for a charitable or social purpose and not with a view to earn profit. These also render services to their members and to the society on voluntary basis. These non-profit seeking entities exist with a primary motive of providing service. Such as, a club provides sports and recreational medical services;
  3. :haracterstics/Features :- Such organisations are set up to provide service to a specific group or the public ch as education, health care, sports, entertainment etc. The main aim of these ons is to provide service either free of cost or at nominal rates and not to earn 5ince the basic objective of NPO is to render services such as social, religious, al, charitable, etc. so they take the form of clubs, schools, colleges, societies, trusts ble bodies. E LEGAL ENTITY:- As every organisation has distinct entity from its members, so 'O. Its name and entity is different from the people who have contributed towards fund. It takes birth by law and winds up in the same way.
  4. NO PROFIT MOTIVE:- These institutions do not operate with a view to earn profit rather their aim is to promote education, sports, charity, religion, culture, etc. ACCOUNTS:- They prepare financial statements at the end of their accounting period in the form of RECEIPTS AND PAYMENT ACCOUNT, INCOME AND EXPENDITURE ACCOUNT and BALANCE SHEET. OR SOURCES OF INCOME (FUNDING):- These organisations collect subscriptions from their members, grants from government, donations, income from investments etc. to meet the operating cost and cost of projects undertaken. SURPLUS NOT DISTRIBUTED AMONG rrs MEMBERS:- Current year's surplus in the form of excess of income over expenditure is not distributed among its members. It is added to Capital Fund. Pradhyumn Somani
  5. FINAL ACCOUNTS or NPOQ!! NPO prepares annual or final accounts reflecting the financial transactions of the organisation . Final accounts of NPO includes : 1. 2. 3. RECEIPTS & PAYMENT A/C INCOME & EXPENDITURE A/C BALANCE SHEET
  6. RECEIPTS AND PA YMENTSA/c RECEIVI'S AND PAYMENTS a/c is a summary of cash transactions . It records all receipts and payments , whether of revenue or capital nature , and irrespective of the period to which they relate. It begins with cash and bank balances in the beginning & ends with the cash & bank balances at the end of the accounting period . NOTE : No adjustments for o/s , depreciation , accrued • Income , etc. are made in it.
  7. SPECE/MENOF RECE/PTS ANDPA YMENTS"C
  8. Amount TO BALANCE B/D To Subscription To Donation To Legacy To Entrance Fee To Life membership fee To Endowment fund To Donation for Building To Tournament Fund To Lockers Rent To Sale of Assets To Sale of old newspapers / periodicals To Proceeds from charity show RECBVIS & PAYMEv7S A/C For the year ending Amount BY CAPITAL PAYMENTS Building Furniture Investments Tournaments expenses Books BY REVENUE PAY MENI'S Salary Honorarium Rent & Taxes Advertisements Electricity BY BALANCE C/D
  9. ILLUSTRATION • From the following particulars , prepare receipts and Payments a/c of metro club, Delhi for the year ended Dec. 31st ,20080pening balance of cash and bank on jan 1, 2008 was rs. 8,500 . • Subscription received for current year Rs. 30,000,previous year Rs. ,ooo & future year Rs. 1,000. Life membership fees Rs.7,ooo , investments Rs.30,ooo, Donations Rs.4,ooo, Tournament Fund Rs.4,ooo, Furniture Rs.15,ooo, Tournament expenses Rs.2,500, Salary Rs.7,ooo. Charge depreciation on furniture @ 10%p.a., Salary o/s Rs.400, Accured interest on investment Rs.500.
  10. Dr. Receipts To bal b/d TO Subscription: Previous year 2,000 Current year 30,000 FutureYear 1,000 To life membership fees To Donations To Tournament fund RECEIPTS & PAYMENTS A/C For the year ended 31st dec. , Amount 8,500 33,000 7000 4000 4000 56, 500 Payments By investments By furniture By tournaments expenses By salary By balance c/d Amount 30,000 15,000 2,500 7,000 2,000 56,500
  11. INCOME AND EXPENDITURE ACCOUNT o o Income and Expenditure is like a Profit&Loss a/c of a business firm. It should be noted that Income & Expenditure a/c does not have an opening balance . Closing balance is either surplus or deficit, which is transferred to Capital Fund, shown in the Balance Sheet. Income & Expenditure A/c is prepared on accural basis so
  12. SPECIMEN or INCOME ANDEXPEND/TURE PC
  13. To Salaries ADD, O/s at the end LESS O/s in the beginning LESS, PIP at the end ADD: P/p at the beginning To Rent To Insurance Premium To Printing & Stationary To Honorarium To Depreciation To Loss on Sale of Assets To Audit Fees To Surplus For the year ending ... By Subscriptions ADDO/s at the end LESS O/s in the beginning LESS adv. at the end ADD; adv.at the beginning By Entrance Fees By Donations By Interest on Investments By Misc. Receipts By Sale of Old Newspapers By Profit on Sale Assets By Deficit
  14. o BALANCE SHEET It is a statement that shows the financial position of an organisation or enterprise as at a particular date. The method of pr paring the Balance Sheet of a NPO is similar to that of a usiness firm. The surplus or deficit as per the Income & Expenditure A/c is transferred to the Capital Fund. VVhere Opening Balance of Capital Fund is not given, the same is arrived at by preparing the Opening Balance Sheet.
  15. ?O??? TOEbAL4NCE S/-1EE ? 0FN0T-r0K-morm OKGAN/SA TIONS
  16. CAPITAL EV,ND Orening [ulance ADD: Surplus LESS Deficit Life Membership Donations for buildings Entrance Fees SPECIAL FUNDS Match hand/tournament hand/h•ize hand Opening Eulance ADD, incl'tne LESS expenses Bank O/D Amount FIXED ASSELS Buildins(op. Balance) ADD: Acidition LESS Depreciation EVRNIWRE , Opening lance ADD: Purchased LISS Sale(bcok value) LBS Depreciation CURRENT ASSE"IS Cash in hand Stxk of Consumable items like fcod stuff/stationery Interest on Investment Accrued Suhscnvtion Outstanding
  17. 50ME /MPORTANT ITEMS ENTRANCE / ADMISSION FEES:- It is the amount paid by a person at the time of becoming a member of a NPO. It is a revenue receipt and therefore is accounted as an INCOME and CREDITED to INCOME AND EXPENDITURE COUNT. Particulars INCOME AND Amount Particulars By entrance fees Amount 1000
  18. — LIFE MEMBERSHIP FEE It is accounted as a capital Receipt and added to Capital Fund on the liability side of the balance sheet. It would be improper to account Life membership fee as income cause a Life Member makes one time payment and avails services all throu h his life. LIABILITIES Capital fund ux Add . life membership Amount ASSETS Ba anceS eet Amount
  19. LEGACY:- It is the amount which a not-for-profit organisation will receive as per the will of a deceased person . Since it is non-recurring in nature so it is capitalised and added to capital fund on the liabilities side of the balance sheet . However if it for a specific purpose , it should be capitalised in the name of the 'fund'. BALANCE SHEET liabilities Legacy Amount Asset Amount
  20. SALE OF OLD ASSETS:- It appears on the debit side of Receipt and Payment a/c. It is a capital receipt and as such should not be transferred to Income and Expenditure a/c. However, the profit and loss on the sale of an asset must be taken to the Income and Expenditure a/c. For example, if the book value of furniture appearing in the books is Rs. 5000, out of which furniture of Rs. 1000 is sold for Rs. 400, the loss of Rs. 600 will be taken to the debit side of Income and Expenditure a/c and the furniture of Res. 4000 (Rs. 5000 less Rs. 1000) will be shown on the Assets side of the Balance Sheet.
  21. INCOME AND EXPENDITURE A/c Dr. Particulars To furniture Lia bility Amount 600 Particulars BALANCE SHEET Amount Asset Furniture Cr. Amount Arnount 4000
  22. — SALE OF OLD NEWSPAPERS AND SPORTS MATERIAL:- The sale of old newspapers is an income and is CREDITED to INCOME AND EXPENDITURE ACCOUNT. As regards sale of sports material is concerned, it is also considered as income of the organisation. Sports material consumed is in the nature of depreciation of sports material so it is shown on the DEBIT side of INCOME AND EXPENDITURE ACCOUNT. If this consumed sports material is sold, money realised is in the nature of income to be CREDITED to INCOME AND EXPENDITURE ACCOUNT.
  23. INCOME AND EXPENDITURE A/C Dr. Particulars 0 depreciation on sports material Amoun t Particulars By sale Of Old newspapers By sale of sports material Amount xxx
  24. HONORARIUM:- Special payment made to a person who is not the regular employee of organisation and rendered some special and extra ordinary service to the organisation is called Honorarium. This is made on regular basis that is why it is considered as revenue in nature and will be DEBITED to INCOME AND EXPENDITURE A/c. INCOME AND EXPENDITURE A/c Dr. P articula To honorarium Cr. Amount Particulars Amount
  25. SUBSCRIPTION SUBSCRIPTION:- It is the amount paid by the members of NPO on periodical basis so that their membership is not cancelled. Thus, it is a recurring source of revenue from its members. It is the main source of revenue of NPO so it is CREDITED to INCOME AND EXPENDITURE A/c. It is appeared on the DEBIT side of RECEIPTS AND PAYMENT A/c.
  26. Broadly, subscription received has the following FOUR adjustments :- SUBSCRIPTION O/S AT THE END OF CURRENT Since 1. subscription has not been received so far, so on accrual basis it is ADDED to subscription received on the credit side of income and expenditure a/c and will be shown on asset side ofb/s. SUBSCRIPTION O/S AT THE BEGINNING OF CURRENT YEAR It refers 2. to Is subscription of last year and it is DEDUCTED from the subscription ceived on the credit side of income and expenditure a/c and will not be shown in closing b/s. . SUBSCRIPTION RECEIVED IN ADVANCE AT THE END OF CURRENT YEAR :- It refers to income received in advance and hence it is DEDUCTED from subscription received on credit side of income and expenditure a/c and will be shown on liability side of b/s. SUBSCRIVTION RECEIVED IN ADVANCE AT THE BEGINNING OF 4. h*ffiption received on the credit CURRENT YEAR 1
  27. Subscription can be calculated in three ways : . By showing it in income & expenditure a/c itself. 2. preparing subscription account. By preparing statement of subscription.
  28. INCOME AND EXPENDITURE A c Dr. P arti culars Amount Particulars By subscription ADD: closing o/s subscription ADD: opening advance subscription LESS: opening o/s subscription LESS: closing advance subscription Amount
  29. Dr. Cr. Particulars To opening o/s subscription o income & expenditure a/c (b.f.) To closing adv. subscription SUBSCRIPTION A/C Amount P articul ars By opening adv. Subscription By bank By closing o/s subscription Amount
  30. STATEMENT OF CURRENT YEAR'S LESS : SUBSCRIPTION Particul ars Subscription received during the year Closing o/s subscription Opening advance subscription Opening O/s subscription Closing advance subscription Subscription Income Amount
  31. Common Balance Sheet in each Liabilities Adv ce subscription Amoun t Assets Accrued subscription Amount
  32. ILLUSTRATION Bombay Sports Club disclosed that it received Rs. 1,50,ooo by way of subscription during the year ended 31st March 2006. Additional Information :- Subscription o/s 2004-05 . Advance subscription received in 31-3-05. Advance subscription received in 31-3-06. Subscription o/s on 31-3-06 for 2005-06. Show the total subscription of Bombay Sports Club. 4,000 4,500 5,100 3,800
  33. Dr. P articulars INCOME AND EXPENDITURE A/C For the year ending 31st March Amount Particulars By subs. ADD : closing o/s subs. 1,000 ADD: opening Subs. Rece.in advance 4,500 LESS: opening O/s Subs. 4,000 LFSS: closing subs. Rece. in adv. 5,100 Amount
  34. Dr. P articulars To opening o/s subscription T ncome & penditure a/c (b.f.) TO closing advance subs. SUBSCRIPTION ACCOUNT Am ount 4, 000 5,100 P articulars By opening adv. Subs. By bank By closing O/s subscription Am ount 4,500 3,800
  35. SOLUTION : STATEMENT OF SUBSCRIPTION (for the year ending 31st March 2006) Add: Less: Particulars Subscription Closing O/s subscription Opening subs. rece. in advance Opening o/s subscription Closing subs. rece. in advance Subscription income Amount 3,800 4,500 4,000 5,100
  36. BALANCE Amount losing adv. Subscription 4.300 SHEET Closing o/s subscription 6,000
  37. GENERAL FUND vs. SPEC/F/CFUND As, the excess of assets over liabilities in case of 'not- r-profit organisations 'is called ' capital fund '. The balance of Income & Expenditure acc. in the form of surplus/deficit is transferred to capital fund every year. This fund is also called ' Accumulated Fund or General Fund'.
  38. Specific Funds are those funds which have been constituted for some specific purpose like Prize Fund ,Match Fund ,Sports Fund, Building Fund etc. The income generated from these specific funds and expenses incurred related to these funds are directly adjusted from the concerned funds on the liabilities side of balance sheet and these are never adjusted in Income & Expenditure A/C. • For instance, in the absence of match fund , match receipts & match expenses will be shown in the Income & Expenditure A/C .
  39. CAP/FAL CAP/FALFUND CAPrrAL Ille term capital is used by business i. i. ii. business concern. Capital is contributed by the owners owners of the business entity. iii. Capital can be withdrawn by the owners if they desire so. iv. Capital is the contribution of the ii. iii. CAPITAL FUND "Ille term capital fund is used NPO. Capital Fund is the excess of as assets over liabilities of NPO. Capital Fund cannot be withdra withdrawn by its members.
  40. FUNDBASED ACCOUNTING When funds are created for some specific purposes such as sports fund, building fund, prize fund, etc. then receipts and income relating to that fund are credited to that fund and ents and expenses will be debited to that fund . P So we can say fund based accounting is a book-keeping technique whereby separate self- balancing sets of assets, liability , income, expenses and fund balance accounts are maintained for each contribution for a specific purpose.
  41. ILLUSTRATION Sports Fund Sports Fund Investment 35,000 35,000 ncome From Sports Fund Investment 4,000 Donations For Sports Fund Sports Prizes Awarded Expenses On Sports Events Interest On General Fund Investments 15,000 10,000 4,000 20,000
  42. SOLUTION Dr. Expenditure nxcz ,ncmn Income & Expenditure A/c. For the year ended 31st march 2013 Amount By Interest on General Fund Investment Balance Sheet Amount 20.000 Amount Sports fund 35.000 Add, Income from Sports fund Sports Fund Investments 35,000 fund Investment 4,000 Add; Donations For Sports Fund 15.000 Less, Sports Prizes Awanied
  43. ILLUSTRATION Sports Fund Sports Fund Investment ncome From Sports Fund Investment Donations For Sports Fund Sports Prizes Awarded Expenses On Sports Events Interest On General Fund Investments 35,000 35,000 4,000 15,000 10,000 49,000 20,000
  44. SOLUTION Dr. Expenditu re Income & Expenditure A/c. For the vear ended 31st march 201. Amount Fund Liabilities Sports fund 35,000 Add: Income from Sports 49,000 Income By Interest on General Fund Investment Balance Sheet Amount Assets Amount 20,000 Amount fund Investment 4, 000 Add: Donations For Sports Fund 15,000 Less: Sports Prizes Awarded Sports Fund Investments 35,000 Pradhyumn Somani
  45. ILLUSTRATION Expenditure on construction of Pavilion • Pavilion Fund (op.bal.) • Donation for Pavilion received ital Fund (opening bal.) 6,oo,ooo 8,00,ooo 10,00,ooo 20,00,ooo e construction work is in progress & not yet completed.
  46. Capital Fund Opening Bal. 20.00000 Add, Trans. From Pavilion Fund 6,00.OOO n Fund: ning Bal. 800,000 Add: Donation 10.00.OOO 18.00000 Less: Trans. to Capital fund Amount Pavilion in Progress 1200.000 600.000 fund 6.00,ooo
  47. UNRESTRICTED FUND LOAN FUND CATEGORIES FUNDS RESTRICTED FUND radhyumn Son ENDOWMENT ANNUITY FUND FUND
  48. UNRESTRICTED FUNDS This fund does not impose any restriction on management. It is free to use the amount of fund for purpose of organisati is fund is called as 'General Fund' or 'Accumulated Fund' or 'Capital Fu RESTRICTED FUND :- It is the fund, the use of which is restricted either the management or the donor for a specified purpose. Examples of such ft are:- Endowment Fund, Annuity Fund, Inan Fund, Prize Fund, Sports Fill etc. EN WMENTFUND This fund from a bequest or gift. It is a do tion with a condition by the donor to use only the income earned fror e investment of such funds for the specified purpose so that the original onated amount remains intact. ANNUIff FUND :- This fund is created from the contribution received giving annuities to the beneficiary. However, the fund becomes the property of the organisation after the death ( the beneficiary and fund can be used as per terms of agreement.

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