1) “Not-for-profit organization is an entity intended to render services to the members of the public without any intention of profit”, eg : sports and arts club, Hospitals, Libraries charitable institutions etc.
a) Non-Profit organization usually keep ‘a cash book’ in which all receipts and payments are recorded.
b) They maintain ‘a ledger’ containing the accounts of all incomes, expenses, assets and liabilities which facilities the preparation of financial statements at the end of the accounting year.
c) The final accounts of a non-profit organization consist of the following:
- Receipts and payment Account
- Income and Expenditure
- Account Balance sheet
2) Procedure for preparation of Receipts and payments account as follows.
1. This account always starts with opening balance of cash in hand and cash at bank, cash in hand always has a debit balance and hence appears on the debit side as the first item. Cash at bank has either a debit balance or a credit balance (overdraft).
2. All receipts made in cash during the accounting year will be shown on the debit side and all cash payments made during the accounting year are shown on the credit side.
3. Only actual cash receipts and cash payments are recorded in this account.
4. At end of the accounting period, this account is balanced and it shows the closing balance of cash in hand and at bank or bank overdraft, as the case may be.
Procedure for preparing Income & Expenditure as follows:-
1. This account is prepared usually in “T” form taking revenue expenses on the debit side and the revenue incomes on the credit side.
2. It is also prepared in vertical form. Under this method, the total of revenue incomes are shown first, revenue expenses follow it. After this, the total of expenses is deducted from the total of the incomes for ascertaining the surplus or deficit.
3. It is prepared to nd out the current year’s surplus or deficit, it does not have any opening balance. Therefore, previous year’s surplus or deficit is not important.
4. This account takes only the revenue incomes and revenue expenses. Capital receipts and payments are not taken into account.
5. Since it is maintained under accrual basis, current year’s income and expenditures alone are shown.
6. Outstanding expenses, accrued incomes, ‘ prepaid expenses, income received in advance, depreciation, provision etc. in the current year are to be suitably adjusted.
7. At the end of the accounting year the income and expenditure account is balanced and it reflects either a surplus or a deficit which is transferred to capital fund.
