Chapter 18
Accounting
for Non-profit
Organisations
Non-Profit Organisations
• Non-profit organisations are formed to
provide social and welfare facilities or
services to its members who are the owners.
• The aim of these types of organisations is to
fulfil the needs of the members rather than
making profits.
• Common examples include Sports Clubs,
Musical Groups and Voluntary Service
Organisations
Sources of Income
•
Subscriptions received from members (collected
at start and throughout the year and becomes
part of the Accumulated Fund).
•
Donations received (please note that this may be
capitalized at times and must be shown in the
balance sheet when received for a special
purpose).
•
Receipts (income) from fund raising events.
•
Receipts (income) from operating specific
activities such as sale of bar stocks or
refreshments.
Financial Statements
and Accounts
• Receipts and payments account: This is a summary
of the cash and bank account.
• Trading account: This is only prepared when there
is a fund raising activity to make a profit. It
determines the gross profit/gross loss.
• Subscriptions account: This is useful to calculate
the subscription for the period because of
subscriptions received either as accruals or
prepayments. By using this, the accrual principle is
adhered to and also, the correct amount can be
transferred to the income and expenditure account.
Subscriptions a/c
Subscriptions a/c
For the period
Balance b/d (arrears)
Balancing figure to be transferred to
the Income and Expenditure a/c
Balance c/d (advance)
--------------------------Bal b/d (arrears)
Balance b/d (advance)
Collections from receipts and
payments
Balance c/d (arrears) ---------------------------Bal b/d (advance)
Financial Statements
and Accounts
• Income and expenditure account: Non-trading
organisation use the above named account instead
of profit and loss account. Therefore, the term
used to determine the yearly amounts will replace
net profit/net loss with the term surplus/deficit.
• Balance sheet: This is no change in the preparation
of the financial statement. Except for the
replacement of the term Capital with the name
Accumulated Fund.