Income and Expenditure Account:
Profit Organizations
Non Profit Organizations
- SOCI / P&L
Income & Expenditure Account
- Balance sheet
Balance sheet
- Profit / loss
Profit  Surplus / Loss  Deficit
- Capital
Capital Fund / Accumulated fund
- Drawings
No concept of drawing
Sources of Income of NPO:
- Members fee/subscription
- Charities
- Telethons
- Investment Income
- Admission fee
- Function / seminars / event
- Trading activity
Receipt & Payment Account
- It is a cash or bank account
- All inflows are recorded on debit side and all outflows are recorded on credit side.
- There will be an opening balance as well as closing balance
Format of I&E Account
NPO Name
Income & Expenditure Account
For the year ___
Income
.
MUHAMMAD FAISAL
1
.
.
Expenses
.
.
Surplus / Deficit
XX
Income & Expenditure Account
For the year
Expenses
Income
Surplus ( )
Deficit ( )
Specific Terms:
1 – Subscription by members or Annual fee by members
Subscription
Date
Particulars
B/F Receivable
Amount Date
X
I & E [bal.]
X
C/F
Advance/Unearned
X
Particulars
B/F Unearned
Amount
X
Receipt
Write off
X
X
C/F Receivable
X
Write off:
Expense
xx
Subscription Account
xx
2 – Entrance fee / Admission fee:
- If nothing is mentioned then it will be an income of NPO
- If specifically mentioned to keep it as capital fund then it will be treated as capital fund.
3 – General Donation
It will be income of NPO
MUHAMMAD FAISAL
2
4 – Specific Purpose Donation
It will be treated as capital fund
5 – Life Membership fee
- Member pay lump sum amount for life fee of NPO
- It is an income of NPO but recorded in I&E account over average life of member.
Bank
xx
Life Membership fund [receipt]
Life Membership fund
xx
xx
I&E
xx
[ Income for the year (100/25) ]
6 – Functions / Seminars / Competition
- There are certain expenses and certain incomes of such events.
- Net income/expenses shall be recorded in I&E account.
7 – Legacy:
- When some of the members transferred asset / cash to NPO as his will after his/her death.
- Then it shall be recorded as capital fund.
NOTE: If an asset is given by the member then it shall be recorded at fair market value.
8 – Honorarium
- It is an expense of NPO
- It is a token payment made to a person who has voluntarily undertaken a service.
9 – When NPO is engaged in trading activity then following must be prepared:
We need to make debtor and creditor ledger.
We need to make income statement / trading account.
Sales
xx
MUHAMMAD FAISAL
3
Less:
Less:
Cost of Sales
Opening stock
X
Purchases
X
Closing stock
(x)
XX
Expenses related to this activity
(x)
Net Profit/loss
x/(x)
Steps to prepare financial statements of Non-Profit Organization:
1 – Make format of I&E account and balance sheet
2 – If opening capital fund is missing then opening liability shall be deducted from opening asset to
determine opening capital fund.
3 – Prepare T accounts for all items for which opening or closing balances are given.
4 – Complete double entries from the information given and post them in the relevant ledger.
5 – Balance T accounts and find out the missing figures.
6 – Complete balance sheet and I&E account.
[PAC Question 1,2,3,8,7]
NOTE:
Purchases means payment to creditor.
When we make advance for fixed asset and by year end, such asset is not received or transferred, then
such advance is called capital work in progress CWIP.
Question 1
w-1
b/f
Income FTY
c/f
Subscription
190000 b/f
Receipt
2480000 Write off
75000 c/f
25000
2450000
30000
240000
MUHAMMAD FAISAL
4