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Advance Financial Accounting (FIN-611)
VU
LESSON # 6
ACCOUNTING SYSTEM IN NON-PROFIT ORGANIZATIONS
Non profit organizations like business entities are also large, medium and small in
size. A large organization will be having a complete accounting system along with a
full fledge accounts department where the double entry accounting will be followed.
Whereas, medium or small sized non profit organization will be maintaining few
books of accounts and will not be having proper accounting system.
Small size non-profit organization
We can observe so many examples of a small size non-profit organizations around us,
the very commonly understood example will be of a street library where cash book
would have been maintained as the only book of account and finally a summary of
that cash book is prepared at the end of the year just to have an overview of the total
receipts and payment made during the year.
Because of the very simple and few transactions, its members do not need to know its
financial position at the end of each accounting period therefore Income &
Expenditure Account and Balance Sheet is not prepared.
Large size non-profit organization
On the contrary, member of the large size organization will be interested in all
financial results of the entity and a proper book-keeping system is developed over
there. The outcome of which is production of a Trial Balance which is used to prepare
Income & Expenditure Account and Balance Sheet.
Medium size non-profit organization
Medium size non-profit organizations although do not prepare proper books of
accounts but need to know the financial status in terms of surplus income and
financial position of the organization. Fro this purpose; rules of conversion of single
entry into the double entry are followed and finally Income & Expenditure Account
and Balance Sheet is prepared.
Practice Question
(This is not difficult at your level to understand what appears in debit and credit
sides of a trial balance and which information is put in the income & expenditure
and with information relates to the balance sheet. For practicing purposes a solved
problem is shown hereunder)
From the following Trial Balance of a club prepare an Income & Expenditure Account
for the year ended on 31st March 2008 and Balance Sheet as on that date:
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Advance Financial Accounting (FIN-611)
VU
Particulars
Dr.
Cr.
Rupees
Rupees
General fund
30,000
Cash in hand
2,000
Cash at bank
3,000
Sundry debtors
2,400
Sundry creditors
1,500
Loan @ 15% (1-07-2007)
20,000
Furniture & Fixture
10,000
Building
40,000
Stock of clod drink
500
Rent
6,000
Rate, Taxes & Insurance
600
Secretary Honorarium
1,200
Entrance fee
1,000
Subscription received in
1,500
advance
Salaries & Wages
5,800
Extension of building
10,000
Printing & Stationary
1,000
Legal charges
500
Annual subscription
30,000
Card & Billiard room receipts
4,000
Sundry expenses
1,600
Cold drink sales
5,000
Repair of building and
400
furniture
Utility expenses
1,000
Purchase of clod drink
4,000
Interest on Loan
1,000
Total
92,000
92,000
Additional Information
1. Subscription for the year end outstanding Rs. 2,000
2. Write off depreciation @10% per annum on furniture and 2% on building
including the extension.
3. Stock of clod drinks Rs. 1,000
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Advance Financial Accounting (FIN-611)
VU
Solution
------ Club
Income and Expenditure Account
For the year ended 31.03.2008
Expenditure
Rs.
Income
Rs.
By Subscriptions
30,000
To  Consumption  of  cold
3,500
Add: Outstanding
2,000
32,000
drink
6,000
To Rent
600
4,000
By  Card  &  Billiard
Room
To Rates, taxes & insurance
1,200
Receipts
5,000
To Secretary's honorarium
1,000
By Cold Drinks
To Entrance fees
5,800
To Salaries & wages
1,000
To Printing and Stationary
500
To Legal charges
1,600
To Sundry expenses
To Repairs to building and
400
furniture
1,000
To Utility Bills
To interest on loan
1,000
Outstanding
Add:
2,250
1,250
2,000
To Depreciation
14,150
To Excess of income over
Expenditure ­ Surplus
41,000
41,000
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Advance Financial Accounting (FIN-611)
VU
----- Club
Balance Sheet
As at 31.03.2008
Liabilities
Rs.
Assets
Rs.
Capital Fund
30,000
Club House
40,000
Add: Surplus
14,150
44,150
Add: Extension
10,000
Sundry Creditors
1,500
50,000
15% Loan
20,000
Less: Depreciation
1,000
49,000
Interest
on
Loan
1,250
(Outstanding)
Furniture
&
Fixture
10,000
Subscriptions  received  in
1,500
9,000
Less : Depreciation  1,000
advance
Stock in hand:
Cigars
400
1,000
Wine
600
2,400
Sundry Debtors
2,000
Subscription due
3,000
Cash at Bank
2,000
Cash in hand
68,400
68,400
Q2. Given below is the receipts and payments account of Hameed Amusement Club:
Receipts and Payments Account
For the year ended 31st December, 2007
Receipts
Rs.
Payments
Rs.
Balance ­ Cash
260
Salary of secretary
2,600
Bank
3,000
3,260
Subscription
8,000
Honorarium
350
(including subscription for 2005
Rs. 150)
Sale of old furniture on Jan 1,
750
Wages
3,400
2006
Sale of old newspapers
80
Charities
1,500
Legacies
3,500
Printing and stationery
400
Interest on investments
1,200
Postage
100
(cost of investment Rs. 20,000)
Endowment fund receipts
10,000
Rent and taxes
1,400
Proceeds of concerts
800
Upkeep of land
500
Advertisement in year book
40
Sports material
2,500
Balance
14,850
27,900
27,900
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Advance Financial Accounting (FIN-611)
VU
Current assets and liabilities as on 31st December, 2006 and 31st December, 2007 are as
follows:
31.12.2006
31.12.2007
Rs.
Rs.
Subscription in arrears
250
475
Subscription in advance
310
620
Furniture
2,000
1,080
Depreciation was 15% p.a. on the furniture left after selling a part of it. It was decided
that half of the legacies may be capitalized.
Required:
Prepare income and expenditure account for the year ending 31st December, 2007
and balance sheet as on that date.
You are also required to show calculations for the loss on sale of furniture.
30
Table of Contents:
  1. ACCOUNTING FOR INCOMPLETE RECORDS
  2. PRACTICING ACCOUNTING FOR INCOMPLETE RECORDS
  3. CONVERSION OF SINGLE ENTRY IN DOUBLE ENTRY ACCOUNTING SYSTEM
  4. SINGLE ENTRY CALCULATION OF MISSING INFORMATION
  5. SINGLE ENTRY CALCULATION OF MARKUP AND MARGIN
  6. ACCOUNTING SYSTEM IN NON-PROFIT ORGANIZATIONS
  7. NON-PROFIT ORGANIZATIONS
  8. PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT ORGANIZATIONS FROM INCOMPLETE RECORDS
  9. DEPARTMENTAL ACCOUNTS 1
  10. DEPARTMENTAL ACCOUNTS 2
  11. BRANCH ACCOUNTING SYSTEMS
  12. BRANCH ACCOUNTING
  13. BRANCH ACCOUNTING - STOCK AND DEBTOR SYSTEM
  14. STOCK AND DEBTORS SYSTEM
  15. INDEPENDENT BRANCH
  16. BRANCH ACCOUNTING 1
  17. BRANCH ACCOUNTING 2
  18. ESSENTIALS OF PARTNERSHIP
  19. Partnership Accounts Changes in partnership firm
  20. COMPANY ACCOUNTS 1
  21. COMPANY ACCOUNTS 2
  22. Problems Solving
  23. COMPANY ACCOUNTS
  24. RETURNS ON FINANCIAL SOURCES
  25. IASBíS FRAMEWORK
  26. ELEMENTS OF FINANCIAL STATEMENTS
  27. EVENTS AFTER THE BALANCE SHEET DATE
  28. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
  29. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 1
  30. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 2
  31. BORROWING COST
  32. EXCESS OF THE CARRYING AMOUNT OF THE QUALIFYING ASSET OVER RECOVERABLE AMOUNT
  33. EARNINGS PER SHARE
  34. Earnings per Share
  35. DILUTED EARNINGS PER SHARE
  36. GROUP ACCOUNTS
  37. Pre-acquisition Reserves
  38. GROUP ACCOUNTS: Minority Interest
  39. GROUP ACCOUNTS: Inter Company Trading (P to S)
  40. GROUP ACCOUNTS: Fair Value Adjustments
  41. GROUP ACCOUNTS: Pre-acquistion Profits, Dividends
  42. GROUP ACCOUNTS: Profit & Loss
  43. GROUP ACCOUNTS: Minority Interest, Inter Co.
  44. GROUP ACCOUNTS: Inter Co. Trading (when there is unrealized profit)
  45. Comprehensive Workings in Group Accounts Consolidated Balance Sheet