- Slides: 6
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 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.