PPT - Accounting for Not-for-Profit Organizations | Principles and Practice of Accounting - CA Foundation PDF Download

 Page 1


ACCOUNTING FOR
NON-PROFIT 
ORGANIZATION
Page 2


ACCOUNTING FOR
NON-PROFIT 
ORGANIZATION
NON PROFIT ORGANIZATIONS
DEFINITION
“A Non-Profit seeking entity which does not usually involve in trading activities,
but engages in rendering services to members and society. ”
? Non profit organizations are established for the purpose of rendering service.
? They are not expected to earn profit, but are organized for social, educational,
religious or charitable purpose.
? They take the form of sports and arts club, hospitals, libraries, charitable
institutions like orphanages, educational institutions, religious institutions etc.
Page 3


ACCOUNTING FOR
NON-PROFIT 
ORGANIZATION
NON PROFIT ORGANIZATIONS
DEFINITION
“A Non-Profit seeking entity which does not usually involve in trading activities,
but engages in rendering services to members and society. ”
? Non profit organizations are established for the purpose of rendering service.
? They are not expected to earn profit, but are organized for social, educational,
religious or charitable purpose.
? They take the form of sports and arts club, hospitals, libraries, charitable
institutions like orphanages, educational institutions, religious institutions etc.
FEATURES OF A NON-PROFIT 
ORGANIZATIONS
o Their main objective is to rent a services to members and public.
o They are not expected to earn profit.
o They do not normally engage in trading activities.
o Credit transactions are not usually made.
o Usually such concerns keep only cashbook to record daily transactions.
o They prepare a summary of cashbook at the end called receipts and payments a/c.
o No trial balance is prepared.
o Do not prepare trading, profit and loss a/c, but prepares income and expenditure a/c.
o Do not have capital, but they have only capital fund representing accumulated
services.
Page 4


ACCOUNTING FOR
NON-PROFIT 
ORGANIZATION
NON PROFIT ORGANIZATIONS
DEFINITION
“A Non-Profit seeking entity which does not usually involve in trading activities,
but engages in rendering services to members and society. ”
? Non profit organizations are established for the purpose of rendering service.
? They are not expected to earn profit, but are organized for social, educational,
religious or charitable purpose.
? They take the form of sports and arts club, hospitals, libraries, charitable
institutions like orphanages, educational institutions, religious institutions etc.
FEATURES OF A NON-PROFIT 
ORGANIZATIONS
o Their main objective is to rent a services to members and public.
o They are not expected to earn profit.
o They do not normally engage in trading activities.
o Credit transactions are not usually made.
o Usually such concerns keep only cashbook to record daily transactions.
o They prepare a summary of cashbook at the end called receipts and payments a/c.
o No trial balance is prepared.
o Do not prepare trading, profit and loss a/c, but prepares income and expenditure a/c.
o Do not have capital, but they have only capital fund representing accumulated
services.
ACCOUNTING STATEMENTS
? Usually non-profit making concerns follow the cash system of accounting. Under cash
system, cash book is the most important book where all cash receipts and payments are
recorded in a chronological order.
? A memorandum book is maintained to record the name of the persons and
institutions from whom amounts have not been received.
? A stock register is kept to record the purchase of assets like furniture, books,
equipment etc.
? A non-profit organization prepares three statements at the end of the accounting
year, which form its final accounts. These statements are:
? Receipts and payments account.
? Income and expenditure account.
? Balance sheet.
Page 5


ACCOUNTING FOR
NON-PROFIT 
ORGANIZATION
NON PROFIT ORGANIZATIONS
DEFINITION
“A Non-Profit seeking entity which does not usually involve in trading activities,
but engages in rendering services to members and society. ”
? Non profit organizations are established for the purpose of rendering service.
? They are not expected to earn profit, but are organized for social, educational,
religious or charitable purpose.
? They take the form of sports and arts club, hospitals, libraries, charitable
institutions like orphanages, educational institutions, religious institutions etc.
FEATURES OF A NON-PROFIT 
ORGANIZATIONS
o Their main objective is to rent a services to members and public.
o They are not expected to earn profit.
o They do not normally engage in trading activities.
o Credit transactions are not usually made.
o Usually such concerns keep only cashbook to record daily transactions.
o They prepare a summary of cashbook at the end called receipts and payments a/c.
o No trial balance is prepared.
o Do not prepare trading, profit and loss a/c, but prepares income and expenditure a/c.
o Do not have capital, but they have only capital fund representing accumulated
services.
ACCOUNTING STATEMENTS
? Usually non-profit making concerns follow the cash system of accounting. Under cash
system, cash book is the most important book where all cash receipts and payments are
recorded in a chronological order.
? A memorandum book is maintained to record the name of the persons and
institutions from whom amounts have not been received.
? A stock register is kept to record the purchase of assets like furniture, books,
equipment etc.
? A non-profit organization prepares three statements at the end of the accounting
year, which form its final accounts. These statements are:
? Receipts and payments account.
? Income and expenditure account.
? Balance sheet.
RECIEPTS AND PAYMENTS 
ACCOUNT
? It is a summary of cash and bank transactions which helps in the preparation
of income and expenditure account and the balance sheet.
? A receipts and payments account is a statement prepared at the end of an
accounting year, giving a summary of all receipts and payments recorded in cash
book.
? It is prepared by analyzing and classifying the entrees in the cashbook of a
particular accounting year.
? It is debited with all items of receipts and credited with all payments.
? In preparing these accounts, no distinction is made between capital and
revenue items.