CA Foundation : Financial Statements of Not-for-Profit Organizations (Summary) CA Foundation Notes | EduRev
- A non profit organization is a legal and accounting entity that is operated for the benefit of the society as a whole, rather than for the benefit of a sole proprietor or a group of partners or shareholders. Financial Statements of such organizations consists of:
1. Receipts and Payments Account
2. Income and Expenditure Account
3. Balance Sheet
- A Receipts and Payments Account is a summary of the cash book.
- The income and expenditure account is equivalent to the Profit and Loss Account of a business enterprise. It is an account which is widely adopted by non-profit making concerns and is prepared by following accrual principle. Only items of revenue nature pertaining to the period of account are included therein.
- Non-profit organizations registered under section 8 of the Companies Act, 2013 are required to prepare their Income and Expenditure account and Balance Sheet as per the Schedule III to the Companies Act, 2013.
- It may be noted that after various accounts have been adjusted as is considered necessary and all the revenue accounts have been closed off by transfer to the Income and Expenditure Account, there will still be a number of balances left over. These are included in the balance sheet. A balance sheet is thus a complement to such an account.
- Donations, Entrance and Admission Fees, Subscription, Life Membership Fee are some of the sources of incomes for the non-profit organizations. These items have separate treatments with some being capitalized while others being treated on accrual basis, as told before.
- Educational institutions are quite different from other not-for-profit organisations in terms of sources of finance and items of expenditure.