CBSE Class 12 Accountancy Accounting For Not For Profit Organisations Notes Set A

UNIT-09

ACCOUNTING FOR NOT FOR PROFIT ORGANISATIONS

1. Meaning of NPO :-

Non profit organizations are those organizations which are established for a Social/Charitable/Cultural purpose & not for earning profit. They render services for the promotion of Art, Culture, Sports, Education & Healthcare etc.

2. Features of NPO :-

 a) They are registered distinct entities

b) They render services to the society at nominal charges

c) Their basic motive is not profit earning but social service. 

3. Final Accounts of NPO :-

They prepare the following financial statements at the end of the accounting period:-

1. Receipts & Payments A/c;

2. Income & Expenditure A/c;

3. Balance sheet.

4. Calculation of Subscription to be credited to Income & Exp. A/c.
Note : - Taking the figure of subscriptions received from the Receipts & Payments a/c as the base, additions for subscription of the current year though outstanding and subtraction of the subscription of the past & future period should be done to arrive at the figure to be credited to Income & Expenditure a/c. It should be clearly kept in mind that only the subscription of the current year should be considered even if it is outstanding and the subscription of the past & future period even if received in the current year should be excluded.

The following illustrations shall clarify the point:-

Illustration : - 1                                                                 Rs.

Subscription received during 2007-08                                  50,000

Subscription outstanding on 31-3-08                                   8,000

Subscription outstanding on 1-04-07                                   6,000

Calculate the amount of subscription to be credited to Income & Expenditure a/c for the yr. 2007-08.

Ans.1

                                                                                        Rs.

Subscription received during the yr.                                     50,000

Add: Subscription outstanding on 31-3-08                           8,000

                                                                                        ---------

                                                                                       58,000

Less: Subscription outstanding on 1-04-07                          6,000

                                                                                       ---------

Amount to be credited to Income & Expenditure A/c ==→    52,000

                                                                                       ---------

Illustration : - 2                                                                  Rs.

Mumbai Club received subscription during the yr. 2005-06     1,50,000

Subscription received on 31-3-05                                        4,500

Subscription received on 31-3-06                                        5,100

Subscription outstanding on 31-3-06for 2005-06                  3,800

Subscription outstanding 2004-05 (of which Rs.4,000 received in 2005-06) 6,000

Calculate the subscription to be taken to Income & Exp. a/c for 2005-06.

Ans. 2                                                                              Rs.

Total Subscription Received during the yr. 2005-06              1,50,000

Add: Sub. Outstanding for 2005-06                                    3,800

Sub. Received in advance on 31-3-05                                 4,500

                                                                                       ----------

                                                                                       1,58,300

Less: Sub received in advance on 31-3-06       5,100

Sub. Of 2004-05 received in 2005-06              4,000          9,100

                                                                  ----------       ------------


Sub for 2005-06 to be taken to Income & Exp. a/c. ==→ Rs.1,49,200

                                                                                        -----------

Calculation of expenses for the year for Income & Expenditure a/c.

Note : Here too, it is important to understand that - the guiding principle is - that the expenses of the current year whether paid or not should be considered. Similarly expenses of previous or future period though paid in the current year should be excluded. The following Illustration shall clarify the concept further.

Illustration :- 3 Ascertain the amount of salary chargeable to Income & Expenditure A/c for 2006-07

                                                                                   Rs.

Total salaries paid in 2006-07                                        10,200

Prepaid salaries on 31-3-2006                                       1,200

Prepaid salaries on 31-3-2007                                       600

Outstanding salaries on 31-3-2006                                 900

Outstanding salaries on 31-3-2007                                 750

Ans. 3                                                                           Rs.

Total Salaries paid in 2006-07                                       10,200

Add: - Outstanding salaries on 31-3-07                           750

Prepaid salary on 31-3-06                                            1,200

                                                                              ---------------

                                                                                 12,150

Less:- Outstanding on 31-3-06 -     900

Prepaid on 31-3-07 -                     600                         1,500

                                                   ------                    ---------------

Salaries dr. to Income & Exp. A/c for 2006-07              10,650

Please refer to attached file CBSE Class 12 Accountancy Accounting For Not For Profit Organisations Notes Set A.