Maharashtra Board Class 12 Book Keeping and Accountancy Chapter 2 Accounts of Not for Profit Concerns PDF Download

Accounts of 'Not for Profit' Concerns

Introduction

There are two types of organisations: 1) Trading organisations or Profit making organisations and 2) Non-Trading or Not for Profit organisations.

Trading organisations' main object is to earn Profit. They are engaged in Trading activities, i.e. Buying and selling of goods and services. Organisations like Sole Trading concern, Partnership, Co-Operative organisations, Public Limited Company etc. are set up for the purpose of making profit. Final Accounts which consists of Trading and Profit and Loss Account and Balance Sheet are prepared. Base of Final Accounts is Trial Balance.

Not for Profit organisations' main aim is to give service to its members or to the society at large. They are not formed for Profit making. They do not carry any Trading activity or manufacturing activity. Sports club, Charitable Hospitals, Schools, Colleges, Universities, Trade Unites, Chamber of Commerce, Professional Institutions, Trusts, Social Welfare Associations, Religious concerns, Libraries etc. are examples of Not for Profit concern. Their main object is to give services to the members. They maintain the books of accounts in a different way.

As their motive is not to earn Profit 'Not for Profit' concerns do not prepare Profit and Loss Account. Instead they prepare Income and Expenditure Account. Similarly they do not prepare Trial Balance but they prepare Receipts and Payments Account. These organisations prepare Balance Sheet to know the Net Worth of the concern on a particular date. Final Accounts of not for profit concerned consists of Income and Expenditure Accounts and Balance Sheet.

Teacher's Note

Not for Profit concerns like schools and hospitals in India are very common. They give social service to the community without making profit as their main aim.

Exam Trick

Remember: Not for Profit = No Trading. Just like your school is not a shop, these organizations are not business.

Points to Remember

Not for Profit concerns do not want to make money as profit.
They give services to society like schools, hospitals, and clubs.
They make Income and Expenditure Account, not Profit and Loss Account.
They keep Receipts and Payments Account instead of Trial Balance.
They make a Balance Sheet to show what they own and owe.

Meaning of Not for Profit Concern

Not for Profit Concerns are those concern which are not started to earn Profit but to give qualitative service to its members and society at the minimum charges. Their main objective is to provide social service and to promote art, culture, sports, education etc. The nature of these concerns are different from Profit organisations. Not for Profit concerns collect income through subscription, admission fees, donations etc. given by members or non members and grants subsidies or concessions received from the Government.

Features of 'Not for Profit' Concerns

1. The primary objective of such concerns is to provide services to its members and not to earn profit.

2. These concerns are formed for promotion of art, culture, education, sports, charity, health, etc.

3. The members of this concerns can not get the dividend. It is prohibited.

4. The management of such concerns is done by elected representatives of members. It is governed by elected members.

5. These concerns prepare Receipts and payments Account, Income and Expenditure Account and Balance Sheet.

6. Capital Fund is created by such concerns. It is made up of Entrance fees, Surplus, Legacies and donations specially received for Capital Fund.

Teacher's Note

In India, many schools and community organisations are Not for Profit concerns. They use their extra money to help more people, not to pay owners.

Exam Trick

Remember: Not for Profit = Help people. Just like your teacher helps you without asking for profit, these organizations work the same way.

Points to Remember

These organizations want to help society, not make money.
Members cannot take profit or dividends from the organization.
Elected leaders manage the organization.
They prepare special accounts to show their work.
Capital Fund shows what they own after all work is done.

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