Accounting For Non-Profit Organisation

Some organizations like clubs, hospitals, and educational institutions are established not for making profit but for the purpose of providing services to members and beneficiaries. Receipts and Payments A/c Income and Expenditure A/c and Balance Sheet form part of their final accounts.

Treatment of Certain Items

• Entrance Fees: Such fees are received by non profit seeking organisations at the time of admitting new members. For the incoming member it is a one time payment.  Entrance Fees can be capitalised or charged to Income Expenditure A/c as per rules of the organization.
• Donations: Donation can be utilised for meeting capital or revenue expenses.  When received for a special purpose, the amount of donation is credited to a special fund, which may be invested in specific securities. Interest, Dividend, etc. received from such investments are credited to Fund A/c expenses for performing the purpose of Fund is charged to Fund A/c.
• Life membership subscriptions: This can be treated in the following ways in the Accounts:–
  • The entire amount is transferred to a special Account on death of the member and it is transferred to the Accumulated Fund.
  • An amount equal to normal yearly membership subscription is charged to Income and Expenditure A/c and the Balance is carried forward until exhausted. In case of death of a member the unexhausted portion is charged to Accumulated Fund on the date of death.
  • An amount calculated according to age and average life of the member may annually be transferred to the credit of Income and Expenditure A/c
• Subscription: This is one of the main sources or Income and has to be accounted for on accrual basis. The amount of subscription chargeable to Income and Expenditure A/c can be determined by opening a Subscription A/c.
• Sale of News papers & used sports materials: Sale proceeds are credited to Income & Expenditure A/c
• Sale of Assets: Sale proceeds are debited in Receipts & Payments A/c and the Profit/Loss on sale is taken to Income/Expenditure A/c.