SUBECT: ACCOUNTANCY

CLASS: XII (SESSION 2020-21)

UNIT 1 – FINANCIAL STATEMENTS of Not-for-the-Profit ORGANISATIONS
Handout – 2
Collaborating Technique
 Explanatory
 Group discussion

Recapulitation
Introduction of Not-for-the-profit Organisations
ACCOUNTING TREATMENT OF SOME IMPORTANT ITEMS:

1) ENTRANCE FEES: It is the amount paid by a person at the time of becoming a member of a nonprofit
organisation.
It is treated as a revenue receipt and is credited to Income and Expenditure account.

If it is specified as to be capitalized then it should be entered in Liabilities side of Balance Sheet.

Q.1 The Receipts and Payments A/c of a club showed that Entrance fees of Rs. 1,00,000 received during the
year 2019- 20. How will it be recorded in the Income and Expenditure A/c in following alternative
cases:-
i) No other information is given
ii) 60% of the entrance fees is to be capitalized
iii) 60 % of the entrance fees is of revenue nature.

2) LIFE MEMBERSHIP FEES OR LIFE SUBSCRIPTION: It is the amount received from a member
in lump sum and he is given the membership of the organisation for the whole life.

It is treated as a capital receipt and added to the capital fund on the liabilities side of the Balance sheet.

3) DONATIONS: Donation is the amount received from a person, firm, company by way of gift. Donation
received may be a general donation or specific donation.
a) General donation: It is treated as an income and is credited to the Income and Expenditure account
b) Specific donation: It will be capitalized and is shown on the liabilities side of Balance sheet.

Note:- In the absence of any information about the nature of donation it should be treated as general
Donation.

4) LEGACY: It is the amount received by the non-profit organisation as per the will of a deceased person.
The donor may or may not specify the purpose for which the donated amount can be used.

In case, no condition is specified, it is accounted as ‘General donation’, and credited to Income and
Expenditure A/c.

And if a condition is specified, it is accounted as ‘Specific donation’, and shown in the Liabilities side of
the Balance Sheet.
 5) SUBSCRIPTION: It is the major source of income of a not-for –profit organisation. Subscriptions are
the amount paid by the members of such organisations to maintain their membership.

RULES OF CONVERSION OF CASH BASIS TO ACCRUAL BASIS:-

To calculate the amount to be credited or debited to Income & Expenditure A/c:-
1st formula
Total amount received / paid
Add outstanding at the end of the year
 Outstanding for the current year at the end of the year
 Still outstanding of previous year which had not received till now
Add prepaid in the beginning
Less outstanding in the beginning of the year for previous year
(including amount received during current year or still outstanding at end)
Less prepaid at end

Alternately, second formula:-

Amount received / paid for the current year in the current year
Add Outstanding for the current year at the end of the current year(since this amount belong to current year,
but will receive or paid in coming year)
Add advance received or paid in the previous year for the current year (prepaid in the beginning)

Q.1 Subscription received in cash during the year amounted to 5,00,000; subscription outstanding at the end
of previous year was 20,000 and outstanding at the end of current year was 25,000. Subscription
received in advance for next year was 8,000 and received in advance during previous year was 7,000.
Calculate the amount credited to Income & Expenditure Account.

Q.2 From the following information, calculate the amount of subscriptions to be credited to the Income &
Expenditure A/c for the year 2019-20:-
Subscriptions received during the year 80,000
st
Subscriptions outstanding as on 31 March, 2019 26,000
Subscriptions outstanding for the year ended 31st March, 2020 6,000
st
Subscription received in advance on 31 March, 2019 15,000
Subscription received in advance on 31st March, 2020 10,000
Subscriptions of 12,000 are still in arrears for the year 2018-19.

Q.3 From the following information, calculate the amount of subscriptions to be credited to the Income &
Expenditure A/c for the year 2019-20:-
Subscriptions received during the year 1,80,000
st
Subscriptions outstanding for the year ended 31 March, 2019 36,000
Subscriptions outstanding as on 31st March, 2020 26,000
st
Subscription received in advance on 31 March, 2019 15,000
Subscription received in advance on 31st March, 2020 10,000
Subscriptions of 18,000 are still in arrears for the year 2018-19.

Q.4 There are 200 members, each paying an annual subscription of 1,000. Subscription received during the
year 1,95,000 (including 1,70,000 for the current year) ; subscriptions received advance at the
beginning of the year 23,000 and at the end of the year 20,000. Calculate the amount of subscription
due for the current year.
Q.5 There are 200 members, each paying an annual subscription of 1,000. Subscription received during the
year 1,95,000 (including 1,70,000 for the current year, 15,000 for last year and 10,000 for coming
year) ; at the beginning of the year subscriptions received in advance 23,000 and subscription due was
20,000. Calculate the amount of subscription due for the current year.

Q.6 How the following information appears in the Receipts & Payments A/c, Income & Expenditure A/c for
the year ended 31st March, 2019 and in the Balance Sheets as at 31st March 2018 and 31st March, 2019:-
There are 500 members each paying annual subscription of 1,000.
20 members failed to pay their dues in 2017-18, out of which 13 paid in 2018-19, however 11 members
paid their dues of 2018-19 in 2017-18 itself.
15 members didn’t pay their dues for 2018-19 till 31st March, 2019 and 7 members paid for 2019-20
during the year 2018-19.

FOR OTHER INCOMES AND EXPENSES THE SAME METHOD USE TO CONVERT CASH BASIS TO ACCRUAL BASIS

Q.7 Salary paid in cash during the current year was 80,000; outstanding salary at the end was 4,000;
Salary paid in advance last year pertaining to the current year was 3,200; paid in advance during current
year for next year was 5000. Calculate the amount debited to Income & Expenditure Account.

NOTEBOOK WORK:
Do Q. Nos. 17, 19, 20, 21, 24, 38 and 39 of the text book.
Also prepare the liquidity ratios with theory for recapitulation in next day class.