Accounts

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(Part 1) (Chapter - 1) (Accounting for Not-for-Profit Organisation)
(Class 12)
> No distinction is made in receipts/payments made in cash or through bank. With the exception of the opening
and closing balances, the total amount of each receipt and payment is shown in this account.
> No non-cash items such as depreciation outstanding expenses accrued income, etc. are shown in this account.
> It begins with opening balance of cash in hand and cash at bank (or bank overdraft) and closes with the year-
end balance of cash in hand/ cash at bank or bank overdraft. In fact, the closing balance in this account
(difference between the total amount of receipts and payments) which is usually a debit balance reflects cash
in hand and cash at bank unless there is a bank overdraft.

Question 5:
What steps are taken to prepare Income and Expenditure Account from a Receipt and Payment Account?
CAnswer 5:
Steps taken to prepare Income and Expenditure Account from a Receipt and Payment Account:
> Pursue the Receipt and Payment Account thoroughly.
> Exclude the opening and closing balances of cash and bank as they are not an income.
> Exclude the capital receipts and capital payments as these are to be shown in the Balance Sheet.
> Consider only the revenue receipts to be shown on the income side of Income and Expenditure Account.
Some of these need to be adjusted by excluding the amounts relating to the preceding and the succeeding
periods and including the amounts relating to the current year not yet received.
> Take the revenue expenses to the expenditure side of the Income and Expenditure Account with due
adjustments as per the additional information provided relating to the amounts received in advance and those
not yet received.
> Consider the following items not appearing in the Receipt and Payment Account that need to be taken into
account for determining the surplus/ deficit for the current year:
(a) Depreciation of fixed assets.
(b) Provision for doubtful debts, if required.
(c) Profit or loss on sale of fixed assets.

Question 6:
What is subscription? How is it calculated?
CAnswer 6:
Subscription is a membership fee paid by the member on annual basis. This is the main source of income of such
organisations. Subscription paid by the members is shown as receipt in the Receipt and Payment Account and as
income in the Income and Expenditure Account.
While calculating subscription for the current period, advance subscription received for the current period in the
previous period and outstanding subscription for the current period are added to the subscription received during
the current period. Whereasadvance subscription received for the next accounting period during the current period
and outstanding subscription for the preceding period are deducted from the subscription received during the
current period.
Calculation of Subscription:
Subscription received during the year XXX

Add: Subscription received (in advance) during previous year for current year XXX
XXX
Add: Subscription outstanding at the end of the year
XXX
Less: Subscription received in advance for the next year
XXX
Less: Subscription outstanding for the previous year XXX
Subscription shown in income and Expenditure account______________

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