‡Non trading concerns or Non profit organization are

those concern whose main object is not to earn profit but to render services to their members and to the community. ‡Eg: Educational institutions, associations, clubs, hospitals, trade unions, charitable societies etc ‡Their income consist of admission fees, subscription collected from members, donation from members and non-members and grants from government and other agencies. ‡Result of the concern may be either surplus or deficit

Statements prepared by Non trading concern
Receipts and payments Account 2. Income and Expenditure Account 3. Balance Sheet
1.

y Like cash book. y The difference between two sides represents cash in hand .1.Receipts and payments Account y It is prepared at the end of the period incorporating therein all receipts and payments covering a particular period in a summary form. all receipts of cash or cheque are entered on the debit side and all payments on the credit side.

ignoring accrued incomes and outstanding expenses. preceding or succeeding period are included Note 2: Only actual receipts and payments are included.Format of Receipts and payments Account Receipts To O e i Cas i Cas at To ll recei (ca ital a ala ce: a a ts reve e) Amount Payments y ll ay (ca ital a y closi Cas i Cas at e ts reve e) ala ce: a a Amount Xxx xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx To ala ce / Cas i a Cas at a Note 1: All receipts and payments whether to the current. .

Income and Expenditure Account y Non trading concern prepare income and expenditure account which is similar to profit and loss account prepared by trading concern y It is a nominal account and is debited with all expenses or losses and credited with all incomes and gains y The result being either excess of income over expenditure (surplus) or excess of expenditure over income (deficit) and is transferred to the capital fund .2.

accrued incomes.Format of Income and Expenditure account Expenditure To All revenue expenses of the current year including provision is made for all outstanding expenses. depreciation. doubtful debt etc To excess of income over expenditure(surplus) Amount Income Amount xx xx xxx By All revenue incomes of the current year xx xxx .

2. 1. Make provision for bad debts.Preparation of Income & Expenditure Account from Receipts & Payments Account mit the opening & closing cash & bank balance Take only revenue items of income & expenditure Take only revenue items for the current period and exclude items relating to the preceding or succeeding periods 4. Make adjustment for accrued incomes. 3. income received in advance and prepaid expenses 5. depreciation etc The difference between two sides will indicate either surplus or deficit and it should be transferred to the capital fund. outstanding expenses. .

Balance sheet y Balance sheet is prepared to ascertain the financial position as on the close of a particular period y It is prepared in the usual manner y There may not be any formal capital for a non-trading concern.3. The excess of assets over liabilities is called capital or general fund .

if they are still outstanding.Procedure for preparing balance sheet Ascertain the capital fund at commencement. 1. . For this opening balance sheet should be prepared. adjust the capital fund for surplus or deficit during the year and also adjust items to be capitalized 3. The difference between the two sides is capital fund in the beginning. setting out the liabilities on one side and assets on the other side. In case of closing balance sheet. 2. In the closing balance sheet bring forward previous years liabilities.

Show the closing balance of the receipts & payments account. during the year. Assets which already exist in the beginning of the year should be adjusted for additions and disposals. 6.Procedure for preparing balance sheet(cont d) 4. This can be traced from the payment side of receipts and payments account . viz cash in hand and cash at bank on the asset side of the balance sheet 5. if any made during the year and also for any depreciation charged on assets. Show the new assets acquired. if any.

outstanding expenses etc should be shown on the liability side 10 Items of special nature should be shown in the balance sheet after making necessary adjustments. that should be shown on the liability side 8 utstanding assets such as income accrued.Procedure for preparing balance sheet(cont d) If there is any fresh liability incurred during the year. expenses prepaid etc should be shown on the asset side 9 utstanding liabilities such as income received in advance. 7 .

since the amount is collected only once and it is of non-recurring nature. Many feel that. . So it should be shown as an income on the credit side of income & expenditure account. the club or institution receives it fairly regularly every year because of regular entry of members. students may treat it any way but they must append a note justifying the choice made I. Note: In the absence of specific instruction in the question. thers argue that. it should be capitalized and taken to the liability side of balance sheet.Items of special nature includes Entrance fees Accountants differ in the treatment of entrance fees.

prepaid etc should be made so as to show the correct income for the period. .Items of special nature includes (ii) Subscriptions This is one of the main source of revenue and should be treated as income. Adjustment for outstanding. This is shown on the credit side of income and expenditure account.

it must be treated as capital receipt and should be shown on the liability side of the balance sheet . Eg: Donation for building. donation for furniture etc b) General donation Donation of a comparatively small amount must be treated as income.Items of special nature includes (iii) Donations a) Specific donations It must be treated as capital receipt and should be shown on the liability side of balance sheet. But if the amount of such donation is big. donation for library.

Note: In the absence of specific information .Items of special nature includes (iv) Legacy It is the amount received by the non-trading concern as per the will of a deceased person. It is a capital receipt and is shown on the liability side of balance sheet. . it may be treated as income and may be shown on the credit side of income and expenditure account. legacy must preferably be capitalized. But if the amount is small.

then income and expenses should not be shown in the income and expenditure account but income should be added to the fund and expenses should be deducted from such fund on the liability side of balance sheet. it must be treated as capital receipt and should be capitalized. endowment fund etc and there are certain items of expenses and income relating to that fund. . charity fund. (vi) Special purpose fund If there is any special purpose fund Eg: Tournament fund. prize fund.Items of special nature includes (v) Life membership fees As the service has to be rendered for a long time without further payment.

But the profit or loss on its sales should be treated as revenue and is taken to income and expenditure account. . (viii) Sale of newspaper. periodicals etc should be treated as income and is credited to income and expenditure account. periodicals etc Amount received on selling newspaper.Items of special nature includes (vii) Sale of old assets The amount realized from the sale of old assets should be treated as capital receipt and should be credited to asset account.

Accounts of Professionals y It involves Preparation of Receipts and Payments from income and Expenditure Account or Preparation of income and expenditure from Receipts and payments account 2. Preparation of Balance Sheet 1. .

y Income and Expenditure reveals only the actual income whether received or not and also actual expenses whether paid or not. current and succeeding periods. y The receipts & payments account includes both revenue & apital items and also actual total amount of cash receipts and cash payments relating to previous.Preparation of Receipts & Payments Account from Income & Expenditure Account y Another type of problem involves the preparation of Receipts & Payments Account from a given Income & Expenditure Account & Balance sheet. y Follow a reverse procedure to calculate the actual cash receipts & cash payments by taking each and every item in the income & expenditure account as the starting point .

Calculation of total receipts(eg: Subscription) Current years subscription (Given in income & Expenditure account) Less outstanding at the end of the current year Add outstanding at the end of the previous year Less received in advance in the previous year Add received in adv. at the end of the current year xxx xxx xxx xxx xxx xxx Note: This figure will be taken as the starting point for the calculation of income .

Calculation of total payments(Eg: Salaries) Current years salaries (Given in income & Expenditure account) Less outstanding at the end of the current year Add outstanding at the end of the previous year Less Paid in advance in the previous year Add Paid in advance at the end of the current year xxx xxx xxx xxx xxx xxx Note: This figure will be taken as the starting point for the calculation of expenditure .

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