Meaning :

Non Profit Organisations are those

organisations whose main object is not
to earn profit but to render valuable
services to its members and to the
society.
Clubs,
associations,
hospitals,
educational
institutions,
trade
unions,
charitable institutions, etc., are the
examples of such organizations.

Special features of the account of

An Income
and Expenditure
takes the place
Non
Profit
makingAccount
organizations:
of the Profit and Loss Account.
The word surplus of income over
expenditure(Surplus) are used in place of net profit.
The word excess of expenditure over
income(Deficit) are used in place of net loss.
The term Accumulated fund is used in place of
Capital account.
A Trading Account is only prepared for an activity
that is in nature of trading and is carried on to
increase the clubs funds.

Important Terms:
1 Legacy : It is the amount which a non
profit Organisation will receive as per
the will of a deceased person. It will be
given on the debit side of the receipt
and payment account. It should be
capitalized being an item of non
recurring nature and should be shown
on the liabilities side of the balance
Sheet.

2 Donations : Donations are the

amounts which are given to the non
profit concerns as gifts by members
of a society. It is also given on the
receipts side of the receipts and
payments account. Donations may
be
General
donations
and
Specific
donations.
Their
treatment is given as under.

Types of Donations:
(i) General Donation : When the donor does
not specify any condition for using the
amount of donation, then it is called as
general donation. It can be treated either as
an item of income(if the amount is small) or
can be capitalized ( If the amount is big
one). If nothing is clear whether the amount
is small or big, it can be treated in any
manner, but a note should be appended
regarding the treatment of such amount.

(ii) Specific Donation : If the

donation is for a specific purpose,
say for the construction of room or
pavilion, then it is called specific
donation. It should be capitalised
and will be shown on the liabilities
side of balance Sheet.

3 Entrance fees : This fee is paid by the

members at the time of joining the club.
Accountants differ on the treatment of
entrance fees. Some prefer to treat it as
capital income and other treat it as
revenue income as it is a regular source of
income. However instructions in the
question must be noted carefully. In
absence of any specific instructions it
should be treated as routine income.

4 Subscription: It is an amount
received by the club from its
members
regularly.
Every
member has to pay certain
amount to the club on regular
basis in order to be continued as
member of the club.

5 Life Membership Fees : It

is paid only once in lieu of
subscriptions. So it should be
capitalized and should be
shown on the liabilities side of
Balance Sheet.

6 Honorarium : Any amount paid to a

person for rendering services to the
concern is called honorarium. For
example, if a payment is made to a
doctor for treating the patient and
providing services of a specialized
nature is honorarium and will be
shown on the debit side of the income
and expenditure account.

Accounts to be
Maintained in Non Profit
1 Receipt and Payment Account
Organisations:

2 Refreshment / Snack bar Trading

Account
3 Income and Expenditure Account
4 Balance Sheet