Accounting for Educational Institutions
(With Accounting Entries)
The below mentioned article provides a close view
on accounting for educational institutions.
Introduction to Accounting for Educational Institutions:
Educational Institutions (like Schools, Colleges,
Universities etc.) do not exist for earning profit.
They simply supply benefits and services to the public.
As a result, their primary sources of income are – Fees,
Subscriptions, Donations, Grants, etc.
Naturally they do not belong to the property of a
particular person or persons.
A group of persons known as ‘Trustee’ or ‘Governing
Body’ or ‘Executive Committee’ or ‘Board of
Management’ organise and manage it. Day-to-day
routine activities are entrusted to a person who is known
as Secretary. Since there are many chances of fraud and
embezzlement of the fund of the Institutions, it becomes
essential that the accounts of Institutions should be
drawn properly.
Generally, accounts of an educational institution are
maintained under Cash-basis of accounting and not
under Mercantile-basis of accounting.
Collection of tuition fees, admission fees, fines, session
charges and special fees— laboratory fees, library fees,
sports fees etc. — should be separately recorded in
Collection Register. Students’ Ledger must be
maintained where all these collections should be
credited to the respective students. Students’ Ledger
should also include free studentship, concessions and
writing-off irrecoverable fees which are to be sanctioned
by higher authority or Managing Committee etc.
Periodical reconciliation should also be made between
the fees collected, fees outstanding at the beginning and
at the end of the period, fees written-off with fees that
should have been collected according to the number of
students in different classes having regard to the
number of students enjoying free studentship,
concessions etc. Separate receipts should also be made
for grants from Government D.P.I, or U.G.C. etc.,
scholarships, stipends etc. All these information are to
be recorded in a columnar Cash Book.
However, the following books of accounts are
necessary:
(a) Cash Book:
In order to record all receipts and payments a columnar
Cash Book is prepared. Each receipt or payment is
analysed into its appropriate head and recorded in the
analysis column and the total of the analysis column will
represent the amount received or paid under a
particular head.
(b) Personal Ledge:
It consists of:
(a) Collection Ledger: It has already been stated earlier.
(b) Donors’ Register: It shows the amount provided by
the donors, the actual amounts collected and the amount
outstanding.
(c) Stock Book Register:
It keeps record of all properties purchased, e.g.,
purchase of Building, Furniture, Investment, Book,
Consumable Stores, etc. As soon as the asset is
purchased, the same is to be recorded first in the Cash
Book and thereafter in the Stock Books. Similarly, when
an asset is sold, the same must be adjusted so that the
Stock Books may remain up-to-date.
(d) Salary and Wage Register:
It keeps records of the amounts of salary and wages
which are paid or payable to the employees of the
Institution. Monthly total should be made and recorded
in Cash Book also.
Annual Statement of Accounts:
This statement reveals the actual income and
expenditure of a year classified under appropriate
heads. The Annual Statement of Accounts should be
audited by Chartered Accountants. This statement is
submitted to the Governing Body of the Institution along
with the auditor’s report. If the same is approved, it
becomes final. This statement is prepared in a columnar
form, first column being used for ‘Budgeted Figures’, the
second one for ‘Actuals’ and the third one ‘Estimated
Figures’ for the coming year.
Annual Statement of Accounts:
Note:
Besides the above, expenditures include pay and
allowances to teaching staff, office staff, general staff,
P.F. contribution, Medical inspection, Examination
expenses, Games and Sports, Functions and Festivals,
Audit fees etc.
Illustration:
From the following Trial Balance of Brahmo Samaj
Education Society as at 31st Dec. 2007, prepare an
Income and Expenditure Account and a Balance
Sheet: