INRTRODUCTION

A non-profit organization is a legal and accounting entity that is operated for the benefit of the society as a
whole, rather than for the benefit of a sole proprietor of a group of partners or shareholders. In every society.
some organizations or associations are found which do not have profit making as their objective. Their main
objective may be social, educational, religious or charitable and they take the form of clubs, societies or
charitable bodies and so on. Many government activities fall into this category, such as hospitals, schools and
colleges.

FEATURES OF NON PROFIT ORGANISATION

1. For providing service to a specific group or public in general such as education, healthcare, recreation
and so on.
2. Organised as charitable trusts or societies and subscribers to these organisations are called members.
3. Managed by a managing committee from amongst the members.
4. Sources of income are: subscriptions from members, donations, legacies, grant-in-aid, etc.
5. Funds raised by such organisations are credited to capital fund or general fund.
6. Surplus (exes of income over expenditure) is not distributed to members, rather credited to capital
fund.
7. Such organisations earn reputation not on the basis of customers' or owners' satisfaction, but on the
basis of their contribution to the welfare of society.
8. Records maintained are meant for present and potential members as well as to meet statutory
requirement.

ACCOUNTING PROCEDURES
Non-profit organizations must prepare regularly annual accounts reflecting the financial affairs of the
organization for submitting to the members and government departments for financial grants and the like. A
majority of the organizations keep their accounting records under the single-entry system. They mainly
maintain cash book, suppliers' ledger and members' register. Where the size of the organization is large, the
accounts are kept under complete double entry system. Whatever may be the system of accounting, these
organizations prepare, at the year end, the following three key statements:
1. Receipts and Payments Account;
2. Income and Expenditure Account; and
 3. Balance Sheet.
Now, we explain below the nature of the above three statements.

RECEIPTS AND PAYMENTS ACCOUNT

MEANING OF RECEIPTS & PAYMENTS ACCOUNT

The 'Receipts & Payment Account' is an Asset Account (or Real Account) which shows the classified summary
of transactions of a Cash Book along with the Cash & Bank balances in the beginning and at the end of an
accounting period. In other words, it is an Asset Account which shows all Receipts and Payments (whether
Capital Revenue or whether relating to previous, current or following accounting year) along with Cash and
Bank Balance in the beginning and at the end of an accounting period.

FEATURES OF RECEIPTS & PAYMENTS ACCOUNT

1. It starts with the Opening Balance of Cash in hand and Cash at Bank.
2. It is debited with all sums received.
3. It is credited with all sums paid out.
4. It records all receipts and payments whether they are of revenue nature or capital nature.
5. It records all receipts and payments whether they relate to the previous, current or following
accounting year.
6. It does not record non-cash items (e.g. Depreciation).
7. It ends with Closing Balance of Cash in hand and Cash at bank.

FORMAT OF RECEIPTS & PAYMENTS ACCOUNT

Dr. RECEIPTS AND PAYMENTS ACCOUNT for the period ending on ... Cr.
Receipts ₹ Payments ₹
To Balance b/f: By Balance b/d (Bank overdraft) xxx
Cash xxx By Annual Sports Expenses xxx
Bank xxx xxx By Salaries & Wages xxx
To Subscription: By Rent. Rates & Taxes xxx
for previous year xxx By Insurance xxx
for current year xxx By Furniture xxx
for next year xxx xxx By Sports Equipment xxx
To Entrance Fees xxx By Books & Periodicals xxx
To Donation for Building xxx By Audit Fees xxx
 To General Donations xxx By Printing & Stationery xxx
To Life Membership Fees xxx By Honorarium xxx
To Legacy xxx By Bank Charges xxx
To Grant from Govt. xxx By Postage & Telegrams xxx
To Contribution for Annual Dinner xxx By Water & Electricity xxx
To Dividend xxx By Conveyance & Travelling xxx
To Interest xxx By Repairs & Maintenance xxx
To Rent xxx By Sundry Expenses xxx
To Receipt on Annual Sports xxx By Annual Dinner Expenses xxx
To Sale of Old Sports Materials xxx By 12% Investments xxx
To Sale of Old Magazines xxx By Balance c/f: xxx
To Sundry Receipts xxx Cash xxx
To Balance c/d (Bank overdraft) xxx Bank xxx xxx
XXX XXX

ILLUSTRATION 1
From the information given below, prepare receipts and payments account of Banerjee Club, Thrissur for the
year ended 31st December, 2014.
Particulars ₹ Particulars ₹
Cash in hand (1-1-2014) 450 Honorarium to Secretary 300
Subscriptions 3,940 Interest received on investments 350
Donations 1,000 Printing and Stationery 150
Entrance fees 450 Petty Cash payments 100
Rent from club hall 600 Insurance premium paid 90
Electricity charges 350 Locker rent received 1,200
Taxes 100 Salaries and wages 2,450

ILLUSTRATION 2
Following is the particulars of star ltd. Prepare receipt and payment for the year ended 31/03/2016
Particulars ₹ Particulars ₹
Cash as at 1.4.2015 1,025 Sale of old Bats etc. 50
Subscription received (including ₹40 2,150 12% General Investments (made on 500
for 2015-2016 & ₹60 for 2016-2017) 1.11.2015)
Upkeep of fields 220 12% Tournament Fund Investments 1,500
(made on 1.11.2015)
Admission Fees 40 Tournament Expenses 1,200
 Salaries 600 Sale of old furniture (cost 100) 60
Drama Expenses 450 Bats and Balls purchased 700
Life Membership Subscription 100 Proceeds of drama tickets 50
Newspapers purchased 150 Interest on 12% General Invest. 12.50
Recei.
Books purchased 100 Printing & Stationery 100
Subscription for Tournament 1,500 Interest on 12% Tournament Fund 37.50
received (on 1.11.2015) & Investment received
Donations received (on 1.11.2015) 500 Furniture 250
Municipal Taxes 40 Subscription received for 3,450
Governor's Party
Charity given 350 Sale of old Bats etc. 50
Sale of old newspapers 45 12% General Investments (made on 500
1.11.2015)

INCOME AND EXPENDITURE ACCOUNT

MEANING OF INCOME & EXPENDITURE ACCOUNT

An Income and Expenditure Account is a final account like Profit & Loss Account, which shows the classified
summary of Revenue Incomes, Revenue Expenses and Losses for Current Accounting Period along with
Surplus (i.e., the Excess of Income over Expenditure) or Deficit (i.e., Excess of Expenditure over Income) which
is transferred to the Capital Fund.

FEATURES OF INCOME & EXPENDITURE ACCOUNT

1. It is debited with the Expenses and Losses.
2. It is credited with the Incomes.
3. It records only those Incomes, Expenses and Losses which are of Revenue Nature.
4. It records only those Incomes, Expenses and Losses which relates to Current Accounting Year.
5. It records Non-Cash Items also (e.g. depreciation).
6. Its balance at the end which represents either the Net Surplus (if credit side exceeds debit side) or
Net Deficit (if debit side exceeds credit side) is transferred to the Capital Fund in the Balance Sheet.
TREATMENT OF SPECIAL ITEMS
1. ENTRANCE FEE/ADMISSION FEE
MEANING OF ENTRANCE FEE/ADMISSION FEE
Entrance Fee (or Admission Fee) is an initial amount payable at the time of seeking admission by a
person who intends to become a member of a club, association, or society.

ACCOUNTING TREATMENT OF ENTRANCE FEE/ADMISSION FEE

The entrance fees may be accounted for in any of the following three ways:
a. It may be treated exclusively as a Revenue Receipt and thus, be credited to Income
Expenditure Account.
b. It may be treated exclusively as a Capital Receipt and thus, be added to the Capital Fund on
the liabilities side of the Balance Sheet.
c. Some portion of Entrance Fee (say 40%) may be treated as a Revenue receipt and thus, be
credited to Income & Expenditure Account and remaining portion (say 60%) may be treated
as a Capital receipt and thus, be, added to the Capital Fund on the liabilities side of the Balance
Sheet as per the Accounting Policy of the organisation.

ILLUSTRATION 3
How will you deal with the Entrance fees while preparing the final accounts for the year ending on31st
March 2016 in each of the following alternative cases:
Case (a) During the year 2015-2016, Entrance Fees received ₹1,00,000
Case (b) During the year 2015-2016 Entrance Fees received ₹1,00,000. The accounting policy of the
club is to treat the entrance fees as of revenue nature.
Case (c) During the year 2015-2016 Entrance Fees received ₹1,00,000. The accounting policy of the
club is to treat the entrance fees as of capital nature.
Case (d) During the year 2015-2016 Entrance Fees received ₹1,00,000. According to accounting policy
of the club, 40% of the entrance fees is to be capitalised. There was no pending membership
as on 31st March 2016.

SOLUTION
Case (a) Entrance Fees ₹1,00,000 may either be credited to Income & Expenditure Account (if
entrance fees is treated as of revenue nature), or be added to the Capital Fund (if entrance fee is to
be treated as of capital nature) by giving a specific note to that effect.
 Case (b) Entrance Fees ₹1,00,000 must be credited to Income & Expenditure Account
Case (c) Entrance Fees ₹1,00,000 must be added to the Capital Fund.
Case (d) Entrance Fees ₹60,000 (i.e., 60% of ₹1,00,000) must be credited to Income & Expenditure
Account and ₹40,000 (i.e., 40% of ₹1,00,000) must be added to Capital Fund.

2. DONATIONS AND LEGACIES

MEANING OF DONATIONS AND LEGACIES
Donations represent the amount donated by any person (whether member or outsider) to the
organisation for a general or specific purpose. Legacies represent the donations which are given under
a will on the death of a donor.

ACCOUNTING OF TREATMENT OF DONATIONS AND LEGACIES

The accounting treatment is summarised below:
Types of Donations and Accounting Treatment
Legacies
1. General Donations These donations & legacies are treated as Revenue Receipts and thus,
and Legacies are credited to Income & Expenditure Account.
2. Specific Donations 1. These donations & legacies are treated as
and Legacies Capital Receipts and thus, are transferred to a 'Special Fun Account'
(e.g., Building Fund) maintained for the purpose.
2. Any Income relating to such 'Special Fund Account' is added the
Respective Fund.
3. Any Revenue Expenditure relating ‘to 'Special Fund Account' is
deducted from the Respective Fund.
4. However, any expenditure of capital nature on account of this
Special Fund (e.g., Expenditure on the construction of building out
of Building Fund) should be shown on the Assets side of the Balance
Sheet and an equal amount should be transferred from that Special
Fund to the Capital Fund.

ILLUSTRATION 4
Show how will you ‘deal with the Prizes awarded ₹2,000 while preparing the final accounts of a Club
for the year ending on March 31, 2016.
SOLUTION

Dr. AN EXTRACT OF INCOME AND EXPENDITURE ACCOUNT for the year ended 31st March, 2016 Cr.
Expenditure ₹ Income ₹
To Prizes awarded 2,000
Reason: There does not exist any Prize Fund.

ILLUSTRATION 5
Show how will you deal with the following items while preparing the final accounts of a Club for the
year ending on March 31, 2016:
Prizes awarded ₹2,000, Prize Fund as at 31.3.2015 ₹12,000.

SOLUTION
AN EXTRACT OF BALANCE SHEET as at 31st March, 2016
Liabilities ₹ Assets ₹
Prize Fund:
Opening Balance 12,000
Less: Prizes awarded 2,000 10,000

ILLUSTRATION 6
Show how will you deal with the following items while preparing the final accounts of a Club for the
year ending on March 31, 2016:
Prizes awarded ₹2,000, Prize Fund as at 31.3.2015 ₹ 12,000, Donations for Prizes received during the
year 2015-2016 ₹2,800.

SOLUTION
AN EXTRACT OF BALANCE SHEET as at 31st March, 2016
Liabilities ₹ Assets ₹
Prize Fund:
Opening Balance 12,000
Add: Donations 2,800
Less: Prizes awarded 2,000 12,800
ILLUSTRATION 7

Show how will you deal with the following items while preparing the final accounts of a Club for the
year ending on March 31, 2016:
Prizes awarded ₹2,000.
Prize Fund as at 31.3.2015 ₹12,000
Donations for Prizes received during the year 2015-2016 ₹2,800
10% Prize Fund Investments as at 31.3.2015 ₹12,000.
Interest on Prize Fund Investments ₹1,200.

SOLUTION
AN EXTRACT OF BALANCE SHEET as at 31st March, 2016
Liabilities ₹ Assets ₹
Prize Fund: 10% Prize Fund Investments 12,000
Opening Balance 12,000
Add: Donations 2,800
Add: Interest on Prize fund 1,200
Investments
Less: Prizes awarded 2,000 14,000

ILLUSTRATION 8
Show how will you deal with the following items while preparing the final accounts of a Club for the
year ending on March 31, 2016:
Prizes awarded ₹ 17,000, Prize Fund as at 31.3.2015 ₹12,000, Donations for Prizes received during the
year 2015-2016 ₹2,800, 10% Prize Fund Investments as at 31.3.2015 ₹12,000. Interest on Prize Fund
Investments ₹1,200.

SOLUTION
Dr. AN EXTRACT OF INCOME AND EXPENDITURE ACCOUNT as at 31st March, 2016 Cr.
Expenditure ₹ Income ₹
To Prize Fund awarded 1,000

AN EXTRACT OF BALANCE SHEET as at 31st March, 2016

Liabilities ₹ Assets ₹
Prize Fund:
Opening Balance 12,000
 Add: Donations 2,800
Add: Interest on Prize fund 1,200
Investments
Less: Prizes awarded 17,000
T/F to I & E Exp. A/c (1000)

ILLUSTRATION 9
Show how will you deal with the following items while preparing the final accounts for the year ending
on 31st March 2016:
Expenditure on Construction of Building ₹3,00,000. The construction work is in progress and has not
yet completed. Opening Capital Fund ₹ 9,00,000.

SOLUTION
AN EXTRACT OF BALANCE SHEET as at 31st March, 2016
Liabilities ₹ Assets ₹
Capital Fund:
Opening Balance 9,00,000

ILLUSTRATION 10
Show how will you deal with the following items while preparing the final accounts for the year ending
on 31st March 2016:
Expenditure on construction of Building ₹ 3,00,000. The construction work is in progress and has not
yet completed. Opening Building Fund ₹ 4,00,000, Opening Capital Fund ₹ 9,00,000

SOLUTION
AN EXTRACT OF BALANCE SHEET as at 31st March, 2016
Liabilities ₹ Assets ₹
Capital Fund: Building-in-progress 3, 00,000
Opening Balance 9,00,000
Add: T/f from Building Fund 12,00,000
3,00,000
Building Fund:
Opening Balance 4,00,000 1,00,000
Less: T/f to Capital Fund 3,00,000
ILLUSTRATION 11
Show how will you deal with the following items while preparing the final accounts for the year ending
on 31st March 2016:
Opening Building Fund 4,00,000
Donation for Building received 5,00.000
Opening Capital Fund 9,00,000
Expenditure on construction of Building. The construction work is in progress 3,00,000.
and has not yet completed.

SOLUTION
AN EXTRACT OF BALANCE SHEET as at 31st March, 2016
Liabilities ₹ Assets ₹
Capital Fund: Building-in-progress 3, 00,000
Opening Balance 9,00,000
Add: T/f from Building Fund 3,00,000 12,00,000
Building Fund:
Opening Balance 4,00,000
Add: Donations 5,00,000
Less: T/f to Capital Fund 3,00,000 6,00,000

ILLUSTRATION 12
Show how will you deal with the following items while preparing the final accounts for the year ending
on 31st March 2016:
Opening Building Fund 4,00,000
Opening 10% Building Fund Investments 4,00,000
Donation for Building received 5,00,000
Interest received on Building Fund Investments 40,000
Opening Capital Fund 9,00,000.
Expenditure on construction of Building The construction work is in progress 4,00,000
and has not yet completed.

SOLUTION
AN EXTRACT OF BALANCE SHEET as at 31st March, 2016
Liabilities ₹ Assets ₹
Capital Fund: Building-in-progress 3, 00,000
 Opening Balance 9,00,000 10% Building Fund 4,00,000
Add: T/f from Building Fund 3,00,000 12,00,000 Investments
Building Fund:
Opening Balance 4,00,000
Add: Donations 5,00,000
Add: Interest on [Link] 40,000
Less: T/f to Capital Fund 3,00,000 6,40,000

3. SALE OF OLD NEWSPAPERS AND PERIODICALS

The sale proceeds of old newspapers and periodicals are treated as Revenue Receipts and thus, are
credited to the Income & Expenditure Account.

4. SALE OF OLD FIXED ASSETS

The sale proceeds of old fixed assets are treated as Capital Receipts and thus, are credited to the
Respective Fixed Asset Account. However, the Profit or Loss on Sale of fixed assets is shown in the
Income & Expenditure Account.

5. CONSUMABLE ΙΤΈMS CONSUMED DURING THE YEAR

a. Sometimes Not-for-profit organisations consume some consumable item e.g. Stationery, Sports
Materials, Medicines.
b. In such a case Total Creditors Account should be prepared to ascertain Credit Purchases (if missing).
c. A separate Stock Account for each of the consumable items is prepared to ascertain the amount of
consumable item consumed during the year.
d. Such amount consumed is debited to Income & Expenditure Account.

ILLUSTRATION 13
How will you deal with the following items while preparing the Income and Expenditure Account for the
year ending on March 31, 2016 and a Balance Sheet as on that date?
Particulars As at 1.4.2015 As at 31.3.2016
₹ ₹
Creditors for Sports Materials 2,000 1,200
Stock of Sports Materials 2,100 500
During the yearn 2016, the payment made to those creditors were ₹10,800. Cash purchase 10 of credit
purchase
 SOLUTION
Dr. AN EXTRACT OF INCOME AND EXPENDITURE ACCOUNT as at 31st March, 2016 Cr.
Expenditure ₹ Income ₹
To sports material consumed 12,600

AN EXTRACT OF BALANCE SHEET as at 31st March, 2016

Liabilities ₹ Assets ₹
Creditor for sports material 1,200 Stock of sports material 500

Working note
Dr. CREDITORS FOR SPORTS MATERIALS ACCOUNT Cr.
Particular ₹ Particular ₹
To Bank A/c 10,800 By Balance b/d 2,000
To Balance c/d 1,200 By Stock of Sports Materials A/c 10,000
(Credit purchases) (b. f.)
12,000 12,000

Dr. STOCK OF SPORTS MATERIALS ACCOUNT Cr.

Particular ₹ Particular ₹
To Balance b/d 2,100 By Income and Expenditure A/c 12,600
(Sports Materials consumed)
To Creditors for Sports Materials (transfer) 10,000 (Balancing figure)
To Bank A/c (cash purchases) 1,000 By Balance c/d 500
13,100 13,100

6. PROFIT/LOSS FROM TRADING ACTIVITIES

a. Sometimes Not-for-profit organisations carry on trading activities e.g. A Restaurant/Bar run by a club,
Chemist shop by a hospital, Book-Shop by a library.
b. In such a case, a separate Trading Account for each of the trading activities is prepared to ascertain
the Profit/Loss from each of such trading activities.
c. Such Profit/Loss is transferred to Income & Expenditure Account.
d. Trading Account is prepared in the same manner as in case of commercial organisations
e. Sometimes the figures of Credit Purchases and Credit Sales are missing in the questions, in such case
Total Creditors' Account and Total Debtors' Account should be prepared to ascertain credit purchases
and credit sales respectively.
ILLUSTRATION 14
Bharat Club provides you the following information:
Stock in Restaurant on 31.3.2015 ₹3,900, and on 31.3.2016 ₹4,500, Restaurant Takings ₹3,61,600,
Restaurant Purchases ₹2,04,800, Wages (including ₹ 50,000 for Restaurant) ₹ 92,300, Fuel ₹ 17,700, China
Glass Cutlery on 31.3.2015 ₹2,500, Depreciation @ 20% is to be provided on China Glass Cutlery.
Required: Show how will you deal with the above items while preparing Restaurant Trading Account,
Income & Expenditure Account and Balance Sheet.

SOLUTION
Dr. RESTAURANT TRADING ACCOUNT for the year ended 31st March, 2016 Cr.
Particular ₹ Particular ₹
To Opening Stock 3,900 By Restaurant Takings 3,61,600
To Purchases 2,04,800 By Closing Stock 4,500
To Wages 50,000 12,000
To Fuel 17,700
To Depreciation on China Glass Cutlery 500
To Surplus transferred to Income & ExpenditureA/c 89,200
3,66,100 3,66,100

Dr. AN EXTRACT OF INCOME AND EXPENDITURE ACCOUNT for the year ended 31st March, 2016 Cr.
Expenditure ₹ Income ₹
To Wages 42,300 By Profit from Restaurant 89,200

AN EXTRACT OF BALANCE SHEET as at 31st March, 2016

Liabilities ₹ Assets ₹
Restaurant Stock 4,500
China Glass Cutlery 2,500 2,000
Less: Depreciation @ 20% 500
7. SUBSCRIPTION

MEANING OF SUBSCRIPTION
Subscription is the major source of revenue income of a not-for-profit entity. Subscriptions are the
amounts paid by the members of such entity to maintain their membership. Subscriptions may be paid
periodically (usually on yearly basis) or as a lump sum for lifetime membership.

ACCOUNTING TREATMENT OF SUBSCRIPTION

Types of Donations and Accounting Treatment
Legacies
1. Periodical These are treated as Revenue Receipts and hence credited to Income
Subscriptions & Expenditure Account.
2. Life Membership These subscriptions are treated, as a Capital Receipt and hence are
Subscriptions added to the Capital Fund.

HOW TO CALCULATE INCOME FROM SUBSCRIPTIONS

(a) In Statement Form,
(b) In Account Form, and
(c) In Equation Form.

(a) In Statement Form:

COMPUTATION OF INCOME FROM SUBSCRIPTIONS FOR THE CURRENT YEAR
Particulars ₹
A. Subscriptions received during the current year
B. Add: (i) Outstanding Subscriptions at the end of current year
(ii) Advance Subscriptions in the beginning of current year
C. Less: (i) Outstanding Subscriptions in the beginning of current year
(ii) Advance Subscriptions at the of current year
D. Subscription Income to be credit to in come & Expenditure Account (A + B-C)
 (b) In Account Form:
Dr. SUBSCRIPTION ACCOUNT Cr.
Particular ₹ Particular ₹
To Outstanding Subscription A/c xxx By Advance Subscription A/c xxx
(Outstanding Subscription in the (Advance Subscription in the
beginning) beginning)
To Income & Expenditure A/c xxx By Bank A/c (Total Subscription xxx
(balancing figure) received during the current year)
To Advance Subscription A/c xxx By Outstanding Subscription A/c xxx
(Advance subscription at the end) (Outstanding subscription at the
end)
xxx xxx

ILLUSTRATION 15
Calculate the amount of subscriptions to be credited to Income and Expenditure Account of the year 1997
Subscriptions received during 1997 12,000
Subscriptions received in advance for 1998 1,600
Subscriptions outstanding at the beginning of 1997 2,000
Subscriptions outstanding at the closing of 1997 700
.
ILLUSTRATION 16
Subscriptions received during the year 1997 Rs 7,000
Subscriptions outstanding at the beginning of 1997 Rs 1,400
Subscriptions outstanding at the closing of 1997 Rs 1,600
Calculate the amount of subscriptions to be credited to Income and Expenditure Account of the year
1997.

ILLUSTRATION 17
Calculate the amount of subscriptions to be credited to Income and Expenditure Account for the year
1997.
Subscriptions received during 1997 15,000
Subscriptions outstanding at the end of 1996 2,000
Subscriptions received in advance on 31st Dec. 1996 1,000
Subscriptions received in advance on 31st Dec. 1997 3,000
Subscriptions outstanding on 31st Dec 1997 5,000
 ILLUSTRATION 18
On 31st March 2021, a club had subscription in arrears of ₹ 28,000 and in advance ₹4,000. During the
year ended 31st March 2022, the club received subscription of ₹2,08,000 of which ₹12,500 was related
to 2022-23. On 31st March, 2022, there were 5 members who had not paid subscription for 2021-22 @
₹1,600 per person. Prepare the Subscription Account for the year 2021-22.

ILLUSTRATION 19
The City Sports Club of Surat had received in 2022-2023 ₹50,000 towards subscription. Subscription for
2021-22 unpaid on 1.4.2022 were ₹5,000.
Subscriptions paid in advance on 31.3.2022 were ₹ 1,250 and the same on 31.3.2023 was ₹1,000.
Subscriptions for 2022- 2023 unpaid on 31.3.2023 were ₹2,250.
Show a statement showing the amount of subscriptions that would appear in Income and Expenditure
Account of the club for the year ended 31.03.2023

BALANCE SHEET

MEANING OF A BALANCE SHEET

1. A Balance Sheet is the Statement of Assets and Liabilities of an accounting unit at a given date.
2. It is prepared at the end of an accounting period after the Income & Expenditure Account has been
prepared.
3. It is called a Balance Sheet because it is a sheet of balances of ledger accounts which are open even
after the preparation of Income & Expenditure Account.
4. In Not-for-Profit organisations, the excess of Total Assets over Total Outside Liabilities is known as
Capital Fund. While preparing the Balance Sheet, the excess of income over expenditure is added to
the opening Capital Fund and the excess of expenditure over the income is deducted from the opening
Capital Fund.

FORMAT OF BALANCE SHEET

A general format of a Balance Sheet of a Not-for-Profit Organisation is given below:
BALANCE SHEET OF... AS AT...
Liabilities ₹ Assets ₹
Capital Fund: Fixed Assets:
Opening Balance Building
Add: Surplus Opening Balance
 (or Less: Deficit) Add: Additions
Add: Entrance Fees Less: Depreciation xxx
(to the extent capitalised) Furniture
Add: Life Membership Subscriptions Opening Balance
(to the extent capitalised) Add: Additions
Add: Amt. of Capital Expenditure Less: Book Value of asset sold
transferred from A Special Fund Less: Depreciation xxx
(e.g. Building Fund) xxx Sports Equipment
Prize Fund: Less: Depreciation xxx
Opening Balance Investments:
Add: Donation for prizes Prize Fund Investments
Add: Income from Prize Fund Building Fund Investments
Investments 10% Govt. Securities
Less: Expenses xxx Fixed Deposits xxx
Building Fund: Current Assets:
Add: Donation for Building Sports Materials xxx
Add: Income from Building Fund Outstanding Subscriptions xxx
Investments Accrued Interest xxx
Less: Transfer to Capital Fund xxx Accrued Rent xxx
Cash in hand xxx
Current Liabilities: Cash at bank xxx
Subscription received in Advan. xxx
Outstanding Expenses xxx
Bank Overdraft xxx
Creditors xxx

xxx xxx

ILLUSTRATION 20
From the following information, prepare Opening and Closing Balance Sheets:
Particulars 31st March 2015 31st March 2016
₹ ₹
Building (subject to 10% depreciation) 30,000 ?
Furniture (subject to 10% depreciation) - 10,000
 Stock of Sports Materials 2,500 1,000
Prepaid Insurance 1.500 3,000
Outstanding Subscription 6,000 4,000
Advance Subscription 3,000 2,000
Outstanding Locker Rent - 3,000
Advance Locker Rent received - 1,000
Outstanding Rent for Godown 3,000 1,500
12% General Fund Investments 1,00,000 ?
Accrued Interest on above - 2,000
Cash Balance 500 32,000
Bank Balance 1,000 -
Bank Overdraft - 1,000

Note: Entrance Fees received ₹10,000, Life Membership Fees received ₹10,000, Surplus from Income &
Expenditure Account ₹30,000. It is the policy of the club to treat 60% of Entrance Fees and 40% of Life
Membership Fees as of revenue nature.

SOLUTION
BALANCE SHEET as at 31st March, 2015
Liabilities ₹ Assets ₹
Outstanding Rent 3,000 Building 30,000
Advance Subscription 3,000 Stock of Sports Materials 2,500
Capital Fund (Balancing Figure) 1,35,500 Prepaid Insurance 1,500
Outstanding Subscription 6,000
12% General Fund Investments 1,00,000
Cash Balance 500
Bank Balance 1,000
1,41,500 1,41,500

BALANCE SHEET as at 31st March, 2016

Liabilities ₹ Assets ₹
Outstanding Rent 1,500 Building
Advance Subscription 2,000 Book Value 30,000
Advance Locker Rent 1,000 Less: Depreciation 3,000 27,000
Bank Overdraft 1,000 Furniture Cost 10,000
Capital Fund: Less: Depreciation 1,000 9,000
 Opening Balance 1,35,500 Stock of Sports Materials 1,000
Add: Entrance Fees 4,000 Prepaid Insurance 3,000
[10,000 x 40%] Outstanding Subscription 4,000
Add: Life Membership Fees 6,000 Outstanding Locker Rent 3,000
[10,000 x 60%] 12% General Fund Investments 1,00,000
Add: Surplus 30,000 1,75,500 Accrued Interest on 12% General
Fund Investments 2,000
Cash Balance 32,000
1,81,000 1,81,000

ILLUSTRATION 21
JB Club furnishes you the Receipts and Payments Account for the year ended 31.03.2023
Receipts ₹ Payments ₹
To Cash in hand (1.4.2022) 40,000 By Salary 20,000
To Cash at Bank (1.4.2022) 1,00,000 By Repair expenses 5000
To Donations 50,000 By Furnitures 60,000
To Subscriptions 1,20,000 By Investments 60,000
To Entrance fee 10,000 By Misc. Expenses 5,000
To Interest on Investments 1,000 By Insurance Premium 2,000
To Interest from Banks, 4,000 By Billiards table and other Sports Items 80,000
To Sale of Old Newspaper 1,500 By Stationery Expenses 1,500
To Sale of Drama Tickets 10,500 By Drama Expenses 5,000
By Cash in Hand (31.03.2023) 26,500
By Cash at Bank (31.03.2023) 72,000
3,37,000 3,37,000

Additional information:
a. Subscriptions in arrear for 2022-23 ₹9,000 and subscription in advance for the year 2023-24 ₹ 3,500.
b. ₹400 was the insurance premium outstanding as on 31.03.2023.
c. Miscellaneous expenses prepaid ₹ 900.
d. 50% of donation is to be capitalized.
e. Entrance fees to be treated as revenue income.
f. 8% interest has accrued on investments for five months.
 g. Billiards table and other sports equipment costing ₹3,00,000 were purchased in the financial year
2021-22 and of which₹80,000 was not paid 31.03.2022. There is no charge for Depreciation to, be
considered
You are required to prepare Income and Expenditure Account for the year ended 31.03.2023 and Balance
sheet of the Club as at 31.03.2023.

ILLUSTRATION 22
OB Library Society showed the following position on 31st March, 2022:
Liabilities ₹ Assets ₹
Capital Fund 7, 93,000 Electrical Fittings 1,50,000
Expenses Payable 7,000 Furniture 50,000
Books 4,00,000
Investments in Securities 1,50,000
Cash at Bank 25,000
Cash in Hand 25,000
8,00,000 8,00,000

The Receipts and Payment Account for the year ended on 31st March, 2023 is given below:
Receipts ₹ Payments ₹
To Balance b/d By Electric Charges 7,200
Cash at Bank 25,000 By Postage and Stationery 5,000
Cash in Hand 25,000 50,000 By Telephone Charges 5,000
To Entrance Fees 30,000 By Books Purchased (Apr, 2021) 60,000
To Membership Subscription 2,00,000 By Outstanding Expenses Paid 7,000
To Sale Proceeds of Old Papers 1,500 By Rent 88,000
To Hire of Lecture Hall 20,000 By Investment in Securities 40,000
To Interest on Securities 8,000 By Salaries 66,000
By Balance c/d
Cash at Bank 20,000
Cash in Hand 11,300
3,09,500 3,09,500

You are required to prepare Income and Expenditure Account for the year ended 31st March, 2023 and a
Balance Sheet as at 31st March, 2023 after making the following adjustments:
(a) Membership subscription included ₹ 10,000 received in advance.
(b) Provide for outstanding rent ₹ 4,000 and salaries ₹ 3,000.
 (c) Books to be depreciated @ 10% including additions. Electrical fittings and furniture are also to be
depreciated at the same rate.
(d) 75% of the entrance fees is to be capitalized.
(e) Interest on securities is to be calculated @ 5% p.a. including purchases made on 01.10.2022 for
₹40,000

ILLUSTRATION 23
Following is the summary of Receipts and Payments of RR Clinic for the year ended 31st March, 2023:
₹
Opening Cash Balance 56,000
Donation Received (including `50,000 for Building Fund) 1,55,000
Payment to Creditors for Medicines Supply 2,10,000
Salaries 70,000
Purchase of Medical Equipments 1 ,05,000
Medical Camp Collections 87,500
Subscription Received 3,50,000
Interest on Investments @ 9% p.a. 63,000
Honorarium to Doctors 1,90,000
Telephone Expenses 6,000
Medical Camp Expenses 10,500
Miscellaneous Expenses 7,000

Additional Information
01.04.2022₹ 31.03.2023₹
Subscription Due 10,500 15,400
Subscription Received in Advance 8,400 4,900
Stock of Medicine 70,000 1,05,000
Medical Equipments 1,47,000 2,14,200
Building 3,50,000 315,000
Creditor for Medicine 63,000 91,000
Supply Investments 7,00,000 7,00,000

You are required to prepare Receipts and Payments Account and Income and Expenditure Account for the
year ended 31st March, 2023 and the Balance Sheet as on 31st March, 2023.
ILLUSTRATION 24
The following information provided by the New Youth Club, Delhi for the first year ended 31st March, 2023:
(i) Donations Received for Building ₹25,00,000;
(ii) Other Incomes and Receipts were:
Particulars Capital Income Revenue Income Actual Receipt
Entrance Fees Life — 251 251
Membership Fees 105 — 105
Subscription — 1,160 1,151
Play Ground Rent — 120 110
Refreshment Account — 115 115
Sundry Incomes — 62 49
₹’000
Particulars Capital Income Revenue Income Actual Receipt
Land 800 — 800
Books 236 — 202
Furniture 345 — 315
Honorarium and Salaries — 165 131
Maintenance of Play Ground — 52 50
Refreshment Account — 79 79
Insurance Premium — 12 15
Sundry Expenses — 70 65

Others:
Donation were utilized to the extent of ₹13 Lakh in construction of building, remaining balance were
unutilized. In order to keep in safe, 8% Government Securities were purchased on 31st December, 2022 for
₹10.50 Lakh. Remaining amount was put in bank as term deposit on 31st March, 2023. During the year 2022-
23, Subscription received in advance ₹52,000 for the year 2023-24.
Depreciation to be charged on Building and Furniture @ 10% and on Books @ 15%.
You are required to prepare the Receipts & Payments Account, Income & Expenditure Account and Balance
Sheet as on 31st March, 2023
ILLUSTRATION 25
The following summary of the Cash Book has been prepared by the treasurer of a Club:
Receipts ₹ Payments ₹
To Balance b/d 4,740 By Wages – outdoor staff 13,380
To Subscriptions 29,720 By Restaurant Purchase 50,400
To Entrance Fees 3,200 By Rent – 18 months’ to July 30, 2022 7,500
To Restaurant Receipts 56,800 By Rates 2,700
To Games & Competition Receipts 13,640 By Secretary’s Salary 3,120
To Due to Secretary for Petty expenses 80 By Lighting 7,200
By Competition Prizes 4,000
By Printing & Postage etc. 6,000
By Placed in Fixed Deposit 8,000
By Balance c/d 5,880
1,08,180 1,08,180

On April 1, 2022 the club’s assets were:- Furniture ₹48,000, Restaurant stock ₹2,600; Stock of prizes ₹800;
₹5,200 was owing for supplies to the restaurant.
On March, 31, 2023, the Restaurant stocks were ₹3,000 and prizes in hand were ₹500, while the club owed
₹5,600 for restaurant supplies.
It was also found that subscriptions unpaid at March 31, 2023, amounted to ₹1,000 and that the figure of
₹29,720 shown in the Cash Book included ₹700 in respect of previous year and ₹400 paid in advance for the
following year.
Prepare an account showing the Profit or Loss made on the Restaurant and a General Income and Expenditure
Account for the year ended 31.3.2023, together with a Balance Sheet as at that date, after writing 10% off
the Furniture

PREPERATION OF RECEIPT AND PAYMENT ACCOUNT WHEN INCOME AND

EXPENDITURE A/C AND BALANCE SHEET ARE GIVEN

ILLUSTRATION 26
The following is the Income and Expenditure Account of GB Club for the year ended 31st March. 2023:
Income and Expenditure Account of GB Club
Dr. for the year ended 31st March, 2023 Cr.
Expenditure ₹ Income ₹
To Salaries 19,500 By Subscription 68,000
 To Rent 4,500 By Donation 5,000
To Printing 750
To Insurance 500
To Audit Fees 750
To Games & Sports 3,500
To Subscriptions written off 350
To Miscellaneous Expenses 14,500
To Loss on sale of Furniture 2,500
To Depreciation:
Sports Equipment 6,000
Furniture 3,100
To Excess of income over expenditure 17,050
73,000 73,000

Additional Information:
01.04.2022₹ 31.03.2023₹
Subscription in arrears 2,600 3,700
Advance Subscriptions 1,000 1,500
Outstanding expenses:
Rent 500 800
Salaries 1,200 350
Audit Fee 500 750
Sports Equipment less depreciation 25,000 24,000
Furniture less depreciation 30,000 27,900
Prepaid Insurance — 150
Book value of furniture sold is ₹ 7,000. Entrance fees capitalized ₹ 4,000. On 1st April, 2022 there was no cash
in hand but Bank Overdraft was for ₹ 15,000. On 31st March, 2023 cash in hand amounted to ₹ 850 and the
rest was Bank balance. Prepare the Receipts and Payments Account of the GB Club for the year ended 31st
March, 2022.

ILLUSTRATION 27
The Income and Expenditure account of an association for the year ended 31 March 2023 is as under: Dr.
Expenditure ₹ Income ₹
To Salaries 1,20,000 By Subscription 1,70,000
To Printing and Stationery 6,000 By Entrance fee 4,000
To Telephone 1,500 By Contribution for Dinner 36,000
 To Postage 500
To General expenses 12,000
To Interest and bank charges 5,500
To Audit fees 2,500
To Annual Dinner Expenses 25,000
To Depreciation 7,000
To Surplus 30,000
2,10,000 2,10,000

The aforesaid Income and Expenditure account has been prepared after the following adjustments: (₹)
Subscription outstanding as on 31st March 2022 16,000
Subscription outstanding as on 31st March 2023 18,000
Subscription received in advance as on 31st March 2022 13,000
Subscription ‘received in advance as on 31st March 2023 8,400
Salaries outstanding as on 31st March 2022 6,000
Salaries outstanding as on 31st March 2023. 8,000
Audit fees for 2021-22 paid during 2022-23 2,000
Audit fee for 2022-23 not paid 2,500
The building owned by the association since 2022 costs 1,90,000
Equipment as on 31st March, 2022 valued at 52,000
At the end of the year after depreciation of ₹7,000, equipment amounted to 63,000
In 2020-21, the association raised a bank loan of which is still not paid 30,000
Cash in hand as on 31st March 2023 28,500
Cash in hand as on 31st March 2022 13,600
Capital Fund as on 31st March 2022 2,20,600
You are required to prepare Receipts and Payment Account of the association for the year ended 31st March
2023 and the Balance Sheet as at that date