Unit 1 Accounting for Non Profit Ogranisation

8/3/2019 Unit 1 Accounting for Non Profit Ogranisation

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Date:-12/28/2011

SUBITITLE:-NON PROFIT ORGANISATION [AUTHOR:-MAHESH SOLANKI] MOBILE NO:-9166579934

G LOBAL

EDUCATION POINT

N OT FOR PROFIT ORGANI S ATION



GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROADKAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

BEST OF LUCK BY MAHESH SOLANKIMOBILE NO:-9166579934 OR 8233832117

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ACCOUNTING FOR NOT FOR PROFIT ORGANISATION

Meaning of non-trading concerns: - Non-trading concerns are such organisations, which are formed with non-profit motive.They are set up with an aim of promoting and encouraging literacy, social religious and physical activities. These organisationsare called non-commercial institutions. Such type of institutions do not trade in commodities like other business persons andorganisations rather, they are engaged in public service activities.

A. Example: - Educational institutions, Dharmshalas, Orphanages, Hospitals, Libraries, Temples, Clubs, Sports association are

non-trading concerns.

Meaning of professional persons:- Those people who are not engaged in the purchases and sales of commodities and earnmoney with their knowledge and expertise are called professionals. These people conduct their business or profession eitherindividually or jointly by forming firm or a company.

A. Example: - Doctors, Advocates, Engineers and Chartered Accountants are professional persons.

Meaning of Receipts: - Actual amount received from capital or revenue nature items are called receipts. It may be related tocurrent year, last year and next year.

A. Example: -Subscription due during the year Rs.60000 but actual amount received during the year Rs.50000 (includingRs.5000 last year and Rs.10000 next year), so actual receipts is Rs.50000.

Meaning of Payments:- Actual amount paid for capital or revenue items are called payments. It may be related to current year,last year and next year.

A. Example: -Expenses due during the year Rs.50000 and actual amount paid during the year Rs.40000 (including Rs.5000last year and Rs.6000 for next year), so actual payment is Rs.40000.

Meaning of Incomes:- Current year revenue nature incomes which is received or receivable is called incomes.

A. Example:- Subscription received during the year Rs.50000 and Accrued subscription (Outstanding subscription) during theyear Rs.10000 and Unearned subscription for last year Rs.5000, then current year subscription is Rs.65000(50000+10000+5000).

Meaning of Expenditure:- Current year revenue nature expenses which is paid or payable is called expenditures.

A. Example:- Salary paid during the year Rs.60000 and outstanding salary during the current year Rs.5000 and prepaid salaryin last year Rs.6000, and then current year revenue nature expenditure is Rs.71000 (60000+5000+6000).

Methods of maintaining accounts and the books maintained:-

A. Objectives of Commercial and non-commercial organisations:-

Example of non trading condern

1.Educational institutions 2.Libraries 3.Hospitals 4.Orphanages 5.Dharmshalas 6.Clubs 7.Temples 8.Sports

association

Example of professionals person

1.Doctors 2.Advocates 3.Chartered accountants 4.Engineers





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B. Commercial organisations:- The aim or an objective of these organisations is to earn profit.

a. Accounting systems maintained by commercial organisations:-

1. Final accounts prepared by manufacturing concerns:-

2. Final accounts prepared by trading concerns:-

C. Non-commercial organisations:- The aim or an objective of these organisations is to promoting and encouraging literacy,social religious and physical activities.

a. Accounting systems maintained by non-trading concerns:-

1. Final accounts prepared by non-trading concerns:-

Receipts and Payments account:- To find out Cash or Bank balance (Debit bank balance or bank overdraftbalance).

Income and Expenditure account:- To find out Surplus (Excess of Incomes over Expenditures) or Deficit(Excess of Expenditures over Incomes).

Balance sheet:- To find out financial position (Assets and liabilities situation) of the entity.

Types of organisations

2.Non commerical organisations

1.Commerical organisations

Final account prepared by trading concern

A.Trading account

To find out gross profit or gross loss

B.Profit and loss account

To find out net profit or net loss

C.Balance sheet

To find out financial position of the entity

Final account prepared by manufacturing concern

A.Manufacturing account

To find out cost of production

B.Trading account

To find out gross profit or gross loss

C.Profit and loss account

To find out net profit or net loss

D.Balance sheet






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Books are kept by non-trading concerns:-

A. Cash Book:- All types of cash transactions (Capital and Revenue nature) are recorded in cashbook according to date of transaction occurred. This book is based on method of cash basis of accounting. Column Cashbook is prepared by non-trading concerns. It is prepared on the basis of daily transactions.

a. Performa of column cash book:-

Performa of column cashbook Dr. side

b. Opening balance of cash and bank account- Opening balance of cash and bank account (Debit bank balance or bank overdraft balance) are recorded in this book.

c. All types of capital and revenue transactions:- All types of capital and revenue transactions are recorded in this book.

d. All types’ cash Receipts are recorded in:- Debit side of column cashbook.

e. All types’ cash Payments are recorded in:- Credit side of column cashbook.

f. Closing balance of column cashbook may be:-

1. Debit balance of cash account or

2. Debit balance of bank account or

3. Credit balance of bank account (Bank overdraft balance).

B. Stock Register:- The stock register is maintained by non-trading concerns for keeping all the particulars of assets. Whensomething is purchased, an entry is made in the stock register.

a. When an asset is in greater volume:- If an asset is in greater volume, a separate register can be kept for the same.

Final account prepared by non trading concern

A.Receipts and Payments account

To find out cash or bank balance

B.Income and Expenditure account

To find out Surplus or Deficit

C.Balance sheet


Books are kept by non-trading concerns

1.Cash book

All types of cash receipts and cash payment are shown in cash

book which may be capital or revenue nature.

2.Stock register

All types of assets records maintained in stock register.

3.Membership register

All types information related to members are recorded in

membership register.

4.Memorandum

All types credit transactions are recorded in memorandum book to remember credit transactions.

Date Particular Total Amount

Rs.

Fees

Rs.

Subscription

Rs.

Donation

Rs.

Date Total Amount

Rs.

Salary and wages Rs.

Stationary

Rs.

Postage and telegram

Rs.

Total Total Total Total Total Total Total Total





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b. Example:- In case of a collage, separate register can be maintained for furniture, sports goods etc., so that physicalverification of the items can be made with the help of the register.

C. Members Register:- There are some regular members in such institutions. They also give donation to the institution.Secondly, entrance fee and membership fee are collected from new members. All these receipts are accounted in themembers register.

D. Memorandum Book:- Generally, there are no credit transactions in non-trading concerns. Even if there are, it is very rare.

To keep such transactions in memory, the same are written in a separate book, which is called memorandum book.Whenever cash is received concerning these transactions, or whenever payment is made, the same is entered in thecashbook.

Adjustment entries related to Outstanding expenses, Accrued incomes, Unearned income and Prepaid expenses:-

Particulars Current year adjustment entries Previous year adjustment entries

1.Outstanding expensesRelated expenses a/c Dr.

To related outstanding expenses a/c(Being outstanding expenses related to current year)

Related outstanding expenses a/c Dr.To related expenses a/c

(Being outstanding expenses related to previous year)

2.Accurd incomesRelated accrued income a/c Dr.

To related income a/c(Being accrued income related to current year)

Related income a/c Dr.To related accrued income a/c

(Being accrued income related to previous year)

3.Uneraned incomesRelated income a/c Dr.

To related unearned income a/c(Being unearned income related to current year)

Related unearned income a/c Dr.To related income a/c

(Being unearned income related to previous year)

4.Prepaid expensesRelated prepaid expenses a/c Dr.

To related expenses a/c(Being prepaid expenses related to current year)

Related expenses a/c Dr.To related prepaid expenses a/c

(Being prepaid expenses related to previous year)

Adjustment format:-

A. Related to Income:-

a. In account format form:-

Related income account Dr.

Particulars Amount(Rs.)

Particulars (Rs.)

To related accrued income (P.Y accrued income) ----- By Cash a/c(Amount shown in Receipts and Payments account) -----

To related unearned income (C.Y unearned income) ----- By related accrued income (C.Y accrued income) -----

To Income and Expenditure account (C.Y revenue nature income) ----- By related unearned income (P.Y unearned income) -----

Total Total

b. In statement form:-

Calculation of amount shown in related income account

Particulars Detailed amount(Rs.) Net amount(Rs.)

Related income received during the year (Receipt and Payment account) -----

Add:- Accrued income related to current year -----

Add:- Unearned income related to previous year ----- ------

Less:- Accrued income related to previous year -----

Less:- Unearned income related to current year ----- -------

Amount shown in Income and Expenditure account -------

B. Related to Expenses:-





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a. In account format form:-

Related expenses account Dr.


Particulars (Rs.)

To opening stock (Shown in opening balance sheet) --(IF)-- By closing stock (Shown in closing balance sheet) --(IF)--

To Cash a/c(Amount shown in Receipts and Payments account) ----- By related outstanding expenses (P.Y outstanding expenses) -----

To related outstanding expenses (C.Y outstanding expenses) ----- By related Prepaid expenses (C.Y prepaid expenses) -----

By related prepaid expenses (P.Y prepaid expenses) ----- By Income and Expenditure account (C.Y revenue nature expenses) -----

Total Total

b. In statement form:-

Calculation of amount shown in related expenses account

Particulars Detailed amount(Rs.)

Net amount(Rs.)

Related expense paid during the year (Receipt and Payment account) -----

Add:- Opening stock -----

Add:- Outstanding expenses related to current year -----

Add:- Prepaid expenses related to previous year ----- ------

Less:- Closing stock -----

Less:- Prepaid expenses related to current year -----

Less:- Outstanding expenses related to previous year ----- -------


Adjustment format:-

Some special heads relating to non-trading concerns: -

A. Entrance fees:- These institutions collect entrance fee from members when they enroll themselves as member. Entrance feeis also collected from the students in the academic institutions.

Current year P.Y

Previous year C.Y

SHORT NAME OFCURRENT YEAR AND

PREVIOUS YEAR

+ - + -C.Y P.Y C.Y P.Y

Outstanding Expenses

Expenses related

adjustment

Income related

adjustment

Accrued Income

Liabilities side Assets side

Income related

adjustment

Expenses related

adjustmentUnearned

Income

Prepaid

Expenses

C.Y P.Y C.Y P.Y - + - +





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a. When information about entrance fees is not given in question then treatment and presentation in final accounts:-Then whole amount of entrance fees is treated as revenue nature.

b. Treatment of revenue nature entrance fees:-

1. Receipts and payment account:- Actual receipts entrance fees have shown in Receipts side (Debit side) of Receipts and payment account.

2. Income and expenditure account: - A Revenue nature entrance fee, which is related to current year, is shownin Income side (Credit side) of Income and expenditure account. Which may be received or receivable.

3. Balance sheet:- Not shown in Balance sheet.

c. Presentation of revenue nature entrance fees:-

1. Receipts and payment account:-

Receipts and Payments account for the year ending ----------- Dr.

Date Receipts Amount Rs.

Date Payments Amount Rs.

To entrance fees ----

Total Total

2. Income and expenditure account:-

Income and Expenditure account for the year ending------------ Dr.

Expenditure Amount Rs.

Incomes Amount Rs.

By Entrance fees ----

Total Total

3. Balance sheet:- Balance Sheet as on --------

Liabilities Amount Rs.

Assets Amount Rs.

Total Total

d. When question say that whole amount of entrance fees is treated as capital nature then treatment and presentationin final accounts:- Then whole amount of entrance fees is treated as capital nature.

e. Treatment of capital nature entrance fees:-

1. Receipts and payment account:- Actual receipts entrance fees have shown in Receipts side (Debit side) of Receipts and payment account.

2. Income and expenditure account:- Not shown in Income and Expenditure account.

Particular Treatment Receipts and Payments account

Income and Expenditure account

Balance sheet

When information is not givenabout entrance fees then

presentation

Entrance fees treated asrevenue nature

Actual received amountin receipts side

Current year relatedrevenue income in

income side

Not shown

When entrance fees treated ascapital nature then presentation

Entrance fees treated ascapital nature


Not shown in Incomesand Expenditures

account

Shown in liabilitiesside and add back in

capital fundWhen some portion of entrance

fees treated as capital nature thenpresentation

Some portion treated ascapital nature



income side

Capital natureportion add back in

liabilities side incapital fund





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3. Balance sheet: - A Capital nature entrance fee is added back in cap ital fund in liabilities side of balance sheet.

f. Presentation of capital nature entrance fees:-





To entrance fees ----

Total Total




Incomes Amo Rs.

----

Total Total

3. Balance sheet:- Balance Sheet as on ---------


Assets Amoun Rs.

Capital fund ---- Add:- Capital nature entrance fees ---- ----

Total Total

g. When information about entrance fees in given and say entrance fees, some portion is treated as capital nature then:- Then some portion is treated as capital nature and balance portion is treated as revenue nature.

h. Treatment of capital and revenue nature entrance fees:-

1. Receipts and payment account:- Actual receipts entrance fees showed in Receipts side (Debit side) of Receipts

and payment account.

2. Income and expenditure account- A Revenue nature entrance fee is shown in Income side (Credit side) of Income and Expenditure account. This may be received and receivable.

3. Balance sheet:- A Capital nature entrance fee is added back in capital fund in liabilities side of balance sheet.

i. Presentation of capital and revenue nature entrance fees:-


Receipts and Payments account for the year ending --------- Dr.



To entrance fees ---

Total Total


Income and Expenditure account for the year ending--------- Dr.


Incomes A Rs.

By Revenue nature Entrance fees ----

Total Total





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3. Balance sheet:- Balance Sheet as on ---------


Assets Amount Rs.

Capital fund ---- Add:- Capital nature entrance fees ---- -----

Total Total

B. Life membership:- There is a provision in the byelaws of non-trading organisations that a person can become life memberby depositing life membership fee. In such a situation, there is no need for that member to pay membership fee every year.The life membership fee received by an institution is not only for the current year rather this amount covers or is related tothe whole life of an institution.

a. When information about life membership fees is not given in question then treatment and presentation in final accounts:- Then whole amount of life membership fees is treated as capital nature.

1. Treatment of capital nature life membership fees:-

Receipts and payment account:- Actual receipts life membership fees have shown in Receipts side (Debitside) of Receipts and payment account.

Income and expenditure account: - Not shown in Income and Expenditure account.

Balance sheet:- Life membership fees whole capital nature amount will be add back in capital fund inliabilities side of balance sheet.

2. Presentation of capital nature life membership fees:-

Receipts and payment account:-




To life membership fees ----

Total Total

Income and expenditure account:-



Incomes A Rs.

Total Total

Balance sheet:-


Income and Expenditure

account

Balance sheet

When information is not givenabout life membership fees

then presentation

Life membership fees treatedas capital nature

Actual receivedamount in receipts

side

Not shown Shown in balance sheetliabilities and add back in

capital fund

When life membership fees

treated as revenue nature thenpresentation

Life membership fees treated

as revenue nature

Actual received

amount in receiptsside

Current year related

revenue incomes inincome side

Not shown

When some portion of lifemembership fees treated as

revenue nature thenpresentation

Life membership someportion is treated as revenuenature and balance portion is

treated as capital nature

Actual receivedamount in receipts

side


income side

Shown in balance sheetliabilities side and addback capital portion of entrance in capital fund





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Balance Sheet as on --------


Assets A Rs.

Capital fund ---- Add:- Capital nature life membership fees - --- ----

Total Total

b. When question say that whole amount of life membership fees is treated as revenue nature then treatment and presentation in final accounts:- Then whole amount of life membership fees is treated as revenue nature.

1. Treatment of revenue nature life membership fees:-

Receipts and payment account:- Actual receipts life membership fees have shown in Receipts side (Debitside) of Receipts and payment account.

Income and expenditure account- A Revenue nature life membership fees is shown in Income side(Credit side) Income and Expenditure account. This may be received and receivable.

Balance sheet: - Not shown in balance sheet.

2. Presentation of revenue nature entrance fees:-




Date Payments Amou Rs.

To life membership fees ----

Total Total




Incomes Rs.

By Revenue nature life membership fees related to current year ----

Total Total

Balance sheet:-

Balance Sheet as on ---------------------------


Assets Rs.

Total Total

c.

When information about life membership fees is given and says life membership fees some portion is treated as revenue nature then:- Then some portion is treated as revenue nature and balance portion is treated as capital nature.

1. Treatment of capital and revenue nature life membership fees:-

Receipts and payment account:- Actual receipts life membership fees showed in Receipts side (Debit side)of Receipts and payment account.

Income and expenditure account- A Revenue nature life membership fee is shown in Income side (Creditside) of Income and Expenditure account which may be received and receivable.





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Balance sheet:- A Capital nature life membership fee is added back in capital fund in liabilities side of balance sheet.

2. Presentation of capital and revenue nature entrance fees:-


Receipts and Payments account for the year ending -----------------

Dr. Date Receipts Amount

Rs. Date Payments Amount

Rs.

To life membership fees ---

Total Total




Incomes Rs.

By Revenue nature life membership fees ----

Total Total

Balance sheet:-

Balance Sheet as on ----------


Assets Amoun Rs.

Capital fund ----- Add:- Capital nature entrance fees ----- ----

Total Total

C. Subscription:- It an important source of income for non-trading concern and it is used for management and functioning of non-trading concern. When information about subscription treatment is not given then it treated as revenue nature income.

a. Treatment of subscription:-

1. Receipts and payment account:- Actual receipts of subscription showed in Receipts side (Debit side) of Receipts and payment account, which may be related to current year, previous year and next year.

2. Income and expenditure account- Revenue nature subscription is shown in Income side (Credit side) of Incomeand Expenditure account which may be received or receivable.

3. Balance sheet:- Not shown in balance sheet.

b.

Presentation of subscription:-1. Receipts and payment account:-

Receipts and Payments account for the year ending ----------------- Dr.



To subscription received ---

Total Total



Balance sheet

When subscription relatedinformation is not given then

Treated as revenuenature

Actual receipts of subscriptionamount shown in receipts side

Current year related revenueincome in Income side

Not shown





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Incomes A Rs.

By Revenue nature current year subscription ----

Total Total

3. Balance sheet:-



Assets Amoun Rs.

Total Total

D. Donation:- Donation has an important place in the functioning of non-trading concern. Donations are two types.

a. General donation:- When an amount received as donation is not meant for specific purpose, such donation is calledgeneral donation.

1. Treatment of general donation:- When general donation amount is lower than treatment:-

Receipts and payment account:- Actual receipts of general donation showed in Receipts side (Debit side)of Receipts and payment account.

Income and expenditure account- Revenue nature general donation is shown in Income side (Creditside) of Income and Expenditure account. When general donation amount is higher than it is not shownin Income and expenditure.

Balance sheet:- Not shown in balance sheet.

2. Presentation of general donation:-





To general donation ----

Total Total




Incomes Rs.

By Revenue nature general donation ----

Total Total

Particular Treatment Receipts and Payments account Income and

Expenditure account

Balance

sheetWhen information about general

donation is given thenTreated as revenue nature

general donationActual received amount of general

donation in receipts sideRevenue nature currentyear general donation in

shown in Income side

Notshown

When information aboutspecific donation is given then

Treated as capital naturespecific donation

Actual receipts amount of specificdonation in receipts side

Not shown Liabilitiesside





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Balance sheet:-



Assets Amoun Rs.

Total Total

b. Special donation:- When an amount received as donation is meant for specific purpose, such donation is calledspecific donation. In addition, if general donation amount in higher than treatment of general donation same asspecial donation and that types of donation is treated as capital nature.

1. Treatment of special donation:-

Receipts and payment account:- Actual receipts of special donation showed in Receipts side (Debit side)of Receipts and payment account

Income and expenditure account- Special donation or General donation amount is very high then notshown in Income side (Credit side) of Income and Expenditure account.

Balance sheet:- Specific donation is shown in liabilities side of balance sheet.

2. Presentation of special donation:-





To specific donation or Higher amountgeneral donation

---

Total Total




Incomes Amo Rs.

----

Total Total

Balance sheet:-

Balance Sheet as on ---------


Assets Amou Rs.

Specific donation or Higher amount general donation ----

Total Total

E. Legacy:- It is capital nature income for non-trading concern.

a. Treatment of legacy:-

1. Receipts and payment account:- Actual receipts of legacy showed in Receipts side (Debit side) of Receipts andpayment account.



Balance sheet

When information is notgiven about legacy then

Legacy amount treatedas capital nature

Actual received amount inreceipts side

Not shown Shown in liabilitiesside of balance sheet.





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2. Income and expenditure account- Not shown in Income and Expenditure account.

3. Balance sheet:- Shown in liabilities side of balance sheet as heading of legacy.

b. Presentation of legacy:-





To legacy received ---

Total Total




Incomes Amo Rs.

Total Total

3. Balance sheet:-



Assets Amou Rs.

Legacy ----

Total Total

F. Sale of sports material:- It is revenue nature income for non-trading concern. Sale of sports materials (used materials likeold balls, bats, nets, etc.) is the regular feature with any Sports Club. It is usually shown as an income in the Income andExpenditure Account.

a. Treatment of sale of sports material:-

1. Receipts and payment account:- Actual receipts of sale of sports material showed in Receipts side (Debit side)of Receipts and payment account.

2. Income and expenditure account:- Revenue nature sale of sports material amount shown in Income side (Creditside) of Income and Expenditure account.


b. Presentation of sale of sports material:-





To sale of sports material ---

Total Total



Balance sheet

When information is not given aboutsale of sports materials then presentation

Sale of sports materialtreated as revenue nature

Actual receivedamount in receipts side

Current year related revenueincome in income side

Notshown





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Incomes AmountRs.

By sale of sports materials ----

Total Total

3. Balance sheet:-



Assets Amou Rs.

Total Total

G. Sale of old newspapers, magazines and periodicals:- It is recurring nature revenue income for non-trading concern.

a. Treatment of sale of old newspapers, magazines and periodicals:-

1. Receipts and payment account:- Actual receipts of sale of newspaper and magazines showed in Receipts andpayment account Receipts side (Debit side).

2. Income and expenditure account- Revenue nature sale of newspaper and magazines is shown in Income andExpenditure account Income side (Credit side).Which may be received or receivable.


b. Presentation of sale of newspaper and magazines:-





To sale of old newspapers, magazines and periodicals ---

Total Total




Incomes Rs.

By sale of old newspapers, magazines and periodicals ----Total Total

3. Balance sheet:-



Assets Amou Rs.

Total Total



Balance sheet

When information is not given about sale of oldnewspapers and magazines then presentation

Treated asrevenue nature



Notshown





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H. Aid from government and other institutions:- It is revenue nature income for non-trading concern.

a. Treatment of aid from government and other institutions:-

1. Receipts and payment account:- Actual receipts of aid from government and other institutions showed Receiptsside (Debit side) of in Receipts and payment account.

2. Income and expenditure account- Revenue nature aid from government and other institution is shown inIncome side (Credit side) of Income and Expenditure account. This may be received or receivable.


b. Presentation of aid from government and other institutions:-





To aid from government and other institutions ---

Total Total




Incomes Am Rs.

By aid from government and other institutions ----

Total Total

3. Balance sheet:-



Assets Amou Rs.

Total Total

I. Sale of old assets:-

a. Calculation of profit or loss on sale of fixed assets:-

-:Profit on sale of fixed assets:-

Profit on sale of fixed assets =Selling price of fixed assets - Cost of fixed assets

-:Loss on sale of fixed assets:-

Loss on sale of fixed assets = Cost price of fixed assets - Selling price of fixed assets

b. Treatment of sale of old assets:-



Balance sheet

When information is not given about aid fromgovt. and other institution then presentation

Aid from government istreated revenue nature

Actual receivedamount in receipts side


Notshown





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Particular Receipts and Payments account Income and Expenditure account

Balance sheet

When loss on sale of oldassets then presentation

Actual amount received from sale of fixed assets shown in Receipts side

Loss on sale of fixed assets isshown in Expenditure side

Less from old assets in balance sheetassets side from related assets

When profit on sale of oldassets then presentation

Actual amount received from sale of fixed assets shown in Receipts side

Profit on sale of fixed assets isshown in Income side

Less from old assets in balance sheetassets side from related assets

1. Receipts and payment account:- Actual receipts from sale of old assets showed in Receipts side (Debit side) of Receipts and payment account.

2. Income and expenditure account- Profit on sale of fixed assets is shown in Income side of Income andExpenditure account or Loss on sale of fixed assets is shown in Expenditure side (Debit side) of Income andExpenditure account.

3. Balance sheet:- Sale of old assets related adjustment made in assets side of balance sheet.

c. Presentation of sale of old assets:-



Date Receipts Amount

Rs.

Date Payments Amount

Rs.To sale of old assets ---

Total Total




Incomes Amo Rs.

To loss on sale of old assets --(IF)-- By profit on sale of old assets --(IF)--

Total Total

3. Balance sheet:- Balance Sheet as on ----------


Assets Am Rs.

Old assets Add:- Purchase of new assets ---- Less:- Sale of old assets ---- Less:- Depreciation ---- ----

Total Total

J. Fund based accounting:-

a. Special funds:- The Not-for-Profit Organizations offices create special funds for special purposes/ activities. Specialfunds are utilized for special activities.

1. Example:- Prize fund, Match fund, Sports fund and Tournament fund etc.

Example of special funds

1.Prize fund 2.Match fund 3.Sports fund 4.Tournment fund





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b. Special fund related income:- When such funds are invested in securities and the income earned on such investmentsis added to the respective fund, not credited to Income and Expenditure Account.

c. Special fund related expenses:- The expenses incurred on such specific purposes are also deducted from the specialfund.

d. For Example:- A club may maintain a special fund for sports activities. In such a situation, the interest income onsports fund investments is added to the sports fund and all expenses on sports deducted there from.

1. When Special fund amount and income from special fund more than expenses or special fund positive balance then presentation:- The special funds are shown in liabilities side of balance sheet.

2. When special fund amount and income from special fund less than expenses or special fund negative balance then presentation:- It is shown in Expenditure side (Debit side) of Income and Expenditure account.

e. Treatment of special fund:-

1. When Special fund amount and income from special fund more than expenses or special fund positive balance then presentation:- The special funds are shown in liabilities side of balance sheet.

Receipts and payment account:- Actual receipts of special fund shown in Receipts side (Debit side) of Receipts and payment account.

Income and expenditure account- Not shown in Income and Expenditure account.

Balance sheet:- Specific fund positive balance is shown in liabilities side of balance sheet.

2. When special fund amount and income from special fund less than expenses or special fund negative balance then presentation:- It is shown in Expenditure side (Debit side) of Income and Expenditure account.

Receipts and payment account:- Actual receipts of special fund showed in Receipts side (Debit side) of Receipts and payment account.

Income and expenditure account- Negative balance of special fund shown in expenditure side of Incomeand Expenditure account.


f. Presentation of special fund:-

1. When Special fund amount and income from special fund more than expenses or special fund positive balance then presentation:-





To specific fund received ---

Total Total




Balance sheet

Special fund When special fund positivebalance then presentation

Actual receipts amountshown in receipts side

Not shown Shown in liabilities side of balance sheet



Balance sheet

Special fund When special fund negativebalance then presentation

Actual receipts amountshown in receipts side

Negative balance shown inExpenditure side

Not shown





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Incomes Amo Rs.

Total Total

Balance sheet:- Balance Sheet as on ----------


Assets Amou Rs.

Specific fund ---- Add:- Income related to special fund ---- Less:- Expenses related to special fund ---- ----

Total Total

2. When special fund amount and income from special fund less than expenses or special fund negative balance then presentation:-





To specific fund received ---

Total Total




Incomes Amo Rs.

Excess expenditure related to special fund ----

Total Total

Balance sheet:- Balance Sheet as on ----------


Assets Amou Rs.

Total Total

K. Payments of Honorarium fees: - It is the amount paid to the person who is not the regular employee of the institution.

a. Example:- Payment to an artist for giving performance at the club is an example of honorarium. This payment of honorarium is shown on the expenditure side of the Income and Expenditure Account.

1. Treatment of honorarium fees:-

Receipts and payment account:- Actual amount paid for honorarium shown in Payment side of Receiptsand Payment account.

Income and expenditure account- Current year related revenue nature honorarium expenditure shown inExpenditure side of Income and Expenditure account.

2. Presentation of honorarium fees:-

i Receipts and payment account:-





20




By honorarium fees ----

Total Total

ii Income and expenditure account:-



Incomes Amo Rs.

To current year revenue nature honorarium fees ----

Total Total

L. Endowment Fund: - It is a fund arising from a bequest or gift, the income of which is devoted for a specific purpose.Hence, it is a capital receipt and shown on the Liabilities side of the Balance Sheet as an item of a specific purpose fund.

a. Treatment of endowment fund:-

1. Receipts and payment account:- Actual receipts of endowment fund showed in Receipts side (Debit side) of Receipts and payment account.

2. Income and expenditure account- Not shown in Income and Expenditure account.

3. Balance sheet:- Endowment fund is shown in liabilities side of balance sheet.

b. Presentation of endowment fund:-





To endowment fund received ---

Total Total




Incomes Amo Rs.

Total Total

3. Balance sheet:- Balance Sheet as on ----------


Assets Amou Rs.

Endowment fund

Total Total

Particular Treatment Receipts and Payments account Income and Expenditure account Balance sheet

Endowment fund Treated as capital nature Actual receipts amountshown in receipts side

Not shown Shown in liabilities side of balance sheet





21

M. Government Grant: - Schools, colleges, public hospitals, etc. depend upon government grant for their ac tivities.

a. Types of Government grant:-

b. Treatment of government grant fund:-

1. When capital nature government grant fund then presentation:-

Receipts and payment account:- Actual receipts of government grant fund showed in Receipts side of (Debit side) Receipts and payment account.

Income and expenditure account- Not shown in Income and Expenditure account.

Balance sheet:- Government grand fund is shown in liabilities side of balance sheet.

2. When revenue nature government grant fund then presentation:-

Receipts and payment account:- Actual receipts of government grant fund showed in Receipts side (Debitside) of Receipts and payment account.

Income and expenditure account- Revenue nature government grant shown in Income side (Credit side)of Income and Expenditure account.


c. Presentation of government grant fund:-

1. When capital nature government grant fund then presentation:-





To government grant fund received ---

Total Total


Types of Government grant

Revenue nature government grant

The recurring grants in the form of maintenance grant is treated as revenue received and credited to Income and Expenditure account. Cash subsidy received from government is

also treated as revenue nature income for the year in which i t is received.

Capital nature government

However, grants such as building grant are treated as capital receipt and transferred to the building fund account.

Particular Treatment Receipts and Payments account Income and

Expenditure account

Balance sheet

When capital naturegovernment grant fund

then presentation

Treated as capitalnature

Actual amount received fromgovernment grant in receipts side

Not shown Shown in liabilitiesside of balance

sheet

When revenue naturegovernment grant fund

then presentation

Treated as revenuenature

Actual amount received fromgovernment grant in receipts side

Revenue naturegovernment grant shown

in Income side

Not shown





22



Incomes Amo Rs.

----

Total Total

Balance sheet:-



Assets Amou Rs.

Government grant fund ----

Total Total

2. When revenue nature government grant fund then presentation:-





To government grant fund ---

Total Total




Incomes Amo Rs.

By revenue nature government grant fund ----

Total Total

Balance sheet:-



Assets Amou Rs.

Total Total

Receipts and Payments account: - It is prepared at the end of the accounting year on the basis of cash receipts and cashpayments recorded in the cash book. It simply is a summary of cash and bank transactions under various heads.

A. Characteristics or silent features of Receipts and Payments account:-

a. Summary of every receipt:- It is summary of cashbook so subscriptions received from the members on different dateswhich appear on the debit side of the cashbook, shall be shown on the receipts side of the Receipt and PaymentAccount as one item with its total amount.

b. Summary of every payment:- Salary, rent, electricity charges paid from time to time as recorded on the credit side of the cash book but the total salary paid, total rent paid, total electricity charges paid during the year appear on thepayment side of the Receipt and Payment Account.

c. All types Receipts or payments are recorded in Receipts and Payments account- Receipt and Payment Account givessummarised picture of various receipts and payments, irrespective of whether they pertain to the current year,previous year or next year or whether they are of capital or revenue nature.





23

d. Non-cash items are not included in Receipts and Payments account:- It may be noted that these account do notshow in Receipts and Payments accounts.

e. Opening balance of Receipts and Payments account:- The opening balance in Receipt and Payment Accountrepresents cash in hand / cash at bank which is shown on its receipts side.

f. Closing balance of Receipts and Payments account:- The closing balance at the end of the year, which appear on thecredit side of the Receipt and Closing balance of this account represents cash in hand and bank balance as at PaymentAccount. If it is bank overdraft at the end, it shall be shown on its debit side as the last item.

B. Objectives of preparation of Receipts and Payments account:-

a. Having control on cash and cash related transactions cashbook.

b. Getting information about receipts and payments under different heads during the year.

c. Facilitating preparation of Income and Expenditure account and the balance sheet.

C. Steps in the preparation of Receipt and Payment Account:-

a. Opening balance of cash or Bank:- Opening debit balance of cash and bank account shown in Receipts side of Receipts and Payments account Show the total amounts of all receipts on its debit side irrespective of their nature(whether capital or revenue) and whether they pertain to past, current and future periods.

Example of non cashitems

1.Depreciation 2.Outstandingexpenses

3.Profit on sale of fixed assets

4.Reserve created

5.Other non cashitems

6.Accured income

7.Loss on sale of fixed assets

Opening balance of Receipts and Payments account

1.Bank overdraft balance 2.Debit balance of cash account

3.Debit balance of bank account

Closing balance of Receipts and Payments account

1.Bank overdraft balance 2.Debit balance of cash account 3.Debit balance of bank account

All types of cash Receipts or payments which may be related to

1.Previous year 2.Next year 3.Current year





24

b. All types of payment are shown: - Show the total amounts of all payments on its credit side irrespective of theirnature (whether capital or revenue) and whether they pertain to past, current and future periods.

c. Non-cash items is not included in Receipts and Payments account:- None of the receivable income and payableexpense is to be entered in this account, as they do not involve inflow or outflow of cash.

d. Closing balance of cash or Bank:- Find out the difference between the total of Receipts side (Debit side) and the totalof payments side (Credit side) of the account and enter the same on the credit side as the closing balance of cash/bank. In case, however, the total of the credit side is more than that of the total of the debit side, show thedifference on the debit as bank overdraft and close the account.

e. Performa of Receipts and Payment account:-

Receipt and Payment Account for the year ending------------- Dr.

Date Receipts Amount(Rs.)

Date Payments Amount(Rs.)

To Balance b/d (Opening balance)Cash in Hand -------

Cash at Bank --(IF)-- ------By Balance b/d (Opening balance)(Bank overdraft) (working note 1)

---(IF)---

To Subscriptions ------ By Wages and Salaries ------To General Donation/ Donation ------ By Rent ------

To Sale of newspaper ------ By Rates and Taxes ------

TO Sale of old sports materials ------ By Insurance/ Insurance premium ------

To Interest on fixed deposits ------ By Printing and Stationery ------

To Interest/Dividend on general fund ------ By periodicals/waste paper ------

To Sale of scraps ------ By Postage and courier ------

To Proceeds from charity show ------ By Advertisement ------

To Miscellaneous receipts ------ By Sundry expenses ------

To Grant-in-aid (Working note 2) ------ By Telephone charges ------

To Legacies ------ By Investments purchased ------

To Specific Donations ------ By Entertainment expenses ------

To Sale of Investments ------ By Locker Rent ------To Sale of Fixed Assets ------ By Audit fees ------

To Life membership fees ------ By Honorarium fees paid ------

To Investment sold ------ By sports material purchased ------

To legacy received ------ By fixed deposit ------

To endowment fund received ------ By audit fees paid ------

To Entrance fees ------ By repair and renewals ------

To specific purpose funds ------ By Repair and Renewals ------

To Interest on specific funds' ------ By Upkeep of ground/ delivery van ------


When Receipts and Paymentsaccount Debit balance

Opening Cash account Debit balance Shown in Debit side (Receipts side)


Opening Bank account Debit balance Shown in Debit side (Receipts side)

When Receipts and Paymentsaccount Credit balance

Opening Bank account Credit (Overdraft) balance Shown in Credit side (Payments side)



Closing Cash account Debit balance Shown in Credit side (Payments side)


Closing Bank account Debit balance Shown in Credit side (Payments side)

When Receipts and Paymentsaccount Credit balance

Closing Bank account Credit (Overdraft) balance Shown in Debit side (Receipts side)





25

To other types capital receipts ------ By Conveyance expenses ------

To other types revenue receipts ------ By Newspapers and Periodicals ------

To Balance b/d (Bank Overdraft)(Working note 3)

------ By Purchases of fixed Assets ------

By Purchase of Investments ------

By other types capital payments ------

By other types revenue payments ------By Balance c/d

Cash in hand ------C ash at Bank* --(IF) —

(Working note 4 ) ------

Total Total

f. Working note:-

1. Working note 1:- When opening Bank overdraft balance (Credit bank balance) then it is shown in payments sideof Receipts and Payments account.

2. Working note 2:- All types’ receipts (Capital or Revenue) are shown in Receipts side of Receipts and Paymentsaccount, which may be related to current year, last year and next year.

3. Working note 3:- When closing balance of bank account is Credit (Bank overdraft) then it is shown in Receiptsside of Receipts and Payments account.

4. Working note 4:- When closing balance of bank account is Debit bank balance then it is shown in Payments sideof Receipts and Payments account.

Income and Expenditure Account:- Receipts and Payments account gives information about only cash receipts and payments.Unpaid expenses, prepaid expenses, Accrued income, unearned income, Depreciation, Profit or loss on sale of fixed assets andnon-cash items are not accounted in Receipts and Payments account. So find out Surplus or Deficit position Income andExpenditure account prepared.

A. Characteristics of Income and Expenditure account:-

a. Only current year related revenue items are shown in it.

b. It is same as profit and loss account nature.

c. It is nominal nature account.

d. It presented surplus or deficit during the year.

B. Preparation of Income and Expenditure account:-

a. Summary of Income and Expenditure account:- It is the summary of income and expenditure for the accounting year.

b. It is just like Profit and loss account:- It is just like a profit and loss account prepared on accrual basis in case of thebusiness organizations.

c. Revenue transactions are recorded:- Only revenue nature transactions, which are related to current year, are recordedin it.

d. Balance of Income and Expenditure account:- The balance at the end represents surplus or deficit.

e. It is same as Profit and loss account:- The Income and Expenditure Account serve the same purpose as the profit andloss account of a business organization does.

f. Expenses are recorded in:- The expenses and losses are recorded in Expenditure side of Income and Expenditureaccount.

g. Incomes are recorded in:- The incomes and gains are recorded in Income side of Income and Expenditure account.

h. Balance of Income and Expenditure account Transferred in:- It shows the net operating result in the form of Surplus (Excess of income over expenditure) or Deficit (Excess of expenditure over income), which is transferred tothe Capital fund shown in liabilities side of balance sheet.





26

i. Income and Expenditure account prepared on the basis of:- The Income and Expenditure Account is prepared onaccrual basis with the help of Receipts and Payments Account and additional information relating to Outstandingexpenses, Prepaid expenses, Accrued income, Unearned income and Depreciation, etc. Hence, many items appearingin the Receipts and Payments need to be adjusted.

C. Method of preparing of Income and Expenditure account:-

a. Revenue nature expenses shown:- Revenue nature expenditures are shown in Expenditure side of Income and

Expenditure account .

b. Revenue nature Income shown:- Revenue nature incomes are shown in Income side of Income and Expenditureaccount.

c. Surplus:- When Income side more than Expenditure side then it present Surplus (Excess of Income overExpenditure).

Surplus = Income side total - Expenditure side total

d. Deficit:- When Expenditure side more than Income side then it present Deficit (Excess of Expenditure over Income).

Deficit = Expenditure side total - Income side total

D.

Steps in the Preparation of Income and Expenditure Account from Receipts and Payments account:-

a. These items are not included in Income and Expenditure account:- These items are not shown in Income andExpenditure account, so these are shown in balance sheet.

b. Current year revenue nature Incomes are recorded in it:- Only the revenue receipts to be shown on the income sideof Income and Expenditure Account. Some of these needs to be adjusted by excluding the amounts relating to thepreceding and the succeeding periods and including the amounts relating to the current year not yet received.

c. Current year revenue nature Expenses are recorded in it: -Only the revenue expenses to the expenditure side of theIncome and Expenditure Account with due adjustments as per the additional information provided relating to theamounts received in advance and these not yet received.

d. These items are not appearing in Receipts and Payments account but recorded in Income and Expenditure account to find out Surplus or Deficit:-

E. Performa of Income and Expenditure account:-

Items not shown in Incomes and Expenditue account

1.Opening cash and Bank balance 2.Capital payments 2.Capital receipts

Items shown in Income and

Expenditure account

1.Deprecaiton on fixed assets 2.Profit on sale of fixed assets 3.Provision for doubtful debts 4.Loss on sale of fixed assets





27


Expenditure Amount(Rs.)

Income (Rs.)

To all revenue nature expenses after adjustment(If adjustment given) ----

By all revenue nature incomes after adjustment(If adjustment given) ----

To depreciation of fixed assets ---- By profit on sale of fixed assets ----To reserve created ---- By Deficit (Excess of Expenditure over Income) --(IF)--

To loss on sale of fixed assets ----

To provision for bad and doubtful debts ----

To Surplus ( Excess of Income over expenditure) --(IF)--

Total Total

Distinction between Income and Expenditure Account and Receipt and Payment Account:-

A. On the basis of Nature:-

a. Income and Expenditure:- It is like as profit and loss account.

b. Receipt and Payment Account:- It is the summary of the cashbook.

B. On the basis of Nature of Items:-

a. Income and Expenditure:- It records income and expenditure of revenue nature only.

b. Receipt and Payment Account:- It records receipts and payments of revenue as well as capital nature.

C. On the basis of Period:-

a. Income and Expenditure:- Income and expenditure items relate only to the current period.

b. Receipt and Payment Account:- Receipts and payments may also relate to preceding and succeeding periods.

D. On the basis of Debit side:-

a. Income and Expenditure:- Debit side of this account records expenses and losses.

b. Receipt and Payment Account:- Debit side of this account records the receipts.

E. On the basis of Credit side:-

a. Income and Expenditure: - Credit side of this account records income and gains.

b. Receipt and Payment Account:- Credit side of this account records the payments.

F. On the basis of Depreciation:-

a. Income and Expenditure: - Includes depreciation.

b. Receipt and Payment Account:- Does not include depreciation.

G. On the basis of Opening Balance:-

a. Income and Expenditure:- There is no opening balance .

1.On the basis of Nature

2.On the basis of Nature of Items

3.On the basis of Period

4.On the basis of Debit side 8.On the basis of Closing Balance

7.On the basis of Opening Balance

6.On the basis of Depreciation

5.On the basis of Credit side 9.On the basis of adjustment

10.On the basis of Institutions

11.On the basis of accounting method





28

b. Receipt and Payment Account:- Balance in the beginning represents cash in hand /cash at bank or overdraft at thebeginning.

H. On the basis of Closing Balance:-

a. Income and Expenditure:- Balance of Income and Expenditure account represent Surplus or Deficit.

b.

Receipt and Payment Account:- Balance at the end represents cash in hand at the end and Bank balance (Debit bank balance or Bank overdraft balance).

I. On the basis of adjustment:-

a. Income and Expenditure:- Adjustment concerning Income and Expenses are made in it.

b. Receipt and Payment Account:- No adjustment is made concerning Income and Expenses.

J. On the basis of Institutions:-

a. Income and Expenditure:- This is maintained by non-trading organizations which do not have profit motiveobjective.

b. Receipt and Payment Account:- It is prepared by professional persons like doctors, advocates, chartered accountantetc.

K. On the basis of accounting method:-

a. Income and Expenditure:- It is a necessary part of double accounting system.

b. Receipt and Payment Account:- It is an independent account and is not part of double entry system.

Difference between Income & Expenditure account and Profit and loss account:-

A. On the basis of Prepared by:-

a. Income and Expenditure account:- It is prepared by not for profit organizations.

b. Profit and Loss account:- It is prepared by trading concern.

B. On the basis of Why it is prepared:-

a. Income and Expenditure account:- It is prepared to find out Surplus or Deficit on a certain date.

b. Profit and Loss account:- It is prepared to find out Profit or loss on a certain date.

C. On the basis of Preparation:-

a. Income and Expenditure account:- It is prepared on the basis of Receipts and Payments account and other

information given in question.

b. Profit and Loss account:- It is prepared on the basis of Trial balance and other information given in question.

D. On the basis of sides:-

a. Income and Expenditure account:- In it, Incomes are shown in Credit side and Expenses are shown in Debit side.

b. Profit and Loss account:- In it, Incomes are shown in credit side and Expenses are shown in Debit side.

Balance Sheet:-

Difference between Income & Expenditure account and Profit and loss account

1.On the basis of Prepared by 2.On the basis of Why it is prepared 3.On the basis of Preparation 4.On the basis of sides





29

A. Objective of preparation of balance sheet:- For ascertaining the financial position of the entity.

B. Balance sheet shows: -It shows assets and liabilities as at the end of the year. Assets are shown on the right hand side andthe liabilities on the left hand side.

C. Capital fund or General fund in place of the capital:- However, there will be a Capital Fund or General Fund in place of the Capital and the surplus or deficit as per Income and Expenditure Account shall be added to/deducted to this fund. It isalso a common practice to add some of the capitalized items like legacies, entrance fees and life membership fees directly

in the capital fund.

D. Specific fund:- Besides the Capital or General Fund, there may be other funds created for specific purposes or to meet therequirements of the contributors/donors such as building fund, sports fund, etc. Such funds are shown separately in theliabilities side of the balance sheet.

E. Balance sheet prepared at the beginning of the year to find out:- Sometimes it becomes necessary to prepare BalanceSheet as at the beginning of the year in order to find out the opening balance of the capital/general fund .

Preparation of Balance Sheet:-

A. Capital fund closing balance shown in closing balance sheet liabilities side:- Take the Capital/General Fund as per theopening balance sheet and add surplus from the Income and Expenditure Account. Further, add entrance fees, legacies, lifemembership fees, etc. received during the year .

Capital fund account Dr.



To deficit (If)----

By balance b/d( Opening capital fund balance) ----

To balance c/d(Closing capital fund balance)

---- By Capitalized entrance fees ----

By capitalized life membership fees ----

By surplus (If) ----

Total Total

B. Fixed assets closing balance shown in closing balance sheet assets side:- Take all the fixed assets (not sold/discarded/ordestroyed during the year) with additions (from the Receipts and Payments account) after charging depreciation (as perIncome and Expenditure account) and show them on the assets side.

Fixed assets account Dr.



To balance b/d(Opening balance of fixed assets) ----

By Cash(If sale of old fixed assets during the year) ----

To cash( If purchase of fixed assets during the year) ----

By depreciation on fixed assets ----

To profit on sale of fixed assets ---- By loss on sale of fixed assets ----

By balance c/d( Closing balance of fixed assets) ----

Total Total

C. Liabilities account closing balance shown in liabilities side of balance sheet:- If some portion of liabilities paid during theyear then balance of liabilities account shown in balance sheet and if new liabilities rise during the year then new liabilitieshad shown in balance sheet liabilities side.

Liabilities account Dr.



To balance c/d(Closing balance) ----

By balance b/d( Opening balance) ----

To cash (If liabilities paid during the year) ----

Total Total

D. Accrued incomes, unearned incomes related adjustment shown in:-





30

a. Opening balance sheet:- If capital fund is not given in question then it is prepared to find out capital fund. In case of new non trading concern there is no capital fund, hence opening balance sheet is not prepared.

Balance sheet as on -------

Liabilities Amount(Rs.)

Assets Amount(Rs.)

Capital fund (B.F) --(If)-- Fixed assets ----

Long term liabilities:-Mortgage loanLoan from financial institutions

--------

Investments:-Short term investmentsLong term investments

----

Current liabilities:-Bank overdraft balanceUnearned incomeOutstanding expensesCreditorsBills payable

--------------------

Current assets:-Stock CashBank Prepaid expensesAccrued incomeDebtorsBills receivable

----------------------------

Reserve and surplus:-Special fundBuilding fundGeneral fund

------------

Total Total

b. Closing balance sheet: -It is prepared to find out financial position of the non-trading concern. Balance sheet as on --------

Accounting Performa:-

A. Fixed assets account:- Fixed assets account

Dr. Cr.



To balance b/d(Opening balance of fixed assets) ----

By Cash(If sale of old fixed assets during the year) ----

To cash( If purchase of fixed assets during the year) ----

By depreciation on fixed assets ----

To profit on sale of fixed assets ---- By loss on sale of fixed assets ----

By balance c/d( Closing balance of fixed assets) ----

Total Total


Assets Amount(Rs.)

Capital fund (Closing balance) ---- Fixed assets ----


--------


----


--------------------


----------------------------


------------

Total Total





31

B. Liabilities account:-

Liabilities account Dr.


Particulars Amou(Rs.)

To balance c/d(Closing balance) ----

By balance b/d( Opening balance) ----

To cash (If liabilities paid during the year) ----

Total Total

C. Income account:-

Related income account Dr.


Particulars Amo(Rs.)

To related accrued income (Previous year accruedincome) -----

By Cash a/c(Amount shown in Receipts andPayments account) -----

To related unearned income (Current year unearnedincome) -----

By related accrued income (Current yearaccrued income) -----

To Income and Expenditure account (Current yearrevenue nature income) -----

By related unearned income (Previous yearunearned income) -----

Total Total

D. Expenses account:- Related expenses account

Dr.



To opening stock (Shown in opening balance sheet)--(IF)--

By closing stock (Shown in closingbalance sheet) --(IF)--

To Cash a/c(Amount shown in Receipts and Paymentsaccount) -----

By related outstanding expenses(Previous year outstanding expenses -----

To related outstanding expenses (Current yearoutstanding expenses) -----

By related Prepaid expenses (Currentyear prepaid expenses) -----

By related prepaid expenses (Previous year prepaidexpenses) -----

By Income and Expenditure account(Current year revenue nature expenses) -----

Total Total

E. Receipts and Payments account:-

Receipt and Payment Account for the year ending------------- Dr.

Date Receipts Amount(Rs.)

Date Payments Amount(Rs.)

To Balance b/d (Opening balance)Cash in Hand -------

Cash at Bank --(IF)-- ------By Balance b/d (Opening balance)(Bank overdraft) (working note 1)

---(IF)---

To Subscriptions ------ By Wages and Salaries ------

To General Donation/ Donation ------ By Rent ------

To Sale of newspaper ------ By Rates and Taxes ------

TO Sale of old sports materials ------ By Insurance/ Insurance premium ------

To Interest on fixed deposits ------ By Printing and Stationery ------

To Interest/Dividend on general fund ------ By periodicals/waste paper ------

To Sale of scraps ------ By Postage and courier ------

To Proceeds from charity show ------ By Advertisement ------





32

To Miscellaneous receipts ------ By Sundry expenses ------

To Grant-in-aid (Working note 2) ------ By Telephone charges ------

To Legacies ------ By Investments purchased ------

To Specific Donations ------ By Entertainment expenses ------

To Sale of Investments ------ By Locker Rent ------

To Sale of Fixed Assets ------ By Audit fees ------

To Life membership fees ------ By Honorarium fees paid ------

To Investment sold ------ By sports material purchased ------

To legacy received ------ By fixed deposit ------

To endowment fund received ------ By audit fees paid ------

To Entrance fees ------ By repair and renewals ------

To specific purpose funds ------ By Repair and Renewals ------

To Interest on specific funds' ------ By Upkeep of ground/ delivery van ------

To other types capital receipts ------ By Conveyance expenses ------

To other types revenue receipts ------ By Newspapers and Periodicals ------

To Balance b/d (Bank Overdraft)(Working note 3)

------ By Purchases of fixed Assets ------

By Purchase of Investments ------

By other types capital payments ------By other types revenue payments ------

By Balance c/dCash in hand ------C ash at Bank* --(IF) —

(Working note 4 )

------

Total Total

F. Income and Expenditure account:-


Expenditure Amount(Rs.)

Income (Rs.)

To all revenue nature expenses after adjustment (If adjustment given) ----

By all revenue nature incomes after adjustment (If adjustmentgiven) ----

To depreciation of fixed assets ---- By profit on sale of fixed assets ----

To reserve created ---- By Deficit (Excess of Expenditure over Income) --(If)--

To loss on sale of fixed assets ----

To provision for bad and doubtful debts ----

To Surplus ( Excess of Income over expenditure) --(If)--

Total Total

G. Balance sheet:-

a. Opening balance sheet:- If capital fund is not given in question then it is prepared to find out capital fund. In case of new non-trading concern there is no capital fund, hence opening balance sheet is not prepared.

Balance sheet as on -------- Liabilities Amount

(Rs.) Assets Amount

(Rs.)

Capital fund (B.F) --(If)-- Fixed assets ----


--------


----

Current liabilities:-Bank overdraft balanceUnearned income

--------

Current assets:-Stock Cash

--------





33

Outstanding expensesCreditorsBills payable

------------

Bank Prepaid expensesAccrued incomeDebtorsBills receivable

--------------------


------------

Total Total

b. Closing balance sheet: -It is prepared to find out financial position of the non-trading concern.

Balance sheet as on --------

H. Performa of column cashbook:-

Performa of column cashbook Dr. side

A. Calculation of amount shown in related expenses account:-

Statement showing Expenses shown in Income and Expenditure account


Net amount(Rs.)

Related expense paid during the year (Receipt and Payment account) -----

Add:- Opening stock -----

Add:- Outstanding expenses related to current year -----

Add:- Prepaid expenses related to previous year ----- ------

Less:- Closing stock -----

Less:- Prepaid expenses related to current year -----

Less:- Outstanding expenses related to previous year ----- -------


Assets Amount(Rs.)

Capital fund (Closing balance) ---- Fixed assets ----


--------


----


--------------------


----------------------------


------------

Total Total

Date Particular Total Amount

Rs.

Fees

Rs.

Subscription

Rs.

Donation

Rs.

Date Total Amount

Rs.

Salary and wages Rs.

Stationary

Rs.

Postage and

telegram Rs.

Total Total Total Total Total Total Total Total





34


B. Calculation of amount shown in related income account:-

Statement showing Income shown in Income and Expenditure account


Net amount(Rs.)

Related income received during the year (Receipt and Payment account) ----- Add:- Accurd income related to current year -----

Add:- Unearned income related to previous year ----- ------

Less:- Accrued income related to previous year -----

Less:- Unearned income related to current year ----- -------


C. Adjustment Related rules:-

D. Short name of Previous year and Current year:-

Debit and Credit rules for account:-

A. Assets account:- When an asset is increase, then it is debited and when an asset is decrease then it is credited due to Assetsaccount has Debit balance always.

. Related Assets account Dr.



When Increase in assets When Decrease in assets

Current year P.Y

Previous year C.Y

SHORT NAME OFCURRENT YEARAND PREVIOUS

YEAR

Balance of accounts

1.Assets have Debitbalance

2.Capital have creditbalance

3.Income have creditbalance

4.Liabilities havecredit balance

5.Expenses haveDebit balance

+ - + -C.Y P.Y C.Y P.Y

Outstanding Expenses

Expenses related

adjustment Adjustment

Income related

adjustment

Accrued Income

Liabilities side Assets side

Income related

adjustment

Expenses related

adjustmentUnearned Income

Prepaid Expenses

C.Y P.Y C.Y P.Y - + - +





35

Total Total

B. Liabilities account:- When a liability is increase then it is credited and when an assets is decrease then it is debited due toliabilities account has Credit balance always.

. Related liabilities account Dr.



When Decrease in liabilities When Increase in liabilities

Total Total

C. Capital account:- When a capital is increase then it is credited and when capital is decrease then it is debited due to capitalaccount has Credit balance always.

. Related capital account Dr.



When Decrease in capital When Increase in capital

Total Total

D. Income account:- When income is increase then it is credited and when income is decrease then it is debited due to incomeaccount has credit balance always.

. Related income account Dr.

When Decrease in income When Increase in income

Total Total

E. Expenses account:- When expenses is increase then it is debited and when expenses is decrease then it is credited due toexpenses account has debit ba lance always.

Related expenses account Dr.



When Increase in expenses When Decrease in expenses

Total Total

Step to be followed for practical question to be solved:- Step to be followed for question solved:-

A. Read question carefully.

B. Determine Current year, Previous year and Next year.

C. What would be question asked to prepare.

D. Find out adjustment given or not related to any item.

E. Find out capitalized items given or not.

F. Find out capital fund given or not.

G. Find out special fund given or not.

H. Find out liabilities balance.

I. Find out assets balance.




J. Find out Accrued income, Unearned income, Prepaid expenses, Outstanding income related adjustment given or not.

K. Find out Profit or loss on sale of fixed assets.

L. Find out Accrued interest during current year.

M. Find out Outstanding expenses during current year.

N. Working note should be part of answer.

Step to be followed for theory types question to be solved:-

A. Theory question is always based on practice problem and when practical problem to be solved then theory types questioneasily to be solved.

B. Always be positive for every question.

Date post:	06-Apr-2018
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Unit 1 Accounting for Non Profit Ogranisation

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