FINANCIAL STATEMENTS OF NOT-FOR-PROFIT ORGANISATIONS(N.P.O) CLASS XII NOTES:-

Meaning of Not-For-Profit Organizations:-

Not for profit organisations are those organisations which commence with a motive to provide the services to their members and society but not earning profit.

For example, Schools🏫, Hospitals🏥, Clubs, Orphanage, etc...

Financial statement of N.P.O includes the following:-

1- Receipt and Payment A/c- It is the summarised form of Cash book/cash transactions which shows cash and bank balance at the end of financial year.

Nature of this account is real A/c and it is prepared with the help of cash book.

2- Income and Expenditure A/c- It is the nominal A/c which shows surplus of deficit at the end of the financial year. It is prepared with the help of Receipt & Payment A/c and adjustments.

3- Balance Sheet- It shows the financial position of an organisation as at a particular date. The nature of balance sheet is real and personal A/c both.

Accounting treatment of Important Terms:- 

1. Subscription- Subscription is the amount paid by the members of N.P.O. to renewal their membership on daily, weekly, monthly, quarterly, half yearly and yearly basis.

It is the main source of N.P.O. so, it is credited to Income and Expenditure A/c.

2. Entrance fees- It is the amount paid by person at the time of becoming a member of N.P.O. 

It is credited to Income & Expenditure A/c.

3. General Donation- It is the donation in which the donor does not specify any condition for its uses.

It is credited to Income & Expenditure A/c.

4. Specific Donation- It is the donation in  which the donor specified the purpose to uses its money.

It is recorded in liability side of balance sheet.

5. Life Membership Fees- It is received from a member in lump-sum for which he is given the membership of the organisation for the whole life.

It is recorded in liability side of balance sheet.

6. Endowment Fund- It arises from a gift or bequest, the income generate from it and to utilise for a specific purpose while its money is kept either forever or specific period.

It is recorded in liability side of balance sheet.

7. Legacy- It is the amount which the N.P.O. will received as per will of a deceased person. 

It is recorded in liability side of balance sheet.

8. Honorarium- The amount paid to a person who is not an employee of the N.P.O. is called honorarium. 

It is recorded in debit side of Income and Expenditure A/c.

9. Surplus- Excess of income over expenditure is called surplus.

   

   Income – Expenditure = Surplus 

10. Deficit- Excess of expenditure over income is called deficit.

     

   Expenditure – Income = Deficit

11. Capital Fund- Excess of assets over liabilities for N.P.O. is called capital fund.

 

    Assets – liabilities = Capital Fund

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