ACCOUNTANCY PROJECT ON NON-PROFIT ORGANIZATIONS MADE BY:- AYUSHI ARORA CLASS:- 11-D

1. ACCOUNTANCY PROJECT ON NON-PROFIT ORGANIZATIONS MADE BY:- AYUSHI ARORACLASS:- 11-D

2. ACKNOWLEDGEMENT • I AYUSHI ARORA OF 11-D IS DECLARING THAT THIS PROJECT ON NON-PROFIT ORGANIZATION IS ENTIRELY MADE BY ME. I WOULD LIKE TO THANK MY SUBJECT TEACHER C.P. AGNIHOTRI SIR FOR GUIDING ME .

3. INTRODUCTION • A not-for-profit organization is also known as non profit organization is an organization setup to render services to the society not with the aim of earning profit. • It is a separate legal entity not owned by an individual or an enterprise. • Though the main source of income of such organization is membership, donation and grantsetc. • As the main aim of these organizations is not to earn profit, they do not prepare Trading and Profit and Loss Account. • But still they have to maintain proper accounts. This is also a legal requirement and they would also like to know whether there current incomes are sufficient to meet their current expenses.

4. Contd… • For this purpose they prepare an Income and Expenditure Account which is similar to Profit and Loss Account of a profit seeking entity. • A Balance Sheet is also prepared in order to show the financial position of the organization on the last date of the Accounting year.

5. Features of Not- For- Profit Organization • Services :- Such organization are setup to provide services to a specific group or the public at large such as education, health care, sports. The main aim of these organization is to provide service either free of cost or at nominal rates and not to earn profit. • Entity:- Non for profit organization are separate legal entities promoted a individuals or an enterprises. • Form:- These organization are setup as charitable societies, trust or clubs etc. with a main objective of rendering social, educational, charitable or religious services. • No profit motive:- not for profit organization do not operate with the objective of earning profit

6. Contd… • Funding :- these organizations collect donations and contributions from the members and outsiders to meet the cost of the project undertaken and also to meet the operating cost. • Form of Accounts:- The annual accounts are prepared by them reflect the purpose for which they are established the annual accounts comprise of Receipts and Payments Account, Income and Expenditure Account and the Balance Sheet.

7. Difference :-

8. Accounting procedures of Not-For-Profit organization • The final accounts of not for profit organization comprise of:- • Receipts and Payment Account • Income and Expenditure Account • Balance Sheet

9. Receipts and Payment Account • It is a classified summary of cash book classifying receipt and payment under appropriate heads of account along with cash and bank balances in the beginning and at the end of the accounting period. • A fair idea can be formed from this account about the cash position of an organization. It is maintain on cash system of accounting. • It does not show expenses and incomes on accrual basis. • It is a real account.

10. Specimen of Receipts and Payment Account Receipts Amt. Payments Amt. To Balance b/d By Balance b/d Cash Bank overdraft Revenue Receipts Revenue Payments To locker’s rent By rent To rent By salaries To interest By Insurance Capital Receipts Capital Payments To sale of fixed assets By Investments To Entrance fee By sports equipment To donations By Balance c/d (for specific purpose) Cash

11. Income and Expenditure Account • It is a nominal account. It is equivalent to the Profit and Loss Account of a business firm. • Incomes are shown on the credit side and Expenses are shown on the debit side • The difference between the two sides is either surplus or deficit. The surplus/deficit as a case may be, is added to / deducted from the capital fund. • It is prepared on accrual basis of accounting and thus all adjustment relating to prepaid outstanding expenses and incomes, provision for depreciation or doubtful debt are made.

12. Format of the Income and Expenditure Account Expenditure Amt. Income Amt. To audit fees By donation To sports material used By sundry receipts To repairs By entrance fees To honorarium By hall rent To depreciation By deficit To surplus

13. Accounting Treatment of important items of Income and Expenditure Account • Life membership fees:- it is accounted as a capital receipt and added to capital fund on the liabilities side of the balance sheet. • Donation:- it is of two types : • General donation:- it is taken as an item of income and it is shown on the income side of the income and expenditure account. • Specific donation:- it should be capitalized and is shown on the liabilities side of the Balance Sheet

14. Contd… • Subscription:- It is a source of income of not-for-profit organization. Substitution related to the current year whether receive or not are shown on the credit side of the Income and Expenditure Account. Outstanding Subscription are shown on the asset side of the Balance Sheet. Subscription receive in advance for the following year are shown on the liabilities side of the Balance Sheet. • Sale of used sports material:- These are consumable assets and are debited to Income and Expenditure Account on purchase. • When the assets are consumed, any amount are realized from sale of such item is treated as income and is credited to Income and Expenditure Account.

15. Balance Sheet • It is a statement that shows the financial position of an organization. • The method of preparing the balance sheet for not-for-profit organization is similar to that of a business firm. • It is prepared at the end of the accounting period after preparing the income and expenditure account. • The balance sheet shows assets and liabilities, capital fund.