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Accounting Principles Lectures PDF

Non-profit organizations prepare receipts and payments accounts and income and expenditure accounts to show periodic performance and a balance sheet to show financial position. The income and expenditure account is similar to a profit and loss account but shows any excess of expenditures over income as a deficit rather than a loss. The balance sheet shows the excess of total assets over total outside liabilities as the capital or accumulated fund, representing amounts contributed over time. Donations may be credited directly to income and expenditure or to special funds depending on their intended purpose, while fees like entrance fees and life membership fees are considered capital receipts credited to capital or general funds.

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553 views10 pages

Accounting Principles Lectures PDF

Non-profit organizations prepare receipts and payments accounts and income and expenditure accounts to show periodic performance and a balance sheet to show financial position. The income and expenditure account is similar to a profit and loss account but shows any excess of expenditures over income as a deficit rather than a loss. The balance sheet shows the excess of total assets over total outside liabilities as the capital or accumulated fund, representing amounts contributed over time. Donations may be credited directly to income and expenditure or to special funds depending on their intended purpose, while fees like entrance fees and life membership fees are considered capital receipts credited to capital or general funds.

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prasad vinny
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Accounting Principles

UPSC- EPFO
• A non-profit organisation 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 or a group of partners
or shareholders.

• Non-profit making organisations such as public hospitals, public educational institutions, clubs,
Temples, churches etc., conventionally prepare Receipts and Payments Account and Income
and Expenditure Account to show periodic performance and Balance Sheet to show financial
position at the end of the period.

• Income and Expenditure Account is just similar to Profit and Loss Account prepared for the
profit making organisations. In case of Income and Expenditure Account, the excess of
expenditure over income is treated as deficit. In non-profit making organisations, total cash
receipts and total cash payments are highlighted through Receipts and Payments Account.
• A Balance Sheet is the statement of assets and liabilities of an accounting unit at a given date.
• In not for profit organizations, the excess of total assets over total outside liabilities is known as
Capital Fund.
• The Capital fund represents the amount contributed by members, legacies, special donations,
entrance fees and accumulated surplus over the years.
• If however, members have not contributed any amount, the name should be Accumulated Fund.
• The surplus or deficit, if any, on the year's working as disclosed by the Income and Expenditure
Account is shown either as an addition to or deduction from the Capital / Accumulated Fund
brought forward from the previous period.
• Donations: These may have been raised either for meeting some revenue or capital expenditure; those
intended for the first mentioned purpose are credited directly to the Income and Expenditure Account
but others, if the donors have declared their specific intention, are credited to special fund account and
in the absence thereof, to the Capital Fund Account.

• Entrance and Admission Fees: Such fees which are payable by a member on admission to club or society
are normally considered capital receipts and credited to Capital Fund.

• Subscription: Subscriptions being an income should be allocated over the period of their accrual. The
Subscription Account is closed off by transferring its balance at the end of the year to the Income and
Expenditure Account.

• Life Membership Fee: Fees received for life membership is a capital receipt as it is of non-recurring
nature. It is directly added to capital fund or general fund.

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