There are some organisations whose objective is not to make profit but to be social, educational or charitable. These types of organisations may take the form of clubs, societies and trusts and are known as Non-profit making organisation (Not for profit organisation). They are formed to cater and to promote the social, cultural and recreational interests of its members or of the society as a whole. For example: The parent teachers association (PTA). The main differences in a trading business and a non profit making organisations are:
Comparison between Profit making organisation and non-profit making organisation | |||
Purpose | Profit making organisation | Non Profit making organisation | |
1 | Money used to start an organisation | Capital | Accumulated fund |
2 | To record cash and cheques received and paid | Cash book | Receipts and Payments |
3 | To measure performance | Trading section (Inc. Stmt) Gross Profit / (Loss) | Bar / Refreshment income statement – Bar profit / (Loss) |
4 | To measure overall profitability | Profit and Loss Section – Income statement Profit / (Loss) for the year | Income and expenditure account Surplus / (Deficit) for the year |
The types of incomes and expenses of these organizations vary according to their needs. Typical examples include the following incomes:
Expenses are normally not very much different to those of trading organizations. However some examples are given below:
Grants and Donations
Money received from grants, donations and fund raising projects are treated as capital receipts and are added with the accumulated fund in the statement of financial position. On the other hand, if these amounts are not received for a specific purpose, then they are treated as revenue receipts and included in the income and expenditure account as income.
The main financial records of non-profit making organisations are:
To calculate accumulated fund at start
Statement to show accumulated fund as at 1st January 2020 | $ | $ |
Assets | ||
Clubhouse | *** | |
Equipment | *** | |
Bar/Café/Refreshment inventory | *** | |
Receipts and Payments (DR) | *** | |
Expenses prepaid (paid in advance) | *** | |
Subscription due (not yet paid) | *** | *** |
Less Liabilities | ||
Trade payables (Owing for refreshments) | *** | |
Expenses due (not yet paid) | *** | |
Subscriptions in advance (prepaid) | *** | |
Receipts and Payments (CR) | *** | (***) |
Accumulated fund | *** |
To calculate amount transferred to income and expenditure account for subscriptions
DR Subscriptions Account CR | |||
$ | $ | ||
Balance b/f (due at start) | *** | Balance b/f (prepaid at start) | *** |
Income and Expenditure | ??? | Receipts and Payments | *** |
Bad debts | *** | ||
Balance c/d (prepaid at end) | *** | Balance c/d (due at end) | *** |
*** | *** | ||
Balance b/d | *** | Balance b/d | *** |
To calculate credit purchases of refreshments /café / bar
DR Trade payables account CR | |||
$ | $ | ||
Payments to suppliers | *** | Balance b/f | *** |
Balance c/d | *** | Credit purchases | ??? |
*** | *** | ||
Balance b/d | *** | ||
To calculate profit/ (loss) from bar/ refreshment/ café
Bar/Refreshment/Café income statement for the year ended 31.12.19 | $ | $ |
Bar/Refreshment sales (Takings) | *** | |
Less cost of sales | ||
Opening inventory | *** | |
Add Purchases | *** | |
Less Closing inventory | (***) | |
Cost of sales | (***) | |
Gross Profit / (Loss) | *** | |
Less expenses | ||
Bar/café staff wages | *** | |
Bar/café expenses | *** | (***) |
Bar/Refreshment/Café profit / (Loss) | *** |
To calculate surplus or deficit
Income and expenditure account for the year ended 31st December 19 | $ | $ |
Income | ||
Subscriptions | *** | |
Bar/ refreshment/ café profit | *** | |
Donations (Revenue receipts) | *** | |
Less expenditure |
| |
Depreciation of NCA | *** |
|
General expenses | *** | |
Ground man’s wages | *** | |
Rent and rates | *** | (***) |
Surplus /(Deficit) |
| *** |
Statement of financial position as at 31st December 19 | $ | $ |
Non current assets | ||
Clubhouse | *** | |
Equipment | *** | |
*** | ||
Current assets | ||
Bar/café inventory | *** | |
Receipts and payments (DR) | *** | |
Expenses prepaid | *** | |
Subscriptions due | *** | *** |
Total assets | *** | |
Accumulated fund | *** | |
Surplus / (Deficit) | *** | |
Donations (Capital receipts) | *** | |
*** | ||
Current liabilities | ||
Trade payables (owing to bar/café suppliers) | *** | |
Expenses due | *** | |
Subscriptions in advance | *** | |
Receipts and payments (CR) | *** | *** |
Funds and liabilities | *** |
Worked example
The following information is available from the books of Sands Social Club:
1st Jan 2015 | 31st December 2015 | |
Non-Current assets | 12 000 | 23 000 |
Bar inventory | 4 500 | 5 250 |
Subscriptions – due | 1 100 | 1 250 |
Subscriptions – prepaid | 1 800 | 1 730 |
| Bar suppliers | 2 500 | 3 300 |
DR Receipts and Payments Account CR | |||
$ | $ | ||
Balance b/f | 11 150 | Bar suppliers | 28 000 |
Takings | 41 000 | Non-Current assets | 13000 |
Donation(Capital receipts) | 8 000 | Match day expenses | 7 700 |
Match day income | 3 200 | General expenses | 1 400 |
Subscriptions | 18 000 | Barman’s wages | 1 800 |
Balance c/d | 29 450 | ||
Step 1 – Calculate accumulated fund at start
Statement to show accumulated fund as at 1st January 2015 | $ | $ |
Assets | ||
Sports Equipment | 12 000 | |
Bar inventory | 4 500 | |
Receipts and Payments (DR) | 11 150 | |
Subscription due (not yet paid) | 1 100 | 28 750 |
Less Liabilities | ||
Trade payables (Owing for refreshments) | 2 500 | |
Subscriptions in advance (prepaid) | 1 800 | (4 300) |
Accumulated fund | 24 450 |
Step 2 – Amount of subscriptions transferred to income and expenditure
DR Subscriptions Account CR | |||
$ | $ | ||
Balance b/f (due at start) | 1 100 | Balance b/f (prepaid at start) | 1 800 |
Income and Expenditure | 18 220 | Receipts and Payments | 18 000 |
Balance c/d (prepaid at end) | 1 730 | Balance c/d (due at end) | 1 250 |
21 050 | 21 050 | ||
Balance b/d | 1 250 | Balance b/d | 1 730 |
Step 3 – Calculate credit purchases
DR Trade payables account CR | |||
$ | $ | ||
Payments to suppliers | 28 000 | Balance b/f | 2 500 |
Balance c/d | 3 300 | Credit purchases | 28 800 |
31 300 | 31 300 | ||
Balance b/d | 3 300 | ||
Step 4 – Calculate bar profit or loss
Bar income statement for the year ended 31st December 2015 | $ | $ |
Bar sales (Takings) | 41 000 | |
Less cost of sales | ||
Opening inventory | 4 500 | |
Add Purchases | 28 800 | |
Less Closing inventory | (5 250) | |
Cost of sales | (28 050) | |
Gross Profit / (Loss) | 12 950 | |
Less expenses | ||
Barman wages | (1 800) | |
Bar profit | 11 150 |
Step 5 – Calculate depreciation
DR Sports Equipment account CR | |||
$ | $ | ||
Balance b/f | 12 000 | Disposal | *** |
Purchase / Acquisition | 13 000 | Depreciation | 2 000 |
| Balance c/d | 23 000 | |
25 000 | 25 000 | ||
Balance b/d | 23 000 | ||
Step 6 – Calculate surplus or deficit
Income and expenditure account for the year ended 31st December 2015 | $ | $ |
Income | ||
Subscriptions | 18 220 | |
Bar profit | 11 150 | |
Match day income | 3 200 | 32 570 |
Less expenditure | ||
Depreciation of NCA | 2 000 | |
General expenses | 1 400 | |
Match day expenses | 7 700 | (11 100) |
Surplus | 21 470 |
Statement of financial position as at 31st December 2015 | $ | $ |
Non current assets | ||
Equipment | 23 000 | |
Current assets | ||
Bar inventory | 5 250 | |
Receipts and payments (DR) | 29 450 | |
Subscriptions due | 1 250 | 35 950 |
Total assets | 58 950 | |
Accumulated fund | 24 450 | |
Surplus | 21 470 | |
Donations | 8 000 | |
53 920 | ||
Current liabilities | ||
Trade payables | 3 300 | |
Subscriptions in advance | 1 730 | 5 030 |
Funds and liabilities | 58 950 |
Question 1
The following information is available from the books of Exotic Club:
1st Jan 2016 | 31st December 2016 | |
Non-Current assets | 15 000 | 25 000 |
Restaurant inventory | 4 800 | 5 200 |
Trade payables | 7 150 | 8 850 |
Subscriptions – due | 1 300 | 1 550 |
Subscriptions -prepaid | 1 500 | 2 780 |
Receipts and Payments Account
Balance b/f | 13 050 | Payment to suppliers | 32 000 |
Restaurant sales | 60 000 | Non-Current assets | 14 000 |
Donation(Capital receipts) | 5 000 | Salaries | 7 000 |
Match day income | 3 000 | Sundry expenses | 1 200 |
Subscriptions | 15 000 | Restaurant expenses | 1 900 |
Balance c/d | ? |
Required
a) Income and expenditure account for the year ended 31st December 2016
b) Statement of financial position as at 31st December 2016
