Non Profit making organisations


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:

  • subscription, membership fee, registration fee
  • profits from running a bar, café, shop, refreshments or restaurant
  • grants and donations
  • fund-raising activities, competition, dances

Expenses are normally not very much different to those of trading organizations. However some examples are given below:

  • purchases for refreshments, inventory for bar, café, shop etc.
  • competition expenses
  • Bar staff salaries
  • Rent of clubhouse


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:

  1. Receipts and payments account
  2. Subscriptions Account
  3. Bar/Refreshment/Restaurant Trading account
  4. Income and expenditure account
  5. Statement of financial position


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