CASH BASIS OF ACCOUNTING, CONVERSTION OF RECEPIT AND PAYMENT A/C INTO INCOME AND EXPENDITURE ACCOUNT, ACCOUTING TREATMENT OF SOME IMPORTANT ITEMS

1. Accounting for
NON-Profit
Organisation
Ms. Aarti
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2. Cash Basis of Accounting
 Receipt & Payment A/c is prepared on CASH
BASIS of accounting.
 NON CASH Incomes & Expenses are not
recoded In Receipt & Payment A/c
 For e.g. DEPRICIATION, OUTSTANDING
EXPENSES & Accrued Incomes
A limitation of R&P A/c
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4.  Understanding the R&P a/c is not a Tough
Task. Its is similar to Cash Book.
 This A/c is not a part of Double Entry System.
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6.  Ignore the Opening & Closing Balance of Cash.
 Ignore the Capital Receipts & Payments. such as,
Life time Membership fees, Donation for Building ,
Purchase of Furniture, Extension of Building.
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7. Steps Cont’
 Pick the REVENUE receipts & payments only
for the Current Year. (Ignore the previous and
subsequent year)
 Add the Prepaid expenses & Income received
in advance in the previous year into the
respective items of current year.
 Add the income & Expenses outstanding at
the end of the current year In the concerned
item.
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8. Steps Cont’
 Calculate Depreciation on Fixed Assets, loss
or profit on sale of fixed assets.
● Instead of depreciation rate, opening &
Closing and purchase of asset is given then
the depreciation is calculated as follows :
Opening Balance of Assets XXX
Add: Purchase of FA XXX
LESS: Closing balance of FA XXX
DEPRICIATION
XXX
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9.  Debit the consumption of the items whose
opening and closing stock is given. For
Example
Steps Cont’
Opening stock of Stationery
Add : Purchases of Stationery
Less : Closing Stock of Stationery
XXX
XXX
XXX
Stationery Consumed debited to I&E A/c XXX
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10.  Check the additional Information and record those
items of expenses and Incomes of Current Year.
 Balancing Of Account.
Excess of Income over Expenditure= Surplus (Debit Balance)
Excess of Expenditure over Income= Deficit (Credit Balance)
Steps Cont’
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11. Things to keep In Mind
 Do not record the following items in Income &
Expenditure A/c
Opening & Closing Balance of
Cash
Capital Receipts/Specific
Donations
Proceeds from sale of Fixed Assets
(Except Profit/Loss on sale)
Capital Payments e.g.
Purchase of Fixed Assets
Expenses of Previous
or Subsequent Year
Incomes of Previous or
Subsequent Year
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12. Money paid by the members at the time of joining the
club/Society.
Nature- Revenue Receipt
Recording- As per Rule, Revenue Incomes are credited
in Income & Expenditure A/c.
1. Entrance Fees/Admission Fees
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13. It is a one-time payment by the members of the NPO while
joining the club for making them the life members.
Nature- Capital Receipt (Non- Recurring in Nature)
Adjustment- Added into the Capital Fund in Balance Sheet.
2. Life Membership Fees
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14. When the donor does not
specify the condition to use
the donation Amount.
Nature- Revenue( Recurring)
Adjustment- Income for the
Organisation, CREDITED to
Income & Expenditure A/c
The donation received to use
for a specific purpose.
E.g. Building Fund, Tournament
Fund
Nature- Capital (Non-Recurring)
Adjustment- it is a Capital
receipt so it will appear in
Balance Sheet.
3. Donations
General Donations Specific Donations
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15. Amount received under the WILL of a deceased
person.
If the purpose to use the donation is specified in
the WILL, is Specific donation. Otherwise it is
treated as General donation.
Nature & Adjustment- Same as Donation.
4. Legacy
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16.  Maintenance/ General Grants- Same as General
Donation.
 Development/ Specific Grants- Same as Specific
Donation.
5. Government Grants
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17. Amount paid to the person invited by the club to
deliver Guest Lectures or artist, is termed as
Honorarium.(Not Salary)
Nature- Revenue Expenditure
Adjustment- Debited to Income & Expenditure A/c.
6. Honorarium
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18. Permanent Fund created by NPO to provide
regular support to the organization.
Nature- Capital Receipt
Adjustment- Liabilities side of Balance Sheet
7. Endowment Fund
Any Interest Received on Endowment fund will be credited to
Income & Expenditure A/c
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19. NPO may Sale old material like sports material,
Instruments, newspapers etc.
Nature- Revenue Income
Adjustment- Credited to Income & Expenditure A/c
8. Sale of obsolete items and old newspapers
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20. Cash received from sale of fixed assets such as sale of
Furniture.
Adjustment- 1. The Book Value of asset sold is deducted
from the respective asset in Balance Sheet.
2. Profit/Loss sold on fixed asset is treated in Income &
Expenditure A/c accordingly.
3. When the book Value is NIL, the sale proceeds are
treated as income.
9. Sale of Fixed Asset
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21.  It is the periodic contribution of fixed amount by
the members of the NPO.
 Received periodically say monthly, quarterly or
yearly.
 Major source of income to the NPO.
10.Subscription
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22.  Total Subscription related to particular
accounting period is recorded in I&E A/c.
 Subscription Outstanding – Assets
Advance- Liabilities
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23.  Added to Amount of Subscription on Credited
side of Income & Expenditure A/c.
 Shown on the Asset side of Closing Balance
Sheet.
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24.  Deducted from Amount of Subscription on
credit side of I&E A/c.
 Assets side of Opening Balance Sheet.
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25.  It is an income related to the next year.
 Deducted from the amount of Subscription on credit
side of Income & Expenditure A/c.
 Shown on the liabilities side of Closing Balance
Sheet.
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26.  Amount received in the previous year as an advance
of current year.
 As it is the income of current year, will be added in
subscription amount credited in I&E A/c.
 Liabilities side of Opening Balance Sheet.
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27. Total Subscription received during the year XXX
Add: O/s at the end of the year XXX
Less: O/s at the beginning of the year XXX
Add: Advanced at the beginning of the year XXX
Less: Advanced at the end of the year XXX
Subscription to be shown in I & E A/c XXX
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28. Question: Following information is extracted from
receipt and payment A/c
Receipts Amount Payments Amount
To Subscription 1,00,000
Receipts & Payment Account
For the year ending 31st march,2019
Dr. Cr.
Additional Information:
As at 31st
March 2018
As at 31st
March 2019
Subscription outstanding 20,000 40,000
Advanced Subscription 30,000 20,000
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29. Solution
:
Expenditures Amount Incomes Amount
By Subscription 1,00,000
Add: O/s at end 40,000
Advanced at beginning 30,000
Less: O/s at the beginning 20,000
Advanced at the end 20,000
1,30,000
Year ending = 2019
Year Beginning = 2018
Income & Expenditure A/C
For the year ending 31st MARCH 2019
Dr. Cr.
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30. Liabilities Amount Assets Amount
Subscription
received in advance
(31/3/2019)
20,000 Subscription
outstanding
(31/3/2019)
40,000
Closing Balance Sheet as at 31st March 2019
Opening Balance Sheet as at 31st March 2019
Liabilities Amount Assets Amount
Subscription
received in advance
(31/3/2018)
30,000 Subscription
outstanding
(31/3/2018)
20,000
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31. Reference Questions:
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36. Thank you
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