2. NON PROFIT ORGANIZATIONS
DEFINITION
“ANon-Profit seeking entity which does not usually involve in trading activities,
but engages in rendering services to members and society.”
Non profit organizations are established for the purpose of rendering service.
They are not expected to earn profit, but are organized for social, educational,
religious or charitable purpose.
They take the form of sports and arts club, hospitals, libraries, charitable
institutions like orphanages, educational institutions, religious institutions etc.
3. FEATURES OF A NON-PROFIT
ORGANIZATIONS
o Their main objective is to rent a services to members and public.
o They are not expected to earn profit.
o They do not normally engage in trading activities.
o Credit transactions are not usually made.
o Usually such concerns keep only cashbook to record daily transactions.
o They prepare a summary of cashbook at the end called receipts and payments a/c.
o No trial balance is prepared.
o Do not prepare trading, profit and loss a/c, but prepares income and expenditure a/c.
o Do not have capital, but they have only capital fund representing accumulated
services.
4. ACCOUNTING STATEMENTS
Usually non-profit making concerns follow the cash system of accounting. Under cash
system, cash book is the most important book where all cash receipts and payments are
recorded in a chronological order.
A memorandum book is maintained to record the name of the persons and
institutions from whom amounts have not been received.
A stock register is kept to record the purchase of assets like furniture, books,
equipment etc.
A non-profit organization prepares three statements at the end of the accounting year,
which form its final accounts. These statements are:
Receipts and payments account.
Income and expenditure account.
Balance sheet.
5. RECIEPTS AND PAYMENTS
ACCOUNT
It is a summary of cash and bank transactions which helps in the preparation of
income and expenditure account and the balance sheet.
A receipts and payments account is a statement prepared at the end of an
accounting year, giving a summary of all receipts and payments recorded in cash
book.
It is prepared by analyzing and classifying the entrees in the cashbook of a
particular accounting year.
It is debited with all items of receipts and credited with all payments.
In preparing these accounts, no distinction is made between capital and
revenue items.
6. FEATURES
It is a real account.
Receipts are recorded in debit side.
Payments are recorded in the credit side.
It is a classified summary of cashbook.
