Compiled by C Munodawafa

0773821392

NON-PROFIT MAKING ORGANISATIONS

Chapter Objectives

Purpose of Non-profit Oriented Organisations

The main purpose of these organisations is not trading or profit-making and these include charities,
clubs, associations and other non-profit-oriented organisations. They are established for the primary
purpose of providing services to their members in return for the payment of subscriptions and other
fees e.g. social football clubs, golf clubs and burial societies. These organisations are also referred to
as Not-For-Profit or Non Profit Making Organisations.
Accounts of Clubs and Societies
The accounts of a club or society are normally kept of a single entry basis although others keep
incomplete records. As they are non-profit oriented, they prepare specialised accounts that reflect the
nature of their operations and the main accounts are:
1. Receipts and Payments
2. Income & Expenditure
3. Statement of Financial Position or Statement of Affairs
Receipts and Payments Accounts:
It is a summary of cashbook, i.e. all cash and bank transactions during a given period of time. It starts
with an opening balance and debited with all items of receipts irrespective of whether they are of
capital nature or revenue nature and whether they are pertaining to the current period or not.
Income and Expenditure Account:
Income and expenditure account is a nominal account. It is debited with all expenses and losses and
credited with all incomes and gains.
Accumulated Fund:
This is the capital fund of the club/society and includes surplus accumulated on a yearly basis.
Difference Between The Terms Used
In Profit Oriented Organisations In Non Profit Oriented Organisations
1. Cash Book - Receipts and payments account
2. income statement Account- Income and expenditure account
3. Net Profit - Surplus
4. Net Loss -Deficit
5. Capital- Accumulated fund
sources of Income of a Club/Society
1. Donations
2. Subscriptions
3. Entrance fees
4. Trading income from club mini-shop, canteen, etc
5. Income from fundraising activities such as dinner dance, competition tickets etc.

Accounts for clubs and societies(Non profit making organisations)

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0773821392

Financial statements( Final accounts) of a non trading organization

Non trading organisation( name)

Bar Trading account for the year ended

Revenue(sales) xx

Less:cost of sales

Opening inventory xx

Add purchases xx

xx

Less: closing inventory xx

Cost of sales xx

Gross profit xx

Less:bar expenses

Wages of bar assistant xx

bar rent and rates xx

Depreciation of bar fittings xx

Xx

Profit on bar/shop xx

An income and expenditure account is also prepared the equivalent of the profit and loss account of
a business. The expenses of the organisation are deducted from the revenue and the resulting figure is
a surplus or deficit,rather than profit or loss

Income and expenditure account for the year ended 31 december year 2010

dr cr
Income
Subscriptions xx
Profit on bar xx
Competition-entrance fees xx
Less expenses xx xx
Raffle prizes xx
Less raffles costs xx xx
Interest received xx
Profit on disposal xx
xx
Less: Expenditure
General expenses xx
Rates and insurance xx
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0773821392

Repairs and maintenance xx

Loan interest xx
Loss on disposal of fixed assets xx
Depreciation of equipment xx
xx
Surplus of income/(deficit) xx

Income = all items on the debit side of the receipts and payments account excluding proceeds from
sale of non-current assets and donations for a specific purpose

Expenditure =all items on the credit side of the receipts and payments account excluding purchases of
non-current assets

Steps in answering in non-profit making organisations

Step 1 calculate opening accumulated fund (assets liabilities)

Step 2 prepare a receipts and payments accounts (bank) if one is not prepared for you eg

Cash/Bank account
Balance b/d XX Payments XX
Receipts XX Balance c/d XX
XXX XXX
Step 3 prepare subscriptions acc as given above

Subscriptions Account
This is an account that needs special attention and the format of a typical subscriptions account is as
follows
Arrears b/d xx Prepaid b/d xx
Income and expenditure a/c(balancing figure)xx Bank (subscriptions paid for the year) xx
Prepaid c/d xx Arrears c/d xx
xx xx

Step 4 calculate sales and purchases for any subsidiary activity in the form of trading eg bar trading

Sales control account

Balance b/d xx Cash and cheques received xx
Credit sales(balancing figure) xx Balance c/d xx
xx xx
Total sales = cash sales + credit sales(from above )
Purchases Control account
Payments to suppliers xx Balance c/d xx
Discounts received xx credit Purchases xx
Balance c/d xx
xx xxx
Total purchases = cash purchases + credit purchases
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Step 5 prepare a trading account for a subsidiary activity as given above for the bar trading

Step 6 prepare T accounts for expenses and assets

Expenses account
other receivables(Prepaid b/d) xx Owing b/d xx
Bank xx To income statement xx
Owing c/d xx Prepaid c/d xx
xxx xxx
Asset account (at NBV)

Balance b/d xx Disposal xx

Purchases at cost xx Depn(Balancing figure) xx
Balance c/d xx Balance c/d xx
xxx xxx
Step 7 Prepare income and expenditure account and statement of financial position

Major areas of concern in clubs and society

1) Life subscriptions when received they should be credited to the deferred income account and
credited to income and expenditure account in equal annual instalments

2) donations if donations are for a special purpose they should not be recorded in the income and
expenditure but shown as a special fund in the statement of financial position not as part of
accumulated fund, but if its not for a specific purpose its income

3) Subscriptions written off if subscriptions owing (arrears) are not received in the following year we
should write them off in the subscriptions account and the income and expenditure as an expense