mNon trading concerns or Non profit organization are

those concern whose main object is not to earn profit

but to render services to their members and to the
community.
mEg: Educational institutions, associations, clubs,
hospitals, trade unions, charitable societies etc
mTheir income consist of admission fees, subscription
collected from members, donation from members and
non-members and grants from government and other
agencies.
mResult of the concern may be either surplus or deficit
Statements prepared by Non trading concern

. Receipts and payments Account

2. Income and Expenditure Account
3. Balance Sheet


eceipts and payments Account
› It is prepared at the end of the period incorporating
therein all receipts and payments covering a particular
period in a summary form.
› Like cash book, all receipts of cash or cheque are
entered on the debit side and all payments on the
credit side.
› The difference between two sides represents cash in
hand
—ormat of
eceipts and payments Account
O
 
    


 O e i ala ce: y ll ay e ts Xxx

Cas i a xxx (ca ital a reve e)
Cas at a Xxx y cl si ala ce:
 ll recei ts Cas i a Xxx
(ca ital a reve e) Xxx Cas at a Xxx
Xxx Xxx
 ala ce /
Cas i a Xxx
Cas at a Xxx

Note
 All receipts and payments whether to the
current, preceding or succeeding period are included
Note 2 nly actual receipts and payments are included,
ignoring accrued incomes and outstanding expenses
2 ncome and Expenditure Account
› Non trading concern prepare income and expenditure
account which is similar to profit and loss account
prepared by trading concern
› It is a nominal account and is debited with all expenses
or losses and credited with all incomes and gains
› The result being either excess of income over
expenditure (surplus) or excess of expenditure over
income (deficit) and is transferred to the capital fund
—ormat of ncome and Expenditure account
÷  
 
 
  


To All revenue expenses

of the current year
including provision is
made for all outstanding
expenses, accrued
incomes, depreciation,
doubtful debt etc xx By All revenue incomes
To excess of income over of the current year xx
expenditure(surplus) xx xxx
xxx
areparation of ncome & Expenditure Account
from
eceipts & aayments Account

. mit the opening & closing cash & bank balance

2. Take only revenue items of income & expenditure
3. Take only revenue items for the current period and
exclude items relating to the preceding or succeeding
periods
4. Make adjustment for accrued incomes, outstanding
expenses, income received in advance and prepaid
expenses
5. Make provision for bad debts, depreciation etc
The difference between two sides will indicate
either surplus or deficit and it should be transferred to
the capital fund.
 ë alance sheet
› Balance sheet is prepared to ascertain the financial
position as on the close of a particular period
› It is prepared in the usual manner
› There may not be any formal capital for a non-trading
concern. The excess of assets over liabilities is called
capital or general fund
arocedure for preparing balance sheet

. Ascertain the capital fund at commencement. For

this opening balance sheet should be prepared,
setting out the liabilities on one side and assets on
the other side. The difference between the two sides
is capital fund in the beginning.
2. In case of closing balance sheet, adjust the capital
fund for surplus or deficit during the year and also
adjust items to be capitalized
3. In the closing balance sheet bring forward previous
years liabilities, if they are still outstanding.
arocedure for preparing balance sheet(cont͙d)
4. Show the closing balance of the receipts & payments
account, viz cash in hand and cash at bank on the
asset side of the balance sheet
5. Assets which already exist in the beginning of the
year should be adjusted for additions and disposals,
if any made during the year and also for any
depreciation charged on assets.
6. Show the new assets acquired, if any, during the year.
This can be traced from the payment side of receipts
and payments account
arocedure for preparing balance sheet(cont͙d)
ΠIf there is any fresh liability incurred during the year,
that should be shown on the liability side
8 utstanding assets such as income accrued,
expenses prepaid etc should be shown on the asset
side
9 utstanding liabilities such as income received in
advance, outstanding expenses etc should be shown
on the liability side

Items of special nature should be shown in the

balance sheet after making necessary adjustments.
tems of special nature includes
I. Entrance fees
Accountants differ in the treatment of entrance fees.
Many feel that, since the amount is collected only once
and it is of non-recurring nature, it should be capitalized
and taken to the liability side of balance sheet.
thers argue that, the club or
institution receives it fairly regularly every year because
of regular entry of members. So it should be shown as an
income on the credit side of income & expenditure
account.
Note: In the absence of specific instruction in the question,
students may treat it any way but they must append a
note justifying the choice made
tems of special nature includes
(ii) Subscriptions
This is one of the main source of revenue and
should be treated as income. This is shown on the
credit side of income and expenditure account.
Adjustment for outstanding, prepaid etc should be
made so as to show the correct income for the
period.
tems of special nature includes
(iii) Donations
a) Specific donations
It must be treated as capital receipt and should
be shown on the liability side of balance sheet.
Eg: Donation for building, donation for library, donation
for furniture etc
b) General donation
Donation of a comparatively small amount
must be treated as income. But if the amount of such
donation is big, it must be treated as capital receipt and
should be shown on the liability side of the balance sheet
tems of special nature includes
(iv) Legacy
It is the amount received by the non-trading concern
as per the will of a deceased person. It is a capital
receipt and is shown on the liability side of balance
sheet.
But if the amount is small, it may be treated as
income and may be shown on the credit side of
income and expenditure account.
Note: In the absence of specific information , legacy
must preferably be capitalized.
tems of special nature includes
(v) Life membership fees
As the service has to be rendered for a long time
without further payment, it must be treated as capital
receipt and should be capitalized.
(vi) Special purpose fund
If there is any special purpose fund Eg: Tournament
fund, charity fund, prize fund, endowment fund etc and
there are certain items of expenses and income relating to
that fund, then income and expenses should not be shown
in the income and expenditure account but income should
be added to the fund and expenses should be deducted
from such fund on the liability side of balance sheet.
tems of special nature includes
(vii) Sale of old assets
The amount realized from the sale of old
assets should be treated as capital receipt and should
be credited to asset account. But the profit or loss on
its sales should be treated as revenue and is taken to
income and expenditure account.
(viii) Sale of newspaper, periodicals etc
Amount received on selling newspaper,
periodicals etc should be treated as income and is
credited to income and expenditure account.
 Accounts of arofessionals
› It involves

. Preparation of Receipts and Payments from income

and Expenditure Account or Preparation of income
and expenditure from Receipts and payments
account
2. Preparation of Balance Sheet
areparation of
eceipts & aayments Account from
ncome & Expenditure Account
› Another type of problem involves the preparation of
Receipts & Payments Account from a given Income &
Expenditure Account & Balance sheet.
› The receipts & payments account includes both revenue &
apital items and also actual total amount of cash receipts
and cash payments relating to previous, current and
succeeding periods.
› Income and Expenditure reveals only the actual income
whether received or not and also actual expenses whether
paid or not.
› Follow a reverse procedure to calculate the actual cash
receipts & cash payments by taking each and every item in
the income & expenditure account as the starting point
¦alculation of total receipts(eg Subscription)

¦urrent years subscription xxx

(Given in income & Expenditure account)
Less outstanding at the end of the current year xxx
Add outstanding at the end of the previous year xxx
Less received in advance in the previous year xxx
Add received in adv. at the end of the current year xxx
xxx

Note: This figure will be taken as the starting point for the
calculation of income
¦alculation of total payments(Eg Salaries)
¦urrent years salaries xxx
(Given in income & Expenditure account)
Less outstanding at the end of the current year xxx
Add outstanding at the end of the previous year xxx
Less Paid in advance in the previous year xxx
Add Paid in advance at the end of the current year xxx
xxx
Note: This figure will be taken as the starting point for
the calculation of expenditure