Not for profit organizations, features, accounts maintained etc.

 NOT FOR PROFIT ORGANIZATIONS

On the basis of profit making, organizations can be classified into two;

1. Profit making organization

2. Not for profit organization

NOT FOR PROFIT ORGANIZATION

These are organizations which are not meant for making profits. Their main aim is to render services. 

Eg: Charitable institutions, Arts and sports club, Libraries etc.

FEATURES OF NOT FOR PROFIT ORGANISATIONS

• A not for profit organization do not seek profit.
• Their main aim is to render services.
• Their main source of income is through donations, subscriptions etc.
• Most of the NPO's are exempted from tax.
• The surplus is not shared amongst the members.
• They keep income and expenditure account and balance sheet as financial statements.
• They also maintain a capital fund.
• Their affairs are managed by executive committee elected by its members.

FINAL ACCOUNTS OF NOT FOR PROFIT ORGANISATIONS

1. Receipts and payments account
2. Income and expenditure account
3. Balance sheet

1. RECEIPTS AND PAYMENTS ACCOUNT

It is a real account prepared at the end of the accounting year to record the cash transactions occurred in a not for profit organization.

FEATURES OF RECEIPTS AND PAYMENTS ACCOUNT

• It is a summary of cash book.
• Only cash transactions are recorded.
• It is debited with all cash receipts.
• It is credited with all cash payments.
• It records all cash transactions irrespective of the period in which they occurred.
• It records cash transactions in the current year, previous year and succeeding year.
• It records cash transactions of recurring(revenue) and non-recurring(capital) nature.

2. INCOME AND EXPENDITURE ACCOUNT

It is a nominal account prepared to ascertain surplus or deficit in a not for profit organization.

SURPLUS: It is the excess of income over expenditure.

DEFICIT: It is the excess of expenditure over income.

FEATURES OF INCOME AND EXPENDITURE ACCOUNT

• It is like a profit and loss account.
• Non cash items are recorded.
• It is debited with expenses and losses.
• It is credited with incomes and gains.
• It records incomes and expenses of current year only.
• It records only revenue items.

3. BALANCE SHEET

A balance sheet is prepared to show the financial statements of the organization.

FEATURES OF BALANCE SHEET

• It is a financial statement.
• It summarizes the assets, liabilities and capital fund as on a particular date.
• it helps to analyze the financial position of an organization.