Chapter 7: Accounts of Non-Profit Seeking Organizations

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Non-Profit Seeking Organizations: Concept

 

Non-profit seeking organizations are entities formed for purposes other than making profits:

 

- Concept: Operate for social, charitable, religious, educational, or cultural objectives.

- Examples: Charities, educational institutions, religious bodies, and NGOs.

 

 Receipts and Payments Account

 

Receipts and Payments Account: Summarizes cash receipts and payments during an accounting period:

 

- Meaning: Records actual cash flows, irrespective of when income or expenses are earned or incurred.

- Features: Simple format showing opening and closing balances, categorized by receipts and payments.

 

 Income and Expenditure Account

 

Income and Expenditure Account: Similar to Profit and Loss Account for non-profit organizations:

 

- Meaning: Reports incomes earned and expenses incurred during the accounting period.

- Features: Includes both revenue and capital items, excluding non-cash transactions.

 

 Preparation of Income and Expenditure Account from Receipts and Payments Account

 

Steps:

 

1. Identify Additional Information: Gather details on accrued income, outstanding expenses, depreciation, etc.

  

2. Adjust Receipts and Payments: Include non-cash items like accrued income and outstanding expenses.

  

3. Prepare Income and Expenditure Account: Allocate income and expenses to appropriate periods, considering adjustments.

 

 Example Scenario

 

Imagine an NGO:

- Receipts: Donations received during the year.

- Payments: Expenses like salaries, rent, and program costs.

- Additional Information: Accrued income from investments, outstanding expenses like rent due.

 

 References

 

- Institute of Chartered Accountants of India (ICAI). (2020). Accounting Standards. Retrieved from [https://www.icai.org](https://www.icai.org)

- Ministry of Corporate Affairs, Government of India. (n.d.). Companies Act. Retrieved from [https://www.mca.gov.in](https://www.mca.gov.in)

 

This chapter provides a comprehensive guide to accounting for non-profit seeking organizations, emphasizing the unique financial reporting requirements and procedures in India.

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