A Balance Sheet is a statement which we prepare at the end of an accounting year after preparing Income and Expenditure Account. The excess of assets over liabilities in Not-for-Profit Organization is known as Capital Fund. We show the surplus or deficit of Income and Expenditure Account by adding or deducting it from the Capital Fund. Also, there are some special accounts which also help in preparing the Balance Sheet.
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1. Donations
A charitable institution often receives donations. Such donations may be the general donation or a specific donation.
General Donation:
General Donation is the donation in which the donor does not specify any condition for its use. The amount of general donation is an income and we credit it to Income and Expenditure Account.
Specific Donation:
In case the donor specifies the purpose for which the donation should be used, it is a Specific Donation.
For example, a donor donates ₹ 10,00,000 for the library. It means the donation should be used only for the library, i.e., it is a specific donation.
Specific donations are capitalized and are shown on the liabilities side of the Balance Sheet.
Browse more Topics under Non Profit Organizations
- Receipts and Payments Account
- Income and Expenditure Account
- Educational Institutes- Special Transactions
Understand the Basic Accounting Procedure here in detail.
2. Entrance and Admission Fees
Entrance Fees or Admission Fees is the amount that a person pays at the time of becoming a member of a Not-for-ProfitOrganization. It is a revenue receipt. Therefore, we account it as an income and credit it to Income and Expenditure Account.
3. Subscriptions
Subscription is the amount that a member pays periodically i.e., quarterly or half yearly or yearly so that their membership remains alive. It is a source of income for the Not-for-Profit Organization.
- We will show the Subscriptions relating to current year whether received or not, on the credit side of the Income and Expenditure Account.
- We will show the Subscriptions outstanding on the Assets side of the Balance Sheet.
- Show the Subscriptions received in advance for the following year on the Liabilities side of the Balance Sheet.
Proforma of Subscriptions Account
Subscriptions Account
| Particulars | Amount | Particulars | Amount |
| To Outstanding Subscriptions A/c | By Advance Subscriptions A/c | ||
| (outstanding in the beginning) | (advance in the beginning) | ||
| To Income and Expenditure A/c | By Bank A/c | ||
| (balancing figure) | (received in the current year) | ||
| To Advance Subscriptions A/c | By Outstanding Subscriptions A/c | ||
| (advance at the end) | (outstanding at the end) | ||
4. Life Membership Fees
Life Membership Fees is a capital receipt and we add it to the Capital Fund on the liabilities side of the Balance Sheet.
We do not account it as an income because a life member makes onetime payment and avails services all through his life.
5. Legacy
Legacy is the amount that a Not-for-Profit Organization receives as a donation under the WILL of a deceased person. The donor may or may not specify the conditions for its use. In case, if:
- There is no specific condition; we account it as ‘General Donation’. We account it as revenue receipt and will credit it to Income and Expenditure Account.
- There is a specific condition for its use, we account it as ‘Specific Donation’. We account it as capital receipt and will credit to a specific ‘Fund Account’ which we maintain for a purpose, for example, Prize Fund. Being a fund, we apply the principles of Fund Based Accounting, i.e., we will credit the income relating to such fund and will debit the expenses.
6. Sale of Old Newspapers and Periodicals
We will debit the amount that is paid for newspapers, magazines, periodicals, etc. to Income and Expenditure Account., being a revenue expense. Thus, we will credit the amount which we realise from the sale of newspapers, magazines, periodicals, etc.
7. Sale of Old Fixed Assets
Sale of an asset may result in a profit if the sale value is more than the book value; or loss, if sale value is less than the book value; or neither no profit nor loss, if sale value is equal to the book value.
We determine the book value of an asset on that date after charging depreciation up to the date of sale on that asset.
In case of gain, we will credit the sale value to the asset account and in case of loss, we will debit the sale value to the Income and Expenditure Account.
8. Honorarium
The honorarium is a token payment to a person who voluntarily takes as service which would normally command a fee. It is an expression of gratitude rather than a payment for the service. We debit Honorarium to Income and Expenditure Account.
Solved Example onSpecial Accounts
The Treasurer of the Royal Tennis Club presented the following Receipts and Payments Account for the year ended 31st March 2018.
Receipts And Payments Account
for the year ended 31st March 2018
| Receipts | ₹ | Payments | ₹ |
| To Balance b/d (Cash at Bank) | 1,02,000 | By Purchase of Balls | 40,000 |
| To Subscriptions | 2,40,000 | By Creditors for Tennis Equipments | 2,20,000 |
| To Sale of Tennis Equipments | 3,05,000 | By Repairing of Tennis Courts | 38,000 |
| To Court Hire | 27,000 | By Construction of New Court | 2,50,000 |
| To Sale of Balls | 37,000 | By Sundry Expenses | 31,000 |
| By Balance c/d (Cash at Bank) | 1,32,000 | ||
| 7,11,000 | 7,11,000 |
He also provides additional information:
- The Club’s Tennis Courts were valued at ₹ 10,00,000 on 1st April 2017.
| Particulars | 1st April 2017 (₹) | 31st March 2018 (₹) |
| Tennis Balls in Hand (At Cost) | 4,000 | 9,000 |
| Creditors for Tennis Equipments | 40,000 | 30,000 |
| Subscriptions Outstanding | 20,000 | 35,000 |
You are required to prepare Income and Expenditure Account for the year ended 31st March 2018 and Balance Sheet.
Ans:
Royal Tennis Club
Income and Expenditure Account
For the year ended 31st March 2018
| Expenditure | Amount | Income | Amount |
| To Repairing of Tennis Court | 38,000 | By Sale of Tennis Balls (WN1) | 2,000 |
| To Sundry Expenses | 31,000 | By Subscriptions (WN2) | 2,55,000 |
| To Surplus | 3,10,000 | By Tennis Equipments: | |
| Sale of Tennis Equipment 3,00,000 | |||
| Less: Purchase (WN3) 2,10,000 | 95,000 | ||
| By Court Hire | 27,000 | ||
| 3,79,000 | 3,79,000 |
Balance Sheet
As at 31st March 2018
| Liabilities | ₹ | Assets | ₹ |
| Capital Fund (WN4) 10,86,000 | Tennis Courts 10,00,000 | ||
| Add: Surplus 3,10,000 | 13,96,000 | Add: New Court 2,50,000 | 12,50,000 |
| Creditors for Tennis Equipments | 30,000 | Tennis Balls | 9,000 |
| Subscriptions Outstanding | 35,000 | ||
| Cash at Bank | 1,32,000 | ||
| 14,26,000 | 14,26,000 |
Working notes:
Tennis Ball Account
| Date | Particulars | Amount | Date | Particulars | Amount | |
| To balance b/d | 4,000 | By Bank A/c (sale) | 37,000 | |||
| To Bank A/c (Purchases) | 40,000 | By Balance c/d | 9,000 | |||
| To Income and Expenditure A/c | 2,000 | |||||
| (surplus on sale) | ||||||
| 46,000 | 46,000 |
Subscriptions Account
| Date | Particulars | Amount | Date | Particulars | Amount | |
| To Subscriptions Outstanding A/c | 20,000 | By Bank A/c | 2,40,000 | |||
| To Income and Expenditure A/c | 2,55,000 | By Subscriptions Outstanding A/c | 35,000 | |||
| 2,75,000 | 2,75,000 |
Creditors for Tennis Equipments Account
| Date | Particulars | Amount | Date | Particulars | Amount | |
| To Bank A/c | 2,20,000 | By Balance b/d | 40,000 | |||
| To Balance c/d | 30,000 | By Tennis Equipments | 2,10,000 | |||
| (Purchase) (bal. fig) | ||||||
| 2,50,000 | 2,50,000 |
Balance Sheet
As at 1st April 2017
| Liabilities | Amount | Assets | Amount |
| Creditors for Equipments | 40,000 | Tennis Courts | 10,00,000 |
| Capital Fund (bal. fig) | 10,86,000 | Tennis Balls | 4,000 |
| Cash at Bank | 1,02,000 | ||
| Subscriptions Outstanding | 20,000 | ||
| 11,26,000 | 11,26,000 |
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