Non-profit organizations (NPOs) like clubs, hospitals, schools, charitable trusts, associations, etc. do not exist to earn profit for owners. Their main aim is service to members/public. Still, they must maintain accounts to show:
In exams, students often confuse the three key statements used in NPO accounting:
This topic becomes easy if you remember what each statement includes/excludes and how to treat common items like subscriptions, donations, entrance fees, and fixed assets.
Non-profit organization is an organization formed for the welfare/service of members/public and not for profit distribution.
Main features:
Receipts & Payments Account is a summary of cash and bank transactions during an accounting period.
Features:
So it answers: “How much cash came in and went out?”
Income & Expenditure Account is prepared on accrual basis to find surplus (excess of income over expenditure) or deficit.
Features:
So it answers: “What is the surplus/deficit for the year?”
This table is a common 3‑mark question.
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Table:
Thus, R&P is cash summary, while I&E shows performance of the year.
Capital fund is the accumulated fund of an NPO.
Points (any three):
Formula table:
Thus, capital fund represents the net worth of the NPO.
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Non-profit organizations (NPOs) like clubs, hospitals, schools, charitable trusts, associations, etc. do not exist to earn profit for owners. Their main aim is service to members/public. Still, they must maintain accounts to show:
In exams, students often confuse the three key statements used in NPO accounting:
This topic becomes easy if you remember what each statement includes/excludes and how to treat common items like subscriptions, donations, entrance fees, and fixed assets.
Non-profit organization is an organization formed for the welfare/service of members/public and not for profit distribution.
Main features:
Receipts & Payments Account is a summary of cash and bank transactions during an accounting period.
Features:
So it answers: “How much cash came in and went out?”
Income & Expenditure Account is prepared on accrual basis to find surplus (excess of income over expenditure) or deficit.
Features:
So it answers: “What is the surplus/deficit for the year?”
This table is a common 3‑mark question.
Balance sheet shows assets and liabilities of NPO at end of period.
Liabilities include:
Assets include:
Capital fund (General fund) represents accumulated surplus of NPO (equivalent to capital in business).
Opening capital fund is calculated as:
Then:
Most exam sums involve adjustments:
Subscriptions are like membership fees.
In Income & Expenditure:
Typical approach:
In Balance Sheet:
Treatment depends on policy/amount:
Exam tip: Always follow what the question says; if not stated, mention “as per policy”.
Receipts & Payments (cash summary) + Adjustments → Income & Expenditure (surplus/deficit) → Balance Sheet (position)
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Meaning: It is a summary of all cash and bank transactions of an NPO during a period.
Features:
Limitations:
Table:
Conclusion: R&P A/c provides cash summary, but for performance we need I&E A/c and Balance Sheet.