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CBSE Accountancy Class XI

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Accountancy - CBSE CLASS XI

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Financial Statements of not-for Profit Organisations



Learning Objectives :

After studying this lesson you will be able to
State the meaning of Not - for - Profit organization :
Explain the various items of accounting in Not-for-Profit organization; Explain about the Financial Statements of Not-for-Profit organization. Show the According Treatment of various items of accounting in Notfor-Profit organization.

Teaching Methods :

Teachers are advised to use various examples of Not-for-Profit organizations.
Story telling method can also be used for various items of Not-for-Profit organization.

Meaning of Not-for-Profit organization

The primary motive of Not-for-Profit organizations is to render services to their member or to promote culture, art, education and other religions, social and charitable activities. These institutions or organizations do not maintain their accounts on the basis of business enterprises. The non-profit seeking entities exists with a primary objective of providing service. For this reason, these institutions do not prepare profit and loss Account.

Examples of not-for-organizations :

Hospitals, dispensaries, sports clubs, recreation clubs, temples, dharamshalas, orphanage, school and College etc.
Such organizations prepares following financial statements at the end of accounting period :

1. Receipts and Payments Account
2. Income and Expenditure Account
3. Balance Sheet

Receipts and Payments Account :

This account is merely a summary of the transactions appearing in the cash book. After preparation of this account, it is easy to prepare the income and expenditure account as well as the balance sheet. All receipts are shown on its debit side and all payments are shown on its credit side. All the receipts and payments during an accounting period are included in it under appropriate head- ings. For example, if a club receives subscription for its members on different dates, they will be recorded in the cash book in a chronological order, where as the receipts and payments account will contain the total subscriptions received during the year.

Features of Receipts and Payment Account :

It is clear from above discussion that the Receipt and Payment Account is merely a summary of the all receipt and all payment during the year. Special features of Receipts and Payment Account are as follows :

  1. It is a real account. Thus Receipts are on its debit side and payments on the credit side.
  2. Excess of receipt of over payment is the closing balance of cash which is shown in Balance sheet on asset side.
  3. This account begins with the opening balance of cash or bank.
  4. An item may be repeated many times in a cash book, but it is shown once in 'Receipts and Payment Account'.
  5. All cash payments are shown on its credit side irrespective of the fact whether these are of capital nature or of revenue nature and whether they relate to current year, previous year or next year.
  6. Receipt and Payment Account records only the actual receipt and payment of cash. Non-cash items such as depreciation, outstanding expenses and accrued incomes are ignored while preparing it.

Limitations of Receipts and Payment Account

  1. It is not prepared on accrual basis, therefore no adjustment are made in it.
  2. This account does not show the income or expenditure of the accounting period.
  3. It does not show the amount received or paid is only for a particular accounting priod.


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CBSE Accountancy Class XI ( By Mr. Aniruddh Maheshwari ) 
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