Financial Statementsof

Not-for-Profit Organisations
LEARNING OBJECTIVES
After studying this chapter, you
should beable tounderstand :
Meaning of Not-for-Profit
Organisations
Receipts and Payments Account: Meaning and
" Income and Expenditure Account : Meaning andFeatures
" Difference
Features
between Receipts and Payments Account & Income
and Expenditure Account
" Preparation of Income and Expenditure Account and Balance
Sheet from Receipts and Payments
Account

Meaning of Not-for-Profit Organisations :

There are certain organisations which are formed not to earn profits but to render
services to itsmembers and to the public. Such organisations include clubs, hospitals,
libraries, schools, religious institutions, charitable institutions and literary societies
etc. These non-profit seeking entities exist with aprimary motive of providing service.
Such as, a club provides sports and recreational facilities; a hospital renders medical
services; a literary society promotes arts and culture; and, an association may also be
formed to protect the rights ofits members. Though the main source of income of such
organisations is membership subscriptions, donations and grants et., they may also
undertake trading activities in order to earn some profit. Such profit is alsoused for the
furtherance of the goals of the organisation.

As the main aim of these organisations is not to earn profits, they do not prepare
Trading and Profit and Loss Alc. But still they have to maintain proper accounts. This
is also a legal requirement and they would also like to know whether their current
incomes are sufficientto meet their current expenses. For this purpose they prepare an
'Income and Expenditure Account' which is similar to a Profit and Loss Account of a
profit seeking entity. ABalance Sheet is also prepared in order to show the financial
position of the organisation on the last date of the accounting year.
 STATEMENTSOF) NOT-FOR-PROFIT

Of
1.2
Features
Main
(or
Specificgroup
Mainaimis
FINANCIAL

or the
service : Such
public at
Not-for-Profit
Characteristics)of
organisations
large such as
ORGANseSrAviTceIONS
tOrganisations :
are set up to provide
cducation, health care, sports,
a to
(0entertainnmentctc. The mainaim of these organisations is to proVIde service
and not to carn profit.
at nominalrates
cost or
either free of upas charitable trusts or
() Form:
organisations are set
These organisationsarecalled
subscribersto these
memberg
and socicties
organisations arc treated
as a
Entity: Notfor profit
words, it is not effected by separate entity
(i)Separatetrom its members. In other
distinct deathor insolvency of
andthe
an existing member. admission of
newmembers
Members: These organisations are usually
(H) Managed by Eleeted committee elected by its members. managed
or executive
by a managing
Income : The major sources offtheir incomes usually are:
of
(1) Major Sources from their members, (b) donations, (c) financial assistance
(a)subscription the form of grant-in-aid, (d) income from investments
from Govermmentin
etc.
distributed among its members : Current year's surplus in +l
(v)Surplus not expenditure 1s not distributed amongst its
form of excess of income over
Fund.
members. It is added to Capital
maintain proper accounts to meet
(vi)Accounts : These organisations also have to
control over utilisation of their
the legal requirement and to exercise proper
funds.
(vii) Form of Accounts : They prepare their financial statements at the end of each
accounting period (usually a financial year) in the form of Receipts and
Payments Account; Income and Expenditure Account and a Balance Sheet.

Distinction between Not-for-Profit Organisation

and Profit Earning Organisation
Basis of Not-for-Profit Organisation Profit Earning Organisation or
Distinction
Business Firm
1. Primary
Motive
Primary motive of
such Primary motive of such
||service.
organisations is to provide organisations is to earn profits.
2. Capital vs. They donot maintain any
Capital Fund Capital Account. They maintain a Capital
|maintain Capital Instead they Account.
Fund'
comprising life membership
fees, legacies,
surpluses etc.
 EINANCIAL STATEMENTS OF
3. Financial
NOT-FOR-PROFIT SATIONS
Statements |Financial statements of suchORGANI
1.3

organisations
() include : Financial statements of such
Receipts and
Account, Payments organisations
(i)
include:
(1) Income and ManufactAccount,
(i) Trading uring Accounl,
Account, and ExDenditurelG|(iv)in Balancc
(ii)Balance Sheet.
Profit &ILoss Account, and
Shect.
4. Surplus vs
The net result
Profit
and Expenditure shownAccount
by Income The net result shown by Profit &
5. Distribution
either Surplus or Deficit. isLoss Account is cither Net Profit
or Net Loss.
of Profit Surplus or deficit is not| Profit or loss is distributed
distributed
It is adjustedamong its members. |among the owners of the
in Capital Fund.
business.

Financial Statements of Not-for-Profit

Not-for-profit Organisations
organisations also prepare their financial statements more or less on
the lines of the proit seeking organisations. The financial statements of
organisations include the following statements : not-for-profit
1. The Receipts and
Payments Account.
2. The Income and
Expenditure Account.
3.The Balance Sheet.

Receipts and Payments Account

This account is merely asummary of the transactions appearing in the Cash Book.
According to William Pickles : "Receipts and Payments Account is nothing more than
a summary of the Cash Book (Cash and Bank transactions) over a certain period,
analysed and classified under suitable headings. It is the form of account most
commonly adopted by the treasurers of societies, clubs, associations etc. when
preparing the results of the year's working.
As such, a receipt and payment account is prepared at the end of the year from the
Cash Book. Allreceipts and payments which are entered in the Cash Book are also
entered in the receipts and payments account, of course, in a summary form. For
example, ifaclub receives subscriptions from its members on different dates, they will
be recorded in the Cash Book in a chronological order, whereas the Receipt and
Payment Account will contain the total subscriptions received during the year. Any
transaction which is not recorded in the Cash Book will not be entered in the receipt
and payment account also.

Salient Features of Receipts and Payments Account :

(1) Nature of Account : It is a real account and hence the rule of real account, 1.e.,
'Debit what comes in and Credit what goes out' is followed while preparing it. Thus
receipts are recorded on its debit side and payments on the credit side.
 EINANCIAL STATEMENTS OF
1.4 NOT-FOR-PROFIT
r

hand
(2) It starts with
always shows
the opening balance of cash in hand and at
a debit balance
show a debit or
and will.
favourable
Cash at bank mav ifbank balance is an overdraft or
therefore,
balance,in which casc it
unfavourable
ORGbankANSNdeTbIiOCatwlNsShlseidne.
be written on its :
wil be
in
on its debit side. But
placed on the credit side. recorded on the Dr.sside : It is a
summary of
halance,
it wil
he
All cashNature
(3)
items
receiptsofare shown onthe debitside of this account the Cash
irrespcctive of he. kact
whether they are of capital nature or of revenue nature or whether they relale t Bosk.
previous year, current year or ncxt year. For example, receipt of subscripion is a
revenue receipt andreceiptfrom sale offurniture is acapital reccipt, but both will he
recorded onits debitside. Moreover, thereceipt for.subscription whether for the yet
2021 orfor 2022, will be written on its debit side.
2020,
ending 31st March recorded on the Cr.
side : Likewise, all
cash
(4) Nature of
items
side,irrespective of the fact whether they are of capital payment
nature s
or
are
of
shown on its credit whether they relateto current year, previous year or next year.
revenue nature and shows closing balance of Cash in
(5) Closing
balanceof this account
at the end of the year, by entering the and
hand
closing balcloasinceng
account is balanced
side. However, ifthe
at bank: This andat bank, on the credit
balance ofcashin hand shown on the debit side.
it shall be
is bank overdraft recordedin this
account: This account records
sonly
items are not items such as
(6) Non-Cash Non-cash
epreciation,
payments of cash.
the actual receipts and incomes areignored while preparing it.
outstanding expenses and accrued
account does not tell us whether the current incomes exceedthe
(7) Purpose: This closing balance of cash in hand
or vice-versa. It merely showsthe
current expenditure
ascertain the net income or loss of a particular period, Incoms
and at bank, In order to help of Receipts and Payments
to be prepared withthe
and Expenditure Account has the adjustments.
Account and after considering various
Account and Cash Book
Distinction between Receipts and Payments
book record cash transactions, i.e.
Both receipts and payments account and cash are some differences
of such similarity, there
cash receipts and cash payments. In spitebelow
between the two, which are enumerated :

Basis of Receipts and Payments Cash Book

Distinction Account
1. Basis |It is preparedon the basis of cashIt is prepared on the basis of each
book. cash receipt and cash payment.
2. Period |It is prepared at the end ofIt is prepared on daily basis.
accounting year. In other words,
it is a summary of cash book.
3. Part of |It is merely a summary of cash It forms part of double enty
Double Entry book, it is not deemed to be a part| system.
System of the double entry system.
FINANCIALSSTATEMENTSS( OF 1.5
NOT-FOR-PROFIT ORGANISATIONS
4. Debit and It has receipts and paymentsIt has dcbit
Credit Sides sides instead of debit and credit and credit sides.
sides,
5 Ledger Folio It has no Ledger Folio
(LE)R has Ledycr Folio (L.F.)
Column Columns. Columns.
6. Institutions |It is
prepared by not-for-profit |It is prepared by all organisations
|organisations. whether profit seeking or
not-for-profit organisation.
ILLUSTRATION 1,
From the following particulars relating to Rotary Club, New
Receipt and Payment Account for the year ending March 31, 2021: Delhi, prepare a

Cash in hand as on April 1, 2020 7,500

Cash at bank as on April 1,2020 48,000
Subscriptions collected for the year ending :
31st March, 2020 15,000
31st March, 2021 2,20,000
31st March, 2022 6,000
Donations received 25,000
Donation received for Pavilion 2,00,000
8% Investments purchased on 1-07-2020 2,00,000
Purchase of refreshments 12,000
Rent paid 6,000
Entrance fee received 18,000
Honararium to Secretary 10,000
Interest on 8% Investments 9,000
Furniture purchased 20,000
Sale of old furniture (Cost <6,000) 4,000
Sports materials purchased 80,000
Sale of refreshments 30,000
74,000
Salaries and Wages
5,000) 25,000
Sports expenses (including unpaid expenses 6,200
Cash in hand as on March 31, 2021
Depreciate furniture @ 10% p.a.
Books of Rotary Club
SOLUTION:
RECEIPTS AND PAYMENTS ACCOUNT
for the year ending 31st March, 2021
Receipts Payments
By 8% Investments purchased 2,00,000
(1-4-2020)
To Balance b/d 7,500|By Purchase of refreshments 12,000
Cash 6,000
Bank 48,000| By Rent paid 10,000
Note 1) By Honorarium to Secretary
ToSubscriptions : (See |ByFurniture purchased 20,000
Year ending31.3.2020 15,000
 FINANCIAL . STATEMENTS OF NOT-FOR-PROFIT
1.6.
Year ending 31.3.2021 2,20,000
Year ending 31.3.2022
By Sports materials purchased
6,000 2,41,000| By Salaries and Wages
ORGANISATI80,O000NS
To Donations received 25,000| By Sports Cxpenses 74,000
ToDonation received for Pavilion| 2,00,000 (25,000 - 5,000)(See Note 3)
To Entrance fee received 18,000|By Balancc c/d : (31-3-2021 ) 20,000
To Interest on 8% Investments Cash
(See Note l) 9,000 Bank (Balancing Figure) 6,200
To Sale of old furmiture 4,000 1,54,300
ToSale of refreshnments 30,000
5,82,500
5,82,509
Working Notes:
(1)Actual cash received or paid is recorded in a Receipts &Payments Account whether ir
iS related to past year, current year or next yeal.
(2) All cash receipts and payments are recorded, whether they are of Capital or
nature. revenue
(3) Non-Cash items such as unpaid expenses, depreciation etc. are not recorded in a
Receipts and Payments Account.

Income and Expenditure Account

It is similar to the Profit &Loss Account of aprofit seeking entity and is prepared
to ascertain whether the current incomes are in excess of current expenditure or
vice-versa. In other words, it reveals the surplus or deficit arising out of the
organisation's activities during a particular period. It is prepared in the same manner in
which a Trading and Profit and Loss Account is prepared in case of trading
organisations. Hence, all expenses and losses of a revenue nature are recorded on its
debit side while all incomes and gains ofa revenue nature., on its credit side. The end
product of this account is surplus or deficit. If credit side of this account exceeds the
debit, it is known as excess of income over expenditure (surplus) and on the contrary,
if the debit side exceeds the credit, it is excess of expenditure over income
(deficit).
Special Features of Income and Expenditure Account :
(1) Nature of Account : It is a nominal account and hence the rule of nominal
account, i.e., Debit all expenses or losses andcredit all incomes and gains' is followed
while preparing it.
(2) Nature of Items Recorded in it:Only items of
revenue nature are recorded
in it. All items of capital nature are ignored while
preparing it. For example, amount
received from the sale of furniture will not be recorded in it but the profit earned or loss
suffered on the sale of furniture will be recorded in it.
(3) Omission of Opening and Closing Balance of
balance of cash and bank are recorded in it. Cash: No opening and closing
(4) Adjustments:This account is prepared in the
and Loss Account is prepared. As such, all same manner in which aProfit
such as depreciation, outstanding adjustments relating to the current year
expenses,
taken into consideration while preparing the prepaid expenses, earned income etc. are
income and expenditure account.
 STATEMENTS OE
sINANCIAL NO T-FOR-PROFIT ORGANISATIONS 1.7
(5) It Records Income and Expenditure
of Current Period : It cxcludes all
expenditure which do not
itemsof)income and pertain to the current period. In other
Words, all items
relating to previous years and future ycars are
preparingit. cxcluded while
(6) Purpose : The closing balance of this statement revcals surplus or deficit. If
thecreditside excecds the debit, it revcals surplus and on the other hand, if the debit
sideexceeds the credit, it reveals deficit. The surplus is added tothe capital fund and
from it.
the deficit is deducted

Distinction Between Receipts &Payments Account and

Income &Expenditure Account
Basis of Distinction Receipts and Payments Income and Expenditure
Account Account
1. Nature It is a summary of the Cash It is like a Profit and LoSs
|book. account of a profit seeking
entity.
2. Sides Debit side of this account Debit side of this account
records receipts and credit side records expenses and losses
records payments. and credit side records
incomes and gains.
3. Type ofAccount It is a real account. It is a nominal account.
4. Opening It starts with the opening| t has no opening balance.
Balance balance of cash and bank.
Closing Balance| Closing balance of this account|Closing balance of this account
represents the closing cash in indicates either excess of
hand and at bank or overdraft income over expenditure
at bank. (surplus) or excess of
expenditure Over income
r(deficit).
6. Nature of Items It records.receiptsand| It records income and
payments both of capital and expenditure of only revenue
revenue nature. nature.
records incomes and
7. Period of It records all receipts and It
current
Income and payments made during the expenditures of the
Expenses year whether they relate to year only.
current, previous or next year.
Adjustments are not| It is necessary to consider
8. Adjustments preparing it
considered while preparing it, adjustments whileprepared on
because it is prepared on cash|because it is
accrual basis of accounting.
basis of accounting. Sheet must
Balance Sheet It need not necessarily be| Balance this account
9. accompanied by a Balanceaccompany
it includes only
Sheet because all revenue as because
arerevenue items, whereas the
well as capital items the
included in it. Balance Sheet contains
remaining balances.
 FINANCIAL STATEMENTS OFFNOT-FOR-PROFIT ORGANISATIONS
10. Transfer of |Closing balance of this account|Closing balance of this accoun#
closing balanceis transferred to the receipt and|is transferred to the
fund in the Balance capital
Payment account of the next
period.
Sheet.
Distinction between Income and Expenditure Account and Profit &Loss
Account
The object of preparing an Income and Expenditure Account or a Profit and
Account is the sanmc i.c., to find out the Loss
net result of operations during an
period. However, hêre are diflerences between the two,which are enumerated belo accounting
Basjs%f
Distinetion
Income and Eypenditure
Account
Proft and Loss Accont
. Objective The main objective of this The main objective of thi
account is to ascertain exccss of account is to ascertain net proft
income over expenditure or or net loss.
CXcess of expenditure over
income,
2. Prepared by This account is prepared by This account is prepared by
not-for-profit organisations trading concerns whose main
whose main objective is to objective is to earn profits.
render service.
3. Basis of This account is prepared mainly|This account is prepared on the
Preparation on the basis of Receipts and basis of Trial Balance and other
|Payments Account and other information,
information.
4. Balance The balance of this account| The balance of this
account
represents Surplus or Deficit. represents net profit or net loss.
Balance Sheet
Just as in profit seeking concerns, a Balance Sheet is
to be
non-profit organisations to show the financial position on the prepared even by
last date of the
accounting year. It is prepared from the balances remaining after the
Evenue incomes and expenditures to the Income transfer of all
and Expenditure Account.
Inother words, it contains only capital
fund. In the absence of a trial balance, items, i.e., assets, liabilities and the capital
the following points should be kept
consideration whilepreparing aBalance Sheet : in
Assets1) Fixed assets
known as the Opening Balanceappearing in the previous year's Balance
Sheet (also
and depreciation during the year.Sheet) should be adjusted for assets purchased,
the adjusted amount will appear in the sold
Balance Sheet. The adjustment in Only
the fixed assets will be made as under closing
()f some new asset has been
asset must have been shownpurchased during the year, the payment for such
on the credit side of the
Açcount. Such assets must be added to the Receipts and Payments
on the assets side of the previous year's assets and shown
) If some asset has been soldcurrent year's Balance Sheet.
side of Receipts and Payments during the year, it must be appearing on the
be deducted from the debit
Account. The book value of such asset should
concerned asset of the previous year.
FINANCIAL. STATEMENTS OF
some depreciation isto be
NOLFORPROT ORGANISATONS
provided, it should be deducted acordingly.
AerPrepaid expenses, acerucd incomes and
assets side, investments should be shown on the
0Therclosing balance of cash and bank as
Accountshould be shown on the asscts side. shown by the Receipts and Payments
hank, it will be sbown on the liabilities side. 1lowever, if there is overdraft balance of
abilities : (1) Ihe loans appearing on the
Balance Sheet should be scen and liabilities side of the previoUs year's
the
seanned to find out whether any new loanReccipts and Payments Account should he
has bccn raised
menaid. Only the net amount of loan willbe shown on the or the oldloans have been
Sheet. liabilitics side of the Balance
fany new loan has been raised it
and Payments Accournt. It should also be will be found on the debit side of the Receipts
shown on the liabilities side.
(3)There is a special receipt like donations for building, it will be shownon
liabilities side. Similarly, special funds created for meeting the
fund, tounament or sports fund willbe shown on the expenses such as prize
liabilities side.
Outstanding expenses and the incomes reccived for next year (unearned
incomes) will be shown on the liabilities side.
) Any excess of Assets over Liabilities in case of a
erganiseton is called Capital Fund or General Fund, It occupiesnon-profit seeking
the same position
Which the capital account occupies in case of profit seeking entities. First of
all,
opening capital fund is calculated by deducting the opening liabilities from opening
assets and then the current year's surplus as shown by Income and Expenditure
Adçount will be added to it or the deficit, if any, will be deducted from it. The net
amount of Capital Fund will be shown on the liabilities side.

ILLUSTRATION 2.
From the following Receipts and Payments Account of Golden Cricket Club, New
Delhi, prepare the Income and Expenditure Account for the year ended March 31,
2022:

Receipts Payments
To Cash in Hand as on By Printing and Stationery 38,750
April 1, 2021 20,000 By Lighting 26,250
To Cash at Bank as on By Rates and Taxes 17,000
April 1,2021 35,000| By Telephone charges 2,600
To Subscriptions By Postage and Courier 2,000
2020-21 30,000 By Wages and Salaries 88,000
2021-22 2,25,000 By Insurance Premium 15,000
2022-23 10,0002,65,000| By Purchase of Furniture |2,00,000
To Donation for building 60,000| By Cash in Hand as on
To Entrance fees 23,000 March 31, 2022 23,400
To Life membership fee 20,000| By Cash at Bank as on
To Interest 18,000 March 31, 2022 70,000
tial Eqr
OF NOT-FOR-PROFIT
1.10

To Locker's rent
FINANCIAL.STATEMENTS
S
42,000
ORGANISATIONS
4,83,000
4,83,000
ACCOUNT
SOLUTION : INCOME AND EXPENDITURE 20022)
Marclh,
Dr. (for the vvr ending 3/st Ci.
Income
Ependiture
38,750 By Subscriptions (for 2021-22)
To Printing and Stationery
26,250| By Entrancec fees
2,25,000
To Lighting
17,000| By Interest
23,000
To Rates and Taxes
2,600| By Locker's rent 18,000
To Telephone Charges 42,000
To Postage and Courier 2,000
To Wages and Salarics 88,000
To Insurance Premium 15,000
To Suplus (Excess of lncome over
Expenditure) 1,18,400
3,08,000 3,08,000
Working Notes :
() Only the subseription relating to Current Year i.e., 2021-22 are written in Income &
Expenditure Ale
(2) Donation received for specific purpose (for example Donation for building) is not
written in Income &Expenditure A/c. It is recorded on Liabilities side of the Balance
Sheet.
(3) Life Membership Fee is also recorded on the Liabilities side of the Balance Sheet
(4) All the assets (for example purchase of furniture) is recorded on the Assets side of the
Balance Sheet.

Some Important items relating to Non-Profit seeking organisations

(D8ubscription :-It is the main source of income of anon-profit entity. It will
be appearing on the debit side of Receipts and Payments
Account and out of it the
subscription belonging to the current year will be posted to the credit side of Income
and Expenditwe Account.
(2ife-Membership Fees -In order to
for the whole of the life, some members pay thebecome the member of an organisation
fee in lump sum, i.e., once in their life
time. It is a receipt ofnon-recurring nature (capital
be required to pay the fees annually. receipt) since the members will not
Hence, it is not credited to the Income and
Expenditure Account but added to the Capital Fund on the
liabilities side.
(3)Endowment Fund
abequest or gift, the income-According to Eric L. Kohler, "It is a fund
arising from
of which is devoted for a
capital receipt because it provides a specific purpose.' Thus, it is a
shown on the libitíties side as a permanent income to the institution. It should be
(4) Entrance
separate item.
Mom theamount ofFees/Admission
annual
Fees :-It is received from the new
members apart
fee on the ground that it is subscriptions. Some people favour capitalising the
nature. However, there are collected once for all and as such it is not of entrance
others who argue that though it is the recurring
paid by each member
oNANCIAL STATEMENTS OF NOTHORPROe.
ORGANISA TION)
only once, it is received fairly regularly cvcry year and as such should he treated as
revenue income.
Intheeabsence of any specific instructions in the exAmination, entrance fees may be
treated as revenue receipt and as such may be shown on the eredit sicde of
&Expenditure Account, Ineome
However, if:an instruction is given in the question to treat it as'Capital Receipt'
should be shown on the Liabilities side of Current year's Balance Sheet,
ILLUSTRAIION 3.
Tlow will you deal with the Entrance Fees while preparing the final aceounts of
New Delhi Sports Club tor the year ended 31st March, 2021 in each ofthe following
cases:

Case 1. During the year 2020-21, Entrance Fees received 1,20,000.

Case 2. Duringthe year 2020-21, Entrance Fees received ?1,20,000. It is the policy of
the club to treat the Entrance Fees as 'Revenue Receipt.
Case 3. During the year 2020-21, Entrance Fees received 1,20,000. It is the policy of
the club to treat the Entrance Fees as Capital Receipt.
Case 4. During the year 2020-21, Entrance Fees received 1,20,000. According to the
policy of the club, 30% of the Entrance Fees is to be capitalised.
SOLUTION :
Case 1. INCOME AND EXPENDITURE ACCOUNT
Cr.
Dr. for the year ended 31st March, 2021
Income
Expenditure 1,20,000
By Entrance Fees

ACCOUNT
INCOME AND EXPENDITURE Cr
Case 2. 2021
Dr.
for the year ended 31st March,
Income
Expenditure By Entrance Fees 1,20,000

BALANCE SHEET
Case 3.
as at 31st March. 2021
Assets
Liabilittes
Capital Fund
Add: Entrance Fees 1,20,000

JNCOME AND EXPENDITURE ACCOUNT Cr.

Case 4.
for the year ended 3lst March, 2021
Dr.
Income
Expenditure
By Entrance Fees
(70% of 1,20,000) 84,000
 STATEMENTS OF NOT-FOR-PROFIT
1.12 FINANCIAL
BALANCE SHEET 4s at 3Ist March,
2021 ORGANISATIONS
Assets
Liabilities
Capital Fund
Add : Entrance Fees
(30% of
1,20,000) 36,000
(syDonation - I may be classificd as specific donation and gencral donation ;:

(A)Specific Donation :- When donation reccivcd is to be utilised for a specific

purpose, i.e., donation for building or donation for providing a swimming pool, it is
the Balance Sheet.
capitaliscd and isshown on the liability side of
(B) General Donation: General donation is the donation in which the donor
not specify the purpose for which the donation has to be used. It is trootor
does Expenditure Account.
income and is creditedto Income and
(6) Lgacy -It is the amountwhich a non-prot entity receives as per the WI I
of a eceased person who may or may not specify the use of this amount. If the ie
the Legacy amount is specified then it will be shown in the Balance Sheet on
liabilities side. If the use of the Legacy amount is not specified it is considered of
Account
revenue nature and is credited to Income and Expenditure
(78ale of OldAssets It appears on the debit side of Receipts and Payments
Acount. It is a capital receipt and as such should not be transferred to Income and
Expenditure Account. However, the proit or loSS On the sale of an asset must be taken
tothe Income and Expenditure Account. For example, if the book value of Furniture
appearing in the booksis 5,000, out of which furniture of ?1,000 issold for 400
the loss of ?600 will be taken to the debit side of Income and Expenditure Account and
the Furniture of 74,000 (?5,000 less 1,000) will be shown on the Assets side ofthe
Balance Sheet.

(8) Sale-of Old Newspapers and Sports Materials - It appears on the debit
side ofKeceiptsand Payments Account and is transferred to the credit side of Income
and Expenditure Account due to the fact that selling the old newspapers and used
sports materials like old bats, balls etc. is a regular feature of any non-profit seeking
institution.

(9)_Payment of Honorarium:- The amount paid to persons who are not the
èmployees of the institution is called honorarium and is debited to the Income and
Expenditure Account.)

General and Special Funds

In case of non-profit organisations there is no Capital A/c. The difference between
the assets and outside liabilities is known by the name Capital Fund' and the
difference of income and expenditure is transferred to this fund every year. Tns
Capital Fund' is also known as the General Fund' to distinguish it from any
special fund which the organisation may create for any specific
purpose.