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Difference Between Profit Making and Non-Profit Making Organisation

The document discusses non-profit organizations and how they differ from profit-making organizations. It provides details on how non-profits generate funds through subscriptions, donations, and ancillary activities. Key differences between non-profits and for-profits include their use of income/expenditure statements instead of income statements and accumulated funds instead of capital. The document also contrasts receipts and payments accounts with income and expenditure accounts and provides an example format for an income and expenditure statement.

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Jean Emanuel
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302 views3 pages

Difference Between Profit Making and Non-Profit Making Organisation

The document discusses non-profit organizations and how they differ from profit-making organizations. It provides details on how non-profits generate funds through subscriptions, donations, and ancillary activities. Key differences between non-profits and for-profits include their use of income/expenditure statements instead of income statements and accumulated funds instead of capital. The document also contrasts receipts and payments accounts with income and expenditure accounts and provides an example format for an income and expenditure statement.

Uploaded by

Jean Emanuel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Non-Profit Organisation

Non-profit organisation is an institution that operates for the benefits of its members and not
for profit making.
Non-profit organisation generates fund:
 Subscriptions (General and life)
 Ancillary Activities
 Donation (General or Specific)
 Gift

Difference between profit making and non-profit making organisation


Profit making Non-profit making

a. Income statement a. Income and Expenditure


b. SOFP b. SOFP
c. Capital c. Accumulated fund
d. Profit (loss) d. Surplus (deficit)
e. Bank account e. Receipt and payment

Difference between receipts and payment account and Income and expenditure account
Receipts and Payment Income and Expenditure account
account
Prepared under cash basis Prepared under accrual basis
Included capital and revenue Included only revenue income
income
Includes capital and revenue
Includes only revenue expenditure
expenditure
Does not contained non-cash
items such as depreciation Contains non-cash items
Final balance represent cash in Final balance represents surplus or
hand and cash at bank deficit
Is mainly prepared for internal Is mainly prepared for presentation
use at AGM and filling with registrar
of association
Format Income and Expenditure account
INCOME $ $
Ordinary / annual subscription xxx
Life Subscription xxx
Bar/Refreshment/Café profit xxx
Gifts and Donation (general) xxx
Collection at Matches / Sales of tickets xxx
Profit on fund raising activity xxx
Profit on disposal xxx
Interest Received xxx

xxx
Total Income
EXPENDITURE
Subscription written off xxx
Bar/Refreshment/Café loss xxx
Depreciation xxx
Loss on disposal xxx
Wages xxx

Total Expenditure (xx)

Surplus (Deficit) xxx

 Subscription- it is contribution made by members. It can be annual or life.

Annual subscription can be calculated as follows (using same concept of accruals and
prepayment of income)

Dr Subscription Account Cr
01-Jan Balance b/d (Accrued xxx Balance b/d(prepaid) xxx
Income and Expenditure xxx Bank xxx
Balance c/d (Prepaid) b balance c/d(accrued) a

balance b/d(accrued) a Balance b/d (Prepaid) b


Life subscription- it is where members pay their subscription once in their life time.
However, an equal amount is transferred to income and expenditure and the
remaining is transferred to accumulated fund.

 General donation is an income and Special donation is added to accumulated fund.


 Legacy is wealth given by a person after his death which is capitalised with
accumulated fund.
SOFP
Finance by
Accumulated fund xxx
Legacy xxx
Donation xx
Life membership xx
Surplus (deficit) xx
xxx

Q1. Annual subscription

2008 2008
1 Jan 31 Dec
Subscription (Due) $300 $400
Subscription (Prepaid) $250 $500

Subscription received by cheque $4,500.

Calculate annual subscription.

Q2. Annual subscription

2009 2010
1 Jun 31 July
Subscription (Due) $150 $200
Subscription (Prepaid) $350 $400

Annual Subscription is $5000.


Subscription written off $500
Calculate subscription received.

Q3. Life subscription

On 1 Jan 2012, life subscription amounted to $300 per members. It was to be credited to ordinary
revenue over 20 years. During the year ended 31 December 2012, the club received $1800 on
account of life subscription.

Calculate:
a. Annual amount of life subscription per member to be credited to ordinary revenue
b. Number of members who paid lifer subscription
c. Total amount of life subscription to be credited to ordinary revenue for the year ended 31
dec 2012.
d. Life subscription account for the year ended 31 Dec 2012.

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