Non-Trading Organisation or NPO

Non Profit Organisation Or Non Trading Organisation now a days are popular among peoples and organisation. People want to do social services and helps the government to uplift the lower sections of society and make available resources to whom who are deprived from. There is no doubt that they do not have motive, they also doing work with objectives and mission but their motive is not to earn profit. with the help of this ppt reader can understand characteristics and importance of NPO's as well as their accounting techniques and different types of account.
This is only for educational purpose.

1. TOPIC: ACCOUNTING FOR NON TRADING ORGANISATION PREPARED BY- RISHAV KUMAR SRM-IST RAMAPURAM, CHENNAI ASSISTANT PROFESSOR DEPARTMENT OF COMMERCE

2. Non-Trading Organisation A non-trading organization, also known as a non-trading company or a non-trading entity, is a type of organization that does not engage in commercial activities for profit. Unlike businesses that are set up to buy and sell goods or provide services for financial gain, non-trading organizations are typically established to serve a specific purpose, often for social, charitable, educational, or religious objectives.

3. Characteristics of Non-Trading Organisation. Non-profit Purpose : The primary objective of non-trading organizations is to serve a specific social, charitable, educational, religious, or other socially beneficial purpose. Their main focus is on advancing their mission and providing public benefits, rather than generating profits for shareholders or owners. No Distribution of Profits : Unlike for-profit businesses, non-trading organizations do not distribute profits or surpluses to individuals or stakeholders. Any surplus funds generated from their activities are reinvested into furthering their mission and objectives. Tax-Exempt Status: Many non-trading organizations enjoy tax-exempt status granted by governments. This status provides certain tax benefits, such as exemption from income tax, enabling them to direct more resources toward their missions. Governance: Non-trading organizations typically have a board of directors or trustees responsible for overseeing the organization's activities and ensuring it operates in accordance with its mission and legal requirements.

4. Maintenance of Accounts:- Typically, the accounts of a non-trading concern are maintained using the double entry book keeping system. At the end of the year, a summary is created, which is known as the income and expenditure summary and  balance sheet. These institutions and societies do not maintain a full set of books. Only a  cash book is maintained in which all  receipts and payments are entered.

5. Final Accounts of Non-Profit Organisation Income and Expenditure Account (or Statement of Activities): The Income and Expenditure Account is similar to the income statement or profit and loss statement of a for-profit business. It records all the incomes received and expenses incurred by the non-trading organization during a specific accounting period, usually one year. The purpose of this account is to determine the surplus (income exceeding expenses) or deficit (expenses exceeding income) for that period. Receipt and Payment Account : While not always required, some non-trading organizations may prepare a cash flow statement to provide information about the cash inflows and outflows during the accounting period. This statement helps in assessing the organization's ability to generate and manage cash. Balance Sheet (or Statement of Financial Position): The Balance Sheet provides a snapshot of the non-trading organization's financial position on a specific date, usually the end of the accounting period. It lists the organization's assets, liabilities, and net assets (or equity).

6. Q1. Prepare Receipt and Payment account of a club for the year ended 31 st Dec,1999 from the following particulars: Opening balance of cash 40000 Rent paid 1200 Receipt of entrance fees 8000 Payment of purchase of cricket ball 500 Subscription received for 1999 16000 Payment of purchase of cricket bat 1600 Previous year’s subscription received 1600 Payment of Stationary in cash 100 Paid Salaries 2000 Paid for Miscellaneous expenses 200

7. Receipts Rs Payments Rs To balance b/d 40000 By Rent 1200 To Entrance fees 8000 By Cricket ball 500 To Subscription: By Cricket bats 1600 For 1999 16000 By Stationary 100 For 1998 1600 17600 By Salaries 2000 By Miscellaneous expenses 200 By Balance c/d 60000 65600 65600 Solution: Receipt and Payment Account for the Year ended 31 st Dec. 1999

8. Q. The following is the Receipt and Payment account of Kanan Recreation club for the year ended 31 st March,2002. Receipts Rs Payment Rs To Balance b/d 7,000 By Salaries 28,000 To Subscriptions: By General Expenses 6,000 2000-2001 5,000 By Electricity 4,000 2001-2002 20,000 By Book Purchased 10,000 2002-2003 4,000 29,000 By Periodicals Purchased 8,000 To Rent for use of conference room 14,000 By Loan Repaid 20,000 To Receipt from entertainment facilities 28,000 By Balance c/d 4,000 To sale of old magazines 2,000 80,000 80,000

9. Additional Data: The club has 50 members each paying Rs 500 PA as subscription. Subscription outstanding on 31-03-2002 Rs 6,000 Salaries outstanding Rs 2,000. Salaries paid include Rs 6,000 for 2000-01. On 01-04-2001, the club properties were:- Building Rs-2,00,000, Furniture & Fittings- Rs 20,000 and Books- Rs 20,000. Provide Depreciation @10% on Building and Furniture. Prepare Income and Expenditure A/c for year ending 31-03-2002 and a balance sheet on that date.

10. Solution- Income and Expenditure Account of Kanan recreation club For the year ending 31 st March, 2002 Expenditure Rs Income Rs To salaries 28,000 By Subscription received for Add- Outstanding 2,000 2001-02 20,000 Less- Salary of previous year paid 6,000 24000 Add- Outstanding for 2001-02 (500*50-20000) 5,000 25,000 To general expenses 6,000 By rent of conference room 14,000 To Electricity 4,000 By income from To periodicals 8,000 Entertainment facilities 28,000 To Depreciation- on building 20,000 By Sale of old 2,000 on Furniture 2,000 To Surplus –Excess of income Over expenditure 5,000 69,000 69,000

11. Balance sheet of Kanan recreation club As on 31 st March, 2002 Liabilities Rs Assets Rs Salaries outstanding 2,000 Cash in hand 4,000 Subscription received in advance Outstanding subscription: For 2002-03 4,000 For 2000-2001 1000 (6000-5000) Capital fund on 1-4-2001 (W.N) For 2001-2002 5000 6,000 2,27,000 Books 20,000 Add- Surplus for the year 5,000 2,32,000 Add- Purchases during the year 10,000 30,000 Furniture 20,000 Less- Depreciation 2,000 18,000 Buildings 2,00,000 Less- Depreciation 20,000 1,80,000 2,38,000 2,38,000

12. Working note for capital fund as on 01-04-2001: Balance sheet as on 31-03-2001 Liabilities Rs Rs Assets Rs Rs Salaries outstanding 6,000 Cash in hand 7,000 Loan 20,000 Subscription outstanding (5000+1000) 6,000 Capital Fund (Bal. fig) 2,27,000 Books 20,000 Furniture and fittings 20,000 Building 2,00,000 2,53,000 2,53,000

13. Thank you.