Accounting for Not-for-Profit Organisation

 Accounting for Not-for-Profit Organisation

Introduction 

There are certain organisations that are set up for providing service to their members and the public in general. Such organisations include clubs, charitable institutions, schools, religious or ganisations, trade unions, welfare societies, and societies for the promotion of art and culture. These organisations have service as the main objective and not the profit as is the case of organisations in the business. Normally, these organisations do not undertake any business activity and are managed by trustees who are fully accountable to their members and the society for the utilization of the funds raised for meeting the objectives of the organisation. Hence, they also have to maintain proper accounts and prepare the financial statement which takes the form of Receipt and Payment Account; Income and Expenditure Account; and Balance Sheet. at the end of every accounting period (normally a financial year).

Meaning and Characteristics of Not-for-Profit Organisation

Not-for-Profit Organisations refer to the organisations that are used for the welfare of society and are set up as charitable institutions which function without any profit motive. Their main aim is to provide service to a specific group or the public at large. Normally, they do not manufacture, purchase or sell goods and may not have credit transactions. Hence they need not maintain many books of account (as the trading concerns do) and Trading and Profit and Loss Account. The funds raised by such organisations are credited to capital funds or general funds. The major sources of their income usually are subscriptions from their member's donations, grants-in-aid, income from investments, etc. The main objective of keeping records in such organisations is to meet the statutory requirement and help them in exercising control over utilisation of their funds. They also have to prepare the financial statements at the end of each accounting period (usually a financial year) and ascertain their income and expenditure and the financial position, and submit them to the statutory authority called Registrar of Societies.

Work in progress

References 

1. NCERT Accountancy Class XII