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Chapter: 12th Accountancy : Accounts of-Not-For Profit Organisation

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Items peculiar to not–for–profit organisations

Distinction between revenue and capital items will be helpful while preparing the final accounts of not–for–profit organisations.

Items peculiar to not–for–profit organisations

Distinction between revenue and capital items will be helpful while preparing the final accounts of not–for–profit organisations. Revenue items will be recorded in income and expenditure account while capital items will be recorded in the balance sheet. Items peculiar to not–for– profit organisations and their accounting treatment in that context is given below:

(i) Subscription

Not–for–profit organisations usually collect subscriptions periodically from their members. These may be collected monthly, quarterly, half-yearly or yearly. In addition, some special subscriptions, for example, subscription for tennis, billiards, etc., are collected from the concerned members playing tennis or billiards as the case may be. All these subscriptions are revenue receipts.

(ii) Interest on investment

For investments made, the organisation may receive interest. It is a revenue receipt.

(iii) Sale of old sports materials

The sale proceeds of old sports materials like balls, bats, etc. are revenue receipts.

(iv) Sale of old newspapers

The sale proceeds of old newspapers are revenue receipts.

(v) Life membership fee

Amount received towards life membership fee from members is a capital receipt as it is non-recurring in nature.

(vi) Legacy

A gift made to a not–for–profit organisation by a will, is called legacy. It is a capital receipt.

(vii) Admission fee or Entrance fee

It is a fee collected from every member only once at the time of his or her admission into the organisation. It may be treated as a revenue receipt as it is a recurring income from new members admitted every year and may be used to meet the expenses at the time of admission. It may also be treated as a capital receipt.

(viii) Grants from government and other organisations

Not–for–profit organisations may receive different forms of grant from government and other organisations.

Grants received towards construction of buildings, acquisition of assets, etc., are treated as capital receipts as they are non-recurring in nature.

Grants received towards maintenance of assets, payment of salaries, etc., are treated as revenue receipts as they are recurring in nature.

(ix) Donations

These are the amounts received by not–for–profit organisations as a gift. It may be general donation or specific donation.

General donation: If the donation is received without any specific condition, then it is a general donation. It is a revenue receipt.

Specific donation: If the donation is received with a specific condition for a particular purpose like donations for sports fund, prize fund etc., it is known as specific donation. It is a capital receipt.

(x) Honorarium

It is the remuneration paid to a person who is not a regular employee of the organisation. It is a revenue expenditure.

(xi) Purchase of sports materials

Sports materials such as balls, bats, nets, etc. are consumable items. Amount of consumed sports materials are taken as revenue expenditure and value of unconsumed sports materials (stock) are shown as asset in the balance sheet.

(xii) Purchase of sports equipment

It is a capital expenditure. Examples: Purchase of Table tennis table, Billiards table, etc.

(xiii) Purchase of books for library

Books purchased for library is a capital expenditure.

Few examples of capital and revenue items peculiar to not–for–profit organisations are given below:


Note: In this unit, entrance fees or admission fees, donations, special fees and grants from government and other organisations have been treated as revenue receipts eventhough these may also be treated as capital receipts.



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