Accounting for non-profit organisations

(a) Receipts and Payments Account for the year ended 31-12-2018

(b) Income and Expenditure Account for the year ended 31-12-2018

Working notes:

• Subscription income $= 50{,}000 + 22{,}000 \text{ (due)} = 72{,}000$.
• Entrance fee: 40% capitalised, so income is $60\% \times 30{,}000 = 18{,}000$ and Rs 12,000 goes to the capital fund.
• Wages $= 20{,}000 + 3{,}000 = 23{,}000$; printing $= 7{,}500 + 500 = 8{,}000$.
• Depreciation $= 10\% \times 3{,}00{,}000 = 30{,}000$.
• Sale of old furniture is a capital receipt, so it is not an income; no book value is given, so no profit or loss on it is taken.

The surplus of Rs 10,200 is added to the capital fund.

Working notes

• Subscriptions for the year: $60{,}000 + 7{,}000 \text{ (accrued)} = Rs\ 67{,}000$.
• Donation: 50% is capitalised (added to the capital fund), so $15{,}000 \times 50\% = Rs\ 7{,}500$ is income and Rs 7,500 goes to the capital fund.
• Salary: $40{,}000 + 5{,}000 \text{ (due now)} - 1{,}000 \text{ (due last year)} = Rs\ 44{,}000$.
• Machine: opening Rs 30,000 plus purchase Rs 50,000 = Rs 80,000. Depreciation $10\% \times 80{,}000 = Rs\ 8{,}000$, so book value is Rs 72,000.
• Entrance fees and sale of periodicals are treated as revenue income, as the question does not say otherwise.

(i) Income and Expenditure Account for the year ended 30th Chaitra 2075

(ii) Balance Sheet as on 30th Chaitra 2075

Creditors are taken unchanged at Rs 15,000, as the receipts and payments account shows no payment to them.

One feature of a non-profit-making organization is that its main objective is to provide service to its members or society, not to earn profit. Any surplus earned is used to further the objectives of the organization and is not distributed among its members.

Income and Expenditure Account of the Social Welfare Club for the year ended 31 Ashadh 2082

Working notes:

• Subscriptions $= 90{,}000 + 10{,}000 \text{ (outstanding)} = 1{,}00{,}000$.
• Entrance fees: 50% is capitalised, so $25{,}000 \times 50\% = 12{,}500$ is income.
• Salaries $= 35{,}000 + 5{,}000 = 40{,}000$.
• Purchase of furniture Rs 50,000 is a capital payment and opening and closing cash are balances; none of these appears in this account.
• Donations are taken as revenue income, since no instruction is given to capitalise them.

Income and Expenditure Account for the year ended 31 Dec 2021

Working notes:

• Subscription income $= 40{,}000 - 3{,}000 \text{ (opening due, belongs to 2020)} + 5{,}000 \text{ (closing due)} = 42{,}000$.
• Donations Rs 20,000: half is capitalised, so Rs 10,000 is income and Rs 10,000 goes to the Capital Fund.
• Salaries $= 25{,}000 + 4{,}000 = 29{,}000$.
• The investment of Rs 15,000 is a capital payment and is shown as an asset.

Capital Fund at the end $= 1{,}50{,}000 + 11{,}000 \text{ (surplus)} + 10{,}000 \text{ (donations capitalised)} = 1{,}71{,}000$.

Balance Sheet as on 31 Dec 2021

(c) It is a real account and records only cash and bank transactions.

A Receipts and Payments Account is a summary of the cash book — it is a real account (since cash and bank are assets) and records every receipt and payment of cash or bank, whether capital or revenue, but never credit transactions.

Differences between Income and Expenditure Account and Receipts and Payments Account

(Any five of the above differences may be written.)

Calculation of Subscription to be credited to Income and Expenditure Account

Working note:

• Opening outstanding subscription relates to the previous year, so it is deducted.
• Closing outstanding subscription relates to the current year, so it is added.
• Opening advance subscription was received last year but relates to the current year, so it is added.
• Closing advance subscription is received this year but relates to the next year, so it is deducted.

Therefore, the amount of subscription to be credited to the Income and Expenditure Account for the current year is Rs. 49,000.

Income and Expenditure Account of Sunrise Club
for the year ended 31st December 2023

Balance Sheet of Sunrise Club
as on 31st December 2023

Working Note:
Opening investment = Opening capital fund − Opening cash − Furniture sold
= 80,000 − 12,000 − 15,000 = Rs. 53,000.