Not for profit making organizations.
STRATHMORE UNIVERSITY
SCHOOL OF FINANCE AND APPLIED ECONOMICS
BSF 1101 ACCOUNTING AND REPORTING 1/INTRODUCTION TO
ACCOUNTING
9. NOT FOR PROFIT MAKING ORGANIZATIONS
9.1 Introduction
These are organizations that are set up to promote or to cater for the welfare of the members involved and not to make a profit. These include clubs, (e.g. professional clubs, academic clubs, sports clubs), welfare associations and any other societies (charitable institutions).
Because these organizations are set up with no intention of trading the financial statements prepared are different from the ones of trading organizations. For example:
1.
The cashbook will is referred to as a receipts and payments where entries are the same as those of a cashbook. But this distinction is not really necessary. Just use cashbook.
2.
Instead of income statement, we have an income and expenditure account. If incomes exceed expenditure, then we have a surplus instead of a profit and if incomes are less than expenditure then we have a deficit (instead of a loss)
3.
Because the club is not formed by any one owner (has no owner), it is funded by members’ contributions, donations, income from investments to get an accumulated fund instead of capital. The organization may carry out some trading to finance some of the clubs activities. In case a club or association has a trading activity, then in addition to the income and expenditure account and the statement of financial position we also prepare an income statement for the trading activity. 9.2 Format of the Final Accounts
Name
Income and Expenditure Account for the year ended 31 December ……
Incomes
Profit from trading activities
Subscriptions
Income from investments
Donations
Income from other activities
[dinner dance, raffles, festivals]
Expenditure
Depreciation
$
$
XX
XX
XX
XX
XX
XX
XX
1
Salaries and wages
Expenses on other activities [prizes]
Loss from trading activities
All
SCHOOL OF FINANCE AND APPLIED ECONOMICS
BSF 1101 ACCOUNTING AND REPORTING 1/INTRODUCTION TO
ACCOUNTING
9. NOT FOR PROFIT MAKING ORGANIZATIONS
9.1 Introduction
These are organizations that are set up to promote or to cater for the welfare of the members involved and not to make a profit. These include clubs, (e.g. professional clubs, academic clubs, sports clubs), welfare associations and any other societies (charitable institutions).
Because these organizations are set up with no intention of trading the financial statements prepared are different from the ones of trading organizations. For example:
1.
The cashbook will is referred to as a receipts and payments where entries are the same as those of a cashbook. But this distinction is not really necessary. Just use cashbook.
2.
Instead of income statement, we have an income and expenditure account. If incomes exceed expenditure, then we have a surplus instead of a profit and if incomes are less than expenditure then we have a deficit (instead of a loss)
3.
Because the club is not formed by any one owner (has no owner), it is funded by members’ contributions, donations, income from investments to get an accumulated fund instead of capital. The organization may carry out some trading to finance some of the clubs activities. In case a club or association has a trading activity, then in addition to the income and expenditure account and the statement of financial position we also prepare an income statement for the trading activity. 9.2 Format of the Final Accounts
Name
Income and Expenditure Account for the year ended 31 December ……
Incomes
Profit from trading activities
Subscriptions
Income from investments
Donations
Income from other activities
[dinner dance, raffles, festivals]
Expenditure
Depreciation
$
$
XX
XX
XX
XX
XX
XX
XX
1
Salaries and wages
Expenses on other activities [prizes]
Loss from trading activities
All