Non-profit organisation
THE NON-TRADING organisations are non-profit-earning entities. They were not set up to earn a profit but, instead, to provide services to members at cost.
ACCOUNTING PROCEDURES
The main difference between a trading entity and a non-trading organisation’s records are:
In the non-profit organisation there is no drawings, simply because there is no owner.
How to prepare the final accounts:
1. Calculate accumulated fund.
2. (All non-trading organisations have ancillary activities, for example, refreshment, bar, etc.) Calculate in the form of a trading account: i. Sales ii. Purchases iii. Expenses
3. Balance OR draw out a cash and bank summary.
Now that I have given some important concepts and information, I will make the presentation one of a worked example. I recommend that you follow the principles I have applied. It is always important for you to understand and retain them as best as possible, since you will need them in the future.
WORKED EXAMPLE
Question:
The treasurer of Sawyers Social Club did not keep accounting records. The following information was available at April 30, 2016:
1. At May 1, 2015, subscriptions paid in advance amounted to $420 and subscriptions in arrears were $300.
2. Receipts during the year ended April 30, 2016:
i. Subscriptions for year ended: ii. sale of refreshments, $9,240
3. Payments during the year ended April 30 2016: Additional information: All receipts and payments were made through the bank account.
You are required to: a. Prepare the subscriptions accounts for the year ended April 30, 2016. b. Calculate the profit made on the sale of refreshments. c. Prepare the receipts and payments account for the year ended April 30, 2016.
d. Explain why the figure for subscriptions in the receipts and payments account might be different from the subscriptions figure in the income and expenditure account.
WORKING SOLUTION
a. Sawyers Social Club
SUBSCRIPTION ACCOUNT
b. Trading account for the year ended April 30, 2016. c. Receipts & payments for the year ended April 30, 2016.
d. The total amount received in the form of cash is posted on the debit side of receipt and payment account, whereas income of the current year is transferred to income and expenditure account. Subscriptions can be in advance or in arrears.
This is where we will end for this week. Join me next week as we continue to complete the syllabus. Grasp the concepts and retain them; you will need them as you progress to excellence. See you next week.