Accounting for Non-Profit Organizations - Class XII

Subscription is the amount that is paid by members of NPO every year. It is the primary source of income of NPO. It is generally paid every month. It is the amount paid by members to keep their membership alive. An advance receipt of subscription from a member is an income received in advance. It is liability for NPO. So it is recorded on credit side of Subscription Account. 

When any kind of income is due and has to be received by company in future it is known as accrued income and this type of income is an asset for firm.

Legacy is the amount received by a non-profit organisation when a person has mentioned about transferring his property value to such organisation on his or her death. Hence, on death of that person, his property will be taken by the non-profit organisation.

When the balance sheet is prepared for any company set up to earn profit, the owner's equity is mentioned because it is funded by the owner to start the business.

Legacy is an amount of property or money left to someone in a will.  It refers to property received by virtue of a will of a deceased person. Acquisition of such property by an institution is a capital receipt because these are not received on a regular basis. Hence, it will not appear in income and expenditure account. It is shown in liabilities side of balance sheet. 

Closing balance for the capital fund can be calculated using the formula given below:

b'Income and expenditure account can be defined as an account that reveals surplus or deficit of a non-trading concern by matching incomes and expenses of a specified accounting period. The balance of income and expenditure account is transferred to the balance sheet. Surplus balance is added to the capital fund in balance sheet. '

Income and expenditure account is prepared on Accrual basis. Accrual basis of accounting is wherein all the expenses that are actually incurred and incomes actually earned are recorded. Its recorded when its realised and not when received.

Income and Expenditure account prepared by non-trading concerns is very much like the profit and loss account prepared by trading concerns. Both accounts show the expenditure incurred and income earned during the year. In the end balance is calculated. In Income and Expenditure account balance is termed surplus or deficit and in Profit and loss account it is termed "Net Profit" or "Net Loss".

Income and Expenditure account prepared by non trading concerns is very much like the profit and loss account prepared by trading concerns. Both account shows the expenditure incurred and income earned during the year. In the end balance is calculated. In Income and Expenditure account balance is termed surplus or deficit and in Profit and loss account it is termed "Net Profit" or "Net Loss".

Accounting equation is a statement representing a relationship between a company's assets, liabilities and its capital.

The capital for a non-profit organisation is not funded by the owner and thus has to be mentioned as capital fund. This is because capital fund is that account which records all those transactions which are related to capital nature.