- Introduction
- Chapter Overview Table
- Official Scope of the Chapter
- Concept Explanation
- 1. Meaning of Non-Profit Organisations (NPOs)
- 2. Key Features of NPOs
- 3. Difference: Profit Organisation vs Non-Profit Organisation
- 4. Receipts and Payments Account
- Nature
- Features
- Format
- 5. Income and Expenditure Account
- Nature
- Features
- Format
- 6. Balance Sheet of NPO
- Liabilities Side
- Assets Side
- 7. Treatment of Subscriptions
- 8. Treatment of Special Funds
- 9. Capital and Revenue Items
- Capital Receipts
- Revenue Receipts
- 10. Adjustments in NPO Accounts
- Important Methods / Formats
- Conversion of Receipts and Payments Account into Income and Expenditure Account
- Capital Fund Calculation
- Subscription Adjustment Table
- Exam Pattern Insight
- Practical Weightage Insight
- Frequently Asked Areas
- Nature of Questions
- Common Mistakes Students Make
- Common Areas of Confusion
- Typical Question Formats Asked in Exams
- Important Subtopics to Prioritize Before Exams
- FAQ
- 1. Do Non-Profit Organisations earn profit?
- 2. Is Receipts and Payments Account same as Cash Book?
- 3. Why is Income and Expenditure Account prepared?
- Also Read:
- Accounting Standards
- B.Com (Hons) Financial Accounting Syllabus – Semester 1
Financial Statements of Non-Profit Organisations
Financial Accounting – Core Course I
Delhi University – School of Open Learning (SOL)
Introduction
This chapter explains the accounting system followed by Non-Profit Organisations (NPOs) such as clubs, charitable trusts, societies, educational institutions, and hospitals. These entities are not formed to earn profit. Their primary objective is to provide services to members or society.
In the DU SOL Semester I syllabus (Financial Accounting), this chapter focuses on preparation of financial statements for non-profit entities. Students are required to understand the structure and preparation of Receipts and Payments Account, Income and Expenditure Account, and Balance Sheet.
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The content is based on the prescribed SOL study material for Financial Accounting .
Chapter Overview Table
| Particulars | Details |
|---|---|
| Chapter Name | Financial Statements of Non-Profit Organisations |
| Subject | Financial Accounting |
| Programme | B.Com. (Hons.) / B.Com. (Prog.) |
| Semester | I |
| Credits | As per CBCS structure (Core Course–I) |
| Exam Pattern | Theory + Numerical Problems |
Official Scope of the Chapter
Based on the prescribed syllabus and study material , the chapter includes:
- Meaning and features of Non-Profit Organisations
- Difference between profit-oriented and non-profit entities
- Receipts and Payments Account
- Income and Expenditure Account
- Preparation of Balance Sheet
- Treatment of subscriptions
- Treatment of special funds
- Adjustments related to outstanding and prepaid items
Concept Explanation
1. Meaning of Non-Profit Organisations (NPOs)
Non-Profit Organisations are entities established for service motives rather than profit earning. Examples include:
- Clubs
- Charitable institutions
- Schools and colleges
- Religious organisations
- Hospitals
These organisations may earn surplus, but surplus is not distributed to members. It is used for achieving organisational objectives.
2. Key Features of NPOs
- Primary objective is service, not profit
- Managed by governing body or managing committee
- Funds mainly come from subscriptions, donations, grants
- Maintain capital fund instead of capital account
- Prepare Income and Expenditure Account instead of Profit and Loss Account
3. Difference: Profit Organisation vs Non-Profit Organisation
| Basis | Profit Organisation | Non-Profit Organisation |
|---|---|---|
| Objective | Earn profit | Provide service |
| Final Account | Trading & P&L Account | Income & Expenditure Account |
| Capital | Capital Account | Capital Fund |
| Surplus | Distributed to owners | Added to Capital Fund |
4. Receipts and Payments Account
Nature
- Real account
- Summary of cash and bank transactions
- Prepared on cash basis
Features
- Includes all receipts and payments (capital and revenue)
- Includes past, present, and future period items
- No distinction between revenue and capital
Format
| Receipts | Amount | Payments | Amount |
|---|---|---|---|
| Opening balance | XXX | Expenses | XXX |
| Subscriptions | XXX | Purchase of assets | XXX |
| Donations | XXX | Closing balance | XXX |
It resembles a cash book summary.
5. Income and Expenditure Account
Nature
- Nominal account
- Prepared on accrual basis
- Similar to Profit and Loss Account
Features
- Includes only revenue items
- Excludes capital receipts and capital payments
- Adjusted for outstanding and prepaid items
- Shows surplus or deficit
Format
| Expenditure | Amount | Income | Amount |
|---|---|---|---|
| Salaries | XXX | Subscriptions | XXX |
| Rent | XXX | Interest | XXX |
| Depreciation | XXX | Entrance fees (if revenue) | XXX |
| Surplus | XXX |
If income exceeds expenditure → Surplus
If expenditure exceeds income → Deficit
6. Balance Sheet of NPO
Balance Sheet shows financial position at a particular date.
Liabilities Side
- Capital Fund
- Special Funds
- Outstanding expenses
- Loans
Assets Side
- Cash and bank balance
- Furniture
- Investments
- Subscriptions outstanding
- Prepaid expenses
Capital Fund is calculated as:
Capital Fund (Closing) = Opening Capital Fund + Surplus − Deficit
7. Treatment of Subscriptions
Subscriptions are major revenue source.
To calculate subscription income for Income and Expenditure Account:
Subscription Received
- Outstanding at end
− Outstanding at beginning
− Advance at end - Advance at beginning
This converts cash basis to accrual basis.
8. Treatment of Special Funds
Special funds include:
- Prize fund
- Building fund
- Sports fund
Rules:
- Income related to specific fund is added to that fund
- Expenses related to fund are deducted from that fund
- Balance shown on liability side
9. Capital and Revenue Items
Capital Receipts
- Life membership fees
- Specific donations
- Sale of fixed assets
- Government grants for asset purchase
Revenue Receipts
- Subscriptions
- General donations
- Entrance fees (if recurring)
- Interest income
Correct classification is essential in examination problems.
10. Adjustments in NPO Accounts
Common adjustments:
- Outstanding expenses
- Prepaid expenses
- Accrued income
- Income received in advance
- Depreciation on assets
These adjustments are required for Income and Expenditure Account and Balance Sheet preparation.
Important Methods / Formats
Conversion of Receipts and Payments Account into Income and Expenditure Account
Steps:
- Exclude capital receipts and payments
- Adjust revenue items for accruals
- Add depreciation
- Calculate surplus or deficit
Capital Fund Calculation
If opening Balance Sheet is not given:
Capital Fund = Total Assets − Total Liabilities
Subscription Adjustment Table
| Particulars | Amount |
|---|---|
| Subscription received | XXX |
| Add: Outstanding (end) | XXX |
| Less: Outstanding (beginning) | XXX |
| Less: Advance (end) | XXX |
| Add: Advance (beginning) | XXX |
| Subscription income | XXX |
Exam Pattern Insight
Delhi University does not publish fixed unit-wise weightage. The following analysis is based on previous year question papers.
Practical Weightage Insight
- Major numerical chapter
- Usually 15–20 marks problem
- Often compulsory question in Section B
Frequently Asked Areas
- Preparation of Income and Expenditure Account
- Conversion from Receipts and Payments Account
- Subscription adjustments
- Calculation of Capital Fund
- Treatment of specific donations
Nature of Questions
- Full question on preparation of final accounts
- Partial adjustments
- Short theory questions on differences
Common Mistakes Students Make
- Including capital receipts in Income and Expenditure Account
- Forgetting subscription adjustments
- Misclassifying entrance fees
- Ignoring depreciation
- Incorrect calculation of Capital Fund
Common Areas of Confusion
- Difference between Receipts & Payments and Income & Expenditure
- Treatment of life membership fees
- Treatment of donation (general vs specific)
- Whether surplus is profit (it is not distributed)
Typical Question Formats Asked in Exams
- Prepare Income and Expenditure Account and Balance Sheet
- Convert Receipts and Payments Account
- Calculate subscription income
- Distinguish between profit organisation and NPO
- Short note on Capital Fund
Important Subtopics to Prioritize Before Exams
- Subscription adjustments
- Difference between capital and revenue items
- Preparation of Income & Expenditure Account
- Calculation of Capital Fund
- Treatment of special funds
These areas frequently appear in numerical questions.
FAQ
1. Do Non-Profit Organisations earn profit?
They may earn surplus, but it is not distributed. It is added to Capital Fund.
2. Is Receipts and Payments Account same as Cash Book?
It is a summary of cash book, prepared at the end of the period.
3. Why is Income and Expenditure Account prepared?
To determine surplus or deficit for the accounting period on accrual basis.
This chapter combines conceptual clarity with practical application. Accurate classification and proper adjustments are central to solving examination problems related to Non-Profit Organisations.
Also Read:
Accounting Standards
B.Com (Hons) Financial Accounting Syllabus – Semester 1
Sushant Kumar
Founder
As a current B.Com (Hons) student at DU SOL and an active Chartered Accountancy (CA) aspirant, I understand the exact pressure, syllabus confusion, and administrative hurdles students face daily. TheSushant.in was built to provide first-hand, stress-tested guidance. Every DU SOL update, exam strategy, and CA study note shared here comes directly from my personal academic journey, official notifications, and real-time student experience. No generic advice: practical, student-to-student blueprints to help you clear your exams and level up.
