ACCOUNTING FOR NON PROFIT ORGANIZATION

By :Wan Maimunah Wan Ishak

Commerce DeptTel : 09-5655300 ext 436

At the end of this chapter, students should be able to :

1. Understand the non profit organization

2. Identify receipts and expenditure of NPO

3. Understand special activities run by NPO

4. Produce accounting records for NPO

What is Non Profit Organization ?

Club & Society Main purpose : to provide facilities to

the members ( not profit making) Example : ?? Recommendation :

Refer to some website of any club & society in Malaysia to have some overview of activities of any club & society

Cont :

Financial statement need to be presented in AGM

Items of Financial Statement :1. Revenue & Payment Account2. Income & Expenditure Account3. Balance Sheet

Items of Financial Statement :

Capital Revenue

Contribution for special

purposes

Income Revenue

Membership Fee

Entrance Fee

Small amount of donation

Items of Financial Statement : cont

Capital Expenses

Fund of certain project

Buying of Non Current Asset

Income Expenses

All expenses spent for that

NPO

Example :Transaction Revenue Expense

s

Capital Income Capital Income

Laundry

Honorarium

Interest on fixed deposit

Gift

Competition Fee

Entrance Fee

Utilities

Maintenance Fee

Purchase of furniture

Premises Rent

Donation for club fund

Donation to build swimming pool

Example :Transaction Reven

ueExpenses

Capital Income Capital Income

Donation

Annual Fee

Purchase of sport equipment

Sales of old furniture

Insurance

Donation to grannies house

Stamp

Repair club premises

Donation to build parking lot

Salary of club’s clerk

Lawyer fee to buy premise

Dividend from investment

- to show cash in inflow & cash outflow

- Similar to cash book in businesses

- refer example 4.3 pg 112

Receipts and Payment Account for the Year Ended 31 Dec 20XX

Receipts & Payment Account

Particulars RM Particulars RM

Bal b/f

All receipts will be recorded here

XX All payments will be recorded hereBal c/f

XX

XX XX

- Capital revenue & capital expenditure WILL NOT be recorded in I&E Ac- Similar to P&L in businesses- refer example 4.4 pg 113

Income & Expenditure account for the Year Ended 31 Dec 20XX

Income & Expenditure Account

Particulars RM Particulars RM

All expenses will be recorded here

XX All income will be recorded here

XX

- Fee – main sources of income for a club/society- Need to be adjusted Fee A/c

Fee Account

Jan 1 Unearned b/f xx Jan 1 Advanced b/f Xx

Dec 31

Income & Expenditure

xx Dec 31

Receipts & Payment

xx

Advanced c/f xx Unearned c/f xx

I&E – revenue item

BS – current liability

BS – current asset

Exercise : Preparing fee a/c

1. A club golf with 100 members charge the annual fee for RM50/member. The club received RM 4,200 as fees for the financial year ended 31 Dec 2009. That amount inclusive of RM 300 for 2010. Prepare Fees A/c 2. Balance as at 1 Jan 2009 : Unearned fees for 2008 RM 160Advanced fees for 2009 RM 80 

Extract from Cash Book as at 31 Dec 2009 :Cash Book

Fees for 2008 RM 140Fees for 2009 RM 4,400Fees for 2010 RM 110

 Additional info: Unearned fees for 2009 as at 31 Dec 2009 is RM 65Balance for Unearned Fees for 2008 are write off . Prepare : Fees A/c, extract of P&L and extract of Balance Sheet

Exercise : Preparing fee a/c

3. Extract from Cash Book as at 31 Dec 2009 :Cash Book

Fees for 2008 RM 80Fees for 2009 RM 4,850Fees for 2010 RM 145

 Additional info. :On 1 Jan 2009, unearned fees is RM 98. Unearned fees for 2008 are write off.There are Unearned Fees for 2009 for RM 68 as at 31 Dec 2009. Prepare : Fees A/c, extract of P&L and extract of Balance Sheet

Question 1 : Info. Of Recreation Club as at 31 Mac 2009 : Summary of Receipts & Payments :Receipts :Ticket sales 2,650Membership Fee 1,200Whole Life Fee 850Profit on sale 315 Payments :Purchase of equipment ( 1 August 2008) 600Rent 300Printing & Stationery 120Organizer’s expenses 160Maintenance Expenses 60Security Guard 520Miscellaneous expenses 55

Enhance your understanding :

cont : Additional info :1. Opening Balance of cash RM 1802. Opening balance of equipment ( 1 April 2008) RM 5003. Unearned as at 31 Mac 2009 RM 4004. Whole Life Fee will be apportioned as income in 5 years5. Depreciation expenses for equipment 20% 6. Prepaid rent as at 31 Mac 2009 is RM 607. Printing expenses are accrued as at 31 Mac 2009 for RM 30

Prepare : a). Fee Accountb). Income & Expenditure fye 31 Mac 2009c). Balance Sheet

Check your answer : Fee A/cUnearned b/f - Advance b/f -Income & Expenditure 1600 Cash 1200Advance c/f - Unearned c/f 400

Solution :Income & Expenditure A/c fye 31/3/

Rent 240 Profit from sales 315Printing & Stationery 150 Ticket sales2650Organizer’s expenses 160 Fee1600Maintenance 60 Whole life fee

170Salaries 520Misc 55Depre-equipment 180Surplus 3370

4735 4735How did this figure

derived ??

Solution :

Balance Sheet as at ………..Non Current Asset :Equipment 1100-Accu. Depre (180)

920Current Asset :Unearned fee 400Prepaid rent 60Cash 3380

3840Current Liab :Printing (30) 3810

4730