Non profit club Accounting

Non Profit - Non profit club Accounting

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Certainly, allowable accounting is important for non-trading institutions. These concerns maintain, generally, a cash book and later they put in order a summary of cash transactions appearing in the cash book. This summary takes the form of an list known as receipts and payments account.

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Non Profit

Such concerns also put in order 'income and expenditure account' (which is more or less on the lines of behalf and loss account) and the balance Sheet.

The day-to-day accounting consists of maintaining.

(i) Cash book for recording receipts and payments, and

(ii) Ledger for classification of transactions under allowable heads.

Receipts and payments account

It is a summary of cash book for a given period, but the Receipts and Payments list shows the totals of cash transactions under different heads. All the receipts, be cheque or cash are entered on the debit (receipts) side (as in cash book) whereas all the payments (both by cheque or cash) are shown on the prestige (payments) side. Following features of the receipts and payments list will help to identify its nature clearly :

1. It is a summary of cash book, like a cash book, receipts are shown on the debit side and
payments on the prestige side.

2. Cash and bank items are merged in one column. That means receipts in cash as-well-as by , cheque are entered in one column on debit and payments in cash as-well-as by cheque are entered in one column on prestige side. Contra entries in the middle of cash and bank get eliminated.

3. It is not a part of double entry book-keeping. It is just a summary of cash book which is a , part of double entry system.

4. Just like cash book, it starts with the opportunity balance of cash and bank and closes with the closing balance of cash and bank.

5. Both wage and capital receipts and payments are recorded in this account. For example, ...An organization that is exclusively set up to carryon with the object of carrying out social aid or promo & organization of social activities, is a non-trading enterprise. Payment for rent and Payment for building and machinery both are recorded on its payments side. Similarly, receipts on list of subscription and machinery are shown on the receipts side.

6. Usually, it shows a debit balance which represents cash in hand and at bank. However, in case of bank overdraft, which is larger than cash in hand, the list will show a prestige balance.

7. Receipts and payments list fails to disclose gain or loss made by the concern during the period because (a) it is ready on actual receipt basis i.e. It records all receipts-irrespective of the period to which it relates (previous year, current year or future), (b) it also ignores the nature of the receipts and payments (whether capital or revenue). I

8. Accounting plan of gain or loss is based on "accrual concept" which by its very nature "receipts and payments account" is not capable of considering. Therefore, fails to disclose gain or loss (earned or suffered by the concern) during the period. For example, this list ignores: !

(i) Decrease or growth i.e. Depreciation or appreciation in the value of assets;

(ii) growth or decrease in the value of stock;

(iii) Provision for expenses incurred but payments not made-outstanding expenses.

(iv) Accounting for Payment in develop for the services to be utilized in the next accounting period-prepaid expenses.
It also fails to distinguish between:

(v) Capital and wage payments-whether expenditure or purchase of an asset, and

(vi) firm charge and appropriation- whether firm expenditure or drawings.

Limitations of receipts and payments account

Receipts and payments list suffers from following limitations :

(a) It does not show expenses and incomes on accrual basis.

(b) It does not show whether the club or community is able to meet its day-to-day expenses out of its incomes.

(c) It does not show expenses on list of depreciation of assets.

(d) It does not illustrate the details about many expenses and incomes. In order to illustrate such questions, treasurer of the club prepares 'Income and expenditure account' and balance sheet.

Income and expenditure account

This list is ready by non-trading concerns who want to know if during the financial year their wage has been more than their expenditure i.e. behalf or vice versa ( i.e. Loss). Since the object of these concerns is not primarily to' earn profit, therefore, they feel shy in giving it the name of behalf and loss account. Because the word 'profit' is a taboo which any community 'looks down upon'. Of course, it discloses whether the involved practice earned or lost.

It is equivalent to and serves the purpose of 'profit and loss account'.

It is ready on "accrual basis" (not on receipt basis) meaning thereby that all incomes are to be included which have been earned in the relevant period (whether no ifs ands or buts received or not). Similarly, it includes all expenses incurred in the relevant period (whether no ifs ands or buts paid or not). This list serves exactly the purpose which 'profit and loss account' serves in a trading concern. On the pattern of 'profit and loss account' wage is shown on the prestige side and expenditure on the debit side. It also distinguishes in the middle of 'capital & revenue' items i.e. It does not take into observation capital items you receive new knowledge about Non Profit . Where you can put to used in your day-to-day life. And most of all, your reaction is passed about Non Profit .