Home » Accounting Explanation » Accounts of Non-Profit Organizations


Common expenditures of non-profit organizations

  • Rent expenses
  • wages and salaries expenses
  • Printing and stationery expenses
  • Depreciation on fixed assets
  • Traveling expenses
  • Interest on bank loan
  • Canteen miscellaneous expenses
  • Heat and light expenses
  • Telephone expenses
  • Meeting expenses
  • Honorarium etc.

Honorarium 

Honorarium is a payment to a person for his/her services that are generally supposed to be performed voluntarily. In other words, an honorarium is a payment to a person for his/her services which are customarily not required any fee or money to be paid. For example, a person (an outsider) got paid $500 (honorarium) for giving a good lecture to the students of a non-profit college


Income and expenditure account

It is an income statement of a non-profit organization. All revenues (or incomes) and expenditure (or expenses) of a non-profit organization are shown in the income and expenditure account.

Income and expenditure account is based on the accrual concept of accounting which means only earned incomes and incurred expenses will be recorded in the income and expenditure account not all incomes and expenses. For example, a non-profit organization receives $500 as subscription from a member but that $500 includes $300 subscription for the next year. Since the member has not yet received the services for $300 or in other words the non-profit organization has not earned this $300, the non-profit organization can’t show full $500 as revenue in the income and expenditure account for the current accounting period or year. The same goes for expenses, if a non-profit organization pays telephone charges in advance but hasn't used the telephone service until the end of accounting period, the non-profit organization can’t show telephone expenses in income and expenditure account for the current accounting period (e.g. a year)


ABC Sports Club
Income and Expenditure Account
For the year ended on 31 Dec, 2012

EXPENDITURES AMOUNT INCOMES AMOUNT
Building rent expense
Groundsman wage
Printing and stationery expenses
Depreciation on building
Depreciation on equipment
Salaries
Traveling expenses
Tournament general expenses
Tournament prizes
Brochure expenses
Depreciation on furniture
Interest on bank loan
Canteen miscellaneous expenses
Heat and light expenses
Telephone expenses
Upkeep of play ground
Meeting expenses
Honorarium

Surplus

$5000
$3000
$1000
$2000
$1000
$5000
$1000
$1000
$7000
$1000
$2000
$1000
$1000
$2000
$1000
$3000
$1000
$2000

27,000
Subscription
Entrance fee
Donations
Net income from canteen trading
Tournament fees and charges
Interest income on deposits
Profit on investments
Sundry income
Profit on sale of fixed assets
Rent income
Profit Sale of instruction manuals

Green fees


$25,000
$7000
$5000
$6000
$5000
$2000
$1000
$2000
$7000
$3000
$1000
$3000

TOTAL $67,000 TOTAL $67,000




Balance sheet of non-profit organizations and accumulated fund

Balance sheet is a statement that lists down the detail of Assets, liabilities and capital. Balance sheet represents the financial position of an entity at a point in time

Balance sheet of non-profit organizations is slightly different, yet it is pretty much similar to other organizations such as companies, partnerships and other profit oriented entities.

Balance sheet is based on accounting equation that is Capital + liabilities = Assets. As you can see there are two parts of this equation the first one is capital + liabilities and second one is Assets. Therefore, there are two sides or parts of a balance sheet one is capital+ liabilities side and other is assets side, both sides need to be equal

Accounting equation of a profit oriented organization or a business is:

Capital + Liabilities = Assets

While accounting equation of a non-profit organization is:

Accumulated fund + liabilities = Assets


Note that accounting equation of a non-profit organization is almost same as accounting equation of profit oriented organizations or businesses except THE ACCUMULATED FUND PART. Accumulated fund is the capital of non-profit organizations. Non-profit organizations use the term accumulated fund in spite of capital because it is more appropriate to use the term accumulated fund than capital, since these organizations exist not to make profit and no one owns them


XYZ Friends Club
Balance sheet
As on 31 Dec, 2012

ASSETS  AMOUNT ACC. FUND + LIABILITIES AMOUNT
Current Assets
Cash in hand
Cash at bank
Subscriptions receivable
Bar Stock
Prepaid rent expenses
Intangible Assets 
Goodwill
Less: Acc. Amortization
Fixed Assets
Land
Building
Less: Acc. depreciation
Cars and other vehicles
Less: Acc. depreciation
Sports equipment
Less: Acc. depreciation
Long term investments
Investment in mutual fund
investment in Govt. securities







$10,000
$5000


$15,000
$10,000
$20,000
$10,000
$5000
$2000


$10,000
$15,000
$25000
$2000
$1000


$5000

$20,000

$5000

$10,000

$3000

$5000
$8000

Accumulated fund
Opening accumulated fund
Add: Surplus for the year
Closing accumulated fund
Short term liabilities
Subscriptions in advance
Creditors
Interest expenses payable
Building rend payable
Long term liabilities
Bank loan
Mortgage loan

$50,000
$20,000




$70,000

$10,000
$5000
$2000
$5000

$7000
$10,000

TOTAL $109,000 TOTAL $109,000