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Non- Profit Organization
• Operated without the intention of making

• Main function: provide facilities to its

members. For examples: Bowling Club,
Football Club, and Golf Club.

• Some clubs and societies may run a café or a

restaurant with the intention of getting extra
Sources of Income
• Non-profit organizations obtain their
revenue from several sources of income.

• However, similar to trading concerns, it is

important to distinguish between revenue
and capital income.
Sources of Income
Capital Income Revenue Income
• Involve the receipts of asset • Involve the receipts of income
that will increase the capital. for one accounting year.
• Example: donation (if stated for • Examples: subscription fees,
capital purposes). entrance fees, visitors’ fees,
locker fees, donations, and
gross trading profits from café
or restaurant.

• Capital income will be shown • Revenue income will be

as liability in the balance sheet. credited in the income and
expenditure account.
Types of Expenditures
• There are two types of expenditures which
1. capital expenditure
2. revenue expenditure
Types of Expenditures
Capital Expenditure Revenue Expenditure
• Payment is made to purchase • Payment made for assets and
assets such as vehicle and office services to run daily activity, such
equipment that will be used to as rent, wages, and insurance.
generate income for the club.
• Assets are used for many years. • Assets are used in that accounting
• Assets can be depreciated. • Assets cannot be depreciated.
• These assets will be shown as • These expenditure will be debited
fixed assets in the balance sheet. in income and expenditure
• Capital expenditure will not affect • Revenue expenditure reduces
business profit. business profit.
Financial Statements
• The organizations do not have trading and
income statement drawn up for them, as
their main purpose is not trading or profit
• The final accounts prepared are:
1. Receipts and Payments account, and
2. Income and Expenditure account.
3. A Balance Sheet , if they possess assets
other than cash.
Terms Used
Profit Making Organization Non-Profit Making
• Cash Account • Receipts and Payments
• Trading and Income • Income and Expenditure
Statement Account
• Net Income • Surplus of Income over
• Net Loss • Excess of Expenditure over
• Capital • Accumulated Fund
Receipts and Payments
• Equivalent to a cash book.
• Purpose - summarizing the cash transaction
during the reporting period.
• Any receipts obtained during the period are
• Any payments made during the period are
• Distinction between the capital and revenue
items is not required.
Receipts and Payments
FPK Bowling Club
Receipts and Payments Account For the year ended 31 December 2013
Receipts: RM Payments: RM
Bank/Cash balance 350 Committee expense 200
Subscriptions received 810 Printing and stationery 210
Rent received 250 Utilities expense 150
Donation received 150 Donation allowed 150
Rent expense 140
Heat and light expense 110
Bank/Cash balance 600
1,560 1,560
Income and Expenditure
• Prepared for recording all the revenue income earned
and revenue expenditures incurred in the current year.
• This account is similar to the trading and income
statement of a trading concern.
Income and Expenditure
• Possible sources of income to be
credited are:
– subscription fees,
– entrance fees,
– visitors’ fees,
– locker fees,
– donations, and
– gross trading profits from café or restaurant.
Income and Expenditure
• Possible types of expenditures to be
debited are:
– rent for club building,
– staff wages,
– honorarium, and
– insurance.
Income and Expenditure
• The difference between total income and
total expenditure can be either:
– Surplus of Income over Expenditure
(income is greater than expenditure)
– Excess of Expenditure over Income
(expenditure is greater than income)
Income and Expenditure
FPK Bowling Club
Income and Expenditures Account For the year ended 31 December 2013
Expenditure: RM Income: RM
Rent for club building 1,200 Subscription fees 8,500
Staff wages 6,500 Entrance fees 1,750
Honorarium 2,100 Locker fees 930
Insurance 2,700 Donations received 2,050
Surplus of Income over 4,570 Profits from café or restaurant 3,840
17,070 17,070
Members’ Subscriptions
• When cash is received from members, the double entry
would be:
Dt Cash XX
Cr Subscriptions Account XX
• Only the subscriptions received relating to the payment of
the current year is transferred to the Income and
Expenditure account.
• Payments in advance will be reported in the balance sheet
as a current liability.
• However, if the members have not paid the subscriptions
until the end of the accounting period, it will be shown in the
balance sheet as a current asset under the heading of
‘Subscriptions in Arrears’ or ‘Accrued Subscriptions’.
Members’ Subsciptions
2004 RM 2004 RM
Beginning balance XX Beginning balance XX
(arrears/accrued) (advance/unearned)
Income and Expenditure Account XX Receipts and Payments XX
Ending balance XX Ending balance XX
(advance/unearned) (arrears/accrued)
Members’ Subscriptions
• Illustration:
The FPK Bowling Club charges its members an annual subscription of RM30 per member. It accrues for
subscriptions owing at the end of each year and also adjusts for subscriptions received in advance. The
following transactions are discovered at the end of the year:
• On 1 January 2013, 15 members owed RM450 for the year 2012.
• On 31 December 2012, 6 members paid RM180 for the year 2013.
• During the year 2013, we received cash for subscriptions RM11,130.

For 2012 540
For 2013 10,380
For 2014 210
• At the end of 31 December 2013, 17 members had not paid their 2013 subscriptions.


Based on the above information, prepare the subscriptions account for the year ended 31 December 2013 of
the FPK Bowling Club.
Members’ Subscriptions
2013: 2013:
Jan 1 Beginning balance 450 Jan 1 Beginning balance 180
(arrears) (advance)
Dec 31 Income & 11,160 Dec 31 Cash 11,130
Dec 31 Ending balance 210 Dec 31 Ending balance 510
(advance) (arrears)
11,820 11,820
Life Membership Subscriptions
• Members can enjoy the facilities of the clubs and
become members for life by paying certain lump sum
• The subscriptions will not be treated as income in the
Income and Expenditure account solely in the year it is
• A separate life membership subscription account
will be prepared.
• The life subscription will be written off annually to the
Income and Expenditure account by instalments and
the credit balance remaining at the end of each year
will be shown in the balance sheet as liability.
Life Membership Subscriptions
• Illustration:
The FPK Bowling Club requires a member to pay
RM3,000 to obtain life membership. During the year
ended 31 December 2013, this club had received
payment of RM3,000 from 5 members. It is the
club's policy to allocate life membership fees to
Income and Expenditure account over a 15-year
Prepare a life membership account for the year
ended 31 December 2013.
Life Membership Subscriptions
Life Membership Account
Income and Expenditure 1,000 Receipts and Payment 15,000
account account

Ending balance (advance) 14,000

15,000 15,000
Profit or Loss from business activities
• Organization may run a café (business
activities) for the convenience of its members
on a permanent basis with the intention of
making profit.
• Thus, the club would need to prepare a
separate income statement to determine
whether a profit or loss has been made from
such activity.
• The profit/(loss) from this activity is included
in the Income and Expenditure account as
income/expenditure for the period
• Donations received are usually shown as
income in the year that they
are received. The following journal entry is
Dr Receipts and Payments Account XX
Cr Income and Expenditure Account XX
• However, if the donation is stated for
capital purposes, the donation should be
shown in the Balance Sheet as an addition to
opening accumulated fund.
Registration Fee
• Paid by new member once in a lifetime in
addition to the membership fee for that
• It is paid by the member in the year that
they join into the clubs.
• The receipts of the fees will be reported as
income in the year that they are received.
Balance Sheet
• The balance sheet of a non-profit making
organization is similar to that of a
trading concern except for two areas:
1. Accumulated Fund
2. Profit or Loss
Accumulated Fund
• In a non-trading concern, the term ‘Accumulated
Fund’ is used instead of Capital.
• In a sole trader or partnership :
Equity + Liabilities = Assets
• In a non-profit making organization:
Accumulated Fund + Liabilities = Assets
• Surplus of income over expenditure will increase
the accumulated fund, and the excess of
expenditure over income will decrease the
accumulated fund.
Accumulated Fund
• Illustration:

Assets and liabilities of a club on 1 January 2014 are as follows:

Assets: RM Liabilities: RM
Building 30,000 Bank loan 5,000
Office equipment 3,600 Rental payable 200
Fixtures & fittings 3,400 Wages payable 150
Furniture 2,500
Cash at bank 1,200
Stationery stock 120
Locker 50
Calculate the accumulated fund of the club as at 1 January 2014.
Accumulated Fund
Assets: RM RM
Building 30,000
Office equipment 3,600
Fixtures & fittings 3,400
Furniture 2,500
Cash at bank 1,200
Stationery stock 120
Locker Rental Receivable 50 40,870
Less Liabilities:
Bank loan 5,000
Rental payable 200
Wages payable 150 5,350
Accumulated Fund 35,520
Profit or Loss
• The profit is referred to a ‘surplus of
income over expenditure’, whereby the
loss is referred to as the ‘excess of
expenditure over income’.
• The profit or loss of the non-trading
concerns will be treated the same way as
in the Balance Sheet of a profit making