Non profit club Accounting

Non Profit - Non profit club Accounting

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Certainly, proper accounting is vital for non-trading institutions. These concerns maintain, generally, a cash book and later they put in order a overview of cash transactions appearing in the cash book. This overview takes the form of an catalogue 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 profit and loss account) and the equilibrium 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 proper heads.

Receipts and payments account

It is a overview of cash book for a given period, but the Receipts and Payments catalogue shows the totals of cash transactions under dissimilar 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 credit (payments) side. Following features of the receipts and payments catalogue will help to identify its nature clearly :

1. It is a overview of cash book, like a cash book, receipts are shown on the debit side and
payments on the credit 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 credit side. Contra entries between cash and bank get eliminated.

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

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

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

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

7. Receipts and payments catalogue fails to disclose gain or loss made by the concern during the duration because (a) it is ready on actual receipt basis i.e. It records all receipts-irrespective of the duration 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 catalogue 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 Cost in advance 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 buy of an asset, and

(vi) enterprise payment and appropriation- whether enterprise expenditure or drawings.

Limitations of receipts and payments account

Receipts and payments catalogue 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 catalogue of depreciation of assets.

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

Income and expenditure account

This catalogue 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. profit 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 profit and loss account. Because the word 'profit' is a taboo which any community 'looks down upon'. Of course, it discloses whether the involved institution 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 duration (whether genuinely received or not). Similarly, it includes all expenses incurred in the relevant duration (whether genuinely paid or not). This catalogue 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 credit side and expenditure on the debit side. It also distinguishes between 'capital & revenue' items i.e. It does not take into notice capital items you receive new knowledge about Non Profit . Where you possibly can put to easy use in your evryday life. And most of all, your reaction is passed about Non Profit .

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