1. Chapter # 2
Accounting for Non – Profit
Earning Concerns
Principles of Accounting – XII
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2. Accounting for Non – Profit Earning Concerns
Chapter # 2
Sameer Hussainwww.a4accounting.weebly.com
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WHAT THE EXAMINER USUALLY ASK?
 Computation of cash balance.
 Computation of accumulated fund.
 Preparation of Final Accounts:
o Income and expenditure account.
o Balance sheet.
 Multiple Choice Questions (MCQs).

3. Accounting For Non – Profit Earning Concern
Chapter # 2
Sameer Hussain
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Chapter # 2
ACCOUNTING FOR
NON – PROFIT EARNING CONCERN
NON – PROFIT ORGANIZATION
Associations, charities, cooperatives, and other voluntary organizations formed to further
cultural, educational, religious, professional, or public service objectives. Their startup funding
is provided by their members, trustees, or others who do not expect repayment, and who do not
share in the organization's profits or losses which are retained or absorbed. Approved,
incorporated, or registered NPOs are usually granted tax exemptions, and contributions to them
are often tax deductible. The basic purpose of non – profit organization is not to earn profit.
ACCOUNTING TERMS IN NON – PROFIT ORGANIZATION
Profit Organization Non – Profit Organization
 Capital  Accumulated fund
 Cash book  Receipt and payment account
 Income statement  Income and expenditure account
 Net profit  Surplus of income over expenditure
 Net loss  Deficit over income
DISTINCTION BETWEEN NON – PROFIT AND COMMERCIAL
ENTITIES
A Not-for-profit organization can be differentiated from a profit seeking organization on the
following basis:
Basis Commercial Organization Non – Profit Organization
Primary Motive:
To carry on the activities for
earning profits.
To provide services to the members
or to the public at large. Profits
earned out of any trading activities
are used to further the service
objectives.
Ownership:
Proprietors of business are owners
and hence, entitled to share the
profits.
Subscribers to the membership of
the Not-for-profit entity are called
the members.
Distribution of
Profit:
Profits are distributed among the
owners.
Profits are not distributed among the
members.
Result:
Result of the entity’s activities is
called profit, which is the
difference between sales and other
incomes, if any, over the expenses.
The profit either be withdrawn or
retained in a business.
Excess of expenses over incomes is
called loss.
Result of the entity’s activities is
called the surplus, which is the
excess of income over expenses. It
increases the Capital Fund and
cannot be withdrawn by the
members. The excess of expenses
over incomes is called deficit.
Accounting
Statements:
The accounting statements are
prepared to serve the information
needs of the users include all or
some of the following:
(i) Manufacturing Account
(ii) Profit and Loss Account
(iii) Balance Sheet.
The accounting statements prepared
to serve the information needs of the
users include:
(i) Receipts and Payments Account,
(ii) Income and Expenditure Account
(iii) Balance Sheet.

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Chapter # 2
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REVENUE RECEIPTS
These are the amounts received on a recurring business and include:
(a) Annual membership subscriptions;
(b) Donations, grants and legacies received regularly for general purposes;
(c) Admission fees not capitalized;
(d) Hall rent received from outsiders for the use of hall;
(e) Receipts from sale of old newspapers and magazines;
(f) Receipts from sale of refreshments, dinner coupons, & other social functions;
(g) Interest received on investment, fixed deposit and loans advanced;
(h) Any other item of the similar nature.
REVENUE PAYMENTS
These are the payments for amounts spent at regular intervals not resulting in the formations of
fixed assets. Revenue payments include the following:
(a) Payments for the salaries and wages;
(b) Payments made for rent, taxes, insurance premium, electricity charges, printing, postage
and stationary charges and repairs.
(c) Payments for travelling and conveyance.
(d) Payments for purchase of refreshments, dinners;
(e) Payments for organizing sport meets and tournaments;
(f) Interest paid on loans and on bank overdraft;
(g) Payments for other items of similar nature.
INCOME AND EXPENDITURE ACCOUNT
An account similar to a profit and loss account, prepared by an organization whose main
purpose is not the generation of profit. It records the income and expenditure of the
organization and results in either a surplus of income over expenditures or of expenditure over
income.
ILLUSTRATION # 1: (Income and Expenditure Account & Balance Sheet)
2004 Regular & Private – BIEK
A summary of receipts, expenditure account of Khairpur Sports Club for one year is given
below:
Receipts Payments
Opening balance 6,000 Salary 4,000
Subscriptions 40,000 Electric charges 1,000
Donations 15,000 Sports expenditure 1,000
Interest 1,000 Sports goods purchased 10,000
Charity show receipts 5,000 Books purchased 8,000
Other expenses 2,000
Charity show expenses 4,000
Investment 10,000
Closing balance 27,000
67,000 67,000
Additional Data:
(i) Subscription included Rs.1,000 for 2002 and Rs.500 for the year 2004.
(ii) Accrued subscription Rs.2,500 for the year 2003.
(iii)Outstanding salary Rs.2,000.
(iv)Accrued interest income Rs.500.
On Jan. 1, 2003 the club had the following assets:
(a) Sports goods Rs.4,000. (b) Books Rs.5,000. (c) Investment Rs.6,000.

5. Accounting For Non – Profit Earning Concern
Chapter # 2
Sameer Hussain
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REQUIRED
(i) Prepare Income and Expenditure Account for Dec. 31, 2003.
(ii) Prepare balance sheet as on Dec. 31, 2003.
SOLUTION # 1:
KHAIRPUR SPORTS CLUB
INCOME AND EXPENDITURE ACCOUNT
FOR THE PERIOD ENDED 31 DECEMBER 2003
Expenditure Income
Salaries expense (4,000 + 2,000) 6,000 Subscription (40,000–1,000–
500+2,500)
41,000
Electric charges 1,000 Donations 15,000
Sports expenditure 1,000 Interest income (1,000 + 500) 1,500
Other expenses 2,000 Charity show receipts 5,000
Charity show expenses 4,000
14,000
Surplus over expenditure 48,500
62,500 62,500
KHAIRPUR SPORTS CLUB
BALANCE SHEET
AS ON 31 DECEMBER 2003
ASSETS EQUITIES
Current Assets: Liabilities:
Cash 27,000 Salaries payable 2,000
Interest receivable 500 Unearned subscription 500
Subscription receivable 2,500 Total liabilities 2,500
Total current assets 30,000
Fixed Assets: Club Equity:
Sports goods 14,000 Accumulated fund 22,000
Books 13,000 Add: Surplus 48,500
Investment 16,000 Total owner’s equity 70,500
Total fixed assets 43,000
Total assets 73,000 Total equities 73,000
Computation of Accumulated Fund:
Cash (Openings) 6,000
Sports goods 4,000
Books 5,000
Investment 6,000
Subscription receivable 1,000
Accumulated Fund 22,000

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Practice questions
Question # 1: 2003 Private – BIEK
The following is the receipts and payments account of Ajmeera Welfare Trust for 2002:
Receipts Payments
Opening bank balance 16,500 Salaries expenses 26,000
Subscription fee 64,000 Repair expense 2,000
Rent revenue 6,000 Utilities expense 8,000
Other revenue 11,000 Other expense 21,000
Furniture 20,000
Closing bank balance 20,500
Adjustment data at December 31, are as follows:
(i) Accrued subscription fees Rs.3,000.
(ii) Prepaid salaries Rs.2,000.
(iii)Accrued utilities Rs.1,000.
(iv)Depreciation on furniture Rs.1,000.
REQUIRED
Income and Expenditure account.
Question # 2: 2012 Private – BIEK
The following are the receipts and payments accounts of Rahim Welfare Trust for 2011:
Receipts (Rs.) Payments (Rs.)
Opening balance 46,200 Salaries 72,000
Subscription fees 178,000 Repairs expenses 6,400
Rent revenue 18,000 Utilities expenses 22,400
Other revenue 30,800 Other expenses 58,800
Furniture 56,000
Closing balance 57,400
273,000 273,000
Additional Data at December 31, 2011:
i) Accrued subscription fees Rs.8,400. ii) Prepaid salaries Rs.5,600.
iii) Accrued utilities expenses Rs.2,800. iv) Depreciation on furniture Rs.2,800.
REQUIRED
Prepare income and expenditure account for the year ended December 31, 2011.
Question # 3: 2010 Regular & Private – BIEK
The following are the receipts and payments account of Zaitoon Welfare Society for the year
ended December 31, 2009.
Receipts Payments
Cash balance 45,000 Salaries to ground men 15,000
Subscription 82,000 Repair expense 20,000
Rent revenue 30,000 Purchase of computer 18,000
Match income 40,000 Utilities expense 20,000
Bank loan 60,000 Purchase of furniture 30,000
Printing of match tickets 3,000
Additional Information on December 31, 2009.
(i) Accrued subscription Rs.3,000 & unearned rent Rs.5,000.
(ii) Prepaid utilities Rs.4,000.
(iii)Depreciation on equipment Rs.2,000.
(iv)Accrued interest on bank loan @ 12.5% per annum.
REQUIRED
Prepare Income and Expenditure Account.

7. Accounting For Non – Profit Earning Concern
Chapter # 2
Sameer Hussain
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Question # 4: 2011 Private – BIEK
The following information is provided by Hamid Sports Club:
Furniture Rs. 25,000/- Utilities expenses Rs. 36,000/-
Cash at bank Rs. 5,000/- Rent revenue Rs. 15,000/-
Admission fee Rs. 40,000/- Other revenue Rs. 12,000/-
Donation Rs. 24,000/- Salaries Rs. 22,000/-
Additional Information at December 31, 2010:
(i) Prepaid salaries Rs.3,000/-.
(ii) Accrued rent revenue Rs.5,000/-.
(iii) Accrued utilities expense Rs.4,000/-.
REQUIRED
Prepare Income and Expenditure Account for the year ended December 31st, 2010.
Question # 5: 2013 Private – BIEK
Following are the receipts and payments account of Pioneer Sports Club for the year 2012:
Receipts Payments
Cash balance Rs.35,000 Staff salaries Rs.12,000
Subscription Rs.72,000 Repair expense Rs.8,000
Rent revenue Rs.20,000 Utilities expense Rs.10,000
Match income Rs.50,000 Purchase of computer Rs.25,000
Bank loan Rs.40,000 Purchase of furniture Rs.30,000
Printing of match tickets Rs.4,000
Additional Information on December 31, 2012:
i) Depreciation on fixed assets @ 10%.
ii) Accrued interest on bank loan @ 12% per annum.
iii) Accrued subscription Rs.6,000.
iv) Unearned rent Rs.4,000.
v) Prepaid utilities Rs.3,000
REQUIRED
Prepare income and expenditure account for the year ended on December 31, 2012.
Question # 6: 2011 Regular – BIEK
Following is the information provided by Khalid Sports Club:
Cash in hand Rs.5,000/-, Cash at bank Rs.50,000/-, Ground rent Rs.40,000/-, Entrance fees
Rs.10,000/-, Miscellaneous expenses Rs.3,000/-, General expenses Rs.21,000/-, Potage and
printing Rs.7,000/-, Closing cash balance Rs.2,000/-, Subscription Rs.35,000/-, Donation
Rs.100,000/-, Taxes Rs.8,000/-, Secretary’s salary Rs.65,000/-, Utility expense Rs.9,000/-, Sale
of tickets Rs.72,000/-.
REQUIRED
Prepare Income and Expenditure Account.
Question # 7: 2008 Regular & Private – BIEK
The following is the summary of receipts and payments of Moona Ramzan Welfare Society the
year ended 31st Dec. 2007:-
Receipts Payments
Cash opening balance 40,850 Purchase of computer 20,000
Donations 170,000 Staff salary 72,000
Membership fee 80,000 Office expenses 10,000
Other incomes 9,150 Office rent 48,000
Medicines, books for poor (free supply) 69,450
Sewing machines for widows (free supply) 40,000
Balance (ending) 40,550
300,000 300,000

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Other Information:
(i) On 1st January, 2007 the society had the following assets:
Furniture Rs.60,000 and equipments Rs.65,000.
(ii) Outstanding membership fee Rs.5,000.
(iii)Non-current assets to be depreciated at 10%.
REQUIRED
(i) Prepare Income and Expenditure Account for the year.
(ii) Prepare Balance Sheet as on December 31, 2007.
Question # 8: 2009 Regular & Private – BIEK
A summary of cash receipts and payments of Abdul Hadi Sports Club for the year ended
December 31, 2008 is given below:
Receipts Payments
Balance Jan. 1, 08 135,000 Purchase of equipment 93,750
Collection from matches 1,237,500 Stadium rent 225,000
Profit on sale of refreshment 236,250 Printing & stationary 48,750
Secretary’s expenses 108,000
Equipment repairs 34,500
Groundman’s wages 390,000
Miscellaneous expenses 49,500
Additional Information on December 31, 2008:
(a) On January 1, 2008, equipment inventory is valued at Rs.375,000.
(b) Depreciation on equipment is charged @ 20% per year.
(c) Prepaid rent is Rs.45,000.
(d) Outstanding printing charges were Rs.24,750.
REQUIRED
(i) Prepare Income and Expenditure Account for the year ended December 31, 2008.
(ii) Prepare Balance Sheet as on December 31, 2008.
Question # 9: 2013 Regular – BIEK
The following are the receipts and payments account of Waqas Welfare Society for the year
ended Dec. 31, 2012:
Receipts Payments
Cash balance Rs.100,000/- Salaries expenses Rs.20,000/-
Subscription Rs.90,000/- Repair and maintenance Rs.10,000/-
Match income Rs.50,000/- Utilities expenses Rs.60,000/-
Rent revenue Rs.60,000/- Purchase of equipment Rs.40,000/-
Additional Information on Dec. 31, 2012:
(i) Subscription received in advance Rs.5,000/-.
(ii) Accrued subscription Rs.7,000/-.
(iii)Rent unearned Rs.10,000/-.
(iv)Prepaid utilities Rs.5,000/-.
(v) Depreciation on equipment Rs.2,000/-.
REQUIRED
Prepare Income and Expenditure account.
Question # 10: 2012 Regular – BIEK
The following data relate to Commerce Welfare Trust on March 31, 2012:
Cash Rs.20,000; Bank Rs.40,000; Land Rs.200,000; Building Rs.300,000; Allowance for
depreciation – Building Rs.10,000; Equipment Rs.50,000; Notes payable Rs.100,000.

9. Accounting For Non – Profit Earning Concern
Chapter # 2
Sameer Hussain
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The Period – End Adjustment Data were as Follows:
i) Subscription fees receivable Rs.45,000 and received in advance Rs.5,000.
ii) Prepaid salaries Rs.6,000 and accrued taxes Rs.2,000.
iii) Estimated depreciation on building Rs.10,000 and on equipment Rs.5,000.
REQUIRED
a) Determine the amount of accumulated fund before adjustments.
b) Prepare balance sheet (income and expenditure account showed surplus of Rs.29,000
for the period).
Question # 11: 2007 Regular & Private – BIEK
A summary of receipts and payments accounts of Ranipur Sports Club for one year is given
below:
Receipts Payments
Opening balance 12,000 Salary expense 8,000
Subscriptions 80,000 Electric charges 2,000
Donations 30,000 Sports expenditure 2,000
Interest 2,000 Sports goods purchase 20,000
Charity show receipts 10,000 Books purchased 16,000
Other expenses 4,000
Charity show expenses 8,000
Investment 20,000
Closing balance 54,000
134,000 134,000
Additional Data:
(1) Subscription included Rs.2,000 for the year 2005 and Rs.1,000 for the year 2007.
(2) Accrued subscription Rs.5,000 for the year 2006.
(3) Outstanding salary Rs.4,000.
(4) Accrued interest income Rs.1,000.
On January 1, 2006 the club had the following assets:
(a) Sports goods Rs.8,000.
(b) Books Rs.10,000.
(c) Investment Rs.12,000.
REQUIRED
(1) Prepare Income and Expenditure Account for the year ended December 31, 2006.
(2) Prepare balance sheet as on December 31, 2006.
Question # 12: 2006 Regular & Private – BIEK
A summary of cash receipts and payments of a Professional Educational Institute for the year
ended December 31, 2005 is given below:
Receipts (in Rs.) Payments (in Rs.)
Opening balance 50,000 Salaries 120,000
Subscription income 600,000 Library books purchased 20,000
Tuition fees 100,000 Examination expense 50,000
Donations 60,000 Computer 10,000
Entry test fees 20,000 Printing & stationary 20,000
Postage & telegram 10,000
Utilities charges 15,000
Repair expense 5,000
Closing balance 580,000

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The Institute had the following Assets on January 1, 2005:
Library books Rs.30,000; Building Rs.500,000; Computer Rs.40,000; Furniture and fixture
Rs.20,000.
Additional Information:
(i) Out of total subscription received, Rs.5,000 is for the year 2004, Rs.30,000 for 2006 &
Rs.10,000 is outstanding for 2005.
(ii) Salary is outstanding Rs.30,000.
REQUIRED
(i) Prepare Income and Expenditure account for the year ended December 31, 2005.
(ii) Prepare balance sheet as on December 31, 2005.
Question # 13: 2002 Regular – BIEK
The balances of a football club are given below:-
ASSETS: Cash Rs.1,500; 10% Government securities Rs.2,000; Subscription receivable
Rs.500; Rent receivable Rs.1,000; Office equipment Rs.1,000; Sports equipment
Rs.5,000; Building Rs.15,000.
EQUITIES: Salaries payable Rs.600; Ground rent payable Rs.400; 4% Loan (payable after 5
years) Rs.10,000; Accumulated fund ?
During the year cash receipts and payments are as under:-
RECEIPTS: Cash balance Rs.1,500; Entrance fees Rs.1,500; Subscription Rs.19,000; Rent
revenue Rs.4,500; Donation Rs.2,000; Interest on securities Rs.200.
PAYMENTS: Salaries expense Rs.16,000; Ground rent Rs.2,000; Sports equipment Rs.2,000;
Office supplies Rs.500; Interest expense Rs.400; Insurance expense Rs.500;
Miscellaneous expense Rs.500.
Data for Adjustment:
(1) Unused office supplies Rs.200.
(2) Subscription and rent receivable Rs.1,000/- & Rs.500/- respectively.
(3) Subscription and rent received in advance Rs.500/- & Rs.300/- respectively.
(4) Ground rent payable Rs.500/-.
(5) Depreciation on building, office equipment & sports equipment @ 10%.
(6) Donation is a part of accumulated fund.
REQUIRED
(a) Prepare income and expenditure account for the year ended June 30, 2001.
(b) Prepare balance sheet as on June 30, 2001.

11. Accounting For Non – Profit Earning Concern
Chapter # 2
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MULTIPLE CHOICE QUESTIONS (MCQS)
1) Which of the following is generally considered as a non-profit oriented
organization?
a) Charitable organization b) Corporation
c) Audit firms d) Insurance companies
2) Non – profit organizations prepare all of the following accounts except:
a) Receipts and payments account b) Income and expenditure account
c) Balance sheet d) Income statement
3) Expenditures greater than incomes of a non – profit organization give rise to a:
a) Loss b) Profit
c) Surplus d) Deficit
4) Which of the following is to be recorded in an income and expenditure account?
a) Purchase of fixed asset b) Profit on sale of fixed asset
c) Sale of fixed asset d) None of them
5) The capital of a non – profit organization is generally known as:
a) Equity b) Accumulated fund
c) Cash fund d) Financial reserve
6) Subscription received but not yet earned is considered as:
a) Asset b) Liability
c) Income d) Expenditure
7) Rs.10,000 received as the annual membership subscription. Out of this, Rs.2,000 is
pertaining to the previous accounting period whereas Rs.1,000 is receivable at the
end of the current accounting period. The amount of subscription that will be
shown in the income and expenditure account for this accounting:
a) Rs.10,000 b) Rs.12,000 c) Rs.9,000 d) Rs.8,000
8) Income and expenditure account shows:
a) Cash available to organization b) Closing capital of an organization
c) Cash available in the bank account d) Surplus or deficit for current accounting
period
9) On what basis the receipts and payments account is prepared?
a) Cash basis b) Accrual basis
c) Both accrual and cash basis d) None of them
10) In non-profit accounting, the sale of old newspapers is generally considered as:
a) Expenses b) Liability
c) Income d) Capital receipt
11) Amount received from any source by way of gift in non-profit organization is
described as:
a) Legacy b) Subscription
c) Donation d) Life time membership
12) Excess of the income of a non-profit concern over its expenses is:
a) Deficit b) Surplus
c) Cash balance d) Income

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13) Income and expenditure account is equivalent to the:
a) Receipt and payment account b) Balance sheet
c) Cash book d) Profit and loss account
14) The credit balance at the end, in income and expenditure, shows:
a) Surplus b) Deficit
c) Both surplus and deficit d) Expenditure
15) Excess of expenditure over income is called:
a) Deficit b) Surplus
c) Both surplus and deficit d) Capital
16) Non-profit making organizations are established for:
a) Profit b) Charitable or religious purposes
c) Manufacturing goods d) Trading concern
17) Receipts and payments account is a summary of:
a) Cash book b) Purchase book
c) Sales book d) Purchase return book
18) Example of non-profit making organization is:
a) Fan factory b) Sugar industry
c) Government college d) Private college
19) This item is not an income in non-profit concern:
a) Government grant b) Donation
c) Interest on loan d) Subscription
20) In non-trading concerns, statement of affairs is used to mean the same as:
a) Profit and loss account b) Bank account
c) Balance sheet d) Trial balance
21) A Receipts and Payments Account is one:
a) Which is accompanied by a balance sheet
b) In which the profit is calculated
c) In which the opening and closing cash balances are shown
d) In which the surplus of income over expenditure is calculated
22) Non – profit earning concerns are established:
a) For making profit b) For loss
c) No profit or loss d) For trading
23) The income and expenditure account lists the club’s:
a) Assets and liabilities b) Income and expenditures
c) Revenues and assets d) Expenditures and assets
24) In non – profit organization, assets – liabilities = :
a) Fixed assets b) Capital
c) Accumulated fund d) Income