Balance Sheet

Even a non-profit organization maintains proper books of accounts. It aims to facilitate simple and convenient calculation of items of income and expenditure and finding the correct position of assets and liabilities of the organization. Let us learn how this balance sheet is made and the accounting treatment of a general fund.

There are several components of the accounting system of non-profit organization. This includes the balance sheet as well. Let us understand more about the balance sheet of a non-profit organization.

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Introduction to Balance Sheet

Preparation of balance in the case of non-trading or non-profit making concern and preparation of balance sheet in the case of a trading firm is same. It has all liabilities and assets as on the date of the preparation of the balance sheet by the organization. The excess of assets over the liabilities is termed as Capital Fund or the General Fund.

Browse more Topics under Accounting For Not For Profit Organisations

• Meaning, Characteristics and Accounting Records for Not-for-Profit Organisations
• Receipt and Payment Account
• Income and Expenditure Account

Preparation of Balance Sheet for Non-Profit Organization

In the case of non-profit organizations, the Capital Fund is accumulated along with capital Receipts and receipts that are capitalized by further increasing the surplus or decreased by the deficit, during the year. At the beginning of a non-trading concern, there will be no formal capital Fund and in such case, the Surplus, if any, earned during the year constitute the Capital Fund at the end of the year.

The balance sheet of a non-profit organization is prepared in the same manner as in the case of a business enterprise. The assets of the organization are recorded on the Right side and liabilities on the Left side. The Non-profit organizations do not use the term Capital. Instead, General Fund or Accumulated Fund appears on the Balance Sheet.

The NPO might also create a special fund, such as prize fund or match fund. The purpose of which is to meet the expenses related to the purpose for which it is created. The incomes on the amount which is invested from these funds accrue to the fund alone and not the income and expenditure account.

Accounting Treatment of General Fund and Preparation of Balance Sheet

• Preparation of a balance sheet starts with the general fund. You have to add the respective surplus or deficit in the amount.
• Further, add life membership fees or legacies at this stage.
• Put all fixed assets on the asset side of the balance sheet.
• Showcase the amounts paid in advance and amount due on the assets and liabilities side.
• Post the closing balances of the assets and liabilities on the respective side of the balance sheet.
• To calculate the amount of the fund, deduct the value of total liabilities from the value of assets.

Let us understand the format of a balance sheet of a nonprofit organization through the following illustration that we study in the question that follows.

Solved Question for You

How will you show the amount of subscription on the balance sheet of a non-profit organization from the following Receipt and Payment account and additional information?

Receipt and Payment a/c

Receipt	Amount	Payment	Amount
To subscription	25000

Additional information:

1. Outstanding subscription for previous year Rs.2000
2. Outstanding subscription for current year Rs.1500
3. Subscription received in advance at the end of previous year Rs. 1000
4. Subscription received in advance at the end of current year Rs. 1200

Answer –

Opening Balance Sheet

Liabilities	Amount	Assets	Amount
Advance subscription (previous year)	1000	Out. Subscription (previous year)	2000
	1000		2000

Closing Balance Sheet

Liabilities	Amount	Assets	Amount
Adv. Subscription (Next year)	1200	Outstanding Subscription (current year) Outstanding Subscription (previous year)	1500 2000
	1200		3500