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Principles and Practice of Accounting > Non-Profit Organizations > Educational Institutes- Special Transactions
Non-Profit Organizations

Educational Institutes- Special Transactions

Educational institutes are not-for-profit organizations. They work for providing education and thus, the welfare of the society. In India, usually, these are registered under the Indian Societies Registration Act, 1860. However, in some of the states, the law requires them to register under the Trust Act also. For example, in the state of Maharashtra, all such societies need to register themselves simultaneously under the Indian Societies Registration Act, 1860 as well as under the Bombay Public Trust Act, 1950.

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Educational Institutes – Special Transactions

These are run by Trust Societies and are thus autonomous bodies. Their office consists of a President, a Secretary, a Treasurer and Executive Committee members. Their General Body comprises of all the members of the society. Also, they may run a number of institutions.


However, the head of the educational institutes for managing the day to day affairs is the Principal. He is also a member of the governing body and is responsible for supervising the smooth functioning of the institute.

The Educational Institutes meet a part of the expenses by raising funds on their own, either from donations or charities. They also receive grants from state governments. However, these grants are not uniform in nature. For the purpose of accounting, these institutes treat financial year as their accounting year.

Thus, we can say that there are three main sources of funds available for educational institutes. They are:

  1. Donations and charities from public
  2. Fees from students like annual tuition fees, admission fees, term fees, laboratory fees, development fees, etc.
  3. Government grants like Maintenance grants, Equipment grants, Building grants, etc

Educational institutes special transaction

Transactions Related  to Education Institutes

Donation from the public

An institute may receive a donation in cash or in kind. The donation in kind may be in the form of land, building, furniture, utensils, equipment, etc. These are generally given in the memory of a member of the donor’s family. However, the donations may be for recurring or non-recurring purposes.

Admission fees

Usually, the parent body running the educational institute collects the amount of admission or capitation fees from the parents or the guardians of the students seeking admission.

Learn more about Income and Expenditure Account here in detail.

Library and laboratory deposit

It generally remains with the institute until the student leaves the school or college. At the time of leaving the school or college refunds this amount to the student.

Term Fees

For the purpose of accounting for the term fees, the educational institution requires to maintain a separate account for the receipts and expenditures. Any surplus in this account is carried forward to the next year. Hence, it can use an amount of term fees for the following:

  1. School functions
  2. Medical inspection of the students
  3. Printing of school magazines
  4. Expenses of printing exam question papers, the supply of answer books and other examination expenses.
  5. Inter-school tournaments
  6. Sports
  7. Extra-curricular activities
  8. Scouting and guiding
  9. Prizes for various co-curricular activities
  10. School musical band
  11. Purchase of books for the library
  12. Maintenance of playground
  13. Sports equipment
  14. Material for drawing and craft
  15. A contribution made to the cultural or athletic associations that are connected with school activities.
  16. Expenses for newspapers and magazines made available to the students.
  17. Educational excursions and visits expenses
  18. Expenses for School competitions such as drama, skit, dance, music, elocution, debate, etc.

Recurring Grants

These are usually received in the form of Maintenance grants and in installments. Thus, these are spread throughout the year.

Grant-in-aid

The School or College code provides a complete list of the items for which an institution can use these. However, the institute may use the amount of the grant for the following:

  1. Payment of Salary and Allowances to staff.
  2. Leave Salary
  3. Teacher’s training expenses
  4. Pension and Gratuity to the staff
  5. Rent and taxes
  6. Insurance expenses
  7. Repairs and maintenance expenses
  8. Electricity and telephone expenses
  9. Payment of the registration fees to the board of education
  10. Audit Fees
  11. Scholarships
  12. Expenses for conferences
  13. Bonus to teachers
  14. Any subscription to an educational association, etc.

Solved Example For You

From the following particulars of Tagore school prepare Income and Expenditure Account and Balance Sheet as at 31st March 2018.

Particulars Amount (Dr.) Amount (Cr.)
Security Deposit 250000
Research fund 500000
Capital fund 1990000
Tuition fees 1000000
Government grants 700000
Donations 100000
Hostel room rent 210000
Mess receipts 180000
Salary 1050000
Scholarships 100000
Student welfare expenses 40000
Sports expenses 60000
Repairs and maintenance 125000
Miscellaneous expenses 50000
Building 2000000
Furniture 700000
Buses 500000
Provision for depreciation:
Building 200000
Furniture 70000
Buses 75000
Bank 650000
5275000 5275000

 

Ans.

In the books of Tagore School

Income and Expenditure A/c

For the year ending 31st March 2018

Particulars Amount Particulars Amount
To Salary A/c 1050000 By Tuition fees A/c 1000000
To Scholarships A/c 100000 By Government grants A/c 700000
To Student welfare expenses A/c 40000 By Donations A/c 100000
To Sports expenses A/c 60000 By Hostel room rent A/c 210000
To Repairs and maintenance A/c 125000 By Mess Receipts A/c 180000
To Misc. expenses A/c 50000
To Surplus 765000
(excess of Income over expenditure)
2190000 2190000

 

Balance Sheet

As at 31st March 2018

Liabilities Amount Assets Amount
Capital fund 1990000 Building 2000000
Add: Surplus 7650000 2755000 Less: provision for depreciation (200000) 1800000
Security deposit 250000 Furniture 700000
Research fund 500000 Less: provision for depreciation (70000) 630000
Buses 500000
Less: provision for depreciation (75000) 425000
Bank 650000
3505000 3505000

 

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