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.
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:
- Donations and charities from public
- Fees from students like annual tuition fees, admission fees, term fees, laboratory fees, development fees, etc.
- Government grants like Maintenance grants, Equipment grants, Building grants, etc
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.
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.
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:
- School functions
- Medical inspection of the students
- Printing of school magazines
- Expenses of printing exam question papers, the supply of answer books and other examination expenses.
- Inter-school tournaments
- Extra-curricular activities
- Scouting and guiding
- Prizes for various co-curricular activities
- School musical band
- Purchase of books for the library
- Maintenance of playground
- Sports equipment
- Material for drawing and craft
- A contribution made to the cultural or athletic associations that are connected with school activities.
- Expenses for newspapers and magazines made available to the students.
- Educational excursions and visits expenses
- Expenses for School competitions such as drama, skit, dance, music, elocution, debate, etc.
These are usually received in the form of Maintenance grants and in installments. Thus, these are spread throughout the year.
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:
- Payment of Salary and Allowances to staff.
- Leave Salary
- Teacher’s training expenses
- Pension and Gratuity to the staff
- Rent and taxes
- Insurance expenses
- Repairs and maintenance expenses
- Electricity and telephone expenses
- Payment of the registration fees to the board of education
- Audit Fees
- Expenses for conferences
- Bonus to teachers
- 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.)|
|Hostel room rent||210000|
|Student welfare expenses||40000|
|Repairs and maintenance||125000|
|Provision for depreciation:|
In the books of Tagore School
Income and Expenditure A/c
For the year ending 31st March 2018
|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|
|(excess of Income over expenditure)|
As at 31st March 2018
|Add: Surplus||7650000||2755000||Less: provision for depreciation||(200000)||1800000|
|Research fund||500000||Less: provision for depreciation||(70000)||630000|
|Less: provision for depreciation||(75000)||425000|