Class 12 Accountancy - KERALA
Accounting for Not-for-Profit Organisations
The chapter Accounting for Not-for-Profit Organisations introduces Class 12 students to the financial accounting practices of entities formed for service rather than profit, such as clubs, hospitals, and libraries. You will learn how these organizations maintain books of accounts without aiming for net income. The primary focus is on preparing three key financial statements: Receipt and Payment Account, Income and Expenditure Account, and the Balance Sheet. Mastering this chapter is essential for Kerala SCERT board exams as it consistently features comprehensive practical problems carrying significant weightage.
Start Learning FreeKey Concepts
Not-for-Profit Organisation (NPO)
Entities set up with the objective of providing service to society rather than earning profit, relying mainly on subscriptions, donations, and government grants.
Receipt and Payment Account
A summary of cash and bank transactions of an NPO during an accounting year, serving as a classified summary of the Cash Book.
Income and Expenditure Account
A nominal account prepared on an accrual basis to find out the surplus or deficit of an NPO for the accounting period, similar to a Profit and Loss Account.
Subscription
The regular periodic contribution made by members of the NPO, treated as a major source of revenue income.
Fund-Based Accounting
A method of accounting where specific funds raised for a particular purpose (like a prize fund or match fund) are kept separately and used exclusively for that purpose.
Important Formulas
Board Exam Info
In the Kerala SCERT Class 12 Accountancy board examination, this chapter typically carries around 8 to 12 marks. Questions usually include a long practical problem requiring the preparation of an Income and Expenditure Account and Balance Sheet from a given Receipt and Payment Account, along with short answers or objective questions regarding fund-based accounting and the treatment of specific items.
Frequently Asked Questions
Is Receipt and Payment Account the same as Profit and Loss Account?
No. Receipt and Payment Account is essentially a summary of cash transactions (like a Cash Book) showing all cash inflows and outflows regardless of the period, whereas a Profit and Loss (or Income and Expenditure) Account is prepared on an accrual basis for a specific accounting period.
How is a Life Membership Fee treated in accounts?
Life membership fee is considered a capital receipt and is directly added to the Capital Fund on the liability side of the Balance Sheet, as it is a non-recurring receipt from a member.
What happens to the closing balance of a Receipt and Payment Account?
The closing balance of a Receipt and Payment Account represents the total cash in hand and cash at bank at the end of the accounting year, which is then shown as an asset in the closing Balance Sheet.
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