Class 12 Accountancy - MAHARASHTRA
Accounting for Not-for-Profit Organisations
The chapter 'Accounting for Not-for-Profit Organisations' in Class 12 Accountancy under the Maharashtra Board (MSBSHSE) introduces students to the financial record-keeping of entities established for service rather than profit, such as libraries, hospitals, and sports clubs. Unlike commercial enterprises, these organizations do not prepare a Trading and Profit and Loss Account; instead, they maintain a Receipts and Payments Account, an Income and Expenditure Account, and a Balance Sheet. Mastering this chapter is crucial for board exams as it usually features a heavy-weighted 10 to 12-mark comprehensive problem involving adjustment entries like outstanding expenses, depreciation, and subscription accruals.
Start Learning FreeKey Concepts
Not-for-Profit Organisation (NPO)
An entity formed with the primary objective of providing service to society rather than earning a profit, such as schools, trusts, and clubs.
Receipts and Payments Account
A summary of cash and bank transactions categorized under various heads, acting as a classified summary of the Cash Book for the entire accounting year.
Income and Expenditure Account
A nominal account equivalent to the Profit and Loss Account, prepared to ascertain the surplus or deficit of incomes over expenditures for the current accounting period.
Subscription
The main periodic contribution made by members to keep their membership active, treated as revenue income and adjusted for outstanding and advance amounts.
Capital Fund
The accumulated fund of a Not-for-Profit Organisation, equivalent to Capital in business entities, calculated as Total Assets minus Total Liabilities.
Important Formulas
Board Exam Info
In the Maharashtra State Board (MSBSHSE) Class 12 Accountancy exam, this chapter typically carries about 10 to 12 marks. The question paper almost always features a major 10 or 12-mark practical question requiring students to convert a Receipts and Payments Account along with additional adjustments into an Income and Expenditure Account and a Balance Sheet.
Frequently Asked Questions
Is Receipts and Payments Account the same as Profit and Loss Account?
No. A Receipts and Payments Account is simply a summary of cash and bank transactions (capital and revenue, past, current, and future), whereas an Income and Expenditure Account records only current year revenue items on an accrual basis.
How do we treat Life Membership Fees in NPO accounts?
Life membership fees are treated as a capital receipt because they are non-recurring in nature. They are directly added to the Capital Fund on the liability side of the Balance Sheet.
What happens to opening cash and bank balances in the Income and Expenditure Account?
Opening and closing cash or bank balances appearing in the Receipts and Payments Account are completely ignored when preparing the Income and Expenditure Account, as they represent assets, not income or expenditure.
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