Class 12 Accountancy - PUNJAB
Accounting for Not-for-Profit Organisations
This chapter introduces accounting practices for Not-for-Profit Organisations (NPOs) such as clubs, hospitals, and schools, which operate for service rather than profit. Unlike commercial entities, NPOs maintain Receipts and Payments Accounts, Income and Expenditure Accounts, and Balance Sheets. For PSEB Class 12 students, this is a high-scoring chapter that tests your ability to convert a cash-based summary into accrual-based income and expenditure statements, while correctly handling specific items like subscription dues, legacy, and life membership fees. Mastering these concepts is essential for solving the comprehensive 6-mark or 8-mark numerical problems frequently asked in board exams.
Start Learning FreeKey Concepts
Not-for-Profit Organisation (NPO)
An entity set up with the primary objective of providing service to society rather than earning profit, such as charitable trusts, libraries, and sports clubs.
Receipts and Payments Account
A summary of cash and bank transactions of an NPO over an accounting period, serving as a classified summary of the Cash Book.
Income and Expenditure Account
A nominal account prepared on an accrual basis to show the surplus or deficit of an NPO for the accounting year, similar to a Profit and Loss Account.
Subscription
The main periodic contribution made by members to maintain their membership, treated as revenue income and adjusted for outstanding and advance amounts.
Fund-Based Accounting
A method of accounting where specific funds raised for specific purposes (like a sports fund or prize fund) are kept separate, and related expenses are deducted from them.
Capital Fund
The accumulated excess of assets over liabilities in an NPO, which is equivalent to the capital account of a proprietary business.
Important Formulas
Board Exam Info
In the Punjab School Education Board (PSEB) Class 12 Accountancy exam, this chapter typically carries around 6 to 10 marks. Questions usually include one objective or short-answer question (1-2 marks) and one major long-answer numerical problem (6 marks) requiring the preparation of an Income and Expenditure Account and a Balance Sheet from a given Receipts and Payments Account with various adjustments.
Frequently Asked Questions
Is Receipts and Payments Account a capital or revenue account?
Receipts and Payments Account is a real account that records all cash and bank receipts and payments of both capital and revenue nature, regardless of whether they relate to the current, past, or future accounting period.
How do we treat the sale of an old asset in the Income and Expenditure Account?
Only the profit or loss arising from the sale of an old asset is recorded in the Income and Expenditure Account. The book value is deducted from the asset in the Balance Sheet, and the actual cash received is shown in the Receipts and Payments Account.
Are honorarium and legacy treated as revenue or capital items?
Honorarium paid to a non-member for services rendered is treated as revenue expenditure and debited to the Income and Expenditure Account. Legacy (amount received as per a will) is generally treated as a capital receipt and added directly to the Capital Fund, unless specified otherwise by the donor.
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