Class 12 Accountancy - WEST-BENGAL
Accounting for Not-for-Profit Organisations
The chapter 'Accounting for Not-for-Profit Organisations' in Class 12 Accountancy for West Bengal Council of Higher Secondary Education (WBCHSE) students teaches how entities formed for public service, education, or recreation maintain their financial records. Unlike profit-seeking businesses, these organizations do not prepare a Trading and Profit and Loss Account; instead, they prepare Receipts and Payments Account, Income and Expenditure Account, and a Balance Sheet. Mastering this chapter is crucial for board exams as it carries substantial weightage and tests your ability to convert cash-based summaries into accrual-based financial statements, a vital skill for practical accounting.
Start Learning FreeKey Concepts
Not-for-Profit Organisation (NPO)
An entity whose primary objective is providing service to society rather than earning profit, such as schools, hospitals, and clubs.
Receipts and Payments Account
A summary of all cash and bank transactions during an accounting period, acting essentially as a classified 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 current accounting year.
Subscription
The regular periodic contribution made by members to keep their membership active, treated as revenue income for the NPO.
Fund-Based Accounting
Accounting treatment where specific funds (like prize fund or building fund) and their related incomes/expenses are kept separate from general income and expenditure.
Important Formulas
Board Exam Info
Under the West Bengal Council of Higher Secondary Education (WBCHSE) curriculum, this chapter typically carries around 8 to 10 marks in the board exam. Questions usually include a comprehensive 6-mark or 8-mark numerical problem involving the preparation of an Income and Expenditure Account and Balance Sheet from a given Receipts and Payments Account, along with short theoretical or calculation-based questions.
Frequently Asked Questions
Is Receipts and Payments Account the same as Profit and Loss Account?
No. Receipts and Payments Account is a summary of cash transactions (like a cash book), whereas a Profit and Loss Account is prepared on an accrual basis to show net profit.
How is a legacy treated in the accounts of an NPO?
General legacy is treated as revenue income, while a specific legacy (given for a particular purpose) is capitalized and shown as a liability on the Balance Sheet.
Why is the opening Balance Sheet prepared in NPO accounting?
It is prepared to find out the opening Capital Fund or General Fund, which is essential for completing the closing Balance Sheet.
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