A Non-Profit Organization is an organization established for the purpose of social welfare and the promotion of social arts and culture. These are usually founded as charities with a motive for service. The trustee manages these organizations. Members of the organization elect a trustee. Nonprofits raise funds from their members and the general public to achieve their goals.
The main motivation for these organizations is to provide services. But they may eventually benefit. In general, these organizations do not manufacture, buy, sell, or provide services for goods. Therefore, they do not need to prepare trading and P & L A / c. They credit the funds they receive to the Capital Fund or the General Fund A / c.
Accounting for Non-Profit Organizations
As we know, non-profits do not trade goods or provide profitable services. However, they also need to keep good records of income, expenses, assets, and liabilities. Their main sources of income are donations, subscriptions and grants. Therefore, most of the transactions are done through cash or bank accounts.
Appropriate books, firstly because members and contributors are accountable, and secondly because the law requires the government to maintain adequate books so that they can manage grants appropriately. Proper accounting also reduces the risk of fraud and embezzlement. In addition to your ledger and cash book, you also need to maintain an inventory ledger. The stock ledger also maintains a complete record of all fixed assets and consumables.
n non-profit accounting, instead of maintaining Capital A / c, these organizations maintain Capital Fund or General Fund A / c. They deposit surpluses, lifetime membership fees, donations, heritage, etc. into this account.
Non-profits are requires to prepare final accounts or financial statements at the end of the fiscal year in accordance with accounting principles. The final account for these organizations consists of:
Receipts and payments A / c: An overview of cash and bank transactions. This will help you create a balance sheet A / c and a balance sheet. You must also submit it to the Social Registration Bureau along with your balance sheet A / c and balance sheet.
Balance A / c: Similar to P & L A / c, check for any surplus or deficiency.
Balance Sheet: Create in the same way as the balance sheet for profit motivation concerns.
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