Associations

Clubs, Associations and other non-profit making organization do not have trading and profit and loss accounts drawn up for them, as their main purpose is not trading or profit making. They are run so that members can do things such as play football or chess.

the kind of final account prepared by these organizations are either receipts and payments or income and expenditure accounts.

receipts and payments.

receipts and payments accounts are summary of the cash book for the period

income and expenditure accounts.

When assets are owned, and there are liabilities, the receipts and payments accounts is not a good way of drawing up final accounts. Other than the cash received and paid out, it shows only the cash balances . the other assets and liabilities are not shown at all. What is required is :

  1. a balance sheet, and
  2. an account showing whether the association's capital has increased

In a profit-making firm, 2 would be atrading and profit and loss account. In a non-profit organization, 2 would be an income and expenditure account.

An income and expenditure account follows the same rules as trading and profit and loss accounts. The only differences are the terms used. A comparison now follows:

Profit making firm / Non-profit organization
A trading and profit and loss account / Incomeandexpenditure accounts.
Net profit / Surplus of income over expenditure
Net loss / Excess of expenditure over income

Accumulated fund

A sole ore a partnership would have capital account. A non-profit making organization would instead have accumulated fund. It is effect the same as a capital account, as it is the difference between assets and liabilities.

In sole trader or partnership

Capital + liabilities = assets

liabilities+ Accumulated fund = assets

outstanding subscription

so far we have treated subscriptions owing as being an asset. However, any treasurer of club would tell you, most subscriptions that have been owing for along time are

Donations

any donations received are usually shown as in come in the year that they are received. It is transferred to the credit of income and expense account

entrance fees

new member often have to pay an entrance fee in the year that they join, in addition to the membership fee for that year. entrance fees are normally included as income in the year that they are received. It is transferred to the credit of income and expense account

subscription

subscription, in an ordinary course, is a regular revenue receipt. It is transferred to the credit of income and expense account

New items

Accumulated fund : A form of capital account for non-profit making organization

income and expenditure accounts an account for non-profit making organization to find the surplus or loss made during a period

Receipts and payments.

Receipts and payments accounts : a summary of the cash book of a non-profit making organization

Main point to remember

  1. a receipt and payments account dose not show full financial position of an organization, except for one where they only asset is cash.
  2. income and expenditure account is drawn up to show either the surplus of income over expenditure or the excess of expenditure over income. These are the same as 'profit' or 'lose, in a profit-base organization.
  3. Accumulated fund is basically the same as a capital account.
  4. Although the main object of the organization is non-profit making, certain activities may be run at a profit ( or may lose money ) in order to help finance the main objects.
  5. in an examination you should treat subscription owing at the end of a period in the same way as debtors, unless told otherwise
  6. Donation are usually treated as income in the period in which they are received
  7. entrance fees are usually treated as income in the year in which they are received
  8. the treatment of life membership fees is purely at the discretion of the organization

1/1 the association received in cash20000 NIS donation from Ali

2/1 company deposited 19000 NIS in bank of Palestine

More than 1000NIS must not be kept in the society's hand (cash)

The society must open an account or more in the bank

3/1 subscriptions paid by Khaled member amounted to 50NIS

4/1subscriptions paid by Salem member amounted to 50NIS

5/1 the company bought furniture from supplier Al nour at 3000 NIS including vat, invoice number 195 and the invoice paid in cheque no. due date 7/1

7/1the bank of Palestine deducted the cheque no.97 from current account

9/1the association paid the telephone expense invoice no 434 to Etisalat company by cash 367NIS, price included VAT

10/1 the association paid the rent expense of4000NIS by cheque no. 45 due date 13/1

record closing entry by electronic way

  • set up surplus account
  • choose accounting menu
  • from report choose "balance sheet",select accounts tab folder
  • in field profit and loss account type surplus account number
  • click "closing accounting period" button
  • Asseal show the message "A new accounting dated will be created"

open a new group with copy a chart of accounts by electronic way from previous year to a new year

  • Set up a new group until Asseal display the window titled "new group and select the option "A group from a existing group", then click continue
  • Asseal will display the window tiled "select group to copy from"
  • Move to group you want copy a chart of account from and stand on it , to continue setting up your company select the " continue " button or press " enter "
  • Asseal display the company properties group window, modify the accounting period , to continue setting up your company select the "continue" button or press "enter"

record opening accounting entry and stock opening storage transactionby electronic way

  • click the utilities menu at the top window
  • from the pull-down window select " copy accounts and items from other groups "
  • Asseal will display warning message click " continue "
  • Asseal will display the window titled "copy accounts and items from other groups "
  • Click " select" button, and choose the group related the previous year and click " select
  • Then click the option " copy account" then click the option " create a journal to copy acc. Balance"
  • To record stock opening storage transaction in electronic way click copy items from "copy accounts and items from other groups " window,Then click the option " copy Items" then click the option " create a transaction to copy items Balance".
  • Click the button "continue"

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