Accounting Records of Not-for-Profit Organisations

Not-for-Profit organisations are established to for the welfare of the society and not with the motive of earning any profits. But this does not mean that they are not required to prepare proper accounting records.

To comply with the regulation of filing accounting records/ financial statements with the Registrar of Society and to ensure proper utilisation of their funds, it is necessary to maintain proper accounting records of not-for-profit organisations.




Books of accounts maintained by Not-for-Profit organisations –

  1. Cash Book – Majority of transactions by not-for-profit organisations are routed through cash or bank. To keep track of the receipts and payments, availability of a proper cash book is a pre-requisite.
  2. Ledger accounts – All the assets, incomes, expenses and liabilities are duly recorded in the ledger accounts which would help in preparing the financial statements at the year end.
  3. Stock Register – To reconcile the quantity of stock available at the year end, a stock register is maintained. This records the stock received and issued during the year.
  4. Fixed Asset Register – This helps in physical verification of fixed assets so as to make sure that assets present in the books of accounts are in fact available with the organisation.

Financial Statements maintained by Not-for-Profit organisations –

Although not-for-profit organisations are not required to prepare Trading and Profit and Loss account as they do not indulge in trading or manufacturing activities.

But to carry out the objectives of the organisation smoothly, it is important to know whether the income generated is sufficient enough to meet the expenditure or not.

These results are further used by the members and other contributors to analyse whether the organisation is fulfilling the objectives for which it was incorporated. For this reason, a not-for-profit organisation is required to prepare the financial statements at the end of the accounting year following the basic principles of accounting.




Following form the part of Financial Statements –

  1. Receipt and Payment Account – The Receipt and Payment account is a summarised form of Cash Book. It records the receipts and payments made by a non-trading concern or a non-profit organisation.
  2. Income and Expenditure Account – It is similar to a Profit and Loss Account. Its main objective is to determine the surplus or deficit for a particular accounting year.
  3. Balance Sheet – It is prepared for ascertaining the financial position of the organisation at the year end. It present the assets and liabilities of the organisation.

Accounting records of Not-for-profit organisations are prepared on similar lines to that of any other entity. They are required in order to comply with the requirements of law and to track the funds available. Also, a not-for- profit organisation is required to file its financial statements with the Registrar of Societies.

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