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Students Of CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes

Students Of CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes

CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits : The CBSE board conducts final examinations at the end of every academic year for All India Senior School Certificate Examination (AISSCE) for Class 10 and 12. The board also annually conducts the AIEEE exam for admission to undergraduate courses in engineering and architecture in numerous colleges spread over India. It also conducts AIPMT All India Pre medical Test for admission to major medical colleges in India.

Students Of CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes

CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits : CBSE Class 11 Commerce Accountancy and including it as an information system play and important role in this field of study. The important points and syllabus structure is given here.

The whole syllabus is divided into 3 parts, Part A- Financial accounting 1, Part B- Financial accounting 2 and Part C- Project work.

Part A has 2 units -Theoretical framework and accounting process. Part B has 3 units- Financial statements of sole proprietorship from complete and incomplete records, Financial statements of not for profit organizations and Computers in accounting.

Details of project work is added in this link. Theory contains 90 marks while project work is of 10 marks.

Students Of CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes

CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits : Here we collected CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes in PDF format. cakart team members provides solved papers, board question papers, revision notes and NCERT solutions for CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes . The topics included are Not-for-profit organizations concept, Receipts, Payments Account features, preparation and others.CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes complete details and syllabus  given here:

Download here Complete details of CBSE class 11 Accountancy study material in PDF format

Part B: Financial Accounting – II (40 Marks)

Unit 4: Financial Statements of Not-for-Profit Organizations (30 Periods)

  • Not-for-profit organizations: concept.
  • Receipts and Payments Account: features and preparation.
  • Income and Expenditure Account: features, preparation of income and expenditure account and balance sheet from the given receipts and payments account with additional information.

Scope:
(i) Adjustments in a question should not exceed 3 or 4 in number and restricted to subscriptions, consumption of consumables and sale of assets/ old material.
(ii) Entrance/ admission fees and general donations are to be treated as revenue receipts.
(iii) Trading Account of incidental activities is not to be prepared.

Students Of CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes

CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits : Nonprofit organizations serve in a variety of sectors, such as religious, education, health, social services, commerce, amateur sports clubs, and the arts. Nonprofits do not have commercial owners and must rely on funds from contributions, membership dues, program revenues, fundraising events, public and private grants, and investment income. Our intent is to present some of the basic concepts that are unique to nonprofit accounting and reporting, including the financial statements required by the Financial Accounting Standards Board (FASB).

We will not dwell on the accounting that is similar to that used by for-profit businesses. If you are not familiar with accounting for businesses or you wish to refresh your understanding, you will find free explanations, quizzes, Q&A, and more at Accounting Topics.  Accountants often refer to businesses as for-profit entities and to nonprofit organizations as not-for-profit entities. We will be using the more common term nonprofit instead of not-for-profit.

Financial Statements of not-for Profit Organisations

IMPORTANT POINTS :

Learning Objectives :

After studying this lesson you will be able to
State the meaning of Not – for – Profit organization :
Explain the various items of accounting in Not-for-Profit organization; Explain about the Financial Statements of Not-for-Profit organization. Show the According Treatment of various items of accounting in Notfor-Profit organization.

Teaching Methods :

Teachers are advised to use various examples of Not-for-Profit organizations.
Story telling method can also be used for various items of Not-for-Profit organization.

Meaning of Not-for-Profit organization

The primary motive of Not-for-Profit organizations is to render services to their member or to promote culture, art, education and other religions, social and charitable activities. These institutions or organizations do not maintain their accounts on the basis of business enterprises. The non-profit seeking entities exists with a primary objective of providing service. For this reason, these institutions do not prepare profit and loss Account.

Examples of not-for-organizations :

Hospitals, dispensaries, sports clubs, recreation clubs, temples, dharamshalas, orphanage, school and College etc.
Such organizations prepares following financial statements at the end of accounting period :

1. Receipts and Payments Account
2. Income and Expenditure Account
3. Balance Sheet

Receipts and Payments Account :

This account is merely a summary of the transactions appearing in the cash book. After preparation of this account, it is easy to prepare the income and expenditure account as well as the balance sheet. All receipts are shown on its debit side and all payments are shown on its credit side. All the receipts and payments during an accounting period are included in it under appropriate head- ings. For example, if a club receives subscription for its members on different dates, they will be recorded in the cash book in a chronological order, where as the receipts and payments account will contain the total subscriptions received during the year.

Features of Receipts and Payment Account :

It is clear from above discussion that the Receipt and Payment Account is merely a summary of the all receipt and all payment during the year. Special features of Receipts and Payment Account are as follows :

  1. It is a real account. Thus Receipts are on its debit side and payments on the credit side.
  2. Excess of receipt of over payment is the closing balance of cash which is shown in Balance sheet on asset side.
  3. This account begins with the opening balance of cash or bank.
  4. An item may be repeated many times in a cash book, but it is shown once in ‘Receipts and Payment Account’.
  5. All cash payments are shown on its credit side irrespective of the fact whether these are of capital nature or of revenue nature and whether they relate to current year, previous year or next year.
  6. Receipt and Payment Account records only the actual receipt and payment of cash. Non-cash items such as depreciation, outstanding expenses and accrued incomes are ignored while preparing it.

Limitations of Receipts and Payment Account

  1. It is not prepared on accrual basis, therefore no adjustment are made in it.
  2. This account does not show the income or expenditure of the accounting period.
  3. It does not show the amount received or paid is only for a particular accounting priod.

Differences between Nonprofits and For-Profits

The following table highlights some of the key differences between nonprofit organizations and for-profit corporations

18X-table-text-01

Mission, Ownership, Tax-Exempt Status

Mission and Ownership

While businesses are organized to generate profits, nonprofits are organized to address needs in society. As a result, nonprofits will issue a statement of activities instead of the income statement issued by for-profit businesses.

Since nonprofits do not have owners, there is no owner’s equity or stockholders’ equity and there cannot be distributions to owners.

Some people mistakenly assume that if an organization is designated as a nonprofit, it cannot legally earn profits. In fact, earning profits (having revenues that exceed expenses) is almost a necessity for a nonprofit if it hopes to withstand such things as:

  • unexpected expenses
  • uneven flows of revenues
  • a decrease in revenues
  • rising costs due to inflation
  • an increase in staffing needs
  • an increase in the need for its services
  • a purchase or replacement of needed equipment
  • other needs since a nonprofit cannot issue shares of stock

Tax-Exempt Status

Nonprofit organizations may apply to the Internal Revenue Service in order to be exempt from federal income taxes.

A second issue is whether a donor’s contribution to a nonprofit organization will qualify as a charitable deduction on the donor’s income tax return. For example, churches, schools, and Red Cross chapters are some of the nonprofits that will qualify as tax-exempt and their donors’ contributions will also qualify as charitable deductions on the donors’ income tax returns.

However, there are nonprofits that qualify as tax-exempt but their donors’ contributions do not qualify as charitable deductions (although they may qualify as business expenses). Examples of these nonprofits include social organizations, chambers of commerce, college fraternities and sororities, amateur sports clubs, employee organizations, and more.

You can learn more about the tax-exempt status for a nonprofit, the deductibility of contributions by donors, and the taxability of activities not directly related to a nonprofit’s exempt purpose in the Internal Revenue Service Publication.

Even if a nonprofit is exempt from federal income taxes, it is likely that its employees will be subject to employment taxes. Nonprofits may or may not be exempt from sales taxes, real estate taxes, and other taxes depending on which state in the U.S. they are incorporated or operate.

Download here CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes

Students Of CBSE Class 11 Commerce Accountancy Financial Statements Of Non-Profits Important Notes

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