Balance Sheet for Non Profit Organization

INTRODUCTION TO BALANCE SHEET

Balance sheet is a financial statement that summarizes all the assets, liabilities and capital of a particular company at a specific period of time. It shows all the amount that the company invested on certain project, the amount of money it owns and it owes. It is prepared by all the profitable and non-profitable organizations.

The organizations prepares its balance sheet so that they can know the financial position of their organization. It is prepared by taking assets and liabilities and also fund based items. The following two balance sheets are prepared by the non-profit organization:

1. Opening balance sheet
2. Closing balance sheet

Opening Balance sheet

This balance sheet is prepared to know the amount of capital fund. In this balance sheet, all the assets, and liabilities related to the previous year is only taken. The amount of capital is obtained by deducting the total liabilities from total assets. (i.e. Capital = Assets – Liabilities)

Closing Balance sheet

In this balance sheet, all the assets and liabilities related to the current year is only taken.

For assets:

1. Fixed assets of previous year should be shown in closing balance sheet after adjustments if any i.e. purchase of assets should be added whereas the sale of assets and depreciation should be deducted from the concerned assets.
2. Prepaid expenses, accrued income and investment should be shown on the assets side.
3. Closing balance of cash and bank should be shown on the assets side.

For liabilities:

1. All fund based items such as donation, prize fund, tournament fund, etc. are shown in liabilities side.
2. If an organization has taken a loan in previous year then that should be shown in closing balance sheet unless they are repaid in the current year.
3. Outstanding expenses, advance income for the next year are shown in liabilities side.

Fig: Balance Sheet format sample

Treatment of Revenue Items

Subscription:

Income & Expenditure a/c

Expenditure	Amount	Income	Amount
		By subscription XX (-) Outstanding previous year XX (+) Outstanding current year XX (+) Advance received in previous year for current year XX (-) Advance received in current year for next yearXX	XXX

Opening Balance Sheet

Liabilities	Amount	Assets	Amount
Adv. Subscription (previous year)	XX	Out. Subscription (previous year)	XX

Closing Balance Sheet

Liabilities	Amount	Assets	Amount
Adv. Subscription	XX	Out. Subscription (current year) Out. Subscription previous year (if any)	XX XX

Rent:

Income & Expenditure a/c

Expenditure	Amount	Income	Amount
To Rent XX (-) Outstanding (previous year) XX (+) Outstanding (current year) XX (+) Advance paid in previous for current year XX (-) Advance paid in current year for next yearXX	XX

Opening Balance Sheet

Liabilities	Amount	Assets	Amount
Outstanding rent	XX	Advance rent	XX

Closing Balance Sheet

Liabilities	Amount	Assets	Amount
Outstanding rent (current year)	XX	Advance rent (Next year)	XX

ILLUSTRATION 1:

How will you show the amount of subscription and rent in the final account of a non-profit organization from the following Receipt and Payment account and additional information?

Receipt and Payment a/c

Receipt	Amount	Payment	Amount
To subscription	25000	By rent	12000

Additional information:

1. Outstanding subscription for previous year Rs.1000
2. Outstanding subscription for current year Rs.1500

• Subscription received in advance at the end of previous year Rs. 1000

1. Subscription received in advance at the end of current year Rs. 1200
2. Rent outstanding at the end of previous year Rs. 1000
3. Rent outstanding at the end of current year Rs. 1300

• Rent paid in advance at end of previous year Rs. 500
• Rent paid in advance at end of current year Rs. 1000

Solution:

Income & Expenditure a/c

Expenditure	Amount	Income	Amount
To Rent 12000 (-) Outstanding (previous year) 1000 (+) Outstanding (current year) 1300 (+) Advance paid in previous for current year 500 (-) Advance paid in current year for the next year1000	11800	By subscription 25000 (-)outstandingprevious year1000 (+)outstandingcurrent year1500 (+) advance received inpreviousyear forcurrent year1000 (-) Advance received in current year for the next year1200	25300

Opening Balance Sheet

Liabilities	Amount	Assets	Amount
Advance subscription (previous year) Outstanding rent (previous year)	1000 1000	Out. Subscription (previous year) Advance rent (previous year)	1000 500
	2000		1500

Closing Balance Sheet

Liabilities	Amount	Assets	Amount
Adv. Subscription (Next year) Outstanding rent (current year) Outstanding rent (previous year)	1200 1300 1000	Out. Subscription (current year) Out. Subscription (previous year) Advance rent (Next year)	1500 1000 1000
	3500		3500

Treatment of Consumable Items

Consumable items are the items for which opening and closing stock and payment made during the year is given in the question. For e.g. stationery, sports, materials, postage, stamps etc.)

The cost of materials can be calculated by applying the following formulae:

Cost of materials = Opening stock + purchase/payment – closing stock – opening creditors + closing creditors + adv. paid in previous year – adv. paid in current year

Opening Balance Sheet

Liabilities	Amount	Assets	Amount
Creditors for stationery last year	XX	Stock of stationery Advance paid	XX XX

Closing Balance Sheet

Liabilities	Amount	Assets	Amount
Creditors for current year	XX	Stock of stationery (current year) Advance paid	XX XX

Treatment of Fund based Items

Fund based items are the specific items which are created to meet the specific purpose of the organization. For e.g. Tournament fund is created to meet the expenses of a tournament and Prize fund for giving prizes, building a fund for constructing building etc. These items should be treated in the balance sheet.

Balance Sheet

Liabilities	Amount	Assets	Amount
Tournament fund XX Add: Income from tournament fund investment XX Add: Donation for tournament fund XX Less: Tournament expensesXX	XX	Tournament fund investment	XX

References:

Sharma, Narendra et.al., Principles of Accounting-XI, Bundipuran Prakashan, Kathmandu

Koirala, Yadav Raj et.al., Principles of Accounting-XI, Asmita Books Publication, Kathmandu

Shrestha, Dasharaha et.al., Accountancy-XI, M.K. Prakashan Kathmandu