Subject: Principles of Accounting
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:
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)
In this balance sheet, all the assets and liabilities related to the current year is only taken.
For assets:
For liabilities:
Income & Expenditure a/c
Expenditure | Amount | Income | Amount |
By subscription XX |
|
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) | XX |
Rent:
Income & Expenditure a/c
Expenditure | Amount | Income | Amount |
To Rent XX | 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:
Solution:
Income & Expenditure a/c
Expenditure | Amount | Income | Amount |
To Rent 12000 | 11800 | By subscription 25000 | 25300 |
Opening Balance Sheet
Liabilities | Amount | Assets | Amount |
Advance subscription (previous year) | 1000 | Out. Subscription (previous year) | 1000 |
2000 | 1500 |
Closing Balance Sheet
Liabilities | Amount | Assets | Amount |
Adv. Subscription (Next year) | 1200 | Out. Subscription (current year) | 1500 |
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 | XX |
Closing Balance Sheet
Liabilities | Amount | Assets | Amount |
Creditors for current year | XX | Stock of stationery (current year) | 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 |
| 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
© 2019-20 Kullabs. All Rights Reserved.