AIM OF PROFIT MAKING VS NON PROFIT MAKING

• Profit making firm = end result is profit
• Non profit- end result if welfare of members, to be charitable
• Example clubs, societies, trusts
• Why formed?
• To cater for social , cultural interests of its members
• Main example = PTA

LET US CONSIDER THE INCOME AND EXPENSES OF A CLUB/SOCIETY

INCOMES

• Subscription, membership fee, registration fee
• Profits from running a side activity of the club; a bar, cafe, shop, refreshments, restaurants
• Grants and donations
• Fund raising activities (competition, dances, etc..)

EXPENSES

• Quite similar to a profit making firm
• Example : purchase of refreshments, inventory for bar
• Competition expenses
• Bar staff salaries
• Rent of clubhouse

GRANTS AND DONATIONS

• Money from donations = capital receipts
• Capital receipts = + to accumulated fund, in Statement of financial position
• However, if amount not received for specific purpose, treat as revenue receipt, hence in income and expenditure account

WHAT ARE THE FINANCIAL RECORDS OF A NON-PROFIT MAKING FIRM?

FINANCIAL RECORDS ARE

• Receipts and payments account
• Subscriptions account
• Refreshments trading account/ bar income statement
• Income and expenditure account
• Statement of financial position

SUBSCRIPTIONS ACCOUNT

NOT FOR PROFIT ORGANIZATION