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Specical Items in NPO Accounting

"Handling the unique income streams of non-profits."

Unlike businesses that have "Sales", NPOs rely on subscriptions, donations, and grants. Their accounting treatment depends on whether they are for general use (Revenue) or specific purpose (Capital).

1. Subscriptions

Nature: Revenue Receipt (Main source of income) account: Credited to Income & Expenditure Account

General Rule:

  • Show only current year's income.
  • Exclude past arrears received this year.
  • Exclude future advance received this year.
  • Include current year's outstanding.

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2. Donations

Donations can be General or Specific.

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Tip: If donation amount is very large and non-recurring, some accountants capitalize it, but sticking to the General/Specific rule is safer for exams.

3. Legacy

Definition: Amount received as per the will of a deceased person.

Treatment:

  • General Legacy: Revenue Receipt (Income side of I&E)
  • Specific Legacy: Capital Receipt (Added to specific fund in B/S)

4. Life Membership Fees

Nature: Capital Receipt (One-time payment by members) Treatment:

  • NOT shown in Income & Expenditure Account.
  • Added to Capital Fund directly in the Balance Sheet.

5. Entrance Fees / Admission Fees

Nature: Debate exists (Revenue vs Capital). Standard Exam Treatment:

  • If question is silent: Treat as Revenue Receipt (Income).
  • If question says "Capitalize": Add to Capital Fund.
  • If question says "50% Capitalize": 50% to Capital Fund, 50% to I&E Income.

6. Sale of Old Assets vs Periodicals

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Note

Asset Sale Example: Furniture (Book Value ₹1,000) sold for ₹800.

  • ₹800 Cash: Goes to R&P Account.
  • ₹200 Loss: Debit to Income & Expenditure Account.
  • Balance Sheet: Reduce Furniture by ₹1,000 (Book Value).

7. Endowment Fund

Definition: A fund arising from a bequest or gift, the income of which is devoted for a specific purpose. Treatment: Capital Receipt (Liabilities side of Balance Sheet).

8. Consumable Items (Stationery, Medicines, Sports Material)

For items consumed during the year, we calculate the Cost of Material Consumed to be debited to I&E A/c.

Formula: Opening Stock + Purchases - Closing Stock = Consumption

Quiz: Special Items

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