Balance Sheet of not-for-profit organization

27/12/2020 0 By indiafreenotes

Even a non-profit organization maintains proper books of accounts. It aims to facilitate simple and convenient calculation of items of income and expenditure and finding the correct position of assets and liabilities of the organization. Let us learn how this balance sheet is made and the accounting treatment of a general fund.

There are several components of the accounting system of non-profit organization. This includes the balance sheet as well.

The balance sheet of non-profit organizations is prepared in the same manner as in the case of business enterprises. Assets of the organization are recorded on the ‘Right-hand side’ and Liabilities on the ‘Left-hand side’. Except for some peculiar transactions, the items are also same. The term ‘Capital’ is nowhere found in the case of non-profit organizations; instead Capital Fund, General Fund or Accumulated Fund is appearing in the Balance Sheet.

The amount of this fund is calculated by deducting the amount of liabilities from the value of assets. In this manner we can say that the method of finding out this fund is exactly same that as of calculating the capital of any business enterprise.

Accounting Treatment of General Fund and Preparation of Balance Sheet

  • Preparation of a balance sheet starts with the general fund. You have to add the respective surplus or deficit in the amount.
  • Further, add life membership fees or legacies at this stage.
  • Put all fixed assets on the asset side of the balance sheet.
  • Showcase the amounts paid in advance and amount due on the assets and liabilities side.
  • Post the closing balances of the assets and liabilities on the respective side of the balance sheet.
  • To calculate the amount of the fund, deduct the value of total liabilities from the value of assets.

The surplus or deficit of the year is adjusted to the fund of previous year. It is worth mentioning that the items which have been capitalized during the current year should also be added. Specific funds created for some specific purposes are shown on the liabilities side. For example, Match Fund, Prize Fund etc. are shown on the liabilities side.

The amounts received on account of these funds, if invested separately, are represented by specific assets in the balance sheet on assets side respectively. For example, Match Fund Investments, Prize Fund Investments etc. are shown on the assets side.

A specimen of Balance Sheet is given below: