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Non-Profit Making Organisations

KISS: Keep It Simple, Stupid

Why are these organisations important for accountants though? They are important because the accounts of these organisations are simpler than they are for a sole trader, a partnership or a limited company. The accounts are simpler for at least two reasons:

• The members of these organisations are normally the only people interested in them
• They are usually very simple organisations:
  • Not that many members
  • Not a huge amount of money involved
  • Not that many activities

In lots of cases the only thing that the Treasurer (the bookkeeper or accountant) of a club or society needs to do is to keep track of the cash and not a lot more than that. Well, why bother with having to set up a full set of ledgers for a Dog Club that has, say, 50 members paying subscriptions of £10 a year that meets 10 times a year and just has one dog show and an annual dinner each year? Not worth the bother is it?

There's profit Jim but not as we know it

Then again, just because an organisation doesn't intend to make a profit doesn't mean that it won't: lots of them do and in the end, all organisations have to make some profit or they won't survive.

Jargon buster

The cash account or cash book is called the Receipts and Payments Account and the Trading and Profit and Loss Account is called the Income and Expenditure Account. Profits are not called profits, they are called surpluses (or deficits if it's a loss) and the capital account isn't the capital account now, it's called the accumulated fund.

Let's just accumulate

The capital account is called the Accumulated Fund and that tells us that there are no private owners who have the right to keep the profits themselves or take an income from the organisation and so on - non-profit making organisations belong to all of their members together.

Guess what they call the balance sheet, by the way? It's still called the balance sheet!

Collecting data

What data will a fairly simple club or society collect? For lots of them, they will receive money for:

• Subscriptions
• Sale of refreshments
• Raffles and other competitions
• Sale of publications
• Annual dinner ticket sales
• Interest on deposit account at the bank
• Sale of old equipment

Receipts will come from such things as:

• Purchase of refreshments
• Purchase of raffle prizes
• Costs of running an annual dinner
• Purchase of new equipment
• Rent of hall

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