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Non-Profit Making Organisations

Simple but not Stupid

In the simplest of all cases, all we need to do at the end of a year is to prepare an account like this:

Then there would be a balance carried down which is either positive or negative depending on whether they received more than they spent or spent more than they received. Let's put some figures to this example now to see how it works; but don't forget, we are dealing here with a receipts and payments account which is the same as a cash book so there are no accruals and prepayments to take into account.

That's it! Wasn't too bad was it? Now try a question of your own - very, very similar to the one you just saw!

Now try this - this question looks a lot different but the method is just the same as the previous question.

For You To Do 2:

Prepare the Receipts and Payments account for the Steel Social Club from the following information. As part of your answer you need to calculate the cash balance c/d.

Now take a look at the solution...

Final remarks: some problems with the Receipts and Payments Account

Clubs and societies prepare a Receipts and Payments Account that just tells us what has been received and paid in cash. This means that such non-profit making organisations might not always apply the accruals concept of accounting. Not applying the accruals concept is not a problem for the kinds of organisations we are dealing with here.

There are problems with the Receipts and Payment Account approach to accounting too:

• Apart from the cash balances, it doesn't show any assets or liabilities.
• There is no real indication, except in the simplest cases, of whether the organisation has made a surplus or a deficit or whether they have made a surplus or deficit on anything that it does.

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