Accounts of Not for Profit Concern 12th New Syllabus | Class 12 Maharashtra Board

Accounts of Not-for-Profit Concern

Introduction

There are two types of organizations
1) Trading organizations or Profit-making organizations and
2) Non-trading or Not-for-profit organizations.

The trading organization’s main objective is to earn Profit. They are engaged in Trading activities. i.e. Buying and selling of goods and services, organizations like Sole Trading concerns Partnership Co-Operative organizations, Public Limited Companies, etc. are set up for the purpose of making a profit. Final Accounts which consist of Trading and Profit and Loss Account and Balance Sheet are prepared. The base of Final Accounts is Trial Balance.

Not-for-profit organizations, ‘ main aim is to give service to their members or the society at large. They are not formed for Profit making. They do not carry any Trading activity or manufacturing activity. Sports clubs, Charitable Hospitals, Schools, Colleges, Universities, Trade units, the Chamber of Commerce, Professional Institutions, Trusts, Social Welfare Associations, Religious concerns, Libraries, etc. are examples of Not for Profit concerns. their main object is to give services to the members. They maintain the books of accounts differently.

As their motive is not to earn Profit ‘Not for Profit’ concerns do not prepare a Profit and Loss Account, instead, they prepare an Income and Expenditure Account. Similarly, they do not prepare Trial Balance but they prepare Receipts and Payments Account. These organizations prepare a Balance Sheet to know the Net Worth of the concern on a particular date. The final Accounts of the not-for-profit concerned consist of Income and Expenditure Accounts and Balance Sheet.

You can watch the introduction video.

Practice question of Lecture 2