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 concern Partnership Co-Operative organizations, Public Limited Company, 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, the main aim is to give service to its members or to 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 Unites, 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 in a different way.

As their motive is not to earn Profit ‘Not for Profit’ concerns do not prepare Profit and Loss Account, instead, they prepare Income and Expenditure Account. Similarly, they do not prepare Trial Balance but they prepared 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 not for profit concerned consists of Income and Expenditure Accounts and Balance Sheet.

You can watch the introduction video.

Practice question of Lecture 2