Not for profit Organisation, are those organizations, that are established to work for the benefit of the society, or for promoting art and culture. Their main objective is to serve the society and earn profit in the due course. Thus, unlike other organizations they are not guided by the profit motive but earning profit is ancillary to their main objective such that the profit can be utilised for social welfare.
They provide service either to a specific group or community of people or public at large. Not-for-profit organizations exist as charitable trusts or charitable societies.
Since, their primary motive is welfare of the general public they normally do not deal in trading or manufacturing activities. Hence, there is no requirement of maintaining a Trading and Profit and Loss Account.
Characteristics of Non Profit Organisation
The features of not for profit organisation class 12 are described below –
- Primary Motive – These organizations are incorporated for sole purpose of providing service to general public either at a nominal charge or completely free of cost. They are not directed to work for earning profit.
- Management – Non-profit organizations are managed by members who subscribe to the organization by paying a specified fees. Out of these members, a managing committee is elected to run the daily operations.
- Sources of Income – Unlike other organizations who generate income by undertaking commercial activity, non profit organizations depend on other sources for generating income. The major sources of income are – donations, government grant, subscriptions from members and interest income from investments.
- Surplus not distributed – Although these organizations do not function to earn profits, there may be excess of income over expenditure. Instead of distributing such surplus among the members, it is adjusted in the capital fund.
- Area of work – The not-for-profit organizations work for serving the society in matters related to education, health, religious, recreation and other social areas.
- Goodwill/ Reputation –These organization gains their reputation in the society based on their contributions towards the welfare of the people and not on the basis of satisfaction of customer’s.
- Accountability – The members who manage the activities of the organizations are answerable to the society as a whole for fulfilling the objectives for which the organization was established.
- Proper Books of Accounts – To ensure that the funds and efforts of the organization are directed towards the objectives for which it was established, the members are required to furnish proper accounts and financial statements to the Registrar of Societies at the end of each accounting year. This includes Receipt and Payment account, Income and Expenditure account and Balance Sheet.
Not for Profit Organizations are set up for serving the members and the society. They do not engage in manufacturing or selling goods rather they work for promoting a specific cause. Thus as the name suggests, NPO function without any profit motive in mind.
Non Profit Organisation Class 12 Notes
Here, We provides you with Accounts Class 12 NPO Notes, well designed by our subject experts who have prior experience in this field.
Class 12 NPO Notes are captivating and concise which serve as a handy tool for effective preparation of Accountancy examination. The information provided in NPO Notes is carefully selected by following the latest guidelines and prescribed syllabus to guide students into mastering the topics.
These notes contain all the tips and tricks with which you can learn the subject in a better way. These notes are curated in such a way that students can rely on these notes for getting a good grip over the concepts.
Chapter 1 – Accounting for Not-for-Profit Organisation
- Meaning and Characteristics of Not-for-Profit Organisation
- Accounting Records of Not-for-Profit Organisations
- Receipt and Payment Account
- Income and Expenditure Account
- Balance Sheet
- Some Peculiar Items