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C H A P T E R

Non-Trading Organisation

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Non-Trading Organisations Non-Trading Organisations are those organisations whose main objective
is not to earn profit but to render services to its members and to the
society.
2. Receipts & Payments Receipts & Payments Account is a summary of Cash and Bank
Account transactions prepared at the end of the accounting period. It records
all receipts and payments, whether of revenue or capital nature, and
irrespective of the period to which they relate.
3. Income & Expenditure Income & Expenditure Account is the summary of income and
Account expenditures of the year. It is like a Profit & Loss Account. It shows surplus or
deficit. It is prepared on accrual basis of accounting.
4. Surplus Excess of income over expenditure of a Non-Trading Organisation is termed
as surplus.
5. Deficit Excess of expenditure over income of a Non-Trading Organisation is termed
as deficit.
6. Subscription Amount received on an annual basis at the time of renewal of the
membership by a non-trading organisation.
7. Entrance Fees/Admission It is the amount which the members pay to a club or association at
Fees the time of becoming a member.
8. Legacy Amount received by an organisation from a deceased person under
his will.
9. Donation It is the amount donated to the organisation in cash or kind.
(a) General Donation When the donor does not specify any condition for using the amount of
donation, it is known as general donation.
(b) Specific Donation When donation is for a specific purpose, say for the construction of a room
or pavilion, it is known as specific donation.
10. Life Membership Fee It is the amount received from a member in lump sum for which he is
given the membership of the organisation for the whole life.
11. Fund Based Accounting It is a system of accounting whereby donations, incomes, etc., relating to
a particular fund are credited to it and expenses are debited.

CHAPTER SUMMARY

• Non-Trading Organisations are voluntary organisations, which are set up not for earning profits but for rendering
services to its members and to the society. Examples are: schools, hospitals, literary societies, etc. Their main sources
of income may be donations, legacies, subscriptions, life membership fees, entrance fees, grants, etc.
• Their main objective may be social, educational, religious or charitable and they take the form of clubs,
societies or charitable bodies and so on. They do not earn profit. They provide service to their members
and to the society.