Page 73 - VIRANSH COACHING CLASSES

7. General Donations
8. Specific Funds
9. Endowment Funds

Competency Statement

o The students will be able to :
 Understand the meaning and features of Not for Profit concerns.
 Know the meaning of Receipts and Payments Account.
 Understand the meaning of Income and Expenditure Account and its difference form Profit &
Loss Account.
 Understand difference between Profit and Not for Profit organisations.
 Learn to acquire the skills for Preparing Income and Expenditure Account and Balance Sheet
of Not for Profit Concern.

2.1.1 Introduction :
There are two types of organisations 1) Trading organisations or Profit making organisations
and 2) Non - Trading or Not for Profit organisations
Trading organisations main object is to earn Profit. They are engaged in Trading activities.
i.e. Buying and selling of goods and services, organisations like Sole Trading concern Partnership ,
Co-Operative organisations, Public Limited Company etc. are set up for the purpose of making
profit. Final Accounts which consists of Trading and Profit and Loss Account and Balance Sheet are
prepared. Base of Final Accounts is Trial Balance.

Not for Profit organisations 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 club, 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 concern. 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 organisations prepare Balance
Sheet to know the Net Worth of the concern on a particular date. Final Accounts of not for profit
concerned consists of Income and Expenditure Accounts and Balance Sheet. .
2.1.2 Meaning of Not for Profit Concern :

Not for Profit Concerns are those concern which are not started to earn Profit but to give
qualitative service to its members and society at the minimum charges. Their main objective, is to
provide social service and to promote art, culture, sports, education etc. The nature of these concerns
are different from Profit organisations. Not for Profit concerns collect income through subscription,
admission fees, donations etc. given by members or non members and grants subsidies or concessions
received form the Government.
2.1.3 Features of ‘Not for Profit’ concerns :
1. The primary objective of such concerns is to provide services to its members and not to earn
profit.

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