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Receipt format sample for non-profit organizations

we are entering into part two series of the learning module on introductory to financial accounting purchase series basically deals with the preparation of financial statements for various forms of ownership starting with the books of non-profit organization as enacted by act number 71 of 1997 as amended this learning area assumes that you are able to apply the double entry system to prepare different accounts in the general ledger you are also able to properly draw up the trial balance let us answer the question what is a non-profit organization here after abbreviated snpo in the nodes an npo is an establishment created to provide a service to certain interest groups its existence do not depend on profit motif it exists as a body corporate ownership is not vested on members the npo act prohibits the distribution of gains derived from its activities to members except a reasonable compensation that will be paid for services rendered which is called honoraria assets and income derived are used for non-profit objectives to defray the running expenses wealth expansion and self-preservation is built by surpluses generated by its operating activities it is governed by the npo act number 71 of 1997 as amended and the organizational constitution the scope of npo act covers the following establishments of interest groups the non-profit organization as we described earlier the incorporated voluntary association which has been established for purposes of public interest participation of the interest group in this category is not as extensive and massive as the above npo one such example is the body corporate consisting of two to three persons representing the interest of tenants and landlord in a particular residential area for accommodation purposes the set are the non-profit company that has been registered with the department of social welfare as a non-profit organization any of the above organization can apply to sars for public benefit organization status so as to be exempted from income tax liability before an npo can commence its activities the npo act requires that an organization submit its application for registration together with its organizational constitution to the directorate of the department of social welfare the organization should also register with cells for exemption purposes the organization should be in possession of a certificate of registration which has been issued by the department of social welfare the advantage of this registration provides the organization with a degree of legal formality and public accountability to attract funding from donors governance refers to proper control and operating systems to ensure a high degree of responsibility and accountability in the way the affairs of the organization is run the first such control being the npo act number 71 of 1997 as amended which governs its establishment and existence the second control is the organizational constitution which specifies the rules and regulations of its operation which are consistent with the legal framework of common law and the npo act the third control is the board members the body corporate and the steering committees that are appointed by participants referred to as interest groups thirdly the compliance with tax exemption conditions it's a good indication of good governance lastly some corporations are expected to comply with corporate governance with a mechanism and processes that control some organization especially the non-profit companies that has registered as npos examples of non-profit organization ing to interest groups or sectors are the sports and recreation charity organization cooperatives faith-based organization non-governmental organization arts and culture as well as professional bodies for accounting purposes we will concentrate on specific accounts dealing with transactions affecting only the npos the basic accounting equation principles remain the same in the general ledger we will draft the following specific accounts the subscription or membership fee account to record members annual fees paid the entrance fees account to record ones of payments received from new members who are joining the clan the honorarium account to record remunerations paid to the secretary or the treasurer for services rendered the receipts and payment account to record the summary of all transactions that took place within a financial period the entries that are recorded in the receipts and payment account are similar entries that are recorded in the cash receipt journal and the cash payment general in practice it is not necessary to draft the two journals instead of the journals a cash book is drafted and then the totals are posted to the receipt and payment account in the general ledger the next account that will be drafted is the income and expenditure account that will summarize all the income accounts and expenses account that falls under the nominal section of the trial balance the last account will be the trading account to record transactions or fundraising nature the second book that will be drafted is the general led journal to record the omissions errors and adjusting entries the third will be to draft the financial statement ing to acceptable standards for submission to the directorate and sales examples of that statement are the receipts and payment which uses similar transactions that were recorded in the receipt and payment account in the general ledger this time we will be drafting a statement the income and expenditure statement which is more or less similar to the profit and loss statement that we normally present for retailing enterprises this statement income and expenditure will use the same entries that were recorded in the income and expenditure account in the general ledger the last statement will be the statement of financial position some constitution requires the appointment of an accounting officer for the compilation of the financial reports the funds of the organization are divided into two categories being the revenue income representing operating income that is used to defray day-to-day expenses in the second category is the capital fund which is used for major or capital projects examples of revenue income are the entrance or joining fee which are ones of payments paid by members who are joining the club the membership or subscription fee paid annually by registered members in the club donations received from donors and the fund-raising activities which represent additional income from fund raising activities examples of capital funds is the special funds in the form of request which are funds received by the organization left in a will of the deceased the second example of special funds are the grants of government subsidies the second example of capital funds are the expandable funds which are sponsorship for a particular general activity for example a donor may extend funds that can be used as sponsorship for buzzers these funds cannot be used for any other objective except for payment of buzzers the third example of capital fund is the capitalized entrance fees these are the same fees that are paid by new members who are joining that lab the constitution of an organization may stipulate that entrance fees should be capitalized if that is the case then the entrance fees will not be used to pay for day-to-day running expenses of the organization the entrance phase will then be treated as an item of capital nature lastly are the surpluses that were generated from the operating activities of an organization these surpluses will be accumulated on a yearly basis in the account called the accumulated funds which is one example of the capital accounts how to account for income received and expenses paid by the npo income is solely derived from membership fees which are fees that are received on an annual basis from registered members entrance fees are once off payment done by new members who are joining the organization fundraising activities this is income that is derived from selling of refreshments or from organizing social gatherings sponsorship and donations this is income received from donors on this income that has been received will be banked and recorded in the receipt and payment account in the period in which the cash is received for the payments that have been incurred and paid this will be recorded in the receipt and payment account in the period in which cash is expended in other words the receipt and payment account will be drawn in the general ledger this account will be debited with all the receipts for the year and credited with all the payments that were made during the year let us look at this example let's start with the requirement you are required to prepare the receipts and payment account for the year ended 31st december 2014. remember in this account we should reflect a summary of all transactions that occurred during the current year secondly we are required to prepare the membership or subscription fee account which is an account that will be prepared to reflect only the subscriptions that was received from members the following transactions is a summary of serengeti tennis club for the year ended very first december 2014. transaction 1 the following are the closing balances of the previous year and the previous year was 2013. the closing balance for capital account twenty three thousand four hundred and fifty six the closing balance for the bank account eleven thousand two hundred and thirty four which is a favorable balance transaction 2 11 new members paid 120 entrance fees and this must be capitalized transaction 3 the annual subscription fees amount to 220. during the current year 49 members paid their 2014 subscription while seven members were in areas with their subscription in respect of 2014 what's happening here is that 49 paid their subscription while seven is still owing in subscriptions for 2014 then nine members paid their subscription in respect of 2015 in advance in other words none members have paid for the new period 2015. six of the eight members who had not paid their subscription in respect of 2013 when it was 2013 last year six of these that were owing last year paid this during the current year the amount still in arrears meaning owing should be written off number four gardiner's wages paid for the year 3600. a cleaner received a monthly payment of 250. the payment included an advance payment for january 2015. refreshments purchased 1348 grants profit on the refreshments 1 348 cups and saucers bought 2 360. depreciation calculated for this year on all crop curry 630. the municipality charges rent of 1000 rent per month for the soccer field in the clubhouse we started this year with rent payable of thousand rent and we closed this year with rent paid in advance of one thousand honorarium paid to the secretary or treasurer amongst one thousand eight hundred proceeds from the year end function 2543 ticket sales from the social function at league finance fifty 341050 remember we are required to prepare the receipts and payment for the year end the 31st of december 2014 and thereafter prepare the membership or subscription fee account the receipts and payment account will be prepared in the general leisure in this account we will summarize all transactions of receipt and all the payments that were made during the financial period will record both revenue and capital items in this account we will start by reflecting the opening balance of the bank account in line transaction 1 we were given a favorable opening bank balance of eleven thousand two hundred and thirty four as a favorable balance this item will be reflected at the beginning of 2014 on the debit side as balance brought down amount 11 234. the line transaction 2 dealt with 11 new members who paid 120 entrance fee which must be capitalized entrance fee its income that has been banked it will therefore be shown in the receipts and payment account on the debit side at the end of the financial period as entrance phase and the total income received is 1320 calculated as 120 times 11. the third transaction is the annual subscription fees amounting to 220 range per member 49 members paid their 2014 subscriptions this is income received it will therefore be banked and because it is banked it will also be shown on the debit side as a result of the receipt and payment account as membership fees received of 2014 calculated as 49 times 220 giving a total of ten thousand seven hundred and eighty further on seven members were in arrears in respect of 2014. these are subscriptions that are owing it is not income that has been received it will therefore not be recorded in the bank and as well as in the receipt and payment account then there were nine members who paid in respect of 2015 this is income received for 2015. it will therefore be deposited in the bank account because it is debited in the bank account we will therefore debit the receipts and payment account with membership fees for 2015 calculated as 9 times 220 giving us a total of 1980. and further on there were eight members who were owing in 2013 of these only six members paid in respect of 2013 the six that paid represent income that has been banked in 2014 it will therefore also be shown in the receipt and payment account as a receipt of membership fees for 2013 calculated as 6 times 220 giving a total of 1310 and twenty the next transaction is line four where the gardener wages was paid for the year the total amount paid three thousand 3600 this entry will be shown on the credit side as a payment at the end of 2014 shown as wages amount 3 600. this was not the only wish that was paid line 5 refers to wages that were paid to a cleaner on a monthly basis of 250 this cleaner was also paid one month in advance it double means that the cleaner was paid wages for 13 not for 12 months we will therefore multiply 250 by 13 months and arrive at a total of 3250 which is added to 3600 to arrive at total wages of 6850. in line transaction 6 refreshments were purchased and an amount of 1348 was paid refreshment as expenses will be shown on the credit side of the receipts and payment account and the amount credited will be one thousand three hundred and forty eight line transaction seven is about gross profit on the refreshments one thousand three hundred and forty eight gross profit is not income received it's a calculation that we have arrived at it is therefore not an entry in the bank account it will also not be an entry in the receipt and payment account in transaction 8 we bought caps and sources among 2360. on the payment side of the refreshments we are showing that check payment of crockery two thousand three hundred and sixty transaction line nine depreciation calculated for the year on all crockery crocodile 630. depreciation it's not cash paid it's an adjustment entry that we made through calculations it is therefore not an entry for receipts and payment because it's not cash paid out of the bank transaction line 10 is the municipality who charges rent of 1000 rent per month so it means per year it will be 12 000 but we made also an advanced payment of 1000 rent therefore it means we've paid rental for 13 months not for 12 months therefore we've issued a check for 13 000 that's what we will record in the receipts and payment rental of 13 000. transaction 11 deals with honorarium paid to the secretary or the treasurer the total amount paid 1 800. as a payment it will be shown on the credit side of the receipts and payment account s honorarium of 1800 line transaction 12 deals with proceed from the year end function two thousand five hundred and forty three as a receipt it was deposited in the bank it will therefore be shown with the receipts on the debit side as proceeds from year end function the total amount deposited 2543 transaction 13 which is the last transaction for the year of 2014. it's ticket sales from the social function at the league finance the total amount received 3456. it will be reflected with receipts on the debit side as ticket sales from social function total amount 3410 56 the receipts and payment account will then be closed off to determine the closing balance for 2040 which will be the opening balance in 2015. we will therefore close with a debit total because it gives us the highest amount carry it over to the credit side calculate the missing figure as the balance carried down which is a closing balance at the end of 2014 which will be shown on the debit side at the beginning of 2015 as balance brought down note that the entries that were recorded in the receipts and payment account are the same entries that are normally recorded in the bank account usually in their bank account on the debit side we are showing total receipt that's exactly what we've done with the receipts and payment account the debit side reflect the total receipts for the claps in the bank account we reflect on the credit side the total payments indeed this account also reflect the total payments that the clubs have made during the year in this example we have read of transactions where income was received in advance or expenses paid in advance or income in areas or expenses in areas let us look at how we treat such transactions where income is received and exceeds 12 months the overlapping months meaning the 13th month the 14th month the 15th month will be treated as income received in advance income received in advance in our books increases liabilities it will therefore become part of their accounts payable when the income received is less than 12 months it means there's income that is owing or in areas such income that is owing is treated as accrued income accrued income therefore increases our assets it therefore becomes one of the accounts receivables for expenses if expenses paid exceeds 12 months we've paid for for 13 months we've paid for 15 months we've paid for 16 months those overlapping months are treated as expenses paid in advance expenses paid in advance increases assets they are therefore part of the accounts receivables if expenses paid are less than 12 months it means there are expenses that remain unpaid at the end of the period therefore the amount owing or the amount that is in area is accrued expense a crude expense will increase liabilities and it is part of the accounts payables credit losses where subscription fee is written off it will be treated as credit losses the second requirement of the exercise is to prepare the subscription fee account this account will reflect all transactions affecting the membership fees let us look at the breakdown for line transaction 3 that deals with the subscriptions the annual subscription fees amounted to 220 per member during the current year 49 members paid their 2014 subscriptions this income once deposited in the bank to complete the double entry system the subscription fee as an income account will be credited at the end of 2014 with the contra details of banks showing the subscription received of 2014 among 10 780 next are the nine members who paid their subscriptions in respect of 2015 in advance this is also income that has been deposited in the bank which will be credited in the subscription fee as bank for subscription received for 2015 1980. this is income that has been received for 2015. it must therefore be excluded in the income for 2014 when financial statements are drawn we will therefore adjust this account by debiting it with the same entry and the contra account will read as the income received in advance which will become a liability in our books what we are saying with this liability is that this income is not for this year it must be included in their income for 2015. next are the seven members who are in areas with their subscription in respect of 2014. what this is saying is that there are seven members who haven't as yet paid their membership fee for 2014. this is income that belongs to the current period it must therefore be added to the income of this financial period we will therefore do that by creating an asset called accrued income we will therefore credit the subscription fee account with accrued income of 1540 as we credit the subscription fee account the accrued income as an asset will be debited with the same entry what we are saying is that this income hasn't as yet been received but we are expecting to receive it in the coming period which is 2015. the next deals with six of the eight members who had not paid their subscription in respect of 2013 paid this during the current year as we deal with this transaction we will compare it with the members that were owing in 2014. what did we do with these members in 2014 who were owing we have increased our income with the amount that is owing so that we included in this can a current financial period we have done exactly the same thing with this entry in 2013. we had eight members who were owing in 2013 this income that we're expecting from eight members was added or included in the total income for 2013. we therefore created an asset in 2013 for the outstanding membership fees of eight members in the current year we are expecting to receive this income from these members in this year we will therefore show the eight members that were owing last year on the debit side of the subscription fee account at the beginning of the period as accrued in khan total amount 1760. we are expecting to receive this income in the current period of 2014. what have we received for this transaction in 2014. we have only received payment from six members we did we debited our bank account with a deposit of 1320. the difference ing to the last transaction it says the outstanding balance of 2013 should be written off as irrecoverable what is the outstanding balance the outstanding balance will be the difference between what was owing last year and what has been paid in the current period we have received 1320 440 is still outstanding that is the amount that must be written off as credit losses as we credit the subscription fee with credit losses the credit loss expense account will be debited with the same entry of 440. after we have recorded all the transactions affecting the subscription fees this account will then be closed off to determine the total income that should have been received from all the registered members in 2014. we will therefore close it with a total that has been calculated on the credit side which will be carried over to the debit side calculate the missing figure of 12 320 show it with a contra account of income and expenditure this amount represent the total income that should have been received from all registered members we can also use this amount to calculate the total number of registered members in that lab we can give take the amount and divide it by 220 to determine the numbers of registered members work through these two activities the first activity you are required to prepare the subscription fee account for the year ending 31st of july 2017. in the second activity you are also required to prepare the subscription fee account as well as the receipt and payment account showing the breakdown of the subscriptions collected thank you