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Simple billing statement sample for non-profit organizations

welcome to accounting with Madame MBI today we are going to look at accounting for nonprofit making organizations or rather not for profit making organizations so we're going to first of all start by defining or explaining what nonprofit making organizations are basically these are organizations whose objective is not profit maximization their objective is not to derive profits from operations rather they exist to CER for other issues like welfare of their members or welfare of the public so such kind of organizations may include member organizations like clubs where you may have like Golf Club they may also include public institutions like public hospitals public universities whose mandate is to provide research education for the public hospitals is heal heal care it will also include football clubs professional bodies like the Law Society and other professional bodies like certified public accountants that is the Institute of public accountants so such kind of Institutions their mandate or their objective is to provide welfare to their members rather they do not have a profit maximization motive or objective so that is examples of not for-profit making organizations with that in mind then we would question where do they get their revenue if they do not exist to make profit what then where then do they derive their revenues so this brings us to a subtopic on the sources of revenue for npos npos derive their revenues majorly from subscriptions that is if they are member member npos like we have said Golf Club Institute of certified public accountants those are member npos where members have to register H with a registration fee they also have to pay annual or other as recommended fees which we are calling here subscriptions so the subscription is a form of payment that is made for membership for one to retain their membership in that institution if it is Golf Club if it is as we have said in of certified public accountants and so on so the subscription forms the first source of revenue for member npos so subscriptions because they represent an income to the organization there are several things that we need to learn about subscriptions the first one is that subscriptions basically we are going to be putting in the income and expenditure account or the one that we going to be recognizing izing as an income in the income and expenditure account shall be the subscription for the year that is the subscription that relates to the accounting year for which you'll be preparing the income statement the reason I'm saying this is because you're going to find that there will be subscriptions in areas and there will be subscriptions in advance and allow me to explain for example the subscription the subscription in advance if some members pay subscription for the current year and they also pay for the following year such that they have made a prepayment for the current I mean for the following year such kind of subscription which is subscription in advance it is not going to be an asset to the organization rather it is going to be a liability to the organization in this sense the organization has received member subscriptions in advance they have sub they have received an income uh they have received money for a service they have not yet rendered so at that time we're going to be saying that the member subscriptions that have been received by the organization in advance they are going to be representative of an eared Revenue that Revenue has not been earned by the organization they're going to earn that Revenue in that period when that year that has been paid for will be accounted for so subscriptions in advance are going to be treated as a current liability the reason I insist on this is because we are used to finding that most advances are usually prepayment I mean I usually assets but that is in the case where it is the organization that has paid in advance in this case it is the organization that has received in advance therefore that is why the subscription in advance will end up being a current liability now the subscription in areas or subscriptions acred this means that some members have not paid subscription for the current year which we are accounting for so if we are accounting for the year 2024 some members the end of year 2024 has it's already the end of year 24 but some members have not paid subscriptions for that current year so those members who have not paid subscriptions at the end of the year that we are accounting for we are going to say that those subscriptions are in areas or they have been acred and because the organization is a recipient it is the one that is going to receive the subscriptions those are the same as saying we have datas of subscriptions we have some members who have not paid up their subscription and those people or those members to the organization represent datas they represent people that the organization is um expecting to pay an amount of money to to the organization so subscription in areas and subscription acred which is the same thing are going to be reported as current assets rather I want you to view it in your mind as datas of subscriptions the organization is considering them to be dettas who have not paid up their accounts so again this is different from how we know Aras because majorly in other cases Aras usually is the organization that has not paid but in this case it is members who have not paid the organization resulting it being a current asset so we also going to prepare a subscription account for us to be able to account for us to be able to account for member subscriptions because we have realized that there are several issues that are affecting subscriptions because of those several issues then we have to be able to determine how much subscription are we going to recognize as income in the income and expenditure account so we are going to determine how much income we going to recognize by preparing a subscriptions account let's start with the de debit side usually the debit side we are going to start with the subscriptions in Aras this is because we have said that subscription in areas are an asset and we so we know that the balances of assets is debited so because subscription in Aras is a an asset we are going to start by debiting the subscription in Aras at the beginning of the year how much subscriptions are in areas or how much much datas of subscriptions and are in areas at the beginning of the year then on the other side at the same time we going to have the subscriptions in advance which is a liability how much of subscriptions have we received in advance for a year that is yet to come for a year yet to be accounted for this is a liability and as we know that liabilities are credited so the opening balance of liability accounts are credited so we also going to start by crediting the subscriptions in advance which is a liability so once you have done that then we are going to you're going to look at for any of these subscriptions that were paid in advance if the members request for a refund any of the subscriptions that have been received in advance if any of the members ask for a refund we are going to go on the other opposite side and refund the subscriptions that is why the refund of subscription is here because we are saying that any of those subscriptions receive Advance if the members request for a refund then we going to debit the refund which is done on the opposite side again for all the subscriptions that are in areas that is from the datas we expecting them to pay if any of the datas finally does not pay the datas of subscription if any of them do not pay and we are forced to write off we're going to have to write off uh some of those subscriptions so we we are going to bring it to this side for any subscription that is written off it is going to be on this side so at the end of this is it the income we going to place it there the written of subscriptions then at the same time we are going to see how much subscriptions have been received in the receipt and payment account and remember that subscriptions when they are received we debit the cash book and our cash book in this case is going to be the receipt and payment account so because it is debited in the receipt and payment account when we come to this account we are going to credit that is what we have here the cash received on the receipt and payment account we are going to place it here on the credit side and uh the opposite is true for balances carried down once the balance brought down is on the debit side for the subscription in Aras the subscription in Aras at the end of the year will be on the credit side and for the subscription in advance once the balance is on the credit side the balance Carri down shall be on the debit side and now the balancing figure of this account will be what is the amount of subscription for the period that we are going to take to the income and expenditure account and we are going to see this in a question I was just trying to explain why we are debiting or crediting but we're going to see that in a question so we can proceed on the other sources of revenue for npos other than subscription because we have spent more time on subscription because it is the majorly the basic source of revenue for npos so other sources of revenue for npos include income from Investments so as much as npos do not have a profit motive overall that is not the motiv US to why they are formed they also have to raise money for their undertakings they also have to raise money to be able to meet their objectives so one of the ways of raising money is that when they have excess cash in the organization they may invest that money so they may invest in shares they may buy shares of companies they may also invest in any other shortterm or long-term uh Investments where they're going to derive some income to fund their operations they may also look for profitable Ventures like Golf Club may have a cafeteria they may have a bar even public institutions like universities they have the cafeteria all those are profitable businesses inside the nonprofit making organization they assist in raising money to fund their core or mandated objective majorly also they may receive a lot of revenue from donations that is organizations receive a lot of donations from well wishers could be members could be government could be donations from non members they may also receive legacies and bequest where some members after their Demis they may leave a will that all their money or part of their money is donated to charitable organizations or to some npos other source of Revenue may be entrance fees especially for national parks and so on they may have an entrance fee game fee or whatever they will call it visitors fees that is a form also of revenue for the npos so we are going to account for all these sources of revenue for NP as we proceed with our question so which accounts then are prepared by npos npos prepare three major accounts they prepare the receipt and payment account they prepare the income and expenditure account and the statement of financial position beginning with a receipt and payment account a receipt and payment account is usually equivalent to a cash book it is the same as a cash book for profit making organizations actually a receipt and payment account is the same as a cash book what does a cash book record a cash book records the cash receipts and the cash payments so what we going to find when you look at a receipt and payment account we are going to start with the opening balance of cash how much cash do we have at the beginning of the year that is the opening balance of cash we're also going to see how much balance we have at bank that is the opening balance of the bank then any of the money that is received we are not going to be classifying whether the money um is in whatever capacity the money is received if it is donations if you are going to receive money for registration we are receiving money for entrance fees we are receiving money from subscriptions we are going to account uh money from investment income all the cash that is received is going to be debited to the receipt and payment account then on the credit side it is going to be all the payments that are made whether they are of Revenue nature meaning that you're paying for expenses or they are capital in nature like purchase of assets whatever it is that you pay for is going to be credited we have here printing we have rent these are expenses wages this is expense but you can also see that they bought equipment which is a expenditure and it is also included in the receipt and payment account because the receipt and payment account is simply all the receipts and all the payment and the balance of this account again shall represent the cash and the bank balances uh as at the end of the year so the ones you have here are the opening balances of cash the ones that you have here are the closing balances of cash so the receipt and payment account in major of the cases in most questions under NPO the receipt and payment shall be provided it is from which we are going to derive most of the items that we are going to need to prepare the income and expenditure account all right so we can proceed and look at the next uh the next item that we are going to prepare we are going to be preparing the income and expenditure account so we're going to be preparing the income and expenditure account the income and expenditure account is an account that is prepared to show all the incomes and all the expenditures you're going to be looking at all the incomes and all the expenditures now when you are preparing the receipt and payment account we have seen that some of the expenditures or some of the things that were paid for they were capital in nature they were form of assets so those things that we paid for which are assets we are not going to be placing them in the income and expenditure account this account specifically shall be looking at Revenue items and it is going to be prepared on a crew basis when I say a crew bis we are going to be only recording that which belongs to the current Financial year so even if you received subscriptions in the receipt and payment account for 3 years the subscription that will find its way to the income and expenditure account is the subscription for the current year that we are accounting for so the income and expenditure account it has incomes you have there you can see profit from Trading activities we have said that the NPO can carry out trading activities we have subscriptions which have specified that the subscriptions we are going to bring to the income and expenditure account is specifically the one for the current year here which is what we are going to determining using a crew then we have income from Investments we have donations income from other activities as we have said they can carry out any activities like dinners raffle sale of Raffles festivals and they going to generate income then you're going to have expenditures the expenditures we are going to account for cash and uncashed why do I say cash and noncash expenditures some of the expenditures we are going to be accounting for like depreciation is an noncash expenditure it is not included in the receipt and payment account because there is no money that is paid to anyone outside the organization called depreciation so it is an ancash expenditure but regardless it is still an expenditure it is still used when you're determining the Surplus or the deficit so we are going to account for expenditures such as depreciation which is noncash item salaries and wages which is a cash item and all other expenses that have been uh incurred During the period even losses on trading activities well as the profit on trading activities is an income any losses from Trading activities is going to be an expense once we have that the answer that you're going to get the difference between the incomes and the expenditures usually we are used to saying profit or loss but in this case they do not call it profit or loss we call it either a surplus or a deficit so it is going to be called either a surplus or a deficit now if the incomes are more than the expenditures it is going to be a surplus but if the incomes are less than the expenditures it is going to end up being a negative figure which is a deficit so we are going to check whether after determining the Surplus and the def or the deficit the taxation most of the npos are Exempted from tax most of npos in most Juris jurisdictions especially those that provide Health Care charitable activities they're Exempted from tax but if in your jurisdiction there is taxation then we can account for taxation then we are going to add the accumulated Surplus if there was Surplus from previous periods are going to add to get the Surplus at the end of the period And basically that is how we are going to prepare the income and expenditure account now so far you may have noted that several differences are there between trading organizations and and profit making organizations while in profit making organizations we prepare income statement in npos we prepare income and expenditure account while in profit making organizations we prepare cash book in npos we prepare the receipt and payment account again we have said while in POS the income statement we find that um the net the bottom line it is either the profit or loss we find that in npos it is either a surplus or a deficit and so many other differences exist between accounting for profit making organizations and accounting for not for profit making organizations so having said so uh the last statement that is going to be prepared by the npos is the statement of financial position uh the statement of financial position is not new to us the balance sheet because we have prepared it severally under all other topics we have prepared the statement of financial position and soul proprietorship we have also prepared and accounting for manufacturing organizations and Partnerships we have also prepared the statement of uh Financial positions under Company accounts so at this point we have to note that it is similar that the statement of financial position is similar to that of other trading businesses or trading concerns there's only one difference that we need to note and the difference is that while other trading organizations whether cash flow I mean whether companies whether Partnerships they have member Capital they have owners they are financed by their owners that is the owner Capital npos do not have owner Capital they do not have owner Capital rather because it's collectively owned by so many members who have um possibly the same rights we are going to find that npos are financed by accumulated fund they are financed by the accumulated fund so you're not going to find their Capital you're going to find what you call accumulated fund and in most cases and in most questions you may not be given the figure for accumulated fund we are going to prepare something we call a statement of Affairs that is going to be prepared at the beginning of the period to determine the accumulated fund for the period that is what we going to do for the statement of financial position now having said so we are going to begin at looking at a question so we have the following question it reads that the following is a summary of the receipts and payment of mutapa rotary club during the year ended 31st July 2023 this is the this is the summary of the receipt and payment account of mutapa club for the year ended 31st July 2023 and we have it reading as follows you have the receipts on one side and you have the payments on the other side so beginning with the receipts you have the cash and bank at the beginning of the period which is 420 then you have the beverage sales that is the amount of money they got from selling beverages which is um 1,874 you have Member Subscription the Member Subscription that was received is 397 you have donations that were received of 3931 that is 3,931 and then you have on the other side of payments you have secretarial expenses you have rent that was paid you have purchase of baverages you have General expenses and insurance that was paid what I would like you to note is that ordinarily in a receipt and payment account we would expect that the balance carried down shall be on the credit side meaning that there is Money in the Bank because a credit balance rather a credit balance carried down here would mean that the balance brought forward or brought down is going to be a debit balance but what we have here is a balance Carri down on the debit side this balance Carri down on the debit side means that when we are going to be opening this account the balance brought down is going to be on the credit side that is a credit balance and that means that this 26 is an overdraft this bank or this receipt and payment account is showing that there's an overdraft there's an overdraft of 26 because that balance being on the debit side the balance carried down means that the balance brought down is going to be on the credit side which is a liability and that means that that account has an overdraft ordinarily the balance should be on this side if we have money in the bank so you have to note that from just looking at that question up to that point then further you're given the following information you're told that the following valuations are also available that 31st July that is for the year 2022 and for the year 2023 that is the end of the year 2022 and the year 2023 you have equipment whose original cost was 2,840 at the end of the year 22 that asset is being valued at 1,950 up to that point it means that the asset has depreciated there's already depreciation which indirectly is being told to you that that asset has already accumulated depreciation up to that point it has accumulated depreciation of 890 the difference between its cost and the net Book value as at the end of 2022 then at the end of 2023 the asset now at the end of 2020 23 it is worth 1,56 again that means that that means that during the year which is our current year that is 2023 it has also further depreciated and by the way before I proceed the end of 2022 marks the beginning of 2023 so it is the same as saying that the balances you have been given here as 2022 they are the opening balances for the year 2023 so when I say opening balance I mean these figures because we are accounting for the year 2023 we are looking for the income and expenditure for the year 2023 we are looking at the statement of financial position for the year 2023 so when I say opening balances I mean that the figures that were closing 2022 are the opening balances for the year 2023 let that be in our mind so that we do not get lost so at the beginning of the year 2023 the asset was worth 1950 but as at the end of the year it is worth 1560 again there was some form of depreciation during the year and the form of depreciation is the difference between the two which is 390 now we have subscription in Aras at the beginning of the year and at the end of the year 2023 we have subscription in ADV at the beginning of the year and at the end of the year 2023 and so on for all the other items remember we said the subscription in Aras they are an they are an asset or subscription in advance are a liability to the organization that has received them so we are required to prepare the accumulated fund the income and expenditure account and the statement of financial position so for the accumulated fund which we are going to start with we are going to use the balances at the beginning of the year all the balances at the beginning of the year what did the organization have at the beginning of the year so they had equipment they had subscriptions they had all these items at the beginning of the year so we can do that we are going to start start by preparing the statement of Affairs so that we can determine the accumulated fund as we have said that npos do not have owner Capital they are financed by accumulated fund we need to see how much does the NPO have and this statement of Affairs is that first August 2022 that is the beginning of the year because the year we are accounting for is the starting in August 2022 and ending in June July 2023 so what did the NPO have in form of assets at the beginning of the year we know we using the formula that capital is equals to assets minus liabilities that is the capital we are looking for so the assets that the organization had at the beginning of the year we are going to get them and the liabilities that they had at the beginning of the year so we are going to look at our question and see that we can start here and see that at the beginning of the year that is um at the beginning of the year 2023 the one we are accounting for they had equipment an equipment whose Netbook value was 1950 that is an asset they had subscription in Aras of 130 and the subscription in Aras we said this is the same as datas of subscription there were some members who had not paid their subscriptions and this is an asset to the organization they had subscriptions that had been received in advance this is a liability they had rent that had not yet been paid this is a liability and they had inventory of beverages this is an asset stock is an asset so from this table we are going to get the assets and the liabilities and class if y them as we have mentioned but then we are not supposed to forget that in the receipt and payment account they also have an asset remembering that we said that this represents the cash book this is the cash at the beginning of the year so they also had an asset which is Cash H at Bank of 420 and those are the assets that we are going to record and the liabilities that we are going to record in our um statement of Affairs to determine the accumulated fund so we can start with the assets we can see the equipment the equipment we are going to record the net Book value that is the how much it has as a net Book value because you can see that we had also been given the cost and we are not interested in the cost of that asset at this point we interested in its worth at the beginning of the year which is given by its Netbook value of 1950 at the same time we have seen that they had subscriptions in Aras subscription in Aras at the beginning of the year and this is datas of subscriptions that is um an amount equal to the subscription in Aras a subscription in of Shillings 130 that is an asset they also had inventory of beverages [Music] inventory of beverages they had um inventory of beverages of 76 of 76 they also had cash at bank cash and bank that we have gotten from the receipt and payment account that is 420 and those were all the assets that they had at the beginning of the year a total of 2576 then they had liabilities we have seen that they had subscriptions in advance the money they had received in advance for services they have not yet rendered this is now a liab ability to them because they have money for subscriptions for future periods that have not yet expired we see that they had subscription in advance of 20 they also had rent acred or rent outstanding this means that they have not yet paid rent as the institution or as the NPO they have not paid rent of 116 the that is the liability so again the total liabilities end up being 136 which we are going to subtract from the assets and the balance we are going to get is our accumulated fund the balance of our accumulated fund at the beginning of the year beginning of the year it is going to be 2,414 and all these items as I have said we have taken them from our question they were right here in our question they are represented by the beginning of the year which is um that is the column for 2022 so we can we have answered part one of the question we can go to part two of the question but before we go to part two of the question because we want to prepare the income and expenditure account we have said that the income and expenditure account is prepared on a Cru basis that is we are only going to record the incomes for this particular period and the expenditures for this particular period so to do so we are going to have to do some um workings the major working number one is going to be on the subscriptions with all this information on subscriptions the areas at the beginning of the year at the end of the year the advance at the beginning and at the end of the year and also more information about the subscriptions here on the receipt and payment that is the amount of subscriptions that were received during the year then we have to determine how much of it goes to the income statement by preparing the subscriptions account so we going to go to prepare the subscriptions account and we are going to start here for the subscriptions account remember this H subscription account if it is an asset we are going to debit and our asset as the beginning of the year is the subscriptions in areas this is what is our asset we are going to debit asset the subscription in areas you have seen at the beginning of the year is 130 this is a liability the subscriptions that have been paid in advance at the beginning of the year the ones at the beginning of the year is a liability and it is amounting to 20 those are the ones at the beginning of the year then the opposite is true for the balance Carri down so the subscription in areas Carri down or at the end of the year they going to be here Subs descriptions in areas carried forward or carried down so these ones are the ones at the end of the year and the subscriptions in advance at the end of the year they are going to be subscriptions in advance carried forward or at the end of the year so I had already picked the ones at the beginning of the year we are going to do the same at the end of the period so we can pick the figures from our question and we can see here that the subscriptions in areas at the beginning is 130 and 20 we have posted these two now we are going to post these two the 170 and 74 the ones at the end of the year each of them respectively the areas and the advance the 170 and 74 so we are going to post them in our subscription account and we are saying that for the one in advance it is going to be 74 Carri down or at the end of the year and the one that is in Aras is going to be 170 that is what we have from our question now the only other item that we would put here is that if some of these subscriptions that were had been received in advance the customers seek a refund any of these advance L paid or received if they are refunded then we going to post the refund here if they are refunded and if any of these areas are no longer receivables if we evaluate and see that some of those members will never pay these subscriptions that have been in areas we have kept on holding on to them as detas dettas every year and we decide to write them off if we decide to write any of those off we are going to write them off again any of these areas that can no longer be recovered if we decide to write off we are going to credit but in our question those two items are not there it is just good to note what we have in our question is what was received during the year in the receipt and payment account now what was received does not have necessarily to be for this accounting period we may have received part of the areas we may have also received some advances so we are going to see how much was received and that is given in the receipt and payment account I want you to look here at the receipt and payment account we are seeing that in the receipt and payment account that the member subscriptions that were received in that period was 397 and let's discuss here this is a receipt and payment account they received and debited it is debited here the Member Subscription so when we go to the subscription account we cannot debit again we are going to credit because from the receipt and payment here it is a debit when we go to our subscriptions account we are going to credit so when we say come here to the subscription account we are going to credit and we are going to say it is received from the receipts and payment account we have received three 97 that is how much we have received from the receipt and payment account and now balancing this account when we balance this account the balancing figure shall be the subscriptions for the current year which we are going to take to the income and expenditure account and remember this is our working number two our working number one was on the accumulated fund so once you add the total on this side we are going to have 587 and the total on this side should also add up to 587 once we get a balancing figure so the balancing figure is what we going to take to the income and expenditure account so the balancing figure once you add all the items here and subtract the two items here you're going to get that the balancing figure is 383 and that is the figure that we are going to take to the income and expenditure account and that is the end of that working for the subscriptions we can also go to another working on the rent so we're going to go to another working on the rent why do we need a working on rent we need a working on rent because if you look at what we have here we have that rent was paid we have that rent was paid and the rent that was paid is the the amount of rent that was paid was 2,800 104 that is the amount of rent that was paid but even as much as this is the rent that was paid you also have balances of rent that had been aced at the beginning and at the end of the year you can see that there was ACR rent at the beginning of the year this was a liability at the beginning of the year there was also another liability at the end of the year and because of these two items then we are going to have to open a rent account we are going to start with the opening balance of 116 a liability balance meaning that it is going to be on the credit side because it is representing an ACR which is a liability and we are going to have a closing balance of 136 and then we going to pick the one from the receipt and payment account so this is what we going to do we are saying that the rent account has begun with a liability the balance brought forward is a liability which is an ACR of 116 and the same account is also going to close with a liability it is going to close with a liability of 136 uh 136 yes it's going to close with a liability of 136 and the opening liability is 116 so because of these two items we also going to look at how much in the receipt and payment account has been paid for rent and we have seen that the amount of rent that was paid as per the receipt and payment account was 28040 and because it is credited in this account in this receipt and payment account it is credited we can see there that it is on the credit side when we go to the rent account we are going to debit so when you go to the rent account we are going to debit so when we come here we are going to say from the receipts and payment account that there was paid a rent of 2804 which we are going to debit to that account so the balancing figure of this account is what we are going to take to our income and expenditure account so this side is complete so we can add it is giving a sum of 2940 and we are saying that once we get the balancing figure the same sum should be on this side 2940 so if you subtract 116 the amount of balance which you are going to take to the income and expenditure account the amount of balance is 28 24 this is what we are going to place in our income and expenditure account and this is going to be our working number three okay so we can proceed and go to working number four in our question that there is a sale of Beverage we need to know whether they got any profit from selling beverages so we are going to compare this is like the normal trading account we usually prepare so we going to start with sales how much revenue did they get from selling the beverages then we are going to L what is the cost of sales cost of sales of those beverages starting with the opening inventory inventory uh then you're going to look at the purchases how much did they purchase of the beverages then you L closing stock you L closing stock closing inventory so that we can see how much revenue did they get from the bavage sales so all this information is in our question we can come back here again we have a the amount of sales we can see here we can see that the sale of beverages beverage sales resulted in h the cash that was received from bavage sale is1 1874 1,874 we can see that the purchases of beverages it is here the purchase of Beverage the cash that was spent to purchase beverages is also here the cash that was spent to purchase beverages is 550 I want you to note the figures the cash received from sale of Beverage is 1874 the purchase of those beverages had costed 550 and in the additional information below you have you have a inventory of beverages you have both the opening and the closing inventory of bavage that is a what you have here you have the opening and closing inventory of bavage 74 I mean 76 and 92 those are the inventory of Beverages and those are the figures we are looking for this is opening stock this is closing stock of Beverage H the other one is the sales and the other one is the purchases so allow me to take all these figures from this part back to this point we have said that the sales is1 1874 we have seen that the purchases is 550 we have seen that the opening inventory is 76 and we have seen that the closing inventory is 92 so we can subtract once that is done we can get the cost of sales to be 534 that is the cost of sales and subtracting the sales minus this less you are Lessing this you are going to subtract once you less you're going to get the gross profit the gross profit from the sale of beverages is going to be 1340 and that is our working number four which is the income from the sale of beverages so we have now been left with the part where we answer our question our question is asking us to prepare an income and expenditure account and we are going to start by getting all the incomes now to be fair let us start with the gross profit from beverage sale that is the thing we have just computed as our working the profit from our beverage sale working number four is 1340 so working number four is 1314 we going to start with that that is our first income we can also go back backwards a little bit and remember our income which is subscriptions which was working number we are going to see that it was working number two where we determined the figure four the figure we are going to take to the income and expenditure account which is 383 that we can take that also from working number two so we are saying from working number two we have 383 those two incomes those two incomes had a working then you can put the expenditures the ones with are working we have seen rent working number three we have seen that the rent that we are going to place in this account is here working number three and the rent we are going to place in the income and expenditure account is what we have computed here as 28 24 so that is what we going to place here again 28 24 we can have two columns Shillings and Shillings we can have two columns with a denomination there and those are the ones that had a working I'm starting with the ones that had a working before we go to the ones that did not have a working so other than that then we can go now to our receipt and payment account we can go to our receipt and payment account here uh this is where we going to get all the other incomes and all the other expenses so we can see here for the bavage we have accounted for it for the cash remember cash is not an income cash is an asset so cash was put in the accumulated fund because it is an asset it is not an income it is an asset beverage sales we have used this figure and the purchases and the invent to determine whether there was a profit Member Subscription we have opened the Member Subscription account because of the areas and advances and we have gotten the figure to place in the income and expenditure account our other income that has not yet been accounted for is donations so we can pick this one directly from here and say that our other income is donation our other income is donation of donations of that 9 31 that is the figure for donations then we can go back and pick all the expenses the the ones that did not have a working you see here there expenses there is the secretarial expense we did no working for that but it was paid for the rent we have done a working the reason we did the working for rent is was because of the acral that were there in the balances below there so for rent we have already accounted for it so we are going to pick secretarial expense for the purchase of bavage we have used to determine the gross profit so that one we not going to use again then we going to pick the general expense and the insurance so again here we are going to pick three items secretarial expense General expense and insurance as the figures are here so we can pick all those again I have said we can start with secretarial secretarial expense it is a 326 you have a general expense you have seen it is 2610 we have insurance insurance the insurance is of three 58 that is the insurance so guys we are only left with one one more expense that we have not yet put here and the expense that we have not yet put here and we may likely forget is the depreciation I want to remind you that we said at the beginning of the year the assets were worth 1950 at the end of the year the assets are worth 1560 during the year in between the year there was depreciation that means that the depreciation for the year this year that we are accounting for the depreciation is 390 the difference between the two here so we are saying that there's depreciation expense which is an ancash item we have depreciation expense depreciation for the year which is 390 and this gives us the total we can get the total of the incomes the total of the incomes is going to be 5654 and the total of the expenditures is going to be 65 08 and once we subtract the incomes minus the expenditures you subtract the incomes minus the expenditures the answer we are getting is negative it is negative this means that this is not a surplus it is a deficit so the answer is a deficit our answer is negative it is a deficit if it was a positive it would be a surplus so this is how we prepare the income and expenditure account and we are left with our final part of our question is to prepare now the statement of financial position or to show which assets again do they have so we are going to start with an uncurrent assets they have an uncurrent asset which is equipment we have the cost of the equipment we have the accumulated depreciation and we have the net Book value so the asset we were told the equipment had a cost of 2840 that is the uh cost of the asset and I'm going to quickly take you back [Music] here in our question the cost of the asset is here the original cost is 2840 now it had an accumulated depreciation silently that is the depreciation that was there already at the beginning of the year 20 that we are accounting for the difference between 2840 and 1950 was the depreciation accumulated at the beginning of the year which we are seeing if you subtract 2840 minus 1950 there was depreciation of 890 again during the year that we are accounting for the asset has further depreciated by another 390 so now the total depreciation shall be the sum of the two so we are saying that the total accumulated depreciation here shall be the sum of the 890 the accumulated depreciation at at the beginning of the year and the depreciation for this current year which is 390 so the total accumulated depreciation here is going to be 1280 which we are going to subtract from this figure so we are going to less this figure to get the net Book value and the net Book value is 156 again we already had that in our answer it was there the 1516 we can also record the current assets inventory and subscription Subs in areas I have insisted so much that you remember that Subs in areas is the same as datas of areas datas over years so we can pick those ones we also going to have current liabilities so the liabilities we have the subscription in advance which we have said these are subscriptions received prior to the period they they relate to you have rent ACR and remember in our receipt and payment account we said we have a Bank overdraft we have a Bank overdraft so I want us to pick all these figures from the question and what we have here is that now we are going to be using the balances at the end of the year I want you to note that the end net Book value of the asset we have gotten is this $560 which is also in our question already we knew that is the netbook value at the end of the year and now I'm saying you're picking these figures when you prepared the accumulated fund we were using the ones at the beginning when you're preparing the balance sheet we are going to use the ones at the end of the period so for the subscription in Aras we are going to pick 170 for the subscription in advance you're going to pick 74 for the rent ACR you are going to pick 136 for the inventory of bavage you are going to pick 92 and I am saying we also are going to pick and now we have finished with all this we also going to pick this figure here the balance carried down on the receipt and payment account of 26 which we said is a Bank overdraft because if you carry down on the debit side you're going to bring down on the credit side meaning it's a liability it has a credit balance so in this particular case ordinarily the balance carried down is usually on this side meaning that we have money in the bank anyway so having said so we can place all those items here as I've seen them in the question the inventory we have said it is 92 the subscription in Aras is 170 the subscriptions in advance is 74 the rent acred is 136 and the Bank overdraft is 26 and we can add we can add the current assets the current assets add up to 262 and we can also add the liabilities the liabilities they add up to two 36 and since this is the total of current assets and this the total of current liabilities we can subtract the two this minus this is going to give us 26 that is this minus this so that we get the working capital which we are going to add we are going to add there to get the net assets and the net assets are going to be 1586 so that is it for the assets those are the net assets financed by what financed by the accumulated fund and the accumulated fund we got in working number one we got it in working number one the accumulated fund is here it was 2440 and also we are going to look at the deficit that we got because we made a deficit from our income statement from our income statement we made a deficits of 854 that shall reduce our money or our accumulated fund so the accumulated fund is 2440 and the NPO made a deficit a deficit of 854 which is a negative balance and once you subtract the answer you get is also 1586 this is now equal to the net assets and this is how you balance the statement of financial position so that marks the end of accounting for nonprofit making organ organizations I hope you have learned look out for more videos in the same area where we can discuss other questions and if you have found this to be helpful kindly like share and subscribe thank you [Music]