Dr.                                                                                                                                    Cr.

Fund Based Accounting –

• the income earned on such investments is added to the respective fund
• Similarly, the expenses incurred on such specific purposes are also deducted from the special fund

        Funds –

1. Unrestricted Funds –

The funds which are not restricted are termed as unrestricted funds. The management can use these funds as required by them in any manner.

General Fund or Capital Fund

The corpus donations received by the Not for profit organizations are included in it and through this fund the entity starts working.

2. Restricted Funds

a) Government Grant

Schools, colleges, public hospitals, etc. depend upon government grant for their activities. The recurring grants in the form of maintenance grant is treated as revenue receipt (i.e. income of the current year) and credited to Income and Expenditure account. However, grants such as building grant are treated as capital receipt and transferred to the building fund account. It may be noted that some Not-for-Profit organisations receive cash subsidy from the government or government agencies. This subsidy is also treated as revenue income for the year in which it is received.

b) Endowment Fund –

It is a fund arising from a bequest or gift, the income of which is devoted for a specific purpose. Hence, it is a capital receipt and shown on the Liabilities side of the Balance Sheet as an item of a specific purpose fund.

c) Annuity Fund –

This fund is received by NPO  by a donor on a condition to pay periodically specified amount to a specific beneficiary. Annuity is a fixed amount paid by the beneficiary during their lifetime after which the fund becomes the property of NPO

d) Loan Fund –

Fund set up to provide loans to people

e) Fixed Assets Fund –

A fund set up to purchase or repair or construct a specific asset

f) Prize Fund –

It is set to give awards or prizes  by the NPO.

 Question -

Show the following information in financial statements of a ‘ Not-for-Profit’ Organisation:

       Details                        Amount (Rs.)

 Match Expenses                16,000

 Match Fund                        8,000

 Donation for Match Fund     5,000

 Sale of Match tickets          7,000

(b) What will be the effect, if match expenses go up by Rs. 6,000 other things remaining the same?

Answer – a) Balance Sheet as on………..*

(b) If match expenses go up by Rs. 6,000, the net balance of the match fund becomes negative i.e. Debit exceeds the Credit, and the resultant debit balance of Rs. 2,000 shall be charged to the Income and Expenditure Account of that year.

Q. How would you deal with the following items in the Balance sheet of a NPO?

                                                                                                                          Rs.

1. Donations received for Auditorium construction                             25,00,000

Expected total cost of the auditorium Rs. 40,00,000)

2. Expenditure on construction of Auditorium                                      21,00,000

3. opening balance of Auditorium fund                                                   1,00,000

 4. 10% Auditorium fund Investment                                                       20,00,000

 5. Interest on Auditorium fund Investment                                           1,50,000