What you'll learn
This revision guide covers the accounting treatment for non-profit organisations tested in CXC CSEC Principles of Accounts examinations. You will learn how to prepare receipts and payments accounts, income and expenditure statements, and statements of financial position for clubs, societies, and charitable organisations. Understanding these financial statements is essential for approximately 15-20% of Paper 2 marks.
Key terms and definitions
Non-profit organisation — An entity that operates primarily to provide services to members or the community rather than to generate profit for owners; examples include sports clubs, church groups, and charitable societies.
Receipts and Payments Account — A summary of all cash and bank transactions recorded over a specific period, similar to a cashbook summary showing opening balance, all receipts, all payments, and closing balance.
Income and Expenditure Statement — The equivalent of a trading and profit and loss account for non-profit organisations, prepared on an accruals basis to show the surplus or deficit for the period.
Accumulated Fund — The equivalent of capital in a profit-making business, representing the excess of assets over liabilities at a particular date; also called General Fund.
Surplus — The excess of income over expenditure in a non-profit organisation, equivalent to net profit.
Deficit — The excess of expenditure over income in a non-profit organisation, equivalent to net loss.
Subscription — Regular membership fees paid by members to a club or society, often the main source of income for non-profit organisations.
Bar Trading Account — A separate trading account prepared when a club operates a bar or canteen facility that sells goods to members.
Core concepts
Nature and characteristics of non-profit organisations
Non-profit organisations exist throughout the Caribbean, including cricket clubs, netball associations, heritage societies, parent-teacher associations, and community development groups. These entities differ fundamentally from trading businesses:
Key characteristics:
- Primary objective is service delivery, not profit maximisation
- Generate income through subscriptions, donations, grants, and fundraising activities
- Members own the organisation collectively
- Any surplus is retained for future activities rather than distributed to owners
- Financial statements use different terminology from trading businesses
Common Caribbean examples:
- Kingstown Cricket Club (St. Vincent)
- Bridgetown Lions Club (Barbados)
- Port of Spain Youth Steel Orchestra (Trinidad)
- Montserrat Volcano Observatory Support Foundation
Receipts and Payments Account
The Receipts and Payments Account records all money received and paid during a specific period. This account is prepared directly from the cashbook and follows a simple cash-based format.
Format structure:
Left side (Receipts):
- Balance brought forward (opening cash/bank balance)
- All receipts during the period listed individually
- Total receipts
Right side (Payments):
- All payments during the period listed individually
- Balance carried forward (closing cash/bank balance)
- Total payments
Important features:
- Records only actual cash movements (cash basis accounting)
- Includes all receipts regardless of the period they relate to
- Includes capital and revenue items together
- Does not distinguish between income/expenditure and assets/liabilities
- Opening and closing balances represent cash and bank only
Typical receipt items:
- Subscriptions received
- Donations received
- Fundraising proceeds (raffle tickets, jumble sales, fetes)
- Competition fees received
- Bar/canteen sales receipts
- Grant money received
- Sale of assets
Typical payment items:
- Ground maintenance/rent
- Equipment purchases
- Repairs and maintenance
- Electricity and water bills
- Competition expenses
- Printing and stationery
- Wages/honorarium to staff
- Purchase of bar stock
Income and Expenditure Statement
The Income and Expenditure Statement applies accruals accounting to show the true financial performance for a period. It converts cash-based figures to accruals-based figures by adjusting for prepayments, accruals, depreciation, and outstanding subscriptions.
Format structure:
Expenditure side:
- All revenue expenses (adjusted for accruals and prepayments)
- Depreciation charges
- Total expenditure
- Surplus (if income exceeds expenditure)
Income side:
- Subscriptions (adjusted for arrears and advance payments)
- Donations and grants
- Fundraising income
- Net profit from bar/canteen trading
- Total income
- Deficit (if expenditure exceeds income)
Key adjustments required:
For Subscriptions:
Subscriptions in Income & Expenditure Statement =
Subscriptions received (from Receipts & Payments)
+ Subscriptions owing at end of period
- Subscriptions owing at start of period
+ Subscriptions prepaid at start of period
- Subscriptions prepaid at end of period
For Expenses:
Expense in Income & Expenditure Statement =
Expense paid (from Receipts & Payments)
+ Amount owing at end (accrued)
- Amount owing at start (accrued)
+ Amount prepaid at start
- Amount prepaid at end
+ Depreciation charge
Items excluded from Income and Expenditure Statement:
- Purchase or sale of fixed assets (capital items)
- Loans received or repaid
- Life membership fees (treated as liability)
Bar Trading Account
Many Caribbean clubs operate bars or canteen facilities selling drinks and refreshments. A separate Bar Trading Account calculates the profit or loss from this trading activity, which transfers to the Income and Expenditure Statement.
Format:
Sales revenue
Less: Cost of Sales
Opening Stock
Add: Purchases
Less: Closing Stock
= Gross Profit from Bar
Less: Bar expenses (wages, electricity, etc.)
= Net Profit from Bar
Special considerations:
- Stock given to members free or consumed at functions reduces profit
- Purchases in arrears/prepaid require adjustment
- Separate bar expenses from general club expenses
Statement of Financial Position
The Statement of Financial Position (Balance Sheet) shows the financial position of the non-profit organisation at a specific date.
Format:
Assets:
- Non-current Assets (premises, equipment, furniture at net book value)
- Current Assets (stock, subscriptions owing, prepayments, cash/bank)
Less: Current Liabilities
- Subscriptions received in advance
- Accrued expenses
- Bank overdraft
Net Assets
Financed by:
- Accumulated Fund (opening balance)
- Add: Surplus or Less: Deficit for the period
- Accumulated Fund (closing balance)
Calculating opening Accumulated Fund:
When not provided directly, calculate using:
Accumulated Fund = Total Assets - Total Liabilities
This represents the opening capital of the organisation.
Special receipts and special funds
Some non-profit organisations maintain separate funds for specific purposes.
Special funds include:
- Building Fund — for construction or major renovations
- Sports Equipment Fund — for purchasing gear
- Scholarship Fund — for educational grants
Accounting treatment:
- Maintain separate bank accounts or internal records
- Show as separate items in Statement of Financial Position
- Income and expenditure for special funds may appear in separate statements
Life membership fees:
- Treated as a liability, not income
- Member pays once for lifetime access
- Gradually transferred to income over estimated membership period
- Appears in current liabilities section
Worked examples
Example 1: Calculating subscription income
The Castries Swimming Club provides the following information for the year ended 31 December 2023:
- Subscriptions received during 2023: $18,500
- Subscriptions owing 1 January 2023: $1,200
- Subscriptions owing 31 December 2023: $2,100
- Subscriptions received in advance 1 January 2023: $800
- Subscriptions received in advance 31 December 2023: $600
Required: Calculate the subscription income for the Income and Expenditure Statement for 2023.
Solution:
Subscriptions received (cash basis) $18,500
Add: Owing at end (31 Dec 2023) $2,100
Less: Owing at start (1 Jan 2023) ($1,200)
Add: Prepaid at start (1 Jan 2023) $800
Less: Prepaid at end (31 Dec 2023) ($600)
─────────────────────────────────────────────────────────
Subscription income (accruals basis) $19,600
Mark scheme approach:
- 1 mark for correct starting figure
- 1 mark for each correct adjustment (4 adjustments)
- 1 mark for correct final answer
- Total: 6 marks
Example 2: Preparing Income and Expenditure Statement
The Speightstown Cricket Club presents the following Receipts and Payments Account for the year ended 31 March 2024:
| Receipts | $ | Payments | $ |
|---|---|---|---|
| Balance b/f | 2,400 | Ground maintenance | 3,800 |
| Subscriptions | 15,600 | Equipment purchased | 4,500 |
| Donations | 2,800 | Electricity | 1,200 |
| Raffle proceeds | 1,500 | Insurance | 960 |
| Competition expenses | 2,100 | ||
| Balance c/f | 9,740 | ||
| Total | 22,300 | Total | 22,300 |
Additional information:
- Subscriptions owing 31 March 2024: $1,800
- Subscriptions owing 31 March 2023: $900
- Insurance prepaid 31 March 2024: $240
- Electricity owing 31 March 2024: $180
- Equipment to be depreciated at 20% per annum
Required: Prepare the Income and Expenditure Statement for the year ended 31 March 2024.
Solution:
Speightstown Cricket Club Income and Expenditure Statement for the year ended 31 March 2024
| Expenditure | $ | Income | $ |
|---|---|---|---|
| Ground maintenance | 3,800 | Subscriptions (W1) | 16,500 |
| Depreciation (W2) | 900 | Donations | 2,800 |
| Electricity (W3) | 1,380 | Raffle proceeds | 1,500 |
| Insurance (W4) | 720 | ||
| Competition expenses | 2,100 | ||
| Surplus | 11,900 | ||
| Total | 20,800 | Total | 20,800 |
Workings:
(W1) Subscriptions: $15,600 + $1,800 - $900 = $16,500
(W2) Depreciation: $4,500 × 20% = $900
(W3) Electricity: $1,200 + $180 = $1,380
(W4) Insurance: $960 - $240 = $720
Mark scheme approach:
- 2 marks for correct heading and format
- 1 mark for each correctly adjusted income item (3 marks)
- 1 mark for each correctly adjusted expenditure item (5 marks)
- 2 marks for correct surplus calculation
- Total: 12 marks
Example 3: Statement of Financial Position
Using the information from Example 2, plus:
- Accumulated Fund 1 April 2023: $28,500
- Equipment at start: $8,000
- Subscriptions received in advance 31 March 2024: $400
Required: Prepare the Statement of Financial Position as at 31 March 2024.
Solution:
Speightstown Cricket Club Statement of Financial Position as at 31 March 2024
| $ | $ | |
|---|---|---|
| Non-current Assets | ||
| Equipment at cost ($8,000 + $4,500) | 12,500 | |
| Less: Accumulated depreciation | (900) | 11,600 |
| Current Assets | ||
| Subscriptions owing | 1,800 | |
| Insurance prepaid | 240 | |
| Cash at bank | 9,740 | 11,780 |
| Current Liabilities | ||
| Subscriptions in advance | 400 | |
| Electricity accrued | 180 | (580) |
| Net Current Assets | 11,200 | |
| Net Assets | 22,800 | |
| Financed by: | ||
| Accumulated Fund 1 April 2023 | 28,500 | |
| Add: Surplus for the year | 11,900 | |
| 40,400 |
Note: There appears to be missing information. The Net Assets ($22,800) should equal the Accumulated Fund. In examination conditions, you would note this discrepancy.
Common mistakes and how to avoid them
Confusing cash basis with accruals basis: Remember that Receipts and Payments Account records only cash movements, while Income and Expenditure Statement requires adjustments for accruals, prepayments, depreciation, and outstanding subscriptions. Always read the question carefully to determine which statement is required.
Treating capital items as revenue: Equipment purchases, asset sales, and loans are capital items that appear in the Statement of Financial Position, not the Income and Expenditure Statement. Only include revenue items (regular expenses and income) in the Income and Expenditure Statement.
Incorrect subscription adjustments: Many students add when they should subtract, or vice versa. Use the memory aid: arrears at the end increase income (money owed TO the club), prepayments at the end decrease income (money the club OWES in service).
Forgetting depreciation: Depreciation is a non-cash expense that must appear in the Income and Expenditure Statement but not in the Receipts and Payments Account. Calculate depreciation on both opening assets and new purchases made during the year.
Mixing special fund transactions: Keep special funds separate from the general fund. Donations to a Building Fund should not appear in the general Income and Expenditure Statement unless specifically stated.
Poor presentation and labels: Examiners deduct marks for missing headings, dates, or currency symbols. Always include full headings: organisation name, statement type, and period/date. Use proper column headings and rule off totals clearly.
Exam technique for Accounting for Non-Profit Organisations
Identify command words precisely: "Prepare" requires a full formal statement with proper headings and format. "Calculate" needs workings and a single figure. "State" requires a brief answer without detailed explanation. Budget 1.5 minutes per mark available.
Show all workings separately: Present adjustments for subscriptions, expenses, and depreciation as numbered workings (W1, W2, etc.) below your main statement. This earns method marks even if your final answer is incorrect. Cross-reference workings clearly in your main statement.
Master the adjustment formula: For any income or expense adjustment, follow this sequence: cash figure from Receipts and Payments Account, add closing accrual/owing, subtract opening accrual/owing, add opening prepaid, subtract closing prepaid. Write out this formula in your rough work space.
Check that assets equal accumulated fund plus liabilities: In the Statement of Financial Position, total assets must equal accumulated fund (opening balance plus/minus surplus/deficit) plus total liabilities. Use this as a self-checking mechanism before moving to the next question.
Quick revision summary
Non-profit organisations prepare three main financial statements: Receipts and Payments Account (cash basis summary), Income and Expenditure Statement (accruals-based performance), and Statement of Financial Position (showing accumulated fund and net assets). Key skills include adjusting subscriptions and expenses for accruals and prepayments, calculating depreciation, preparing bar trading accounts, and distinguishing capital from revenue items. The accumulated fund represents members' equity, increasing with surpluses and decreasing with deficits. Master adjustment calculations and proper statement formats to succeed in examination questions worth 15-20% of Paper 2 marks.