8. Explain steps for the Preparation of Balance Sheet for charitable institutions after
using Income and Expenditure account.
Answers
Answer:
In the case of non-profit organizations, the Capital Fund is accumulated along with capital Receipts and receipts that are capitalized by further increasing the surplus or decreased by the deficit, during the year. At the beginning of a non-trading concern, there will be no formal capital Fund and in such case, the Surplus, if any, earned during the year constitute the Capital Fund at the end of the year.
The balance sheet of a non-profit organization is prepared in the same manner as in the case of a business enterprise. The assets of the organization are recorded on the Right side and liabilities on the Left side. The Non-profit organizations do not use the term Capital. Instead, General Fund or Accumulated Fund appears on the Balance Sheet.
The NPO might also create a special fund, such as prize fund or match fund. The purpose of which is to meet the expenses related to the purpose for which it is created. The incomes on the amount which is invested from these funds accrue to the fund alone and not the income and expenditure account.
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