FAC1502 Nonprofit entities Welcome back to all our financial accounting students.

Nonprofit entities: goal of furthering certain interests of the community not to distribute profits to the members render a service to its members these entities can range from informal social clubs to formal societies revenue is membership fees, donations, fundraising projects, bequests and even government subsidies membership and not ownership A nonprofit organisation can be defined as an economic entity which has the legitimate goal of furthering certain interests of the community.   Its objective is not to distribute profits to the members but to use the profits in order to achieve the stated goal. Such an entity is oriented to render a service to its members, and not to pursue financial gain. These entities/societies can range from informal social clubs, (for example an activity club for the elderly) to formal societies (for example schools and churches). Revenue may be acquired from a variety of sources, such as membership fees, donations, fund raising projects, bequests and even government subsidies. Membership, and not ownership, is acquired through the payment of membership fees.

Nonprofit entities: receipts and payment statement is a summary of cash transactions Receipts and payments statement   A receipts and payment statement is an analysed and classified summary of the cash transactions. It is the most elementary version of a statement for a club or association. Smaller entities which have no other assets than cash will often only prepare a receipts and payments statement as the annual financial statement. The financial information needs of a larger club or society will require more than the mere presentation of a receipts and payments statement. An income and expenditure statement (statement of comprehensive income) as well as a statement of financial position, similar to those of an ordinary trading entity, are usually also required.

Nonprofit entities: receipts and payment statement is a summary of cash transactions income and expenditure statement is very similar to a statement of profit or loss and other comprehensive income Income and expenditure statement   This statement is very similar to a statement of comprehensive income prepared by a trading concern. The layout may differ from that of an statement of profit or loss and comprehensive income because all the relevant sources of income, including investment income, can be shown under the heading “Income” and all the expenses, including finance cost, can be shown under the heading “Expenses” The income and expenditure statement is also prepared according to the accrual principle. The difference between the revenue (credits) and expenses (debits) represents the surplus/deficit for the accounting period.

Nonprofit entities: receipts and payment statement is a summary of cash transactions income and expenditure statement is very similar to a statement of profit or loss and other comprehensive income separate trading statement can be prepared for each operational activity Trading statement   The majority of the bigger clubs do trade in order to generate revenue which they use to achieve their stated goals, for example, the provision of bar and refreshment facilities to their members. If the scale on which trading takes place justifies it, a separate trading statement can be prepared for each operational activity. Therefore it is possible to prepare more than one trading statement for a specific entity/society. The layout of such a trading statement is similar to the trading section of a statement of comprehensive income of an ordinary trading concern.

Nonprofit entities: receipts and payment statement is a summary of cash transactions income and expenditure statement is very similar to a statement of profit or loss and other comprehensive income separate trading statement can be prepared for each operational activity accumulated fund is any initial donations, entrance fees , the surplus/deficit for each period and special funds donated Accumulated fund   Any initial donation made to begin the organisation, entrance fees, the surplus/deficit for each period and special funds donated for general expenses will form part of the accumulated fund.

Nonprofit entities: receipts and payment statement is a summary of cash transactions income and expenditure statement is very similar to a statement of profit or loss and other comprehensive income separate trading statement can be prepared for each operational activity accumulated fund is any initial donations, entrance fees , the surplus/deficit for each period and special funds donated special funds for specific purposes or only the income earned Special funds   When money is donated for a special purpose, separate investment accounts must be opened for special funds. This makes it possible to issue meaningful reports on the acquisition and utilisation of funds. Special funds can be divided into two main sections: Firstly, special funds can be established to save or set aside money for a specific purpose, for example to purchase specific equipment. When sufficient funds have been accumulated or received, the equipment can be purchased with the capital amount as well as the income earned from the capital, if any. Secondly, special funds can be established where only the income earned from the investment of the capital amount may be applied. It is also possible that such income may only be spent on stipulated items.

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding fro 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding fro 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees?

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding for 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? Membership fee was R150 for 2007

Nonprofit entities 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2007 membership fees R150

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding for 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? Membership fees was R180 for 2008

Nonprofit entities 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 2008 membership fees R180

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding for 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? On 1 January 2008, 5 member’s fees were received in advance

Nonprofit entities R(180x5) =R 900 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 R(180x5) =R 900 From 2007 R(180 x 5) = R900

Nonprofit entities Calculation of Income Fees received R 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 Calculation of Income Fees received R add: 2008 Fees 900 less:2007 Fees less:2009 Fees add: 2008 Fees R(180x7) Total Fees 2008 At calculation of income for 2008 it must be added because it was received in advance in 2007 and it is for 2008

Nonprofit entities: Membership fees Dr Membership fees Cr 2008 Jan 1 Dec 31 Fees outstanding R(150x8) Balance b/d Income & Expenditure In advance Balance c/d R Fees in advance R(180x 5) Balance b/d Bank CRJ Fees in arrears R(180x7) Balance c/d 900 2009 Balance b/d In membership fees it is a credit, fees in advance from 2007 for 2008

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding for 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? On 1 January 2008, 8 members were still outstanding for 2007

Nonprofit entities R(150x8) =R 1 200 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 R(150 x 8) = R1 200 for 2007 R(150x8) =R 1 200

Nonprofit entities Calculation of Income Fees received R 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 Calculation of Income Fees received R add: 2008 Fees 900 less:2007 Fees (1 200) less:2009 Fees add: 2008 Fees R(180x7) Total Fees 2008 At calculation of income for 2008 it must be subtracted because it was for 2007 and not for 2008

Nonprofit entities: Membership fees Dr Membership fees Cr 2008 Jan 1 Dec 31 Fees outstanding R(150x8) Balance b/d Income & Expenditure In advance Balance c/d R 1 200 Fees in advance R(180x 5) Balance b/d Bank CRJ Fees in arrears R(180x7) Balance c/d 900 2009 Balance b/d In membership fees it is a debit, fees were still outstanding for 2007

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding for 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? During 2008 membership fees received amounted to R21 720

Nonprofit entities Calculation of Income Fees received R 21 720 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 Calculation of Income Fees received R 21 720 add: 2008 Fees 900 less:2007 Fees (1 200) less:2009 Fees add: 2008 Fees R(180x7) Total Fees 2008 At calculation of income for 2008 it must be added because it was membership fees received for 2008

Nonprofit entities: Membership fees Dr Membership fees Cr 2008 Jan 1 Dec 31 Fees outstanding R(150x8) Balance b/d Income & Expenditure In advance Balance c/d R 1 200 Fees in advance R(180x 5) Balance b/d Bank CRJ Fees in arrears R(180x7) Balance c/d 900 21 720 2009 Balance b/d In membership fees it is a credit or income

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding for 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? Including R1 200 in respect of 2007

Nonprofit entities less: 2007 Fees (1 200) 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 less: 2007 Fees (1 200) 2007 fees

Nonprofit entities Calculation of Income Fees received R 21 720 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 Calculation of Income Fees received R 21 720 add: 2008 Fees 900 less:2007 Fees (1 200) less:2009 Fees add: 2008 Fees R(180x7) Total Fees 2008 At calculation of income for 2008 it must be subtracted because it was for 2007 and not for 2008

Nonprofit entities: Membership fees Dr Membership fees Cr 2008 Jan 1 Dec 31 Fees outstanding R(150x8) Balance b/d Income & Expenditure In advance Balance c/d R 1 200 Fees in advance R(180x 5) Balance b/d Bank CRJ Fees in arrears R(180x7) Balance c/d 900 21 720 2009 Balance b/d In membership fees it is a debit, fees received were outstanding for 2007

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding for 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? R1 230 received in respect of 2009 and not 2008

Nonprofit entities less: 2009 Fees (1 230) 2008 Financial year 12 1 2 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 less: 2009 Fees (1 230) 2009 fees

Nonprofit entities Calculation of Income Fees received R 21 720 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 Calculation of Income Fees received R 21 720 add: 2008 Fees 900 less:2007 Fees (1 200) less:2009 Fees (1 230) add: 2008 Fees R(180x7) Total Fees 2008 At calculation of income for 2008 it must be subtracted because it was for 2009 and not for 2008

Nonprofit entities: Membership fees Dr Membership fees Cr 2008 Jan 1 Dec 31 Fees outstanding R(150x8) Balance b/d Income & Expenditure In advance Balance c/d R 1 200 21 450 1 230 Fees in advance R(180x 5) Balance b/d Bank CRJ Fees in arrears R(180x7) Balance c/d 900 21 720 2009 Balance b/d In membership fees it is a debit, fees received in respect of 2009 and this became the in advance balance

Nonprofit entities Exercise The membership fee of the Clayville Club was R150 for 2007 and R180 for 2008 per member per annum. On 1 January 2008, the beginning of the financial year of the Club, the membership fees of 5 members were received in advance (at the new rate for membership fees) and that of 8 members were still outstanding for 2007. During 2008 membership fees received amounted to R21 720, including R1 200 in respect of 2007 and R1 230 in respect of 2009. The membership fees of 7 members were still outstanding on 31 December 2008. Which amount represents the amount that was credited to the income and expenditure account of the club on 31 December 2008 in respect of membership fees? The membership fees of 7 members were still outstanding on 31 December 2008

Nonprofit entities add: 2008 Fees R(180x7) 1 260 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 2007 Membership fees R150 add: 2008 Fees R(180x7) 1 260 2008 fees

Nonprofit entities Calculation of Income Fees received R 21 720 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 Calculation of Income Fees received R 21 720 add: 2008 Fees 900 less:2007 Fees (1 200) less:2009 Fees (1 230) add: 2008 Fees R(180x7) 1 260 Total Fees 2008 At calculation of income for 2008 it must be added because it is still outstanding for 2008

Nonprofit entities: Membership fees Dr Membership fees Cr 2008 Jan 1 Dec 31 Fees outstanding R(150x8) Balance b/d Income & Expenditure In advance Balance c/d R 1 200 1 230 Fees in advance R(180x 5) Balance b/d Bank CRJ Fees in arrears R(180x7) Balance c/d 900 21 720 1 260 2009 Balance b/d In membership fees it is a credit, fees still outstanding for 2008 and this became the fees outstanding balance

Nonprofit entities Calculation of Income Fees received R 21 720 2008 Financial year 12 1 2 3 4 5 6 7 8 9 10 11 2007 Membership fees R150 2008 Membership fees R180 Calculation of Income Fees received R 21 720 add: 2008 Fees 900 less:2007 Fees (1 200) less:2009 Fees (1 230) add: 2008 Fees R(180x7) 1 260 Total Fees 2008 21 450 At calculation of income for 2008 the total fees for 2008 R21 450

Nonprofit entities: Membership fees Dr Membership fees Cr 2008 Jan 1 Dec 31 Fees outstanding R(150x8) Balance b/d Income & Expenditure In advance Balance c/d R 1 200 21 450 1 230 Fees in advance R(180x 5) Balance b/d Bank CRJ Fees in arrears R(180x7) Balance c/d 900 21 720 1 260 23 880 2009 Balance b/d In membership fees it is a debit, income and expenditure of R21 450