Chapter  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 1 NOT- FOR-PROFIT ORGANISATIONS LEARNING OUTCOME:  TO SHOW THE FINANCIAL REPORTS AND THE ACCOUNTING AND NON-ACCOUNTING RECORDS REQUIRED TO BE MAINTAINED BY NOT-FOR-PROFIT ORGANISATIONS 4

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 2 KEY TERMS  accumulated funds  goods and services tax (GST)  incorporation  reconstruction of accounts  special activity accounts and statements  statement of receipts and payments  subscriptions

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 3 INCORPORATION  The Corporations Law and the Associations Incorporation Act cover incorporation for a not-for-profit organisation  Incorporated clubs or societies can register and are required to keep proper accounting records  Organisations are expected to adhere to the Australian Accounting Standards whether incorporated or not

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 4 BENEFITS OF INCORPORATION  Organisation becomes a separate legal entity from members and can enter into binding legal agreements  Organisation can hold property in its name  Organisation can be sued only as an association, protecting committee members and members

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 5 BENEFITS OF INCORPORATION  Organisation has right to perpetual continuity even if members change  Liability of members limited to outstanding fees  Organisation able to invest surplus monies or raise funds to benefit members

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 6 MEMBERS’ FUNDS  Accumulated funds of club or society are similar to owner’s equity and represent the net worth  A reduction in accumulated funds comes from deficits  An increase in accumulated funds comes from surpluses

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 7 RECORDS TO BE MAINTAINED  The constitution  Register of members  Minute book  Correspondence file

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 8 OFFICERS OF A CLUB OR SOCIETY  Members are elected to fill the following positions: ÙPresident ÙTreasurer ÙSecretary ÙCommittee ÙSpecial fundraising groups

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 9 ACCOUNTING COMPARISONS  The minimum accounting records for not-for-profit organisations are a cash book and petty cash records and bank reconciliations

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 10 SUBSCRIPTIONS  There are five items to consider: ÙCash for subscriptions received during the accounting year ÙCash received that is required to pay subscriptions for the previous year ÙCash received paid in advance by members for the following year ÙAmount accrued and due in the current year ÙCash received in the previous year but applicable to the current year

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 11 MEMBERS’ SUBSCRIPTION Members’ subscription account DateSubscriptions in arrears DateSubscriptions in advance DateIncome and expenditure account DateBank – receipts from members Subscriptions in advance Subscriptions in arrears

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 12 SPECIAL ACTIVITIES OF NOT-FOR- PROFIT ORGANISATIONS  Although clubs or societies do not aim to make profit, this might occur when providing facilities for the members’ use Ùe.g. large clubs need to maintain facilities such as bars, dining rooms and poker machines

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 13 BAR ACTIVITIES  Opening inventories of liquor and drinks  Purchase returns  Bar wages  Cash sales  Per cent electricity and other costs related to bar  Accrued bar wages  Cash purchases  Depreciation bar equipment  Replacement of broken glasses

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 14 JOURNALS AND LEDGER ACCOUNTS  Smaller clubs maintain cash receipts and cash payments journal  Larger not-for-profit bodies may have full accounting systems

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 15 FINANCIAL STATEMENTS FOR NOT- FOR-PROFIT ORGANISATIONS  Statement of receipts and payments  Statement of Financial Performance  Statement of Financial Position

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 16 FINANCIAL STATEMENTS  STATEMENT OF RECEIPTS AND PAYMENTS ÙTotal receipts for the period are added to the opening cash balance and total payments made in cash are deducted to calculate balance of cash on hand ÙThis ledger account includes all cash actually received and paid out

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 17 FINANCIAL STATEMENTS  STATEMENT OF FINANCIAL PERFORMANCE ÙIncludes all items that are relevant to an accounting period ÙStatement of Financial Performance relates to expenses incurred and revenue earned during the period, whether received or paid

 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Applications for Financial Accounting by David Willis, slides prepared by Kaye Watson 18 FINANCIAL STATEMENTS  STATEMENT OF FINANCIAL POSITION ÙThe term ‘owner’s equity’ used in a sole trader business is replaced by the term ‘accumulated funds’ ÙThe ‘accumulated funds’ balance equals the net assets of the club or society i.e. total assets minus total liabilities