Lesson Notes By Weeks and Term - Senior Secondary 2

Account for non-profit making organization

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Term: 1st Term

Week: 5

Class: Senior Secondary School 2

Age: 16 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Financial accounting

Topic:-       Account for non-profit making organization

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

  1. Define non-profit making organization
  2. Outline the features of non-profit making organization
  3. State what the final accounts of non-profit making organizations consists of

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION

TEACHER’S ACTIVITY

STUDENT’S ACTIVITY

STEP 1

INTRODUCTION

The teacher reviews the previous lesson on manufacturing account

Students pay attention

STEP 2

EXPLANATION

She explains non-profit making organization and outlines their features

 

Students pay attention and participates

STEP 3

DEMONSTRATION

She states what the final accounts of non-profit making organization consists of

Students pay attention and participate

STEP 4

NOTE TAKING

The teacher writes a summarized note on the board

The students copy the note in their books

 

NOTE

ACCOUNT FOR NON-PROFIT MAKING ORGANIZATION

Non-profit organizations are organizations formed with the intention of the

welfare of society and the general public. The main objectives of such

organization are the welfare of society, promotion of art and culture,

advancement in education, relief to the poor, preservation of environment

and monuments, or advancement of any object of general public utility.

These are mainly set up as charitable institutions with a service motive.

Major funding of such organizations is either from their members or as

donations or grants received from the general public. 

 

Features of Non-Profit Organizations (NPO) 

  1. Service Motive:These organizations are set up with the motive of providing service to their members or a specific group or the general public. These services are mainly free or for a minimum charge. Majorly these organizations work on the welfare of society, promotion of art and culture, advancement in education, relief to the poor, preservation of environment and monuments, or advancement of any object of general public utility.
  2. Members:These organizations are formed as charitable trusts, societies, or Section 8 Companies. The initial persons involved in the setting up of such organizations and subscribers to such organizations become their members.
  3. Income:The major sources of income of such organizations are subscriptions, donations, government grants, income from investments, etc.
  4. Profit:The profit generated in the due course of the business is used to achieve the main objectives of the Company and cannot be distributed among its members.
     

Non-profit organizations do not exchange goods or provide services for

profit. But during the course of their business, they earn income and incur

expenses that need to be recorded accurately. These organizations need

to keep adequate and proper books of accounts so that the government

can keep proper control over the grants and also reduces the risk of fraud

and misappropriation of funds. 

In addition, a complete record of all fixed assets and consumables is kept

in an inventory register. In accounting for non-profit organizations, Capital

Fund or General Fund A/c is maintained instead of a Capital account.
 

The Final Accounts of Non-profit Organizations Consist of:

  1. Receipts and Payments Account:The receipt and payment account is the summary of payments and receipts of an organization during an accounting period. It gives a picture of the cash position of the organization. It records all cash and bank transactions of both capital and revenue nature and does not include any non-cash transactions It is prepared at the end of an accounting period.
  2. Income and Expenditure Account:This account records all the incomes and expenses of the non-profit organization.  All income-related expenses and losses are recorded as debits and all income-related income and profits are recorded as credits. The closing balance of these accounts represents the organization’s surplus or deficit.
  3. Balance Sheet:The Balance Sheet is the statement that reflects the financial position of the non-profit organization which contains all the items of capital nature that is, assets, liabilities, equity capital, total debt, etc. at a point in time. It provides a full picture of companies net worth. The golden rule of the balance sheet is that the total assets shall match the total liabilities of the Company that is, Assets = Liabilities + Equity. A capital fund is also known as a General Fund or corpus fund, it is the excess of assets over liabilities.

EVALUATION:    1. Define non-profit making organization

  1. State the features of a non-profit making organization
  2. What does the final account of the non-profit making organization consists of?

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively