Final accounts of NPO comprise Receipts and Payments account, income and Expenditure accountand Balance Sheet.
Receipts and Payments Account is a real account and prepared exactly like cashbook but it is not prepared date wise. Income and expenditure account is a nominal account and is prepared like profit and loss account of the trading concerns.
Debit side of the account records expenses and credit side records incomes. There is Capital Fund or General fund in place of Capital.
Receipts and Payments account show total subscription actually received during the year, while income and expenditure account show subscriptions related to current year irrespective of the fact whether it has been received or not.
General donation appears on the debit side of the receipts and payments account in the year of receipt. General donation of small amount is credited to income and expenditure account and of big amount or donations for specific purpose are to be capitalised.
Endowment fund is shown in the liabilities side of the Balance Sheet. It is not treated as income.
Honorarium is shown in the expenditure side of the income and expenditure account.
Grant from Government in the form of maintenance grant is treated as revenue receipt and credited to the income and expenditure account. However, grants such as building grant are treated as capital receipt and transferred to the building fund account.
In case of, Fund Based Accounting, amount received on account of these funds are added to the specific funds and interest on any investment made on account of these funds is added to that fund and any expenses made are deducted from the fund. Hence amount received on account of specific funds are not shown as income and expenses on such account.
Other adjustments dealt are, cost of consumables, sale of old assets etc.
Generally Income and Expenditure account is prepared with the help of receipts and payments account.
When Trial Balance is given debit side includes expenses and assets, while credit side includes incomes and liabilities.