Theory question 103
Not-for-Profit Organisations3. (a) Mention three features of not-for-profit making organizations. (b) Give two similarities and two differences between a Receipt and Payment Account and an Income and Expenditure Account.
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(a) Any three: they are not set up to make profit but to serve members or society; their income comes mainly from subscriptions, donations, grants and fund-raising; any surplus is used for the organisation's aims and not shared among members; their capital is called the accumulated fund; they prepare receipts and payments and income and expenditure accounts instead of trading and profit and loss accounts.
(b) Similarities (any two): both are prepared by non-profit organisations; both cover the same period; both summarise the organisation's transactions; both are prepared at the end of the year from the books.
Differences (any two): receipts and payments is a summary of the cash book (a real account) while income and expenditure is like a profit and loss account (nominal); receipts and payments includes capital and revenue items, income and expenditure only revenue items; receipts and payments is on a cash basis, income and expenditure on an accruals basis (adjusted for accruals and prepayments); receipts and payments ends with a cash balance, income and expenditure with a surplus or deficit; depreciation appears only in income and expenditure.
Remember: receipts and payments is about cash, income and expenditure is about surplus.