Theory question 103
Not-for-Profit Organisations(a) Explain the following terms used in not-for-profit making organizations: (i) Accumulated fund; (ii) Subscription in arrears; (iii) Receipts and Payment Accounts; (iv) Income and Expenditure Accounts; (v) Entrance fees.
(b) Distinguish between shares and debentures.
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(a)(i) Accumulated fund: the capital of the organisation - total assets less total liabilities, built up from past surpluses.
(ii) Subscription in arrears: subscriptions due from members for the period but not yet paid; a current asset.
(iii) Receipts and payments account: a summary of the cash book showing opening cash/bank balances, all receipts and payments, and closing balances.
(iv) Income and expenditure account: the club's equivalent of a profit and loss account, recording revenue income and expenditure of the period and showing a surplus or deficit.
(v) Entrance fees: a once-only payment made by a new member on joining; treated as income (or capitalised).
(b) Shares are parts of the ownership capital of a company; holders are members and receive dividends only when profits allow. Debentures are long-term loans to the company under its seal; holders are creditors, receive fixed interest whether or not there is profit, and are repaid before shareholders.
For (b), compare ownership, return and risk.