Identify the steps in preparation of final accounts of not for profit organisation (NPO).

A. Prepare Balance sheet of NPO
B. Prepare Income & expenditure Account from Receipts and payment A/c
C. Prepare Receipts and payment A/c
D. Adjust outstanding / prepaid expenditure / Income and determine surplus / deficit
E. Prepare cash book

Choose the correct answer from the options given below:

E, C, B, D, A

The correct answer is option 1- E, C, B, D, A.

Preparing the final accounts of a not-for-profit organization (NPO) involves the following steps.

E. Prepare Cash Book: This is generally maintained throughout the year to record daily cash transactions. The receipts and payment account can be derived from the cash book.

C. Prepare Receipts and Payment Account: The Receipt and Payment Account is the summary of cash and bank transactions which helps in the preparation of Income and Expenditure Account and the Balance Sheet. It is prepared at the end of the accounting year on the basis of cash receipts and cash payments recorded in the cash book. It is a summary of cash and bank transactions under various heads.

B. Prepare Income & Expenditure Account from Receipts and Payment A/c: The Income and Expenditure Account serves the same purpose as the profit and loss account of a business organisation does. All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side and incomes and gains on the income side of the account. It shows the net operating result in the form of surplus (i.e. excess of income over expenditure) or deficit (i.e. excess of expenditure over income), which is transferred to the capital fund shown in the balance sheet.

D. Adjust outstanding / prepaid expenditure / Income and determine surplus / deficit: The Income and Expenditure Account is prepared on accrual basis with the help of Receipts and Payments Account along with additional information regarding outstanding and prepaid expenses and depreciation etc. Hence, many items appearing in the Receipts and Payments need to be adjusted.

A. Prepare Balance Sheet of NPO: ‘Not-for-Profit’ Organisations prepare Balance Sheet for ascertaining the financial position of the organisation. The preparation of their Balance Sheet is on the same pattern as that of the business entities. It shows assets and liabilities as at the end of the year. Assets are shown on the right hand side and the liabilities on the left hand side. However, there will be a Capital Fund or General Fund in place of the Capital and the surplus or deficit as per Income and Expenditure Account which is either added to/deducted from the capital fund, as the case may be. It is also a common practice to add some of the capitalised items like legacies, entrance fees and life membership fees directly in the capital fund.Some times it becomes necessary to prepare Balance Sheet as at the beginning of the year in order to find out the opening balance of the capital/general fund.