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Accounting Treatment: Admission or Entrance Fees, Donation and Legacies, Grants from Government, Sale of Fixed Assets, Life Membership Fees

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1. Admission or Entrance Fees: 

Admission or Entrance Fees is an amount that a Not- For- Profit Organisation charges from a new member apart from the Annual Subscription fee. Such amount is paid by the members so as to join the Organisation. Admission or Entrance Fees can be treated as capital receipt and also as a revenue income according to the situation. When it is believed that such payment is a one-time payment, it is treated as a capital receipt, on the other hand, some organisations believe that even though it is paid by each member once in a lifetime, but is received by the organisation every year, and hence is a revenue income. 

Accounting Treatment:

A. When treated as a Revenue Income:

 

Illustration: 

During the year 2021-2022, Entrance Fees received ₹3,20,000.

Solution:

 

Note: Admission or Entrance Fees without any specific information shall be treated as a revenue receipt and be shown on the credit side of the Income and Expenditure Account.

B. When treated as a Capital Receipt:

 

Illustration 2: 

During the year 2021-2022, Entrance Fees received ₹3,20,000. It shall be treated as a Capital Receipt. The capital fund stood at ₹10,00,000.

 

2. Donation: 

A donation is giving something as a charity. For the purpose of preparing the financial statement of a Not-for-Profit Organisation, it are classified as:

  • Specific Donation: When the donation is made and used for a specific purpose is it called a Specific donation. For example, Donations for buildings or donations for tournaments.
  • General Donation:  General donations are used for the general activities of the Organisation.  General donations can be of both recurring and non-recurring nature. When such donations are received in a big amount, it is treated as capital receipt and non-recurring. Similarly, if the amount of donation is small, it is expected to be recurring in nature and is treated as a revenue income.

Accounting Treatment:

A. When the amount of Donation is either large or for a specific purpose:

 

Illustration: 

During the year 2021-2022, the donation for the sports fund received was ₹3,60,000. The sports fund was ₹8,00,000 at the beginning of the year.

Solution:

 

B. Small amount General Donation:

 

Illustration: 

During the year 2021-2022, the donations received of ₹ 30,000.

Solution:

 

3. Legacy: 

Legacy is the amount received as per the will of any deceased person by a Not-For-Profit Organisation. Such amounts are of non-recurring nature and are treated as capital receipts.

Accounting Treatment:

 

Illustration:

During the year 2021-2022, the organisation received a legacy of ₹5,00,000. The Capital Fund at the beginning of the year was ₹20,00,000.

Solution:

 

4. Grants from Government: 

Grants from Government are transfer payments made by Central, State, or Local Government Authorities for the benefit of society. For example, Subsidies by the government, Government Scholarships, etc. Grants received for specific purposes should be added to that fund in the Balance Sheet or in the absence of that fund, it is added to the Capital Fund. General grants which are recurring in nature are taken to Income and Expenditure A/c. In the absence of information, it is not capitalised.  

Accounting Treatment:

A. General Grants treated as a Revenue Income:

 

Illustration:

During the year 2021-2022, received a Government Grant of ₹25,000.

Solution:

 

B. Special Grants treated as a Capital Receipt:

 

 

Illustration:

During the year 2021-2022, an Organisation received a Government Grant of ₹ 1,00,000 for organising a tournament. The Tournament Fund at the beginning of the year was ₹9,00,000.

Solution:

 

5.  Sale of Fixed Assets:  

An amount received by a Not-for-Profit Organisation in return for the sale of the asset. Such amounts are of non-recurring nature and are treated as capital receipts.

Accounting Treatment:

 

  • On Profit of Sale of Asset:

 

  • On Loss of Sale of Asset:

 

 

Illustration:   

On 1.4.2021, a Club owned furniture of ₹ 10,000. Furniture of Book Value of ₹ 5,000 was sold for ₹ 3,000 during the year. 

Solution:

 

 

 

6. Life Membership Fees: 

Some members do not pay the membership fee annually, rather they pay a lump sum amount at once for the whole life membership. Such amounts are of non-recurring nature and are treated as capital receipts. 

Accounting Treatment:

 

Illustration: 

200 new members were added in the Club who paid a life membership fee of ₹1,000 each on 1.4.2021. 

Solution:

 



Last Updated : 05 Apr, 2023
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