Balance Sheet for Not for Profit Organisation

The Balance Sheet of an organisation is a statement showing its financial position on a particular date. The Balance Sheet prepared by Not-for-Profit organisations is similar to a business firm. The Balance Sheet shows the value of assets, liabilities, and capital funds at the end of the accounting year of the organisation on a particular date. It is prepared at the end of the accounting year after preparing the Income and Expenditure Account.

The Balance Sheet shows the actual value of Assets, Liabilities, and Capital Funds of the organisation. The surplus/deficit ascertained from Income and Expenditure A/c is added/deducted from the Capital Fund as the case may be. Other items added to Capital Fund are the capitalized events or transactions like Legacies, Entrance fees, and Membership fees. Some funds may be created other than Capital Fund, like Sports Fund, Building Fund, etc., to meet the specific requirement or the requirements of donors/contributors.  

Steps in preparing Balance Sheet:

Step 1: When the opening balance of the Capital Fund is not given, it is arrived at by preparing the Opening Balance Sheet. Opening Capital Fund is an excess of assets over the liabilities in the beginning. The surplus/deficit ascertained from Income & Expenditure A/c is added/deducted, as the case may be.

Step 2: The net amount of the liabilities is shown in the liabilities side of the Balance Sheet. Liabilities already appearing in the previous year’s Balance Sheet should be seen as to whether any payment has been made against them.

Step 3: Assets appearing in the previous year’s Balance Sheet are adjusted for any sale, purchase during the year and depreciation. If any part of the asset is sold, then the book value of an asset is deducted from the concerned asset. The difference between the book value and the actual sale proceeds is treated as profit or loss, which is shown in the Income & Expenditure A/c. On purchase of the new asset, the payment is shown on the payment side of the Receipts and Payment A/c.

Step 4: The adjusted value of the advance given is shown on the assets side of the Balance Sheet.

Step 5: The adjusted value of the expenses made in Income & Expenditure A/c will also appear on the Balance Sheet, i.e., Outstanding Expenses will appear on the liability side and Prepaid Expenses will appear on the assets side of the Balance Sheet.

Format of Balance Sheet:

Name of the organisation

Balance Sheet

(as on ..)

Illustration: From the following additional information and Receipt & Payment Account, prepare Income & Expenditure A/c and Balance Sheet of Geeks Foundation for the year ended on 31st March 2021.

Additional Information:

a) 50% of Donations and Entrance Fees to be capitalized.

b) Write off ₹700 from Books and ₹900 from Furniture.

c) In the beginning of the year, the Foundation’s books showed:

Assets: Furniture ₹30,000, Books ₹17,000, Investment ₹5000, Arrears in Subscription ₹4,900, and 

Liabilities: Capital Fund ₹40,400, ₹1,700 Rent is still unpaid, General Fund ₹18,300, Building Fund ₹11,600 and Sports Fund ₹10,400.

Solution: