(a) Explain the following terms as used in account of not-for-profit making organization. (i)entrance fees (ii) subscription (b) State five features of inco...

(a) Explanation of terms used in the accounts of a not-for-profit making organisation

(i) Entrance fees: This is a one-off amount paid by a new member on first joining the club or society, in addition to the ordinary subscription. It is a form of admission fee that entitles the person to become a member. It is normally treated as revenue income and credited to the Income and Expenditure Account in the year it is received, although some clubs, by their rules, capitalise it and add it to the Accumulated Fund.

(ii) Subscription: This is the periodic amount (usually annual) paid by members to enjoy the benefits and facilities of the organisation. It is the main source of revenue for most clubs and societies. In the Income and Expenditure Account only the subscription relating to the current year is taken, after adjusting for subscriptions owing (accrued) and subscriptions paid in advance.

(b) Five features of an Income and Expenditure Account

1. It is prepared by not-for-profit making organisations (clubs, societies, associations) rather than by trading firms.
2. It is drawn up on the accruals (matching) basis, so only incomes and expenses relating to the current period are included, whether paid or not.
3. It records only revenue incomes and expenses; capital items (purchase of assets, capital receipts) are excluded.
4. Its final balance is described as a surplus (excess of income over expenditure) or a deficit (excess of expenditure over income), not net profit or net loss.
5. It is the equivalent of the Profit and Loss Account and the surplus or deficit is transferred to the Accumulated Fund in the Balance Sheet.