Financial Accounting · Lesson 11

Receipts and payments, income and expenditure, accumulated fund

JAMBWAECNECO

What the syllabus asks

JAMB: Topic 11 Accounts of not-for-profit organisations (receipts and payments account, income and expenditure account, subscriptions, accumulated fund, statement of financial position)

WAEC: Not-for-profit organisations: receipts and payments, subscriptions, income and expenditure account, accumulated fund, income-generating activities (bar, canteen, raffle)

NECO: Not-for-profit organisations: receipts and payments, subscriptions, income and expenditure account, accumulated fund, income-generating activities (bar, canteen, raffle)

What you will learn

Explain the nature and purpose of not-for-profit organisations and their accounts.
Prepare a receipts and payments account.
Calculate subscriptions income and prepare a subscriptions account.
Prepare a bar or canteen trading account and treat other fund-raising activities.
Find the opening accumulated fund.
Prepare an income and expenditure account and statement of financial position.

Key points

Not-for-profit organisations serve members or society; any surplus is retained.
Receipts and payments account = summary of cash book: all cash items, any period.
Income and expenditure account = accruals-based statement of revenue items; result is surplus or deficit.
Accumulated fund = assets − liabilities (equivalent of capital).
Subscriptions income adjusts cash for arrears and advances at both ends.
Bar/canteen: separate trading account; only its profit goes to I&E.
Life membership: capitalise in a fund and release over expected years (or as instructed).
General donations are income; specific/capital donations and legacies go to funds.
Capital items are excluded from I&E; depreciation is included.
Closing fund = opening fund + surplus (+ capitalised receipts).

Start here: Nature of not-for-profit organisations

Across Nigeria, people join together for purposes other than making money: old students’ associations, sports clubs, town unions and progressive unions, market women’s associations, professional bodies, religious organisations, cooperative societies, charities and non-governmental organisations (NGOs). These are not-for-profit organisations (also called non-trading or non-profit-making organisations).

Their aim is to provide services to members (sports facilities, welfare, social events) or to society (scholarships, health outreaches, community projects). Any excess of income over spending is not shared as profit; it is kept to further the organisation’s objectives.

Sources of income

Members’ subscriptions and entrance fees.
Life membership fees.
Donations, grants and legacies.
Fund-raising: bars, canteens, raffles, dances, launchings, film shows, sale of souvenirs.
Hire of hall or equipment; interest on investments.

Who keeps the accounts?

The treasurer, elected by members, keeps the cash book and prepares the annual accounts, which are presented at the annual general meeting (AGM) for approval after being checked by auditors (often honorary). Members want to know how their money was used, whether the organisation can meet its commitments, and whether subscriptions should change. Transparency builds trust: many associations have collapsed over unexplained spending.

Why accounting matters for associations

A town union in Anambra collecting levies for a community borehole, or a mosque or church committee raising funds for a new hall, handles members’ money in trust. Good accounts protect honest officers from false accusations, help members see how projects are progressing, and are often required by banks, donors and the Corporate Affairs Commission, where an association is registered as incorporated trustees under Part F of CAMA 2020. Donors such as foundations and international agencies usually insist on audited income and expenditure accounts before releasing grants.

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Practice questions

1. A receipts and payments account is a summary of

cash and bank transactions for the period
incomes and expenses on an accruals basis
assets and liabilities
members’ names

Show answer

A: cash and bank transactions for the period
It is like a cash book summary.

2. The closing balance of a receipts and payments account shows

the surplus for the year
the accumulated fund
subscriptions owing
cash and bank balances at the end

Show answer

D: cash and bank balances at the end
It is a balance of cash.

3. An excess of income over expenditure is called a

gross profit
deficit
surplus
net profit

Show answer

C: surplus
Not-for-profit bodies use surplus/deficit.

4. An excess of expenditure over income is called a

overdraft
deficit
surplus
loss on realisation

Show answer

B: deficit
A deficit reduces the accumulated fund.

5. A club received ₦640 000 in subscriptions this year, including ₦15 000 arrears for last year and ₦25 000 paid in advance for next year. There are no arrears this year. Subscription income for the year:

₦600 000
₦640 000
₦680 000
₦615 000

Show answer

A: ₦600 000
₦640 000 − ₦15 000 − ₦25 000 = ₦600 000.

Key words

Not-for-profit organisation: A body formed to promote a purpose for members or society, not to make profit for owners.
Receipts and payments account: A summary of cash and bank transactions for a period.
Income and expenditure account: A statement of revenue income and expenditure for a period on accruals basis.
Surplus: Excess of income over expenditure.
Deficit: Excess of expenditure over income.
Accumulated fund: The excess of assets over liabilities of a not-for-profit organisation.
Subscriptions: Regular payments by members for membership.
Subscriptions in arrears: Subscriptions due but not yet paid.
Subscriptions in advance: Subscriptions received for a future period.
Entrance fee: A one-off fee paid on joining.
Life membership: A single payment giving lifetime membership.
Legacy: Money left to the organisation in a will.

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