Not For Profit Organisation

Presented By:-Deepak Saini-11BSP1937

Yatin Mundeja-11BSP1229

Non Profit OrganizationsA non profit organization, as defined by law, is an

organization that cannot distribute assets or income to, or for the benefit of, its members, officers, or directors.

Organisations which are formed not for earning profits but for a charitable or social purpose are called as not for profit organisations.

Special Characteristics

Absence of the profit measure

Contributed capital

Fund accounting

Governance

1) Separate legal entity2) Service motive3) Form 4) Profit- not a motivator5) Funding6) Accounts

FEATURES

Separate legal EntitySeparate legal Entity

According to the principle of separate legal entity, a not for profit organisation is an separate entity independent of its members.

These are the separate entity promoted by individuals or companies, but these are not owned by the promoters or managers.

Service MotiveService Motive

These organisations are formed

For welfare of the society.

For providing services to its members.

Main motive is to provide services.

FormForm

Charitable hospitals

Schools

Trusts

Colleges

Clubs

Hospitals

Societies

Profit – not a motivatorProfit – not a motivatorNPOs do not operate with the objective of earning profits.Their aim is to promote art, science, commerce, religion,

culture, education, charity, sports etc.Some NPOs may involve in trading activitiesMain objective is not to earn the profit but to benefit the

members and society.Any excess of income over expenditure is termed as SURPLUS

while any excess of expenditure over income is termed as DEFICIT.

Funding Funding

The main sources of income of such organisations are: Subscriptions from members, Donations, Legacies, Grant-in-aid, Income from investments, etc.

Accounts Accounts

The Not-for-Profit Organisations are also required to prepare financial statements at the end of the each accounting period.

They have to prepare their final accounts at the end of the accounting period and the general principles of accounting are fully applicable in their preparation.

Receipt and Payment AccountIncome and Expenditure Account, andBalance Sheet.

The final accounts of a ‘not-for-profit organisation’ consist of the following:

Management control system

Product pricing: Many nonprofit organizations give inadequate attention to their pricing policies. Pricing of services at their full cost is desirable.

Pricing for peripheral activities should be market-based. A nonprofit hospital should price its health care services at full cost, but prices in its gift shop should be market based.

Strategic planning & budget preparation: In nonprofit organizations that must decide how best to allocate limited resources to worth-while activities, strategic planning is a more important & more time consuming process than in the typical business.

Operation & evaluation: In most nonprofit organizations, there is no way of knowing what the optimum operating costs are. Responsibility center managers, therefore, tend to spend whatever is allowed in the budget, even though the budgeted amount may be higher than is neccesary. Many organizations have had increasing difficulty in raising funds, especially from government resources.

Management control system

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