Key Examples and Accounting Treatment of Peculiar Items in NPOs
Some peculiar items are special financial entries unique to non-profit organisations (NPOs). These items, including subscriptions, legacies, donations, and government grants, are crucial in school and competitive exams like CBSE, UGC NET, and other commerce-related tests. Understanding their meaning, examples, and treatment helps students master NPO accounting and perform accurately in questions regarding financial statements and fund-based accounting.
| Peculiar Item | Definition | Type (Capital / Revenue) | Treatment in Accounts | Example |
|---|---|---|---|---|
| Subscriptions | Fees paid by members to maintain their membership | Revenue | Receipts & Payments A/c: Receipt side; Income & Expenditure A/c: Income side | Annual member fee of a sports club |
| Donations (General) | Voluntary contributions received without any specific purpose | Revenue | Income & Expenditure A/c: Income side | General donation by a patron |
| Donations (Specific) | Donations given for a particular project or asset | Capital | Balance Sheet: Liability side, under respective fund | Donation for building construction |
| Legacies | Amount bequeathed via will, i.e., left by deceased persons | Capital / Revenue | Specific: Liability in Balance Sheet; General: Income in Income & Expenditure A/c | Legacy via will, either for specific or general use |
| Government Grants | Funds provided by the government to support the organisation | Revenue / Capital | General: Income in Income & Expenditure A/c; Specific: Liability in Balance Sheet | Sports grant, educational scheme grant |
| Life Membership Fees | Lump sum paid by members for lifetime membership | Capital | Balance Sheet: Added to Capital Fund | Life membership in a library |
Peculiar Items in Non-Profit Organisations
Peculiar items in non-profit organisations are financial entries that do not usually appear in business accounts. These are crucial for maintaining transparency and proper fund management. Understanding them helps students handle exam questions about charitable trusts, societies, or clubs accurately.
Key Peculiar Items: List and Short Explanation
- Subscriptions: Regular fees from members for continued association.
- Donations: Funds or assets received voluntarily (could be general or specific).
- Legacies: Amounts left to the organisation through wills.
- Government Grants: Support from government bodies for operations or projects.
- Life Membership Fees: Once-off payment for permanent membership.
Accounting Treatment of Peculiar Items
| Peculiar Item | Where Shown | Capital/Revenue Nature | Key Note |
|---|---|---|---|
| Subscriptions | Income & Expenditure A/c (income); Receipts & Payments A/c (receipt) | Revenue | Adjusted for outstanding and advance subscriptions |
| General Donations | Income & Expenditure A/c (income) | Revenue | Can be used freely |
| Specific Donations | Balance Sheet (liability) | Capital | Must be used for specified purpose |
| Legacies | General: Income & Expenditure A/c (income) Specific: Balance Sheet (liability) |
Capital / Revenue | Depends on condition in the will |
| Government Grants | General grant: Income & Expenditure A/c Specific: Balance Sheet (liability under fund) |
Revenue / Capital | Matching principle applies |
| Life Membership Fees | Balance Sheet (added to Capital Fund) | Capital | Not a yearly income |
Types of Peculiar Items: Detailed Explanation
Let’s explore how some peculiar items are categorised and recorded in non-profit accounting:
- Subscriptions: Shown as income in the Income and Expenditure Account, after adjusting for outstanding and received-in-advance amounts. Receipts are shown in the Receipts and Payments Account as and when actually received.
- Donations: General donations are treated as revenue income. Specific donations, like building or prize funds, must be used for intended purposes and are shown as liabilities until spent.
- Legacies: If the legacy does not specify a use, it is income. If for a specific use, it is a liability recorded under a special fund in the balance sheet.
- Government Grants: If specific (e.g., grant for books), it is a liability; if general, it is income.
- Life Membership Fees: Treated as capital receipt and shown with the capital fund, rarely transferred to income.
All these peculiar items ensure the non-profit follows fund-based accounting and keep its finances transparent for donors and regulators. Learn more about Fund-Based Accounting and Subscription here.
Why Peculiar Items Matter for Exams and Practice
Peculiar items form the core of several competitive exam questions, especially in Class 11, Class 12, and B.Com. They test your understanding of the difference between capital and revenue, as well as specific treatments. Real examples, such as legacies, donations, and government grants, often appear in practical questions and theoretical notes. Knowing how to classify and present them is essential for scoring high marks.
Real-World Example
A sports club receives annual subscriptions from members, a Rs. 1 lakh donation from a local business, and a special grant from the state for playground development. The accountant must know which amounts go to income, which are earmarked funds, and how to show them separately on the balance sheet and income statement.
Revision List: Four Peculiar Items (For Exams)
- Subscriptions
- Donations (general/specific)
- Legacies
- Life Membership Fees
For more detailed classification, review Capital and Revenue Items and Capital and Revenue Transactions.
Related Concepts and Further Reading
- Accounting for Not-For-Profit Organisations
- Fund-Based Accounting and Subscription
- Receipts and Payments Account
- Sample Textbook Problems: DK Goel
- Difference Between Trading and Non-Trading Concerns
Summary
To summarise, some peculiar items—such as subscriptions, donations, legacies, government grants, and life membership fees—are unique to non-profit organisations. Understanding their definition, classification, and accounting treatment is vital for students and exam aspirants. Mastery of this topic ensures clarity in preparing financial statements and scoring well in both school and competitive examinations. For more expert guidance, refer to Vedantu’s resources and partner pages.
FAQs on Some Peculiar Items in Non-Profit Organisations Explained
1. What are peculiar items in accounting for non-profit organisations?
Peculiar items in non-profit organisation (NPO) accounting are unique financial entries not typically found in for-profit businesses. They represent income or expenses specific to NPOs, such as donations, legacies, and government grants. Understanding their treatment is crucial for accurate financial reporting.
2. How are subscriptions recorded in NPO accounts?
Subscriptions in NPOs are recorded as income, usually in the income and expenditure account. The treatment depends on whether the subscription is for a specific service or general membership. For example, if it's for a specific service, it's treated similar to service revenue; for general membership, it's often capitalized if it's a life membership fee.
3. What is the difference between general and specific donation?
A general donation is unrestricted; the NPO can use it for any purpose. A specific donation is restricted to a particular project or purpose. This distinction is crucial in fund-based accounting and impacts how the donation is recorded in the financial statements. Special aids are frequently categorized as specific donations.
4. How is a legacy treated in the Balance Sheet?
A legacy, or bequest, is recorded as income when received. In the balance sheet, it might appear as part of the organization's funds, perhaps under the category of restricted funds if the will dictated a specific use for the legacy. Its impact may show in the income and expenditure account.
5. Give four examples of peculiar items for non-profit organisations.
Four examples of peculiar items in NPO accounting are: donations (general or specific), legacies (bequests), government grants, and membership fees (including life memberships). These are all unique entries that may require specific treatment in fund accounting.
6. What does 'special aids are treated as' mean in NPO accounting?
In NPO accounting, 'special aids are treated as' refers to how specific types of donations or grants are recorded. They are generally categorized as restricted funds, meaning their use is limited to a specific purpose outlined by the donor. This is different from general donations.
7. What does peculiar items mean?
Peculiar items in non-profit accounting refer to income or expenses unique to non-profit organizations. Examples include donations, legacies, and government grants. These items differ from those found in for-profit entities and necessitate special accounting treatment.
8. What is donation class 12?
In Class 12 accounting, a donation is a peculiar item for non-profit organizations (NPOs). It's an inflow of resources without any exchange of goods or services, requiring careful classification as either general or specific based on the donor's restrictions.
9. What are items that appear in a non-profit statement?
Non-profit statements (income and expenditure accounts and balance sheets) include various items. Key entries include peculiar items such as donations, legacies, government grants, membership fees, and income from fundraising activities. The specific items depend on the nature of the organization's operations.
10. What is a donation in an NPO?
In an NPO, a donation is a voluntary contribution of money or other resources. Donations can be general (unrestricted) or specific (restricted to a particular purpose), influencing their treatment in financial reporting and the balance sheet.
11. Write four items relating to not-for-profit organizations.
Four items relating to not-for-profit organizations (NPOs) are: donations, government grants, membership subscriptions, and legacies (bequests). These are examples of peculiar items with unique accounting considerations compared to for-profit businesses.
