Accounting for Non-Profit Making Organisations

Accounting for Non-Profit Making Organisations

Non-Profit making organisations (NPOs) in Singapore have been major contributors to the holistic growth and development of the nation. Non-profit-making organisations typically exist to further a specific cause or help specific sectors of society. Examples include Autism Resource Centre, Ngee Ann Kongsi and Singapore Association for the Visually Handicapped. Making a profit is not their main purpose, although many carry on fund-raising activities to further support their members and cause. The organisation is ‘owned’ by all of its members and not by just one person or partnership. Records of money received and spent are usually kept by a club member who is not a trained bookkeeper or accountant. Usually no other records are kept.

It follows from the above that a business which is meant to make profits is not a non-profit-making organisation, even if it keeps making losses. To keep their finances in check, NPOs generally utilise the best accounting services in Singapore.

Special features of the accounts of non-profit-making organizations:

  • An Income and Expenditure Account takes the place of the Profit and Loss Account.
  • The words Surplus of income over expenditure are used in place of ‘net profit’
  • The words excess of expenditure over income are used in place of ‘net loss’
  • The term Accumulated fund is used in place of ‘Capital account’
  • A Trading Account is only prepared for an activity that is in the nature of trading and is carried to increase the club’s funds.

The treatment of income

Income of a club to cover all non-profit-making organizations should be treated in the club’s accounts as follows:


The amount credited to the Income and Expenditure Account should equal the annual subscription per member multiplied by the number of members. It may be helpful to prepare a Subscriptions account as workings to decide how much should be credited to the Income and Expenditure Account.

Subscriptions in arrears and subscriptions in advance should normally be treated as accruals and prepayments. However, each club has its own policy for treating subscriptions in arrears or in advance. The two possible policies are as follows:

  • Cash basis: The amount received in the year is credited to the Income and Expenditure Account. This may include subscriptions for a previous year or paid in advance for the next year.
  • Accruals basis: All subscriptions due for the year including those not yet received, are credited to the Income and Expenditure Account. It will usually be the club’s policy to write off, as bad debts, subscriptions that are not received in the year after they were due.

Life subscriptions and entry fees:

Life subscriptions and entry fees are received as lump sums but should not be credited in full to the Income and Expenditure Account when received. The club should have a policy of spreading this income over a period of, say, five years. The amount received should be credited to a Deferred Income account and credited to the Income and Expenditure Account is equal annual installments over a period determined by the club committee.


Donations and legacies to a club are usually made for particular purposes, for example towards the cost of a new pavilion or a piece of equipment. such donations should be credited to an account opened for the purpose, and expenditure on it debited to the account. Money received for special purposes should be placed in a separate bank account to ensure that it is not spent on other things.

Ancillary activities

Ancillary activities are secondary to a club’s main purpose. They raise money to supplement income from subscriptions. If they involve some sort of trading, a Trading Account should be prepared for them as part of the annual accounts, and the profit or loss should be transferred to the Income and Expenditure Account.

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