Several special items are used in the accounts of non-trading concerns (i.e., non-profit organizations). This article highlights the main special items and provides brief explanations. A subscription is an amount paid by the members of non-trading concerns at regular intervals to keep their memberships active. It is the main and regular source of income for non-profit organizations. The name of a member may be deleted from the membership roll if they do not pay their subscriptions within a specified time. Normally, subscription payments are made annually. ACCOUNTING TREATMENT As noted earlier, subscriptions are the main source of income for non-profit organizations. Therefore, they should be entered as a form of income in the income and expenditure account. Subscriptions may be received for the previous, current, and next year, and so care should be taken to ensure that only subscriptions relating to the current year are treated as income. Example Suppose that 2024 is the current year for which an income and expenditure account is being prepared. How would the following subscriptions appear in the income and expenditure account for 2024? $ Subscription of 2024 received in 2025 3,000 Subscription of 2025 received in 2025 10,000 Subscription of 2025 received in 2024 3,000 Subscription of 2026 received in 2025 2,000 Subscription of 2025 still outstanding 5,000 Solution Income and Expenditure Account For the year ended 31 December 2025 Expenditure $ Income $ Subscriptions 10,000 Add: Received in 2024 3,000 Add: Outstanding 5,000 18,000 Less: Previous Years 3,000 15,000 Less: Advance 2,000 13,000 13,000 The admission fee (or entrance fee) is the amount received from new members at the time of their admission, in addition to subscriptions. Every member pays an admission fee only once (i.e., when they become a member). ACCOUNTING TREATMENT Accountants are divided on the treatment of admission fees. Some accountants state that admission fees are received only once from a member, and so they constitute a receipt of a non-recurring nature. Therefore, they should be treated as capital receipts and should be added to the capital fund. Another opinion is that although admission fees are only received once, membership remains open throughout the year. Each year, many new members are admitted, which leads to a receipt of a recurring nature that should be treated as an income. Where the admission fee amount is small, some accountants argue that just to cover the expenses of admission, it should be treated as a revenue receipt and should be recorded on the income side of the income and expenditure account. Old newspapers and periodicals (magazines) are sold at regular intervals. The amount realized in this way is very nominal and recurring in nature. ACCOUNTING TREATMENT It is a revenue receipt and treated as an income. Therefore, it should be credited to the income and expenditure account. In sports clubs, this is a routine activity due to the fact that sports materials and equipment age with extensive use. ACCOUNTING TREATMENT Proceeds from the sale of old sports materials are revenue receipts and should be credited to the income and expenditure account. If, however, depreciation is charged on sports material, then sports materials are an asset. In this case, the sale of old sports materials will be deducted from sports materials on the assets side of the balance sheet. A donation is an amount or item received by way of a gift from members and the general public. The number of subscriptions may not sufficient to meet the expenses of a non-trading concern, and this is why they often seek to receive donations. Donations may be received for general or specific purposes. For example, donations are often received by universities and other organizations for the construction of new buildings. ACCOUNTING TREATMENT If the donation is received for any specific purpose, it will be treated as a capital receipt and will be recorded on the liabilities side of the balance sheet. If the donation is not for a specific purpose and the amount received is not a fairly large amount, it will be treated as an income and recorded on the income side of the income and expenditure account. Sometimes, an organization offers its members the chance to become lifetime members by paying a lump sum. This fee is known as a Life Membership Fee. ACCOUNTING TREATMENT There are several ways that accountants may treat life membership fees. The amount or property received by non-trading concerns by way of the will of a deceased person is called a legacy. It is a non-recurring receipt by nature. ACCOUNTING TREATMENT It is a capital receipt and will be added to the capital fund on the liabilities side of the balance sheet. The additional amount collected from members for some special purposes is called a special subscription. A special fund is created and a special subscription is transferred to this fund (e.g., building fund, tournament fund, and prize fund). ACCOUNTING TREATMENT The amount of the special subscription is credited to the special fund that is recorded as a liability in the balance sheet. Any expenses out of these funds will be deducted from the special fund in the balance sheet. Also, they will not be recorded as expenses in the income and expenditure account. Some non-trading concerns sell old assets (e.g., old furniture or equipment). These sales are non-recurring in nature. ACCOUNTING TREATMENT Sale of assets is not an income; rather, it is a decrease in assets and will be deducted from the respective assets in the balance sheet. Any loss on the sale of an asset is recorded on the debit side of the income and expenditure account. Any profit on the sale of assets will be added to the capital fund on the liabilities side of the balance sheet. An honorarium is a token payment made to a person who is invited to give a lecture or to perform for the members of the non-profit organization. For example, an honorarium payment may be made to a singer or renowned scholar. ACCOUNTING TREATMENT An honorarium is a revenue payment and, being an expense, will be recorded on the debit side of the income and expenditure account. This recurring expense should be recorded on the expenditure side of the income and expenditure account. In organizations such as sports clubs, sports material is consumed over a short time period. Therefore, buying and selling sports materials is a routine activity for these clubs. ACCOUNTING TREATMENT Purchase of sports materials is treated as revenue expenditure and is recorded as an expense on the debit side of the income and expenditure account. If, however, depreciation is charged on sports material, it is treated as an asset. Depreciation is the permanent and gradual decrease in the value of fixed assets due to usage and general wear and tear. ACCOUNTING TREATMENT This is an item of revenue expenditure and will be recorded on the debit side of the income and expenditure account. The capital of a non-trading concern consists of the contributions of the members, special donations, admission fees, and the transferring of surplus. Thus, the excess of total assets over total liabilities in non-trading concerns is called the capital fund. ACCOUNTING TREATMENT Just like the capital of trading concerns, the capital fund is recorded on the liabilities side of balance sheet. Surplus is added to it and deficit is deducted from it. An unrestricted fund is at the disposal of the management committee of a non-trading concern. It is available for use as authorized by the management committee. Funds that can only be used by donors are known as restricted funds. To "endow" is to provide a permanent income for something. An endowment fund is one where the principal is retained in an income-producing investment for an indefinite time period. ACCOUNTING TREATMENT Endowment funds, like other funds, are treated as liabilities. Investments made from endowment funds are treated as assets. Additionally, interest on the investment of endowment funds is treated as an income. An annuity fund is a fund established by non-trading concerns to make specified payments periodically for a particular period for the assets received. Non-profit organizations use loan funds to grant loans to members. This fund is created with the amount held by the non-profit organization as a custodian. An example is a fund established using the security deposits of the members. This would be shown as a liability on the balance sheet.1. Subscriptions
2. Admission Fee
3. Sale of Newspapers
4. Sale of Old Sports Materials
5. Donations
6. Life Membership Fee
In this case, the amount of the life membership fee will be recorded as a liability in the balance sheet.
In addition, an amount equal to an annual subscription is transferred every year to the income and expenditure account as an income. The balance will be shown as a liability in the balance sheet.
When a specific direction has been given, it should be treated accordingly.7. Legacy
8. Special Subscriptions
9. Sale of Assets
10. Honorarium
11. Purchase of Newspapers and Periodicals
12. Purchase of Sports Materials
13. Depreciation
14. Capital Fund
15. Unrestricted Fund
16. Restricted Fund
17. Endowment Fund
18. Annuity Fund
19. Loan Fund
20. Agency Fund
Accounting Treatment of Special Items of Non-trading Concerns FAQs
Non- trading concerns or non-profit organizations are those organizations which are not engaged in profit-making activities. They are operated for the benefit of their members or the society as a whole.
The main special items used in the accounts of non-trading concerns are:1. Subscriptions2. Admission fee3. Sale of newspapers4. Sale of old sports materials5. Donations6. Life membership fee7. Legacy8. Special subscriptions9. Sale of assets10. Honorarium11. Purchase of newspapers and periodicals12. Purchase of sports materials13. Depreciation14. Capital fund15. Unrestricted fund16. Restricted fund17. Endowment fund18. Annuity fund19. Loan fund20. Agency fund
An honorarium is a revenue payment and, being an expense, will be recorded on the debit side of the income and expenditure account.
There are several ways that accountants may treat life membership fees.First, the amount received as a life membership fee may be treated as a capital receipt.Second, if the amount of the life membership fee is small, then it may be treated as an income.When a specific direction has been given, it should be treated accordingly.
If the donation is received for any specific purpose, it will be treated as a capital receipt and will be recorded on the liabilities side of the balance sheet.If the donation is not for a specific purpose and the amount received is not a fairly large amount, it will be treated as an income and recorded on the income side of the income and expenditure account.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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