Question

The Balance Sheet of a non-trading organisation is prepared based on relevant information. In this context, explain any five of its features.

Answer 1

A non-trading organisation’s Balance Sheet is generated using its Receipts and Payments Account, Income and Expenditure Account, and other relevant information. Its main features are as follows:

1. Prepared on a particular date: A Balance Sheet is always created on a certain date (often the last day of the accounting year), rather than for a period.
2. Prepared after Income and Expenditure Account: The Balance Sheet is generated after the Income and Expenditure Account because the surplus or deficit determined in I&E must be added to or deducted from the Capital Fund reflected in the Balance Sheet.
3. It is a statement, not an account: A balance sheet is a statement of assets and liabilities. It is not part of the double-entry posting system.
4. Shows financial position on a specified date: The Balance Sheet shows the organization's overall financial situation by detailing all of its assets, liabilities, and Capital Fund as of a specific date.
5. Depicts the Capital Fund: The Capital Fund is depicted on the Balance Sheet of a non-trading company. It covers the launch of the Capital Fund, surplus from I & E, life membership fees, entrance fees, legacies, and capital donations.
6. Statutory requirement: Non-trading organizations must create a Balance Sheet in accordance with the Cooperative Societies Act, the Societies Registration Act, and other applicable laws.