CS Professional · CSR and Social Governance

Financial and Non-financial Reporting of Different Non-Corporate Entities: formula sheet

Full chapter guide

Key formulas

Basic test: Non-corporate entity = any entity not incorporated as a company under the Companies Act, 2013; A Section 8 company is still a company, so it is corporate.
Main types: Trusts, societies, partnerships, sole proprietorships, cooperatives, other NPOs; Link each type to its governing law or document.
Governing source: Trust: trust deed and trust law; Society: memorandum and rules; Partnership: Indian Partnership Act, 1932; Reporting duties come from this source plus tax and other laws.
Accountability map: Company: shareholders; Non-corporate entity: beneficiaries, members, donors, regulators; Use this to explain why reporting needs differ.
Trustee's duty on accounts (Indian Trusts Act, 1882): Trustee must keep clear and accurate accounts of trust property and give the beneficiary full information on request; This is a duty of the trustee. The beneficiary has a matching right to inspect accounts and vouchers.
Society's filing duty (Societies Registration Act, 1860): Annual list of governing body members to be filed with the Registrar; State Acts may add audited accounts and annual returns. Name the state law if the facts give it.
Section 8 company: Companies Act, 2013 applies: books of account, financial statements, audit, annual return; Profits must go to the objects. No dividend to members.
Tax exemption conditions for charitable entities: Registration + income applied to charitable purposes + books of account + audit above the limit + return filed; Quote the section numbers from the Income-tax Act, 2025 for June 2027. Do not use old section numbers unless contrasting.
Application of income: Income applied to charitable purposes in the year; shortfall may be accumulated under the prescribed conditions; Check the exact percentage and conditions in the Act text supplied before stating a figure.
Accrual basis: Income when earned, expense when incurred, not when cash moves; Receipts and payments accounts alone are not enough for a proper NPO reporting if accrual is required.
Revenue grant: Income for the year = grant ÷ period of related cost, matched to costs incurred; Recognise only if there is reasonable assurance of compliance with conditions and receipt.
Capital grant for a specific asset: Net asset cost = cost of asset − grant (or show grant as deferred income); Depreciation is on the reduced cost under the first method, or grant is credited to income over the asset life under the second.
Specific or corpus donation: Credit to the fund directly, not to income and expenditure; General donations go to income.
Fund-wise surplus: Closing fund = opening fund + receipts to the fund + fund income − fund expenses; Track each restricted fund separately.
Surplus or deficit: Surplus or Deficit = Total revenue income of the year − Total revenue expenditure of the year; Both on accrual basis. A surplus increases the capital fund; a deficit reduces it.
Accrual adjustment for an expense: Expense for the year = Amount paid in the year − Opening outstanding − Closing prepaid + Closing outstanding + Opening prepaid; Opening prepaid relates to the current year, so it is added. Opening outstanding was already charged earlier, so it is deducted.
Accrual adjustment for an income: Income for the year = Amount received in the year − Opening accrued + Closing accrued − Closing received in advance + Opening received in advance; Opening accrued income was earned last year, so deduct it. Opening advance relates to this year, so add it.
Capital fund: Capital fund = Total assets − Total outside liabilities (excluding special funds shown separately); Use this to find the opening capital fund from the opening balance sheet when it is not given.
Consumption of stock: Consumed = Opening stock + Purchases − Closing stock; Used for stationery, medicines and canteen items. Take purchases on accrual basis.
Treatment of items: Revenue items → Income and Expenditure Account; Capital items → Balance Sheet; Entrance fees, legacies and general donations may be capitalised or treated as income depending on the facts or the stated policy. Follow the question.
Results chain: Inputs → Activities → Outputs → Outcomes → Impact; Use this to structure any answer on what a good report must show. Outputs are not outcomes.
Core content of a non-financial report: Mission and activities + Beneficiaries and reach + Governance + Outcomes and impact + Compliance + Lessons and plans; A checklist, not a statutory list. Say so in the answer.
Qualities of good disclosure: Relevant, Accurate, Comparable, Timely, Verifiable, Balanced; Use as a framework for evaluating a report given in a case.
Financial vs non-financial reporting: Financial = money received, spent, held. Non-financial = activities, outcomes, governance, impact; The two should reconcile. Spending reported in accounts should match activities reported.
Accountability chain: Governing document + registration law + tax law + FCRA (if foreign funds) + funder terms = total compliance duty; Use this to list every source of obligation before answering.
Core accounts of a non-profit: Balance Sheet + Income and Expenditure Account (or Receipts and Payments Account for small entities) + notes to accounts; Income and Expenditure follows the accrual basis. Receipts and Payments records cash only and has no non-cash items.
Surplus or deficit: Surplus (or deficit) = Income − Expenditure; It is not profit for distribution. It is applied to the objects of the entity.
FCRA fund discipline: Foreign contribution → designated bank account → use only for stated purpose → separate records → prescribed returns; Never merge it with domestic funds. Confirm current forms and due dates from the official text.
Audit opinion test: Books properly kept + accounts agree with books + true and fair view + funds applied to objects; A checklist for what the auditor confirms or reports on.

Quick revision

Non-corporate entities are not companies; trusts and societies are common examples.
Always identify the entity type first, because the governing law follows from it.
A Receipts and Payments account is a summary of cash and bank transactions.
An Income and Expenditure account follows the accrual basis and is like a profit and loss account for a non-profit.
Receipts and Payments shows capital and revenue items together; Income and Expenditure shows revenue items only.
Show outstanding and prepaid items in Income and Expenditure, adjusted for the period concerned.
Capital receipts such as corpus donations go to the Balance Sheet, not to Income and Expenditure.
A surplus in a non-profit is not profit for distribution; it is applied to the objects.
Non-financial reporting covers outputs, outcomes and impact, not only money spent.
Audit and public disclosure build donor and regulator trust.
In case answers, always write provision, analysis and conclusion.

Common mistakes

Treating a Section 8 company as non-corporate because it is non-profit. Fix: Ask one question: is it incorporated under the Companies Act? If yes, it is corporate.
Saying all non-corporate entities follow one law. Fix: Name the specific Act, deed or byelaws for each entity type.
Applying the Companies Act to every non-profit entity Fix: Use the Companies Act only for a Section 8 company. Trusts and societies follow their own laws.
Saying the Societies Registration Act, 1860 requires full audited accounts Fix: State that the central Act requires an annual list of the governing body. Say state laws may add audit and return duties.
Crediting every donation to income Fix: Check whether it is corpus or for a specific purpose. Those go to a fund.
Recognising a grant when it is only promised Fix: Recognise only with reasonable assurance of meeting conditions and receiving it.
Copying the whole receipts and payments account into the income and expenditure account. Fix: Include only revenue items of the current year. Opening and closing balances and capital items never go in.
Showing subscriptions on cash basis. Fix: Adjust for subscriptions outstanding and in advance, both opening and closing, using the income formula.
Treating non-financial reporting as a statutory form that every NGO must file. Fix: Say it is largely driven by governance practice, donor terms and specific regulations. Cite a mandatory requirement only when sure.
Reporting only outputs, such as number of camps held, and calling it impact. Fix: Show the change in condition of beneficiaries, with baseline and method.

Exam tips

Begin with the definition, then list types with their governing law.
Always contrast with a company on accountability and reporting.
Mention the Section 8 company exception to show precision.
In case questions, apply the entity's own law to the facts before concluding.
Link the topic to CSR when a company funds a trust or society.
Begin every answer by naming the entity and its governing law.
Keep the old and new Income-tax Acts separate. Use the 2025 Act for June 2027.
Use a short table-like list in your answer: entity, law, duty, filing.