Accounting · Financial Statements of Not-for-Profit Organisations

Accounting for Specific Activities in Not-for-Profit Organisations

Updated 1 October 2026 · Fact-checked

Specific activities are trading-type activities of an NPO, such as a canteen, bar or publications. You prepare a separate trading account for each, find its profit or loss, and transfer only that net figure to the Income and Expenditure Account. Do not show the gross items again there.

Understand Accounting for Specific Activities

A club or society exists to serve members, not to earn profit. But many run side activities that look like a business: a canteen, a bar, a sale of books or the sale of sports goods. These have sales, purchases and stock, so a plain receipt or payment total does not tell you the result.

To show the result of each activity, you prepare a separate trading account (sometimes a trading and profit and loss account if the activity has its own direct expenses, such as the canteen staff wages). The account shows opening stock, purchases, direct expenses, closing stock and sales. Its balancing figure is the profit or loss on that activity.

The key rule is that only the net result goes to the Income and Expenditure Account. Profit goes to the credit side as income. Loss goes to the debit side as expenditure. If you also show canteen sales and purchases there, you count them twice.

Purchases are usually not given directly. You find them from the creditors account: payments made to creditors, plus closing creditors, minus opening creditors. Sales may be cash sales plus credit sales. Consumption of items like stationery or sports material is found as: opening stock + purchases - closing stock. That consumed amount is an expense of the period.

Sale of old or used sports material is different. It is the sale of a fixed asset or of used stock, not a trading sale. You treat any profit or loss on that sale separately. It does not go into the canteen or bar profit.

Key rules to remember

Profit on a specific activity: Profit = Sales - (Opening stock + Purchases + Direct expenses - Closing stock); A negative answer is a loss. Transfer only the net figure to the Income and Expenditure Account.
Purchases from creditors: Purchases = Payments to creditors + Closing creditors - Opening creditors; Use this when purchases are not given. Cash purchases are added separately.
Credit sales from debtors: Credit sales = Cash received from debtors + Closing debtors - Opening debtors; Add cash sales to get total sales.
Consumption of stock: Consumption = Opening stock + Purchases - Closing stock; Works for stationery, sports material and similar items. Charge the consumption, not the payment, to Income and Expenditure.
Profit or loss on sale of old asset: Profit or loss = Sale proceeds - Book value of the asset sold; Show it in Income and Expenditure Account. Do not mix it with trading activity profit.

How to solve Accounting for Specific Activities questions

Use this order for any question where a club runs a canteen, bar, or sells publications or sports goods.

1Read the question and list each activity separately. Note the opening and closing stock of each.
2Find the purchases. If creditors are given, use the creditors formula. Add cash purchases if any.
3Find the sales. Add cash sales and credit sales, or take the figure given.
4Add direct expenses of that activity, such as wages or electricity if clearly allocated to it.
5Prepare the trading account. Debit opening stock, purchases and direct expenses. Credit sales and closing stock. The balancing figure is profit or loss.
6Transfer only the profit or loss to the Income and Expenditure Account. Keep gross items out.
7Handle other items separately: consumption of stationery or sports material as an expense, and sale of old material as profit or loss on asset sale.
8Show closing stock of each activity in the Balance Sheet as a current asset.

Quickest way: Working notes first, then one net figure

When to use it: Use this when the question gives a Receipts and Payments Account with several trading items and you have limited time.

Make a small box for each activity: Sales, Purchases, Opening stock, Closing stock.
Compute purchases and sales in a working note, with the formula visible for step marks.
Calculate profit as Sales - Purchases - Opening stock + Closing stock - Direct expenses.
Put the single net figure in the Income and Expenditure Account, labelled clearly, for example Profit on canteen.
Tick off the Receipts and Payments items you have used so none is counted twice.

Common mistakes in Accounting for Specific Activities

Showing canteen sales and purchases separately in the Income and Expenditure Account.
The items appear in the Receipts and Payments Account, so students copy them across.
Fix: Prepare the trading account first. Show only the net profit or loss in Income and Expenditure.
Using the payment to creditors as purchases.
Students forget that some purchases are unpaid and some payments relate to last year.
Fix: Apply Payments + Closing creditors - Opening creditors.
Charging stationery or sports material paid in cash instead of the amount consumed.
The payment is visible and the stock adjustment is overlooked.
Fix: Compute opening stock + purchases - closing stock and charge only that amount.
Adding the sale of old sports material to canteen or bar income.
Students treat any sale as trading income.
Fix: Sale of old material is an asset or stock disposal. Compare proceeds with book value and show the profit or loss separately.
Ignoring closing stock of the activity in the Balance Sheet.
Students use closing stock in the trading account and then forget it.
Fix: Show it as a current asset in the Balance Sheet.

Worked examples

Example 1

A club's canteen had opening stock ₹8,000 and closing stock ₹6,000. Payments to creditors for canteen purchases were ₹52,000. Creditors were ₹7,000 at the start and ₹9,000 at the end. Canteen sales were ₹78,000. Canteen wages were ₹10,000. Find the canteen profit or loss.

Show the solution

Purchases = 52,000 + 9,000 - 7,000 = ₹54,000.
Cost of goods sold = 8,000 + 54,000 - 6,000 = ₹56,000.
Gross profit = 78,000 - 56,000 = ₹22,000.
Net result after wages = 22,000 - 10,000 = ₹12,000 profit.
Show ₹12,000 as income on the credit side of the Income and Expenditure Account.

Answer: Canteen profit is ₹12,000, transferred to the credit side of the Income and Expenditure Account.

Example 2

A sports club had sports material stock of ₹15,000 at the start of the year. It paid ₹40,000 for sports material during the year. Closing stock was ₹12,000. It also sold old sports material, with a book value of ₹5,000, for ₹3,500. Show the effect on Income and Expenditure.

Show the solution

Consumption = 15,000 + 40,000 - 12,000 = ₹43,000.
Charge ₹43,000 as an expense on the debit side of the Income and Expenditure Account.
Loss on sale of old material = 5,000 - 3,500 = ₹1,500.
Show the ₹1,500 loss on the debit side of the Income and Expenditure Account.
Show closing stock of ₹12,000 in the Balance Sheet as an asset.

Answer: Debit Income and Expenditure with sports material consumed ₹43,000 and loss on sale of old material ₹1,500. Closing stock ₹12,000 is an asset.

Exam tips

Write the trading account for each activity separately and label it with the activity name.
Show working notes for purchases and consumption. Marks are often given for the method even if a figure goes wrong.
State clearly that only the net profit or loss goes to Income and Expenditure.
Check whether the question gives stock at the start and end. Missing stock often has to be taken from the Balance Sheet.
If an item says old or used material sold, treat it as a sale of asset, not as a trading sale.

Practice questions from Financial Statements of Not-for-Profit Organisations

Accounting for Specific Activities: frequently asked questions

How do I treat canteen income in a club's final accounts?

Prepare a canteen trading account using sales, purchases and stock. Take only the profit or loss to the Income and Expenditure Account. Show closing canteen stock in the Balance Sheet.

How is the sale of old sports material treated in NPO accounts?

Compare the sale proceeds with the book value of the material. Show the difference as profit or loss in the Income and Expenditure Account. Do not add it to trading activity profit.

How do I find consumption of stationery in an NPO?

Add opening stock and purchases, then deduct closing stock. Charge that amount to the Income and Expenditure Account as an expense. Do not simply use the cash paid.

Should bar profit go to the Income and Expenditure Account?

Yes, but only the net profit or loss of the bar. Prepare a bar trading account first. A profit is shown as income and a loss as expenditure.