Financial Accounting · Financial Statements of Not-for-Profit Organisations

Trading Activities of NPOs: Canteen, Bar and Consumables

Updated 10 October 2026 · Fact-checked

A not-for-profit organisation (NPO) that runs a canteen, bar or event prepares a separate trading account for it. The profit or loss goes to the Income and Expenditure Account. Consumption of stationery or sports material is opening stock plus purchases less closing stock. Only the consumed amount is charged to Income and Expenditure.

Understand Trading Activities: Stock of Consumables and Incidental Income

Many clubs and societies sell things to members: food in a canteen, drinks at a bar, tickets for an event. These are trading activities. They are not the main purpose of the NPO, but they bring in money and cost money.

The Receipts and Payments Account shows only cash. To find the true result of a canteen, you need a trading account (or a profit and loss statement) for it. It starts with opening stock, adds purchases, deducts closing stock and compares the cost with sales. Purchases and sales must be adjusted for creditors and debtors, just like in a business.

The result is treated in one of two ways. You may show only the net profit or loss on the income side or expenditure side of the Income and Expenditure Account (for example, 'Profit on canteen'). Or, if the question asks, you may show sales on the income side and the costs on the expenditure side. The net method is the usual one. Direct expenses of the activity, such as the canteen waiter's wages, are charged in the activity account first. Do not charge them a second time in Income and Expenditure.

Stationery, sports material and similar items are consumables. They are bought in one year but may be used over several periods. The expense for the year is only what was used: opening stock + purchases (adjusted for outstanding amounts) - closing stock. Stock is shown on the Balance Sheet as a current asset.

Sports goods are different when they are durable, such as a cricket net or a gym machine. These are treated as fixed assets and depreciated, unless the question says to treat them as consumed. Always read how the question describes the item.

Key rules to remember

Consumption of stationery or sports material: Consumption = Opening stock + Purchases during the year - Closing stock; Purchases mean the amount for the year: cash paid + closing creditors - opening creditors. This consumption is the expense in Income and Expenditure.
Purchases for the year (credit purchases): Purchases = Cash paid to suppliers + Closing creditors - Opening creditors; Use this when payments are given in the Receipts and Payments Account and creditors are given in the balance sheets.
Sales of canteen/bar: Sales = Cash received + Closing debtors - Opening debtors; Use this only if some sales are on credit. If all are cash, receipts equal sales.
Profit or loss of the activity: Profit = Sales - (Opening stock + Purchases - Closing stock) - Direct expenses of the activity; A negative figure is a loss. Show profit on the income side and loss on the expenditure side of Income and Expenditure Account.
Treatment in Income and Expenditure: Net profit of activity: credit side. Net loss: debit side.; Do not show the sales receipts again. Stocks of consumables go to the Balance Sheet as assets.

How to solve Trading Activities: Stock of Consumables and Incidental Income questions

Use this order for any question with a trading activity or consumables. Work from the Receipts and Payments Account and the extra information given.

1Identify each activity (canteen, bar, sports, event) and each consumable (stationery, sports material). Note which figures belong to which.
2For each activity, find the year's sales: cash received adjusted for opening and closing debtors, if any.
3Find the year's purchases: cash paid adjusted for opening and closing creditors.
4Build the activity's trading account: opening stock + purchases - closing stock = cost of goods sold. Deduct direct expenses such as wages. Find the profit or loss.
5Calculate consumption of stationery or sports material using opening stock + purchases - closing stock. Keep a separate working note.
6Transfer only the net profit or loss of each activity, and only the consumption figure, to Income and Expenditure Account. Skip the amounts already used in the activity account.
7Show closing stocks of consumables and any outstanding items on the Balance Sheet.
8Tick off every item in the Receipts and Payments Account to be sure nothing is left out or counted twice.

Quickest way: Three-line working for each item

When to use it: Use when the Receipts and Payments Account and the adjustments are given and you have limited time.

Write one line for each activity: Sales - cost of goods sold - direct expenses = profit or loss. Fill the cost using stock and creditor adjustments.
Write one line for each consumable: Opening + Purchases - Closing = consumption.
Cross out each Receipts and Payments item after you use it, so it is not charged again in Income and Expenditure.
Put profit or loss on the correct side, and then put the closing stock on the Balance Sheet.

Common mistakes in Trading Activities: Stock of Consumables and Incidental Income

Charging the full purchases of stationery or sports material to Income and Expenditure.
Students copy the payment from the Receipts and Payments Account.
Fix: Always compute consumption using opening stock, purchases and closing stock. Charge only the consumed amount.
Showing canteen sales and canteen purchases on both the activity account and Income and Expenditure.
The items appear in the Receipts and Payments Account, so students enter them again.
Fix: Use the activity account to find the net result. Move only the net profit or loss to Income and Expenditure, unless the question asks for gross items.
Forgetting to adjust purchases for opening and closing creditors.
The creditors figures are in the balance sheet data and are overlooked.
Fix: Use cash paid + closing creditors - opening creditors. Do the same for sales with debtors.
Putting a canteen loss on the income side.
Students think the activity is an income item by default.
Fix: Profit is income. Loss is expenditure. Check the sign of your result before posting.
Leaving closing stock off the Balance Sheet.
Students stop after finding consumption.
Fix: Closing stock of canteen items, stationery and sports material is a current asset. List it on the asset side.
Treating durable sports equipment like consumables, or the reverse.
Both are called sports material.
Fix: Read the question. If stock figures are given, treat as consumables. If it is an asset with a cost and a depreciation rate, treat it as a fixed asset.

Worked examples

Example 1

A club runs a canteen. For the year: opening stock ₹8,000; closing stock ₹11,000; cash paid to suppliers ₹1,20,000; creditors at start ₹10,000 and at end ₹15,000; canteen sales (all cash) ₹1,52,000; canteen wages paid ₹12,000. Prepare the canteen trading account and state the treatment in Income and Expenditure Account.

Show the solution

Purchases = 1,20,000 + 15,000 - 10,000 = ₹1,25,000.
Cost of goods sold = 8,000 + 1,25,000 - 11,000 = ₹1,22,000.
Gross profit = 1,52,000 - 1,22,000 = ₹30,000.
Deduct wages ₹12,000: net profit = 30,000 - 12,000 = ₹18,000.
Show ₹18,000 as 'Profit on canteen' on the income side of Income and Expenditure Account. Do not show wages again.
Show closing stock ₹11,000 on the Balance Sheet as an asset.

Answer: Purchases ₹1,25,000; cost of goods sold ₹1,22,000; net profit on canteen ₹18,000, credited to Income and Expenditure Account. Closing stock ₹11,000 appears in the Balance Sheet.

Example 2

An NPO's Receipts and Payments Account shows payment for sports material of ₹46,000 and for stationery of ₹9,000. Information: stock of sports material at start ₹12,000, at end ₹15,000. Creditors for sports material at start ₹5,000, at end ₹8,000. Stock of stationery at start ₹2,000, at end ₹1,500; outstanding stationery bill at end ₹1,000, none at start. Find the amounts charged to Income and Expenditure Account and the closing stocks for the Balance Sheet.

Show the solution

Sports material purchases = 46,000 + 8,000 - 5,000 = ₹49,000.
Sports material consumed = 12,000 + 49,000 - 15,000 = ₹46,000.
Stationery purchases = 9,000 + 1,000 = ₹10,000.
Stationery consumed = 2,000 + 10,000 - 1,500 = ₹10,500.
Charge ₹46,000 for sports material and ₹10,500 for stationery to the expenditure side.
Balance Sheet: sports material stock ₹15,000 and stationery stock ₹1,500 as assets; sports material creditors ₹8,000 and outstanding stationery ₹1,000 as liabilities.

Answer: Sports material consumed ₹46,000; stationery consumed ₹10,500. Closing stocks ₹15,000 and ₹1,500 are assets. Creditors ₹8,000 and outstanding stationery ₹1,000 are liabilities.

Exam tips

Show all workings as separate notes, such as 'Working Note 1: Purchases of sports material'. Step marks are given for each correct calculation.
Check how the question wants the activity shown: net profit only, or sales and costs separately. If unclear, use the net method and say so.
Read the extra information after the Receipts and Payments Account first. Stocks, creditors and outstanding amounts are hidden there.
Check that each Receipts and Payments item is used exactly once, either in a working or in a final statement.
For MCQs, compute consumption or purchases quickly. A common wrong option is the plain cash payment without adjustment.

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

Trading Activities: Stock of Consumables and Incidental Income: frequently asked questions

How do I treat profit on canteen or bar in the Income and Expenditure Account?

Prepare a separate account for the activity and find its net profit or loss. Show profit on the income side and loss on the expenditure side. Do not show the sales and purchases again.

How is consumption of sports material calculated in an NPO?

Consumption = opening stock + purchases for the year - closing stock. Purchases are cash paid adjusted for opening and closing creditors. Only this consumption is charged to Income and Expenditure.

Where does closing stock of stationery go?

It goes to the asset side of the Balance Sheet. It is not an expense of the current year because it has not been used yet.

Should canteen wages be shown separately in Income and Expenditure?

No, if they are direct expenses of the canteen and you have already deducted them in the canteen account. Showing them again would count them twice.