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Fundamentals of Accounting · Accounting for Non-Profit Organizations

Balance Sheet of a Non-Profit Organisation from Receipts and Payments

Updated 11 October 2026 · Fact-checked

A non-profit organisation's balance sheet shows its assets and liabilities on the last day of the year. You find the opening Capital Fund as assets minus outside liabilities, add the surplus from the Income and Expenditure Account and any capital receipts, then list closing assets and liabilities using the Receipts and Payments Account and adjustments.

Understand Balance Sheet and Conversion from Receipts and Payments

A club, trust or society does not have an owner who put in capital to earn profit. Its "owner's money" is called the Capital Fund (also called Accumulated Fund or General Fund). It is the net worth of the organisation. It builds up over the years from surpluses and certain capital receipts.

The Receipts and Payments Account is only a summary of cash and bank. It has no accrual items, no depreciation and no opening or closing outstanding amounts. So you cannot read a balance sheet straight from it. You must convert it: first the Income and Expenditure Account (the revenue side), then the Balance Sheet.

The starting point is the opening Balance Sheet. If the question does not give one, you build it. List every asset at the start of the year, list every outside liability, and the difference is the opening Capital Fund. Opening cash and bank figures are the first lines of the Receipts and Payments Account, so they help you here.

Then you move forward. Closing Capital Fund = opening Capital Fund + surplus (or minus deficit) + capital items such as entrance fees, legacies and general donations that the question says to capitalise. Every other balance sheet item comes from the Receipts and Payments Account plus the adjustments: closing cash and bank from the account itself, fixed assets from opening cost plus purchases less depreciation, and outstanding or advance items from the adjustments given.

The balance sheet must tally. If it does not, an adjustment was missed or posted to the wrong side. That check is your built-in proof.

Key rules to remember

Opening Capital Fund
Capital Fund = Total Assets − Total Outside Liabilities
Use balances at the start of the year. Specific funds (such as a Prize Fund) are liabilities, not part of the Capital Fund.
Closing Capital Fund
Closing Capital Fund = Opening Capital Fund + Surplus (or − Deficit) + Capitalised receipts
Capitalised receipts are items such as entrance fees, legacies and general donations that the question says to treat as capital.
Income for subscriptions
Subscription income = Received − Opening outstanding − Advance at end + Closing outstanding + Advance at start
Apply the same logic to any expense or income with outstanding or advance amounts.
Expense for the year
Expense = Paid − Opening outstanding + Closing outstanding − Opening prepaid + Closing prepaid
Use this for salaries, rent and similar items before showing them in the Income and Expenditure Account.
Closing fixed asset
Closing value = Opening value + Purchases − Depreciation − Book value of assets sold
Depreciation is charged in the Income and Expenditure Account and reduces the asset on the Balance Sheet.
Balance Sheet check
Capital Fund + Liabilities = Assets
Closing cash and bank come directly from the Receipts and Payments Account.

How to solve Balance Sheet and Conversion from Receipts and Payments questions

Follow the same order for every question. It keeps the adjustments organised and makes the balance sheet tally.

  1. 1Prepare the opening Balance Sheet from the information given, or from opening balances in the Receipts and Payments Account. Find the opening Capital Fund as assets minus outside liabilities.
  2. 2Read the Receipts and Payments Account and split each item into revenue (goes to Income and Expenditure) and capital (goes to the Balance Sheet). Purchases of assets and sale of investments are capital items.
  3. 3Adjust each revenue item for the outstanding, advance and prepaid figures given. Work out the amount that belongs to this year.
  4. 4Prepare the Income and Expenditure Account with the adjusted incomes and expenses, including depreciation. Find the surplus or deficit.
  5. 5Compute the closing Capital Fund: opening Capital Fund plus surplus (or minus deficit) plus any capitalised receipts.
  6. 6Build the closing Balance Sheet. Take closing cash and bank from the Receipts and Payments Account, fixed assets after additions and depreciation, and outstanding or advance items from the adjustments.
  7. 7Total both sides and check that they agree. If not, recheck the adjustments and the opening balances.

Quickest way: Opening-to-closing roll forward

When to use it: Use this when the question asks only for the Balance Sheet, or when time is short and you must reach the closing figures quickly.

  1. Write the opening balance sheet items in a column and find the opening Capital Fund as the balancing figure.
  2. Next to each item, write the closing figure: assets as opening plus purchases minus depreciation, liabilities as opening adjusted by the new outstanding or advance figures.
  3. Take the closing cash and bank balance directly from the foot of the Receipts and Payments Account.
  4. Compute the surplus in one line: total adjusted income minus total adjusted expenditure, then add it to the Capital Fund.
  5. Tally the two sides. A difference usually equals one missed adjustment, so look for an amount of that size.

Common mistakes in Balance Sheet and Conversion from Receipts and Payments

  • Taking the Capital Fund from the Receipts and Payments Account or guessing it

    Students forget that the Capital Fund is a balancing figure, not a cash item.

    Fix: Always list all assets and outside liabilities at the start and subtract. Do this even when the opening balance sheet is not given directly.

  • Forgetting to add the surplus (or deduct the deficit) in the closing Capital Fund

    Students prepare the Income and Expenditure Account and then treat it as a separate task.

    Fix: Make closing Capital Fund the fifth step of your method: opening + surplus (or − deficit) + capitalised receipts.

  • Showing capital receipts such as legacies, entrance fees (when capitalised) or specific donations in the Income and Expenditure Account

    These appear on the receipts side next to revenue items, so they look the same.

    Fix: Read the question for the treatment of each. Capital items go to the Capital Fund or the relevant fund in the Balance Sheet, not to income.

  • Ignoring opening outstanding or advance figures when adjusting a payment or receipt

    Students adjust only for closing figures and forget last year's items inside this year's cash.

    Fix: Use the full formula: cash amount, minus opening outstanding, plus closing outstanding. Do the same for subscriptions and mirror it for prepaid and advance items.

  • Showing subscriptions received in advance as an asset, or outstanding subscriptions as a liability

    Students mix up what is owed to the organisation and what it owes.

    Fix: Outstanding subscription is an amount to receive, so it is an asset. Subscription received in advance is an amount owed in service, so it is a liability.

  • Showing a purchased asset at cost without depreciation, or charging depreciation on the Balance Sheet only

    Students treat depreciation as a balance sheet matter and forget the Income and Expenditure side.

    Fix: Charge depreciation in the Income and Expenditure Account and reduce the asset by the same amount in the Balance Sheet.

Worked examples

Example 1

On 1 April 2024, the Pune Cultural Society had: cash in hand ₹5,000; bank balance ₹45,000; furniture ₹60,000; sports equipment ₹80,000; investments ₹1,00,000; subscriptions outstanding ₹8,000. It owed salaries of ₹12,000 and had received subscriptions in advance of ₹4,000. Prepare the opening Balance Sheet and find the Capital Fund.

Show the solution
  1. Add the assets: 5,000 + 45,000 + 60,000 + 80,000 + 1,00,000 + 8,000 = ₹2,98,000.
  2. Add the outside liabilities: outstanding salaries ₹12,000 + subscriptions received in advance ₹4,000 = ₹16,000.
  3. Capital Fund = 2,98,000 − 16,000 = ₹2,82,000.
  4. Write the Balance Sheet. Liabilities: Capital Fund ₹2,82,000; Outstanding Salaries ₹12,000; Subscriptions in Advance ₹4,000; total ₹2,98,000. Assets: Cash in Hand ₹5,000; Bank ₹45,000; Furniture ₹60,000; Sports Equipment ₹80,000; Investments ₹1,00,000; Subscriptions Outstanding ₹8,000; total ₹2,98,000.

Answer: The opening Capital Fund is ₹2,82,000 and both sides of the opening Balance Sheet total ₹2,98,000.

Example 2

The Delhi Readers' Club had these balances on 1 April 2024: cash ₹10,000; bank ₹40,000; furniture ₹50,000; subscriptions outstanding ₹6,000; salaries outstanding ₹5,000. Its Receipts and Payments Account for the year ended 31 March 2025 showed: Receipts: opening cash and bank ₹50,000; subscriptions ₹1,10,000; general donations ₹20,000. Payments: salaries ₹48,000; furniture purchased on 1 April 2024 ₹20,000; other expenses ₹30,000. Adjustments: (i) subscriptions outstanding on 31 March 2025 ₹9,000; (ii) subscriptions received in advance on 31 March 2025 ₹3,000; (iii) salaries outstanding on 31 March 2025 ₹7,000; (iv) depreciate furniture at 10% per year on its total value. General donations are treated as income. Prepare the Income and Expenditure Account (in summary) and the Balance Sheet as on 31 March 2025.

Show the solution
  1. Opening Capital Fund: assets = 10,000 + 40,000 + 50,000 + 6,000 = ₹1,06,000. Liabilities = ₹5,000. Capital Fund = ₹1,01,000.
  2. Closing cash and bank: receipts = 50,000 + 1,10,000 + 20,000 = ₹1,80,000. Payments = 48,000 + 20,000 + 30,000 = ₹98,000. Balance = ₹82,000.
  3. Subscriptions for the year = 1,10,000 − 6,000 (opening outstanding) − 3,000 (advance for next year) + 9,000 (closing outstanding) = ₹1,10,000.
  4. Salaries for the year = 48,000 − 5,000 + 7,000 = ₹50,000.
  5. Furniture after purchase = 50,000 + 20,000 = ₹70,000. Depreciation at 10% = ₹7,000. Closing furniture = ₹63,000.
  6. Income and Expenditure Account: Income = subscriptions 1,10,000 + donations 20,000 = ₹1,30,000. Expenditure = salaries 50,000 + other expenses 30,000 + depreciation 7,000 = ₹87,000. Surplus = 1,30,000 − 87,000 = ₹43,000.
  7. Closing Capital Fund = 1,01,000 + 43,000 = ₹1,44,000.
  8. Balance Sheet. Liabilities: Capital Fund ₹1,44,000; Outstanding Salaries ₹7,000; Subscriptions in Advance ₹3,000; total ₹1,54,000. Assets: Cash and Bank ₹82,000; Furniture ₹63,000; Subscriptions Outstanding ₹9,000; total ₹1,54,000.

Answer: Surplus for the year is ₹43,000. The closing Capital Fund is ₹1,44,000 and the Balance Sheet totals ₹1,54,000 on each side.

Exam tips

  • Show the opening Balance Sheet and the Capital Fund calculation as a separate working note. Marks are usually given for it even if a later figure goes wrong.
  • Show workings for each adjusted item (subscriptions, salaries, depreciation) in a neat note. Markers can award method marks when the final figure is wrong.
  • Read how each donation, legacy and entrance fee is to be treated. The question usually tells you, and the treatment decides whether it goes to income or to the Capital Fund.
  • Always tally the Balance Sheet. If the two sides differ, check opening balances and each adjustment before moving on.
  • Use the standard layout: liabilities on the left, assets on the right. Put the Capital Fund first and show fixed assets net of depreciation.

Practice questions from Accounting for Non-Profit Organizations

Balance Sheet and Conversion from Receipts and Payments in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Balance Sheet and Conversion from Receipts and Payments: frequently asked questions

How do I find the Capital Fund of a non-profit organisation?

Add up all assets and subtract all outside liabilities at the same date. The balance is the Capital Fund. For the closing figure, add the surplus (or subtract the deficit) and any capitalised receipts to the opening Capital Fund.

Is the Capital Fund the same as the Accumulated Fund?

Yes. Capital Fund, Accumulated Fund and General Fund all mean the net worth of a non-profit organisation. Use the name given in the question.

Why can't I make the Balance Sheet directly from the Receipts and Payments Account?

The Receipts and Payments Account only records cash and bank. It leaves out outstanding and advance items, depreciation and non-cash balances. You must adjust for these through the Income and Expenditure Account and the opening Balance Sheet.

What if the question gives no opening Balance Sheet?

Build it. List the opening balances of all assets and liabilities from the information given, including opening cash and bank from the Receipts and Payments Account. The difference between assets and outside liabilities is the opening Capital Fund.