NPOs Flashcards
Define NPOs
An organisation aimed at providing facilities or services to its members rather than making profits
- can consist of clubs, societies and associations eg sport clubs, social clubs, youth clubs etc
- these organizations are not formed with the aim to make profits for their owners but to provide services to their members
Name and explain the features of NPOs
OWNERSHIP:
- owned by members
RAISING OF FINANCE:
- member fees/ subs are the main source of finance
- clubs may receive grants from local authority/ other bodies to help finance the purchase of necessary assets
- fund-raising events
- additional activities
- donations form other organisations
Define the term accumulated funds
Where surpluses are held by a NPO and its similar to the corporate profit earned by a traditional entity based on its retained earnings
Define the term subscriptions
An amount of money received regularly from a member to be a part of an organisation
Define the term surplus
The amount of an asset or resource that exceeds the portion that is actively utilised
Define the term deficit
An amount by which a resource, especially money, falls short of what is required
Define receipts and payments account
A summarized cash book for a given period
NPOs prepare them at the end of their financial period
Define income and expenditure accounts
Is outlined by the non-trading entities to determine surplus/ deficit of income over expenditures for a particular time frame
Define the term life membership
When you have been paid/ been chosen to be a member for the rest of your life
It is a “once in a life” lump sum payment made by the members in lieu of their subs
Life membership fees is a capital receipt and is added to the capital fund on the liabilities side of the balance sheet - it is not treated as an income
Differentiate between terminology of NPOs and trading businesses
Name the sources of income of a NPO
- Sub/ membership fees for services
- individual donations and major gifts
- bequests
- corporate contributions
- foundation grants
- government grants and contracts
- interest from investments
- loans/ program-related investments
Name ways to increase income
- increase sub fees
- increase price of refreshments
- organise fund raising activities
- increase number of members
- ask for donations
- selling of unused assets
- obtaining loan
- find cheaper suppliers
Name the sources of expenditure of a NPO
Overhead expenses are “indirect” costs which are necessary for running your organisation but do not directly contribute to profits
Overhead includes:
- facilities costs
- membership and licensing fees
- equipment costs
Overhead excludes advertising/ fundraising costs
