Treatment of Special Items: Subscriptions, Entrance Fees, Life Membership, Donations, Legacies and Sale of Assets

Several recurring items need special, careful treatment when moving from the Receipts and Payments Account to the Income and Expenditure Account and Balance Sheet. Getting each one right is what most Class 12 examination problems actually test.

Subscriptions

Subscription is the main revenue income of most NPOs, and it is almost never received in a perfectly matching amount — some members pay late (outstanding), some pay early (advance). The subscription actually received during the year (as shown in the Receipts and Payments Account) must be converted to the subscription relating to the current year for the Income and Expenditure Account:

The closing outstanding subscription is shown as an asset in the closing Balance Sheet; the closing advance subscription is shown as a liability.

Entrance Fees / Admission Fees

A new member's one-time entrance fee could reasonably be seen either as revenue (a fee for joining, like a subscription) or as capital (a one-time contribution towards the Fund). Practice therefore follows the organisation's own stated policy:

• If the organisation's rules capitalise entrance fees fully, the whole amount is added directly to the Capital Fund.
• If the rules treat it as revenue, the whole amount is credited to the Income and Expenditure Account.
• Many problems specify a split policy (for example, 50% capitalised, 50% revenue) — apply the stated percentage exactly.
• If a question is silent on policy, entrance fees are conventionally treated as revenue income.

Life Membership Fees

A member who pays a lump sum once, in place of paying an annual subscription every year for life, is a Life Member. Because this fee substitutes for many years of future subscriptions rather than rewarding the current year alone, Life Membership Fees are always capitalised — added directly to the Capital Fund — and never credited to the Income and Expenditure Account, regardless of any policy statement.

Donations

• General Donation — a donation given without any condition on how it must be used. Treated as revenue income, credited to the Income and Expenditure Account, unless the amount is unusually large and one-off, in which case the organisation's own policy may capitalise it (add to Capital Fund) — always apply whatever the question specifies.
• Specific Donation — a donation given by the donor for a stated purpose (for example, 'for construction of a new building', 'for purchase of library books', or 'prize fund'). This is always capitalised — it is never revenue income, because the donor's condition must be honoured. It is shown as a separate named fund/liability in the Balance Sheet (for example, a 'Building Fund'), not merged with the general Capital Fund, unless the organisation's stated policy is otherwise.

Legacies

A legacy is an amount received by an NPO under the will of a deceased person. Since it is inherently a one-time, capital-nature receipt, a legacy is always treated as a capital receipt and added directly to the Capital Fund.

Sale of Old Newspapers, Sports Materials, and Fixed Assets

• Sale of old newspapers, periodicals, or old sports material is a small, recurring, revenue-nature receipt — credited directly to the Income and Expenditure Account as income (no profit/loss computation is normally needed for these low-value routine sales). …