Capital Fund and the Balance Sheet

A not-for-profit organization prepares a Balance Sheet at the end of the year in exactly the same format as a trading concern, showing assets on one side and liabilities together with the Capital Fund on the other.

Capital Fund (also called the General Fund or Accumulated Fund) takes the place of a trading concern's 'Capital'. It represents the excess of the organization's assets over its liabilities, and is built up over the years from:

• the opening balance carried forward from earlier years,
• the surplus (or less, any deficit) of the current year transferred from the Income and Expenditure Account, and
• capital receipts such as legacies, life membership fees, and donations meant to be capitalized, and entrance fees where a question specifically directs that they be capitalized.

Calculating the opening Capital Fund. Where a question does not give the Capital Fund directly, it is found by preparing an opening Balance Sheet as on the first day of the accounting year from the list of assets and liabilities given, and treating the Capital Fund as the balancing figure:

Capital Fund (opening) = Total Assets (opening) − Total Liabilities (opening, other than Capital Fund)

Closing Capital Fund = Opening Capital Fund + Surplus for the year (or − Deficit) + any capital item (legacy, life membership fee, capitalized donation/entrance fee) received during the year and not already included in the surplus. …