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Tuesday, March 22, 2011

Usual Terminology of Non-Trading Concern

1. Subscription:
Subscription is a periodic fee paid by a member for his membership to the organization.It is a main source of income of a club annually paid by the members. However, it is also paid monthly, quarterly and half-yearly. Subscription may be paid periodically or as a lump sum for life-time membership. Periodical subscription are treated as revenue receipts and shown in Income and Expenditure Account as an income. Life membership subscriptions are treated as capital receipts and transferred to the capital fund.

2. Donations:
Donations refers to the amount received form any member or outsider to the organization for general or specific purpose. It is received by the way of gift. It appears on the receipt side of the receipts and payments account. It can be classified as general and specific.
  • General Donation: This is such donation, which is received not for a specific purpose. It can be used for any purpose. It is taken to the credit side of Income and Expenditure Account if the amount of such donation is small. However, in case of large amounted general donation, it is to be treated as a capital receipt and shown on the liability side of the Balance Sheet. The nature and size of the firm decides the size of general donations whether it is small or large.
  • Specific Donation: Specific donation is received for specific purpose. Donation for library building, donation for the purchase of ambulance, donation for medical supplies and laboratory etc. are some examples of specific donation. Specific donations are often treated as capital receipts and shown in the liability side of balance sheet.
3. Legacy:
Legacy is a specific donation, which is the amount left to the organization by the will f deceased person. In other words, it refers to the amount that is donated under a will on the death of donor. Legacies are generally treated as capital receipts and shown on the liability side of a balance sheet.

4. Life Membership Fees:
It represents the amount (fees) paid by a member for a life in one lump sum. It enables the payer to become the member of the organization for whole of the life if he/she pays fees only once often large amount. In the absence of any specific instruction, it is treated as a capital receipt and shown on the liability side of balance sheet.

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