Lesson Note on Account of Non-Profit Organization: Accumulated Fund and Balance Sheet for SSS 2

Class: Senior Secondary School 2 (SS2 / SSS2)
Term: First Term
Week: 7
Age: 16 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Accounting for Non-Profit Organizations
Previous Lesson: Account of Non-Profit Organization: Income and Expenditure Account.
Topic: ACCOUNT OF NON-PROFIT ORGANIZATION
Subject Matter: Preparation of income and expenditure account, accumulated fund (meaning and calculation), preparation of balance sheet

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

• Define a non-profit organization.
• Explain the purpose of an Income and Expenditure Account.
• State the meaning and importance of Accumulated Fund.
• Identify the components of a Balance Sheet for a non-profit organization.

Affective Domain:

• Appreciate the need for proper financial record-keeping in non-profit organizations.
• Demonstrate a positive attitude towards preparing accurate financial statements.

Psychomotor Domain:

• Prepare an Income and Expenditure Account from given information.
• Calculate the Accumulated Fund.
• Prepare a Balance Sheet for a non-profit organization.

Social Domain:

• Work collaboratively with peers to solve accounting problems related to non-profit organizations.

Reference Materials

The following resources were used in planning this lesson:

• Senior Secondary Schools Education Curriculum
• State Unified Scheme of Work
• Longe, O.A. (2018). Financial Accounting for Senior Secondary Schools. University Press PLC.

Instructional Materials

The teacher will teach this lesson with the aid of:

• Charts showing the format of Income and Expenditure Account.
• Flashcards with accounting terms.
• Sample financial data of a non-profit organization.

Rationale for the Lesson

This lesson helps pupils understand how non-profit organizations manage their finances and report their financial position. It enables pupils to prepare key financial statements for these organizations, which is important for accountability and future studies in accounting.

Prerequisite/Previous Knowledge

Pupils have prior knowledge of basic accounting concepts, the double-entry system, and the preparation of final accounts for trading organizations.

Lesson Content/Board Summary

ACCOUNT OF NON-PROFIT ORGANIZATION

Meaning of Non-Profit Organization

A non-profit organization (NPO) is an organization established for social, charitable, educational, religious, or other purposes, rather than for generating profit for its owners or shareholders. Examples include clubs, schools, churches, and hospitals.

Income and Expenditure Account

The Income and Expenditure Account is a summary of all nominal accounts (income and expenses) for a non-profit organization over a specific period, usually a year. Its purpose is to determine the surplus (excess of income over expenditure) or deficit (excess of expenditure over income) for the period.

Features:

• It is similar to a Profit and Loss Account for trading concerns.
• It records only revenue incomes and revenue expenditures, applying the accrual concept.
• Non-cash items like depreciation are included.
• Capital incomes (e.g., legacies, endowments) and capital expenditures (e.g., purchase of fixed assets) are excluded.

Format:

Income and Expenditure Account for the year ended [Date]

Expenditure	N	Income	N
Salaries	XXX	Subscriptions	XXX
Rent	XXX	Donations (revenue)	XXX
General Expenses	XXX	Grants	XXX
Depreciation	XXX	Interest Received	XXX
(Add) Deficit (if expenditure > income)	XXX	(Add) Surplus (if income > expenditure)	XXX
Total	XXX	Total	XXX

Accumulated Fund

The Accumulated Fund represents the capital of a non-profit organization. It is the excess of assets over liabilities at a specific point in time. It is equivalent to the Capital Account in a trading concern.

Calculation of Opening Accumulated Fund:

Opening Accumulated Fund = (Opening Assets) – (Opening Liabilities)

This is calculated by preparing an Opening Statement of Affairs.

Example: Calculation of Opening Accumulated Fund

A club had the following balances on 1st January 2023:

• Cash at bank: N15,000
• Equipment: N40,000
• Subscriptions in arrears: N5,000
• Creditors for expenses: N8,000

Step 1: Identify Opening Assets

Cash at bank = N15,000

Equipment = N40,000

Subscriptions in arrears = N5,000

Total Opening Assets = N15,000 + N40,000 + N5,000 = N60,000

Step 2: Identify Opening Liabilities

Creditors for expenses = N8,000

Step 3: Calculate Opening Accumulated Fund

Opening Accumulated Fund = Total Opening Assets – Total Opening Liabilities

= N60,000 – N8,000 = N52,000

Balance Sheet of a Non-Profit Organization

The Balance Sheet for a non-profit organization shows its financial position at a specific date. It lists all assets and liabilities, along with the Accumulated Fund.

Key Components:

• Fixed Assets: Assets held for long-term use (e.g., land, buildings, equipment).
• Current Assets: Assets expected to be converted to cash or used within one year (e.g., cash, bank, debtors, stock).
• Current Liabilities: Obligations due within one year (e.g., creditors, expenses accrued, income received in advance).
• Accumulated Fund: The equivalent of capital, adjusted by surplus or deficit for the year.

Format:

Balance Sheet as at [Date]

Assets	N	N
Fixed Assets:
Equipment	XXX
Furniture	XXX	XXX
Current Assets:
Cash at bank	XXX
Cash in hand	XXX
Subscriptions in arrears	XXX	XXX
Total Assets		XXX
Capital and Liabilities
Accumulated Fund:
Opening Balance	XXX
Add: Surplus / Less: Deficit	XXX
		XXX
Current Liabilities:
Creditors for expenses	XXX
Subscriptions received in advance	XXX	XXX
Total Capital and Liabilities		XXX

Worked Example: Preparation of Income and Expenditure Account and Balance Sheet

The following information relates to Great Hope Club for the year ended 31st December 2023:

Balances on 1st January 2023:

• Cash at bank: N20,000
• Equipment: N60,000
• Subscriptions in arrears: N3,000
• Creditors for expenses: N5,000

Receipts and Payments for the year ended 31st December 2023:

• Subscriptions received: N120,000
• Donations received: N10,000
• Rent paid: N18,000
• Salaries paid: N50,000
• General expenses paid: N15,000
• Purchase of new equipment: N25,000

Additional information:

• Subscriptions in arrears at 31st December 2023: N4,000
• Creditors for expenses at 31st December 2023: N6,000
• Depreciation on equipment is to be provided at 10% per annum on opening balance.

Required:

1. Calculate the Opening Accumulated Fund.

2. Prepare the Income and Expenditure Account for the year ended 31st December 2023.

3. Prepare the Balance Sheet as at 31st December 2023.

Solution:

1. Calculation of Opening Accumulated Fund:

Statement of Affairs as at 1st January 2023

Assets	N	Capital & Liabilities	N
Cash at bank	20,000	Creditors for expenses	5,000
Equipment	60,000	Accumulated Fund (balancing figure)	78,000
Subscriptions in arrears	3,000
Total	83,000	Total	83,000

Opening Accumulated Fund = N78,000

2. Income and Expenditure Account for the year ended 31st December 2023

Expenditure	N	Income	N
Rent	18,000	Subscriptions (120,000 + 4,000 – 3,000)	121,000
Salaries	50,000	Donations	10,000
General Expenses	15,000
Depreciation on Equipment (10% of N60,000)	6,000
		Surplus (balancing figure)	42,000
Total	89,000	Total	131,000

Surplus for the year = N42,000

3. Balance Sheet as at 31st December 2023

Step 1: Calculate closing cash/bank balance.

Opening cash: N20,000

Total Receipts: N120,000 (Subscriptions) + N10,000 (Donations) = N130,000

Total Payments: N18,000 (Rent) + N50,000 (Salaries) + N15,000 (General Expenses) + N25,000 (Equipment) = N108,000

Closing Cash at Bank = N20,000 + N130,000 – N108,000 = N42,000

Step 2: Calculate closing Equipment value.

Opening Equipment: N60,000

Add: Purchases: N25,000

Less: Depreciation: N6,000

Closing Equipment: N60,000 + N25,000 – N6,000 = N79,000

Balance Sheet as at 31st December 2023

Assets	N	N
Fixed Assets:
Equipment		79,000
Current Assets:
Cash at bank	42,000
Subscriptions in arrears	4,000	46,000
Total Assets		125,000
Capital and Liabilities
Accumulated Fund:
Opening Balance	78,000
Add: Surplus	42,000	120,000
Current Liabilities:
Creditors for expenses		5,000
Total Capital and Liabilities		125,000

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 5 minutes
Teaching Skill: Set Induction
Teacher’s Activity: The teacher greets the pupils and asks them to recall the financial statements prepared by trading organizations. The teacher then introduces the concept of organizations that do not aim to make a profit.
Pupils’ Activity: Pupils respond to questions about trading organizations and listen attentively to the introduction of non-profit organizations.
Learning Point: Pupils recall prior knowledge and are introduced to the topic of non-profit organizations.

Step 2: Explanation of Non-Profit Organizations and Income and Expenditure Account

Time: 10 minutes
Teaching Skill: Explanation/Illustration
Teacher’s Activity: The teacher defines a non-profit organization with examples and explains the purpose and features of the Income and Expenditure Account, using charts for illustration.
Pupils’ Activity: Pupils listen, ask questions, and take notes on the definitions and features.
Learning Point: Pupils understand the nature of NPOs and the role of the Income and Expenditure Account.

Step 3: Explanation and Calculation of Accumulated Fund

Time: 10 minutes
Teaching Skill: Explanation/Demonstration
Teacher’s Activity: The teacher explains the meaning of Accumulated Fund and demonstrates how to calculate the opening accumulated fund using an opening statement of affairs with a simple example on the board.
Pupils’ Activity: Pupils pay attention, copy the example, and participate in the calculation steps.
Learning Point: Pupils learn how to define and calculate the opening accumulated fund.

Step 4: Explanation of Balance Sheet for Non-Profit Organizations

Time: 5 minutes
Teaching Skill: Explanation
Teacher’s Activity: The teacher explains the purpose of the Balance Sheet for non-profit organizations, highlighting its components and how it differs from a trading organization’s balance sheet, particularly with the Accumulated Fund.
Pupils’ Activity: Pupils listen and understand the structure and components of the Balance Sheet for NPOs.
Learning Point: Pupils identify the structure and key elements of a non-profit organization’s Balance Sheet.

Step 5: Guided Preparation of Income and Expenditure Account and Balance Sheet

Time: 10 minutes
Teaching Skill: Demonstration/Guidance
Teacher’s Activity: The teacher guides the pupils through the preparation of a complete Income and Expenditure Account and the Balance Sheet for a non-profit organization, using the worked example from the board summary. The teacher emphasizes adjustments for accruals, prepayments, and depreciation.
Pupils’ Activity: Pupils actively participate, ask questions, and follow the steps in preparing the financial statements.
Learning Point: Pupils practice applying their knowledge to prepare financial statements for NPOs.

Step 6: Evaluation/Review

Time: 5 minutes
Teaching Skill: Questioning/Assessment
Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. Define a non-profit organization.
2. State two features of an Income and Expenditure Account.
3. Explain the term ‘Accumulated Fund’.
4. List three items that would appear on the Balance Sheet of a non-profit organization.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 7: Conclusion

Time: 5 minutes
Teaching Skill: Summarization
Teacher’s Activity: The teacher summarizes the key learning points of the lesson, reiterating the importance of preparing accurate financial statements for non-profit organizations. The teacher then gives homework.
Pupils’ Activity: Pupils listen to the summary and copy the assigned homework.
Learning Point: Pupils consolidate their understanding of the lesson and are given further practice.

Lesson Keywords

• Non-Profit Organization – An organization not primarily aimed at making profit.
• Income and Expenditure Account – A statement showing income and expenses to determine surplus or deficit.
• Accumulated Fund – The capital of a non-profit organization, representing the excess of assets over liabilities.
• Surplus – When income exceeds expenditure in a non-profit organization.
• Deficit – When expenditure exceeds income in a non-profit organization.
• Balance Sheet – A statement showing the financial position of an organization at a specific date.

Differentiation

For pupils who grasp concepts quickly, additional challenging problems involving more complex adjustments can be provided. For those needing more support, the teacher will provide simplified examples and one-on-one guidance during practical exercises.

Note for teachers using this lesson plan

Ensure that pupils have a solid understanding of basic accounting principles before introducing non-profit organization accounts. Use practical examples relevant to the pupils’ local community to make the lesson more relatable. Emphasize the accrual concept and the distinction between revenue and capital items when preparing the Income and Expenditure Account.