How to Prepare Balance Sheet from Receipt and Payment Account

>> February 23, 2013


Balance sheet of a non profit organisation can easily made from receipt and payment account because all most all the transactions of non profit organisation are in the form of cash. So, if we have previous year balance sheet and current year receipt and payment account, we can easily prepare balance sheet.
Now I am explaining its steps :

1st Step: Get the Raw Data.

First of you have to keep previous year balance sheet and current year receipt and payment account near to you. Both will be helpful for preparing balance sheet. In balance sheet, we show all the capital items which have been shown in the receipt and payment account and also bring previous year assets and liabilities.

2nd Step: Show the Asset and Liabilities from Receipt and Payment Account 

Now, we have explaining, how you can convert the payments of receipt and payment account into the assets of Balance sheet.

a) Credit side of receipt and payment account will be payment side. In this side, you have to take capital nature expenses and closing balance. All other revenue expenses payments should leave. Add new bought asset in the particular asset’s opening balance which we can take from previous year balance sheet. If any fixed asset has been sold, deduct it in same fixed asset. After this, deduct the depreciation.

Now, deduct the depreciation and show it in the fixed asset side.

For example we are taking one fixed asset 

 Furniture opening balance xxxx

 Add new bought           xxxx
-------------------------------------
Total furniture             xxxx

Less sale of scrap furniture xxxx.
--------------------------------------
 Value of furniture in business xxxx.

Less depreciation xxxx
-----------------------------------
 Total furniture shows in b/s xxxx.
===========================

 b) Closing balance of receipt and payment account will be shown as current asset in the balance sheet. If you bought other current asset. Add it in the opening balance of current asset in it. If you sell the current asset, you should deduct this.

c) Payment to Creditors which will show in the payment side of receipt and payment account will be helpful for finding the closing balance of creditor. Closing balance of creditor will show in the current liability of balance sheet.


Opening balance of creditor from opening balance sheet XXXXX

Add New Credit  purchase  XXXXX

Deduct Cash paid to creditors XXXXX

-----------------------------------------------------
Closing balance of Creditor
===================================


d) Debit side of receipt and payment account will be receipt side. In this side, you have to take capital nature items. Receipt from debtor will be helpful to calculate the closing balance of debtor which will go to the current asset.

Opening balance of debtor from opening balance sheet XXXXX

Add New Credit  Sale XXXXX

Deduct Cash received from debtor XXXXX

Deduct Bad Debts XXXXX
-----------------------------------------------------
Closing balance of Debtors
===================================

e) All Advance received incomes will be our current liabilities in balance sheet.

f) All advance paid expenses will be our current asset in the balance sheet.

g) All received donation for special fund will be the long term liability in the balance sheet

h) Any legacy amount which will get from the will of any person will be capital receipt and will be show in long term liability.

i) The fund for life membership account  will goes to  the balance sheet's liability side.

3rd Step: Not Included Items in Balance Sheet 

We leave opening balance, all operating incomes and expenses because all these will go to income and expenditure account.

4th Step : Show Adjustments

There are many adjustments which you have to do in the balance sheet whose information, you can not get from receipt and payment account. For example, we will make income and expenditure account from receipt and payment account and its surplus will be added in reserves and surplus in the liability side of balance sheet. We also show all the funds and capital funds in our new balance sheet by taking figures from previous year balance sheet. Except this, we also check previous year balance sheet if there is any fixed asset, current asset, current liability or fixed liability which we still did not write. Write them. If some proportion of liability paid, then decrease same before showing it in the balance sheet.

5th Step : Match  the Balance of Asset Side and Liability Side

After making the balance sheet, you should match its asset side and liability side. It must be equal.

In following screenshot, you will see that we have made income and expenditure account from receipt and payment account and then we have made balance sheet by taking figures from receipt and payment account and some adjustment. Capital fund is taken from previous year balance sheet.









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