Overview of Financial Statements of NGOs

Need for financial reporting framework for NGOs


Components of Accounting Framework as per Technical Guide

(a) Elements of financial statements

(b) Principles for recognition of items

(c) Principles of measurement

(d) Presentation and disclosure principles

Note: a, b and c are sector-neutral, while presentation and disclosure differ for not-for-profit and for-profit sectors.


Accounting Terms

Accounting Transaction: A monetary activity recorded in account books with monetary effect on the financial statements.

Sales: Products/services are transferred from sellers to buyers for cash or credit.

Purchases: Transactions to obtain materials and services to accomplish goals.

Receipts: Payments received for providing services or goods.

Payments: Payments made for availing goods/services from vendors, staff etc.


More Accounting Terms

Assets

Liabilities

Equity/Capital

Expenses

Revenue/Income


What is a Financial Statement?


BS, I&E, R&P


Key Points for Preparation of Financial Statement


MRL and ML

Management Representation Letter (MRL)

Management Letter (ML)


Maintaining Books of Accounts for NGOs


Other Required Documents


Bookkeeping Guidelines

  1. Form: Books can be in written, electronic, digital or print-out form.

  2. Place: Kept at registered office. If kept elsewhere, AO must be informed.

  3. Period: Maintain for 10 years from end of relevant assessment year.

  4. Note: Entities under section 11(4) and 11(4)(a) must keep separate books for that income.


Accounting Standards


AS-1: Disclosure of Accounting Policies

Considerations
a. Prudence – Do not anticipate profits, provide for all known liabilities.
b. Substance over Form – Economic substance over legal form.
c. Materiality – Disclose material items that influence user decisions.


AS-1 Points to Remember


AS-10: Accounting for Fixed Assets

  1. Gross and net book values

  2. Construction/acquisition expenditure

  3. Revaluation method, appraisal year, valuer involvement


AS-13: Accounting for Investments


Revision #2
Created 25 April 2025 04:39:24 by Pooja
Updated 25 April 2025 04:45:14 by Pooja