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Importance of Accounting to a NonProfit Making Organization

Importance of Accounting to a Non-Profit Making Organization

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Reference ID: PS-130-TM


This research material titled “Importance of Accounting to a Non-Profit Making Organization” is dedicated to God for his enabling grace, and to all computer enthusiasts who contributed to make life a pleasant experience during my research documentation.


I extend my sincere gratitude to all those who contributed to the completion of this project. Special thanks to my Supervisor (Name of your Supervisor), the Head of Department (Name of your HOD), the Lecturers in the department of Accountancy / Accounting, Book Authors and Profound Scholars of existing or related project material on “Importance of Accounting to a Non-Profit Making Organization” for their invaluable guidance, support, and expertise throughout the journey.

I am also grateful to your study area (mention any funding organizations, if applicable) for their financial assistance. This research would not have been possible without the encouragement and assistance of some stakeholders (mention any mentors, teachers, or colleagues). Additionally, I would like to acknowledge the understanding and patience of my family and friends during this endeavor. Your unwavering support has been a constant source of motivation. Thank you all for being part of this meaningful endeavor.

Importance of Accounting to a Non-Profit Making Organization




  • 1.0 Introduction
  • 1.1 Background of the study
  • 1.2 Statement of the problems
  • 1.3 Purpose of the study
  • 1.4 Research questions
  • 1.5 Hypothesis
  • 1.6 Scope of the study
  • 1.7 Limitation of the study


  • 2.0 Literature review
  • 2.1 The importance of accounting to non-profit making organization
  • 2.2 The effects of accounting to non-profit making organization
  • 2.3 The significance role of accounting ton non-profit making organization
  • 2.4 The role of accounting to non-profit making Organization
  • 2.5 The summary of the chapter


  • 3.0 Summary of findings
  • 3.1 Conclusions
  • 3.2 Recommendation
  • 3.3 Suggestions for further study



This study is titled importance of Accounting to a non profit making organization. what profit accounting does for non profit oriented organization is to enable the management is measuring performance decision making and adequate planning in finding out some possible solutions to the numerous problems.

In chapter one, deals with introduction background of the study statement of study purpose of study significance of study research questions etc. Hence, proper accounting is require in non profit making organization in order to ascertain the indebtedness of the organization and also pin point ways by which settlements may be made.

Chapter two deals with the literature review, importance of accounting to non profit making organization the effects of accounting to non profit making organizations significance role of accounting to non profit making organization etc. The researcher work ends in chapter three with summary conclusions and recommendations.

Importance of Accounting to a Non-Profit Making Organization


1.0 Introduction

1.1 Background of the Study

American accounting Association defined Accounting as the process of identifying, measuring and communicating economic information for permit inform judgment and decisions by the user of the information. This information is presented systematically and accuracy recorded financial report about an entity engage in economic activity to users to such report. (Akeju, 2003, 2003; 29).

In this study accounting is a systematic record measurement and economic process used the report on the financial objectives of association not for profit making motive, not for profit organization as defined by Akeju (2002)” are those organization which are established not the objectives of making profit and distributing such profit to their members inform of interest on capital in the business organization to purpose the objective of which the business is established for”.

The name not for profit can be misleading because the impression that the business are not allowed to partake in the profit making activities. This is not such, the business are allowed under law to undertake any lawful business activities not against their constitution and use the net cash flow for which constitution and use the net cash flow which the are established therefore. It is possible that not for profit making organization undertake tracing activities which can bring profit to them but such profit is not to be distributed as a result to make the members in form of interest or dividend.

Organization that fall under non profit motive include public and private organization which set up to promote art, culture, religion, science, social club and so on. Examples of them include stride unions student unions, sports, religion, social clubs and so on. It is established by members of like minds to do their welfare, they are required to be registered as an association under the companies and Allied matters Decree no 1 of 1990 as amended. They are intended for profit but they indulge in any activities that is profit oriented. The official of these organization are elected mostly for their commitment than for their financial knowledge. Therefore, only the simplest records are maintained including a cash book periodically. The records are passed to the association accountant who may prepare a receipt and payment account. If an expenditure account determines the accumulated fund and finally close it up at a balance sheet for the financially period.

Normally the association in this range may carry out activities in different several way. There may not be uniform title for such transactions amongst the organization. as a result such similar transactions are financially treated alike despite the different in title they may bear. Then the financial statement whether the reported results for the organization truly reflects its operations. The accounting entries of a non-profit making organization is governed by the basic principles in book keeping and account. It is recorder like the way incomplete records is recorded because most of the accounting information is not available as they are provided and maintained by incompetent staff.

However financial report produced as based on the reputations of the association. Some association in line with their cord of operations requires that its officers should prepare and present to members and users monthly, quarterly semi annually or annually reports since most association prepare and present financial statement usually in any period a small profit or loss usually arises. in the long term however, profit are accumulated only to the extent that they are needed, for example to enable self financing expansion to take place.

The association organize fund raising activities to improve their financials for instance, dances and parties could be organized. Also a bar to provide refreshment to members at commercial rates could be established where the activities is for a temporary nature as is in the case of dances and parties, the expenses is simply set off against revenue in the income and expenditure account, but where the activities are on the permanent basis, a separate trading account should be prepared and the profit or loss from the activity is transferred.

The financial statement of the non-profit making organization is probably very important and most relevant source of information to the members management of the association and interested outsiders. This is because the indicate the general condition for the organization and used in comparing past result with current one.

This study aims mostly at investigating the book keeping and financial records of the non-profit making organizations general, such organization are generally chartable and non-profit making oriented. Since the organizations make the financial transactions which are subject to be accounted for with special attention on the receipt and payment account income and expenditure account accumulated fund, the bar trading account and the balance sheet.

1.2 Statement of Problems

The fact that much non-profit making organization keeps records or the activities in their organizations many do not keep proper accounting records and do not keep or see its significance in general. These therefore are some of the problems in this research topic, but the main aims are the following;

  1. Proper accounting records are not kept
  2. Payments are made without the approval of the authorized body.
  3. Officers who receive cash make the accounting records and bank at which result to improper accounting records.
  4. Unqualified accounting officers and employees used brings about improper accounting records financial statements are externally audited.

1.3 Purpose of the Study

The main purpose of this study is aimed at providing possible solutions to the statement of the problems above they are;

  1. To overhaul the accounting records expected to be kept and at proper standard.
  2. To determine who authorizes payments and receipts and whether such are made according to the approval of the authorities person.
  3. To find out the extent of the internal control system whether it is weak or strong.
  4. To ascertain whether financial statement are extremely audited periodically or elected accounting officers are qualified and competent in financial knowledge.

1.4 Significance of the Study

This study will be extremely useful in many ways and they include;

  1. It is an aid to management in measuring the performance planning and decision making.
  2. It enlightens accounting officers to know the accounting records expected to be kept and steps towards proper accounting records.
  3. Accounting officers members and interested parties will understand the relevance of proper accounting records to the organization performance and also to the Nigerian economy.
  4. It ascertains the indebtedness of the organization settlement may be made.

1.5 Research Questions

The following were formulated.

  1. Does officers elected base on their commitment rather than financial knowledge proper accounting record.
  2. Does inadequate accounting records lead to fraud embezzlement and misappropriation of fund in the organization.

1.6 Hypothesis

Ho: Accounting for non-profit organization has no significance effect in the organization performance.

Hi: Accounting for non-profit organization has significant effect in the organization performances.

Ho: Payment made without the approach of the authorized persons result in defrauding the organization.

Hi: Payment made without the approval of the authorized person (s) do not result to defrauding the organization.

Hi: Unqualified accounting officers and employees for their commitment rather than their financial knowledge results to improper accounting record.

Hi: Unqualified accounting officers and employers for their commitment rather than their financial knowledge doe not result to improper accounting records.

1.7 Scope of the Study

Accounting to non-profit organization is very broad topic that cannot be falling exhausted in this study. Nevertheless, this scope of study will encompass the junior and senior accounting officers.

1.8 Limitations of the Study

This was constrained by these factors like;

Time Constraint:

This study which requires a comprehensive exercise was done in the specification of three months, there was not time for the researcher to locate his wanted auditors for hot review. Time was not enough to travel to other areas of interest.


There was also constraints of money for traveling, photocopying and printing.

Lack of Data:

There was also constraints in the fetch of relevant materials which purpose to aid in the sources of this study like journals, textbooks, good other materials but have not hindered or hampered the successful completion of the works.


2.0 Literature Review

2.1 Introduction

This chapter focuses on the review of related literature. A literature review includes the current knowledge as well as theoretical and methodological contributions to a particular topic. It documents the state of the art with respect to the topic you are writing. It surveys the literature in the topic selected. In this research work the literature review includes the …

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