What is the treatment of the following in an NPO:
(i) Entrance fee and
(ii) Life Membership fee
Treatment of admission or entrance fee
Generally, the admission/entrance fee is considered as revenue receipt and is credited to the income and expenditure account for the period concerned. But where the amount received as admission/entrance fee is large, it should be treated as a capital receipt and credited to the capital fund account in the year in which it is received from the member.
Treatment of life membership fee
The amount of life membership fee is initially credited to a special fund account. Each year an amount equal to the annual subscription is credited to the income and expenditure account till the amount in the special fund is fully exhausted. If a member who has paid a life membership fee dies before the whole amount paid by him has been transferred to the income and expenditure account, the balance should be transferred to the capital fund account on the date of death.