Accounting for an NGO or non-profit organisation depends on its legal form, activities and applicable reporting framework. Charitable purpose does not automatically exempt an entity from accounting standards or audit. A Section 8 company, trust and society may have different statutory requirements.
Reviewed 6 October 2026. The principal professional reference used here is ICAI’s Technical Guide on Accounting for Not-for-Profit Organisations, third edition, 2023. Official ICAI guide.
Which accounting standards apply to an NPO?#
ICAI distinguishes company and non-company frameworks. Section 8 companies follow the applicable Companies Act financial-reporting framework; the relevant AS or Ind AS rules must be checked. Non-company entities require a separate applicability assessment. ICAI explains that commercial, industrial or business activity can bring accounting standards into scope even where the entity is charitable. It recommends accrual accounting and appropriate standards for NPOs outside mandatory application as well. The guide does not support a blanket claim that NGO accounting is less stringent or that Ind AS is simply optional for every NPO. ICAI guide, accounting framework discussion.
| Legal form | Reporting assessment | Additional matters to check |
|---|---|---|
| Section 8 company | Companies Act financial statements and applicable accounting-standard rules | MCA filing, company audit and governance records |
| Trust | Trust instrument and applicable state/other law | Tax registration, donor conditions and required audit |
| Society | Relevant society legislation and governing documents | Registrar returns, member approvals and tax requirements |
| Other NPO | Constituting law and applicable professional framework | Sector-specific reporting, grants and funding conditions |
Tax exemption, 80G approval and permission to receive foreign contribution address separate issues. None should be treated as a substitute for financial statements or an applicable accounting framework.
Practical fund accounting and financial records#
Use an accounting structure that separates income and expenditure by programme, funding source and restriction where needed. A donor-restricted balance should remain traceable to its conditions and permitted use. Record liabilities and commitments accurately rather than presenting every receipt as unrestricted income available to spend.
Maintain a chart of accounts and document policies for recognition, assets, depreciation, grants, donations and fund balances with the accountant. Classification depends on the facts and applicable framework; avoid treating all grants or donations identically.
| Record | Practical purpose | Review question |
|---|---|---|
| Donation and grant register | Track source, purpose and conditions | Can the amount be reconciled to bank receipts and donor evidence? |
| Programme ledger | Explain spending by activity | Is the allocation supported and consistent? |
| Fixed-asset register | Track custody and accounting | Can the asset be located and its movement explained? |
| Restricted-fund schedule | Track obligations attached to funding | Is expenditure within the permitted purpose and period? |
| Bank reconciliation | Identify timing differences and errors | Are unresolved entries assigned and followed up? |
| Related-party and approval records | Support governance | Were conflicts and approvals handled under applicable rules? |
Monthly close and annual reporting workflow#
- Reconcile bank accounts and review outstanding items.
- Match income to source documentation and restrictions.
- Check expenditure approvals and programme allocation.
- Review receivables, liabilities, assets and fund balances.
- Compare programme reports with the financial ledger.
- Prepare the applicable financial statements and disclosures.
- Obtain required audit and governing-body approvals, then complete applicable returns.
This workflow is an operational control recommendation. It does not create a universal statutory monthly filing for every NGO.
Audit preparation for NGOs#
Prepare a complete evidence trail for material balances and transactions. Separate financial-statement audit, tax audit, foreign-contribution reporting and donor assurance assignments: they can have different scope and reporting requirements. Read audits for NPOs and the applicable annual-return requirements.
NPO accounting review pack
- Constituting documents and current registrations.
- Documented accounting framework and policies.
- Ledgers, bank reconciliations and balance schedules.
- Grant agreements, donation evidence and restricted-fund reconciliation.
- Asset register, approvals and related-party information.
- Financial statements, disclosures and prior audit findings.
Frequently asked questions#
Are NGOs exempt from accounting standards?
Not automatically. Assess legal form and activity. Company-law standards apply to Section 8 companies under the relevant rules; ICAI provides a separate applicability framework for non-company entities.
Is a receipts-and-payments account the same as an income-and-expenditure account?
No. Cash receipts and payments show cash movement, while an income-and-expenditure account prepared on an accrual basis recognises the relevant period’s income and expenses. Use the statements required by the applicable framework.
Does 80G registration remove annual reporting obligations?
No. Tax approvals and financial reporting are separate. Check the entity’s governing law, applicable tax conditions, funding arrangements and any foreign-contribution requirements.
Review your NGO’s accounting system#
Contact SigmaTenders with the entity’s legal form, activities, funding sources and existing accounts to identify the applicable reporting and audit workflow.