Many NGOs mistakenly record restricted grants as income when they are actually liabilities. For example, if an NGO receives ₹50 lakhs for a project, it must consider the specific conditions of the grant. Under accrual-based accounting, income is recognized only when earned, meaning funds should only be counted as income as the organization fulfills its obligations. Incorrect treatment inflates surplus, weakens credibility, and misleads boards. Accountants should understand deferred income and be

Cash vs Accrual Accounting is crucial for NGOs as it influences compliance and transparency with donors and regulators. Cash accounting records transactions when cash is received or paid, focusing on current liquidity, while accrual accounting records income when earned and expenses when incurred, offering a more accurate financial picture. Nonprofits face varying legal requirements, such as mandatory accrual accounting under the Companies Act and flexibility under the laws for Societies. The In

Grant accounting is essential for NGOs, focusing on managing donor funds through structured processes that ensure compliance. Unlike traditional accounting, it rigorously checks if funds were used as intended and reported accurately. Key steps entail setting up grants as cost centres, tracking budgets, and generating donor reports. This practice strengthens relationships with donors, enhances decision-making, reduces compliance risks, and improves funding opportunities. NGO finance professionals