Quick answer
Trust accounting for schools is how schools run by trusts, societies, or Section 8 companies keep non-profit accounts. Instead of profit and loss, they prepare an income and expenditure account, a receipts and payments account, and a balance sheet. Restricted funds, such as building or scholarship funds, are tracked separately, and audited accounts keep tax exemptions.
- Non-profit schools prepare income and expenditure accounts, not profit and loss.
- Restricted funds must be tracked separately from general funds.
- Tax exemption depends on registration, proper use of income, and audit.
- Fee, donation, and grant records must reconcile with the books.
What financial statements does a school trust prepare?
| Statement | What it shows |
|---|---|
| Receipts and payments account | Cash and bank received and paid during the year |
| Income and expenditure account | Income earned and expenses incurred, with surplus or deficit |
| Balance sheet | Assets, liabilities, and funds at year end |
| Schedules and notes | Details of funds, fixed assets, and policies |
What is fund accounting?
Fund accounting tracks money by its purpose. A general fund covers day-to-day running, while restricted or earmarked funds, such as a building fund, scholarship fund, or a specific donation, can only be used for their stated purpose. Each fund needs its own balance and report so trustees and auditors can see that money was used correctly.
What income and expenses does a school record?
- Income: tuition fees, admission and registration fees, transport, activity and exam fees, donations, grants, and interest.
- Expenses: salaries, rent, utilities, maintenance, learning materials, technology, marketing, and depreciation.
- Capital items: buildings, buses, furniture, and equipment, recorded as fixed assets.
What tax and legal points should school trusts know?
- Educational trusts and societies can register with the Income Tax Department for exemption, subject to conditions on how income is used.
- Donors may get a tax deduction if the institution holds the relevant approval.
- Accounts must be audited, with audit reports filed on time.
- Many school education services are exempt from GST; some other services may not be.
- Several states regulate school fees through fee regulation laws and committees.
India replaced the Income-tax Act, 1961 with the Income-tax Act, 2025 from 1 April 2026, so section numbers have changed. Confirm your obligations with a chartered accountant and the Income Tax Department.
What controls keep school accounts clean?
- Issue a receipt for every fee and donation, with no cash collected by teachers.
- Reconcile fee collections with bank statements weekly.
- Separate duties: the person who collects money does not approve refunds.
- Approve purchases against a budget.
- Keep a fixed asset register.
How does school software help with trust accounting?
Fee collection, salary, and budgets should flow into the books without retyping. The Hudace SchoolOS Finance module handles fees and collection with reconciliation, payroll, budgets, cost centres, and accounting export to Tally and Zoho, so the accountant works from clean data. See also school accounting software.
Frequently asked questions
Are private schools in India non-profit?
Schools are generally required to be run by non-profit bodies such as trusts, societies, or Section 8 companies.
What is an income and expenditure account?
The non-profit equivalent of a profit and loss account, showing surplus or deficit.
What is a restricted fund?
Money that can only be used for a specific purpose, such as a building or scholarship fund.
Do school trusts need an audit?
Yes. Audits are required for tax exemption and under trust, society, or company rules.
Is GST charged on school fees?
Many school education services are exempt. Check specific services with a tax adviser.
Can a school trust make a surplus?
Yes, but surpluses must be used for the trust’s objects within the rules.
Which software do schools use for accounts?
Many use Tally or Zoho for books, with a school ERP for fees and payroll feeding in.