Bookkeeping monograph on the distribution of the surplus / profit of a non-profit organization

The “Save the Forest” Association is a non-patrimonial entity, constituted according to OG no. 26/2000 on associations and foundations. In order to generate income, the entity has the activity of selling promotional materials. The income from this activity is economic income, subject to profit tax. In 2014, the association makes a surplus in the amount of 1,000 lei.

Does this entity have an obligation to constitute a legal reserve? Can the association distribute dividends?

The normative framework that regulates the accounting of a person without patrimonial purpose is given by OMFP no. 1969/2007. According to point 183 of this order, the legal reserves are constituted annually from the surplus / profit of the entity, within the quotas and limits provided by law.

From the point of view of the registration in the accounting, the amounts representing reserves constituted from the surplus / profit of the current financial year are registered according to point 191 par. (4) of the order, by the accounting article:

129 “Distribution of surplus” = 106 “Reserves”

The surplus / accounting profit remaining after the distribution is taken over at the beginning of the financial year following the one for which the annual financial statements are prepared in account 117 “Retained earnings”, from where it is to be distributed to the other legal destinations.

The accounting accounting of the destinations of the accounting surplus / profit is performed after the general meeting that approved the distribution of the surplus / profit, by recording the amounts representing reserves and other destinations. Entities may not return to the records made in respect of the distribution of surplus / profit

The associations are established, organized and operate based on OG no. 26/2000 on associations and foundations. This ordinance does not establish the obligation of the associations to constitute a reserve fund as imposed by the Companies Law on art. 183.

In conclusion, the associations established according to Government Ordinance (OG) no. 26/2000 regarding associations and foundations do not have the obligation to establish legal reserves.

Regarding the distribution of dividends, art. 1 of OG no. 26/2000 establishes that individuals may set up foundations that may carry out activities of general interest or in the interest of a community. If the foundation carries out the activity in the personal interest of the founding natural person, it must be a non-patrimonial one. Consequently, a non-profit organization does not pay dividends to the founders, and the realized profit remains at the disposal of the entity for the continuation of its activity.