II. Very Short Answer Questions

Question 1.
State the meaning of not-for-profit organisation.
Answer:
Some organisations are established for the purpose of rendering services to the public without any profit motive. They may be created for the promotion of art, culture, education and sports, etc. These organisations are called not-for-profit organisation.

Question 2.
What is receipts and payments account?
Answer:
Receipts and Payments account is a summary of cash and bank transactions of not-for-profit organisations prepared at the end of each financial year. It is a real account in nature.

Question 3.
What is legacy?
Answer:
It is the amount given to a non-trading concern as per the will. It is like a donation. It appears on the debit side of receipts and payments account, but is not treated as income because it is not of recurring nature. It is a capital receipt.


Question 4.
Write a short note on life membership fees.
Answer:
Life membership fee is accounted as a capital receipt and added to capital fund on the liabilities side of Balance sheet. It is non – recurring in nature.

Question 5.
Give four examples for capital receipts of not-for-profit organisation.
Answer:

  1. Life membership fees
  2. Legacies
  3. Specific donation
  4. Sale of fixed assets

Question 6.
Give four examples for revenue receipts of not-for-profit organisation.
Answer:

  1. Subscription
  2. Interest on investment
  3. Interest on fixed deposit
  4. Sale of old sports material

III. Short Answer Questions

Question 1.
What is income and expenditure account?
Answer:
Income and expenditure account is a summary of income and expenditure of a not-for-profit organisation prepared at the end of an accounting year. It is prepared to find out the surplus or deficit pertaining to a particular year. It is a nominal account in nature in which items of revenue receipts and revenue expenditure relating to the current year alone are recorded.

Question 2.
State the differences between Receipts and Payments Account and Income and Expenditure Account.
Answer:


Question 3.
How annual subscription is dealt with in the final accounts of not-for-profit organisation?
Answer:
(A) Treatment in income and expenditure account:
When subscription received for the current year, previous years and subsequent period are given separately, subscription received for the current year will be shown on the credit side of income and expenditure account after making the adjustments given below:

  • Subscription outstanding for the current year is to be added.
  • Subscription received in advance in the previous year which is meant for the current year is to be added.

When total subscription received in current year is given:

  • Subscription outstanding in the previous year which is received in the current year will be subtracted.
  • Subscription received in advance in the previous year which is meant for the current year is added and subscription received in advance must be subtracted.

(B) Treatment in Balance sheet:

  • Subscription outstanding for the current year and still outstanding for the previous year will be shown on the asset side of the Balance sheet.
  • Subscriptions received in advance in the current year will be shown on the liabilities side of the Balance sheet.


Question 4.
How the following items are dealt with in the final accounts of not-for-profit organisation?

  1. Sale of sports materials
  2. Life membership fees
  3. Tournament fund

Answer:
1. Sale of sports materials:
The sale proceeds of old sports materials like balls and bats, etc., are revenue receipts.

2. Life membership fees:
Amount received like membership fee from members is a capital receipt as it is non – recurring in nature.

3. Tournament fund:
It is recurring in nature. It is revenue receipt. It is shown on liabilities side of balance sheet. Opening balance added donations and subtracted expenses incurred.

IV. Exercises