Most Important Questions: Class 12 Accountancy Chapter 1 – Accounting For Not For Profit Organisation:-
Short Questions for NCERT Accountancy Solutions Class 12 Part 1 Chapter 1
1. State the
meaning of ‘Not-for-Profit’ Organisations.
Organisations that
are established with the aim of providing services to society and not profit
earning are called as Not-for-profit Organisations (NPO). Some organisations
that come under NPO are hospitals, religious organisations and trade unions. An
NPO earns income from life membership fees, subscriptions, grants, donations
etc.
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| Most Important Questions: Class 12 Accountancy Chapter 1 – Accounting For Not For Profit Organisation |
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2. State the
meaning of Receipt and Payment Account.
A receipts and
payments account (R & P Account) is a summary of actual cash receipts and
payments that is extracted from the cash book over a certain time period. All
the cash received is recorded on the Receipts and all the cash payments gets
recorded in Payments side of the R & P Account. All the cash and bank
transactions are recorded in Cash Book and this book is created on the basis of
all these transaction. All cash and bank transactions that are of revenue and
capital nature gets recorded. It records all transactions i.e. bank receipts
and cash receipts.
This account helps
in determining the closing balance of bank and cash receipts and thereby assess
cash position of a Not-for-profit organisation or NPO.
3. State the
meaning of Income and Expenditure Account.
Income and
Expenditure (I & E) account is the equivalent of P & L account (Profit
and Loss Account). In an income and expenditure account, surplus and deficit is
determined during the accounting period while in a P& L account the net
profit or loss is determined at the running of accounting period. It is nominal
account and records transactions that are of revenue nature. The closing balance
is called deficit or surplus based.
4. What are the
features of Receipt and Payment Account?
The receipts and
payments account has the following features:
1. It is known as
cash book summary for NPO (Not-for-profit organisations) as it records all the
cash and cash equivalents of the organisation.
2. This account
shows cash transactions that are of revenue and capital nature
3. It does not
follow the double entry bookkeeping system as it is a summary of transactions.
4. It does not
include transactions that do not have cash or bank items.
5. It helps in
revealing the cash position of the organisation
5. What steps are
taken to prepare Income and Expenditure Account from a Receipt and Payment
Account?
Following steps
should be followed:
1. Exclude opening
cash and bank balances and also do the same for closing cash and balances
2. Exclude income
of the previous period and any such income that is received in advance
3. Exclude all
items involving capital receipts and payments
4. Exclude
expenditures that are of the previous or coming period
5. Include all
incomes of the current period which are yet to be received
6. Include
expenditures of current period which are yet to be paid.
7. Provision for
bad debts and fixed assets depreciation should be taken into account and
charged to the account (income and expenditure account)
6. What is
subscription? How is it calculated?
For a
not-for-profit organisation subscription acts as one of the main sources of
income. It refers to money that the members pay periodically for maintaining
their membership in active state. Subscription charges can be paid in flexible
options like monthly, quarterly, half-yearly or yearly. It appears on the
receipt side of R & P account.
For calculating
subscription for current period, add subscription received in advance meant for
current period during the previous year and outstanding subscription for
current year to the subscription received for the current year and deducting
subscription received in advance for next year and outstanding subscription
from previous year from subscription received in the current year.
Calculation of
Subscription
Subscription received during
the year
(+) Subscription received (in advance) during previous year for current year (+) Subscription outstanding at the end of the year
(-)
Subscription received in advance for the next year
(-) Subscription outstanding for the previous year Subscription shown in Income and Expenditure Account |
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–
–
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–
–
–
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7. What is Capital
Fund? How is it calculated?
The scenario where
value of assets of NPO are more than its liabilities, it is called as capital
fund. This is similar to the concept of capital for an organisation working to
earn profit. If any surplus amount is received from I & E account, it gets
added to capital fund, likewise any deficit will be deducted from the same and
is known as Accumulated Fund.
Calculating Capital
Fund
Capital
Fund at the beginning of the year
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Add:
Surplus from Income and Expenditure Account
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**
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Add:
Subscription Amount (Capitalised amount)
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**
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Add:
Life membership fee.
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**
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**
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Less:
Deficit from Income and Expenditure Account
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**
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Capital
Fund at the end of the year
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