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Non Profit Organisation is a kind of organisation which is set up to promote the social welfare, cultural, educational, professional or religious objectives. These organisations are formed not to earn profit but to render their services to the society for the upliftment of the various sections of the society. It is a separate legal entity and not owned by any individual or an enterprise.
Such organisations include clubs, hospitals, libraries, schools, religious institutions, charitable institutions and literary societies etc. These non profit seeking entities exist with a primary motive of providing service. As clubs provide sports and recreational facilities; hospitals render medical services; literary society promotes art and culture and association may also be formed to protect the rights of the members.
FEATURES OR CHARACTERISTICS
ENTITY
The non- profit organisation is a separate legal entity which is not owned by an individual or enterprise. It has its own existence in the eyes of the law. Also, it is not affected by the retirement, death, lunacy or insolvency of any member.
FORM
These organisations are in the form of clubs, hospitals, libraries, schools, religious institutions, charitable trusts, literary societies etc.
PURPOSE OR AIM
The purpose of these organisations is to further cultural, educational, religious, professional objectives and rendering services to the people at large.
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NO PROFIT MOTIVE
Non –Profit organisation does not function with the objective of earning profit. The surplus is used for the objects for which it is set-up. Thus, surplus of these organisations is not distributed to the members as profit share.
MANAGED BY ELECTED MEMBERS
These organisations are usually managed by their elected members known as Trustees or Managing Committee.
NON PROFIT ORGANISATION ACCOUNTS
SOURCE OF FUNDS
The main sources of income of these organisations are:
- Subscription: The amount paid by the members periodically as their contribution.
- Donations: Specific or General Donation received by the public.
- Financial Assistance from the Government in the form of grant-in-aids.
- Income from investment.
MANDATORY MAINTENANCE OF ACCOUNTS
These organisations also have to maintain proper accounts to meet the legal requirement and to exercise proper control over utilization of funds.
FINAL ACCOUNTS
The final accounts maintained by these organisations are:
- Receipts and Payments Account
- Income and Expenditure Account
- Balance Sheet
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CAPITAL FUND
As these organisations do not aim at earning profit, so the balance of the Income and Expenditure Account is taken as either Surplus or Deficit. The surplus or deficit is not distributed to the members rather is added or deducted from the capital fund.
Table of Contents
NON PROFIT ORGANISATION ACCOUNTS
Surplus of Not-for-Profit organisation is distributed among the members
True
False
Answer: False
Not-for-Profit Organizations prepare
Income and Expenditure Account
Trading and Profit and Loss Account
Trading Account
Both (a) and (c)
Answer: a
The account which shows classified summary of transactions of a ‘Cash Book’ in a Not-for-Profit Organisation is called
Income and Expenditure Account
Receipts and Payments Account
Profit and Loss Account
Subscriptions Account
Answer: b
Title of the account which shows Surplus/Deficit of NPO is
Cash Book
Income and Expenditure Account
Receipts and Payment Account
Balance Sheet
Answer: b
Choose NPO from the following:
Reliance Industries Limited
Indian Hockey Federation
Infosys Ltd.
Private Hospital
Answer: b
Subscription is not a source of revenue income of a Not-for-Profit. Organisation.
True
False
Answer: False
NON PROFIT ORGANISATION ACCOUNTS
Proceeds from the sale of old newspapers are shown as income.
True
False
Answer: True
Scholarships granted to students provided by government are debited to Income and Expenditure Account.
True
False
Answer: False
Payment of honorarium is a revenue expenditure.
True
False
Answer: True
Any expenditure relating to special fund is deducted from that special fund.
True
False
Answer: True
Legacy Donation received by NPO to be used for specific purpose is accounted as
Revenue Receipt
Capital receipt
An Asset
Is decided by the Management
Answer: b
Life Membership Fee received by NPO is accounted as
Revenue Receipt
Capital Receipt
An Asset
Miscellaneous Receipt
Answer: b
Which of the following is not a capital receipt?
Donations for tournament
Donations for building fund
Life membership fee
Entrance fees
Answer: d
Which of the following is not a revenue receipt?
Donation for tournament
Government grants
Subscriptions
Entrance fees
Answer: a
Which of the following is a capital receipt?
Subscriptions
Sale of used sports material
Endowment Fund
Entrance Fees
Answer: c
NON PROFIT ORGANISATION ACCOUNTS
Receipts and Payment Account shows the receipts and payment of revenue nature only.
True
False
Answer: False
Receipts and Payments Account is a summary of cash transactions.
True
False
Answer: True
Income and Expenditure Account is equivalent to the Profit and Loss Account of a business enterprise.
True
False
Answer: True
Receipts and Payments Account shows total income and expenditure.
True
False
Answer: False
Only revenue nature items are shown in the Income and Expenditure Account.
True
False
Answer: True
Loss on sale of fixed asset is debited to Income and Expenditure Account. Whereas gain (profit) on sale of fixed asset is credited to Income and Expenditure Account.
True
False
Answer: True
Receipts and Payments Account is prepared on
Cash Basis
Time Basis
Accrual Basis
Sales Basis
Answer: a
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