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NON PROFIT ORGANISATIONS ACCOUNTS CLASS 12 ; MCQs , NUMERICAL PROBLEMS

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NON PROFIT ORGANISATION ACCOUNTS

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.

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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