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Long Questions and Answers:
Q.1. Explain any
three features of Not-For-Profit Organisations.
Ans.
(i) Social organisation: Their objective is to render social, educational, religious or charitable services. They take the form of clubs, societies or charitable bodies.
(ii) Source of Finance: The funds are raised through donations, subscriptions, membership fees etc. for carrying out the activities of the organisation.
(iii) No-Profit Motive: They do not operate with the objective of earning a profit. Their main objective is to provide service to the society.
Q.2. Give four
features of the Receipts and Payments Account.
Ans.
(i) It starts with the opening cash and bank balances and ends with the closing cash and bank balances.
(ii) It is the summary of the cash and bank transactions; like a cash book, all the receipts (capital or revenues) are debited and all the payments (capital or revenue) are credited.
(iii) In includes all cash and bank receipts and payments, whether they are related to current, past or future periods.
(iv) It records both revenue and capital nature items.
Q.3. What are
advantages and limitations of the Receipts and Payments Account?
Ans. Advantages of Receipts and Payments Account:
(i) It is possible to know receipts and payments during a period under different heads.
(ii) It helps in preparation of an income and expenditure account.
Limitations of Receipts and Payments account:
(i) It is prepared on cash basis of accounting. It does not record non-cash items.
(ii) It records both the revenue and capital items. It does not show any surplus or deficit.
Q.4. Give four
features of Income and Expenditure Account.
Ans.
(i) It is a nominal account which reveals either surplus, i.e., excess of expenditure over income.
(ii) It is prepared for an accounting period based on the accrual concept following the matching principle.
(iii) Only revenue items are considered, while capital items are excluded.
(iv) Both cash and non-cash items, such as depreciation, are recorded.
Q.5. ‘Receipts and
Payments Account’ is a summarized version of Cash Book. Comment.
Ans. A Receipts and Payments Account is a summary of
cash and bank transactions made over a certain period. In the cash book,
transactions are recorded on day-to-day basis, while Receipts and Payments
Account is prepared at the end of the accounting year and all cash and bank
receipts and payments made in cash and through bank account are shown in the
account classified under appropriate heads of accounts.
Q.6. How are
consumable items dealt with in the final accounts of a Not-For-Profit
Organisation?
Ans. Consumption of consumables during the year is accounted as an expense. It is debited to Income and Expenditure Account, and is calculated as follows:
Particulars Amount Opening stock of consumable goods xxxxxxx Add: Purchases during the year xxxxxxx Total xxxxxxx Less: Closing Stock xxxxxxx Balance (debited to the Income and Expenditure Account) xxxxxxx Opening stock of such goods is shown in the opening balance sheet and closing stock in the closing balance sheet.
Q. 7. Distinguish
between Receipts and Payments Account and Income and Expenditure Account.
Ans. (Four points only)
|
Basic |
Receipt and Payment Account |
Income and Expenditure Account |
|
1. Nature |
It is a Real Account |
It is nominal Account. |
|
2. Recording |
It records receipt and payments of both capital and revenue
nature. |
It records incomes and expense of revenue nature only. |
|
3. Opening Balance |
Balance at the beginning represents cash and bank
balance at the beginning of the year. |
There is no balance at beginning. |
|
4. Closing Balance |
Balance at the end represents cash and bank balance
at the end of the year. |
Balance at the end represents either surplus or deficit. |
|
5. Period of items |
It records the items received or paid during the
current year, whether relating to past, present or future periods. |
It includes expenses or incomes relating to current
year only. |
|
6. Non cash items | It ignores non-cash items like depreciation, credit purchase, credit sales etc. | It records non-cash items also. |
7. Balance of account | It usually shows a debit balance. | It may show a debit or a credit balance. |
|
8. Carrying forward | Closing balance is carried forward to the next period. | Closing balance is added to the capital fund. |