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Accounts of Non-Profit OrganisationPartnership-IPartnership-IIPartnership-IIIIssue of SharesIssue of DebenturesRatioCash Flow

Long Questions and Answers:

Q.1.  Explain any three features of Not-For-Profit Organisations.


(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.


(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.


(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 goodsxxxxxxx
 Add: Purchases during the yearxxxxxxx
 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)


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.

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