Tag: financial accounting and reporting

Questions Related to financial accounting and reporting

Non-production overheads are usually omitted from stock valuation for the following reason :

elements of accounts accounting for not-for-profit organisation balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations financial accounting and reporting

  1. They are outside the control of production management.

  2. They are incurred after the stock has been brought to its present location and condition.

  3. They cannot be identified with individual products.

  4. They are fixed period costs.

Show answer
Correct Option: B
Explanation:

SSAP 9 defines that the valuation of stock is to be done on cost or realizable  value whichever is less. Cost is further defines as the cost of raw material, labour, expenses and overheads which are incurred for bring the stock at its location and condition.

Non- production overhead are expenses which are incurred after the stock has been brought to its present location and condition.

In Not-for-Profit organisations effect of surplus is_____________.

elements of accounts accounting for not-for-profit organisation balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations financial accounting and reporting

  1. Deducted from capital fund

  2. Added to capital fund

  3. Deducted from asset

  4. Added to asset

Show answer
Correct Option: B
Explanation:

Not-for-profit organisation prepare balance sheet for ascertaining the financial position of the organisation. There will be capital fund or general fund in place of the capital, and surplus or deficit ascertained from income and expenditure account is added to/ deducted to the capital fund account.

 It is also a common practice to add some of the capitalised  items like legacies, entrance fees, and life membership fees directly in the capital fund.

If a small amount is received as specific donation the __________.

elements of accounts accounting for not-for-profit organisation balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations financial accounting and reporting

  1. it is shown on the liabilities side of the balance sheet

  2. it is shown by way of deduction in capital fund in liability side of the balance sheet

  3. it is treated as income and credited to income and expenditure account

  4. None of the above

Show answer
Correct Option: A
Explanation:

b"Donation received for specific purpose is capital receipt. Specific donation can't be used for any other purpose than the purpose for which it is given. It creates a liability for Not for Profit Organisation. That's why It is shown on the liabilities side of the balance sheet. "

Outstanding subscription for a non-profit organization is considered as a/an ____________.

elements of accounts accounting for not-for-profit organisation balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations financial accounting and reporting

  1. Expenses

  2. Liability

  3. Equity

  4. Asset

Show answer
Correct Option: D
Explanation:

Subscription is a annual charge paid by the members of the organisation to receive or avail service or information. It is an income for the organisation and if income is outstanding or say yet to be received it will be an asset for the company hence, will be shown under the head current assets.

Donations for specific purposes are always capitalized.

elements of accounts accounting for not-for-profit organisation balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations financial accounting and reporting

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Specific donations is a donation received for a specific purpose say for constructing a building. Specific donations are not charged to income and expenditure account rather capitalised and shown on the liabilities side and any expenses of the same are deducted from the fund. 

Income and Expenditure account is ______ to account like Profit and Loss account.

book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

  1. real

  2. personal

  3. nominal

  4. expense

Show answer
Correct Option: C
Explanation:

Income and Expenditure account is prepared by non-trading concern to reveal the surplus or deficit arising out of the operating activities during the accounting period. It is one of the final accounts of non-trading concern like the profit and loss account of the trading concern,

In Income and Expenditure account all Expenditure are recorded on ______________.

book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

  1. Debit side

  2. Credit side

  3. Income side

  4. None of the above

Show answer
Correct Option: A
Explanation:

In income and Expenditure account all expenditure are recorded on the debit side whereas all incomes are recorded on credit side of Income and Expenditure account.

Any revenue expense for which a separate fund is available will be ___________.

book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

  1. debited to that separate fund

  2. debited to income and expenditure account

  3. capital issues and shown in the balance sheet

  4. credited to the separate fund

Show answer
Correct Option: A
Explanation:

Separate funds are those funds which are earmarked for a specific activity. In case of fund based accounting, all the incomes related to that particular activity is credited to that fund and all the expenses debited to that fund. For example, Building fund, Sports fund etc. 

Non-trading institutions prepare ___________.

book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

  1. profit and loss account

  2. trading account

  3. manufacturing account

  4. income and expenditure account

Show answer
Correct Option: D
Explanation:

Non trading organizations like professionals i.e doctors, chartered accountants, lawyers are preparing the income and expenditure account.

The revenue receipts are to be shown on ______side.

book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

  1. credit side of income & expenditure

  2. debit side of income & expenditure

  3. asset side of balance sheet

  4. liabilitie side of balance sheet

Show answer
Correct Option: A
Explanation:

Receipts may be classified as revenue receipts and capital receipts. 

Receipts which are received in the normal course of business are treated as revenue receipts.
Receipts which are received with a specific object is considered as capital receipts.
Revenue receipts are credited to income account and shown in the credit side of  Income & Expenditure account.