Tag: financial accounting and reporting

Questions Related to financial accounting and reporting

Surplus revealed by Income and expenditure account ___________.

commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

  1. is shown as deduction in accumulated fund at the balance sheet

  2. is transferred to an account called capital fund

  3. is distrusted among the members of the non-profit organization

  4. must be donated to other non-profit organization

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Correct Option: B
Explanation:

b'Income and expenditure account can be defined as an account that reveals surplus or deficit of a non-trading concern by matching incomes and expenses of a specified accounting period. The balance of income and expenditure account is transferred to the balance sheet. Surplus balance is added to the capital fund in balance sheet. '

Income and Expenditure Account is prepared on ____________.

commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

  1. Cash basis

  2. Accrual basis

  3. Hybrid basis

  4. Either (A) or (B)

Show answer
Correct Option: B
Explanation:

Income and expenditure account is prepared on Accrual basis. Accrual basis of accounting is wherein all the expenses that are actually incurred and incomes actually earned are recorded. Its recorded when its realised and not when received.

Professional people like solicitors, doctors, company secretary, cost accountant, chartered accountants etc., prepare for themselves ___________ which is a modified form of Income & Expenditure A/c prepared by non-trading concerns. 

commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

  1. Receipt & Expenditure A/c

  2. Income & Payment A/c

  3. Profit & Loss A/c

  4. Any of the above

Show answer
Correct Option: C
Explanation:

Income and Expenditure account prepared by non-trading concerns is very much like the profit and loss account prepared by trading concerns. Both accounts show the expenditure incurred and income earned during the year. In the end balance is calculated. In Income and Expenditure account balance is termed surplus or deficit and in Profit and loss account it is termed "Net Profit" or "Net Loss".

Income and Expenditure Account is equivalent to ____________.

commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

  1. Profit and Loss Account

  2. Receipts and Payments Account

  3. Balance Sheet

  4. Receipts and Expenditure Account

Show answer
Correct Option: A
Explanation:

Income and Expenditure account prepared by non trading concerns is very much like the profit and loss account prepared by trading concerns. Both account shows the expenditure incurred and income earned during the year. In the end balance is calculated. In Income and Expenditure account balance is termed surplus or deficit and in Profit and loss account it is termed "Net Profit" or "Net Loss".

Which of the following is the accounting equation for a non-profit organization ?

commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

  1. Asset = Capital + Liabilities

  2. Capital + Liabilities = Assets

  3. Accumulated fund + Liabilities = Assets

  4. Liabilities = Asset + Accumulated fund

Show answer
Correct Option: C
Explanation:

Accounting equation is a statement representing a relationship between a company's assets, liabilities and its capital.

The accounting equation for non-profit organisation is the sum of company's liabilities and the accumulated fund or capital fund which equals to the assets possessed by organisation.
$Accumulated\quad fund+Liabilities=Assets$.

The capital of a non-profit organization is generally known as __________.

commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

  1. Equity

  2. Accumulated fund/Capital fund

  3. Cash fund

  4. Financial reserve

Show answer
Correct Option: B
Explanation:

The capital for a non-profit organisation is not funded by the owner and thus has to be mentioned as capital fund. This is because capital fund is that account which records all those transactions which are related to capital nature.

Surplus of Income and Expenditure Account is deducted from the capital/general fund.

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

False. Surplus of Income and expenditure account is added to the capital/general fund. Surplus is arrived when there is excess of income over expenditure hence it is addition to the and fund and should be added to the capital fund. 

State True or False:
Scholarships granted to students out of funds provided by government will be debited to Income and Expenditure Account. 

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

False. Scholarships granted to students out of funds provided by government will be deducted from the fund provided by government. If there appears any fund respective incomes/expenses will added/deducted from the respective fund. 

If there appears a sports fund, the expenses incurred on sports activities will be shown on the debit side of Income and Expenditure Account. 

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

False. If there appears a sports fund, the expenses incurred on sports activities will be deducted from the sports fund. If there appears any fund respective incomes/expenses will added/deducted from the respective fund. 

Income and expenditure accounts show ______________.

book keeping and accountancy accounting for not-for-profit organisation financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations prepration of income and expenditure account

  1. Cash available to an organization

  2. Closing capital of an organization

  3. Cash available in the bank account

  4. Surplus or deficit for the current accounting Period

Show answer
Correct Option: D
Explanation:

Income and Expenditure account is prepared to calculate the surplus or deficit with the company for current accounting period. The previous year transaction and the various cash transactions are not considered while preparing this account beacuse such transaction are related to receipt and payment account.