Tag: accounting for not-for-profit organisation

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Questions Related to accounting for not-for-profit organisation

Multiple choice 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

Deficit as per Income and Expenditure Account is given effect as______________.

  1. Added to capital fund

  2. Deducted from capital fund

  3. Added to liabilities

  4. Deducted from liabilties
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The deficit as per Income and Expenditure Account is deducted from capital fund. Capital fund is the excess over assets over liabilities. Any addition or reduction in the fund is adjusted through the capital fund account. 

Multiple choice 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

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

  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.
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

Multiple choice 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

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

  1. Deducted from capital fund

  2. Added to capital fund

  3. Deducted from asset

  4. Added to asset
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

Multiple choice 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

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

  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
Reveal answer Fill a bubble to check yourself
A Correct answer
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. "

Multiple choice 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

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

  1. Expenses

  2. Liability

  3. Equity

  4. Asset
Reveal answer Fill a bubble to check yourself
D Correct answer
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.

Multiple choice 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

Donations for specific purposes are always capitalized.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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. 

Multiple choice 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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
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. 

Multiple choice 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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
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. 

Multiple choice 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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
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. 

Multiple choice 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

Income and expenditure accounts show ______________.

  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
Reveal answer Fill a bubble to check yourself
D Correct answer
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.