Tag: accounts of 'not for profit' concerns

b'Option D is correct. Capital receipts refer to those receipts which either create a liability or cause a reduction in the assets of the firm. They are non-recurring or non-routine in nature. Sale of investments leads to reduction in assets. Bank loan and money raised through issue of shares create liability for firm. All are capital receipts. '

When starting with an overdraft as per the Cash Book, items that decrease the bank balance (like interest charged by the bank) are added, not deducted, to reconcile with the Pass Book.

All the revenue incomes during the accounting period are shown on the income side and all of the revenue expenses during the period are shown on the debit side of income expenditure account.

Funds raised by Non-for-Profit organisations through various sources is credited to capital fund. Capital fund is the excess of assets over liabilities.  So, the excess amount which is mostly the income of organisation is the funds raised by them. Any addition in funds will be added ro capital fund/general fund. 

Non-for-profit organisations earn their reputation on the basis of contributions to the welfare. The are set up for the purpose of promoting science, commerce, social cause, education etc. Their main purpose is not to earn profit but to provide services. 

Non-for-Profit organisations do not maintain Capital account. They prepare income and expenditure account as profit and loss account, receipts and payments account as cash account and balance sheet. They do not maintain a capital account because of all the balance regarding the capital introduced and withdrawn are recorded in the balance sheet.

Main source of income of No-for-Profit organisation is legacies, donations and subscriptions. A non-for-Profit organisations is set up for promoting science, commerce, social cause etc. 

The main objective of non-for-profit organisations is providing services. The services provided by the not-for-profit organisations are meant to satisfy the needs of the people like joining as member and receive medicines at very low cost.

The organisations which are set up for providing services are called as not-for-profit organisations. They are set up for purpose other than profit for promoting science, religion, social cause etc. Hence, the organisation meant for a social cause are categorized as Not-for-profit organisation. 

In a double entry system, every transaction has two effects. One is debit and other is credit. In Trial Balance, balances of all the ledger accounts are recorded. If debit side of trial balance matches with credit side it shows the mathematical accuracy of all the accounts.