Financial Statements and Analysis Test - 6

Any expense paid in advance will give benifit in future and any benifit which firm will get in future is called asset. Hence, Rent paid in advance is asset.

Income which received in advance is liability on the part of entity which receive.Hence, Subscrption received in advance is treated as liability.

Accural basis of accounting says that record an entry whether cash or not . So, Income and Expenditure account consider all transaction whether they are in cash or not. 

Capital Fund is a liability in the balance sheet hence life membership fee is to be added in capital fund on the liabilty side of a balance sheet.

Profit on sale of fixed assets is an income in NPO which is to be recorded in Income and Expenditure account.

Honorarium is a payment given for professional services that are rendered nominally without charge. so,we can say it is a kind of remuneration paid to a person who is not the employee of a non-profit organization which is a revenue expenditure. It is shown in the Income and expenditure account on the expenditure side.

The capital fund of a nonprofit organization. Money is directed into the accumulated fund when revenues are greater than expenditures. money is directed away from the accumulated fund (withdrawn) when expenditures are greater than revenues.

Cash is coming so it will be debit and life Membership fee will be credit.Hence, cash account debit and life membership fee credit. 

Any NPO if have its seprate trading activity then they need to know activity wise profit and loss which is to then transferred to income and expenditure account of that NPO to make consolidated Accounts. Hence, profit/loss of Trading activity of club is to be presented in income and expenditure A/c.

Receipt and payment account is summary of cash book which shows only cash receipts and cash expenditure hence it is based on cash basis of accounting.