FS of Non Profit Organisation Test - 5

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.

income and expenditure account shows the income received and expenditure incurred during a year through which result is surplus or deficit.If there is exess of Revenue over expenditure there will be surplus and if there is excess of expenditure over revenue there will be Deficit. 

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

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

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.

The statement of financial position for nongovernmental not-for-profit organizations includes assets, liabilities, and net assets. "Net assets" is used rather than "retained earnings" by not-for-profits.

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.

Sale of grass will be revenue for NPO which is to be shown on income and expenditure side of NPO hence it is an income.

NPO doesn't have any owners equity , they can take debt.

Any amount invested outside is treated as investment so sport fund if invested outside it will be investment.

It is a primary source of income of a non-profit organisation. It is usually collected every month from all the ordinary members. Subscription is the amount paid by the members to keep their mem­bership alive.But if it is received in advance it creates liability . hence, Subscription received in advance is a liability for NPO which is to be shown in balance sheet.

It is like donation. It is the amount given to a non-trading concern as per the will of deceased person. It is taken to the Receipts and Payments Account as Capital Receipts. This will appear in Balance Sheet on liability 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the accumulated fund when revenues are greater than expenditures; money is directed away from the accumulated fund (withdrawn) when expenditures are greater than revenues.so, the equation in NPO is :- Accumulated fund + Liabilities = Assets

Nongovernmental not-for-profit organizations are required to provide only Statement of financial position, statement of activities, and statement of cash flows as their external financial statement.

The statement of financial position is another name for the balance sheet. It is one of the main financial statements and it reports an entity's assets, liabilities, and the difference in their totals.

A nonprofit's statement of activities is issued instead of the income statement which is issued by a for-profit business.

The statement of cash flows for a nonprofit organization is similar to that of a for-profit business. It reports the organization's change in its cash and cash equivalents during the accounting period.

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. 

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.

receipt and payment account is summary of cash book which records only cash recipts and cash payments hence it is based on cash basis

Belle, a non-governmental NPO when receive Funds for its annual campaign, it will be a liability for them which will be recorded in balance sheet. And if Organisation pledge this fund to another non governmental NPO , it will be an assets for Belle Non govt. oranisation which is to be recorded on the assets side of balance sheet. 

income and expenditure account shows surplus or deficit.Surplus of NPO is added to capital fund and deficit is deducted from capital fund.

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

Entrance Fee is an recurring item which is to be treated as revenue receipt.

Temporarily restricted assets are those that are donated subject to restrictions that are limited to a specific period of time hence it is a temporarily restricted asset.

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.

By selling old newspapers, NPO will receive revenue hence it will be an income for NPO which is to shown in Income and expenditure account on income side.

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.