AccountingQA Latest Questions

A_Team
A_Team
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Receipts and Payments A/C for the year ended 31st March 2020 Receipts Amt Payments Amt To Balance b/d  (Cash)        180,000 By Salary        480,000 To Subscriptions        900,000 By Rent           50,000 To Sale of Investments        200,000 By Stationery           20,000 To Sale ...

  2. Radha M.Com, NET
    This answer was edited.

    Here I've prepared the Income & Expenditure A/c. Income & Expenditure A/c for the year ended 31st March 2021 Expenditure Amt Income Amt To Salary      4,80,000 By Subscriptions      9,00,000 To Rent          50,000 By Donations          10,000 To Stationery          20,000 To Loss on sale ofRead more

    Here I’ve prepared the Income & Expenditure A/c.

    Income & Expenditure A/c for the year ended 31st March 2021

    Expenditure Amt Income Amt
    To Salary      4,80,000 By Subscriptions      9,00,000
    To Rent          50,000 By Donations          10,000
    To Stationery          20,000
    To Loss on sale of furniture (WN)          10,000
    To Surplus      3,50,000
         9,10,000      9,10,000

     

    Working Note: Calculation of Loss on sale of furniture

    The following calculation is made to identify the loss incurred on the sale of furniture.

    Particulars Amt
    Book Value of Furniture        40,000
    Less: Sale Value of Furniture        30,000
    Loss on Sale of Furniture        10,000

     

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Jayesh Gupta
Jayesh GuptaCurious
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Receipts Amt Payments Amt To Balance b/d 85,000 By Doctors and Coaches Honorarium 25,000 To Subscription 68,500 By Medicines 15,500 To Entrance Fees 25,000 By Medical Equipment 30,000 To Life Membership Fees 30,000 By General Expenses 8,000 To Donations for tournament fund 20,000 By Furniture 20,000 To Sale of old Medical equipment (Book Value ...

  2. Manvi Pursuing ACCA
    This answer was edited.

    In the books of Krish Fitness and Wellness Club Income & Expenditure A/c for the year ended 31 March 2020 Expenditure Amt Income Amt To Doctors and Coaches Honorarium 25,000 By Subscription (600*100) 60,000 To Medicines 15,500 By Entrance Fees 25,000 To General Expenses 8,000 By Miscellaneous ReRead more

    In the books of Krish Fitness and Wellness Club

    Income & Expenditure A/c for the year ended 31 March 2020

    Expenditure Amt Income Amt
    To Doctors and Coaches Honorarium 25,000 By Subscription (600*100) 60,000
    To Medicines 15,500 By Entrance Fees 25,000
    To General Expenses 8,000 By Miscellaneous Receipts 15,000
    To Newspaper 8,000 By Deficit (excess of expenditure over income) 21,500
    To Rent, Rates and Taxes 5,000
    To Tournament Expenses (W.N.1) 25,000
    To Loss on Sale of Medical Equipment (W.N.2) 10,000
    To Depreciation on Medical Equipment 25,000
    1,21,500 1,21,500

     

    Working Notes:

    1.Calculation of Tournament Fund

    Tournament Fund as of 1 April 2019 15,000
    Add: Donations to Tournament Fund 20,000
    Less: Tournament Expenses -60,000
                   Tournament Expenses -25,000

     

    2. Calculation of Loss on Sale of Medical Equipment

    Book Value of Medical Equipment 15,000
    Less: Sold -5,000
                     Loss on Sale of Medical Equipment 10,000
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Bonnie
BonnieCurious
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Receipts and Payments Account for the year ended 31st March 2019 Receipts Amt Payments Amt To Balance b/d By General Expenses 32,000 Cash in Hand 40,000 By Newspapers 18,500 Cash at Bank 155,500 By Electricity 30,000 To Subscription By Fixed Deposits with Bank 180,000       2017-18                         12,000      (On 30 ...

  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    In the books of Rural Literacy Society Income & Expenditure A/c for the year ended 31 March 2019 Expenditure Amt Amt Income Amt Amt To General Expenses 32,000 By Subscription (W.N.1) 2,72,000 To Newspapers 18,500 By Legacy 12,500 To Electricity 30,000 By Government Grant 1,20,000 To Rent 65,000Read more

    In the books of Rural Literacy Society

    Income & Expenditure A/c for the year ended 31 March 2019

    Expenditure Amt Amt Income Amt Amt
    To General Expenses 32,000 By Subscription (W.N.1) 2,72,000
    To Newspapers 18,500 By Legacy 12,500
    To Electricity 30,000 By Government Grant 1,20,000
    To Rent 65,000 By Interest Received on Fixed Deposit 9,000
    Less: Prepaid Rent (65,000/13) -5,000 60,000     (1,80,000*10%*6/12)
    To Salary 36,000
    Add: Outstanding Salary 6,000 42,000
    To Postage Charges 3,000
    To Loss on Sale of Furniture (W.N.2) 13,000
    To Surplus (excess of income over expenditure) 2,15,000
    4,13,500 4,13,500

     

    Balance Sheet as on 31 March 2019

    Liabilities Amt Amt Assets Amt Amt
    Capital Fund (W.N.3) 3,85,500 Fixed Deposit 1,80,000
    Add: Surplus 2,15,000
    Advance Subscription 5,000 Books 50,000
    Outstanding Salaries 6,000 Add: Purchased 70,000 1,20,000
    Furniture 1,20,000
    Add: Purchased 1,05,000
    Less: Sold -50,000 1,75,000
    Outstanding Subscription 15,000
    Prepaid Rent 5,000
    Cash in Hand 30,000
    Cash at Bank 82,000
    Accrued Interest (W.N.4) 4,500
    6,11,500 6,11,500

     

    Working Notes:

    W.N.1: Calculation of Subscription

    Subscription for 2018-19 2,65,000
    Add: Outstanding Subscription (31 March 2019) 15,000
    Less: Outstanding Subscription (2017-18) -8,000
                     Total Subscription 2,72,000

    In the above calculation, for the year 2017-18 subscription amount was 12,000, and in the adjustment at the end of the year subscription was 20,000 so the difference of 8,000 is the amount of subscription that was outstanding.

     

    W.N.2: Calculation of loss on sale of furniture

    Book Value of Furniture 50,000
    Less: Sold -37,000
                    Loss on Sale of Furniture 13,000

     

    W.N.3: Calculation of Capital Fund

    Balance Sheet as on 31 March 2018

    Liabilities  Amt  Assets Amt
    Capital Fund (Balancing Figure) 3,85,500 Books 50,000
    Furniture 1,20,000
    Outstanding Subscription 20,000
    Cash in Hand 40,000
    Cash at Bank 1,55,500
    3,85,500 3,85,500

     

    W.N.4: Calculation of Accrued Interest

    Interest as of 30 September 2018 9,000
    Less: Interest as of 31 March 2019 -4,500
                   Accrued Interest 4,500
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A_Team
A_Team
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  2. GautamSaxena Curious .
    This answer was edited.

    Income and Expenditure A/c of Charitable Trust Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specRead more

    Income and Expenditure A/c of Charitable Trust

    Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specific accounting period.

    It shows the summary of all the income and expenditures done by the charitable trust over an accounting year. All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side, and incomes and gains on the income side of the account.

     

    • Therefore, as you can see here, how a charitable trust may use MS Excel for making their Income and Expenditure A/c, the Surplus and Deficit are the balancing figures used for balancing both the debit and credit sides.

    Later on, they are even used in the Balance Sheet. As follows-

    On the Assets Side 

     

    On the Liability Side

     

     

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Aadil
AadilCurious
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  2. Ayushi Curious Pursuing CA

    The accounting equation for a non-profit organisation is almost the same as in the case of the profit-oriented organisation. Let's first briefly understand what accounting equation and non-profit organisation are: Accounting Equation Accounting equation is an equation that depicts the relationship bRead more

    The accounting equation for a non-profit organisation is almost the same as in the case of the profit-oriented organisation. Let’s first briefly understand what accounting equation and non-profit organisation are:

    Accounting Equation

    Accounting equation is an equation that depicts the relationship between assets, liabilities and capital of an entity.

    Assets = Liabilities + Capital

    As per this equation, the total assets of an entity are equal to the sum of its total liabilities and total capital. This equation holds good in every situation.

    Non-Profit Organisation

    A Non-Profit Organisation is an entity which exists for purposes other than for profit. Such organizations exist and operate for charitable purposes, promotion of culture and sports and welfare of society. The accounting for Non-profit organisation is slightly different from For-profit organisations. In the case of a non-profit organisation, the capital account is known as the capital fund.

    Accounting Equation for non-profit organisations

    The Accounting equation for a non-profit organisation is as follows:

    Assets = Liabilities + Capital fund.

    The difference is only in name. In the case of non-profit organizations, the capital is known as a capital fund. Rest everything is the same. The accounting equation will be prepared as normally prepared for business concerns.

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Vijay
VijayCurious
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Capital Expenditure Revenue Expenditure Cash Expense Credit Expense

  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    The correct answer is 2. Revenue Expenditure. An honorarium is a voluntary payment paid to a person for the services provided. It is a type of cost incurred for the expenses of guests and volunteers. This is a payment made to the person who is not an employee of the institution. Revenue expendituresRead more

    The correct answer is 2. Revenue Expenditure. An honorarium is a voluntary payment paid to a person for the services provided. It is a type of cost incurred for the expenses of guests and volunteers. This is a payment made to the person who is not an employee of the institution.

    Revenue expenditures are the short-term expenses and consumed within one accounting year and are also known as operating expenses.

    Payment of honorarium to the secretary is treated as revenue expenditure because benefits from the expense are derived in the same accounting period. The honorarium is a type of outside expense and any outside expense is revenue in nature. It is a daily allowance incurred to cover the hotel/stay expense.

    Payment of honorarium to the secretary is shown on the Expenditure side of the Income and Expenditure Account.

    Capital Expenditure is the expense incurred on acquiring an asset and honorarium cannot be a capital expenditure as benefits derived from it cannot be carried forward to the next year.

    It cannot be treated as cash or credit expense although it is paid in cash or credit. In this case, it will be treated as a revenue expense while preparing financial statements.

    Payment of honorarium is mainly a topic of not-for-profit organizations.

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Ishika Pandey
Ishika PandeyCurious
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  2. SidharthBadlani CA Inter Student
    This answer was edited.

    Yes, accounting is necessary even for not-for-profit organizations. NPOs or not-for-profit organizations are those that are created for the welfare of the society. They intend to advance some social cause. For example charities, orphanages etc Accounting for NPOs becomes necessary as the trustees ofRead more

    Yes, accounting is necessary even for not-for-profit organizations.

    NPOs or not-for-profit organizations are those that are created for the welfare of the society. They intend to advance some social cause. For example charities, orphanages etc

    Accounting for NPOs becomes necessary as the trustees of these institutions are liable to their members, the donors and the government. They discharge this function with documenting activities of the institution.

     

    What is a not-for-profit organization?

    A not-for-profit organization is an entity that undertakes charitable activities. These institutions do not have earning profit as their primary motive. Their focus is on extending social welfare.

    Every not-for-profit organization usually has a group of trustees that are responsible for handling all its operations. These trustees are accountable to the members of the NPO.

    A not-for-profit organization usually relies on donations and grants as its primary source of revenue. They do not charge the stakeholders to whom they extend their services or goods.

     

    What does accounting for Not-for-profit organizations entail

    The professionals undertaking accounting of not-for-profit organizations must have a significant knowledge of statutory provisions and accounting principles. Here is a brief overview of what accounting for a not-for-profit organizations entails

    • Ensuring that the institution fulfills all the legal compliances necessary for it to continue functioning as a NPO.
    • Documenting all the activities of the institution and ensuring that the NPO has the necessary permits to carry out those activities.
    • Accounting for all the revenue receipts and expenses of the institution. The professional must keep in mind that the interests of the members and other stakeholders are not being subjected to any prejudice.
    • In India, every NPO has to compulsorily prepare a receipt and payment account, income and expenditure account and a balance sheet. These have to be submitted to the Registrar of Societies before the due dates.

    • Every professional undertaking the accounting of a not-for-profit organization must keep in mind that a single non-compliance or partial-compliance can result in the NPO losing out on its tax-exempt status.
    • In the past there have been many instances when NPOs have been used for the purpose of money laundering or tax evasion.
    • This has resulted in the government making the compliances for these institutions more stringent. The institutions are now required to be more transparent regarding their operations.

    We can conclude that accounting is an indispensable requirements for not-for-profit organizations to be able to continue their operations and claim the statutory benefits that the government has extended to them.

     

     

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Bonnie
BonnieCurious
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  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    To start with let me first explain the difference between receipts and income & payment and expenditure. Although Receipts and Income may look similar terms, there are some differences. Receipts have their relation with both cash and cheques received on account of various items of the organizatiRead more

    To start with let me first explain the difference between receipts and income & payment and expenditure.

    Although Receipts and Income may look similar terms, there are some differences.

    Receipts have their relation with both cash and cheques received on account of various items of the organization. Whereas, income is considered as a revenue item for finding surplus or deficit of the organization. All the receipts collected during the year may not be considered as income.

    For Example, if an organization sale of its assets that is of a capital nature, it would not be considered as an item of income and hence would be treated in the balance sheet.

    Similarly, Payment and Expenditure are two different terms. Payments are those that have their relation with cash and cheques given for various activities of the organization. Whereas, Expenditure is considered as revenue expenditure for ascertainment of surplus or deficit in the case of a not-for-profit organization. All payments made during the year may not be considered as expenditures.

    Differences

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Atreya
AtreyaCurious
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  2. Ishika Pandey Curious ca aspirant

    Definition Not-for-profit organizations are also known as non-profit organizations set up to further cultural, educational, religious, professional, or public service objectives. Its  aim is not to earn profit Accounting done by non-profit organizations is fund based.   Type of accounting Non-pRead more

    Definition

    Not-for-profit organizations are also known as non-profit organizations set up to further cultural, educational, religious, professional, or public service objectives. Its  aim is not to earn profit

    Accounting done by non-profit organizations is fund based.

     

    Type of accounting

    Non-profit organizations do Fund Based Accounting.

    Donations received or funds set aside for specific purposes are credited to a separate fund account and are shown on the liabilities side of the balance sheet.

    The income from or donations for these funds are credited to the respective fund account. On the other hand, expenses or payments out of these funds are debited.

    Accounting when done on this basis is known as Fund Based Accounting.

    Let me explain to you with an example :

    The sports fund has a balance of Rs 100000 which is invested as a fixed deposit in a bank earning 8% interest. A further donation of Rs 10000 is received towards it. Expenses incurred towards prizes are Rs 7000; Rs 3000 towards trophies and Rs 4000 distribution of cash prizes. The accounts are shown as follows :

    Categories of funds

    In the case of non-profit organizations, funds may be classified under the following heads :

    Unrestricted fund :

    The unrestricted fund does not carry any restriction with respect to its use. In other words, management can use the amounts in the funds as it deems appropriate, but to carry out the purpose for which the organization exists.

    This is known as the general fund or the capital fund to which the surplus for the year is added and in case of deficit, deducted.

    Restricted fund :

    A restricted fund is a fund, the use of which is restricted either by the management or by the donor for a specific purpose.

    Examples of such funds are endowment funds, annuity funds, loan funds, prize funds, sports funds, etc.

    • Government grant: grant received from the government for a specific purpose is restricted to be used for the purpose it is granted. It is accounted for in the books following fund-based accounting.
      • For example, a grant received from the government for ‘the polio eradication program is credited to the polio eradication fund, and income earned relating to the fund is credited to the fund while expenses are debited.

     

    • Endowment fund: it’s a fund usually a non-profit organization, arising from a bequest or gift, the income of which is devoted to a specific purpose.

     

    • Annuity fund: an annuity fund is established when a non-profit organization receives assets from a donor with a condition to pay

     

    • Loan fund: loan fund is set up to grant loans for specific purposes say loans to pursue higher studies.

     

    • A fixed assets fund is a fund earmarked for investment in fixed assets or already invested in fixed assets.

     

    • Prize funds: it is a fund set up to use for distribution as prizes say for achievements or contributions to the welfare of society.
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Bonnie
BonnieCurious
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  2. prashant06 B.com, CMA pursuing
    This answer was edited.

    The "Income and Expenditure" account lists all the income and expenses incurred by the entity throughout the year. This account is very identical to the profit and loss account and is generally prepared on an accrual basis irrespective of whether the amount is received or paid. Non-profit organizatiRead more

    The “Income and Expenditure” account lists all the income and expenses incurred by the entity throughout the year. This account is very identical to the profit and loss account and is generally prepared on an accrual basis irrespective of whether the amount is received or paid. Non-profit organizations (NPO) prepare this type of account to ascertain surplus earned or deficit incurred by them during the period.

    Talking about the format of income and expenditure accounts we generally see that all the expenses are recorded on the debit side while all incomes are recorded on the credit side. One important thing to note is that items so recorded are revenue items while capital nature items are generally ignored because only current period items are recorded in this statement.

    Since it is a Nominal account, we follow the golden rules to prepare this, stating “debit all expenses and losses and credit all incomes and gains”. The closing balance at the end shows the surplus or deficit for the year. If the balancing figure appears on the debit side it is surplus and if the balancing figure appears on the credit side it is a deficit for the entity.

    Following is the format of income and expenditure account

     

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