Solutions-Class-12-Commerce-Book Keeping and Accountancy-Chapter-2-Accounts of ‘Not for Profit’ Concerns-Maharashtra Board

(b) Social

(a) Capital Receipt

(d) Nominal

(c) An Asset

(d) A Liability

(c) Surplus

(b) Income and Expenditure

(b) Cash and Bank balance

(a) Service

(a) Capital

1. Not for Profit Concern / Organization: The form of organization providing services to the society only.
2. Income and Expenditure Account: An account which is prepared by a Not for Profit Concern instead of a Profit and Loss Account.
3. Specific Donation: Donation received for a specific purpose.
4. Capital Receipts: Receipts which are not recurring in nature.
5. Income and Expenditure Account: An account which records only revenue items in the case of a Not for Profit Concern.
6. Receipts and Payments Account: An account which records only cash transactions (summary of cash and bank transactions) in the case of a Not for Profit Concern.
7. Accrued Income / Outstanding Income: The income which is earned during the year but not received during the year.
8. Surplus: The credit balance (excess of income over expenditure) of an Income and Expenditure Account.
9. Capital Fund: The excess of total assets over total liabilities of a Not for Profit Concern.

10. Capital Receipts: All such receipts which are non-recurring in nature and not forming a part of a regular flow of income.

Statement is : True

Reason: The primary objective of Not for Profit concerns is to provide qualitative services to its members and society rather than earning profit.

Statement is : False

Reason: As their motive is not to earn profit, charitable institutions do not prepare a Profit and Loss Account; instead, they prepare an Income and Expenditure Account to show the result of their operations.

Statement is : False

Reason: There are several differences; for example, a Receipts and Payments Account is a Real Account that records all cash transactions (capital and revenue), whereas an Income and Expenditure Account is a Nominal Account that records only revenue items for the current period.

Statement is : True

Reason: The closing balance of the Income and Expenditure Account represents either a surplus (excess of income over expenditure) or a deficit (excess of expenditure over income).

Statement is : False

Reason: The Receipts and Payments Account starts with the opening balances of cash in hand and cash at bank.

Statement is : False

Reason: Not for Profit concerns prepare a Balance Sheet to know the net worth and exact financial position of the organization on a particular date.

Statement is : True

Reason: Purchases of sports equipment is a Capital Expenditure because it is a non-recurring expenditure on a fixed asset, the benefits of which are received over a long period.

Statement is : False

Reason: The Income and Expenditure Account is a Nominal Account, as it records only revenue-related expenses, losses, incomes, and gains.

Statement is : False

Reason: The Receipts and Payments Account records all cash and bank transactions made during the current period, regardless of whether they relate to the previous, current, or next year.

Statement is : True

Reason: The Capital Fund represents the accumulated net worth of the concern and is calculated as the excess of total assets over total liabilities.

Trading

Service

Real

Cash

Profit and Loss

Payments

Nominal

Income and Expenditure

Revenue

Current

A Not for Profit Concern is an organization formed to provide services for social, cultural, educational, or charitable purposes and not to earn profit.

Not for Profit Concerns, such as schools, hospitals, and social welfare associations, prepare an Income and Expenditure Account.

A Receipts and Payments Account is a summary of all cash and bank transactions for a specific period, acting as a real account for the organization.

An Income and Expenditure Account is prepared to ascertain the net results of a concern's revenue transactions, determining if there is a surplus or a deficit for the period.

Capital Fund represents the accumulated net worth of a concern, calculated as the excess of total assets over total liabilities.

Subscription is the regular revenue income collected periodically from the members of a Not for Profit concern.

Legacy refers to gifts or property received by an organization under the terms of a donor's will upon their death.

Surplus is the excess of revenue income over revenue expenditure during a particular accounting period.

Non-recurring expenses are capital expenditures that do not occur regularly and provide benefits to the organization over a long period.

The Surplus or Deficit is transferred to the Capital Fund in the Balance Sheet.

The calculations are based on the principle that Surplus is the excess of income over expenditure, while Deficit is the excess of expenditure over income.

These calculations follow the rule that Prepaid Expenses are deducted from the total paid, while Outstanding Expenses are added to determine the actual expenditure for the current year.

Income for the year is calculated by deducting Income Received in Advance and adding Accrued (Outstanding) Income to the total amount received.

Depreciation = Cost of Furniture x Rate x Period

= ₹ 50,000 × \(\frac{10}{100}\) × \(\frac{3}{12}\) = ₹ 5,000 × 0.25 = ₹ 1,250.

Thus, Depreciation on furniture @ 10% on ₹ 50,000 for 3 months = ₹ 1,250.

I = \(\frac{PRN}{100}\)  = 80,000 x  × 1 = ₹ 9600,

Thus, Interest on Bank loan ₹ 80,000 for 1 year = ₹ 9600.

Dr.                              Income and Expenditure Account                                Cr.

Library Books ₹ 50,000 Less 10 % Depreciation ₹ 5,000 = ₹ 45,000

Receipts and Payments Account

Reason: Trading Account, Profit and Loss Account, and Balance Sheet are the components of final accounts for Profit-making (Trading) organisations. Receipts and Payments Account is specifically prepared by Not for Profit concerns.

Salaries

Reason: Machinery, Furniture, and Computers are Fixed Assets shown on the Assets side of a Balance Sheet. Salaries is a Revenue Expenditure (an expense) recorded in the Income and Expenditure Account.

Stationery

Reason: Subscription, Interest Received, and Locker Rent received are all examples of Revenue Receipts (Income) for a Not for Profit concern. Stationery is a consumable item treated as an Expenditure.

Reliance Industries

Reason: Venna Vidya Mandir (educational), Laxmi Hospital (medical), and Manoj Sports club (sports) are examples of Not for Profit concerns aimed at providing services. Reliance Industries is a Public Limited Company established for the purpose of making profit.

Net Profit

Reason: Surplus, Deficit, and Capital Fund are all accounting terms related to the results and net worth of Not for Profit concerns. Net Profit is the term used for the net result of a Profit-making organisation.