Chapter 2 
Accounts of Not for Profit Concerns

Q.1.A.   Select the most appropriate alternative from the following & rewrite the sentence.

i. Not for profit concern renders __________ service to public at large. 

a) Commercial

b) Social 

c) Individual 

d) Group

ii. Donation for Scholarship Fund is __________

a) Capital receipt 

b) Revenue receipt

c) Capital Expenditure

d) Revenue Expenditure

iii. Income and Expenditure Account is a __________ Account. 

a) Nominal

b) Real

c) Personal

d) Capital

iv. Outstanding subscription at the end of the accounting year represent __________.

a) Liability

b) An Assets

c) An Expenditure

d) Capital Fund

v. Subscription received in advance during the accounting year is _________.

a) An Assets

b) An Expense

c) An Income

d) A Liability

vi. Excess of income over expenditure is term as __________

a) Deficit

b) Profit

c) Surplus

d) Loss

vii. Not for profit concerns prepares __________ account instead of profit and loss account to known the result.

a) Trading

b) Income and Expenditure 

c) Cash 

d) Receipt and Payments

viii) The closing balance of Receipts and Payments account usually represent __________.

a) Closing stock

b) Cash and Bank Balance 

c) Surplus

d) Deficit

ix) Not for profit organisation is also called __________ organisation.

a) Service

b) Trading

c) Profit making

d) Commercial

x) Expenditure on purchase of Building is a _________ Expenditure.

a) Capital

b) Revenue

c) General

d) Recurring 

Q.1.B. Write the Word/ Term/ Phrase which can substitute each of the following statements.

i) The Form of Organisation proving services to the society only.

Ans: Not for Profit Concerns

ii) An account which prepared by Not for Profit Concern instead of Profit and Loss Account.

Ans: Income and Expenditure Account

iii) Donation received for a specific purpose.

Ans: Specific donation/ Capital Receipt

iv) The receipts which are not recurring in nature.

Ans: Capital receipt

v) An account which records only revenue items in case of Not for profit concern. 

Ans: Income and Expenditure Account

vi) Accounts which records only cash transaction in case of Not for profit concern.

Ans: Receipts and Payments Account

vii) The income which is earned during the year but not received during the year.

Ans; Outstanding income

viii) The credit balance of income and expenditure account.

Ans: Surplus

ix) To excess of total assets over total liabilities of a Not for profit concern.

Ans: Capital Fund

x) All such receipts which are non-recurring in nature and not forming a part a regular flow of income.

Ans: Capital Receipts 

Q.1.C. State whether the following statements are True or False with reasons.

i) Not for Profit Concerns do not have profit motive.

Ans: This statement is True.

Not for profit concerns', main aim is to give service to its members or to the society at large. They do not carry any Trading activity or Manufacturing activity so there is no question of having profit motive for 'Not for Profit' concerns.

ii) Charitable Institutions prepare Profit and Loss Account at the end of every financial year.

Ans: This statement is False.

Charitable Institutions, Not for Profit Concerns, do not undertake any trading activities and hence instead of Profit and Loss Account prepare Income-Expenditure Account to record all revenue expenses/ losses and revenue income/ gains of account year.

iii) There is no difference between Receipts and Payments Account and Income and Expenditure Account.

Ans: This statement is False.

In the Receipts and Payments Account, all receipts and payments transactions in cash or through bank are recorded irrespective of the current year, previous year or next year while in Income-Expenditure Account, only current year's income and expenses(Revenue) are recorded.

iv) Income and Expenditure Account represents either surplus or deficit.

Ans: This statement is True.

In Income and Expenditure Account, all revenue incomes and expenses are recorded and at the end of the specified period, difference is found out which is known as 'Surplus' ( Revenue incomes are more than Revenue expenses) or 'Deficit' ( Revenue expenses are more than Revenue income).

v) Receipts and Payments Account do not have any opening balance.

Ans: This statement is False.

Receipts and Payments Account is just like a cash book of trading concern and opening balance ( cash or Bank or Cash and Bank ) must be there to start recording of transactions.

vi) Not for Profit Concerns do not prepare Balance Sheet.

Ans: This statement is False.

To know financial position of organisation, at the end of the particular period, Not for Profit concern prepare Balance sheet.

vii) Purchases of  Sports Equipment is a capital expenditure. 

Ans: This statement is True.

Generally, life span of sports equipments is more than one year, so purchase of sports equipment is considered as capital expenditure.

viii) Income and Expenditure Account is Real Account.

Ans: This statement is False.

In Income and Expenditure Account, all the revenue income and expenses are recorded and therefore it is a Nominal Account and not a Real Account. 

ix) Receipts and Payments Account contains only the transactions relating to current year.

Ans: This statement is False.

In Receipts and Payments Account, transactions of not only current year but of previous year or of next year are also recorded.

x) Excess of Assets over Liabilities is capital Capital Fund.

Ans: This statement is True.

For 'Not for Profit' concerns in the Balance sheet, when total of Assets is more than the total of Liabilities, the difference of amount is considered as 'Capital Fund'.

Q.1.D. Fill in the blanks

i) Not for profit organisation never is engaged in __________ activities.

Ans: Trading

ii) Not for profit organisation is called __________ organisation.

Ans: Service

iii) Receipts and Payments Account fails under the category of __________ Account.

Ans: Real

iv) In receipts and payment account the summary of __________ transactions are recorded.

Ans: Cash

v) Income and Expenditure Account is similar to the __________ account of Trading Concern.

Ans: Profit and Loss

vi) Credit side of Receipts and Payments Account shows cash __________.

Ans: Payments

vii) Income and Expenditure account is a __________ account.

Ans: Nominal 

viii) Mumbai University prepares __________ account instead of a Profit and Loss account.

Ans: Income and Expenditure

ix) Subscription received from the members is considered as __________ receipts.

Ans: Revenue

x) The transactions recorded in Income and Expenditure account are related only to the __________ year.

Ans: Current

Q.1.E. Answer in one sentence only.

i) What do you mean by 'Not for Profit' Concern?

Ans: A concern or organisation which is found  and established to serve its members and society or general public by undertaking various activities without any profit motive is called a 'Not for Profit' concern.

ii) Which organisations prepares income and expenditure account?

Ans: 'Not for profit concern prepares Income and Expenditure Account.

iii) What is Receipts and Payments Account?

Ans: An account which is prepared by a ' Not for Profit concerns' to recorded summary  of all types of cash receipts and cash payments inclusive of bank transactions is called Receipts and Payments Account.

iv) Why Income and Expenditure account is prepared?

Ans: Income and Expenditure Account is prepared to ascertain, whether the concern has sufficient income to meet its expenses, or not.

v) What is Capital Fund?

Ans: Excess of Assets over Liabilities is known as Capital Fund which also consists of contributions subscription, entrance fees, surplus income, etc. 

vi) What is Subscription ?

Ans: Subscription is the periodical payment made by the members to the 'Not for Profit' concern for maintaining his membership.

vii) What is 'Legacy' ?

Ans: Any assets, property or amount of cash which 'Not for Profit' concern receives as per the provisions made in the will of the donor after his death is called Legacy.

viii) What is Surplus ?

Ans: Excess of income over expenditure shown by Income and Expenditure Account represents surplus for the financial year.

ix) What do you mean by Non-recurring Expenses ?

Ans: Non recurring expenses which is made for acquisition of fixed assets which gives benefits for a long period.

x) To which account 'Surplus' or 'Deficit' is transferred ? 

Ans: 'Surplus' or 'Deficit' is transferred to Balance Sheet by adding it or subtracting it from Capital Fund.

Q.1.F. Complete the Table

Sr. No.	Income	Expenditure	Surplus/Deficit
1	10,000	?	5,000 (Deficit)
2	8,000	?	4,000 (surplus)
3	?	15,000	8,000 (surplus)
4	7,500	9,000	?
5	15,000	11,300	?

 

Solution:

Sr. No.	Income	Expenditure	Surplus/Deficit
1	10,000	15,000	5,000 (Deficit)
2	8,000	4,000	4,000 (surplus)
3	23,000	15,000	8,000 (surplus)
4	7,500	9,000	1,500
5	15,000	11,300	3,700

 

II. Salaries paid during the year:

Sr. No.	Total Rs.	Prepaid/ Outstanding	Rs.	Expenditure
1	1,100	Prepaid	100	?
2	2,700	Prepaid	?	2,000
3	8,250	Prepaid	?	6,650
4	1,200	Outstanding	200	?
5	?	Outstanding	600	5,100
6	1,800	Outstanding	?	2,200

 

Solution:

Sr. No.	Total Rs.	Prepaid/ Outstanding	Rs.	Expenditure
1	1,100	Prepaid	100	1,000
2	2,700	Prepaid	700	2,000
3	8,250	Prepaid	1,600	6,650
4	1,200	Outstanding	200	1,400
5	?	Outstanding	600	5,100
6	1,800	Outstanding	400	2,200

 

III. Rent received in Advance/Accrued

Sr. No.	Total Rs.	Rent received in Advance/Accrued	Rs.	Income for the year Rs.
1	1,300	Advance	200	?
2	?	Advance	400	1,400
3	2,650	Advance	?	2,000
4	?	Accrued	290	3,190
5	1,700	Accrued	?	2,150
6	2,600	Accrued	500	?

 

Solution:

Sr. No.	Total Rs.	Rent received in Advance/Accrued	Rs.	Income for the year Rs.
1	1,300	Advance	200	1,100
2	?	Advance	400	1,400
3	2,650	Advance	650	2,000
4	?	Accrued	290	3,190
5	1,700	Accrued	450	2,150
6	2,600	Accrued	500	3,100

 G) Calculate the following:

1) 10% p.a. Depreciation on Furniture Rs. 50,000 (for three months)

Ans: Depreciation = Cost of Asset x Rate x Period

                                = 50,000 x 10/100 x 3/12               = Rs. 1,200 Depreciation for 3 months

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

2) 12% p.a. Interest on Bank Loan Rs. 80,000 for 1 year.

Ans. I = PRN/100 = 80,000 x 12/100 x 1 = Rs. 9,600

Thus, interest on bank loan Rs. 80,000 for 1 year = Rs. 9,600

3) opening stock of stationery Rs. 5,000, purchases of stationery Rs. 7,000, outstanding stationery bill Rs. 1,200. Closing stock Rs. 1000. What is the amount of stationery consumed.

Ans: To consumption of stationery:                                          Rs.

                Opening Stock                                                        5,000

                Add: purchases                                                       7,000

                Add: Outstanding stationery bill                            12,000

                                                                                               24,000

Less: Closing stock                                                    1,000

Consumption of stationery                                         23,000

4) Salary Rs. 10,000, outstanding salary Rs. 5,000. Calculate the salary to be debited to income and expenditure account.

Ans:       Dr.                                          Income and Expenditure Account                            Cr.

Particulars	Amount (Rs.)	Amount (Rs.)	Particulars	Amount (Rs.)	Amount (Rs.)
To Salary Add: Outstanding Salary	10,000 5,000	15,000

 

5) Library Books Rs. ………. ? Less 10% Depreciation Rs. 5,000 = Rs. 45, 000.

Ans: Library Books Rs. 50,000. Less 10% Depreciation Rs. 5,000 = Rs. 45, 000.

Q.1.H. Find Odd One.

1. Trading Account, Profit and Loss Account, Receipts and Payments Account, Balance sheet.

Ans: Receipts and Payment Account

2. Machinery, Furniture, Computers, Salaries.

Ans: Salaries

3. Subscription, Stationery, Interest Received, Locker Rent received.

Ans: Stationery

4. Reliance Industries, Venna Vidya Mandir, Laxmi Hospital, Manoj Sports Club

Ans: Reliance Industries

5. Surplus, Deficit, Net Profit, Capital Fund

Ans: Net Profit

Practical Problems

Q.1 Calculation of Stationery consumed during the year

Balance Sheet as on 01.04.2018

Liabilities	Amount (Rs.)	` Amount (Rs.)	Assets	Amount (Rs.)	Amount (Rs.)
			Stock of Stationery		400

                     Receipts and Payments Account for the year ending 31.03.2019                                          Dr.                                                                                                                                                   Cr.                                         

Receipts	Amount (Rs.)	Amount (Rs.)	Payments	Amount (Rs.)	Amount (Rs.)
			By Stationery Purchased		6,300

Adjustments:    1)      Rs. 1,000 outstanding for Stationery bill.

2)      Stock of Stationery as on 31.03.2019 was valued at Rs. 1,800

With the above information, calculate the amount of Stationery consumed during the year and show its presentation in final Accounts of a concern.

Solution:

In the book of ____________

Income and Expenditure for the year ended 31.03.2019

Dr.                                                                                                                                                 Cr.    

Expenditure	Amount (Rs.)	Amount (Rs.)	Income	Amount (Rs.)	Amount (Rs.)
To Stock of Stationery Opening Stock Purchases (-) Closing stock	6,300 400	5,900

Q.4 (Preparation of Income and Expenditure Account only)

Following is the Receipts and Payments Account of "Satara Sports Club" Satara Prepare Income and Expenditure Account for the year ending 31.03.2019.

Receipts and Payment Account for the year ending 31.03.2019

Dr.                                                                                                                                                                                          Cr.

Receipts	Amount (Rs.)	Amount (Rs.)	Payments	Amount (Rs.)	Amount (Rs.)
To Balance b/d Cash in hand Cash at Bank To Subscription 2017-18 2018-19 2019-20 To Entrance fees To Donation for Building fund To Interest To Sale of furniture (Book Value Rs. 8,000)	4,500 12,000   4,000 44,500 3,500	16,500       52,000 8,000   70,000 600     4,500   1,51,600	By Salaries By Rent (Including Rs. 2,000 for 2017-18) By Electricity Charges By Fixed Deposit By Printing and Stationery By General expenses (Including Rs. 500 paid for Next year) By Sports Material Purchased By Balance c/d Cash in hand Cash at Bank	8,900 25,000	5,000   5,000 1,450 60,000   750 5,500     40,000       33,900

Adjustments:

1) Outstanding Subscription for Current Year is Rs. 4,500.

2) Outstanding Rent for Current Year amounted to Rs. 1,000

3) Entrance fees are to be treated as Revenue Income

4) Stock of Sports Material as on 01.04.2018 Rs. 6,000 and on 31.03.2019 Rs. 14,000

(Ans.; Surplus Amount Rs. 5,900) [Video Solution]

Q.5 "Bhartiya Kala Kendra", Solapur gives you the following information, for the year ended on 31.03.2018 Prepare Income and Expenditure Account for the year ending 31.03.2018.

                Receipts and  Payment Account for the year ending 31.03.2018

Dr.                                                                                                                                            Cr.

Receipts	Amount	Payment	Amount
To Balance b/d Cash in hand Cash at Bank To Locker Rent To Entrance Fees To Sale of old newspaper To Receipts from Drama To Legacies To Interest of Govt. Securities To Misc. Receipts	200 12,500 400 2,900 250 9,000 12,000 400   400     38,050	By Stationery By Furniture Purchases By Investment in Govt. Securities By Exp. Of Drama By Postage By Magazine and Newspaper By Salaries By Balance c/d Cash in hand Cash at Bank	600 7,000 14,000   3,000 450   600 4,400   700 7,300   38,050

Additional Information:

1) Legacies are to be capitalized

2) Outstanding Salary Rs. 200

3) 50% of Entrance Fees are to be capitalized

(Ans: Surplus Rs. 2,650) [Video Solution]

Q.6 (Accounts of Charitable Hospital)

From the following particulars relating to "Radha-Krishna Charitable Hospital" Pune. Prepare Income and Expenditure Account for the year ending 31.03.2020 and Balance Sheet as on that date.

                Receipts and Payment Account for the year ending 31.03.2020.

Dr.                                                                                                                                                        Cr.

Receipts	Amount	Payment	Amount
To Balance b/d Cash To Subscription To Donation (General) To Interest on Investments To Proceeds from Charity show	8,230 52,000 17,500 10,000   8,530           96,260	By Medicines purchased By General Exp. By Salaries By Stationery By Exp. On charity show By Surgery and Dispensary Exp. By Equipments By Balance c/d Cash in hand Cash at Bank	41,000 1,050 23,500 2,000 550   4,200 10,000   960 13,000   96,260

Additional Information:

 

Provide depreciation on equipments Rs. 1,900 and building Rs. 1,500 [Video Solution]

7. From the following transactions of Receipts and Payments Account of “Pavan - putra Hanuma Vyayamshala” Parbhani, and the adjustments given, you are required to prepare Income and Expenditure Account and Balance Sheet as on 31st March 2019. 

Receipts and payments Account for the year ending 31.03.2019.

Adjustments : 

1) There are 500 members paying an annual Subscription of ` 50 each 

2) Outstanding Salary was ` 1,200 

3) The Assets on 01.04.2018 were as follows: Building ` 50,000, Furniture ` 15,000 

4) Provide depreciation on Building and Furniture at 5 % and 10 % respectively. 

5) 50 % Entrance Fees is to be capitalized. 

6) Interest on Investment at 5 % p. a. has accrued for 6 months. 

7) Capital Fund ` 70,000 on 01.04.2018 

(Ans. : Surplus ` 19,395, Total of Balance Sheet ` 94, 105)

8. (Newly Started Art Circle) “Jeevan Jyoti Art Circle” a newly established concern has presented the following information. Receipts and payments Account for the year ending 31.03.2018.

Adjustments : 

1) Subscription Outstanding for the year was ` 5,000 

2) Depreciate Furniture @ 10 % p.a 

3) Full amount of Admission Fees and 50 % Donations are to be capitalized. You are required to prepare income and Expenditure Account for the year ending 31.03.2018 and Balance Sheet as on that date. 

(Ans. : Surplus ` 45,340, Total of Balance Sheet ` 76,340) 

9. Given below is Receipts and Payments Account of “Vithai Mahila Mandal” Pandharpur for the year ending 31.03.2018. Prepare an Income and Expenditure Account for the year ended 31.03.2018 and Balance Sheet as on that date. Receipts and payments Account for the year ending 31.03.2018.

Adjustments :

1) Capital Fund on 01.04.2017 was ` 90,000 

2) Outstanding Subscription ` 4,000 

3) Entrance Fees are to be capitalized 

4) Rent paid includes ` 800 paid for April 2018 

5) They have following Assets and Liabilities 01.04.2017 Furniture ` 9,000, Building ` 70,000, and Outstanding Expenses ` 12,000 

(Ans. : Deficit ` 6,050, Total of Balance Sheet ` 99,450) 

10. From the following Receipts and Payments Account “K.B.P. Engineering College” Nashik for the year ending on 31.03.2019 and additional information, prepare Income and Expenditure Account for the year ending 31.03.2019 and Balance Sheet as on that date. Receipts and payments Account for the year ending 31.03.2019

1) 50% of Donation are for Building Fund and the balance is to be treated Revenue Income. 

2) Outstanding subscription ` 5,300 

3) Life membership fees are to capitalized 

(Ans. : Surplus ` 5,59,550, Total of Balance Sheet ` 28,81,950)

11. (Account of a School) From the following Balance Sheet and Receipts and Payments Account of “New English School”, Barshi, Prepare Income and Expenditure Account for the year ending 31.03.2020 and a Balance Sheet as on that date. Balance Sheet as on 01.04.2019

Additional Information : 

1) Outstanding Salary of ` 9,000 

2) Outstanding Tution Fees ` 15,000 

3) Depreciate Library Books by ` 9,000 and Furniture by ` 10,000 

(Ans. : Surplus ` 48,800, Total of Balances Sheet ` 7,61,800)

12. (Account of a Library) Following is the Receipts Payments Account of “Dhananjay Library , Mumbai” for the year ending 31.03.2020 Receipts and payments Account for the year ending 31.03.2020

You are required to prepare an Income and Expenditure Account for the year ended 31.03.2020 and Balance Sheet as on that day. The following information is also made available to you. 

1) On 31.03.2019, the Library had the following Assets also; Books at ` 50,000, Furniture ` 6,500, and Machinery of ` 30,000 

2) Subscription received in advance amounted to ` 500 

3) Outstanding Salaries ` 1300 and for Rent ` 950 

4) 50 % of the Admission Fees should be capitalized. 

5) Furniture to be depreciated at 10 % p.a. 

6) Library Books were purchased on 1st April 2019 charge Depreciation at 10 % p. a. 

7) The Investments were purchased on 01.04.2019 and they carry interest at 20 % p.a. 

(Ans. : Surplus ` 300, Balance Sheet Total ` 96,300 Capital Fund ` 91,000) 

13. (Outstanding Expenses and Prepaid Expenses) From the following information supplied to you, prepare Income and Expenditure Account for the year ending on 31.03,2020 and Balance Sheet as on that date for “Morya Sports Club” Thane. Balance Sheet as on 01.04.2019 

Adjustments : 

1) Subscription received includes ` 3,000 for 2018 - 19 and Outstanding Subscription for 2019 - 20 was ` 14,000. 

2) On 31.03.2020, Prepaid Insurance Premium was ` 2,500. 

3) Depreciate Furniture by ` 3,000. 

4) Locker Rent Outstanding for 2019 - 20 is ` 400. 

(Ans. : Surplus ` 84,800, Total of Balance Sheet ` 1,59,400) 

14. (Charitable Hospital) Following information has been provided by “Vivekanand Charitable Hospital” Latur. You are required to prepare Income and Expenditure Account for the year ending on 31.03.2019 and Balance Sheet as on that date. Balance Sheet as on 01.04.2018.

Adjustments : 

1) On 31.03.2019 Stock of Drugs was valued at ` 22,000. 

2) Depreciation on Building at 5 % p.a. and on Ambulance ` 30,000. 

3) Life Membership Fees are to be capitalized. 

(Ans. : Deficit ` 49,100, Balance Sheet Total ` 17,40,900)

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FYJC Commerce - Maharashtra State Board Textbook Solutions

Chapter 1 Basic Concept of Economic

Chapter 2 Money

HSC Commerce 12th Board Exam- Maharashtra State Board Textbook Solutions

Chapter 1 - Partnership Final Accounts

Chapter 2 - Not for Profit Concerns
Chapter 4 - Retirement of Partner
Chapter 5 - Death of Partner
Chapter 6 - Dissolution of Partner
Chapter 7 Bill of Exchanges