Show the treatment of the following items by a Not-for-Profit Organisation: (i) Annual subscription (ii) Specific donation (iii) Sale of fixed assets (iv) Sale of old periodicals (v) Sale of sports materials (vi) Life membership fee"
Answers
The treatment of the following items by a Not-for-Profit Organisation are as follows :
(i) Annual subscription : It is revenue in nature and taken on the credit side of income and expenditure account.
(ii) Specific donation : General donations are taken on the credit side of income and expenditure account whereas specific donations are taken on the liabilities side.
(iii) Sale of fixed assets : there are two instances :
(a) If there is no book value : Consider it as an income and show on the credit side of income and expenditure account.
(b) If there is book value : Find out profit and loss and show it in the income and expenditure account.
(iv) Sale of old periodicals : It is revenue in nature and is taken to the credit side of income and expenditure account.
(v) Sale of sports materials : It is also revenue in nature and is taken to the credit side of income and expenditure account.
(vi) Life membership fee : This receipt is capital in nature and taken on the liabilities side of balance sheet.
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Prepare Income and Expenditure Account and Balance Sheet for the year ended December 31, 2016 from the following Receipt and Payment Account and Balance Sheet of culture club: Receipt and Payment Account for the year ending March 31, 2016 Receipts Amount Rs Payments Amount Rs Opening cash balance 12,000 Furniture 4,000 Subscription Telephone expenses 800 2014-2015 2,000 Salary 2015-2016 22,000 24,000 2014-2015 1,000 Entrance fees 2,800 2015-2016 4,000 Locker rent 1,000 Newspapers 700 Life membership fee 1,200 Sundry expenses 1,000 Government grant 11,000 Defence bonds 18,000 Land 20,000 Closing cash balance 2,500 52,000 52,000 Balance Sheet for the year ending March 31, 2015 Liabilities Amount Rs Assets Amount Rs Advance locker rent 200 Cash in hand 12,000 Subscription Received in Advance 1,000 Outstanding Expenses 3,000 Outstanding salary 2,000 Building 35,000 Loan 10,000 Capital fund 36,800 50,000 50,000
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Answer:
The Treatment Of Following Items :
i ) Annual Subscription :
Current Year Subscription is to be calculated and it is shown on the credit side of Income and expenditure account.
ii ) Specific Donation :
There are 2 types Of donations , Specific Donation is the donation for library etc. must be treated as capital Receipt and shown on the liability side of balance sheet.
iii ) Sale Of Fixed Assets
If there is no book value of assets, then it is considered as income. It is shown on Income and expenditure account.
iv ) Sale of Old Periodicals :
It should be treated as an income. And shown in Credit Side of income and expenditure account.
v ) Sale of Sports materials :
The value of such items used is considered as income and shown in Credit Side of Income And Expenditure Account.
vi ) Life Membership fee :
It is lumb sum amount received from certain members towards like membership instead of annul Subscription. It should be capitalised as it is a Capital receipt.