Assignment No. 2 Chapter No.

2
The Accounts of Non Profit Making Organizations

Rules for making Income and Expenditures account:

I. All Revenue nature items are recorded in it
II. Items relates to current year should be recorded whether received or paid or not
III. Items relates to previous or next year should not be recorded if amount is already
included on that particular item then it will be subtracted
IV. Opening and closing balances are not recorded in it.

Format for Making Income and Expenditure Account:

Dr Cr
Expenditure Rs Income Rs
All Revenue Expenditures XXX All Revenue Income XXX
Surplus ( Balancing fig) XXX Deficit ( Bal Fig) XXX
Total XXX XXX

Note: The difference between debit and credit side is called balance, if expenditure side exceeds
than income side it will be deficit and if income side exceeds it will be surplus.
MCQs:
Choose the appropriate Answer.

1. What kind of final account do non-trading concerns prepare?

(a) Manufacturing cost statement (b) Statement of affairs

(c) Income and expenditure statement (d) Retained earnings statement.

2. What is the subscription received advance treated as?

(a) Accrued income (b)Unearned income (c)Accrued expense
(d)Prepaid expense.
3. In a non trading enterprise, how is the entrance fee received during the year treated as?
(a) Advance income (b) Revenue income (c) Capital income
(d) Special income.
4. Receipt and payment account is summary of:
(a) Cash Book (b) Purchase Book (c) Sales Book (d) Purchase
return Book.
5. If salaries paid during the year are Rs.1575 and amount debited to income and expenditure
account is Rs.1500,the amount of the prepaid salaries will be:
(a) RS.75 (b) RS.1500 (c) Rs.1575 (d) Rs.1425
6. Amount received from any source by way of gift is described as:
(a) Legacy (b) Subscription (c) Donation (d) Life membership
fee
7. Receipt and payment account is:
(a) Nominal Account (b) Personal Account (c) Real Account (d) Impersonal Account
 8. What is subscription received in advance treated as?
(a) Unearned income (b) Earned income (c) Accrued expense (d) Prepaid expense
9. The credit balance of income and expenditure a/c indicates:
(a) Excess of income over expenditure (b) Excess of expenditure over income (c)
Receipts over cash payment (d) Excess of cash payment over cash receipt.
10. Admission fee income should be:
(a) Capitalized (b) Treated as revenue (c) Treated as liability (d) Added in assets.
11. Non-trading institution prepare:
(a) Profit and Loss a/c (b) Manufacturing a/c (c) Income and expenditure a/c (d) Trial
balance.
12. Non-profit making organization is also known as:
(a) Non-Profit seeking concern (b) Non-Trading concern (c) Trading Concern (d) Both
“A” and “B”.
13. Subscription received in advance is:
(a) An Income (b) An expense (c) Both “A” and “B”(d) None of these.
14. Receipt and payment account is a summary of.

a. Cash Book b. Purchase Book

c. Sale Book d. Purchase return Book
15. Non-profit making organization is also known as:
a. Non-profit seeking concern b. Non-Trading concern
c. Trading Concern d. “a” and “b”
16. Receipts and payments account record the transaction of:
a. Revenue nature b. Capital Nature
c. Revenue & Capital Nature d. None of the above
17. Example of non-profit making organization:
a. Fan Factory b. Sugar Factory
c. Hospital d. Shoe Factory
18. Subscription received relating to current year:
a. Income b. Expense
c. Asset d. Liability
19. Admission fee income Should be
a) Capitalized (b) Treated as revenue (c)Treated as liability (d) Added
in Asses
20. If salaries paid during the year are Rs.1500 and amount debited to income and
expenditure account is Rs.1575, the amount of the outstanding salaries will be:-
(a)RS.75 (b) RS.1500 (c) Rs.1575 (d) Rs.1425
 Short Questions:
I. Define Special Subscription?
II. What are admission fee / Entrance fee?
III. What is Legacy?
IV. What is Capital Fund?
V. What is Life Membership fee?
VI. What is special subscription?
VII. What is Receipt and payment account?
VIII. What is meant by nonprofit organization?
IX. How would you deal Donations for specific purpose, life member ship fee and legacies
while preparing income and expenditure account?
X. Write three differences between cash book and receipt and payment account.

Long Questions:
Given below is the Receipts and payments Account of the Eagle Club for the year ending 31 st
December 2005:
Dr. Cr.
Receipts Rs Payments Rs
Balance B/d 10,250 Salaries 6,000
Subscriptions: General Expenses 750
2004 400 Drama Expenses 4,500
2005 20,500 News-papers etc. 1,500
2006 600 Muncipal taxes 400
Donations 5,400 Charity 3,500
Proceeds of Drama tickets 9,500 Investments 20,000
Sales of waste paper 450 Electricity Charges 1,450
Balance c/d 9,000
47,100 47,100

Prepare the Club’s Income and Expenditure Account for the year ended 31st December,2005 and
its Balance sheet as on that date, after taking the following information into account:-
There are 500 members, each paying an annual subscription of Rs.50.
Municipal taxes amounting to Rs.400 per anum have been paid up to 31st March2006, and
Rs.500 for salaries is outstanding.
Buildings stood in the books at Rs.50, 000 and it is required to write off depreciation at 5
percent.
Three percent interest has accrued on investments for five months.
Question No.2
From the following Receipts and Payment Account of the Crown Club prepare an Income and
Expenditure Account for the year Ended 31st Dec, 2005 and a Balance sheet as on that
date.
Dr.
Receipts Rs. Payments Rs.
Balance b/d 130 Rates 2500
Entrance Fees 210 Stationary 340
Subscription 11,010 General Expenses 3610
Locker Rent 300 Capital Expenditure on 2500
Building
Miscellaneous Fees 1660 Repairs 300
Balance c/d 4,060
13,310 13,310

The following further information is available:

1. Locker rent Rs. 20 referred to the previous year and Rs. 30 is still owing.
2. Rates Rs. 620 referred to the previous year and Rs.620 is still owing.
3. Subscription unpaid for the current year Rs. 210.
4. The capital expenditure on building upto 31st December, 2004 was Rs. 67,500.
5. Depreciation is to be provided on building including additions at 5%.

Past Paper short questions:

I. Define Special Subscription? (2016)
II. What are admission fee / Entrance fee? (2015)
III. What is Legacy? (2017)
IV. What is Life Membership fee? (2014)
V. What is meant by nonprofit organization? (2014) (2017) (2018)
VI. How would you deal Donations for specific purpose, life member ship fee and legacies
while preparing income and expenditure account? (2015) (2019)
Past Paper Long Questions:
Q 1 (2014)
Below is given the Receipt and Payment Account of Leo's Club, Lahore. Prepare
Income and Expenditures Account as on 1st December 2005 and a Balance sheet
as on that date:
Receipts Rs. Payments Rs.
Balance b/d 2476 General exp. 1084
Annual subscription 3260 Salaries 1100
Life membership fee 500 Furniture 1600
Entrance fee 466 Rent 1120
Interest 80 Printing 250
Repairs 300
Balance c/d 1728
Total 7182 7182
  On 31st Dec 2005, the annual subscription in arrears amounted to Rs. 700/-.
 Rs. 200/- is to be written off as depreciation on furniture.
 Capitalize the membership fee.

Q 2 (2018)
Convert the following receipts and payments account of the Pakistan nursing society for
the year ended 30th June 2015 into an income and expenditure account and prepare a
balance sheet:
Receipts Rs. Payments Rs.
Balance b/d (1-7-2014) 2010 Salaries of Nurses 1036
Subscriptions: 1115 Rent, Rates and taxes 200
Fee from non-members 270 Cost of car 2000
Municipal grant 1000 Car expenses 840
Donation for building fund 1560 incidental expenses 670
Interest 38 Balance c/d (30-6-2015) 1247
5,993 5,993
The society owns freehold land costing Rs. 8000 on which it was proposed to build the Nurses
hostel. A donation of Rs. 100, received to building fund, was wrongly included in the
subscription account. A bill for medicines purchased during the year amounting to Rs. 128 was
outstanding.

Q 3 (2019)
The following is the receipts and payments account of the Lahore club for the
year ended on 31st December 2015.
Receipts Rs. Payments Rs.
Balance (1st January) 300 Rent 5200
Entrance fees 550 Stationary 3068
Subscription 2014 200 Wages 5330
Subscription 2015 16900 Billiards table 3900
Subscription 2016 300 Repairs and renewals 806
Lockers rent 500 Interest 1500
Special subscription for Balance (31st Dec) 2396
Governor’s party 3450

Lockers Rent Rs.60/- referred to 2014 and Rs.90/- is still owing. Rent Rs.1300/- pertained 2014
and another Rs.1300/- is still due. Stationary Rs.312/- related to 2014 still owing Rs.364/-.
Subscription unpaid for 2015 Rs.468/-; special subscription for governor's party outstanding
Rs.5501-.
Required:
From the above information you are required to prepare an income and expenditure
account for the club for the year ended on 31st Demeter 2015.