MH Board Class 12th BK Accounts of 'Not for Profit' Concerns Objective Questions Solutions-

12th commerce book keeping & accountancy solutions pdf

Objective Questions Accounts of ‘Not for Profit’ Concerns

EXERCISE - 2 [PAGES 111 - 112]

12th commerce book keeping & accountancy solutions pdf

Exercise - 2 | Q 1 | Page 111

A) Select the most appropriative alternatives from those given below.

Not for Profit Concern renders __________ services to public at large.

1.  Commercial

2.  Social

3.  Individual

4.  Group

Solution: Not for Profit Concern renders Social services to the public at large.

Exercise - 2 | Q 2 | Page 111

Donation for Scholarship Fund is ______ .

1.  Capital Receipt

2.  Revenue Receipt

3.  Capital Expenditure

4.  Revenue Expenditure

Solution: Donation for Scholarship Fund is Capital Receipt.

Exercise - 2 | Q 3 | Page 111

Income and Expenditure Account is a ________ Account

1.  Capital 

2.  Real

3.  Personal

4.  Nominal

Solution: Income and Expenditure Account is a Nominal Account.

Exercise - 2 | Q 4 | Page 111

Outstanding subscription at the end of the Accounting Year represents _______ .

1.  Liability

2.  An Expenditure

3.  An Asset

4.  Capital Fund

Solution: Outstanding subscription at the end of the Accounting Year represents An Asset.

Exercise - 2 | Q 5 | Page 112

Subscription received in advance during the accounting year is _______.

1.  An income

2.  An expenditure

3.  An asset 

4.  A liability

Solution: Subscription received in advance during the accounting year is a liability.

Explanation:

Subscription income which is not related to the current year but received during the year is known as income received in advance. It is also known as unearned income and lities side of the Balance Sheet.

Exercise - 2 | Q 6 | Page 112

Excess of Income over Expenditure is termed as ___________ .

1.  Deficit

2.  Profit

3.  Surplus

4.  Loss

Solution: Excess of Income over Expenditure is termed as Surplus.

Exercise - 2 | Q 7 | Page 112

Not for Profit Concerns prepares _________ account instead of Profit and Loss account to know the result.

1.  Trading

2.  Income and Expenditure

3.  Cash

4.  Receipt and Payments

Solution: Not for Profit Concerns prepares Income and Expenditure account instead of Profit and Loss account to know the result.

Exercise - 2 | Q 8 | Page 112

The closing balance of Receipts and Payments account usually represent _______.

1.  Closing Stock

2.  Cash and Bank Balance

3.  Surplus

4.  Deficit

Solution: The closing balance of Receipts and Payments account usually 

represents Cash and Bank Balance.

Exercise - 2 | Q 9 | Page 112

Not for Profit Organization is also called __________ organization.

1.  Service

2.  Trading

3.  Profit Making

4.  Commercial

Solution: Not for Profit Organization is also called Service organization.

Exercise - 2 | Q 10 | Page 112

Expenditure on Purchase of Building is a ________ Expenditure.

1.  Capital

2.  Revenue

3.  General

4.  Recurring

Solution: Expenditure on Purchase of Building is a Capital Expenditure.

EXERCISE - 2 [PAGE 112]

Exercise - 2 | Q 1 | Page 112

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

The Form of Organization providing services to the society only.

Solution: The Form of Organization providing services to society only. - Not for profit concern

Exercise - 2 | Q 2 | Page 112

An account which is prepared by Not for Profit concern instead of Profit and Loss Account.

Solution: An account which is prepared by Not for Profit concern instead of Profit and Loss Account. - Income and Expenditure Account.

Exercise - 2 | Q 3 | Page 112

Donation received for a specific purpose. 

Solution: Donation received for a specific purpose. - Specific donation / Capital receipt.

Exercise - 2 | Q 4 | Page 112

The receipts which are not recurring in nature.

Solution: The receipts which are not recurring in nature. - Capital Receipt

Exercise - 2 | Q 5 | Page 112

An Account which records only revenue items in case of Not for profit concern.

Solution: An Account which records only revenue items in case of Not for profit concern. - Income and Expenditure Account.

Exercise - 2 | Q 6 | Page 112

Accounts which records only cash transactions in case of Not for Profit Concern.

Solution: Accounts which records only cash transactions in case of Not for Profit Concern. -Receipts and Payments Account.

Exercise - 2 | Q 7 | Page 112

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

Solution: The income which is earned during the year but not received during the year. - Outstanding income.

Exercise - 2 | Q 8 | Page 112

The credit balance of Income and Expenditure Account.

Solution: The credit balance of Income and Expenditure Account. - Surplus

Exercise - 2 | Q 9 | Page 112

To excess of total assets over total liabilities of a Not for Profit concern.

Solution: To excess of total assets over total liabilities of a Not for Profit concern. 

- Capital Fund.

Exercise - 2 | Q 10 | Page 112

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

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

EXERCISE - 2 [PAGE 112]

Exercise - 2 | Q 1 | Page 112

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

Not for Profit Concerns do not have profit motive.

1.  True

2.  False

Solution: Not for Profit Concerns do not have profit motive. - True.

Explanation:

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

Exercise - 2 | Q 2 | Page 112

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

1.  True

2.  False

Solution: Charitable Institutions prepare Profit and Loss Accounts at the end of every financial year. - False.

Explanation: 

Charitable Institutions, Not for Profit concerns, do not undertake any trading activities and hence instead of a Profit and Loss Account prepare an Income-Expenditure Account to record all revenue expenses/losses and revenue incomes/gains of the current year.

Exercise - 2 | Q 3 | Page 112

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

1.  True

2.  False

Solution: There is no difference between Receipts and Payments Account and Income and Expenditure Account. - False.

Explanation:

In the receipts and Payments Account, all receipts and payments transactions in cash or through the bank are recorded irrespective of the current year, previous year or next year while in IncomeExpenditure Account, only the current year’s incomes and expenses (revenue) are recorded.

Exercise - 2 | Q 4 | Page 112

Income and Expenditure Account represents either surplus or deficit.

1.  True

2.  False

Solution: Income and Expenditure Account represents either surplus or deficit. - True.

Explanation:

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

Exercise - 2 | Q 5 | Page 112

Receipts and Payments Accounts do not have any opening balance.

1.  True

2.  False 

Solution: Receipts and Payments Accounts do not have any opening balance. - False.

Explanation:

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

Exercise - 2 | Q 6 | Page 112

Not for Profit concerns do not prepare a Balance Sheet.

1.  True

2.  False

Solution: Not for Profit concerns do not prepare a Balance Sheet. - False.

Explanation:

To know the financial position of the organization, at the end of the particular period, Not for Profit concerns prepare a Balance Sheet.

Exercise - 2 | Q 7 | Page 112

Purchases of Sports Equipments is a Capital Expenditure.

1.  True

2.  False

Solution: Purchases of Sports Equipments is a Capital Expenditure. - True.

Explanation:

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

Exercise - 2 | Q 8 | Page 112

Income and Expenditure Account is Real Account.

1.  True

2.  False

Solution: Income and Expenditure Account is Real Account.  - False.

Explanation: 

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

Exercise - 2 | Q 9 | Page 112

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

1.  True

2.  False

Solution: Receipts and Payments Account contains only the transactions relating to the current year. - False

Explanation:

In the receipts and Payments Accounts, transactions of not only the current year but of the previous year or of next year are also recorded.

Exercise - 2 | Q 10 | Page 112

Excess of Assets over liabilities is called Capital Fund.

1.  True

2.  False

Solution: Excess of Assets over liabilities is called Capital Fund. - True.

Explanation:

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

EXERCISE - 2 [PAGE 113]

Exercise - 2 | Q 1 | Page 113

D) Fill in the blanks

Not for Profit Organization never is engaged in __________ activities.

Solution: Not for Profit Organization never is engaged in trading activities.

Exercise - 2 | Q 2 | Page 113

Not for Profit organization is called ________ organization. 

Solution: Not for Profit organization is called service organization.

Exercise - 2 | Q 3 | Page 113

Receipts and Payments Account falls under the category of _____ Account.

Solution: Receipts and Payments Account falls under the category of Real Account.

Exercise - 2 | Q 4 | Page 113

In Receipts and Payments Account the summary of _____ transactions are recorded.

Solution: In Receipts and Payments Account the summary of Cash transactions are 

recorded.

Exercise - 2 | Q 5 | Page 113

Income and Expenditure Account is similar to the _____ account of Trading Concern.

Solution:  Income and Expenditure Account is similar to the Profit and loss account of Trading Concern.

Exercise - 2 | Q 6 | Page 113

Credit side of Receipts and Payments Account shows cash ______.

Solution:  Credit side of Receipts and Payments Account shows cash payments.

Exercise - 2 | Q 7 | Page 113

Income and Expenditure Account is a _____ Account.

Solution: Income and Expenditure Account is a Nominal Account

Exercise - 2 | Q 8 | Page 113

Mumbai University prepares _______ Account instead of a Profit and Loss account. 

Solution: Mumbai University prepares Income and expenditure account instead of a Profit and Loss account.

Exercise - 2 | Q 9 | Page 113

Subscription received from the members is considered as ________ receipts.

Solution: Subscription received from the members is considered revenue receipts.

Exercise - 2 | Q 10 | Page 113

The transactions recorded in Income and Expenditure Account are related only to the _______ year.

Solution: The transactions recorded in the Income and Expenditure Account are related only to the Current year.

EXERCISE - 2 [PAGES 112 - 113]

Exercise - 2 | Q 1 | Page 113

E) Answer in one sentence only.

What do you mean by ‘Not for Profit’ Concern?

Solution: A concern or organization which is formed and established to serve its members and society or the general public by undertaking various activities without any profit motive is called a ‘Not for Profit’ concern. 

Exercise - 2 | Q 2 | Page 113

Answer in one sentence only.

Which organizations prepare Income and Expenditure Account?

Solution: ‘Not for profit concern prepares Income and Expenditure Account.

Exercise - 2 | Q 3 | Page 113

Answer in one sentence only.

What is Receipts and Payments Account? 

Solution: An account that is prepared by a ‘Not for Profit Concern’ to record a summary of all types of cash receipts and cash payments inclusive of bank transactions is called the receipts and Payments Account.

Exercise - 2 | Q 4 | Page 113

Answer in one sentence only.

Why Income and Expenditure Account is prepared?

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

Exercise - 2 | Q 5 | Page 113

Answer in one sentence only.

What is Capital Fund?

Solution 1: 

In the case of not-for-profit organizations, an excess assets over liabilities is called a capital fund. It is similar to the capital account in the case of profit-making entities. Any surplus/ deficit shown by the Income and  Expenditure Account will be added/ deducted from the opening capital and the net capital fund will be shown on the Liabilities side.

Solution 2: 

Excess of assets over liabilities in case of not-for-profit concern is known as a capital fund.

Solution 3: 

The capital fund consists of contributions, entrance fees, surplus income, legacies, and donations specifically received for the capital fund.

Exercise - 2 | Q 6 | Page 113

Answer in one sentence only.

What is a Subscription?

Solution: Subscription is the periodical payment made by the members to the ‘Not for Profit’ concern for maintaining their membership.

Exercise - 2 | Q 7 | Page 112

What is ‘Legacy’? 

Solution: Any asset, property or amount of cash that ‘Not for Profit’ concern receives as per the provisions made in the will of the donor after his death is called Legacy.

Exercise - 2 | Q 8 | Page 113

What is Surplus?

Solution 1: Excess of income over expenditure in case of not-for-profit concern is known as surplus.

Solution 2: Excess of income over expenditure shown by the Income and Expenditure Account represents Surplus for the financial year.

Exercise - 2 | Q 9 | Page 113

Answer in one sentence only.

What do you mean by Non-recurring Expenses ?

Solution: Non-recurring expenses are the expenses which is made for the acquisition of fixed assets which gives benefits for a long period.

Exercise - 2 | Q 10 | Page 113

To which account ‘Surplus’ or ‘Deficit’ is transferred?

Solution:  ‘Surplus’ or ‘Deficit’ is transferred to the Balance Sheet by adding it or subtracting it from Capital Fund.