Chapter # 1 | NON – TRADING CONCERN
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Q.1: | Define non – trading organization? |
Ans: | A legal and accounting entity that is operated for the benefit of the society as a whole rather than for the benefit of a sole proprietor or group of partners or share holders. In other words, it’s main purpose is to serve its members rather than earning profit. |
Q.2: | Give any three characteristics of on – trading concerns? |
Ans: | i) Non – profit makingii) They provide services to their members. iii) Their source of income is subscription, donations etc. |
Q.3: | Differentiate between trading and non – trading concerns? |
Ans: |
TRADING |
| NON – TRADING |
It’s main purpose is to earn profit. |
| It’s main purpose is to serve its members. |
The source of income of these concerns is the sales of goods & services. |
| The main source of such institutions income is subscriptions, donation etc. |
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Q.4: | What is Receipts & payments account? |
Ans: | A summary of the cash book is called receipts and payments account. This is the primary report prepared by treasures of non – trading concerns to present the result of year’s cash position. |
Q.5: | Give any three characteristics of receipts and payments account? |
Ans: | i) No distinction is made between capital and revenue items.ii) It usually stars with the opening balance of cash. iii) It is a duplicate of cash book is concise form. |
Q.6: | Define Incomes and Expenditure account? |
Ans: | The account through which surplus or deficit of a particular period is determined of non – trading concerns is called incomes and expenditures account. |
Q.7: | Give any three characteristics of incomes & expenditures account? |
Ans: | i) It is revenue account prepared at the end of financing period.ii) Both cash and non cash items are recorded in it. iii) All capital expenditures are excluded. |
Q.8: | Name major statements which are prepared by non – trading concerns? |
Ans: | i) Receipts and payments account.ii) Incomes and expenditures account. iii) Balance sheet. |
Q.9: | Name major statements which are prepared by non – trading concerns? |
Ans: | i) Receipts & payments accountii) Incomes & expenditures account. iii) Balance sheet |
Q.10: | What is mean by Legacy? |
Ans: | The amount or property received as per the will of deceased person by non – trading concerns is called legacy. |
Q.11: | What is the accounting treatment of legacy? |
Ans: | Normally, legacy is treated as capital item, however, its some part maybe considered as income according to instructions. |
Q.12: | What do you know about honorarium? |
Ans: | The amount paid to the person who is not the employee of non – trading organization and such payment is made as gift against some services rendered by him to such institution is called honorarium. |
Q.13: | What is accounting treatment of honorarium? |
Ans: | Honorarium is expenditure so it is written on the debit side of incomes and expenditures account. |
Q.14: | Define capital fund? |
Ans: | The difference between the assets and liabilities of non – trading concerns represents capital fund. |
Q.15: | Differentiate between receipts and payments A/c and incomes and expenditures A/c? |
Ans: |
i) It includes both capital and revenue items. |
| It includes revenue items only. |
ii) It does not consider non – cash item. |
| It considers both non – cash and cash items. |
iii) It normally being with opening balance of cash. |
| It does not commence with any previous balance. |
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Q.16: | Define Subscription? |
Ans: | The contribution made by the members annually to non – trading concerns is called subscription. |
Q.17: | What do you know about donation? |
Ans: | Amount received in the shape of gifts to non – trading concerns is called donation. |
Q.18: | What do you mean by Special Subscription? |
Ans: | A subscription collected by non – trading concerns from the members who participate in a particular activity is called Special subscription. |
Q.19: | What is the accounting treatment of sale of newspapers, periodicals, magazines? |
Ans: | It is written on the income side of incomes and expenditures account. |
Q.20: | What is the treatment of Sale of sports material? |
Ans: | It is written on the income side of incomes & expenditures account. |
Q.21: | Define life membership fee? |
Ans: | A subscription paid in lump sum by any member of non – trading concern for all period of membership is known as life membership fee. |
Q.22: | Define Entrance fee? |
Ans: | A fee received by Non – trading concerns from new member as a result of his / her admission is called entrance fee or admission fee. |
Q.23: | What is the accounting treatment of admission fee or Entrance fee? |
Ans: | It amount is large, so it is treated as liability, if amount is small, it is treated as income. |
Q.24: | What is the accounting treatment of General fund / Capital fund / Accumulate fund? |
Ans: | It is treated as liability in the balance sheet. |
Q.25: | What is the accounting treatment of deficit in the non – trading concerns accounts? |
Ans: | It is treated as liability in the balance sheet. |
Q.26: | What do you mean by deficit in Non – trading concerns? |
Ans: | If the expenditures of non – trading concerns exceeds the incomes of these institutions, such difference is called deficit. |
Q.27: | What do you mean by surplus in Non – trading concerns? |
Ans: | If the Incomes of non – trading concerns exceeds the expenditure of these institutions, such difference is called surplus. |
Q.28: | What is the accounting treatment of surplus in non – trading concerns accounts? |
Ans: | It is directly added to capital fund in the balance sheet. |
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