Chapter 2 - Accounts of ‘Not for Profit’ Concerns [Latest edition] State whether the following statement is True or False with reasons

Balbharati solutions for Book-keeping and Accountancy 12th Standard Hsc Maharashtra State Board 

Chapter 2 - Accounts of ‘Not for Profit’ Concerns [Latest edition]

State whether the following statement is True or False with reasons

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

Explanation:

Not for profit concerns’, main aim is to give services 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.

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 Profit and Loss Account prepare Income-Expenditure Account to record all revenue expenses/losses and revenue incomes/gains of current year.

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 bank are recorded irrespective of the current year, previous year or next year while in IncomeExpenditure Account, only current year’s incomes and expenses (revenue) are recorded.

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).

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 opening balance (Cash or Bank or Cash and Bank) must be there to start a recording of transactions.

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

Explanation:

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

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

Explanation:

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

Income and Expenditure Account is Real Account. - False.

Explanation:

In 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.

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

Explanation:

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

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

Explanation:

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’.