CBSE Class 12 Accountancy Accounting for Not-for-Profit Organisation Worksheet

OBJECTIVE QUESTIONS

Question. Identity the type of fund stated below:
‘Himanshu Club has a fund which can only be used for the distribution of prizes.’
(A) Prize fund
(B) Endowment fund
(C) Non-approved fund
(D) Honorarium C
Answer. Option (A) is correct.

Question. The following information has been extracted from the financial statements of a not-for-profit organization for the year ended 31st March, 2019:
Particulars                                                       Amount (rs)
Opening Balance of Match Fund                     10,00,000
Sale of Match tickets                                       7,50,000
Donation for Match Fund received
during the year                                                2,28,000
Match expenses                                               10,00,000
Which of the following statements is correct for the presentation of the above items in the financial statements of the not-for-profit organization ?
(A) Negative Balance of Match fund rs 2,000 will be shown on the liabilities side of the Balance Sheet as at 31st March, 2019.
(B) Opening Balance of Match Fund rs 10,00,000 will be shown on the liabilities side of Balance Sheet as at 1st April, 2018.
(C) Negative balance of match fund rs 2,000 will be shown on the expenditure side of the Income and Expenditure Account for the year ended 31st March, 2019.
(D) Both (B) and (C).
Answer. Option (D) is correct

Question. Sports Star Charitable Club has income of rs 16,000 and ‘deficit’ debited to capital fund of rs 4,300 for the year 2019-20, then expenditure for 2019-20 is:
(A) rs 11,700
(B) rs 4,300
(C) rs 20,300
(D) None of the above
Answer. Option (C) is correct.

Question. Income and Expenditure Account records:
(A) Receipts and Payments of revenue and capital nature both.
(B) Income and expenditure of revenue nature only.
(C) Expenditure of capital nature only.
(D) Receipts of revenue nature only.
Answer. Option (B) is correct.

Question. Receipts and Payments Account is a summary of:
(A) Debit and credit balance of ledger account
(B) Cash receipts and payments
(C) Incomes and expenses
(D) Balances of assets and liabilities 
Answer. Option (B) is correct.

Question. Pick the odd one out:
(A) Receipts and Payments A/c
(B) Income and Expenditure A/c
(C) Balance Sheet
(D) Profit and Loss A/c 
Answer. Option (D) is correct.

Question.The nature of Receipts and Payments Account is:
(A) Nominal Account
(B) Real Account
(C) Personal Account
(D) None of the above 
Answer. Option (B) is correct.

Question.Which of the following is not a capital receipt?
(A) Donations for tournament
(B) Donations for building fund
(C) Life membership fee
(D) Entrance fees
Answer. Option (D) is correct.

Question. Jaipur Club has a prize fund of rs 6,00,000.
It incurs expenses on prizes amounting to rs 5,20,000. The expenses should be:
(A) Debited to Income and Expenditure Account.
(B) presented on the assets side of the balance sheet.
(C) Debited to Income and Expenditure Account and presented on the assets side of the balance sheet.
(D) deducted from the prize fund on the liabilities side of the balance sheet.
Answer. Option (D) is correct.

Question. Donation received for special purpose is a:
(A) Liability
(B) Revenue Receipt
(C) Capital Receipt
(D) None of these 
Answer. Option (C) is correct.

Question. Pick the odd one out:
(A) Entrance fees
(B) Subscription
(C) Government grant
(D) Life membership fees 
Answer. Option (D) is correct.

Question. The following information below is related to an NPO :
Dr. Receipts and Payments A/c [An Extract]

If the firm closes its accounts on 31st March every year, what amount of accrued interest on investments will be shown in the Balance Sheet of the firm on 31-03-19 ?
(A) Rs 2,400
(B) Rs 4,800
(C) Rs 6,000
(D) None of these
Answer. Option (A) is correct.

Question. Subscription received in advance during the current year is:
(A) An income
(B) An asset
(C) A liability
(D) None of the above 
Answer. Option (C) is correct.

Assertion and Reason Based MCQs

Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R).
Mark the correct choice as:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.

Question. Assertion (A): Endowment Fund is recorded only in the Balance Sheet.
Reason (R): Endowment is treated as capital receipt hence shown on the liabilities side of Balance Sheet. 
Answer. Option (A) is correct

Question. Assertion (A): The Income and Expenditure Account is like the cash book.
Reason (R): Income and Expenditure Account shows the surplus or deficit that is earned during the financial year by the non-profit organisation. 
Answer. Option (D) is correct.

Question. Assertion (A): The subscription received during the year is recorded in the Receipts and Payments Account.
Reason (R): Receipts and Payments Account records all the cash transactions whether pertaining to the current year or previous year. 
Answer. Option (A) is correct.

Question. Assertion (A): The amount of subscription of Rs 15,000 was paid out of which Rs 3,000 is pertaining to the next year. The amount of subscription to be recorded in the Income and
Expenditure Account is Rs 15,000.
Reason (R): The Income and Expenditure Account records all the transactions that are relevant only for the current financial year. 
Answer. Option (D) is correct.

Case-based MCQs

I. Read the following information and answer the questions that follow:

Dr. Rajni Mehta a qualified M.B.B.S. doctor got voluntary retirement at the age of 50 years from a renowned hospital. She was residing in a flat of a wide apartment which is surrounded by a slum which is inhabited by economically weaker strata of the society. As the people in that area were not aware about importance of health care, a widespread ailment had been persistently prevailing. Rajni met with some of the well-off people of apartment and decided to open a dispensary named as ‘LOCAL Clinic’ to provide them cost free medical assistance and make them aware about hygienic living, physical fitness, and economic balance diet. Many of the apartment members agreed to it. She approached health department of the town with her proposal which was accepted and an initial one time grant of Rs 2,00,000 was sanctioned immediately for purchase of medical equipment and test kits for pathological tests. 10 members of the apartment contributed Rs 20,000 each as lifetime subscription to the clinic. Rajni decided to charge Rs 10 as one time registration fee from patients. Apart from above Rajni made following transactions for first year:

Question. Not for profit organization prepares:
(i) Income and Expenditure Account
(ii) Trading and Profit & Loss Account
(iii) Receipt and Payment Account
(iv) None of the above
(A) Only (ii)
(B) Only (iii)
(C) Both (i) and (ii)
(D) Both (i) and (iii)
Answer. Option (D) is correct.

Question. Honorarium paid to physiotherapist and yoga teacher will be posted to:
(A) Debit side of Income and Expenditure Account
(B) Debit side of Receipt and Payment Account
(C) Debit side of Profit and Loss Account
(D) Credit side of Income and Expenditure Account
Answer. Option (A) is correct.

Question. “Donations received by Ms. Rajni Mehta from health department should be capitalized.”
Consider the statement and choose the correct options:
(A) The statement is true.
(B) The statement is false
(C) The statement is partially true.
(D) The statement is incomplete.
Answer. Option (A) is correct

Question. Lifetime subscription paid by 10 members will be posted in:
(A) Expenditure side of Income and Expenditure Account
(B) Liability side of closing Balance Sheet
(C) Income side of Income and Expenditure Account
(D) Assets side of closing Balance Sheet
Answer. Option (B) is correct.

II. Read the following information and answer the questions that follow:

Talent Sports Club is engaged in the activity of identifying and promoting sports talent from rural and tribal areas of the country. Identifying with this noble cause Mr. Manohar, a renowned industrialist donated Rs 50,00,000 on 1st July, 2020, for the construction of a new hostel and mess for upcoming sportsmen.Besides this, Mr. Manohar offered the services of his personal chartered accountant, free of charge, to streamline the accounts of Total Sports Club. The chartered accountant visited the office of the NPO on 31st March, 2021 and found that till date Rs 35,00,000 had been spent on construction of hostel and mess building. He also noted that the NPO had a capital fund of Rs 1,20,00,000 in the beginning of the year. Other important points that he noted were that NPO had 2,000 regular members each having an annual subscription of Rs 2,000 per annum. On 1st April, 2020, 180 members had not paid for subscription of previous year and 20 members had paid for 2020-2021 in advance (out of which 5 had paid advance of 2021- 2022 as well).

On 31st March, 2021, 110 members had outstanding balance (including 50 who had not paid for 2019-20 as well) and 25 members had paid for 2021- 2022 in advance (including all 5 who had paid in advance in 2019-20). Since the accountant of NPO was not clear about how to deal with all the above information he drafted a set of questions for guidance.
Considering that you are the chartered accountant of Mr. Manohar answer the following questions based on the information detailed above. 

Question. The amount of Rs 50,00,000 received from Mr. Manohar towards building and mess should be transferred to:
(A) Capital Fund
(B) General Fund
(C) Income and Expenditure Account
(D) Building Fund
Answer. Option (D) is correct.

Question. The amount of Rs 35,00,000 spent on construction of building should be:
(i) Reflected on debit side of Income and Expenditure Account as an expense.
(ii) Reflected on asset side of balance sheet.
(iii) Reflected as a deduction from Building fund and addition to Capital Fund.
(iv) Not be recorded till the building is complete.
On basis of given information choose which of the following stands true:
(A) Only (iv)
(B) Both (i) and (iv)
(C) Both (ii) and (iii)
(D) None of the above
Answer. Option (C) is correct.

Question. The amount of subscription in arrears on 1st April, 2020 is:
(A) Rs 3,60,000
(B) Rs 3,00,000
(C) Rs 2,000
(D) Rs 1,80,000
Answer. Option (A) is correct.

Question. The amount of subscription in arrears on 31st March, 2021 is:
(A) Rs 2,20,000
(B) Rs 3,60,000
(C) Rs 3,20,000
(D) Rs 1,80,000
Answer. Option (C) is correct.

III. Read the following information and answer the questions that follow:

VIJAYA SHANKAR, an Ex-Indian cricketer decided to start a cricket academy to train the young enthusiastic players of down south.
With the support and guidance of his family he started the Star Cricket Academy at Tirunelveli township area on 1st April, 2020.
Land was donated by his grandfather worth Rs 10,00,000 as per his will for cricket coaching.His father Shankar donated Rs 5,00,000 for the construction and running the academy. He spent Rs 3,00,000 for construction of the pavilion. 200 players of Tirunelveli joined the academy and they paid yearly subscription of Rs 1,200 each. 10 players paid in advance for the next year 2021-22. Vijaya Shankar appointed well experienced coach for them. The coach fee amounted to Rs 1,20,000 p.a.
The maintenance expenses amounted to Rs 75,000. Bats and balls purchased during the year amounted to Rs 15,000. Closing stock of bats and ball amount to Rs 1,000.

Question. The amount of subscription to be credited to Income and Expenditure Account:
(A) Rs 2,00,000
(B) Rs 1,40,000
(C) Rs 2,40,000
(D) Rs 3,00,000
Answer. Option (C) is correct.

Question. The liability towards advance subscription amounted to:
(A) Rs 12,000
(B) Rs 24,000
(C) Rs 1,200
(D) Rs 1,20,000
Answer. Option (A) is correct

Question. What is the primary source of income for the academy?
(A) Subscription
(B) Fund
(C) Donation
(D) All of the above
Answer. Option (A) is correct.

Question. How will you treat the land donated by his grandfather?
(A) To be treated as legacy and is to be capitalized.
(B) To be treated as donation and is debited to Income and Expenditure Account.
(C) To be treated as legacy and shown in the assets side.
(D) To be treated as legacy and is credited to Income and Expenditure Account.
Answer. Option (A) is correct.

Very Short Answer Type Questions 

Question. Name the term used for showing excess of income over expenditure in not-for-profit organizations. 
Answer. Surplus 

Question. Mayank Club received life membership fees from its members. Which type of receipts it is ?
Answer. Capital receipts 

Question. State the basis of accounting of preparing ‘Income and Expenditure Account’ of a not-forprofit organization.
Answer. Accrual basis  

Question. Name the account that shows the summary of cash receipts and cash payments of a not-forprofit organization. 
Answer. Receipts and Payments Account 

Question. What is a fund usually made a non-profit institution, arising from gift, the income of which is devoted to a specified purpose, called? 
Answer. Endowment fund. 

Question. What is the nature of Income and Expenditure Account ? 
Answer. Nominal Account