NPOS Flashcards

1
Q

What Is Non-Profit Organisation?

A

It is an organization which provide facilities for their members. Profit
maximization is not their main objective. They make profit or surplus but that is invested back into the club to
improve its services.

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2
Q

Key Differences Between Profit-Making Organisation and Non-Profit Organisation?

A

Income Statement-Income and Expenditure Account
Bank- Receipts and Payments Account
Revenue- Subscriptions Income
Capital/Equity-Amount invested by owners in business
Accumulated Fund-It is Surplus which piles up over number of years club has been operating
Profit For Year Surplus/Excess of Income over Expenditure
Loss For Year Deficit/Excess Of Expenditure over Income

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3
Q

Subscriptions:

A

Members pay it to avail club’s goods or services. This generates revenue for Club and is
primary source of income for club.

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4
Q

Life Membership Subscriptions:

A

without having to worry about annual subscription payments.
Thus, life
membership income will be spread over its duration and each year income belonging to respective year will
be taken as income. Remaining amount of life membership will be added to Accumulated Fund. This is done
as per accruals/matching concept.Also as per prudence concept Surplus will not be overstated.

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5
Q

revenue reciepts of donations

A

Will be debited to receipts and payments account while being credited to income.
Also if donation is for day-to-day expenses then will also be treated as revenue receipt.

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6
Q

Capital Receipt:

A

Donations with strings attached
such as buying freehold premises, use for annual sports event only etc. They will be credited to accumulated fund. It is usually deferred income/prepaid income if money is to be used in another
accounting year.As per accruals/matching concept income earned during accounting year should be
recorded in Income and Expenditure A/C and not just received. Moreover, as per prudence concept
surplus or income should not be overstated

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7
Q

Receipts And Payments Accounts Vs Income and Expenditure Account:

A
  • Shows increase or decrease in cash Shows Surplus or Deficit
  • Prepared on Cash Basis-Receipts and payments irrespective of current accounting year.
    Prepared on Matching concept/accrual
    basis.Incomes and Expenditures relate to current accounting year.
  • Only cash transactions Includes non-cash transactions such as
    depreciation, gain or loss on disposal, provision for doubtful debts
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8
Q

Donations Vs Subscriptions:

A
  • Not compulsory to pay Mandatory for members to pay
  • Members as well as non-members Only members
  • Irregular payment Regular payment such as monthly or annual
    basis.
  • Can be obligated by donor for specific purpose such as buying freehold premises only
  • Used For payment of day-to-day expenses of club
  • Can be capitalized if specific donation Only be treated as income
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