CBSE Class 12: Accountancy - Chapter 1: Not For Profit Organisations (NPOs) - Questions and Answers - (Part 1) (#eduvictors)(#class12Accountancy)

Chapter 1: Not For Profit Organisations (NPOs) 

Questions and Answers - (Part 1)

CBSE Class 12: Accountancy 

Q1: What is a Not For Profit Organisation (NPO)?

Answer: NPO's are voluntary organisations founded with objective of promoting art, culture, education and other social and charitable purpose without any intention of earning profit. They work for self interest.

e.g. Hospitals,colleges,schools,universities,religious organisations, culture institutions, professional accounting bodies i.e. ICAIICSI etc are generally run by NPOs.


Q2: What are the salient features of NPOs?

Answer:
   (i) Service motive
   (ii) Profit is not the criterion.
   (iii) Surplus not distributed among its members.
   (iv) Separate entity.
   (v) Unique names connect their working.
   (vi) Managed by elected persons.
   (vii) Major funds in the form of contribution and donations, etc.


Q3: Distinguish between Not for Profit Organisation and Profit Organisation.



Answer:

Feature	NPO	Trading Organisation
Main Objective	To serve community interest	To earn profit
Ownership	NPO subscribers	Proprierters Of Business
Funds	Receives capital funds in form of subscriptions, donations etc.	Receive funds as capital from partners, owners etc.
Final Accounts	Receipt and Payment a/c, income and expenditure a/c and balance sheet.	Includes Trading a/c, profit and loss a/c and balance sheet.
Result	The net result of the activities of such entities is known as the surplus/deficit	The net result of the activities of such entities is known as the profit/loss.
Distribution of Profit	Surplus or deficiet is not distributed among members, instead it is adjusted in capital fund.	Profit or loss is distributed among owners.

Q4: State the primary motive of not-for-profit organization.

Answer: To provide services.

Q5: Define Subscription.

Answer: It is the amount paid by the members periodically so that their membership service alive.

Q6: Give two main sources of income of a “not- for-profit organization.” 

Answer: Subscriptions and membership fee are two sources of income of a not-for-profit organization.

Q7: Write the differences between receipts and payment account and income and expenditure a/c or features of receipts and payment account and income and expenditure account.

Answer: 

Receipts and payment Account	Receipts and payment Account
1. It is prepared on the basis of cash book	1. It is like Profit & Loss a/c i.e. It is a Nominal a/c
2. It is real account.	2. It follows accrual basis of accounting.
3. It records all types of transactions whether revenue or capital nature and relates to any year	3. It records only revenue transactions related to current year only i.e. after adjustments
4. It follows cash basis of accounting.	4. It does not have an opening balance i.e. follows accrual basis accounting.
5. It starts with the opening balance of cash and bank and ends with closing balance of cash and bank	5. It does not have an opening balance. At the end it shows the surplus i.e. excess of income over expenses or deficit i.e. excess of expenses over income

Q8: What is endowment?

Answer: Endowment is a donation with a condition by the donor to use only the income earned from investment of such fund for the specified purpose so that the original donated amount remain intact.


Q9: State the basis on which Receipts and Payments Account is prepared.

Answer: Cash basis


Q10: State the nature of Receipts and Payments A/c.

Answer: Real Account.


Q11: Define Honorarium.

Answer: Honorarium is a payment made to a person who has voluntarily undertaken a service which would normally command a fee. It is an expression of gratitude rather than a payment for the receivers.


Q12: Write differences between between receipt and payment a/c and cash book.

Answer:

Receipt and Payment account	Cash book
1. It is prepared by not for profit organisation.	1. It is prepared by all the organisations
2. It is prepared on the basis of cash book.	2. It is prepared on the basis of source documents/vouchers.
3. It is prepared at the end of accounting year.	3. It is recorded on daily basis.

Q13: What is the nature of Income and Expenditure Account ? 

Answer: Nominal Account.


Q14: List the the books of accounts generally maintained by every Not-for-Profit Organization?

Answer:
(i) Cash book
(ii) Ledger
(iii) Member’s Register
(iv) Register of Assets


Q15: (a) Define subscription.
(b) What is its treatment in 
     (i) income and expenditure account
     (ii) balance sheet

Answer:
(a)  It is the preiodical amount paid/ contributed by the members at regular interval. It will be treated as revenue receipt.
(b) (i) As an income
     (ii) Outstanding as an asset and advance received as a liabilities.


Q16:  Where is specific donation received shown in the final accounts of a not-for-profit organization? 

Answer. Specific donation is not shown in Income and Expenditure Account. It is shown on the liability side of the balance sheet and the amount spent is deducted from the donation amount.


☛See Also:
Accountancy Sample Question Paper (2015)
Accountancy Sample Question Paper with Marking Scheme (2016)
Accountancy Sample Question Paper (2017-18)
Accountancy Sample Question Paper + Marking Scheme (2018-19)
Accountancy Sample Question Paper (+ MS) Set -1 (2019-2020)
Accountancy Basics of Partnership (Short Q & A)