UNIT II
Final Accounts of Charitable Trust
Q1) Define Non-Profit Organizations.
A1) A non-profit organization is an organization established as a charity that is used for the welfare of society and functions for no commercial purpose. Their main purpose is to serve a particular group or the general public. Generally, they do not manufacture, buy, or sell merchandise and may not engage in margin trading. Therefore, they do not need to maintain many books and trading and P & L accounts (as trading concerns do). Funds raised by such organizations are credited to the Capital Fund or the General Fund. Their main sources of income are usually donations from members, grants and income from investments. Main purpose
Keeping records in such organizations is to meet statutory requirements and assist them in managing the use of funds. You will also need to prepare financial statements at the end of each accounting period (usually the fiscal year), review your income and expenses, and your financial position and submit them to a statutory authority called a social registrar.
Q2) What are the main characteristics of non-profit organization?
A2) The main characteristics of such an organization are:
1. Such organizations were established to serve specific groups or the general public, such as education, medical care, recreation and sports, without regard to caste, beliefs or colours. Its sole purpose is to provide the service for free or for a small fee, not for profit.
2. These are organized as public interest trusts / associations, and the members of such organizations are called members.
3. Their work is usually managed by a management / executive committee elected by their members.
4. The main sources of income for such organizations are (i) subscriptions from members, (ii) donations, (iii) heritage, (iv) grants, and (v) income from investments.
5. The funds raised by such organizations through various sources are redited to capital or general revenue.
6. Surpluses generated in the form of income in excess of expenditure will not be distributed among members. It is simply added to the capital stock.
7. Non-profits do not gain a reputation based on their contribution to social welfare Customer or owner satisfaction.
8. The accounting information provided by such organizations is intended for current and potential contributors and is intended to meet statutory requirements.
Q3) How do you view your subscription amount on your non-profit balance sheet from the following Receipt and Payment accounts and additional information?
Receipt | Rs. | Payment
| Rs. |
To subscription
| 25,000 |
|
|
Additional Information:
A3) Start of Balance Sheet
Liabilities | Rs. | Assets
| Rs. |
Pre-subscription (previous year) out. | 1,000
1,000 ________ 2,000 | Subscription (previous year)
| 2,000
________ 2,000 |
Closing the Balance Sheet
Liabilities | Rs. | Assets
| Rs. |
Advanced Subscription (Next Year)
|
1,200
1,200 | Unprocessed Subscription (This Year) Unpaid subscription (previous year)
|
1,500 2,000
3,500 |
Q4) Calculate sports material debited to Income & Expenditure a / c. Yearly. It ended on March 31, 2007, based on the following information. The amount paid for sports material during the year. It was Rs.19,000
|
A4)
Option 2. Rs.20700
Description: Amount debited to income and expenditure as consumption of sports materials = payment amount + starting inventory-ending inventory-starting creditor + ending creditor. Amount debited to income and expenses = 19000 + 7500-6400-2000 + 2600 = Rs. 20,700
Q5) The non-profit has received Rs.10,000 as an admission fee for new members. If 20% of the fee needs to be capitalized, what is the amount of the fee that needs to be displayed in the balance account?
A5) Option 2 Rs.8000
Description: These are the fees collected from all members upon enrolment in membership. Once you become a member of society or a club, you will only be paid once by new entrants. It is treated in two ways: -when capitalized, it appears on the debt side's balance sheet. -If it is considered a receipt for income, it will be displayed in the income and expenditure account on the income side. Therefore, Rs. 20% means Rs. 2000 (10,000 * 20%) appears on the balance sheet on the debt side and the balance of Rs. 8000 is displayed in the income and expenditure account on the income side.
Q6) Prize Rs.10000, Prize Investment Interest Rs.1000, Prize Payment Rs.2000, Prize Investment Rs.8000. What will happen to that treatment?
A6)
Option 4. Rs.9000, Rs on the debt side. 8000 on the asset side
Description: The balance sheet calculation looks like this: -Prize-9000 Addition: -Interest 1000 deduction for prize investment: -Prize payment 2000 Debt side amount = Rupee. 9000 prize investment Rs. 8000 is displayed on the asset side.
Q7) Bell, a non-governmental non-profit organization, received special pledged funding from a donor to another non-governmental non-profit medical organization during its annual campaign. How does Bell need to record these funds?
A7)
Option 2. Increased assets and increased liabilities
Description: Bell, a non-governmental NPO, is responsible for the funds for the annual campaign and is recorded on the balance sheet. And if the organization pledges this fund to another non-governmental NPO, it becomes a property of the Bernon government. Organisation recorded on the asset side of the balance sheet.
Q8) From the information below, we will calculate the amount of stationery that will be posted to the Income and Expenditure account of the Cultural
Association of India for the year ending March 31, 2018.
Details Stationery inventory Stationery creditors | 1.4.2017 (Rs.) 21,000 11,000 | 31.3.2018 (Rs.) 18,000 23,000 |
Stationery purchased in the year ended March 31, 2018 was Rs 75,000. Also, please present relevant items on the social balance sheet as of March 31, 2018.
A8)
Stationery Account
Dr. |
|
| Cr.
|
Details | Rs. | Details | Rs. |
To Balance b / d | 21,000 | By income and expenditure in balance A / c | 78,000 |
To Bank balance | 75,000 | Balancing figure |
|
|
| By balance c / d
| 18,000
|
| 96,000 |
| 96,000 |
Balance sheet as of March 31, 2018
Liabilities | Amount | Assets | Amount |
Stationery Creditors | 23,000 | Stationery Inventory | 18,000 |
Q9) From the information below, we will calculate the amount of the subscription that will be credited to the 2007-2008 balance account.
Amount | |
Subscriptions received for year | 50,000 |
Outstanding subscriptions on March 31, 2007 | 20,000 |
Unprocessed subscriptions on March 31, 2008 | 6,000 |
Subscriptions pre-received on March 31, 2007 | 8,000 |
Subscriptions received in advance on March 31, 2008. The 2006-07 delinquency is still 1,500. | 9,000
|
A9)
Particulars | Amount |
Subscriptions received for year | 50,000 |
(+) March 31, 2008 Unprocessed Subscriptions (6,000 – 1,500) | 4,500 |
(+) Subscriptions received in advance on March 31, 2007 | 8,000 |
(-) Subscription received in advance on March 31, 2008 | (9,000) |
(-) Unprocessed subscriptions on March 31, 2007 (20,000 – 1,500) | (18,500)
|
Revenue from 2007-08 subscription | 35,000 |
Q10) Find out the cost of drugs consumed in 2015-16 from the following information:
Particulars | Amount (Rs) |
Purchase price of medicine | 3,70,000 |
Creditors of purchased medicines April 1, 2015 March 31, 2016 | 25,000 17,000 |
Drug inventory April 1, 2015 March 31, 2016 |
62,000 54,000 |
Pre-pharmaceutical supplier April 1, 2015 March 31, 2016 |
11,500 18,200 |
A10)
Particulars | Amount |
Payment for drug purchase | 3,70,000 |
(-) Decrease in drug creditors in 2016 (25,000 – 17,000) | (8,000) |
(-) Increase in drug advance payments in 2016 (18,200 – 11,500) | (6,700) |
2016 drug purchase | 3,55,300 |
(+) Starting inventory of pharmaceutical products on April 1, 2015 (-) End of stock of pharmaceutical products on March 31, 2016 | 62,000 (54,000) |
= Medicines consumed in 2016 | 3,63,000 |
Q11) From the following receipt and payment accounts for the Cricket Club and the additional information provided, prepare the balance sheet for the year ending December 31, 2018 and the balance sheet for that date.
Receipt and Payment Accounts
Year ending December 31, 2018
To bal b/d | Rs. |
| Rs. |
- Cash | 3,520 | By Maintenance | 6,820 |
-Bank | 27,380 | By tableware | 2,650 |
-Time deposit @ 6% | 30,000 | By Match cost | 13,240
|
To subscription (2017 including Rs 6000) | 40,000 | By salary
| 11,000 |
To admission | 2,750 | By Transportation | 820 |
To Donation | 5,010 | By maintaining the lawn | 4,240 |
To Interested in time deposit | 900 | By Stamps | 1,050 |
To Tournament Fund | 20,000 | By purchasing cricket products | 9,720 |
To Sale of tableware (book value Rs. 1200) | 2,000 | By Miscellaneous expenses
| 2,000 |
|
| By Investment | 5,700 |
|
| By Tournament costs | 18,800 |
|
| By Balance c / d: -Cash -Bank |
2,200 23,320 |
|
| Time deposit | 30,000 |
| 1,31,560 |
| 1,31,560
|
Additional Information:
A11)
Cricket Club Income and Expenditure Account
Year ended December 31, 2018
Expenditure | Rs. | Income | Rs. |
| ||
To Maintenance | 6,820 | By Subscription | 40,000 |
| ||
To transport | 820 | less: Rec. Last year | 6,000 |
| ||
To Lawn Maintenance | 4,240 | Add: untreated this year | 8,000 | 42,000 | ||
To match cost | 13,240 | By Admission fee | 2,750 | |||
To Salary | 11,000 |
| By Donations | 5,010 | ||
Add: Outstanding |
1,000 |
12,000 | By Interest on time deposits |
900 |
| |
To Postage stamps: |
| Added: Unpaid due | 900 | 1,800 | ||
Balance at the beginning |
750 |
| By Gain on sale of tableware (2000-1200) |
800 | ||
Add: Purchase | 1,050 |
|
|
|
| |
Less: Closing Inventory |
(900) |
900 |
|
|
| |
To cricket goods: |
|
|
|
|
| |
Beginning balance Added: Buy Less: Closing price
|
3210 9720 (2800) |
10,130 |
|
|
| |
To miscellaneous expenses | 2,000 |
|
|
| ||
To income that exceeds expenditure (Bal Fig) |
2,210
|
|
|
| ||
| 52,360 |
| 52,360 | |||
Balance sheet
As of December 31, 2018
Liabilities | Amount | Assets | Amount | ||
Tournament Fund Less: Tournament costs | 20,000
18,800 |
1,200 | Cash Bank Time deposit Investment
| 2,200 23,320 30,000 5,700 | |
Unpaid salary |
| 1,000 | Crockery
| 2,650 | |
Capital (balance Fig) Added: Surplus | 72,660
2,210 |
74,870 | Interest accrued on time deposit | 900 | |
|
|
| Subscription expiration date 2017 (6600-6000) 2018 |
600 8000 |
8,600 |
|
|
| Stamps and stationery |
900 | |
|
|
| Cricket product inventory |
2,800 | |
| 77,070 |
| 77,070 |