Accounting Exam Paper 2009 100%work

OBJECTIVE QUESTIONS
true / False.
Non profit making organizations provide services.
Sugar industry is an example of non profit making organizations.
Non profit making organizations are established to earn profit.
Non profit making organizations are also known as non profit seeking organizations.
Treasurer is a person who is elected to run the club.
There is no difference between receipts and payments account and income and expenditure account.
Income and expenditure account is a nominal account.
Receipts and payments account consists of both capital and revenue nature items.
Income and expenditure account contains only capital nature items.
The difference of debit and credit side of income and expenditure account may be surplus or deficit.
Subscription is treated as capital receipt.
Legacy is usually capitalized.
Excess of incomes over expenditures indicates deficit.
Receipts and payments account contain both cash and credit transactions.
Receipts and payments account is a nominal account.
Fill in the blanks.
----------------------- do not buy/manufacture and sell goods.
In non-profit making organizations----------------------- object in not to earn profit.
Non-profit seeking concerns are established for------------------------ of the people.
disclose the true result of a concern.
Receipts and payments account---------------------
Receipts and payments account is a summarized-
receipts and
payments are
In receipts and payments account-------------------
recorded.
Receipts and payments account is an--------------
edition of cash book.
side, whereas
In receipts and payments account receipts are recorded onpayments are recorded on----------------------- side.
and
nature are
Cash receipts and cash payments of both---
transactions are recorded.------------- balance.
recorded in receipts and payments account.
In receipts and payments account only----------------
system.
Receipts and payments account generally shows — Receipts and payments account is not an account within the

Definitions 100% work

THE ACCOUNTS OF NON-PROFIT MAKING ORGANISATIONS

8. LEGACY:
Legacy refers to property received by virtue of a will of a person after his death. Acquisition of such property by an institution is regarded as capital receipt. Hence it will not appear in Income & Expenditure Account. Properties or cash received on account of Legacy is shown on asset side on the balance sheet on one hand and on the other hand it is added to the capital fund account on the liabilities side of the balance sheet.
9. LIFE MEMBERSHIP FEE:
In some institutions one may become a life member by paying a lump sum at a tune - he is not required to pay monthly or annual subscription. So life membership fee is in effect regular subscription paid in advance. The subscriptions collected from the members are utilized for rendering services to them, so it is revenue income. If, however, there is any stipulation in the bye-laws of the institution, it must be observed, if it is stipulated that life membership fee will be regarded as capital income, it cannot be included in income and expenditure account, it will be credited to capital fund account and shown on the liabilities side of balance sheet as an addition to that fund. Again, it may be stipulated that admission fee i$j to be regarded partly as capital and partly revenue.
10. DONATION:
Sometimes institution like Club, Hospital etc. collect donation from members and general pubbcj "Whether such donation is to be treated as capital or revenue depends upon the purpose for which donation is collected. If the donation is collected for any special purpose, it must be treated as capital credited to a special fund account and shown on Liabilities side of Balance Sheet, e.g., Building Fi Charity Fund, Prize Fund etc. On the other hand, if the donation is collected not for any special purpose, i is treated as revenue and credited to Income & Expenditure Account.
11. CAPITAL FUND:
Any concern - whether profit-seeking or non-profit-seeking - requires money for conducting da> day functions. In the case of profit-seeking concerns such money is called Capital, while in the case non-profit-seeking concerns it is called Capital Fund. The excess of total assets over total exte liabilities of a concern is called Capital Fund. Capital Fund is created with surplus revenue and ca; receipts and incomes, such as surplus (excess of income over expenditure). Donation, Life Member Fee, Admission Fee, Profit on Sale of Fixed Assets etc. It is also called General Fund or Accumi Fund or surplus Account. It is shown on Liabilities side of Balance Sheet as the first item. In pare Capital Fund is the capital of a non profit-seeking concern.

Definitions

JOINT STOCK Definitions
5. TRANSFERABILITY OF SHARES:
The shareholders of a company have full freedom to transfer their shares to consulting other shareholders.
6. SEPARATION OF OWNERSHIP FROM MANAGEMENT:
The shareholders, who are the owners of the company, are large in number. They a over the country. Being absentee owners, they cannot manage the affairs of the company. Tr. therefore, elect Board of Directors in the annual general meeting and entrust the mani company to them. The ownership and management of the company are thus in two separate ri
7. STATUTORY REGULATIONS:
A company right from its inception, has to comply with a number of statutory requ also to submit returns and report during its lifetime to the Government.
8. COMMON SEAL:
Since the company is an artificial person created by law, it therefore cannot sign itself. The common seal with the name of the company engraved on it is, therefore, used as its signature.
9. RIGIDITY OF OBJECTS:
In a company form of organization, the objects and powers of the company art memorandum of association of the company. A change in the object and powers of a comp made after complying with the relevant provisions of the Companies Ordinance.
KINDS OF COMPANIES
There are four kinds of companies registered under companies ordinance, 1984. (1) COMPANY LIMITED BY SHARES:
This is the principal form of company which is registered with the registrar of joint under the Companies Ordinance. In a company limited by shares, the capital is divided i shares. A person who buys one or more than one shares becomes a member of the company be freely transferred and sold. The liability of the members is limited to the amount if an shares held by them. A company limited by shares is further divided into (a) private c Public company.
(a) Private Limited Company:
According to the' Companies Ordinance 1984 it can be formed (a) at least by its total membership cannot exceed 50. (b) The company by its articles also rest transfer its shares, (c) It also prohibits any invitation to the public to invest their mo debentures of the company.
(b) Public Limited Company:
It can be formed by at least seven members and there is no limit to the maximum nu limited company invites applications from investors through advertisement in the newspi details of the objects, share capital, method of applying for the procedure to be adopted fo
the shares etc.

Accounting

LEGACY:
Legacy refers to property received by virtue of a will of a person after his death. Acquisition of such property by an institution is regarded as capital receipt. Hence it will not appear in Income & Expenditure Account. Properties or cash received on account of Legacy is shown on asset side on the balance sheet on one hand and on the other hand it is added to the capital fund account on the liabilities side of the balance sheet.
9. LIFE MEMBERSHIP FEE:
In some institutions one may become a life member by paying a lump sum at a tune - he is not required to pay monthly or annual subscription. So life membership fee is in effect regular subscription paid in advance. The subscriptions collected from the members are utilized for rendering services to them, so it is revenue income. If, however, there is any stipulation in the bye-laws of the institution, it must be observed, if it is stipulated that life membership fee will be regarded as capital income, it cannot be included in income and expenditure account, it will be credited to capital fund account and shown on the liabilities side of balance sheet as an addition to that fund. Again, it may be stipulated that admission fee i$j to be regarded partly as capital and partly revenue.
10. DONATION:
Sometimes institution like Club, Hospital etc. collect donation from members and general pubbcj "Whether such donation is to be treated as capital or revenue depends upon the purpose for which donation is collected. If the donation is collected for any special purpose, it must be treated as capital credited to a special fund account and shown on Liabilities side of Balance Sheet, e.g., Building Fi Charity Fund, Prize Fund etc. On the other hand, if the donation is collected not for any special purpose, i is treated as revenue and credited to Income & Expenditure Account.
11. CAPITAL FUND:Any concern - whether profit-seeking or non-profit-seeking - requires money for conducting da> day functions. In the case of profit-seeking concerns such money is called Capital, while in the case non-profit-seeking concerns it is called Capital Fund. The excess of total assets over total exte liabilities of a concern is called Capital Fund. Capital Fund is created with surplus revenue and ca; receipts and incomes, such as surplus (excess of income over expenditure). Donation, Life Member Fee, Admission Fee, Profit on Sale of Fixed Assets etc. It is also called General Fund or Accumi Fund or surplus Account. It is shown on Liabilities side of Balance Sheet as the first item. In prae Capital Fund is the capital of a non profit-seeking concern

Accounting

The following are the characteristics of Income and Expenditure Account:
(1) It is in. fact the Profit and Loss Account of a profit-seeking concern.
(2) All expenses are recorded on Debit side and all revenues on Credit side.
Only revenue transactions are included in it. No capital items is taken into account.
(4) All the items of income/revenue concerning current year — whether received in cash or not
— and all items of expense — whether paid in cash or not — are taken into account. But no, item of income or expense concerning last year or next year is included in it.
(5) Surplus or deficit of a concern is ascertained through this account. Credit balance indicatessurplus, while debit balance indicates deficit.
(6) Its balance is transferred to Capital Fund Account.
(7) It is prepared on the last day of an accounting year..(8) It does not start with any opening balance.
METHOD OF PREPARATION:
The following points are to be noted, while preparing the above account:
1. Surplus or deficit of a fixed period of time is ascertained through this account. So it's heading willbe:
Income and Expenditure Account for the year ended 31.12.2005.
(If the accounting year closes on 31.12.2005).
2. Income and Expenditure Account is a Nominal Account. Hence, only revenue (no capital) items willfind place in it.
3. All items of revenue income and expenditure relating to the .current year will appear in it. In otherwords, all items of income relating to the current year - whether received in cash or not - and allitems of expenditure relating to the current year - whether paid in cash or not - will find place in thisaccount. No itrms of income or expenditure relating to last year or next year will be included in thisaccount.
SOME PECULIAR ITEMS OF A NON-PROFIT SEEKING CONCERNS
1. DEPRECIATION:Depreciation means loss on account of use of an asset or decrease in its value on account of passage of time. Suppose, an almirah is bought for Rs. 1,000. Its value must diminish gradually on account of use -the more it is used, the more will it diminish in value. After sometime it will become unfit for use. Then a new almirah is to be bought. Suppose, the almirah can be used for 10 yrars. In that case the annual loss on account of depreciation will be Rs. 100 (1,000 + 10). It must be debited to Income and Expenditure Account; otherwise the true result cannot be obtained, Similarly, depreciation must be taken into account in respect of all other assets like building, typewriter, furniture etc

The following are the characteristics of Income and Expenditure Account:
(1) It is in. fact the Profit and Loss Account of a profit-seeking concern.
(2) All expenses are recorded on Debit side and all revenues on Credit side.

(3) Only revenue transactions are included in it. No capital items is taken into account.
(4) All the items of income/revenue concerning current year — whether received in cash or not
— and all items of expense — whether paid in cash or not — are taken into account. But no, item of income or expense concerning last year or next year is included in it.
(5) Surplus or deficit of a concern is ascertained through this account. Credit balance indicatessurplus, while debit balance indicates deficit.
(6) Its balance is transferred to Capital Fund Account.
(7) It is prepared on the last day of an accounting year..(8) It does not start with any opening balance.
METHOD OF PREPARATION:
The following points are to be noted, while preparing the above account:
1. Surplus or deficit of a fixed period of time is ascertained through this account. So it's heading willbe:
Income and Expenditure Account for the year ended 31.12.2005.
(If the accounting year closes on 31.12.2005).
2. Income and Expenditure Account is a Nominal Account. Hence, only revenue (no capital) items willfind place in it.
3. All items of revenue income and expenditure relating to the .current year will appear in it. In otherwords, all items of income relating to the current year - whether received in cash or not - and allitems of expenditure relating to the current year - whether paid in cash or not - will find place in thisaccount. No itrms of income or expenditure relating to last year or next year will be included in thisaccount.
SOME PECULIAR ITEMS OF A NON-PROFIT SEEKING CONCERNS
1. DEPRECIATION:Depreciation means loss on account of use of an asset or decrease in its value on account of passage of time. Suppose, an almirah is bought for Rs. 1,000. Its value must diminish gradually on account of use -the more it is used, the more will it diminish in value. After sometime it will become unfit for use. Then a new almirah is to be bought. Suppose, the almirah can be used for 10 yrars. In that case the annual loss on account of depreciation will be Rs. 100 (1,000 + 10). It must be debited to Income and Expenditure Account; otherwise the true result cannot be obtained, Similarly, depreciation must be taken into account in | respect of all other assets like building, typewrite

THE ACCOUNTS OF NON - PROFIT MAKING

What Non-Profit Making Organizations are?
People Join together for a number of reasons in voluntary organization: for mutual entertainment, for protection, or for professional reasons. There are sports clubs, trade unions, consumer societies, political associations, and many more. The degree of richness of any society lies partly in the variety of the voluntary organization it promotes.
Non-profit making organization are those, which do not buy/manufacture and sell goods and whose primary object is not to earn profit. Their object is to do good to the society through welfare activities; e.g. clubs, schools, colleges, Hospitals, Libraries etc.
From the book-keeping point of view the aim of such organizations is the pursuit of some interest other than financial benefit, so these may be termed as Non-Profit making Organizations. Although these organization are not meant for profit earning, yet organizations of this sort must have funds to promote their activities, and these funds must be honestly accounted for. For example in case of a club, the official elected for this purpose is called the "Treasurer", one of the key figures on the committee which is elected to run the club. The others are the secretary, responsible for organizing the club's activities, and the chairperson, or president, who controls the meetings.
The treasure's functions are to collect subscriptions, disburse such funds as are needed in the course of the activities, and report to the members when required, but especially at the annual General Meeting — an important occasion in the club's life. At this meeting the activities of the club are reviewed, criticisms are voiced, or praise is accorded the committee.
How Activities are accounted for? — An example of a club
Clubs rarely keep a full set of Ledger Accounts, but some clubs are very large indeed and need just as huge an organization as any other large scale business. Such huge organizations can hardly conduct their affairs with a simple Cash Book, yet many club treasurers in small clubs do exactly’ that, while bigger clubs usually have just a Cash Book with analysis columns. This analytical Cash Book is a basic club record or "book of original entry. But most of the clubs maintain a simple Cash Book as by business concerns.
In this type of book the treasurer keeps a record of all sums received and paid; and analyses them into various sub-headings as he goes along. All cash transactions are first recorded in the Cash Book, then posting is made into the Ledger and Finally Trial Balance is prepared. Rest of the transactions arc entered in General Journal. Now see how we record the transactions of a club in the books of accounts and prepare Final Accounts at the end.