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Principles Of Accounting
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Difference between receipts and payments account and incomes and expenditure account. Receipts and payments account 1 It is the cash book prepared by a non 1 trading concern 2 It records all receipts and payments of 2 cash and cheque only 3 It records receipts and payments without considering whether for current year or previous year or for next year 4 The balance in this account is either cash in hand or cash at bank or balance of bank overdraft 4 The balance in this account represents surplus or deficit 3 Income and expenditure account It is the profit and loss account prepared by non trading concern It records only incomes and expenditures during the current year It records incomes and expenditures relating to the current year only
Trading account Some non trading organizations do carry out regular trading activity, but this is not the main purpose of the organization. Many clubs and societies have a caf, a shop, a bar and so on, where goods are bought and sold. A trading account should be prepared for each trading activity in order to calculate the gross profit or loss earned. The gross profit or loss of a trading activity of a non trading concern is transferred to the income and expenditure account. If it is gross profit, it is shown as income and if it is gross loss, shown as expenditure in the income and expenditure account. Key points Accumulated fund on the opening date = total assets on the opening date total liabilities on the opening date. It can be calculated by preparing an opening statement of affairs (balance sheet format) on the opening date, as a balancing figure. While preparing the trading account of bar or any other trading activity, if the purchase figure is not given, it can be calculated as:Purchases = closing creditors + payments to creditors opening creditors.
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The profit or loss as a result of sale of a fixed asset should be shown as income(if profit ) or expenditure( if loss) in the income and expenditure account. Usually the depreciation on fixed assets will be calculated by comparing the opening and closing values. The surplus is added with accumulated fund and deficit is deducted from accumulated fund. The stock items from trading activity are shown as current assets in the balance sheet. The subscription is one of the most important incomes for a non trading concern. It may be given as a single amount or separately for three years(for last year, this year and next year) If it is given as a single amount, to find out the amount of subscription to be shown in the income and expenditure account, use the following formula:
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MCQ 1. What does a credit balance of income & expenditure account show at the end of a year? A. Surplus B. Loss C. Deficit D. Gross profit 2. The name of the account prepared by a non trading concern to calculate the balance of or balance at bank is called : A. bank account C. income & expenditure account B. bank statement D. receipts and payments account. cash
3. The difference between total assets and total liabilities of a club is known as : A. capital B. working capital C. accumulated fund D. total capital
4. The subscription details of a club are given below:Received during the year Subscription in advance on 1-1-2003 Subscription in advance on 31-12- 2003 $ 1080 $ 300 $ 50
What amount will be entered in the income & expenditure account for the year ended 31st Dec 2003? A. $ 1330 B. $ 830 C. $ 1080 D. $ 1380
5.The following details are available: Subscription arrears on 1-1-2003 Subscription received during the year Subscription in advance on 31-12-2003 Subscription in advance on 1-1-2003 $ 200 $ 2080 $ 150 $ 300
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A. $ 3180 B.$1880 C. $2030 D. $2230 6. Which should be considered as capital receipt of a club? A. Donation B. Sale of news paper
What is the amount to be shown in the income & expenditure account for the year ended 31st Dec 2003?
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B. Sale of Furniture
7. Which of the following items will not appear in the balance sheet of a club? 1. Subscription received for the current year. 2. Subscription received for the next year. 3. Subscription outstanding during the year. 4. Insurance prepaid 8. How are the subscriptions paid in advance recorded in a clubs balance sheet? A. A current asset. C. A fixed asset. B.A current liability. D. Added to accumulated fund.
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9. Which of the following will not be entered in income & expenditure account? A. Sale of old news paper. C. Payment of honorarium. B. Loss on sale of an asset. D. Amount received from sale of Furniture. 10. The following information is available from the books of club for the year ended 31st Dec 2003:Stock of stationery on 1-1-2003 Creditors for stationery on 31-12-2003 Stock of stationery on 31-12-2003 $ 600 $ 260 $ 100
Amount paid for stationery during the year 2003 $ 1260 What amount on account of stationery will be entered to income & expenditure account A. $ 2160 B. $ 2920 C. $ 2020 D. $ 2660
Incoming search terms: Accounting for clubs and societies accumulation fund income expense account clubs bookkeeping Club revenues club expenditures surplus and deficit as well as accumulated funds mcq for accounts of non trading organisations principles of accounts clubs and societies
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