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1. Which of the following is generally considered as a not for profit organization?
A) Charitable organization
B) Corporation
C) Audit firms
D) Insurance companies
Charitable organizations are generally considered as a not for profit organization. So, option (A) is correct
2. Not-for-profit organizations prepare all of the following accounts except the
A) Receipts and payment accounts
B) Income and Expenditure accounts
C) Balance sheet
D) Income statement
Not-for-profit organizations normally prepare, Income and Expenditure accounts & Balance sheet but do not prepare Income Statement. So, option (D) is correct
3. Expenditures greater than incomes of a not-for-profit organization give rise to a
A) Loss
B) Profit
C) Surplus
D) Deficit
Expenditures greater than incomes of a not-for-profit organization give rise to Deficit . So, option (D) is correct
4. Rent expense of a not-for-profit organization paid in advance. Which of the following is the correct classification of rent?
A) Expense
B) Liability
C) Equity
D) Asset
Rent paid in advance by a not-for-profit organization would be treated as Advance. So, option (D) is correct
5. Advance receipt of subscription from a member of the not-for-profit organization is considered as
A) Income
B) Liability
C) Equity
D) Asset
Advance receipt of subscription from a member of the not-for-profit organization is considered as Liability. So, option (B) is correct
6. Which of the following is to be recorded in an income and expenditure account?
A) Purchase of a fixed asset
B) Capital expenditure incurred on a fixed asset
C) Profit on the sale of a fixed asset
D) Sale of a fixed asset
Profit on Sale of Fixed Asset is recorded in an income and expenditure account. So, option (C) is correct
7. Honorarium paid by not-for-profit organization to non-employee is treated as :
A) It’s a revenue expenditure
B) It’s a Capital expenditure
C) It is not recorded in the books of accounts
D) None of the above
Honorarium paid by not-for-profit organization to non-employee is treated as Revenue Expenses.
So, option (A) is correct
8. The capital of a not-for-profit organization is generally known as
A) Equity
B) Accumulated fund
C) Cash fund
D) Financial reserve
The capital of a not-for-profit organization is generally known as Accumulated fund. So, option (B) is correct.
9. When Cash is received for life membership, the entry is :
A) Cash Debit and capital Credit
B) Life membership Debit and cash Credit
C) Investment Debit and cash Credit
D) Cash Debit and life membership fund Credit
When Cash is received for life membership, the entry is Cash Debit and life membership fund Credit. So, option (D) is correct.
10. XYZ club runs a Bar that maintains a separate trading account for its trading activities. Profit & Loss of Bar for Trading activities is :
A) Profit or loss is directly shown in the balance sheet
B) Profit or loss is to be presented in income and expenditure account
C) Profit and loss is credited in income statement
D) Profit or loss is added to accumulated fund
XYZ club runs a Bar that maintains a separate trading account for its trading activities. Profit & Loss of Bar for Trading activities is to be presented as in income and expenditure account. So, option (B) is correct.
11. Which of the following is the accounting equation for a not-for-profit organization?
A) Asset = Capital + Liabilities
B) Capital + Liabilities = Assets
C) Accumulated fund + Liabilities = Assets
D) Liabilities = Asset + Accumulated fund
Accounting equation for a not-for-profit organization is Accumulated fund + Liabilities = Assets. So, option (C) is correct.
12. Subscription received but not yet earned is considered as
A) Asset
B) Liability
C) Income
D) Expenditure
Subscription received but not yet earned (received in advance) is considered as Liability. So, option (B) is correct.
13. A not-for-profit organization received Rs.10,000 as the entrance fee of a new member. If 20% of the fee has to be capitalized, what is the amount of fee needs to be shown in the income and expenditure account?
A) Rs.2000
B) Rs.8000
C) Rs.9000
D) Rs.10,000
2000 (20% of 10000) is Capitalised and Balance 8000 is treated as Income. So, option (B) is correct.
14. Rs.10,000 received as the annual membership subscription. Out of this, Rs.2000 is pertaining to the previous accounting period whereas Rs.1000 is receivable at the end of the current accounting period. Calculate the amount of subscription that will be shown in the income and expenditure account for this accounting.
A) Rs.10,000
B) Rs.9000
C) Rs.12,000
D) Rs.8000
Subscription treated as Income = 10000 (received) + 1000 (receivable) – 2000 (previous year). So, option (B) is correct.
15. Balance Sheet of a not-for-profit organization (like charitable hospital) doesn’t contain
A) Assets
B) Building
C) Debts
D) Owner’s equity
The Balance Sheet of a not-for-profit organization normally doesn’t contain Owner’s equity. So, option (D) is correct.
16. Income and expenditure accounts show
A) Cash available to an organization
B) Closing capital of an organization
C) Cash available in the bank account
D) Surplus or deficit for the current accounting period
Income and expenditure accounts show Surplus or deficit for the current accounting period. So, option (D) is correct.
17. On what basis the receipts and payments account is prepared?
A) Cash basis
B) Accrual basis
C) Both accrual and cash basis
D) None of the above
In Not-for-Profit organisation, Receipts and Payments account is prepared on Cash Basis. So, option (D) is correct.
18. Investment in sinking fund by a not-for-profit organization is
A) Liability
B) Accumulated fund
C) Asset
D) Equity
Investment in sinking fund by a not-for-profit organization is treated as Asset. So, option (C) is correct.
19. In not-for-profit accounting, the sale of old newspapers is treated as
A) Expenses
B) Expenditure
C) Income
D) Capital receipt
Sale of old newspapers is treated as Income. So, option (C) is correct.
20. Which of the following is a distinguishing characteristic of a not-for-profit organization?
a.Its revenues do not exceed its expenses
b.There is no ownership interests that can be sold, transferred, or redeemed
c.It does not depreciate its capital assets
d. It does not charge fees for any of its services In not-for-profit, there is no ownership interests that can be sold, transferred, or redeemed
