2nd year accounting Notes for I.Com Part II Non Trading Concern Chapter 1

CHAPTER NO.1                                           NON TRADING CONCERN

1.What is meant by non trading concerns?  Individuals or institutions with activities other than trade and their primary object is not to earn profit are known as non trading concerns. Like hospitals, libraries and colleges. 2.  What is receipt & payment account? A receipts & payments account is summarized cash book for given period. Receipts are shown on the debit side and payments are shown on credit side without any distinction between capital and revenue. 3.      What is income and expenditure account? The account through which surplus or deficits of a non trading concern is ascertained. This account is credited with all earning and debited with expenses is called income and expenditure account.4.   What is major difference between receipts or payment account and an income and expenditure account? 

Receipts and payments account only a summary of the cash transactions whereas income & expenditure accounts a comparable account of a profit and loss account which shows the incomes expenses and surplus / deficit for the period. 5.   What are key statements prepared in accounts of non profit seeking organization?

The following three key statements are prepared at the end of year

• Receipts and payments accounts
• Income and expenditure accounts (Profit and loss account)
• Balance sheet

6.      What are key statements prepared in accounts of profit seeking organization?

The following key statements are prepared at the end of year

• Trial Balance
• Trading  and Profit & loss account
• Balance sheet

7.      Define legacy?

The amount given to a non trading concern as per the will of deceased person is known as legacy. It should be treated as capital receipts and included capital fund account.8.  Define donations?

Donation is the amount received from some person, firm, company or any other body by way of gift.

if donations are for specified purpose then it should be treated as capital expenditures and otherwise credited to income and expenditure account 9.      What is subscription?

The amount paid by the member annually to keep their membership alive is known as subscription.

It should be credited to income and expenditure account.

10.  What is special subscription?It is the special subscriptions collected form the members who participate in a particular activity because of the cost involved in providing these may vary considerably.  It should be credited to income and expenditure account.11.  Define life membership fee? This is a system where by a member pays a lump sum and then becomes a member of the whole life. Life member not required to pay the annual membership fees. As life membership fees is a substitute for annual membership fees only fair portion is to considered in income and expenditure account. If not mentioned treat all the amount.

12.  Define entrance fees?At the time of admission every new member is to pay specific fee in addition to subscription called entrance fees. It should either treat as capital or revenue receipts but normally treat as revenue receipts 13.  What is sale of news paper? As the old newspaper or magazines and other things are disposed off every year, It should be credited in income and expenditure account 14.  Define sale of sports material? Sale of sports material is a regular function of club, It should be credited in income and expenditure account 15.  What is capital fund? The difference between total assets over total external liabilities in case of non trading concern is called capital fund. It should not considered in income and expenditure account 16.  What is honorarium?

The amount paid to the person who is not the employee of the organization is said to be honorarium person may be invited to deliver lectures or artists may be invited to give their performance

It should be debited in income and expenditure account