Accounts

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(Part 1) (Chapter - 1) (Accounting for Not-for-Profit Organisation)
(Class 12)
Question 6:
Show the treatment of items of Income and Expenditure Account when there is a specific fund for those items.
CAnswer 6:
Specific fund can only be used for the specific purpose for which they are received. For example, if donation is
received for construction of buildings, then this donation is a specific donation and thereby can only be used for
construction of the building.
Treatment:
Specific receipts are considered as liabilities to the NPO as these amounts are received for specific purpose and
cannot be used for any other purpose. These are shown on the Liabilities side of the Balance Sheet, until and unless
they are completely set off against the purpose for which they are received. If such amount is invested in the form
of shares, debentures etc., then these are called funds like match fund, prize fund etc. The interest and income
earned are credited to the respective Fund Account and not in Income and expenditure account. Similarly, the
expenses incurred for such funds are not debited to the Income and Expenditure Account but are debited to the
respective Fund Account. If the related expenses exceed the related receipts of the fund, then the difference is
shown in the income and Expenditure Account.
Balance Sheet
Liabilities Amount (?) Assets Amount (?)
Specific Fund (i.e. Tournament, Tournament Fund Investment
Match, Prize Fund, etc.)

Income and Expenditure A/c

Expenditure Amount (?) Income Amount (?)
Expenses
(i.e. Tournament, Match, Prize
Expenses etc. except capital
expenditure like, i.e. expenses on
construction of building)

Question 7:
What is Receipt and Payment Account? How is it different from Income and Expenditure Account?
CAnswer 7:
Receipt and Payment Account is prepared at the end of the accounting year on the basis of cash receipts and cash
payments recorded in the cash book. It is a summary of cash and bank transactions under various heads. For
example, subscriptions received from the members on different dates which appear on the debit side of the cash
book, shall be shown on the receipts side of the Receipt and Payment Account as one item with its total amount.
Similarly, salary, rent, electricity charges paid from time to time as recorded on the credit side of the cash book but
the total salary paid, total rent paid, total electricity charges paid during the year appear on the payment side of the
Receipt and Payment Account. Thus, Receipt and Payment Account gives summarised picture of various receipts
and payments, irrespective of whether they pertain to the current period, previous period or succeeding period or
whether they are of capital or revenue nature. It may be noted that this account does not show any non-cash item
like depreciation. The opening balance in Receipt and Payment Account represents cash in hand/cash at bank
which is shown on its receipts side and the closing balance of this account represents cash in hand and bank balance
as at the end of the year, which appear on the credit side of the Receipt and Payment Account. However, if it is
bank overdraft at the end it shall be shown on its debit side as the last item.

Basis of distinction Income and Expenditure Receipt and Payment Account

Nature It is like as profit and loss It is the summary of the cash account.
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