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CA Foundation · Accounting · Financial Statements of Not-for-Profit Organisations

A club's Receipts and Payments Account shows 'Entrance fees received ₹30,000' and 'Sale of old newspapers ₹2,000'. The club treats entrance fees as a capital receipt. Which statement is correct about the treatment of these items when preparing the Income and Expenditure Account?

Entrance fees treated as a capital receipt go to the capital fund in the Balance Sheet, and the sale of old newspapers is a revenue receipt shown as income in the Income and Expenditure Account. Capital items from the Receipts and Payments Account are not taken to the income side.

  1. ABoth are shown on the income side
  2. BEntrance fees are added to the Income and Expenditure Account and newspapers are added to capital fund
  3. CEntrance fees are added to the capital fund and the sale of old newspapers is shown as incomeCorrect
  4. DNeither is shown anywhere in the final accounts

Explanation

Entrance fees treated as capital receipts are credited to the capital fund through the Balance Sheet, so they are excluded from the Income and Expenditure Account. Sale of old newspapers is a small revenue receipt and is shown as income. Showing both as income ignores the stated capital treatment.

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