Skip to content

CS Professional · CSR and Social Governance · Financial and Non-financial Reporting of Different Non-Corporate Entities

Anand Education Society keeps cash-basis books. Its auditor notes the society has prepared only a receipts and payments account. The society is also required by its state registration law to present a true picture of its year's surplus and financial position, and it holds fixed assets and has outstanding fees. What should the auditor advise?

The society should prepare an accrual-based income and expenditure account and a balance sheet, besides the receipts and payments account. The latter shows only cash movements and omits outstanding fees and fixed assets, so it cannot show the true surplus or financial position.

  1. AReceipts and payments account alone is sufficient since it is a society
  2. BPrepare an income and expenditure account and balance sheet on accrual basis, along with the receipts and payments accountCorrect
  3. CPrepare only a balance sheet
  4. DPrepare a profit and loss account under Schedule III of the Companies Act and nothing else

Explanation

A receipts and payments account shows only cash flows and ignores outstanding items and fixed assets. To show surplus and position, the society needs an income and expenditure account and a balance sheet on accrual basis. Schedule III is for companies, so using it exclusively is incorrect.

Did you get it right without looking?

One question tells you little. A timed set on Financial and Non-financial Reporting of Different Non-Corporate Entities shows your real accuracy, how long you take and where you lose marks.

Practise Financial and Non-financial Reporting of Different Non-Corporate EntitiesFree diagnostic mock

More Financial and Non-financial Reporting of Different Non-Corporate Entities questions