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CSEET · Fundamentals of Accounting · Accounting for Non-Profit Organizations

Greenfield Sports Association received ₹50,000 as entrance fees during the year, treated as capital receipts as per the association's rules. How will this be shown in its final accounts?

Entrance fees treated as capital receipts are added to the Capital Fund in the Balance Sheet. They are non-recurring and are not credited to the Income and Expenditure Account, otherwise the year's surplus would be overstated.

  1. ACredited to Income and Expenditure Account as income
  2. BAdded to the Capital Fund in the Balance SheetCorrect
  3. CShown as a liability for entrance fees refundable
  4. DDeducted from the expenses in Income and Expenditure Account

Explanation

When entrance fees are capitalised under the rules, they are non-recurring receipts of a capital nature. They are added directly to the Capital Fund in the Balance Sheet. Showing them as income would wrongly increase the surplus for the year.

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