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CMA Intermediate · Financial Accounting · Financial Statements of Not-for-Profit Organisations

In a club's Receipts and Payments Account, the receipt of ₹1,00,000 as a life membership fee and ₹40,000 received on sale of old equipment would normally be treated in the Income and Expenditure Account as follows:

Both are capital receipts. The life membership fee is credited to a Life Membership Fund or Capital Fund on the Balance Sheet, and the sale proceeds reduce the asset's book value, with only any profit or loss on sale taken to the Income and Expenditure Account.

  1. ABoth credited as income of the year
  2. BBoth are capital items shown on the Balance Sheet side, not credited as income (life membership fee to a fund; sale proceeds against the asset)Correct
  3. CLife membership fee credited as income; sale proceeds ignored
  4. DBoth are ignored and not shown anywhere

Explanation

Life membership fees are capital receipts, added to Life Membership Fund (or Capital Fund). Sale proceeds of equipment are adjusted against the asset, with any profit or loss alone going to the Income and Expenditure Account. Neither is revenue income.

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