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

Sunrise Association's life membership fee is ₹10,000 per member. During 2025-26, 12 persons became life members. The association's policy is to treat life membership fees as capital receipts and, by the year-end, transfer nothing to income. On 1 April 2025 the Life Membership Fund was ₹3,60,000. What is the balance of Life Membership Fund at 31 March 2026 under this policy?

Twelve new life members at ₹10,000 give ₹1,20,000. Under the policy of treating the fees as capital with no transfer to income, this is added to the opening fund of ₹3,60,000, giving a closing Life Membership Fund of ₹4,80,000.

  1. A₹4,80,000Correct
  2. B₹3,60,000
  3. C₹4,70,000
  4. D₹1,20,000

Explanation

Fees collected = 12 × 10,000 = 1,20,000. Under the capitalisation policy it is added to the fund: 3,60,000 + 1,20,000 = 4,80,000. Option ₹3,60,000 ignores the new receipts, and ₹1,20,000 shows only the current receipts.

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