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CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of a Not-for-Profit Organisation

Sunrise Society had a Prize Fund of Rs 50,000 with Prize Fund Investments of Rs 50,000 at the start of the year. During the year it earned Rs 4,000 interest on these investments and paid prizes of Rs 6,500. Prize Fund balance at year end, if interest is added to the fund and prizes are charged to the fund, is:

The Prize Fund closes at Rs 47,500. The opening Rs 50,000 is increased by Rs 4,000 interest earned on fund investments and reduced by Rs 6,500 prizes paid. Both items go through the fund, so Income and Expenditure Account is not affected.

  1. ARs 47,500Correct
  2. BRs 54,000
  3. CRs 43,500
  4. DRs 51,500

Explanation

Closing fund = 50,000 + 4,000 interest - 6,500 prizes = 47,500. Interest on fund investments is credited to the fund, not to Income and Expenditure Account. Rs 43,500 wrongly deducts interest, and Rs 54,000 ignores prizes.

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