Case Study Accountancy Class 12
Not for Profit Organisation (NPO)
Case Study
Read the following hypothetical text and answer the given questions:
Dr. Rajani Mehta a qualified M.B.B.S. doctor got voluntary retirement at the age of 50 years from a renowned hospital. She was residing in a flat of a wide apartment which is surrounded by a slum which is inhabited by economically weaker strata of the society. As the people in that area were not aware about importance of health care, a widespread ailment had been persistently prevailing. Rajani met with some of the well-off people of apartment and decided to open a dispensary named as `LOCAL Clinic’ to provide them cost free medical assistance and make them aware about hygienic living, physical fitness, and economic balance diet. Many of the apartment members agreed to it. She approached health department of the town with her proposal which was accepted and an initial one time grant of ₹.2,00,000 was sanctioned immediately for purchase of medical equipment and test kits for pathological tests. 10 members of the apartment contributed ₹.20,000 each as lifetime subscription to the clinic. Rajni decided to charge ₹10 as one time registration fee from patients. Apart from above Rajni made following transactions for first year:
Rajni informed that during the first year 10,500 patients were registered for treatment and for other services. Taking reference from the above, answer the following questions.
Question 1:
Not for profit organization prepares
(i) Income and Expenditure account
(ii) Trading and Profit loss account
(iii) Receipt and Payment account
(iv) None of the above
Options:
(a) Only (ii)
(b) Only (iii)
(c) Both (i) and (ii)
(d) Both (i) and (iii)
Answer: (d) Both (i) and (iii)
Explanation: The Financial Statements of Not for Profit Organisation are Receipt and Payment Account, Income and Expenditure Account and Balance Sheet
Question 2:
Honorarium paid to Physiotherapist and sports teacher Will be posted to
(a) Debit side of Income and Expenditure Account.
(b) Debit side of Receipt and Payment Account.
(c) Debit side of Profit and Loss Account.
(d) Credit side of Income And Expenditure account
Answer: (a) Debit side of Income and Expenditure Account.
Explanation: Honorarium paid to Physiotherapists and sports teacher is a Revenue Expenditure, hence it will be Recorded in the Debit side of the Income and Expenditure Account.
Question 3:
State whether the following statements are true or false:
“Donations received by Ms Rajani Mehta from health department should be capitalized.”
Answer: True
Explanation: The donation received in the given case is for a specific purpose.
that's why it should be capitalized.
Question 4:
Lifetime subscription paid by 10 members will be posted in
(a) Expenditure side of Income and Expenditure Account
(b) Liability side of closing Balance Sheet
(c) Income side of Income and Expenditure Account
(d) Assets side of closing Balance Sheet
Answer: (b) Liability side of closing Balance Sheet
Explanation: Lifetime Subscription or Life Membership Fees is Non-Recurring in Nature. So it will be posted on the Liability side of the closing balance sheet.
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