(a) Explain the following terms as used in account of not-for-profit making organization. (i)entrance fees (ii) subscription
(b) State five features of income and expenditure account.
Explanation
(a)i) Entrance Fees: -These are amounts prospective members of a not-for-profit-making organization have to pay before being admitted as members; - it is a one time payment (ii) Subscriptions: These are periodic contributions/dues made by members of a not-for-profit-making organization; -They are main sources of funds/ income to the club.
(b) Features of Income and Expenditure Account: (i) This account operates like a profit and loss account of a trading organization; (ii) All expenses are debited and income credited to the account; (iii) It is classified as a nominal account; (iv) It discloses a closing balance which is either a surplus or a deficit (v) It is prepared at the end of a period; (vi) It records only revenue expenditures and revenue receipts. (vii) All revenue receipts and expenditure items in a period are included in the account whether they are actually paid or not. OR the accrual concept underlies its preparation; (viii) Profits or losses from significant commercial activities are disclosed in the account; (ix) The balance is transferred to accumulated fund.