Q.Distinguish between Receipts & Payments and Income & Expenditure Accounts.
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🔒 Start your 14-day free trial to unlock the full solution →Concept understanding — Accounting for Not-for-Profit Organisations
Not-for-Profit Organisations (NPOs) — clubs, charitable trusts, hospitals, schools and societies — exist to render service, not to earn profit, so they do not prepare a Trading and Profit & Loss Account. Instead they prepare three statements:
- Receipts and Payments Account — a real account that summarises all cash and bank receipts and payments during the year (capital and revenue, current and past/future), starting and ending with the cash/bank balance.
- Income and Expenditure Account — the NPO's equivalent of a Profit & Loss Account: it matches revenue incomes against revenue expenses of the current year on the accrual basis to find the Surplus (excess of income) or Deficit.
- Balance Sheet — showing the Capital/General Fund, specific funds, assets and liabilities. …
Both statements are prepared by not-for-profit organisations, but one is a cash summary and the other measures the year's performance. They differ in basis, items recorded and the final result. …
The Receipts & Payments Account is a summarised cash book (all cash in and out, capital and revenue, of any period), while the Income & Expenditure Account is like a Profit & Loss Account showing only the revenue incomes and expenses of the current year to find surplus/deficit.
In TS Intermediate 2nd-year Accountancy (not-for-profit organisations), these two statements are frequently distinguished:
| Basis | Receipts & Payments Account | Income & Expenditure Account |
|---|---|---|
| Nature | Summary of the cash book (real account) | Like a Profit & Loss Account (nominal account) |
| Basis of accounting | Cash basis | Accrual (mercantile) basis |
| Items recorded | All receipts and payments — capital and revenue | Only revenue incomes and expenses of the current year |
| Period of items | Of any period (previous, current, future) | Of the current year only |
| Opening/closing balance | Starts and ends with cash/bank balance | No cash balance; ends with surplus or deficit |
| Sides | Receipts on debit, Payments on credit | Expenditure on debit, Income on credit |
Showing the 12 most recent of 56 on this concept.
- CBSE 2025Set ANNUAL1 markMCQQ.Legacies should be treated as (A) Liability (B) Revenue Receipt (C) Asset (D) Income
›Reveal solutionSolution
A legacy is a donation received under a will; it is a capital receipt, capitalised by adding to the Capital Fund, which appears on the liabilities side of the Balance Sheet. Hence the answer is (A) Liability.
For Bihar Class-12 (BSEB Inter) commerce candidates, in Not-for-Profit Organisation accounting:
- A legacy is an amount received by the organisation as per the will of a deceased person.
- Being non-recurring and of a capital nature, the usual treatment is to capitalise it by adding it to the Capital Fund. …
- CBSE 2025Set ANNUAL1 markMCQQ.All receipts of capital nature are shown in (A) Income and Expenditure A/c (B) Balance Sheet (C) Profit and Loss A/c (D) Cash Flow Statement
›Reveal solutionSolution
In a Not-for-Profit Organisation, capital receipts do not belong to the Income and Expenditure Account; they are capitalised and shown on the liabilities side of the Balance Sheet. Hence the answer is (B) Balance Sheet.
For the BSEB Inter / Bihar Class-12 Accountancy syllabus:
- The Income and Expenditure Account records only revenue items of the current period (like a profit and loss account). …
- CBSE 2025Set ANNUAL1 markMCQQ.Subscription received in advance is (A) Asset (B) Income (C) Expense (D) Liability
›Reveal solutionSolution
Subscription received in advance is income of a future period received early, so the organisation owes membership/service for it; it is a current liability shown in the Balance Sheet. Hence the answer is (D) Liability.
For Bihar Class-12 (BSEB Inter) commerce candidates, in Not-for-Profit Organisation accounting, subscription is matched to the period it relates to:
- Only the subscription relating to the current year is credited to the Income and Expenditure Account. …
- CBSE 2025Set ANNUAL1 markMCQQ.Which of the following is a capital receipt ? (A) Subscription (B) Donation (C) Building fund (D) Interest on fixed deposit
›Reveal solutionSolution
Building fund is a capital receipt, so the answer is (C).
In not-for-profit organisation accounting, capital receipts are amounts received for a specific long-term purpose or that create a fund, whereas revenue receipts are recurring incomes of the year.
- Building Fund (C) is a specific-purpose fund; the contribution is capitalised and shown on the liabilities/fund side of the balance sheet — a capital receipt.
- Subscription (A) is the regular annual income of members — a revenue receipt. …
- CBSE 2025Set ANNUAL1 markMCQQ.The surplus / deficit of not-for-profit organisation is ascertained by (A) Income & Expenditure A/c (B) Receipts and Payments A/c (C) Profit & Loss A/c (D) Income Statement
›Reveal solutionSolution
The surplus or deficit of an NPO is ascertained through the Income and Expenditure Account, so the answer is (A).
A not-for-profit organisation does not prepare a Profit and Loss Account. Instead it prepares an Income and Expenditure Account on an accrual basis, recording all revenue incomes and revenue expenses of the current year.
- The excess of income over expenditure is a surplus; the excess of expenditure over income is a deficit.
- The Receipts and Payments Account (B) is only a summary of cash transactions and does not show surplus/deficit. …
- CBSE 2025Set ANNUAL1 markMCQQ.Which of the following is a revenue expenditure ? (A) Purchase of furniture (B) Payment of salaries (C) Construction of building (D) Purchase of machinery
›Reveal solutionSolution
Payment of salaries is a revenue expenditure, so the answer is (B).
Revenue expenditure is incurred for the day-to-day running of an organisation and its benefit is used up within the accounting year. Capital expenditure, by contrast, is spent on acquiring long-term assets whose benefit lasts several years.
- Payment of salaries (B) is a recurring running cost — revenue expenditure. …
- CBSE 2025Set ANNUAL1 markMCQQ.Donations received for specific purpose are treated as (A) Asset (B) Liability (C) Capital receipt (D) Expense
›Reveal solutionSolution
Donations received for a specific purpose are treated as a capital receipt (specific fund), so the answer is (C).
When a not-for-profit organisation receives a donation earmarked for a particular purpose (e.g. a prize fund, tournament fund, building fund), it cannot be spent on general activities.
- Such a donation is capitalised and shown as a specific fund on the liabilities/fund side of the balance sheet, i.e. it is a capital receipt — option (C).
- It is not treated as revenue income in the Income and Expenditure Account (that applies to general donations). …
- CBSE 2025Set ANNUAL1 markMCQQ.The summary of cash and bank transaction shows (A) Cash A/c (B) Bank A/c (C) Receipts and Payments A/c (D) Bank overdraft
›Reveal solutionSolution
The summary of cash and bank transactions is the Receipts and Payments Account, so the answer is (C).
A not-for-profit organisation prepares a Receipts and Payments Account at the year end. It is a real account that summarises all cash and bank receipts (debit side) and all cash and bank payments (credit side), regardless of whether they relate to the current, previous or next year, and whether capital or revenue.
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- CBSE 2025Set ANNUAL1 markMCQQ.Payment of honorarium to Secretary is treated as (A) Capital expenditure (B) Revenue expenditure (C) An income (D) All of these
›Reveal solutionSolution
Payment of honorarium to the Secretary is a revenue expenditure, so the answer is (B).
An honorarium is a token remuneration paid for services rendered (here, to the Secretary). It is a recurring operating expense whose benefit is consumed within the year, so it is a revenue expenditure and is debited to the Income and Expenditure Account.
- It is not a capital expenditure (A) because it does not create any long-term asset. …
- CBSE 2025Set ANNUAL1 markMCQQ.Which of the following shows transactions related to one year ? (A) Receipts and Payments A/c (B) Income & Expenditure A/c (C) Balance Sheet (D) None of these
›Reveal solutionSolution
The Income and Expenditure Account shows transactions relating to one (current) year, so the answer is (B).
The Income and Expenditure Account is prepared on an accrual basis and includes only the revenue incomes and revenue expenses that belong to the current accounting year — amounts relating to past or future years are excluded.
- The Receipts and Payments Account (A) records all cash transactions irrespective of the year to which they relate, so it is not restricted to one year. …
- CBSE 2025Set ANNUAL1 markMCQQ.Entrance fee is treated as (A) Capital Receipt (B) Revenue Receipt (C) Donation (D) Subscription
›Reveal solutionSolution
Entrance fee is treated as a capital receipt, so the answer is (A).
Entrance fee (admission fee) is the amount paid once by a new member at the time of joining a not-for-profit organisation. Because it is a non-recurring receipt of a substantial, one-time nature, the BSEB Inter / Bihar Class-12 answer treats it as a capital receipt and adds it to the Capital/General Fund on the liabilities side.
- It is not treated here as a recurring revenue receipt (B). …
- CBSE 2025Set ANNUAL1 markMCQQ.What is used to prepare the opening Balance Sheet ? (A) Income and Expenditure A/c (B) Receipts & Payments A/c (C) Cash A/c (D) Capital A/c
›Reveal solutionSolution
The opening balance sheet is prepared using the Receipts and Payments Account (its opening cash/bank balance and other opening items), so the answer is (B).
To compute the opening Capital/General Fund, an opening balance sheet is prepared at the beginning of the year. The opening cash and bank balances come directly from the opening balance of the Receipts and Payments Account, which are combined with other opening assets and liabilities given in the question.
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