CBSE class 12 commerce Accountancy fast track revision notes
CBSE class 12 commerce Accountancy fast track revision notes:-CBSE Class 12 Accountancy Fundamentals of partnership and Goodwill Partnership: features, Partnership Deed. Provisions of the Indian Partnership Act 1932 in the absence of partnership deed. Fixed v/s fluctuating capital accounts. Preparation of Profit and Loss Appropriation account- division of profit among After going through this Unit, the students will be able to: state the meaning of partnership, partnership firm and partnership deed. describe the characteristic features of partnership and the contents of partnership partners, guarantee of profits. Past adjustments (relating to interest on capital, interest on drawing, salary and profit sharing ratio). Goodwill: nature, factors affecting and methods of valuation – average profit, super profit and capitalization.
CBSE class 12 commerce Accountancy fast track revision notesCBSE class 12 commerce Accountancy fast track revision notes
Accounting for Not-for-Profit Organisation
There are certain organisations which are set up for providing service to its members and the public in general. Such organisations include clubs, charitable institutions, schools, religious organisations, trade unions, welfare societies and societies for the promotion of art and culture. These organisations have service as the main objective and not the profit as is the case of organisations in business. Normally, these organisations do not undertake any business activity, and are managed by trustees who are fully accountable to their members and the society for the utilization of the funds raised for meeting the objectives of the organisation. Hence, they also have to maintain proper accounts and prepare the financial statement which take the form of Receipt and Payment Account; Income and Expenditure Account; and Balance Sheet. At the end of for every accounting period (normally a financial year). This is also a legal requirement and helps them to keep track of their income and expenditure, the nature of which is different from those of the business organisations. In this chapter we shall learn about the accounting aspects relating to not-for-profit organisation.
CBSE class 12 commerce Accountancy fast track revision notes:-Meaning and Characteristics of Not-for-Profit Organisation
Not-for -Profit Organisations refer to the organisations that are for used for the welfare of the society and are set up as charitable institutions Accounting for Notfor-Profit Organisation 1 LEARNING OBJECTIVES After studying this chapter, you will be able to;
- Identiy the need for, and nature of accounting records relating to not-for-profit organisations;
- List the principal financial statements prepared by notfor-profit organisations and explain their nature;
- Prepare the Receipt and Payment Account from a given data;
- Explain the procedure of preparing the Income and Expenditure Account from a given Receipt and Payment Account and some additional information;
- Distinguish between the Receipt and Payment Account and the Income and Expenditure Account;
- Prepare Income and Expenditure Account and Balance Sheet from a given Receipt and Payment Account and the relevant additional information;
- Explain treatment of certain peculiar items of receipts and payments such as subscriptions from members, special funds, legacies, sale of old fixed assets, etc. 2015-16 2 Accountancy – Not-for-Profit Organisation and Partnership Accounts which function without any profit motive.
Their main aim is to provide service to a specific group or the public at large. Normally, they do not manufacture, purchase or sell goods and may not have credit transactions.
Hence they need not maintain many books of account (as the trading concerns do) and Trading and Profit and Loss Account. The funds raised by such organisations are credited to capital fund or general fund.
The major sources of their income usually are subscriptions from their members donations, grants-in-aid, income from investments, etc. The main objective of keeping records in such organisations is to meet the statutory requirement and help them in exercising control over utilisation of their funds.
They also have to prepare the financial statements at the end of each accounting period (usually a financial year) and ascertain their income and expenditure and the financial position, and submit them to the statutory authority called Registrar of Societies.
CBSE class 12 commerce Accountancy fast track revision notes:-The main characteristics of such organisations are:
1. Such organisations are formed for providing service to a specific group or public at large such as education, health care, recreation, sports and so on without any consideration of caste, creed and colour. Its sole aim is to provide service either free of cost or at nominal cost, and not to earn profit.
2. These are organised as charitable trusts/societies and subscribers to such organisation are called members.
3. Their affairs are usually managed by a managing/executive committee elected by its members.
4. The main sources of income of such organisations are: (i) subscriptions from members, (ii) donations, (iii) legacies, (iv) grant-in-aid, (v) income from investments, etc.
5. The funds raised by such organisations through various sources are credited to capital fund or general fund.
6. The surplus generated in the form of excess of income over expenditure is not distributed amongst the members. It is simply added in the capital fund.
7. The Not-for-Profit Organisations earn their reputation on the basis of their contributions to the welfare of the society rather than on the customers’ or owners’ satisfaction.
8. The accounting information provided by such organisations is meant for the present and potential contributors and to meet the statutory requirement.
CBSE class 12 commerce Accountancy fast track revision notes:-Receipt and Payment Account
It is prepared at the end of the accounting year on the basis of cash receipts and cash payments recorded in the cash book. It is a summary of cash and bank transactions under various heads.
For example, subscriptions received from the members on different dates which appear on the debit side of the cash book, shall be shown on the receipts side of the Receipt and Payment Account as one item with its total amount.
Similarly, salary, rent, electricity charges paid from time to time as recorded on the credit side of the cash book but the total salary paid, total rent paid, total electricity charges paid during the year appear on the payment side of the Receipt and Payment Account.
Thus, Receipt and Payment Account gives summarised picture of various receipts and payments, irrespective of whether they pertain to the current period, previous period or succeeding period or whether they are of capital or revenue nature.
It may be noted that this account does not show any non cash item like depreciation. The opening balance in Receipt and Payment Account represents cash in hand/cash at bank which is shown on its receipts side and the closing balance of this account represents cash in hand and bank balance as at the end of the year, which appear on the credit side of the Receipt and Payment Account.
However, if it is bank overdraft at the end it shall be shown on its debit side as the last item. Let us look at the cash book of Golden Cricket Club given in the example to show how the total amount of each item of receipt and payment has been worked out.
CBSE class 12 commerce Accountancy fast track revision notes:-Steps in the preparation of Receipt and Payment Account
1. Take the opening balances of cash in hand and cash at bank and enter them on the debit side. In case there is bank overdraft at the begining of the year, enter the same on the credit side of this account.
2. Show the total amounts of all receipts on its debit side irrespective of their nature (whether capital or revenue) and whether they pertain to past, current and future periods.
3. Show the total amounts of all payments on its credit side irrespective of their nature (whether capital or revenue) and whether they pertain to past, current and future periods.
4. None of the receivable income and payable expense is to be entered in this account as they do not involve inflow or outflow of cash.
5. Find out the difference between the total of debit side and the total of credit side of the account and enter the same on the credit side as the closing balance of cash/bank.
CBSE class 12 commerce Accountancy fast track revision notes
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