Sunrise Recreation Club received ₦500,000 as entrance fees during the financial year. According to the club's constitution, 60% of entrance fees are to be capitalized, with the remainder recognized as revenue income. What amount (in ₦) should be credited to the Income and Expenditure Account for the year?
Answer: 200000 ₦
Answer
₦200,000 should be credited to the Income and Expenditure Account.
When a non-profit organization's policy specifies that a portion of entrance fees should be capitalized, only the remaining percentage is treated as revenue income. Subtracting the 60% capital portion leaves 40% for revenue income. 40% of ₦500,000 equals ₦200,000, which is credited to the Income and Expenditure Account.
Step-by-Step Solution
Key Concept
Treatment of Entrance Fees in Non-Profit Organizations