Match each financial item of a non-profit organization with its correct accounting treatment in the Receipts and Payments Account.
- Life membership fees received in cash for future accounting periodsRecorded on the receipts side because all cash inflows are included regardless of capital nature or period
- Depreciation charged on clubhouse equipment for the yearExcluded completely because it is a non-cash operational expense
- Subscriptions due from members but remaining unpaid at year-endExcluded completely because no cash inflow occurred during the accounting period
- Payment made by cheque for purchasing new clubhouse furnitureRecorded on the payments side as a capital cash expenditure
Answer
Life membership fees received in cash are recorded on the receipts side regardless of period; depreciation on equipment is excluded as a non-cash expense; unpaid subscriptions due are excluded because no cash was received; payment for new furniture is recorded on the payments side as a capital cash expenditure.
The Receipts and Payments Account is a summarized Cash Book. It includes all actual cash inflows and outflows (capital or revenue, for past, present, or future periods) while strictly excluding non-cash transactions (like depreciation) and accruals (like outstanding subscriptions).
Step-by-Step Solution
Key Concept
Scope and Exclusions of Receipts and Payments Account