Match each non-profit organization financial item listed on the left with its appropriate accounting treatment in relation to the Income and Expenditure Account on the right.
- Subscriptions received in advance for the upcoming financial yearExcluded from the Income and Expenditure Account and recognized as a current liability
- Depreciation charge on clubhouse sports equipment for the current yearDebited as an operating expenditure item in the Income and Expenditure Account
- Specific legacy received for constructing a new library wingExcluded from the Income and Expenditure Account and credited directly to a capital fund
- Net profit realized from hosting the annual fundraising dinner danceCredited as a revenue income item in the Income and Expenditure Account
Cevap
Subscriptions received in advance match with being excluded from the Income and Expenditure Account and recognized as a current liability. Depreciation charge matches with being debited as an operating expenditure item. Specific legacy for construction matches with being excluded from the Income and Expenditure Account and credited directly to a capital fund. Net profit from fundraising matches with being credited as a revenue income item.
Under accrual accounting principles governing non-profit organizations, the Income and Expenditure Account records only revenue expenses (debited) and revenue income (credited) attributable to the current financial year. Depreciation is an operational revenue expense, and fundraising profit is revenue income. Subscriptions paid in advance are unearned revenues carried forward as current liabilities, while specific legacies are capital receipts credited directly to specialized capital funds on the Statement of Financial Position.
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Anahtar Kavram
Classification of Revenue vs Capital items and Accrual Adjustments in Income and Expenditure Accounts