Q.1 Which of the following is the primary objective of accounting for a non-trading concern?
To calculate profit
To ascertain financial position
To determine cost of goods sold
To compute trading margin
Explanation - Non-trading concerns, such as clubs and charities, do not aim to earn profit; their main objective is to know their financial position through accounting.
Correct answer is: To ascertain financial position
Q.2 Which account is generally not prepared in a non-trading concern?
Income and Expenditure Account
Receipt and Payment Account
Balance Sheet
Trading Account
Explanation - Non-trading concerns do not engage in buying and selling of goods for profit; hence, a Trading Account is not required.
Correct answer is: Trading Account
Q.3 Receipt and Payment Account is:
A nominal account
A real account
A personal account
A financial statement showing all receipts and payments
Explanation - Receipt and Payment Account is a summary of cash and bank transactions showing all receipts and payments during a period, similar to a cash book.
Correct answer is: A financial statement showing all receipts and payments
Q.4 Which of the following items appears in the Income and Expenditure Account?
Opening stock
Donation received for a specific purpose
Subscription received during the year
Salary paid
Explanation - Income and Expenditure Account is an accrual-based account. Expenses like salaries are recorded here, whereas specific-purpose donations appear only in the Balance Sheet.
Correct answer is: Salary paid
Q.5 Capital fund in a non-trading concern is equivalent to:
Owner's capital in a business
Revenue receipts
Expenditure
Accumulated depreciation
Explanation - Capital fund represents the accumulated fund of a non-trading concern and is analogous to owner's capital in a trading business.
Correct answer is: Owner's capital in a business
Q.6 Which of the following is a revenue receipt for a non-trading concern?
Donation for building fund
Entrance fees
Donation for furniture fund
Loan received
Explanation - Revenue receipts are regular, recurring incomes used for day-to-day expenses. Entrance fees are revenue receipts, while donations for specific funds are capital receipts.
Correct answer is: Entrance fees
Q.7 Which of the following is a capital expenditure for a non-trading concern?
Rent paid
Purchase of furniture
Electricity charges
Stationery purchased
Explanation - Capital expenditures are incurred to acquire assets or increase the capacity of existing assets. Furniture purchased is a capital expenditure.
Correct answer is: Purchase of furniture
Q.8 Income and Expenditure Account is prepared on which basis?
Cash basis
Accrual basis
Mixed basis
Hybrid basis
Explanation - Income and Expenditure Account is prepared on accrual basis, recording income when earned and expenses when incurred, regardless of cash flow.
Correct answer is: Accrual basis
Q.9 Subscription received in advance is treated as:
Income
Liability
Expense
Asset
Explanation - Subscriptions received in advance are not yet earned and hence recorded as a liability in the Balance Sheet.
Correct answer is: Liability
Q.10 The excess of receipts over payments in Receipt and Payment Account indicates:
Profit
Surplus
Capital fund
Loss
Explanation - Excess of receipts over payments is called surplus in non-trading concerns, not profit, as profit is a trading concept.
Correct answer is: Surplus
Q.11 Donation for a specific purpose should be shown in:
Income and Expenditure Account
Balance Sheet under specific fund
Receipt and Payment Account only
None of the above
Explanation - Donations for a specific purpose are capital receipts and shown as a separate fund in the Balance Sheet, not in the Income and Expenditure Account.
Correct answer is: Balance Sheet under specific fund
Q.12 Which of the following is a distinguishing feature of non-trading concerns?
Profit motive
Providing services without profit
Issuing shares
Trading goods
Explanation - Non-trading concerns operate to provide services to members or the public and do not aim at profit generation.
Correct answer is: Providing services without profit
Q.13 What is the purpose of preparing a Receipt and Payment Account?
To ascertain profit
To summarize cash transactions
To calculate depreciation
To determine subscription
Explanation - Receipt and Payment Account is a summarized record of cash and bank transactions, not concerned with profit or loss.
Correct answer is: To summarize cash transactions
Q.14 Income and Expenditure Account resembles which account of a trading concern?
Trading Account
Profit and Loss Account
Balance Sheet
Cash Book
Explanation - Income and Expenditure Account is similar to the Profit and Loss Account of a trading concern, recording revenues and expenses for a period.
Correct answer is: Profit and Loss Account
Q.15 Outstanding expenses are shown in:
Receipt and Payment Account
Income and Expenditure Account
Balance Sheet
Both Income & Expenditure and Balance Sheet
Explanation - Outstanding expenses are recorded as liabilities in the Balance Sheet and also accounted as expenses in the Income and Expenditure Account.
Correct answer is: Both Income & Expenditure and Balance Sheet
Q.16 Entrance fees collected by a club are treated as:
Revenue income
Capital income
Deferred income
Liability
Explanation - Entrance fees are usually a one-time contribution and are treated as capital income to increase the club's capital fund.
Correct answer is: Capital income
Q.17 Which of the following items will appear only in the Receipt and Payment Account?
Subscription received during the year
Salaries paid
Donation for building fund
Outstanding expenses
Explanation - Receipt and Payment Account records all receipts and payments including capital receipts and payments, like donation for building fund, unlike Income and Expenditure Account.
Correct answer is: Donation for building fund
Q.18 Closing stock in a non-trading concern is shown in:
Income and Expenditure Account
Receipt and Payment Account
Balance Sheet
None of the above
Explanation - Closing stock of consumables or other assets is shown in the Balance Sheet as an asset, not in the Income and Expenditure Account.
Correct answer is: Balance Sheet
Q.19 Prepaid expenses are:
Revenue receipts
Liabilities
Assets
Capital fund
Explanation - Prepaid expenses represent payments made in advance for expenses and are treated as assets in the Balance Sheet.
Correct answer is: Assets
Q.20 The basic difference between a trading concern and a non-trading concern is:
Trading concern earns profit; non-trading concern provides service without profit
Both aim to earn profit
Both do not earn profit
Non-trading concern trades goods
Explanation - The main distinction lies in the objective: trading concerns aim at profit, while non-trading concerns provide service without profit motive.
Correct answer is: Trading concern earns profit; non-trading concern provides service without profit
Q.21 A non-trading concern does not prepare:
Income and Expenditure Account
Receipt and Payment Account
Trading Account
Balance Sheet
Explanation - Since non-trading concerns do not engage in trading activities, a Trading Account is not prepared.
Correct answer is: Trading Account
Q.22 Accrued income in a non-trading concern is shown as:
Asset
Liability
Revenue
Expense
Explanation - Income earned but not received during the period is shown as an asset in the Balance Sheet.
Correct answer is: Asset
Q.23 Excess of payments over receipts in Receipt and Payment Account indicates:
Profit
Deficit
Surplus
Capital fund
Explanation - If payments exceed receipts, it is termed a deficit, representing a shortfall in cash or resources during the period.
Correct answer is: Deficit
Q.24 Which fund represents accumulated capital of a non-trading concern?
Capital fund
Revenue fund
Building fund
Subscription fund
Explanation - Capital fund is the accumulated fund, representing the total resources available for use by a non-trading concern.
Correct answer is: Capital fund
Q.25 Salaries paid to staff are recorded in:
Income and Expenditure Account
Receipt and Payment Account
Balance Sheet
None of the above
Explanation - Salaries paid are revenue expenses and are recorded in the Income and Expenditure Account, not in the Receipt and Payment Account.
Correct answer is: Income and Expenditure Account