CBSE XII | ACCOUNTANCY

MOST IMPORTANT QUESTIONS - SOLUTIONS

CBSE XII
Accountancy
Most Important Questions - Solutions

Note:
 Questions in this document have been created based on analyses of previous years’
board papers.
 Solutions can be used as a guideline to enable students to prepare effectively and to
help them score more marks.
 Please write the answers in your exams as per the question and the marks allotted.
 Answers provided here will also help you answer objective-based questions.

Accounting for Not-for-Profit Organisation

1. What is the main aim of an NPO?

[1 M]
[Modified question asked in 2019]

Suggested Answer: A not-for-profit organisation (NPO) is set up with the objective

to further cultural, educational, religious, public services to public and/or members
etc. Since its aim is not to earn profit, earning profit is incidental to carrying on its
activities.

2. Give differences between not-for-profit organisation and profit-earning

organisation.
[1 M each]
[Modified question asked in 2019]

Suggested Answer:
Basis Not-for-Profit Organisation Profit-Earning Organisation
(Business Firm)

Purpose Its purpose is to render services. Its purpose is to earn profits.

Formation & Formed by promoters and Formed by entrepreneur(s) and

Management managed by trustees. managed by owners or managers.

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Funds It raises funds by way of It receives funds from the

membership fees, donations and proprietor, partners in the form of
surplus from operations which are capital (in case of proprietorship
shown in the books as general, and partnership) and from
capital or corpus funds. shareholders in the form of share
capital (in case of companies).
Profits which are not distributed to
partners and shareholders are
shown as reserves.

Financial Final accounts are prepared every Final accounts prepared comprises
Statements year that comprises receipt and trading, profit and loss account and
payment account, income and balance sheet.
expenditure account and balance
sheet.

Surplus/Profit Excess of income over expenditure Excess of credit side over the debit
in the income and expenditure side of the profit and loss account
account is termed surplus/profit. is termed net profit.

3. How are the following items accounted for in the books of a not-for-profit
organisation?
a. Prize fund Rs. 5,00,000
b. Prizes paid Rs. 60,000
c. Interest on Prize Fund Investment Rs. 45,000
[1 M]
[Modified question asked in 2019, Sample Paper 2019-20]

Suggested Answer: Prize fund mentioned in the question is a specific fund, and
therefore, accounting treatment is as follows:
Balance Sheet of NPO as on...
Liabilities Amount Assets Amount
Prize Fund (Opening Balance) 5,00,000
Add: Interest on Prize Fund Investment 45,000
5,45,000
Less: Prizes Paid (60,000) 4,85,000

4. Differences between receipts and payments account and income and expenditure
account on the basis of various aspects.
[1 M each]
[Modified question asked in Sample Paper 2018-19, 2019]

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Suggested Answer:
Basis Receipts and Payments Account Income and Expenditure
Account
Purpose It is prepared to show difference It shows net result of activities
between two sides showing undertaken during the year
cash/bank balance at the end. resulting in surplus or deficit.

Nature It is a classified summary of cash It is like a profit and loss account

transactions showing receipts and and therefore is a nominal
payments under different heads for account.
the period.

Form It records receipts on the debit side It records all the expenses and
and payments on the credit side. losses on the debit side and all
the incomes and gains on the
credit side of the account.

Balance Opening balance means cash in hand Opening balance does not exist in
and bank balance in the beginning, this account. Any closing balance
and closing balance means cash in at the end is either a surplus or
hand and bank balance at the end. deficit.

Capital and It records receipt and payment items It records incomes and expenses
Revenue of capital as well as revenue nature. during the accounting period
Items which are of revenue nature only.
Items of capital nature are not
recorded in this account.

Contents It records receipts and payments It records incomes and

during the year whether they relate expenditures of the current year
to past, current or succeeding year. only.

Adjustments It follows the cash system of It follows the accrual system of

accounting, and therefore, no accounting, and therefore,
adjustments are made. adjustments are to be made for
prepaid and outstanding incomes
and expenses.

Depreciation It records only cash items and non- It records non-cash items and
cash items (like depreciation) are therefore, non-cash items (like
ignored. depreciation) can be recorded in
this account.

5. Where is life membership fee received shown in the books of a not-for-profit

organisation?
[1 M]
[Modified question asked in 2019]

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Suggested Answer: Life membership fee is accounted as a capital receipt and added
to the capital fund on the liabilities side of the balance sheet as it is a one-time
payment made by a life member to avail services all through his life.

6. How is an honorarium payment accounted in the books of a not-for-profit

organisation?
[1 M]

Suggested Answer: Honorarium payment is a token payment made to a person who

has voluntarily undertaken service which would normally command a fee. It is
treated as an expense which is debited to the income and expenditure account.

7. Where is subscriptions outstanding for the current year shown in the books of a not-
for-profit organisation?
[1 M]

Suggested Answer: Subscriptions outstanding for the current year are shown on
the asset side of the balance sheet of a not-for-profit organisation as such amount is
the subscription income relating to the current year but not received during the
current year.

8. Determine the amount of subscriptions to be shown in the income and expenditure

account and the amount of outstanding subscription for the year ended 31st March
2018 from the details given below.
a. Subscription outstanding for the year ended 31st March 2017 is 4,000.
b. There are 410 members, each of them pay an annual subscription of Rs. 500.
c. Subscriptions received during the year ended 31st March 2018 are as follows:
For year ending on 31st March 2017 3,000
For year ending on 31st March 2018 1, 50,000
For year ending on 31st March 2019 5,000 1, 58,000
[3 M]
[Modified question asked in 2019]

Suggested Answer: Calculation is to be done for

i. Amount to be shown in the income and expenditure account for the year
ended 31st March 2018:
Subscription receivable for the year ended 31st March 2018
= Number of Members × Annual Subscription
= 410 × 500
= 2,05,000

ii. Amount of outstanding subscription for the year ended 31st March 2018:
Outstanding for 2016-17 = 4,000 – 3,000 = 1,000
Outstanding for 2017-18 = Total Subscription – Amount Received
= 2,05,000 – 1,50,000
= 55,000

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Therefore, the total outstanding for the year ended 31st March 2018 = 1,000
+ 55,000 = 56,000.

9. Explain what is legacy and its accounting treatment while preparing the financial
statements of a not-for-profit organisation.
[3 M]
[Modified question asked in 2019]

Suggested Answer: Legacy is the amount which is received as donation by a not-

for-profit organisation under Will of a deceased person. The accounting treatment of
legacy depends on the nature of receipt and conditions specified with that receipt.
i. In case there are any specific conditions, they are to be classified as ‘Specific
Donation’. Such amounts are credited to a specific fund account and is shown
on the liabilities side of the balance sheet. Since it is a fund, principles of
fund-based accounting are applied where income relating to the fund is
credited, while expenses are debited to such a fund.
ii. In case there are no specific conditions, it is accounted as ‘General Donation’.
Such amounts are recorded as revenue receipts and are therefore credited to
the income and expenditure account.

10. From the information given below, explain the treatment of the following items in
the financial statements of an NPO.
Receipt and Payment 31-12-2006
Receipts Amount Payments Amount
By Salaries:
2005 40,000
2006 5,60,000
2007 36,000

Additional Information:
a. Salaries outstanding on 31st December 2005 = Rs.50,000
b. Salaries outstanding on 31st December 2006 = Rs.90,000
c. Salaries paid in advance on 31st December 2005 = Rs.20,000
[3 M]

Suggested Answer:
Income and Expenditure Account
for the year ended 31st December 2006
Dr. Cr.
Expenditure Amount Income Amount
To Salaries 5,60,000
Add: Salaries received in Advance (LY 2005) 20,000
Add: Outstanding (CY 2006) 80,000
6,60,000

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Balance Sheet
as on 31st December 2005

Liabilities Amount Assets Amount

Salary outstanding 50,000 Salaries Prepaid 20,000

Balance Sheet
as on 31st December 2006
Liabilities Amount Assets Amount
Salaries outstanding: Salaries Prepaid 36,000
2005 (50,000 – 40,000) 10,000
2006 (90,000 – 10,000) 80,000 90,000
Note:
Salaries outstanding as on 31st December 2006 appearing on the liabilities side of
the balance sheet amounted to Rs. 90,000. It included salaries outstanding for the
year 2005 Rs.10,000 (i.e. Rs.50,000 - Rs.40,000) and salaries outstanding for the
year 2006, amounted to only Rs.80,000.

11. From the information given below, calculate the amount of medicines consumed
during the year ending 31st March 2019.
Particulars 1st April 2018 31st March 2019
Amount Amount
Stock of Medicines 4,39,375 3,61,625
Creditors for Medicines 37,67,250 45,51,750
During the year ending 31st March 2019, medicines purchased were Rs. 152,01,750.
[3 M]

Suggested Answer:
Statement of Medicines Consumed
during the year 2018-19
Particulars Amount
Medicine purchased during the year 2018–19 152,01,750
Add: Stock in the beginning (as on 1 April 2018) 4,39,375
Less: Stock at the end (as on 31 March 2019) (3,61,625)

Medicine to be debited to income and expenditure account 152,79,500

12. From the information given below, compute the amount of sports material to be
transferred to the income and expenditure account for the year ended 31st March
2019.

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Particulars Amount
Sports material sold during the year (Book Value Rs. 20,000) 22,400
Payment to creditors for sports material 36,400
Sports material purchased in cash 16,000
Balance of sports material as on 31st March 2018 20,000
Balance of sports material as on 31st March 2019 22,000
Creditors for sports material as on 31st March 2018 14,800
Creditors for sports material as on 31st March 2019 18,000
[3 M]
[Modified question asked in Sample Paper 2018-19, 2019]

Suggested Answer:
Statement for Calculation of Sports Material transferred to Income and
Expenditure Account for the year ended 31st March 2018

Particulars Amount
Amount paid to creditors of Sports Material 36,400
Add: Creditors at the end of the period 18,000
Less: Creditors at the beginning of the period (14,800)
Add: Cash purchases of Sports Material 16,000
Total Purchases 55,600
Less: Sale of Sports Material during the year (Book Value) (20,000)
Add: Opening Stock of Sports Material 20,000
Less: Closing Stock of Sports Material (22,000)
Amount transferred to Income and Expenditure Account 33,600

13. Compute the cost of goods consumed to be recorded in the books of a not-for-profit
organisation from the following information.

Stock of goods as on 1st April 2017 35,000

Creditors for goods as on 1st April 2017 21,000
Creditors for goods as on 31st March 2018 40,000
Stock of goods as on 31st March 2018 46,000
Amount paid for goods purchased during the year 2017-18 93,000
[3 M]

Suggested Answer:
Statement showing goods consumed during 2017-18
Particulars Amount Amount
Amount paid for goods during the year 93,000
Add: Stock of goods as on 1st April 2017 35,000
Creditors for goods as on 31st March 2018 40,000 75,000
Less: Stock of goods as on 31st March 2018 46,000
Creditors for goods as on 1st April 2017 21,000 67,000
Goods consumed during 2017-18 1,01,000

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14. Compute the amount to be posted to the income and expenditure account for the
year ended 31st March 2019.
Particulars Amount
Creditors for Stationery on 1 April 2018
st 10,000
Creditors for Stationery on 31st March 2019 6,500
Stock of Stationery on 1 April 2018
st 15,000
Stock of Stationery on 31 March 2019
st 2,500
Payment for Stationery during the year ended 31st March 2019 54,000
Advance paid for Stationery on 31st March 2019 1,500
Advances paid for stationery carried forward from the year ended 1,000
31.03.2018
[3 M]

Suggested Answer:
Statement of Stationery
for the year ended 31st March 2019
Particulars Amount

Amount paid for Stationery during the year 2018-19 54,000

Add: Opening stock (as on 1 April 2018) 15,000
Less: Closing stock (as on 31 March 2019) (2,500)
Less: Creditors in the beginning (as on 1 April 2018) (10,000)
Add: Creditors at the end (as on 31 March 2019) 6,500
Add: Advance in the beginning (as on 1 April 2018) 1,000
Less: Advance at the end (as on 31 March 2019) (1,500)
Amount to be posted to Income and Expenditure Account 62,500

15. Show the following information in the appropriate financial statements of the club
for the year ended 31st March 2018 and 31st March 2019.
Particulars Amount
Donation received during the year for match fund 20,000
Amount received from the sale of match tickets 17,500
Match expenses paid during the year 81,000
Match fund as on 31st March 2018 1,20,000
[3 M]
[Modified question asked in 2019]

Suggested Answer:
Balance Sheet as at 31st March 2018
Liabilities Amount Assets Amount
Match Fund 1,20,000

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MOST IMPORTANT QUESTIONS - SOLUTIONS

Balance Sheet as at 31st March 2019

Liabilities Amount Amount Assets Amount
Match Fund 1,20,000
Add: Donations received 20,000
Proceeds from Match Tickets 17,500
1,57,500
Less: Match Expenses (Note) 81,000 76,500

16. Prepare the income and expenditure account from the following particulars of Josh
Club for the year ended 31st March 2018.
Receipts and Payments A/c
for the year ended 31st March 2018
Dr. Cr.
Receipts Amount Payments Amount
To Balance b/d 13,000 By Salaries 12,600
To Subscription By Postage 500
2016-17 600 By Rent 3,600
2017-18 24,000 By Printing and Stationery 5,600
2018-19 720 25,320 By Sports Material 4,600
To Donations (Billiards table) 36,000 By Miscellaneous Expenses 1,240
To Entrance Fees 440 By Furniture (1.10.2017) 8,000
To Sale of Old Newspapers 180 By 10% investment 28,000
(1.10.2017)
By Balance c/d (31.3.18) 10,800
74,940 74,940
Additional Information:
a. Value of sports material at the beginning and at the end of the year was
₹1,200 and ₹1,800, respectively.
b. Depreciation to be provided @ 10% p.a. on furniture.
c. Subscription outstanding as at March 31st 2018 ₹6,480. Also, ₹480 is still in
arrears for the year 2016-17 for subscription.
[6 M]
[Modified question asked in Sample Paper 2018-19, 2019]

Suggested Answer:
In the books of Josh Club
Income and Expenditure Account
for the year ended 31st March 2018
Dr. Cr.
Expenditure Amount Income Amount
To Salaries 12,600 By Subscriptions 24,000
To Postage 500 Add: Outstanding 6,000 30,000
To Rent 3,600 By Entrance Fees 440
To Printing and Stationery 5,600 By Sale of Old 180
Newspapers
To Consumption of Sports 4,000 By Interest on 1,400
Material Investment
To Depreciation on 400

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Furniture 1,240
To Miscellaneous Expenses 4,080
To Surplus
32,020 32,020

Working Notes:
Consumption of Sports Material = Opening Stock + Purchases - Closing Stock
i.
Consumption of Sports Material = 1,200 + 4,600 - 1,800 = 4,000
6 10
ii. Depreciation on Furniture = 8,000   = 400
12 100
10 6
iii. Interest on Investment = 28000    1, 400
100 12

17. From the following information of Solitaire Club, prepare the income and
expenditure account for the year ended 31st March 2018.

Receipts and Payments Account of Solitaire Club for the year ended 31st March
2018
Dr. Cr.
Particulars Amount Particulars Amount
To Balance b/d. 12,500 By Furniture 32,500
To Interest on Investments 600 By Salaries 16,125
To Donations 4,250 By Misc. Expenses 13,000
To Subscriptions 75,000 By Telephone Charges 3,000
To Rent Received 17,500 1,500
By Fax Machine
To Sale of Old Newspapers 150
By 6 % Investments (on 01-08-2017) 25,000
By Printing and Stationery
4,750
By Balance c/d 14,125
1,10,000 1,10,000
Additional Information:
Opening stock of printing and stationery was ₹3,000, whereas closing stock was
₹3,750. Salaries unpaid on 31st March 2018 were ₹2,000 and rent receivable was
₹500. Subscription received included ₹3,750 for 2018–19. Also, the amount of
subscription outstanding on 31st March 2018 was ₹5,000.
[6 M]
[Modified question asked in 2019]

Suggested Answer:

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MOST IMPORTANT QUESTIONS - SOLUTIONS

Books of Solitaire Club

Dr. Income and Expenditure Account for the year ended 31st March 2018 Cr.
Expenditure Amount Income Amount
To Salaries 18,125 By Interest on Investment 600
To Miscellaneous Expenses 13,000 Add: Accrued Interest 400 1,000
To Telephone Charges 3,000 By Donations 4,250
To Printing and Stationery 4,000 By Subscriptions 76,250
To Surplus transferred to 61,525 By Rent 18,000
Capital Fund By Sale of Old Newspapers 150
99,650 99,650
Working Notes:
i. Subscription for current year 2017-18:
Subscription during the year = Total Received - Advance Received + Outstanding at the end
Subscription during the year = 75,000 - 3,750 + 5,000
Subscription during the year = 76,250

ii. Salaries for current year 2017-18:

Salary during the year = Paid during the year + Outstanding at the end
Salary during the year = 16,125 + 2,000
Salary during the year =18,125

iii. Rent for current year 2017-18:

Rent for the current year = Rent Received +Rent Receivable
Rent for the current year = 17,500 + 500
Rent for the current year = 18,000

iv. Printing and Stationery for current year 2017-18:

Printing and Stationery for the current year = Opening Stock + Amount Paid - Closing Stock
Printing and Stationery for the current year = 3,000 + 4,750 - 3,750
Printing and Stationery for the current year = 4,000

18. Following is the receipts and payments account of Golden Club for the year ended
31st March 2019. Prepare the income and expenditure account for the year ended
31st March 2019.

Dr. Receipts and Payments Account for the year ended 31st March 2019 Cr.

Receipts Amount Payments Amount

To Balance b/d By Advertisement 6,550
Cash in hand 8,525 By Rent rates and Taxes 7,000
Current a/c with bank 9,285 By Repairs 7,500
To Donations 10,000 By Printing and Stationery 8,000
To Proceeds from charity show 8,100 By Government Bonds 2,500
To Subscription 26,000 By Telephone Expenses 500

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To Life membership fees 2,625 By Furniture (purchased on 35,000

1st July 2018)
To Entrance Fees 3,000 By Balance c/d
To Interest on investment @ 3,600 Cash in hand 1,585
7% for the year Cash at Bank 2,500
71,135 71,135

Additional Information:

a. Furniture is to be depreciated at the rate of 15% p.a.

b. There were 208 members and the subscription payable by each member to be
a life-time member is Rs. 125.

Subscription outstanding on 31st March 2018 3,000

Subscription outstanding on 31st March 2019 3,500
Subscription received in advance on 31st March 2018 2,000
Subscription received in advance on 31st March 2019 2,500
[6 M]
[Modified question asked in 2019, Sample Paper 2019-20]

Suggested Answer:
Dr. Income and Expenditure Account Cr.
for the year ended 31st March 2019

Expenditure Amount Income Amount

To Advertisement 6,550 By Donations 10,000
To Rent, Rates and Taxes 7,000 By Proceeds from
To Repairs 7,500 Charity show 8,100
To Printing and Stationery 8,000 By Subscription 26,000
To Telephone expenses 500 By Entrance fees 3,000
To Depreciation on furniture 3,937.5 By Interest on 3,600
(35000x15/100x9/12) Investments
To excess of Income over 17,212.5
Expenditure
50,700 50,700

Dr. Subscription Account Cr.

Particulars Amount Particulars Amount

To Subscription in arrears in the 3,000 By Subscription in advance at

beginning end 2,000
To Income and Expenditure 26,000 By Receipts and Payments 26,000
To Subscription in advance at end 2,500 By Subscription in arrears at end 3,500
31,500 31,500

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19. From the following particulars of Town Club, prepare the receipts and payments
account for the year ended 31st March 2019.

Particulars Rs. Particulars Rs.

Opening Cash in Hand 20,000 Books Purchased 1,36,000

Opening Cash at Bank 1,36,000 Sale of Old Newspapers 4,800
Subscriptions Received 6,28,000 Newspapers 34,800
Investment Purchased 2,00,000 Sports Material Purchased 20,000
Printing and Stationery 10,000 Interest received on Investments 1,88,000
Rent Paid 20,000 Honorarium to Coaches 60,000
General Expenses 92,000 Closing Cash in Hand 12,000
Donations Received 1,12,000 Closing Cash at Bank ?

[6 M]
[Modified question asked in 2019]
Suggested Answer:

In the books of Town Club

Receipts and Payments Account
for the year ended 31st March 2019
Dr. Cr.
Receipts Amount Payments Amount
To Balance b/d By Investments Purchased 2,00,000
-----Cash in Hand 20,000 By Rent Paid 20,000
---- Cash at Bank 1,36,000 1,56,000 By General Expenses 92,000
To Subscription 6,28,000 By Postage and Stationery 10,000
Received
To Donation Received 1,12,000 By Newspapers and 34,800
Magazines
To Sale of Old 4,800 By Books Purchased 1,36,000
Newspapers
To Interest on 20,000 By Sports Material Purchased 1,88,000
Investments Received
By Honorarium to Coacher 60,000
By Balance c/d
----Cash in Hand 12,000
----Cash at Bank 1,68,000 1,80,000
9,20,800 9,20,800

20. Prepare the income & expenditure account and balance sheet for the year ending
31.03.2019 from the receipts & payments account given below.

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Receipts Amount Payments Amount

To Balance b/d By Rent 30,000
Cash in hand 12,500 By Printing & Stationery 9,500
Cash at Bank 1,22,500 1,35,000 By Salaries 1,50,000
To Subscription 2,00,000 By Printer 20,000
To Bank Interest 1,000 By Investments 40,000
To Sale of Van 20,000 By Balance c/d:
Cash in hand 6,500
Cash at Bank 1,00,000 1,06,500

3,56,000 3,56,000
Additional Information:

a. Subscriptions include Rs. 40,000 for the year ending 31.03.2018 & Rs. 20,000 for
the year ending 31.03.2020. Rs. 40,000 of the current year are still in arrears.
b. Investments were purchased on 01.10.2018 and earns an interest @5% p.a.
c. Rent for 1 month Rs. 2,500 is still outstanding.
d. Payment for stationery Rs. 1,500 is still outstanding.
e. Van sold for Rs. 20,000 had a book value of Rs. 27,500.
[6 M]
[Modified question asked in 2019]
Suggested Answer:
Dr. Income and Expenditure Account Cr.
for the year ended 31st March 2019

Expenditure Amount Income Amount

To Rent By Subscription 2,00,000
30,000
Add: Outstanding 2,500 32,500 Less: For 2017-18 (40,000)
To Printing and Stationery 9,500 For 2019-20 (20,000)
Add: Outstanding 1,500 11,000 1,40,000
To Salaries 1,50,000 Add: Outstanding 40,000 1,80,000
To Loss on Sale of Van 7,500 By Bank Interest 1,000
Add: Accrued 1,000 2,000
By Deficit 19,000
2,01,000 2,01,000

Balance Sheet as at 31st March, 2019

Liabilities Amount Amount Assets Amount
Capital Fund: Cash in hand 6,500
Opening Balance 2,02,500 Cash at bank 1,00,000
Less: Deficit (19,000) 1,83,500 Outstanding Subscription 40,000
Advance Subscription 20,000 Interest Accrued 1,000
Outstanding Rent 2,500 Investments 40,000
Outstanding Printing & Stationery 1,500 Printer 20,000
2,07,500 2,07,500

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Workings Notes:
i. Calculation of Opening Balance of Capital Fund:

Balance Sheet as at 31st March 2018

Liabilities Amount Assets Amount
Capital Fund 2,02,500 Cash in hand 12,500
Cash at bank 1,22,500
Outstanding Subscription 40,000
Van 27,500
2,02,500 2,02,500

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