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MCQ NPO

The document consists of multiple-choice questions (MCQs) related to Non-Profit Organizations (NPOs), covering topics such as objectives, income sources, financial statements, and accounting principles. It includes questions about specific accounting practices, calculations for income and expenditure, and explanations of various financial terms relevant to NPOs. Additionally, it features statements that require validation regarding the operations and financial management of NPOs.

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4 views3 pages

MCQ NPO

The document consists of multiple-choice questions (MCQs) related to Non-Profit Organizations (NPOs), covering topics such as objectives, income sources, financial statements, and accounting principles. It includes questions about specific accounting practices, calculations for income and expenditure, and explanations of various financial terms relevant to NPOs. Additionally, it features statements that require validation regarding the operations and financial management of NPOs.

Uploaded by

niveditaad123
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MCQ CMA FOUNDATION

TOPIC: NON -PROFIT ORGANISATION


1. What is the primary objective of a Non-Profit Organization (NPO)?
a) To earn maximum profits
b) To serve the society and fulfill a social cause
c) To maximize shareholder value
d) To provide dividends to members

2. Which of the following is a common source of income for NPOs?


a) Sales revenue
b) Donations and grants
c) Shareholder investments
d) Interest from loans

3. Which financial statement is typically prepared by Non-Profit Organizations to show their financial
performance?
a) Profit and Loss Statement
b) Income and Expenditure Account
c) Cash Flow Statement
d) Balance Sheet

4. What is a "Surplus" in the context of an NPO?


a) The amount by which income exceeds expenses
b) The amount of funds owed to creditors
c) The total amount of donations received
d) The excess of expenses over income

5. In NPO accounting, what is the “Capital Fund” or “General Fund”?


a) A fund created by the sale of assets
b) The accumulated surplus of the organization
c) A fund representing the investment of shareholders
d) A fund representing long-term liabilities

6. What does the term "Accrual Basis of Accounting" mean for NPOs?
a) Recording income and expenses only when cash is received or paid
b) Recording income and expenses when they are incurred, regardless of cash flow
c) Recording income and expenses only at the end of the financial year
d) Not recording expenses until the cash is available

7. Why do NPOs maintain a "Receipts and Payments Account"?


a) To show the financial position at the end of the year
b) To record all cash transactions during the year
c) To calculate the net profit or loss
d) To evaluate the performance of the organization

8. The following information is extracted from the books of a Non-Profit Organization for the year ending 31st
March 2024:

Subscriptions received during the year: ₹25,000


Subscriptions outstanding at the beginning of the year: ₹3,000
Subscriptions outstanding at the end of the year: ₹2,000
Subscriptions received in advance at the beginning of the year: ₹1,500
Calculate the amount of subscriptions to be shown in the Income and Expenditure Account.
a) ₹24,500
b) ₹26,500
c) ₹28,000
d) ₹25,500

9. A sports club purchased sports equipment for ₹50,000 on 1st April 2022. Depreciation is charged at 10% per
annum on a straight-line basis. Calculate the depreciation expense to be shown in the Income and
Expenditure Account for the year ending 31st March 2024.
a) ₹5,000
b) ₹10,000
c) ₹7,500
d) ₹4,500

10. The Receipts and Payments Account of a charitable trust shows a payment of ₹15,000 for rent, which includes
₹3,000 for the last year. If the rent payable for the current year is ₹14,000, what is the amount of rent to be
shown in the Income and Expenditure Account for the current year?
a) ₹15,000
b) ₹12,000
c) ₹14,000
d) ₹16,000
Answer: c) ₹14,000

11. A library purchases books worth ₹20,000 during the year and sells old newspapers and magazines for ₹1,200.
If the books are to be capitalized and depreciation is charged at 20% per annum, what is the depreciation
expense for the books for the current year?
a) ₹4,000
b) ₹3,800
c) ₹2,000
d) ₹2,400

12. A Non-Profit Organization receives a donation of ₹30,000, which is to be used specifically for building
maintenance. The organization spends ₹18,000 on building repairs and maintenance during the year. What
amount will be carried forward as a specific fund at the end of the year?
a) ₹12,000
b) ₹18,000
c) ₹30,000
d) ₹48,000

13. A school’s Receipts and Payments Account shows fees received during the year as ₹60,000. The fees
outstanding at the end of the previous year were ₹5,000, and at the end of the current year, they are ₹7,000.
Calculate the amount of fees to be shown in the Income and Expenditure Account for the current year.
a) ₹62,000
b) ₹58,000
c) ₹55,000
d) ₹65,000

14. During the year, a cultural club received a legacy of ₹50,000. The club's policy is to treat all legacies as capital
receipts. How should this amount be shown in the financial statements?

a) As income in the Income and Expenditure Account


b) As an expense in the Income and Expenditure Account
c) As a capital receipt in the Balance Sheet
d) As a liability in the Balance Sheet
15. A Non-Profit Organization’s Income and Expenditure Account shows a surplus of ₹10,000. If the opening
balance of the Capital Fund was ₹50,000 and the organization received donations of ₹15,000 during the year,
what is the closing balance of the Capital Fund?

a) ₹65,000
b) ₹75,000
c) ₹85,000
d) ₹70,000

EXPLAIN WITH REASON THE FOLLOWING STATEMENT ARE CORRECT OR INCORRECT


1. NPOs aim to maximize profits for their members.

2. The Receipts and Payments Account of an NPO is prepared on an accrual basis.

3. An NPO can earn a surplus, which is reinvested into the organization.

4. Subscriptions received in advance are considered a liability for an NPO.

5. Donations given for a specific purpose are treated as revenue income.

6. The Income and Expenditure Account of an NPO is similar to a Profit and Loss Account of a for-profit
business.

7. The Capital Fund of an NPO is the equivalent of the owner’s equity in a for-profit business.

8. Assets donated to an NPO are recorded in the Income and Expenditure Account.

9. The Balance Sheet of an NPO includes both assets and liabilities.

10. Life membership fees are always treated as revenue income.

11. Depreciation is not charged on fixed assets owned by an NPO.

12.Outstanding expenses of an NPO are shown on the liabilities side of the Balance Sheet.

13.An NPO can distribute its surplus among its members.

14.The main sources of income for NPOs are donations, grants, and membership fees.

15.The Receipts and Payments Account records both cash and credit transactions.

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