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Answer - A
Explanation - All revenue and expenses of NPO are recorded in the statement of activity
which is income and expenditure account. Only Revenue incomes and Expenses are
recorded.
2. All assets and liabilities of Non-profit organisation are reported on its statement of
A. Fund flow statement
B. Cash Flow statement
C. Financial position
D. Income position
Answer - C
Explanation - The balance sheet is a statement which shows all assets and liabilities from
which the financial position of the business can be ascertained. All Assets and Liabilities
reported at the Balance sheet.
Answer - D
4. Classifying expenses into program activities and supporting activities is known as
the _______ basis
A. Both
B. Functional
C. Natural
D. None
Answer - B
Explanation - Classifying the expense on the basis of Programme and supporting activity is
called functional basis. Since, Programme Expenses are the expense incurred to carry out
programmes of Non profit organisation and supporting expenses are incurred for raising
funds and For management.
5. Reporting expenses by categories such as salaries, rent, utilities, etc. is known as
the ______ basis.
A. Both
B. Natural
C. None
D. Functional
Answer - B
Explanation - Natural basis report the expense by categories such as rent , salary etc.
6. Fund earmarked for investment in fixed assets is known as
A. Annuity fund
B. Prize fund
C. Assets fund
D. Loan Fund
Answer - C
Explanation - Assets funds are used to account for the construction or acquisition of fixed
assets such as buildings, equipment and roads.These are also called Capital project funds.
7. Which of the following is not a restricted fund
A. General fund
B. Assets fund
C. Annuity fund
D. Prize fund
Answer - A
Explanation - The restricted fund is those which can be utilized for the purpose only for which
they are made like prize fund for giving prize etc. Hence General fund is not a restricted fund
because it is not for a specific purpose.
8. The two types of restrictions on contributions that are classified as temporarily
restricted are purpose and
A. Moment
B. Time
C. Period
D. None
Answer - B
Explanation - Temporarily restricted contributions are those that are subject to a time period
condition .
9. All expenses of a Non-profit organisation are reported as part of the changes in ______ net assets.
A. Permanently Restricted
B. None of these
C. Temporarily restricted
D. Unrestricted
Answer - D
Explanation - If a donor does not specify a restriction/ Condition on his or her contribution, the
amount received by the non-profit organisation (NPO) is recorded as an asset and called
unrestricted net assets. we show the change in net assets (Revenue - Expense) as
unrestricted as the amount received can be utilized for any purpose or expense.
10. Normally the principal portion of an endowment will be classified as ________ net
assets.
A. Permanently restricted
B. Unrestricted
C. None of these
D. Temporarily restricted
Answer - A
Explanation - Permanently Restricted Assets are Assets of a not-for-profit organization that
comes with certain restrictions. Permanently restricted assets are any assets that are given to
a not-for-profit organisation by an outside individual or agency with restrictions on their use or
purpose and the principal portion of endowment fund is classified as Permanently restricted
net assets for not-for-profit organisation (NPO)
11. A non-profit organization's assets that have been designated by its board of
directors for a specific project should be reported on the external financial statements
as ________ net assets.
A. None of these
B. Temporarily restricted
C. Unrestricted
D. Permanently restricted
Answer - C
Explanation - If a donor does not specify a restriction or condition on his or her contribution to
NPO, the amount received by the non-profit Organisation (NPO) is recorded as an asset and
these are called unrestricted net assets. Unrestricted contribution revenues (reported on the
statement of activities) also cause the amount of unrestricted net assets to increase. Hence,
A non-profit organization's assets that have been designated by its board of directors for a
specific project should be reported on the external financial statements as unrestricted net
assets.
12. Contribution received by a Non-profit organisation is shown in the statement of
activities under the caption:
A. Both Revenue and Capital
B. None
C. Capital
D. Revenue
Answer - D
Explanation - A non-profit's statement of activities is issued instead of the income statement
which is issued by a Not-for-profit Organisation (NPO) which shows revenue such as
contributions, program fees, membership dues, grants, investment income, and amounts
released from restrictions. All these contributions are shown under the head revenues in the
statement of activity of NPO.
13. Which of the following is true relating to Income and expenditure account:
A - Adjustments relating to prepaid and outstanding expenses etc. are made
B - An assets account
C - Give fair idea of earned position
D - Records all transactions without distinguishing among current, previous and succeeding
accounting periods
A. (B)
B. (C)
C. (A)
D. (D)
Answer - C
Explanation - Income and expenditure account shows the amount earned and incurred during
a year after adjusting all prepaid and outstanding amounts. It shows only current year Income
and expenses.
14. ________ is an amount received by a non-profit organization as per the WILL of a
deceased person.
A. Endowment
B. Legacy
C. Annuity
D. Prize
Answer - B
Explanation - Legacy is an amount of money or property left to someone under a will of a
deceased person. It is a liability for NPO which is to be shown in the balance sheet of NPO.
Which form of financing is allowed for a nonprofit organization?
A. Debt
B. Sale of equity securities
C. None
D. Both
Answer - A
Explanation - NPO are allowed to take debt for meeting their capital expenditure.
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