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during the year 2007 a club received RS 100000 as entrance fees.according to accounting policy 40% of the fees is to be capitalised
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during the year 2007 a club received RS 100000 as entrance fees.accord...
Entrance fees Rs 60000(i.e., 60% of 100000) will be credited to income and expenditure account and Rs. 40000(i.e., 40%of 100000) will be added to capital fund in balance sheet.
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during the year 2007 a club received RS 100000 as entrance fees.accord...
Understanding Entrance Fees in Not-for-Profit Organizations
In a not-for-profit organization, entrance fees are often treated as a source of revenue that can be utilized for various activities. In 2007, the club received RS 100,000 as entrance fees, and according to its accounting policy, 40% of this amount is to be capitalized.
Calculation of Capitalization
- **Total Entrance Fees Received**: RS 100,000
- **Percentage to be Capitalized**: 40%
Capitalized Amount
- **Calculation**:
- Amount to be capitalized = Total Entrance Fees × Percentage to be Capitalized
- Amount to be capitalized = RS 100,000 × 40%
- Amount to be capitalized = RS 40,000
This RS 40,000 will be recorded as a capital receipt in the books of accounts, reflecting the long-term benefit that the organization expects to derive from the fees.
Remaining Amount for Revenue
- **Amount Treated as Revenue**:
- Remaining Amount = Total Entrance Fees - Capitalized Amount
- Remaining Amount = RS 100,000 - RS 40,000
- Remaining Amount = RS 60,000
The remaining RS 60,000 will be recognized as income in the income and expenditure account for the year 2007.
Accounting Treatment
- **Balance Sheet**:
- Capitalized Amount (RS 40,000) will appear under Fixed Assets or Capital Fund.
- **Income and Expenditure Account**:
- Revenue from Entrance Fees (RS 60,000) will be included in the income section.
This treatment ensures transparency and adherence to the accounting policies of not-for-profit organizations, allowing for effective financial management and reporting.
In a not-for-profit organization, entrance fees are often treated as a source of revenue that can be utilized for various activities. In 2007, the club received RS 100,000 as entrance fees, and according to its accounting policy, 40% of this amount is to be capitalized.
Calculation of Capitalization
- **Total Entrance Fees Received**: RS 100,000
- **Percentage to be Capitalized**: 40%
Capitalized Amount
- **Calculation**:
- Amount to be capitalized = Total Entrance Fees × Percentage to be Capitalized
- Amount to be capitalized = RS 100,000 × 40%
- Amount to be capitalized = RS 40,000
This RS 40,000 will be recorded as a capital receipt in the books of accounts, reflecting the long-term benefit that the organization expects to derive from the fees.
Remaining Amount for Revenue
- **Amount Treated as Revenue**:
- Remaining Amount = Total Entrance Fees - Capitalized Amount
- Remaining Amount = RS 100,000 - RS 40,000
- Remaining Amount = RS 60,000
The remaining RS 60,000 will be recognized as income in the income and expenditure account for the year 2007.
Accounting Treatment
- **Balance Sheet**:
- Capitalized Amount (RS 40,000) will appear under Fixed Assets or Capital Fund.
- **Income and Expenditure Account**:
- Revenue from Entrance Fees (RS 60,000) will be included in the income section.
This treatment ensures transparency and adherence to the accounting policies of not-for-profit organizations, allowing for effective financial management and reporting.
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during the year 2007 a club received RS 100000 as entrance fees.according to accounting policy 40% of the fees is to be capitalised Related: NCERT Solution - Accounting for Not-for-Profit Organisation (Part - 1)?
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