Life Membership is a capital receipt and will be added to capital fund in________a)Profit and loss accountb)Income expenditure accountc)None of thesed)Balance sheetCorrect answer is option 'D'. Can you explain this answer?

Question

Answer

Life membership fees sirf ek hi baar milti hai aur jab tak uski life khatam na ho tab tak apne liye liability hai isliye b/s liability side

Answer

Life member ship fee is kind of liability which by appear liability side in balance sheet

Answer

Life Membership is a capital receipt and will be added to capital fund in the balance sheet.

Life Membership is a type of membership offered by certain organizations or clubs that provides the member with lifetime benefits and privileges. When an individual becomes a life member, they typically make a one-time payment or contribution to the organization. This payment is considered a capital receipt and has a long-term impact on the financial position of the organization.

Capital Receipt:
A capital receipt refers to any receipt that affects the capital or net worth of an organization. It is a non-recurring receipt that does not arise from the regular activities of the organization. Capital receipts are typically long-term in nature and have an impact on the organization's financial position.

Addition to Capital Fund:
The capital fund represents the owners' or shareholders' equity in the organization. It represents the amount invested by the owners or shareholders to establish or expand the organization. Any increase in the capital fund represents an increase in the net worth or financial position of the organization.

When a life membership fee is received, it is considered a capital receipt and is added to the capital fund in the balance sheet. This addition reflects the increase in the organization's net worth due to the receipt of the life membership fee.

Balance Sheet:
The balance sheet is a financial statement that provides a snapshot of an organization's financial position at a specific point in time. It consists of three main sections: assets, liabilities, and owners' equity. The capital fund is part of the owners' equity section of the balance sheet.

The addition of the life membership fee to the capital fund is reflected in the balance sheet under the owners' equity section. It increases the total owners' equity and represents the long-term financial contribution of the life members to the organization.

Conclusion:
In conclusion, life membership fees are considered capital receipts and are added to the capital fund in the balance sheet. This addition reflects the increase in the organization's net worth and represents the long-term financial contribution of the life members.

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