51
Profit on the sale of furniture in a non profit organisation is to be shown on the:
Answer & Solution
Answer: Option
B
Solution:
* Non-Profit Organizations (NPOs): These organizations don't aim to make a profit. Instead, they focus on a cause or service.
* Income and Expenditure Account: This is like a Profit and Loss account, but for NPOs. It shows the organization's income and expenses during a period.
* Receipts and Payments Account: This account records all cash inflows (receipts) and outflows (payments).
* Balance Sheet: This shows the organization's assets, liabilities, and equity at a specific point in time.
Now, let's look at the options:
* Option A: Credit side of Profit and Loss a/c: Incorrect. NPOs don't prepare a Profit and Loss account. They use an Income and Expenditure account instead.
* Option B: Credit side of Income and Expenditure account: Correct. Profit (or gain) from the sale of an asset (like furniture) is considered income for the NPO. Income is shown on the credit side of the Income and Expenditure account.
* Option C: Receipt side of Receipts and Payment account: Incorrect. While the cash received from the sale would be on the receipt side, this account doesn't show the profit. It only shows the cash flow.
* Option D: Assets side of Balance Sheet: Incorrect. The furniture WAS an asset, but after it's sold, it's no longer there. The profit isn't an asset; it's an increase in the organization's funds.
Therefore, the profit on the sale of furniture in a non-profit organization is shown on the credit side of the Income and Expenditure account.
* Income and Expenditure Account: This is like a Profit and Loss account, but for NPOs. It shows the organization's income and expenses during a period.
* Receipts and Payments Account: This account records all cash inflows (receipts) and outflows (payments).
* Balance Sheet: This shows the organization's assets, liabilities, and equity at a specific point in time.
Now, let's look at the options:
* Option A: Credit side of Profit and Loss a/c: Incorrect. NPOs don't prepare a Profit and Loss account. They use an Income and Expenditure account instead.
* Option B: Credit side of Income and Expenditure account: Correct. Profit (or gain) from the sale of an asset (like furniture) is considered income for the NPO. Income is shown on the credit side of the Income and Expenditure account.
* Option C: Receipt side of Receipts and Payment account: Incorrect. While the cash received from the sale would be on the receipt side, this account doesn't show the profit. It only shows the cash flow.
* Option D: Assets side of Balance Sheet: Incorrect. The furniture WAS an asset, but after it's sold, it's no longer there. The profit isn't an asset; it's an increase in the organization's funds.
Therefore, the profit on the sale of furniture in a non-profit organization is shown on the credit side of the Income and Expenditure account.