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Question
Receipts and payments account serves as the basis for preparing the balance sheet of non-trading organisation.
Solution
Against:
- A non-trading organization's Balance Sheet does not start with the Receipts and Payments Account.
- The closing balance sheet is prepared using the Income and Expenditure Account as well as the opening balance sheet.
- The Receipts and Payments Account is a summary of all cash transactions that are equal between capital and revenue items or match income and expenses to the appropriate period.
- As a result, it does not provide the necessary asset, liability, and capital information to create a complete Balance Sheet.
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RELATED QUESTIONS
Write any two uses of the Balance Sheet?
What are the features of a Balance Sheet?
It is a financial statement which sets out the assets and liabilities of a trading or non-trading organisation as on a certain date.
The excess of assets over liabilities represents the ______ of the owner.
It helps the investor to know the earning capacity and financial health of the firm.
Distinguish between a Profit and Loss Account and a Balance Sheet.
The following trial balance was extracted from the books of A. Harding, as on 31st March, 2019:
| Debit (₹) | Credit (₹) | |
| Capital | 20,100 | |
| Drawings | 1,500 | |
| Cash in Hand and at bank | 1,400 | |
| Petty Cash | 100 | |
| Cash Purchases and Sales | 10,000 | 20,000 |
| Credit Purchases and Sales | 12,000 | 25,000 |
| Returns | 2,000 | 1,000 |
| Discount | 400 | |
| Carriage Inwards | 500 | |
| Salaries | 6,000 | |
| Sundry and Petty Expenses | 1,200 | |
| Opening Stock | 5,000 | |
| Bad Debts | 600 | |
| Rent | 1,500 | |
| Machinery | 36,000 | |
| Furniture | 5,000 | |
| Debtors and Creditors | 5,000 | 10,000 |
| Stationary | 2,500 | |
| Commission | 200 | |
| Bank Loan | 14,400 | |
| 90,700 | 90,700 |
Prepare the complete set of final accounts for Mr. A. Harding, after incorporating the following adjustment:
- Closing stock is ₹ 26,000.
The main use(s) of a Balance Sheet for a non-trading organisation is/are ______.
It is always prepared on a particular date.
______ shows the financial position of the organization.
