Identify the steps in preparation of final accounts of not for profit…

Identify the steps in preparation of final accounts of not for profit organisation (NPO).

A. Prepare Balance sheet of NPO
B. Prepare Income & expenditure Account from Receipts and payment A/c
C. Prepare Receipts and payment A/c
D. Adjust outstanding / prepaid expenditure / Income and determine surplus / deficit
E. Prepare cash book

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → E, C, B, D, A

The final accounts of a not-for-profit organisation are built up one from another:

(E) The cash book records every cash receipt and payment during the year.
(C) The Receipts and Payments Account is a summary of the cash book under suitable heads.
(B) The Income and Expenditure Account is prepared from the Receipts and Payments Account, taking only revenue items.
(D) The revenue items are adjusted for outstanding and prepaid amounts, and the surplus or deficit is found.
(A) Finally the Balance Sheet is prepared, with the surplus or deficit added to or deducted from the capital fund.

Note: This question is from the pre-rationalised NCERT book. The topic is not there in the latest NCERT book (2026-27), and it is also out of the CUET 2026 syllabus.

NCERT (Pre-rationalised edition):
Accounting Records of Not-for-Profit Organisations – “… The Receipt and Payment Account is the summary of cash and bank transactions which helps in the preparation of Income and Expenditure Account and the Balance Sheet.”

NCERT (Pre-rationalised edition):
Steps in the Preparation of Income and Expenditure Account – “… 4. Consider only the revenue receipts to be shown on the income side of Income and Expenditure Account. Some of these need to be adjusted by excluding the amounts relating to the preceding and the succeeding periods and including the amounts relating to the current year not yet received. 5. Take the revenue expenses to the expenditure side of the Income and Expenditure Account with due adjustments as per the additional information provided relating to the amounts received in advance and those not yet received.”

NCERT (Pre-rationalised edition):
Balance Sheet – “‘Not-for-Profit’ Organisations prepare Balance Sheet for ascertaining the financial position of the organisation. The preparation of their Balance Sheet is on the same pattern as that of the business entities. It shows assets and liabilities as at the end of the year. Assets are shown on the right hand side and the liabilities on the left hand side. However, there will be a Capital Fund or General Fund in place of the Capital and the surplus or deficit as per Income and Expenditure Account which is either added to/deducted from the capital fund, as the case may be.”