Which of the following is false for Not-for-profit organisation?

Scholarships granted to students out of funds provided by government will be credited to Income and Expenditure Account

The correct answer is Option (1) → Scholarships granted to students out of funds provided by government will be credited to Income and Expenditure Account.

* Scholarships granted to students out of funds provided by government will be credited to Income and Expenditure Account - This statement is false. Any expense is debited not credited to the income & expenditure account.

* Receipt and Payment Account does not differentiate between Capital and Revenue receipts- This is true. 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. It is prepared at the end of the accounting year on the basis of cash receipts and cash payments recorded in the cash book. It is a summary of cash and bank transactions under various heads.

* Opening Balance sheet is prepared when the opening Balance of Capital fund is not given- This is true. The preparation of the 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. Thus, capital fund is the excess of Assets over Liabilities. Opening capital fund is calculated by preparing opening balance sheet for the not for profit organisations.

* The balancing figure on credit side of Income and Expenditure denotes excess of expenses over incomes- This is true. Income and expenditure account is the summary of income and expenditure for the accounting year. It is just like a profit and loss account prepared on accrual basis in case of the business organisations. It includes only revenue items and the balance at the end represents surplus or deficit. The Income and Expenditure Account serves the same purpose as the profit and loss account of a business organisation does. All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side and incomes and gains on the income side of the account. It shows the net operating result in the form of surplus (i.e. excess of income over expenditure) or deficit (i.e. excess of expenditure over income), which is transferred to the capital fund shown in the balance sheet.