Accountancy Part AAccounts for Non Profit Organsiation

Life membership fee is :

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Taken as liability in Balance sheet

A life membership fee is a lump sum paid once in place of yearly subscriptions. It is a capital receipt, so it is not income of the year; it is added to the capital (general) fund, which is shown on the liabilities side of the Balance Sheet.

Why the other options are incorrect

Option (1) Credited to Receipt and Payment A/c — Incorrect. The cash received appears on the receipts (debit) side of the Receipts and Payments Account, and that account does not decide whether the item is capital or revenue.
Option (2) Debited to Income and Expenditure A/c — Incorrect. A capital receipt does not pass through the Income and Expenditure Account at all, and a receipt would never be on its debit (expenditure) side.
Option (4) Taken as asset in Balance sheet — Incorrect. The fee adds to the fund the organisation owes to its members, which is a liability, not an asset.

Note: This question is from the pre-rationalised NCERT book. The topic is not there in the latest NCERT book (2026-27), but it is still in the CUET 2026 syllabus, so do not skip it.

NCERT (Pre-rationalised edition):
Some Peculiar Items – “… Life Membership Fees: Some members prefer to pay lump sum amount as life membership fee instead of paying periodic subscription. Such amount is treated as capital receipt and credited directly to the capital/general fund.”