Financial Accounting WASSCE (SC), 2022

Question 3

Explain the following terms:
(i) Accumulated fund;
(ii) Statement of Affairs.
List five sources of income for a not-for-profit-making organization.
State three differences between Receipts and Payments Account and Income and Expenditure Account.

Observation

Generally in question 3, the candidates were well disposed in answering the question and their attempts were quite impressive. The overall highest score for those who attempted was gained in this question.

Some of the suggested answers are:

3(a) Explanation of terms:

Accumulated fund: It is the equivalent of capital for a not-for-profit making organization.

It is the difference between an organization’s total assets and total liabilities.

Statement of Affairs: It is a statement drawn from incomplete records depicting assets, liabilities and capital at a point in time.

It is the statement prepared at a point in time to determine the accumulated fund or capital of an organization.

3(b) Sources of income for a not-for-profit making organization:

Subscriptions or Dues;
Donations;
Interest on bank deposits or investments;
Fine on members;
Entrance fees;
Life membership fees;
Proceeds from sales of items – fixed assets e.t.c;
Locker fees;
Proceeds from income generating activities – bar operations, telephone, rentals, dance, bazaars, funfair e.t.c;
Grants or subvention;
Gifts.

3(c)

	*Receipts and Payments Account*	*Income and Expenditure Account*
1.	It is a real account.	It is a nominal account.
2.	It is prepared on cash basis.	It is prepared on accrual basis.
3.	The balance on the account represents cash or an overdraft.	The balance on the account represents surplus or deficit.
4.	It is equivalent to the cash book.	It is equivalent to the profit and loss account.
5.	It records both capital and revenue items.	It records only revenue items.
6.	Receipts are debited and payments credited.	Income are credited while expenditure are debited subject to adjustments.
7.	It is usually prepared on daily basis.	It is usually prepared periodically.
8.	The balance on the account is carried to the next period.	The balance on the account is transferred to the accumulated fund at the end of the period.