Which of the following statements is not true of a non-profit making organization?
Answer Details
The statement that is not true for a non-profit making organization is that "receipts and Payments account is a substitute for expenditure account."
A non-profit organization, like any other organization, needs to track its financial transactions. They prepare financial statements to assess their financial performance, financial position, and cash flow.
The Income and Expenditure account is the primary statement that a non-profit organization prepares to show their financial performance for a particular period. This statement includes all revenue and expenses for the period, but it excludes capital receipts and capital payments. Accruals and prepayments are also excluded from this statement.
On the other hand, the Receipts and Payments account is a statement that shows all cash inflows and outflows of a non-profit organization during a specific period. It is a summary of all cash transactions, including both revenue and capital receipts, and both revenue and capital payments.
Therefore, the Receipts and Payments account cannot be a substitute for the Income and Expenditure account as they serve different purposes. The former shows cash inflows and outflows, while the latter shows revenue and expenses incurred during a particular period.