The correct answer is 2. Revenue Expenditure. An honorarium is a voluntary payment paid to a person for the services provided. It is a type of cost incurred for the expenses of guests and volunteers. This is a payment made to the person who is not an employee of the institution. Revenue expendituresRead more
The correct answer is 2. Revenue Expenditure. An honorarium is a voluntary payment paid to a person for the services provided. It is a type of cost incurred for the expenses of guests and volunteers. This is a payment made to the person who is not an employee of the institution.
Revenue expenditures are the short-term expenses and consumed within one accounting year and are also known as operating expenses.
Payment of honorarium to the secretary is treated as revenue expenditure because benefits from the expense are derived in the same accounting period. The honorarium is a type of outside expense and any outside expense is revenue in nature. It is a daily allowance incurred to cover the hotel/stay expense.
Payment of honorarium to the secretary is shown on the Expenditure side of the Income and Expenditure Account.
Capital Expenditure is the expense incurred on acquiring an asset and honorarium cannot be a capital expenditure as benefits derived from it cannot be carried forward to the next year.
It cannot be treated as cash or credit expense although it is paid in cash or credit. In this case, it will be treated as a revenue expense while preparing financial statements.
Payment of honorarium is mainly a topic of not-for-profit organizations.
See less
To start with let me first explain the difference between receipts and income & payment and expenditure. Although Receipts and Income may look similar terms, there are some differences. Receipts have their relation with both cash and cheques received on account of various items of the organizatiRead more
To start with let me first explain the difference between receipts and income & payment and expenditure.
Although Receipts and Income may look similar terms, there are some differences.
Receipts have their relation with both cash and cheques received on account of various items of the organization. Whereas, income is considered as a revenue item for finding surplus or deficit of the organization. All the receipts collected during the year may not be considered as income.
For Example, if an organization sale of its assets that is of a capital nature, it would not be considered as an item of income and hence would be treated in the balance sheet.
Similarly, Payment and Expenditure are two different terms. Payments are those that have their relation with cash and cheques given for various activities of the organization. Whereas, Expenditure is considered as revenue expenditure for ascertainment of surplus or deficit in the case of a not-for-profit organization. All payments made during the year may not be considered as expenditures.
Differences
See less