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.
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The accounting equation for a non-profit organisation is almost the same as in the case of the profit-oriented organisation. Let's first briefly understand what accounting equation and non-profit organisation are: Accounting Equation Accounting equation is an equation that depicts the relationship bRead more
The accounting equation for a non-profit organisation is almost the same as in the case of the profit-oriented organisation. Let’s first briefly understand what accounting equation and non-profit organisation are:
Accounting Equation
Accounting equation is an equation that depicts the relationship between assets, liabilities and capital of an entity.
Assets = Liabilities + Capital
As per this equation, the total assets of an entity are equal to the sum of its total liabilities and total capital. This equation holds good in every situation.
Non-Profit Organisation
A Non-Profit Organisation is an entity which exists for purposes other than for profit. Such organizations exist and operate for charitable purposes, promotion of culture and sports and welfare of society. The accounting for Non-profit organisation is slightly different from For-profit organisations. In the case of a non-profit organisation, the capital account is known as the capital fund.
Accounting Equation for non-profit organisations
The Accounting equation for a non-profit organisation is as follows:
Assets = Liabilities + Capital fund.
The difference is only in name. In the case of non-profit organizations, the capital is known as a capital fund. Rest everything is the same. The accounting equation will be prepared as normally prepared for business concerns.
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