Question

A charitable organization has recently sold old office fumiture and purchased new sports equipment. In the Receipts and Payments Account, where would these transactions appear, and what impact would they have on the final balance?

Options

• Sale of furniture appears on the debit side; purchase of sports equipment appears on the credit side, reducing the final balance.

• Sale of furniture appears on the credit side; purchase of sports equipment appears on the debit side, increasing the final balance.

• Both transactions appear on the debit side, reducing the final balance.

• Both transactions appear on the credit side, increasing the final balance.

Answer 1

Sale of furniture appears on the debit side; purchase of sports equipment appears on the credit side, reducing the final balance.

Explanation:

The Receipts and Payments Account serves as a cash summary, with cash inflows deducted and outflows credited. Selling old furniture brings cash into the organization, putting it on the debit side, whereas purchasing sports equipment results in a cash payment on the credit side, reducing the overall cash balance.