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Non Profit Organizations – CA Foundation Notes

Financial Statements of  Non Profit Organizations – CA Foundation, CPT notes, PDF

This article is about Financial Statements of Non Profit Organizations for CA foundation CPT students. we also provide PDF file at the end.

Non Profit Organizations

Financial Statements of Non Profit Organizations

Alternative names:

  1. Final Accounts of Non-Trading Concern;
  2. Receipt & Payment Account and Income & Expenditure Account

What we will study in this chapter:

  1. We will study how the final accounts of charitable organizations like trust, society, clubs etc. are prepared and accounting for and meaning of items which are specific to them.
  2. We will study what is included in the financial statements of such organisation.
  3. We will use the same fundamental accounting principles and procedures studied in 1st chapter, because these are applicable everywhere.
  4. We will also study the different ways in which questions are asked in the examination.

Such organisations are generally registered as Trust or Societies. If such an organisation is registered u/s 8 of the Companies Act, 2013, then it will have to prepare its Financial Statement as per Schedule III of the Companies Act, 2013 as covered in Chapter 25 Company Financial Statement.

INTRODUCTION

The charitable organizations like trust, clubs, schools, etc., which are non-trading/non-profit motive organizations prepares their financial statements (final accounts) in the following form:

(i) Income & Expenditure A/c (ii) Balance sheet.

Generally such organizations also prepares a Receipt & Payment A/c.

There are some accounts, which are specifically related to such organizations like donations, subscription, entrance fees, fund a/c etc. Also there are different ways in which question is asked in the examination.

Usual type of questions are:

(A)     Prepare Final a/c from Receipt & Payment (R&P) a/c and Other Information given

(B)     Prepare R&P a/c from I&E a/c and Other Information given

(C)    Prepare Final a/c from Trial Balance (TB) and Other Information given

These are also final accounts although of different type of entities, hence whatever is given in Chapter on final accounts is equally and more or less fully applicable here as well. Hence students are advised to study this chapter only after studying Final Account portion.

21.1   EXPLAIN INCOME AND EXPENDITURE ACCOUNT (l&E A/C)

♦        Income & Expenditure Account – is just like a profit & loss account.

♦        All the Expenses for that year i.e., related to that year, will be debited to it.

♦        All the incomes related to that year will be credited to it,

♦        If the credit side is more, the balance is known as “Surplus” (Profit) &

♦        If the debit side is more the balance is known as “Deficit” (Loss) which is then

♦    Transferred (Surplus is credited/Loss is debited) to the capital account of the Association/Trust which is known by different names such as Trust Fund/General Fund/Capital Fund etc.

Important Points:

Income is what is earned during the year and Expense is what is incurred during the year. When an amount is paid or received, is not important, while preparing an Income & Expenditure a/c. The items which are shown in Income & Expenditure a/c in this year may have been paid/received in this year or previous year (ie brought forward as opening prepaid/pre-received) or next year (i.e, carried forward as closing payable/receivable) (i.e. apply mercantile system/accrual concept).

Generally such organization may not have trading of goods etc. It may have some new items like donation, subscription, entrance fees, and expenses on the object of trust etc.

It is not necessary that balance of I&E a/c will be fully transferred to Trust Fund a/c (though usually done by authors in their books). Many organizations keep on accumulating it, then balance of I&E a/c will appear in balance sheet just like P&L a/c balance appears in balance sheet of corporate entities.

Simple Format of Income and Expenditure A/c.

Bhagat Singh College Sports Club, Delhi

Dr.Income and Expenditure A/c

for the year ending on 31st March, 2011

Cr.
ExpenditureRs.IncomeRs.
To Rent a/cBy Subscription a/c
To Match Expenses a/cBy General Donations a/c
To Postage Expenses a/cBy Entrance Fees a/c
To Salary a/cBy Profit on sale of old sports material a/c
To Repairs & Maintenance a/cBy Miscellaneous Receipts a/c
To Sports Materials consumed
To Depreciation on Furniture
To Miscellaneous Expenses a/c
To Prize expenses a/c
To Surplus transferred to
Capital Fund a/c
Total—–Total—–

Illustration 21.1: From the following data, prepare an Income and Expenditure Account for the year ended 31st December, 2011 of the Mayura Hospitals.

Receipt and Payments Account (For the year ended 31st Dec., 2011)

Particulars (Receipts)Rs.Particulars (Payment)Rs.
To Balance:By Salaries (Rs.3600 for 2010)15,000
Cash400By Hospital Equipment8,500
Bank2.6003,000By Furniture purchased3,000
By Additions to Building25,000
To Subscriptions:By Printing & Stationery1,800
For 20102,550By Diet Expenses7,800
For 201112,250By Rent & Rates (Rs.150 for 2012)1,000
For 20121.20016,000By Electricity & Water Charges1,200
By Office Expenses1,000
To Govt. Grant:By Investment .10,000
For Building                 40,000By Balances:
For Maintenance         10,00050,000Cash                                        700
To Fees from Sundry patients2,400Bank                                        3,4004,100
To Donations (not to be capitalized)4,000
To Net Collection from benefit show3,000
78,40078,400

Additional information:

(i) Subscription in arrears as on 31-12-2010 Rs.3,200

(ii) Investments in 8% Govt. Securities were made on 1st July, 2011

Solution:

Income and Expenditure A/c for the Year Ended 31.12.2011

Particulars (Expenditure)Rs.Particulars (Income)Rs.
To Salary11,400By Interest on Govt. Securities
To Printing & stationery1,800(10,000 × 896 × 6/12)400
To Diet expenses7,800By Donations4,000
To Rent & rates850By Fees from patient2,400
To Electricity & Water1,200By Govt, grant for Maintenance10,000
To Office expenses1,000By Net collection from benefit show3,000
To Surplus transferred to capital fund8,000By Subscription12,250
32,05032,050

WORKING NOTES:

Subscription A/c

To Opening Outstanding3,200By Cash a/c (Collected)16,000
To Income & Expenditure A/c12,250By Closing Outstanding (3200-2550)650
(Income) (Balancing figure)
To Closing Balance (Advance)1,200
16.65016.650

Salary A/c

To Cash/Bank a/c (Paid)15,000By Balance outstanding b/d3,600
By Income & Expenditure A/c (Expense)11,400
15.00015,000

Rent A/c

To Cash a/c (Paid)1,000By Income & Expenditure (Balance figure)850
By Closing Prepaid c/f150
1,0001,000

Important Points:

  1. Govt. grant for Building will be credited to building fund a/c and will appear in Balance sheet.
  2. Addition to/Purchase of Furniture, Equipment, Building and Investment will be debited to respective asset a/c and will appear in Balance sheet.

21.2 EXPLAIN BALANCE SHEET

♦    Balance sheet is prepared as usual, the only difference is that some new type of items may also be there in this case. Like funds a/c.

♦       Balance sheet shows the financial position of the entity as at a particular point of time.

♦       It shows what and how much entity owns (i.e. its assets) and

♦       How much it owes to others (i.e. its liabilities),

♦       The balance is the owners equity i.e. Capital fund/trust fund.

♦       It is not an account, hence does not have debit and credit side.

♦    On one side assets like fixed assets (building, furniture, etc), current assets (like stock, debtors, receivables, cash bank balance, advances, pre-paid etc.) and investments if any are shown.

♦    On the other side in addition to owners capital Le trust fund and reserves, the outside liabilities like loans taken, creditors, expenses payable etc. are shown.

♦       The two sides total must be same.

Important Points:

Even though balance sheet does not have debit and credit side, student should remember that asset side represent debit and capital and liability side represent credit. It will help in correctly preparing final accounts.

Generally Mercantile/accrual system is followed, as it is the proper and complete system to measure the performance of entity and to show its financial position. In your syllabus every where this is considered. Under this system, incomes are recognized when these are earned irrespective of whether amount is received or not. Similarly expenses are recognized when these are incurred or accrued irrespective of whether amount is paid or not. As a result we have to make adjustment for expenses outstanding (payable), prepaid, income outstanding (receivable) and advance-received etc.

Simple Format of balance sheet.

Bhagat Singh College Sports Club, Delhi Balance Sheet as at 31st March, 2011

LiabilitiesRs.AssetsRs.
Capital Fund:Fixed Assets:
Opening BalanceFurniture
Add: Surplus as per I&E a/cBuilding—-
Add: Entrance Fees
Add: Donation capitalized
Add: Donation in kind—-Investments:
Prize Fund Investments
Prize Fund:Building Fund Investments
Opening BalanceGeneral Investment—-
Add: Donations
Add: Income on InvestmentCurrent Assets:
Stock of Sports Material
Less: Expenses incurred—-Subscription in arrears
Prepaid Expenses
Building Fund:Cash Balance
Opening BalanceBank Balance—-
Add: Donations
Add: Income on Investment—-
Current Liabilities:
Creditors for sports material
Subscription in advance
Outstanding Expenses—-
Total——Total—–

Illustration 21.2: (Adopted from Nov. 1999) Mahaveer Sports Club gives the following information for the year ended March 31,2011.                                                        .                       .                             .

As on 31.3.2010 (Rs.)As on 31.3.2011 (Rs.)
Outstanding Expenses2,8004,100
Library Books10,00020,000
Sports Goods8,00010,000
Furniture and Fixtures10,00010,000
Subscriptions Receivable5,00012,000
Investment – Government Securities50,00050,000
Accrued Interest600 .600
Cash Bank balance5,20012,020

Provide Depreciation on:

Furniture and Fixtures @ 10% p.a. Sports Goods @ 20% p.a.         Library Books @10% p.a.-

Surplus for the year after providing above depreciation is Rs. 20,220.

You are required to prepare Clubs Opening balance sheet as on 1.4.2010 and Closing balance sheet as on 31.3.2011.

Solution:

Balance sheet on date 31.3.2011

LiabilitiesRs.AssetsRs.
Capital fund86,000Sports goods8,000
(+) Surplus20.2201,06,220(+) Addition2,000
Outstanding expenses4,100(-) Depreciation 20%1.8008,200
Library10,000
(+) Addition10,000
(-) Depreciation 10%1.50018,500
Furniture10,000
(-) Depreciation 10%1.0009,000
Cash bank12,020
Subscription Outstanding12,000
Investment50,000
Accrued interest600
1,10,3201,10,320

Depreciation on addition during the year is charged for half of the year (i.e. for 6 month)

Balance sheet on date 31.3.2010 (1.4.2010)

LiabilitiesRs.AssetsRs.
Capital fund (Balancing figure)86,000Cash/bank5,200
Outstanding expenses2,800Library10,000
Sports goods8,000
Furniture10,000
Investment50,000
Accrued interest600
Subscription outstanding5,000
88,80088,800

21.3 DESCRIBE RECEIPT AND PAYMENT ACCOUNT (R&P A/C)

♦       Receipt & Payment Account – is a summarized cash book.

♦       All receipts in that year may be loan, a capital receipt or an income will be Debited to Receipt & Payment a/c.

♦       Income received in this year may be related to this year or previous year or next year.

♦    Similarly all payments made in this year may be for capital expenditure, repayment of loan, revenue expenditure etc. should be credited to Receipt & Payment A/c.

♦       The revenue expenditure paid in this year, may relate to this year or previous year or next year.

♦       Balance of this a/c is the closing cash and bank balance and will appear in the balance sheet.

Important Points:

Such organization are not doing business (some small incidental activity may be there) hence significant part of its transactions take place on cash. Credit transactions and adjustments will be quite insignificant. Hence it is customary for such organization to present receipt and payment a/c as part of final a/c.

Simple Format of Receipt and Payment A/c.

Receipts and Payments Account of Bhagat Singh College Sports Club, Delhi

for the year ended on 31 st March, 2011

Dr.Cr.
ReceiptsRs.PaymentsRs.
To Opening Balance b/f: Cash           —By Rent
                                    Bank                ——-By Postage Expenses
To SubscriptionBy Furniture (Purchased)
To Entrance FeesBy Creditors for sports Material
To General DonationsBy Cost of prizes
To Donations for Prize FundBy Building Fund Investment
To Donations for Building FundBy Match Expenses
To Sale of old Sports MaterialsBy Miscellaneous Expenses
To Interest onBy Closing Balance c/f; Cash
Prize Fund Investment                       —Bank
Building Fund Investment                   —
General Investment                            ——-
To Miscellaneous Receipts—-
—–—-

Differentiation between Fund account and money

Fund word is used for Cash i.e. money in finance but when we talk of Fund a/c in accounts remember for ever that it is not money, rather it’s a notional account which gives information about the nature and purpose of receipt and has credit balance and appears on liability side. Money or cash has debit balance and hence appears on asset side. Just remind yourself of double entry say for donation or grant received for building fund.

Cash/Bank A/c Dr.                 —         : This is asset

To Building Fund A/c               —-        : This shows the nature and purpose of above receipt.

Illustration 21.3: (Adopted from Nov. 1998) The following informations were obtained from the books of Delhi Club as on 31.3.2011 at the end of the first year of the Club. You are required to prepare Receipts and Payments Account for the year ended 31.3.2011:

(i) Donations received for Building and Library Room Rs. 2,00,000.

(ii) Other revenue receipts:

Actual Receipts Rs.
Entrance Fees17,000
Subscription19,000
Locker Rents600
Sundry Income1,060
Refreshment Account16,000

(iii) Other actual payments:

Actual Payments Rs.
Land (cost Rs. 10,000)10,000
Furniture (cost Rs. 1,46,000)1,30,000
Salaries4,800
Maintenance of Playgrounds1,000
Rent8,000
Refreshment Account8,000

Donations to the extent of Rs. 25,000 were utilized for the purchase of Library Books, balance was still unutilized. In order to keep it safe, 9% Govt. Bonds of Rs. 1,60,000 were purchased on 31.3.2011. Remaining amount was put in the Bank on 31.3.2011 under the term deposit.

Solution:

Delhi Club

Receipt and Payments A/c for the year ended 31st March, 2011

ReceiptsRs.PaymentsRs.
To Building and library fund a/c2,00,000By Library book a/c                 25,000
To Entrance fees a/c17,000By Bond 9% Govt. a/c          1,60,000
To Subscription a/c19,000By Fixed deposit a/c (Bal. fig) 15.0002,00,000
To Locker rent a/c600By Land a/c10,000
To Sundry income a/c1,060By Furniture a/c1,30,000
To Refreshment a/c16,000By Salaries a/c4,800
To Closing balance (Overdraft balance)1,08,140By Maintenance of playgrounds a/c1,000
(balancing figure)By Rent a/c8,000
By Refreshment a/c8,000
3,61,8003,61,800

21.4 WHAT IS ENTRANCE FEES AND HOW IS IT ACCOUNTED FOR?

♦    The Associations collect entrance fees/admission fees from the new members at the time of their admission.

♦    It is different from the membership fees/subscriptions, which are received every year and hence treated as revenue income and transferred to Income & Expenditure account. But the entrance fees is received only once from a member, hence it can be treated as follows:

(a)  If the amount is just sufficient to recover the expenditure incurred while admitting any member then it will be treated as revenue income and transferred to Income & Expenditure account.

(b)  Otherwise the entrance fees can be Capitalized & transferred to the Trust Fund Account. OR;

(c)  Entrance fees may be treated as deferred Income and shown in the Balance Sheet under the head “Entrance Fees Account” & Part-part amount can be written off every year by transferring to Income & Expenditure A/c in proportion to the benefit extended to the members, estimated on some suitable basis.

Illustration 21.4 : 50 members joined the trust and paid entrance fees Rs.500 each. Pass journal entry and suggest treatment.

Solution:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank a/cDr.25,000
To Entrance fees A/c25,000
(Entrance fees received 50 × 500 = 25,000)
2.Entrance fees A/cDr.25,000
To Income & Expenditure A/c25,000
(Entrance fees received recognized as income)

Illustration 21.5 : 50 members joined the trust and paid entrance fees Rs.500 each. Against this Trust provides certain benefit to the members for the life. Pass journal entry and suggest treatment.

Solution:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank a/cDr.25,000
To Entrance fees A/c25,000
(Entrance fees received 50 × 500 = 25,000)
2.Entrance fees A/cDr.25,000
To Trust Fund A/c25,000
(Entrance fees received capitalised)

Illustration 21,6 : 50 members joined the trust and paid entrance fees Rs.500 each. Against this Trust provides certain benefit to the members for a period of five years. Pass journal entry and suggest treatment.

Solution:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank a/cDr.25,000
To Entrance fees A/c25,000
(Entrance fees received 50 × 500 = 25,000)
2.Entrance fees A/cDr.5,000
To Income & Expenditure A/c5,000
(Entrance fees received, 1/5th recognized as income.)

Note: Balance Rs.20,000 of entrance fees will appear on liability side of balance sheet as deferred income and will be written off in next 4 years.

21.5 EXPLAIN ACCOUNTING OF MEMBERSHIP FEES AND SUBSCRIPTION

♦       These are usually charged yearly from the members hence are treated as revenue income and credited to I&E a/c.

♦       The amount received should be duly adjusted for outstanding and advances, so as to get the figure of income for the year.

♦    When number of members and the rate of membership fees/subscription is given then income = number of member × rate per member.

♦       Outstanding subscription i.e. subscription receivable will be shown on the asset side of balance sheet.

♦       Advance subscription i.e. unearned subscription will be shown on the liability side of balance sheet.

Illustration 21.7 From the following particulars, calculate the amount of subscription to be credited to the income and expenditure account for the year ended 31st March, 2011:

31.3.201031.3.2011
Outstanding subscriptions1,5003,000
Subscriptions received in advance9001,300

A sum of Rs. 25,500 was received as subscriptions during the year ended 31st March, 2011. Solution:

Dr.Subscription A/cCr.
ParticularsRs.ParticularsRs.
To Opening outstanding subscription b/f1,500By Opening advance subscription b/f900
To I&E a/c (balancing figure) (Income)26,600By Cash/Bank a/c (Received)25,500
To Closing advance subscription c/f1,300By Closing outstanding subscription c/f3,000
29,40029,400

Important Points:

When figure of subscription income is known, by preparing above account we can get subscription received as balancing figure. Such accounts can be prepared for any other income account.

Alternatively above figure can be ascertained by preparing a statement.

Rs.
Subscription received during the year25,500
Add: Opening advance900
Closing outstanding3,0003,900
29,400
Less: Closing advance1,500
Opening outstanding1,3002,800
Subscription income for the year26,600

Illustration 21.8 : (Adopted from Dec. 2000) Members of a club, are paying an annual subscription of? 500. On 31st March, 2010, subscriptions in arrears from 10 members and received in advance from 5 members. Subscriptions received during the year ended 31st March, 2011 from 446 members, including from 21 members for the year 2011-2012. Subscriptions in arrears as on 31st March, 2011 from 30 members.

Calculate the amount of subscriptions income for the year ended on 31st March, 2011 by preparing subscriptions a/c.

Solution:

Dr.Subscription A/cCr.

 

ParticularsRs.ParticularsRs.
To Opening outstanding b/f (10 × 500)5,000By Opening advance b/f (5 × 500)2,500
To I&E a/c (balancing figure)2,25,000By Cash/Bank a/c (446 × 500)2,23,000
(Income for the year){Received during the year)
To Closing advance c/f (21 × 500)10,500By Closing outstanding c/f (30 × 500)15,000
2,40,5002,40,500

Alternatively above figure can be ascertained by preparing a statement.

Rs.
Subscription received during the year2,23,000
Add: Opening advance2,500
Closing outstanding15,00017,500
2,40,500
Less: Closing advance10,500
Opening outstanding5,00015,500
Subscription income for the year2,25,000

21.6 WHAT DO YOU MEAN BY FUND FOR SPECIFIC PURPOSE?

♦       The Trust/Association generally creates funds for various purposes.

♦    The funds are created by crediting the donations and fees etc., received for the purpose of that fund or by transfer from Income & Expenditure Account.

♦    Until the funds are utilized for the specified purpose, the same may be invested in Government Securities/ Bank Deposits etc.

♦    Then the income earned on such investments will be credited to that fund account and not to Income and Expenditure Account.

♦       The purpose of above is to keep proper control and utilise the money for the purpose for which it is intended.

♦       Fund a/c will appear on the liability side of the balance sheet.

♦       Whereas investment of the same fund will appear on the asset side of the balance sheet.

21.7  CLASSIFY FUNDS FOR SPECIFIC PURPOSE

The funds can be broadly divided into two types:

  1. Funds for some Capital Expenditure.
  2. Funds for meeting some Revenue Expenditure.

21.8  EXPLAIN ACCOUNTING OF FUNDS FOR CAPITAL EXPENDITURE

♦    In case of Funds for the purpose of some capital expenditure, when any amount is spent for that purpose, the same will be Debited to a separate Assets Account/Capital Expenditure Account.

♦       When such funds are utilized it results into an asset for the organization.

♦       e,g. Building Fund. The donations etc., are credited to Building Fund A/c

♦    Whereas expenses incurred for Building Construction are debited to Building A/c and the same will appear on the asset side of the balance sheet.

♦       Hence, in such cases the credit balance in fund account will keep on accumulating.

♦    When that asset is complete, an equivalent amount can be transferred debiting building fund a/c and crediting capital fund a/c. Student should do it only if so required by the question.

Illustration 21.9 : A society receives donations of Rs.5,00,000 for the construction of building. It has invested Rs.2,00,000 out of it and spent Rs.2,75,000 for the construction of building which is in progress. Interest on investment received for the year Rs.2,000. Pass journal entry and show how the figures will appear in balance sheet.

Solution:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank A/cDr.5,00,000
To Building Fund A/c5,00,000
(Donation received for building fund)
2.Building Fund Investment A/cDr.2,00,000
To Cash/Bank A/c2,00,000
(Building fund invested )
DateParticularsDr. Rs.Cr. Rs.
3.Building (Under construction) A/c Dr.2,75,000
To Cash/Bank A/c2,75,000
(Amount spent for Building construction)
4.Cash/Bank A/c Dr.2,000
To Building Fund A/c2,000
(Interest received on building fund investment)

Note: Balance Rs.27,000 of building fund is in cash/bank form and will appear on asset side of balance sheet. Investment will be sold when required for construction of building.

Balance Sheet as at 31st March, 2011 (Extract only)

LiabilitiesRs.AssetsRs.
Building Fund:Fixed Assets

Building (Work in progress) Investments:

2,75,000
Opening Balance Add: Donations5,00,000Building Fund Investments2,00,000
Add: Income on Investment2,0005,02,000Current Assets:
Cash/Bank Balance27,000
Total5,02,000Total5,02,000

21.9 EXPLAIN ACCOUNTING OF FUNDS FOR REVENUE EXPENDITURE

♦       e.g. Price fund, Tournament Fund etc.

♦       The incomes, donations etc. received for a particular purpose are credited to that Fund a/c

♦       All expenditure incurred for that purpose are debited to that Fund a/c.

♦       The Balance if credit is shown in balance sheet and carried forward to next year,

♦    But if it is Debit (that means expenditure is more) then it will be transferred to Income & Expenditure a/c. (The Funds/Reserve Account should never show Debit balance).

♦    When such funds are utilized, it does not create any asset for the organization, e.g. Prices distributed or expenses incurred to organise tournament etc.

Illustration 21.10 : A society receives donations of Rs.3,00,000 for the distribution of prizes to rank holder students. It has invested Rs.2,50,000 out of it and spent Rs. 35,000 for the distribution of prizes. Interest on investment received for the year Rs. 3,000. Pass journal entry and show how the figures will appear in balance sheet.

Solution:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank A/cDr.3,00,000
To Prize Fund A/c3,00,000
(Donation received for prize fund)
2.Prize Fund Investment A/cDr.2,50,000
To Cash/Bank A/c2,50,000
(Prize fund invested)
3.Prize fund A/cDr.35,000
To Cash/Bank A/c35,000
(Amount spent for distribution of prizes)
4.Cash/Bank A/cDr.3,000
To Prize Fund A/c3,000
(Interest received on prize fund investment)

Note: Balance Rs.l8,000 of prize fund is in cash/bank form and will appear on asset side of balance sheet. Investment will be sold when required for prizes distribution or alternatively only interest income can be used and investment kept intact.

Balance Sheet as at 31st March, 2011 (Extract only)

LiabilitiesRs.AssetsRs.
Prize Fund:Investments:
Opening BalancePrize Fund Investments2,50,000
Add: Donations3,00,000
Add: Income on Investment3,000Current Assets:
3,03,000Cash/Bank Balance18,000
Less: Expenses incurred35,0002,68,000
Total2,68,000Total2,68,000

21.10  EXPLAIN ACCOUNTING FOR INVESTMENT

♦       When organization has surplus funds, it can invest in securities or bank deposits etc.

♦       This investment apart from keeping money safe and liquid also gives incomes in the form of interest/dividend.

♦       When investments are unrelated to any specific fund then its income is credited to I&E a/c.

♦       When funds for specific purpose are not immediately usable, then the same may be invested.

♦       As and when need of fund arises for that purpose, investments are sold and proceeds used for that purpose.

♦       Income and profit/loss on such investments will be credited to related fund a/c and not to I&E a/c.

21.11  COMMENT ON FUND BALANCE AND ITS RELATED INVESTMENT BALANCE

♦    If there is Investment account against a particular fund then the credit balance in fund account should not be less than the investment a/c.

♦       When expenses incurred are more than the income on that fund then such situation will arise.

♦    Hence in such cases the excess expenses incurred on that activity can be debited to Income and Expenditure a/c instead of that fund a/c.

♦    The balance of Fund a/c, can be more than its Investment a/c that means remaining fund may be in the form of cash bank balance.

Important Points:

The fund word is commonly used to refer money (i.e. cash/bank balances which are assets and has debit balance). But fund a/c is not money in itself, rather it is the second effect (credit) of the money received, hence fund a/c always shows credit balance and appears on the liability side.

Illustration 21.11 : A society receives donations of Rs.3,00,000 for the distribution of prizes to rank holder students. It has invested Rs.2,50,000 out of it and spent Rs.63,000 for the distribution of prizes. Interest on investment received for the year Rs.3,000. Pass journal entry and show how the figures will appear in balance sheet.

Solution:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank A/cDr.3,00,000
To Prize Fund A/c3,00,000
(Donation received for prize fund)
2.Prize Fund Investment A/cDr.2,50,000
To Cash/Bank A/c2,50,000
(Prize fund invested)
3.Prize fund A/cDr.63,000
To Cash/Bank A/c63,000
(Amount spent for distribution of prizes)
4.Cash/Bank A/cDr.3,000
To Prize Fund A/c3,000
(Interest received on prize fund investment)
5.Income and Expenditure A/c Dr.10,000
To Prize Fund A/c10,000
(Amount spent for distribution of prizes in excess of (fund balance – investment) transferred to I&E a/c so that fund balance will not be less than investment)

Balance Sheet as at 31st March, 2011 (Extract only)

LiabilitiesRs.AssetsRs.
Prize Fund: Opening BalanceInvestments:

Prize Fund Investments

2,50,000
Add: Donations3,00,000
Add: Income on Investment3,000Current Assets:
3,03,000Cash/Bank Balance
Less: Expenses incurred 63,000
Less: Transferred to I&E 10,000*53,0002,50,000
Total2,50,000Total2,50,000

*(excess 10,000 spent is out of general income)

21.12 SUGGEST ACCOUNTING OF GRANTS/SUBSIDIES

♦       Grants/Subsidies are received from Govt. or other local authorities to be used for the specified purpose.

♦       Accounting of such Grants/Subsidies will depend upon the purpose for which it is received.

♦    Grants/Subsidies may be for (1) Capital expenditure (i.e. for acquiring fixed assets) or (2) Revenue expenditure (i.e. for maintenance etc.).

♦       In the 1st case it will be credited to separate a/c & shown in the Balance sheet on the liability side.

♦    It can be deferred and credited to l&E a/c in proportion of depreciation charged on that asset or alternatively grant can be credited to the asset a/c itself consequently reducing depreciation.

♦       If there is fund a/c for such capital expenditure then it can be credited to that fund a/c.

♦    In the 2nd case, it will be credited as income in Income & Expenditure a/c because corresponding expense is also debited in income and expenditure a/c.

♦       Thus above accounting is in accordance with the matching principle.

Illustration 21.12 : A society receives grant of Rs.5,00,000 for the construction of building. Pass journal entry.

Solution:

It is a grant for capital expenditure and can be treated as follows:

1st Alternative: it is capitalized in the relevant fund:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank A/cDr.5,00,000
To Building Fund A/c5,00,000
(Grant received for building fund)

2nd Alternative: it is capitalized as a separate item:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank A/cDr.5,00,000
To Government Grant A/c5,00,000
(Grant received for building is treated as a capital receipt)

3rd Alternative: it is credited to the asset acquired:

DateParticularsDr. Rs.Cr.
1.Cash/Bank A/c Dr.5,00,000
To Building A/c5,00,001
(Grant received for building is treated as a capital receipt and credited to building to reduce its cost. Consequently depreciation will be calculated on reduced base.)

4th Alternative: it is treated as a deferred income:

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank A/cDr.5,00,000
To Government Grant A/c5,00,000
(Grant received for building is treated as a deferred income)
2.Government Grant A/cDr.50,000
To Income & Expenditure A/c50,000
(Grant is amortised in proportion to depreciation charged on building. Assuming building is being depreciated by SLM over 10 years, 1 / 10th of grant will be amortised)

Illustration 21.13: A society receives Salary Grant from Government of Rs.1,00,000.50% of the Grant is used. Pass journal entry.

Solution:

It is a grant for revenue expenditure and hence credited to Income & Expenditure A/c:

DateParticularsDr. (Rs.)Cr. (Rs.)
1.Cash/Bank A/c Dr.1,00,000
To Salary Grant A/c1,00,000
(Salary grant received)
2.Salary Grant A/c Dr.50,000
To Income & Expenditure A/c50,000
(Grant is credited to Income & Expenditure a/c being of revenue nature)

21.13    SUGGEST TREATMENT FOR DONATION

Explain the accounting treatment of donation received for specific purpose in the case of charitable society. (May, 2007)

♦    Donations are the voluntary contribution provided by the well wishers for general or specific purpose.

♦    If donations are received for a particular purpose then it will be credited to that particular fund a/c say donation received for construction of building credited to Building fund a/c.

♦    Otherwise general donations will be credited to Income & Expenditure a/c.

♦    If question requires capitalisation, but does not specify the fund to which it should be credited, then credit such donation to trust fund a/c.

♦    Donation may be in kind then stock or fixed asset whatever is received will be debited and the credit will be as explained in above points.

21.14    EXPLAIN TREATMENT OF SCHOLARSHIP

♦    Scholarship is the monetary benefit given to students under certain schemes by Govt, or other authorities etc.

♦    When received scholarship a/c will be credited and when paid to student scholarship a/c will be debited and hence in general it will not appear in financial statement.

♦    In case of schools/colleges, there may be credit balance in Scholarship a/c which represents Scholarship received from Govt. etc. hut yet to be distributed to the students. This should be shown as liability in the Balance sheet.

♦    Debit balance in scholarship a/c may represent paid to student and recoverable from the concerned authority. This should be shown as an asset in the Balance sheet.

♦    But if college has its own scholarship then that debit balance will go to I&E a/c.

Illustration 21.14 : A College receives Scholarship from government for backward class scholars of Rs.l,00,000. The same is distributed to the concerned students. Pass journal entry.

Solution:

Here College is just acting as a distribution agent:

DateParticularsDr. (Rs.)Cr. (Rs.)
1.Cash/Bank A/c                                                Dr.1,00,000
To Scholarship A/c1,00,000
(Scholarship received from govt.)
2.Scholarship A/c                                              Dr.1,00,000
To Cash/Bank A/c1,00,000
(Scholarship received from govt, is distributed to the concerned students)

If before year end 1st step take place but not the 2nd then ^1,00,000 of scholarship will appear as liability in balance sheet. If before year end 2nd step take place but not the 1st thenX1,00,000 of scholarship will appear as asset in balance sheet.

Illustration: 21.15: A College gives Scholarship to merit rank holders amounting to Rs.l,00,000. Pass journal entry.

Solution:

Here College is distributing scholarship hence it is its expenditure:

DateParticularsDr. (Rs.)Cr. (Rs.)
1.Scholarship A/cDr.1,00,000
To Cash/Bank A/c1,00,000
(Scholarship is distributed to the merit students)
2.Income & Expenditure A/cDr.1,00,000
To Scholarship A/c1,00,000
(Scholarship expense transferred to Income & Expenditure a/c)

21.15 HOW TO PRESENT INCOME AND EXPENDITURE OF SPECIAL ACTIVITIES/FUNCTIONS/ PROGRAM?

♦       Trust may organize various functions/activities like Charity show, sports functions etc.

♦    Income & Expenses on this account are generally netted & net balance is shown in the Income & Expenditure a/c.

♦    Basic objective of such functions is to raise funds for the organization and use such funds for the objects of the trust.

Illustration 21.16 : A society receives donations of Rs.50,000 for the charity show of music for raising the funds. It receives Rs.75,000 from the sale of tickets. It has spent Rs.63,000 for the program. Pass journal entry and show how the figures will appear in Income and Expenditure a/c.

Solution:

DateParticularsDr. (Rs.)Cr. (Rs.)
1.Cash/Bank A/cDr.50,000
To Charity Show-Income A/c50,000
(Donation received for Charity show)
2.Cash/Bank A/cDr.75,000
To Charity Show-Income A/c75,000
(Received from sale of tickets for Charity show)
3.Charity Show-Expense A/cDr.63,000
To Cash/Bank A/c63,000
(Amount spent for organising charity show)

Income & Expenditure for the year ended 31st March, 2011 (Extract only)

ExpenditureRs.IncomeRs.
Charity Show:
Income earned                              1,25,000
Expenditure incurred                      63,00062,000
TotalTotal

21.16 HOW MISSING DATA RELATED TO ANY A/C CAN BE ASCERTAINED?

♦       For ascertaining the missing information, if any, the accounts as follows can be prepared.

♦    Whatever information of that a/c is available should be 1st entered and on balancing the account, we will get the missing information.

♦       It can be done by add less also, but it is advisable to prepare accounts.

21.17 DRAFT AN INCOME ACCOUNT

Any and every income account can be as follows:

Income A/c

To Opening Outstanding B/f (Receivable)xxxBy Opening Advance B/fxxx
To Income & Expenditure a/c (Income for the year)xxxBy Cash/Bank a/c (Received during the year)xxx
To Closing Advance C/fxxxBy Closing outstanding C/f (Receivable)xxx
TotalxxxTotalxxx

Illustration 21.17 : (Adopted from June 1998) From the following particulars, calculate the amount of subscription to be credited to the income and expenditure account for the year ended 31st March, 2011:

31.3.201031.3.2011
Outstanding subscriptions1,5001,200
Subscriptions received in advance900540

A sum of Rs. 14,670 was received as subscriptions during the year ended 31st March, 2011.

Solution:

Dr.Subscription A/cCr.
ParticularsRs.ParticularsRs.
To Opening outstanding subscription1,500By Opening advance subscription900
To I&E a/c (Income) (balance figure)14,730By Cash/Bank a/c (received)14,670
To Closing advance subscription540By Closing outstanding subscription1,200
16,77016,770

21.18 DRAFT AN EXPENSE ACCOUNT

Any and every expenses account can be prepared as follows:

Expense A/c

ParticularRs.ParticularsRs.
To Opening Advance B/f (Prepaid)xxxBy Opening Outstanding B/f (Payable)xxx
To Cash/Bank A/c (Paid during the year)xxxBy Income & Exp. A/c (Expense for the year)xxx
To Closing outstanding C/f (payable)xxxBy Closing Advance C/f (prepaid)xxx
TotalxxxTotalxxx

Illustration 21.18 : On the basis of the following information related to its many rented premises, calculate the amount that will appear against the item ‘Rent’ in the income and expenditure account for the year ended 31st March, 2011:

Rs.
Rent prepaid as on 1st April, 201012,000
Rent payable as on 1st April, 201025,600
Amount paid for rent during the year ended 31st March, 20111,40,000
Rent prepaid as on 31st March, 201123,200
Rent payable as on 31st March, 201124,000

Solution:

Dr.Rent A/cCr.
ParticularsRs.ParticularsRs.
To Opening prepaid b/f12,000By Opening payable b/f25,600
To Cash/Bank a/c (Paid)1,40,000By I&E a/c (balancing figure) (rent expense)1,27,200
To Closing payable c/f24,000By Closing prepaid c/f23,200
1,76,0001,76,000

21.19 DRAFT AN ACCOUNT OF CONSUMABLES LIKE STATIONERY, MEDICINES, SPORTS MATERIAL ETC.

Any and every such account can be prepared as follows:

Stationery Stock A/c

ParticularsRs.ParticularsRs.
To Opening stock balance b/fxxxBy I&E a/c (stationery used/consumed)xxx
To Cash/R&P a/c (purchases)xxx
To Creditors a/c (purchases)xxxBy Closing stock balance c/fxxx
xxxxxx

Important Points:

When opening Balance sheet is not given the same should be prepared to ascertain any missing information like opening balance of Trust fund etc.

Other a/cs. Like assets a/c, loan a/c, creditors a/c, goods a/c, etc. can also be prepared to ascertain missing data if any.

Illustration 21.19 : (Adopted from June 2003) On the basis of the following information, calculate the amount that will appear against the item ‘stationery consumed’ in the income and expenditure account for the year ended 31st March, 2011:

Rs.
Stock of stationery as on 1st April, 201012,000
Creditors for stationery as on 1st April, 201025,600
Amount paid for stationery during the year ended 31st March, 20111,40,000
Stock of stationery as on 31st March, 201123,200
Creditors for stationery as on 31st March, 201124,000

Solution:

Dr.Stationery A/cCr.
ParticularsRs.ParticularsRs.
To Opening stock b/f12,000By Opening Creditors b/f25,600
To Cash/Bank a/c1,40,000By I&E a/c (balancing figure)1,27,200
(Stationery consumed)
To Closing creditors c/f24,000By Closing stock c/f23,200
1,76,0001,76,000

Note: Alternatively you can prepare two accounts as explained below that will also show you amount of stationery purchased.

Creditors for Stationery A/c

ParticularsRs.ParticularsRs.
To Cash Bank a/c (Payment)1,40,000By Opening balance b/f25,600
To Closing balance c/f24,000By Stationery stock a/c (balancing figure) (Stationery purchased)1,38,400
1,64,0001,64,000

Stationery Stock A/c

ParticularsRs.ParticularsRs.
To Opening balance b/f12,000By I&E a/c (balancing figure)

(stationery’ used/consumed)

1,27,200
To Creditors a/c (purchases)1,38,400By Closing balance c/f23,200
1,50,4001,50,400

21.20 WHAT TYPE OF QUESTIONS ARE ASKED IN THE EXAM?

Generally there may be three types of questions:

(a)  Receipt payment a/c and Opening Balance sheet or other information is given from which Income & Expenditure a/c & Balance sheet is required to be prepared, or

(b)  Balance sheet & Income Expenditure a/c is given, from which Receipt & payment a/c is required to be prepared. or

(c)  Trial balance and other information is given from which Income & expenditure a/c & Balance Sheet is to be prepared.

21.21 HOW TO PREPARE FINAL A/c WHEN RECEIPT & PAYMENT A/c IS GIVEN AND NOT TRIAL BALANCE?

♦       R&P a/c is nothing but summarized cash book which contains most of the transactions, and

♦       Whatever is not yet received/paid will be given as information.

♦       Opening balance sheet or opening balances will also be given.

In normal and usual cases, the opening balances are 1st taken to the respective a/c. All transactions are entered in cash book and other books of entry and then posted to ledger accounts. Balances of such a/cs are extracted and written in trial balance from which final accounts are prepared.

♦    Same process to be followed here, take opening balances in the a/c (assets have debit balance and liabilities have credit balance)

♦    Receipt side items represent debit to cash bank a/c, now make credit posting to the a/c according to the nature of receipt.

♦    Similarly payment side items have been credited to cash bank a/c and now make debit to the a/c according to nature of payment.

♦       For other information (which is nothing but transaction) make double entry and post to the respective a/c.

♦    By balancing various accounts you will get missing information which may be either balance of an account or a transaction.

♦       In case balancing figure is a transaction then complete its double entry.

♦       Now balance of all this accounts will result into trial balance and consequently final a/c.

♦    But if you do everything in writing, it will require lot of time and hence prepare only those accounts as working which has more debits and credits in it, and

♦    For others think and give treatment directly to I&E a/c and balance sheet depending upon whether this a/c is an expense, income, asset or liability.

♦    Thus instead of completing full account book and preparing the trial balance, we go short cut and directly prepare the final accounts.

Always keep double entry in mind and use the basic accounting procedure anywhere and everywhere. This is the key to your success.

Illustration: 21.20 : (Adopted from May 2002) When Opening balance sheet. Receipt & Payment a/c and some information is given.

Smith Library Society showed the following position on 31st March 2010:

Balance sheet as on 31st March, 2010

LiabilitiesRs.AssetsRs.
Capital fund7,93,000Electrical Fittings1,50,000
Expenses payable7,000Furniture50,000
Books4,00,000
Investment in Securities1,50,000
Cash at bank25,000
Cash in hand25,000
8,00,0008,00,000

The Receipt and Payment Account for the year ended on 31st March, 2011 is given below

Particulars (Receipt)Rs.Particulars (Payment)Rs.
To Balance b/fBy Electric charges7,200
Cash at bank 25,000By Postage and stationery5,000
Cash in hand 25,00050,000By Telephone charges5,000
To Entrance Fees30,000By Books Purchased60,000
To Membership Subscription2,00,000By Outstanding Expenses paid7,000
To Sale proceeds of old papers1,500By Rent88,000
To Hire of lecture hall20,000By Investment in securities40,000
To Interest on securities8,000By Salaries66,000
By Bat c/f. Cash at bank20,000
Cash in hand11,300
3,09,5003,09,500

You are required to prepare an Income and Expenditure Account for the year ended 31 st March, 2011 and a Balance Sheet as at 31st March, 2011 after making the following adjustments:

(a)    Membership Subscription included Rs. 10,000 received in advance.

(b)    Provide for outstanding rent Rs. 4,000 and salaries Rs. 3,000.

(c)  Books to be depreciated @10% including additions. Electrical Fittings and Furniture’s are also to be depreciated at the same rate.

(d)    75% of Entrance Fees is to be capitalised.

(e)  Interest on Securities is to be calculated @ 5% p.a. including purchases made on 1.10.2010 for Rs. 40,000.

Solution:

Income and Expenditure Account

ExpenditureRs.IncomeRs.
To Electric charges a/c7,200By Subscription a/c1,90,000
To Postage and stamp a/c5,000By Hire of lecture hall a/c20,000
To Telephone Charges a/c5,000By Sale of old news a/c1,500
To Rent a/c92,000By Entrance fees a/c7,500
To Salary a/c69,000By Interest a/c8,500
To Depreciation a/c66,000By Deficit a/c16,700
2,44,2002,44,200

Balance sheet on date 31.3.2011

LiabilitiesRs.AssetsRs.
Capital fundElectric fitting1,50,000
Balance7,93,000(-) Depreciation15,0001,35,000
(+) Entrance fees22,500Furniture50,000
(-) Deficit16,7007,98,800(-) Depreciation5,00045,000
Advance Subscription10,000Books4,00,000
Expense outstanding7,000(+) Addition60,000
(-) Depreciation46,0004,14,000
Investment1,50,000
(+) Addition40,0001,90,000
Interest outstanding500
Bank20,000
Cash11,300
8,15,8008,15,800

Working notes:

Expenses outstanding A/c

ParticularsRs.ParticularsRs.
To Cash7,000By Opening balance b/f7,000
To Balance c/f.7,000By Rent4,000
By Salary3,000
14,00014,000

Subscription A/c

ParticularsRs.ParticularsRs.
To I&E a/c (Income)1,90,000By Cash a/c (Received)2,00,000
To Closing advance subscription a/c10,000
2,00,0002,00,000

Rent A/c

ParticularsRs.ParticularsRs.
To Cash a/c (paid)88,000By I&E a/c (Expense)92,000
To Closing outstanding rent a/c4,000
92,00092,000

Salary A/c

ParticularsRs.ParticularsRs.
To Cash a/c (paid)66,000By I&E a/c (Expense)69,000
To Closing outstanding salary a/c3,000
69,00069,000

Entrance fees A/c

ParticularsRs.ParticularsRs.
To Capital fund a/c (capitalized)22,500By Cash a/c30,000
To I&E a/c (income)7,500
30,00030,000

Interest A/c

ParticularsRs.ParticularsRs.
To I&E a/ c (Income)8,500By Cash (received)8,000
By Interest outstanding a/c500
8,5008,500

Calculation of interest on investment:

Interest for full year on opening balance1,50,000 × 5%= 7,500
Interest for half year on addition40,000 × 596 × 6/12= 1.000
Total Interest for the year8,500
Received during the year8.000
Interest outstanding at the end of the year500

21.22 HOW TO PREPARE RECEIPT & PAYMENT A/C FROM INCOME & EXPENDITURE AND BALANCE SHEET?

♦       It is a reverse order question wherein final a/c is given and cash book (R&P a/c) is required to be prepared.

♦    The only change is that now in the working accounts prepared you will write figures of incomes and expenses and on balancing you will get receipt and payment.

♦    Expenditure side items represent debit to I&E a/c, now make credit posting to the concerned expenditure a/c.

♦    Similarly Income side items have been credited to I&E a/c and now make debit posting to the concerned Income a/c.

♦ Payment/receipt on a/c of fixed assets or loans etc. if any, can be similarly ascertained by preparing a/cs.

Illustration 21.21 : Income & Expenditure A/c and Opening & Closing Balance sheet is given.

Chail Cricket Club gives you the following information:

Income & Expenditure Account for the year ended Slat Dec., 2011

ExpenditureRs.IncomeRs.
To Remuneration to Coach a/c18,000By Donation & Subscription a/c1,02,000
To Salaries & Wages a/c24,000
To Rent a/c12,000By Bar Room:
To Repairs a/c11,000Receipts24,0004,000
To Miscellaneous Expenses a/c7,000Less: Expenses20,000
To Honorarium to Secretary a/c18,000By Bank Interest a/c2,000
To Depreciation on Equipment a/c5,000By Hire Club Hall a/c12,000
To Surplus a/c25,000
1,20,0001,20,000

Balance Sheet

2010201120102011
Rs.LIABILITIESRs.Rs.ASSETSRs.
Capital Fund as on 31-12-1048,00025,000Equipment20,000
Entrance Fees10,000
Surplus25.0006,000Subscription Outstanding8,000
48,00083,0005,000Cash-in-hand4,000
4,000Subscription in advance3,000
Outstanding Liabilities:
1,500Miscellaneous Exp.1,0002,500Cash at Bank10,000
2,000Salary & Wages3,000
3,000Honorarium to Secretary2,00020,000Fixed Deposits50,000
58,50092,00058,50092,000

Prepare the Receipt and Payment Account of the Club for the year ended 31st Dec. 2011. Solution:

Important Points:

Expenses in which there is no opening or closing adjustment will be equal to payment and will appear as it is in Receipt & Payment a/c.

Similarly Income in which there is no opening or closing adjustment will be equal to receipt and will appear as it is in Receipt & Payment a/c.

For others figure of receipt or payment will be ascertained by preparing concerned account.

Receipt and Payment A/c

Particulars (Receipt)AmountParticulars (Payment)Amount
To Opening BalanceBy Remuneration to Coach a/c18,000
Cash a/c5,000By Rent a/c12,000
Bank a/c2.5007,500By Repairs a/c11,000
To Bar Receipt a/c24,000By Bar Expense a/c20,000
To Bank Interest a/c2,000By Fixed Deposit a/c30,000
To Hire Club Hall a/c12,000By Salary & Wages a/c23,000
To Entrance Fees a/c10,000By Misc. Expense a/c7,500
To Donation & Subscription a/c99,000By Honorarium to Secretary a/c19,000
By Closing Bal. Cash a/c4,000
Bank a/c10.00014,000
1.54.5001.54.500

Working notes

Salary and Wages A/c

To Cash A/c (Bal. figure)23,000By Opening Outstanding b/d2,000
To Closing Outstanding c/d3,000By Income & Expenditure a/c24,000
26,00026,000

Miscellaneous Expense A/c

To Cash A/c (Bal. figure)7,500By Opening Outstanding b/d1,500
To Closing Outstanding c/d1,000By Income & Expenditure a/ c7,000
8.5008.500

Honorarium to Secretary A/c

To Cash (Bal. figure)19,000By Opening Outstanding b/d3,000
To Closing Outstanding c/d2,000By Income & Expenditure a/c18,000
21.00021.000

Equipment A/c

To Opening Balance25,000By Depreciation a/c5,000
By Balance c/d20,000
25.00025.000

Fixed Deposit A/c

To Opening Balance20,000By Balance c/d50,000
To Cash (Bal. figure) Deposit made30,000
50.00050.000

Subscription A/c

To Opening Outstanding6,000By Opening Advance4,000
To Income & Expenditure a/c1,02,000By Cash (Bal. Figure)99,000
To Closing Advance c/d3,000By Closing Outstanding c/d8,000
1.11.0001.11.000

21.23 COMMENT ON FINANCIAL STATEMENTS OF EDUCATION INSTITUTIONS

Ans. Whatever is discussed earlier is equally applicable to Education Institutes as these are also not for profit organization. Some distinct features may be as follows:

♦       It can have item like scholarship.

♦       Sometimes it can have separate term fees a/c etc.

♦       Govt, grant for teacher’s salary, maintenance, etc. will be credited to I&E, etc.

♦       It may have income like tuition fees, exam fees, etc.

♦ It may run canteen, stationery shop, etc. for students.

Illustration 21.22: From the following balances and particulars of Republic College prepare Income & Expenditure Account for the year ended March 1999 and a Balance Sheet as on the date:

Seminars & Conference Receipts4,80,000
Consultancy Receipts1,28,000
Security Deposit-Students1,50,000
Capital fund16,06,000
Research Fund8,00,000
Building Fund25,00,000
Provident Fund5,10,000
Tuition Fees received8,00,000
Government Grants5,00,000
Donations50,000
Interest & Dividends on Investments1,85,000
Hostel Room Rent1,75,000
Mess Receipts (Net)2,00,000
College Stores-Sales7,50,000
Outstanding Expenses2,25,000
Stock of Stores and Supplies3,00,000
Purchases-stores and Supplies8,00,000
Salaries-Teaching8,50,000
Research1,20,000
Scholarships80,000
Students Welfare Exp.38,000
Repairs & Maintenance1,12,000
Games & Sports Exp.50,000
Misc. Exp.65,000
Research Fund Investments8,00,000
Other Investments18,50,000
Provident Fund Investments5,10,000
Seminar & Conference Exp.4,50,000
Consultancy Exp.28,000
Land1,00,000
Building16,00,000
Plant & Machinery8,50,000
Furniture & fitting6,00,000
Motor Vehicle1,80,000
Provision for Depreciation
Building4,80,000
Plant & Equipment5,10,000
Furniture & Fittings3,36,000
Cash at Bank6,42,000
Library3,60,000
Total1,03,85,0001,03,85,000

Adjustments:

(1) Materials & supplies consumed for:

Teaching 50,000, Research 1,50,000 Students Welfare 75,000 Games or Sports 25,000

(2) Tuition fee receivable from Government for Backward Class Scholars 80,000

(3) Stores selling prices are fixed to give a net profit of 10% on selling price.

(4) Depreciation is provided on straight-line basis at the following rates:

(i) Buildings 5% (ii) Plant & Equipment 10% (iii) Furniture & Fixtures 10% (iv) Motor Vehicles 20%.

Solution:

Income and Expenditure A/c for the Year Ended 31.03.99

ParticularsAmount

Rs.

ParticularsAmount

Rs.

To Teaching Salaries8,50,000By Seminar & Conference Receipt4,80,000
+ Material50.0009,00,000(-) Seminar & Conference exp.4.50.00030,000
To Research Salaries1,20,000By Consultancy receipt1,28,000
+ Material1.50.0002,70,000(-) Consultancy expense28.0001,00,000
To Scholarship80,000By Tuition fees received8,00,000
(-) Scholarship receivable80.000NilBy Government grant5 00,000
To Student welfare expense38,000By Interest & dividend on investment1,85,000
+ Material75.0001,13,000By Hostel room rent1,75,000
To Repairs & Maintenance1,12,000By Mess receipt (Net)2,00,000
To Games & Sports expense50,000By Profit on college stores75,000
+ Material25.00075,000By Donation50,000
To Miscellaneous expense65,000
To Dep. (80000+85000+36000+60000)2,61,000
To Surplus3.19.000
21.15.00021.15.000

Balance Sheet as on 31.03.99

Capital fund16,06,000Bank A/c6,42,000
+ Surplus3.19.00019,25,000Research fund investment8,00,000
Provident fund investment5,10,000
Security deposit: Students1,50,000Other Investment18,50,000
Research fund8,00,000Land1,00,000
Building fund25,00,000Building16,00,000
Provident fund5,10,000(-) Provision for dep.5.60.00010,40,000
Outstanding expense2,25,000(4,80,000+80,000)
Plant & Machinery8,50,000
(-) Provision for dep.5.95.0002,55,000
(5,10,000+ 85,000)
Motor vehicles1,80,000
(-) Depreciation36.0001,44,000
Furniture & fitting6,00,000
(-) Provision for dep.3.96.0002,04,000
(3,36,600 +60,000)
Library3,60,000
Scholarship receivable80,000
Closing stock1.25.000
61.10.00061.10.000

College Stores A/c

To Opening stock b/d3,00,000By Sales A/c7,50,000
To Purchases8,00,000By Material Consumed3,00,000
To Profit (10% on 750000)75,000By Closing Stock (Balancing figure)1,25,000
11.75.00011.75.000

Important Point:

Scholarship is not income for college when it is received from government, because it is payable to students & thus it is a liability. If credit balance in scholarship then it is shown in balance sheet on liability side. If debit balance of scholarship then it is not expense but it is receivable from government, if it is a Government scholarship. But this debit balance will be an expense if it is scholarship given by college itself.

21.24 WHAT IS FUND BASED ACCOUNTING? EXPLAIN BRIEFLY

What is “Fund Based Accounting” under non-profit organizations?                                   (Nov 2008)

♦  Fund based accounting is not to be confused with the fund a/cs, seen earlier, though it is used in the same context.

♦  Fund based accounting refers to a system which are followed by not for profit organization to keep their specific purpose funds separately so that it is not put to some other use.

♦  Here independent double entry books of account are maintained for each type of funds with their separate cash and bank a/c.

♦  Thus each fund is treated as a separate entity for accounting, keeping its separate assets, liabilities and bank a/cs etc.

♦  Transfer from one fund to another fund may require transfer of money also and entries will be passed in the books of account of both the funds.

♦  For management’s use separate final a/c of each fund will be prepared but for outsiders and statutory purposes a combined final accounts will be prepared comprised of all funds which are of that organization.

Illustration 21.23 : Institute of World Management furnishes you the following information in respect of its development fund for the year 2010-11:

Rs.
Govt. grants received for construction of Buildings30,00,000
Private grants for acquisition of Land15,00,000
Transfer from unrestricted fund for purchase of Furniture5,00,000
Income from fixed deposits (Fixed deposits for one year Rs. 20,00,000)1,50,000
Cost of Land acquired5,25,000
Advance payment made for acquisition of further Land3,00,000
Furniture purchased55,000
Payments made to contractors for construction of Buildings7,75,000

Pass necessary Journal entries, Prepare a statement of changes in balances of development fund for the year 2010-11 and a balance sheet for development fund as on 31st March, 2011.

Solution:

Journal entries in the books of Development Fund of M/s Institute of World Management

DateParticularsDr. Rs.Cr. Rs.
1.Cash/Bank A/cDr.30,00,000
To Govt. Grant for building A/c30,00,000
(Govt. grant received for construction of building)
2.Cash/Bank A/cDr.15,00,000
To Private Grant for land A/c15,00,000
(Private grant received for acquisition of land)
3.Cash/Bank A/cDr.5,00,000
To Transfer from other funds A/c5,00,000
(Transfer from unrestricted fund for purchase of furniture)
4.Fixed Deposit A/cDr.20,00,000
To Cash/Bank A/c20,00,000
(Amount of development fund not needed immediately kept in fixed deposit)
5.Cash/Bank A/cDr.1,50,000
To Interest on Fixed deposit A/c1,50,000
(Interest on Fixed deposit received)
6.Land A/cDr.5,25,000
To Cash/Bank A/c5,25,000
(Amount of development fund used to buy land)
7.Advance for Land A/cDr.3,00,000
To Cash/Bank A/c .3,00,000
(Amount advanced to buy land)
8.Furniture A/cDr.55,000
To Cash/Bank A/c55,000
(Furniture purchased)
9.Building under construction A/cDr.7,75,000
To Cash/Bank A/c7,75,000
(Amount advanced to Contractor for construction of building)
10.All above incomes like donation, grant, interest etc. will be credited to Development fund a/c.
11.Development Fund A/cDr.5,80,000
To Land A/c5,25,000
To Furniture A/c55,000
(Asset ready for use transfer to General Fund)

For item 3 above following entry will be passed in the books of Unrestricted/General Fund.

Transfer to Development Fund A/c                            Dr.5,00,000
To Cash/Bank A/c5,00,000
(Amount transferred to development fund for purchase of furniture)

For item 11 above following entry will be passed in the books of Unrestricted/General Fund.

Land A/c                                                         Dr.5,25,000
Furniture A/c                                                   Dr.55,000
To Transfer from Development Fund A/c5,80,000
(Assets transferred from development fund recognised)

General Fund will also account assets transferred to it and will charge depreciation wherever applicable. The asset will appear in General Balance sheet and not in the development fund balance sheet

Statement of changes in development fund/Development Fund A/c.

Rs.
Opening BalanceNil
Add; Govt. grant for building construction30,00,000
Private Grant/Donation for Land15,00,000
Transfer from other fund for furniture5,00,000
Interest income1,50,00051,50,000
51,50,000
Less: Assets transferred : Land5,25,000
Furniture55,0005,80,000
Closing Balance45,70,000

Cash/Bank A/c

ReceiptsRs.PaymentsRs.
To Opening Balance b/fNilBy Fixed Deposit A/c20,00,000
To Govt. Grant30,00,000By Land A/c5,25,000
To Pvt. Grant/Donations15,00,000By Advance for Land A/c3,00,000
To Transfer from other fund5,00,000By Furniture A/c55,000
To Interest on Fixed Deposit1,50,000By Building under construction A/c7,75,000
By Closing Balance c/f14,95,000
51,50,00051,50,000

Balance sheet of Development Fund as on 31.3.2011

LiabilitiesRs.AssetsRs.
Development fund A/c45,70,000Building under construction7,75,000
Advance for Land3,00,000
Fixed Deposit20,00,000
Cash/Bank Balance14.95.00034,95,000
45,70,00045,70,000

EXAM PROBLEMS WITH SOLUTIONS FOR SELF-STUDY

Problem No. 1: (Dec. 1999)

From the following, find out the amount of subscriptions to be included in the income and expenditure account for the year ended 31st March, 1999.

Subscriptions were received during the year 1998-99 as follows:

Rs.
For the year 1997-982,000
For the year 1998-199930,000
For the year 1999-20003,000

Subscriptions outstanding as on 31st March, 1998 were Rs. 3,500 out of which Rs. 500 were considered to be irrecoverable. On the same date, subscription received in advance for 1998-99 were Rs. 2,000. Subscriptions still outstanding as on 31st March, 1999 amounted to Rs. 6,000.

Solution:

Dr.Subscription a/cCr.
ParticularsRs.ParticularsRs.
To Op. outstanding subscription a/c3,500By Op. advance subscription a/c2,000
To I&E a/c (income bal. figure)37,000By I&E (irrecoverable amount)500
To Closing advance subscription a/c3,000By Cash/Bank a/c for
1997-982,000
1998-9930,000
1999-20003.00035,000
By Closing o/s subscription a/c6,000
43,50043,500

Problem No. 2: (Dec. 2000)

There are 450 members of a club, each paying an annual subscription of Rs. 500. On 31st March, 2000, subscriptions in arrears totalled Rs. 5,000. Subscriptions received during the year ended 31st March, 2001 amounted to Rs. 2,23,000 including Rs. 4,500 for the year 1999-2000 and Rs. 7,500 for the year 2001-2002.

Calculate the amount of subscriptions in arrears as on 31st March, 2001 by preparing subscriptions a/c.

Solution:

Dr.Subscription a/cCr.
ParticularsRs.ParticularsRs.
To Op. outstanding subscription a/c5,000By Op. advance subscription a/cNil
To I&E a/c (450 × 500)2,25,000By Cash/Bank a/c2,23,000
To Closing advance subscription a/c7,500By Closing outstanding subscription a/c14,500
(balance figure)
2,37,5002,37,500

Problem No. 3: (Nov. 2009)

Om Shanthi Club has 500 Members with Annual Fee of Rs. 1,000 per Member. At the end of the accounting year, the Accountant noticed that 40 Members have not paid Annual Fee, and 70 Members had paid fee in advance. Help the Accountant to compute Cash Receipts of Annual Fee for the year.

Solution:

Subscription A/c

ParticularsRs.ParticularsRs.
To balance b/d (Receivable)NilBy balance b/dNil
To Income and Expenditure A/c5,00,000– (Received in Advance)
– Subscription Income for the year (500 × Rs. 1,000)By Cash/Bank A/c

– Subscriptions Received during

5,30,000
To Balance c/d (Received in Advance)70,000the year (balancing figure)
(70 × Rs. 1,000)By balance c/d (Receivable) (40 × Rs. 1,000)40,000
5,70,0005,70,000

Problem No. 4: (Nov. 2012)

During the year ended 31st March, 2012, Sachin Cricket Club received subscriptions as follows :

Rs.
For year ending 31st March, 201112,000
For year ending 31st March, 20126,15,000
For year ending 31st March, 201318,000
Total6,45,000

There are 500 members and annual subscription is Rs. 1,500 per member.

On 31st March, 2012, a sum of Rs. 15,000 was still in arrears for subscriptions for the year ended 31st March, 2011. Ascertain the amount of subscriptions that will appear on the credit side of Income and Expenditure Account for the year ended 31st March, 2012. Also show how the items would appear in the Balance Sheet as on 31st March, 2011 and the Balance Sheet as on 31st March, 2012.

Solution:

Dr.Subscription A/c year ended 31.03.2012Cr.

 

ParticularsRs.ParticularsRs.
To Opening outstanding (12000+15000)27,000By Opening advance subscription b/fNil
To I&E a/c (500 × 1,500) (Income)7,50,000By Cash/Bank a/c (Received)
For the year ended 31.03.2012For year ended 31.3.1112,000
To Closing advance subscription c/f18,000For year ended 31.3.126,15,000
For year ended 31.3.1318.0006,45,000
By Closing outstanding (bal. fig.)
For year ended 31.3.1115,000
For year ended 31.3.121,35,0001,50,000
7,95,0007,95,000

Income & Expenditure Account (An extract) of Sachin Cricket Club For the year ended 31st March, 2012

Rs.Rs.
By Subscription7,50,000
(500 members × Rs. 1,500 per member)

Balance Sheet of Sachin Cricket Club as on 31st March 2011 (An extract)

LiabilitiesRs.AssetsRs.
Subscription Receivable (15,000 + 12,000)27,000

Balance Sheet of Sachin Cricket Club as on 31st March 2012 (An extract)

LiabilitiesRs.AssetsRs.
Advance Subscription18,000Outstanding Subscription
of 2010-11 15,000
of 2011-12 17.50.000 – 6.15.0001 1.35.0001,50,000

Problem No. 5: (May 2014)

From the following extract of Receipts and Payments Account and the additional information, you are required to calculate the Income from Subscription for the year ending 31st March 2014, and show them in the Income & Expenditure Account, and the Balance Sheet of a Club.

An extract of Receipts and Payments Account for the year ended 31st March 2014

ReceiptsRs.PaymentsRs.
To Subscription
2012-13 4,000
2013-14 20,000
2014-15 5,00029,000

Information:

(i) Subscription outstanding on 31.03.2013Rs. 5,000
(ii) Subscription outstanding on 31.03.2014Rs. 4,000
(iii) Subscription received in advance on 31.03.2013 for 2013-14Rs. 5,000

Solution:

  1. Subscription A/c (to compute Subscription Income for the year)
ParticularsRs.ParticularsRs.
To Opening outstanding Balance b/d5,000By Opening advance Balance b/d5,000
To Income & Expenditure A/c (bal. figure)28,000By Bank A/c [Subscription received]29,000
[Subscriptions Income for the year] To Closing advance Balance c/d5,000By Closing outstanding Balance c/d4,000
Total38,000Total38,000
  1. Income and Expenditure Account for year ended 31.03.2014 (Extract)
ExpenditureRs.IncomeRs.
By Subscription Income (WN 1)28,000
  1. Balance Sheet as on 31.03.2014 (Extract)
LiabilitiesRs.AssetsRs.
Subscription received in advance5,000Subscription receivable4,000

PREPARATION OF INCOME AND EXPENDITURE A/C AND BALANCE SHEET FROM RECEIPT AND PAYMENT A/C AND OTHER BALANCES AND

INFORMATION

Problem No. 6: (May 2010)

On the basis of the following information, prepare Income and Expenditure Account for the year ended 31st March, 2010:

Receipts and Payments Account for the year ended 31st March, 2010

ReceiptsRs.PaymentsRs.
To Cash in hand (opening)1,300By Salaries2,58,000
To Cash at Bank (opening)3,850By Rent71,500
To Subscriptions4,94,700By Printing & Stationery3,870
To Interest on 8% Govt. Bonds4,000By Conveyance10,600
To Bank Interest160By Scooter purchased50,000
By 8% Govt. Bonds1,00,000
By Cash in hand (closing)840
By Cash at Bank (closing)9,200
5,04,0105,04,010

(i)      Salaries paid includes Rs. 6,000 paid in advance for April, 2010. Monthly salaries paid were Rs. 21,000.

(ii)      Outstanding rent on 31st March, 2009 and 31st March, 2010 amounted to Rs. 5,500 and Rs. 6,000 respectively.

(iii) Stock of printing and stationery material on 31st March, 2009 was Rs. 340; it was Rs. 365 on 31st March, 2010.

(iv) Scooter was purchased on 1st October, 2009. Depreciation @ 20% per annum is to be provided on it.

(v)      Investments were made on 1st April, 2009.

(vi) Subscriptions due but not received on 31st March, 2009 and 31st March, 2010 totalled Rs. 14,000 and Rs. 12,800 respectively. On 31st March, 2010 subscriptions amounting to Rs. 700 had been received in advance for April, 2010.

Solution:

Income and Expenditure Account for the year ended 31st March, 2010

ExpenditureRs.IncomeRs.
To Salaries2,52,000By Subscription4,92,800
To Rent72,000By Interest on 8% Government bonds8,000
To Printing and Stationery3,845By Bank Interest160
To Conveyance10,600
To Depreciation on Scooter5,000
To Surplus1,57,515.
5,00,9605,00,960

Working Notes:

Rs.
(i) Salaries paid2,58,000
Less: Salary paid in advance for April, 20106,000
Salaries for the year (21,000 × 12)2,52,000
(ii)Rent paid71,500
Add: Outstanding rent as on 31.3.20106,000
77,500
Less: Outstanding rent as on 31.3.20095,500
Rent for the year 2009-201072,000
(iii)Printing and stationery3,870
Add: Stock as on 31.3.2009340
4,210
Less: Stock as on 31.3.2009365
Printing and stationery consumed during the year 2009-20103,845
(iv)Depreciation on scooter = Rs. 50,000 ×  ×  = Rs. 5,000

 

(v)Interest on Government bonds received4,000
Add: Interest due but not received as on 31.3.2010 (bal. fig.)4,000
Interest income for the year 2009-20108,000
(vi)Subscription received4,94,700
Add: Accrued subscription as on 31.3.2010

Less: Accrued subscription as on 31.3.2009

Unearned subscription for April, 2010

Income for the year 2009-2010

14,00012,800
700(14,700)
4,92,800

Problem No. 7: (June 2000)

On 31st March, 1999 Writers Club a cultural association had the following assets and liabilities:

LiabilitiesRs.AssetsRs.
Trust fund5,00,000Cash3,000
Accumulated surplus inCanara Bank:
income & expenditure a/c1,05,000Savings a/c7,000
Membership fee received inFixed deposits2,00,000
advance for 1999-200010,000Investments in:
Outstanding expenses10,000Government securities3,00,000
Fixed assets95,000
Membership fee receivable15,000
Prepaid expenses5,000
6,25,0006,25,000

The following is the receipt and payment account for the year ended 31st March, 2000:

ReceiptsRs.PaymentRs.
Opening balance:Administrative expenses1,25,000
Cash3,000Programme expenses including cost2,75,000
Savings with Canara Bank7,00010,000of printing souvenir
Membership fee receivedFixed deposits with Canara Bank1,25,000
Up to 31/3/199914,000Fixed assets purchased80,000
For 1999-20001,50,000Investments in ICICI Bond3,00,000
For 2000-200116,0001,80,000Closing balance:
Sale of tickets – Programme25,000Cash                                        2,700
Advertisements in programme souvenir5,00,000Savings with Canara Bank     5,0007,700
Fixed deposits with Canara Bank75,000
Interest on bank a/c:
Savings 700
Fixed deposit 22,00022,700
Amount received on maturity of government security inclusive of interest Rs. 8,000 (cost Rs. 80,000)1,00,000
9,12,7009,12,700

The club informs you that:

Membership fee for 1999-2000 due is Rs. 25,000; it includes Rs. 1,000 due from the member who has not yet paid also for 1998-99; provision for irrecoverable membership is to be made in respect of this member.

Income receivable on 31-3-2000 on ICICI bond is Rs. 30,000 and on government securities is Rs. 24,000.

Prepaid expenses on 31-3-2000 amount to Rs. 7,000.

Outstanding expenses on 31-3-2000 amount to Rs. 8,000.

Depreciation provision is to be Rs. 12,500.

Programme is an annual feature.

The club asks you to prepare: (a) Income and expenditure account for the year ended 31st March, 2000.

(b) Balance sheet as at 31st March, 2000.

Solution:

Income & Expenditure A/c

ExpenditureRs.IncomeRs.
To Bad Debts A/c2000By Membership Fees A/c1,85,000
To Depreciation A/c12500By Bank Interest A/c22,700
To Expenses A/c1,21,000By Programme
To Surplus c/f3,96,200Income                             5,25,000
(-) Expenses                     2,75,0002,50,000
By Profit on sale
of Govt. security A/c12,000
By Interest on Investment A/c62,000
5,31,7005,31,700

Balance Sheet As On 31.03.2000

LiabilitiesRs.AssetRs.
Trust Fund5,00,000Fixed Asset1,62,500
Income & Expenditure1,05,000Fixed Deposits2,50,000
(+) Surplus3,96,2005,01,200Interest Outstanding54,000
Advance Membership Fees16,000Investments
Expense Outstanding8,000ICICI Bond3,00,000
Govt. Securities2,20,0005,20,000
Prepaid Expenses7,000
Cash2,700
Bank5,0007,700
Outstanding
Membership Fees26,000
{-) Provision2,00024,000
10,25,20010,25,200

Working Notes

By preparing this accounts we get missing information which may be a transaction (complete the double entry of same) or a balance of that account. Complete accounting for whatever information is available in the question. Then by balancing the account you will get missing information as a balancing information.

Membership Fees A/c [subscription]

ParticularsRs.ParticularsRs.
To Opening Outstanding15,000By Opening Advance Balance10,000
To Income & Expenditure A/c1,85,000By Cash/Bank A/c1,80,000
To Closing Advance Balance16,000By Closing Outstanding Balance26,000
2,16,0002,16,000

Expenses A/c

ParticularsRs.ParticularsRs.
To Opening Prepaid Balance5,000By Opening Outstanding10,000
To Cash A/c1,25,000By Income & Expenditure A/c1,21,000
To Closing Outstanding8,000By Closing Prepaid Balance7,000
1,38,0001,38,000

Fixed Deposits A/c

ParticularsRs.ParticularsRs.
To Opening Balance2,00,000By cash A/c75,000
To Cash A/c1,25,000By Balance (c/f)2,50,000
3,25,0003,25,000

Government Securities A/c

ParticularsRs.ParticularsRs.
To Opening Balance

To Interest on Investment a/c

To Profit on Govt. security

3,00,000

8,000

12,000

By Cash A/c (maturity proceed)

By Balance c/f

1,00,000

2,20,000

3,20,0003,20,000

Fixed Asset A/c

ParticularsRs.ParticularsRs.
To Opening Balance

To Cash A/c

95,000

80,000

By Depreciation A/c

By Closing Balance

12,500

1,62,500

1,75,0001,75,000

Interest On Investment A/c

ParticularsRs.ParticularsRs.
To Income & Expenditure A/c62,000By Govt. Security A/c

By Closing Outstanding

8,000

54,000

62,00062,000

Problem No. 8: (Dec. 2003)

The following is the receipts and payments account of Jyoti Charitable Hospital for the year ended 31st March, 2003:

ReceiptsRs.PaymentsRs.
To Balance b/d1,40,000By Payment for medicines6,00,000
To Subscriptions10,00,000By Honorarium to doctor2,00,000
To Donations2,90,000By Salaries5,50,000
To Interest on investmentsBy Sundry expenses10,000
@ 1% per annum for the year1,40,000By Equipment’s purchased3,00,000
To Charity show collections2,00,000By Charity show expenses20,000
By Balance c/d90,000
17,70,00017,70,000

Additional information:

On 1.4.2002 (Rs.)On 31.3.2003 (Rs.)
Subscriptions due10,00020,000
Subscriptions received in advance20,00010,000
Stock of medicines2,00,0003,00,000
Creditors for medicines1,60,0002,40,000
Equipment’s4,20,0006,00,000
Buildings8,00,0007,60,000

You are required to prepare income turd expenditure account for the year ended 31st March, 2003 and balance sheet as at that date.

Solution:

Income & Expenditure A/c [ P&L A/c ]

ExpenditureRs.IncomeRs.
To Honorarium to Doctors a/c2,00,000By Donation A/c2,90,000
To Salary A/c5,50,000By Interest A/c1,40,000
To Sundry Expenses A/c10,000By Charity Show
To Medicine A/c5,80,000Income2,00,000
To Depreciation on Equipment A/c1,20,000(-)Expenses20.0001,80,000
To Depreciation on Building A/c40,000By Subscription A/c10,20,000
To Surplus A/c1,30,000
16,30,00016,30,000

Balance Sheet As On 31.03.2003

LiabilityRs.AssetRs.
Trust Fund33,90,000Investment20,00,000
(+) Surplus1.30.00035,20,000Subscription Outstanding20,000
Advance Subscription10,000Medicine Stock3,00,000
Creditors for medicine2,40,000Building7,60,000
Equipment6,00,000
Cash/Bank90,000
37,70,00037,70,000

Working Notes:-

Important Points:

By preparing this accounts we get missing information which may be a transaction (complete the double entry of same) or a balance of that account. Complete accounting for whatever information is available in the question. Then by balancing the account you will get missing information as a balancing information.

Subscription A/c

ParticularsRs.ParticularsRs.
To Opening Outstanding10,000By Opening Advance20,000
To Income & Expenditure A/c10,20,000By Cash/Bank A/c (Received)10,00,000
To Closing Balance (advance)10,000By Closing outstanding balance20,000
10,40,00010,40,000

Medicine A/c

ParticularsRs.ParticularsRs.
To Opening Balance (Op. Stock)2,00,000By Income & Expenditure A/c5,80,000
To Creditors A/c (Purchase)6,80,000(consumed)
By Closing Stock A/c3,00,000
8,80,0008,80,000

Creditors For Medicine A/c

ParticularsRs.ParticularsRs.
To Cash/Bank A/c (Payment)6,00,000By Opening Balance1,60,000
To Closing balance c/f2,40,000By Purchase A/c (balancing figure)6,80,000
8,40,0008,40,000

Equipment A/c

ParticularsRs.ParticularsRs.
To Opening Balance4,20,000By Depreciation A/c (balancing fig.)1,20,000
To Cash/Bank A/c (Purchase)3,00,000By Closing Balance6,00,000
7,20,0007,20,000

Building A/c

ParticularsRs.ParticularsRs.
To Opening Balance8,00,000By Depreciation A/c (balancing fig.)40,000
By Closing Balance7,60,000
8,00,0008,00,000

Balance Sheet As On 31.03.2002

LiabilityRs.AssetRs.
Advance Subscription20,000Cash/Bank1,40,000
Creditors for Medicine1,60,000Investment***20,00,000
Trust Fund (Balancing figure)33,90,000Subscription Outstanding10,000
Stock of Medicine2,00,000
Equipment4,20,000
Building8,00,000
35,70,00035,70,000

*** Investment is calculated from interest. Investment = 1,40,000/7 × 100 = 20,00,000.

Problem No. 9: (Nov. 1999)

Mahaveer Sports Club gives the following Receipts and Payments Account for the year ended March 31, 1998.

Receipt(Rs.)Payment(Rs.)
To Opening Cash and Bank balance5,200By Salaries15,000
To Subscriptions34,800By Rent and Taxes5,400
To Donations10,000By Electric Charges6,000
To Interest on Investments1,200By Sports Goods2,000
To Sundry Receipts300By Library Books10,000
By Newspapers and Periodicals1,080
By Closing Cash and Bank Balances12,020
51,50051,500

 

As On 31.3.97 (Rs.)As On 313.98 (Rs.)
Outstanding Expenses:
Salaries1,0002,000
Newspapers and Periodicals400500
Rent and Taxes600600
Electricity Charges8001,000
Library Books10,000
Sports Goods8,000
Furniture and Fixtures10,000
Subscriptions Receivable5,00012,000
Investment – Government Securities50,000
Accrued Interest600600

Provide Depreciation on:

Furniture and Fixtures @ 10% p.a. Sports Goods @ 20% p.a. Library Books @ 10% p.a.

You are required to prepare Clubs opening balance sheet as on 1.4.97, income and expenditure account for the year ended on 31.3.98 and balance sheet as on that date.

Solution:

Income and Expenditure Account

ExpenditureRs.IncomeRs.
To Salary16,000By Donation10,000
To Newspapers1,180By Sundry receipts300
To Rent and taxes5,400By Subscription41,800
To Electric charges6,200By Interest1,200
To Depreciation4,300
To Surplus20,220
53,30053,300

Balance sheet on date 31.3.1998


 

 

LiabilitiesRs.AssetsRs.
Capital fund86,000Sports goods8,000
(+) Surplus20,2201,06,220(+) Addition2,000
(-) Depreciation1,8008,200
Outstanding expenses4,100Library10,000
(2000+500+600+1000)
(+) Addition10,000
(-) Depredation1,50018,500
Furniture10,000
(-) Depredation1,0009,000
Cash bank12,020
Subscription Outstanding12,000
Investment50,000
Accrued interest600
1,10,3201,10,320

Balance sheet on date 31.3.1997 (1.4.1997)

• LiabilitiesRs.AssetsRs.
Capital fund86,000Cash/bank5,200
Outstanding expensesLibrary10,000
(1000+4000+600+800)2,800Sports goods8,000
Furniture10,000
Investment50,000
Accrued interest600
Subscription outstanding5,000
88,80088,800

Working notes:

Salary a/c

ParticularRs.ParticularRs.
To Cash a/c15,000By Opening outstanding balance1,000
To Closing outstanding balance2,000By Income & Expenditure a/c16,000
17,00017,000

Newspaper a/c

ParticularRs.ParticularRs.
To Cash a/c1,080By Opening outstanding400
To Closing stock500By Income & Expenditure a/c1,180
1,5801,580

Rent and Tax a/c

ParticularRs.ParticularRs.
To Cash a/c5,400By Opening outstanding balance600
To Closing outstanding balance600By Income & Expenditure a/c5,400
6,0006,000

Electric charges a/c

ParticularRs.ParticularRs.
To Cash a/c6,000By Opening outstanding balance800
To Closing outstanding balance1,000By Income & Expenditure a/c6,200
7,0007,000

Subscription a/c

ParticularRs.ParticularRs.
To Opening outstanding balance5,000By Cash a/c34,800
To Income & Expenditure a/c41,800By Closing outstanding balance12,000
46,80046,800

Interest a/c

ParticularRs.ParticularRs.
To Opening outstanding600By Cash a/c1,200
To Income & Expenditure a/c1,200By Closing outstanding balance600
1,8001,800

Problem No. 10: (May 2008)

Following is the Receipts and Payments Account of Mayur Club for the year ended 31st March, 2008:

ReceiptsRs.PaymentsRs.
To Opening balance (1.4.2007)By Sports materials3,04,500
Cash on hand39,100By Salaries3,15,000
Cash at bank50,000By Equipment purchased on 1.10.200760,000
To SubscriptionsBy Bank fixed deposit on 31.3.20081,50,000
For the year 2006-0718,000By Rent1,48,500
For the year 2007-089,63,000By Ground maintenance22,120
For the year 2008-094,500By Insurance38,400
To Interest on bank45,000By Stationery3,450
Fixed deposits @10%By Sundry expenses5,880
By Closing balance as on 31.3.2008
Cash on hand31,750
Cash at bank40,000
15,75,00015,75,000

Following additional information is provided to you:

(i)     The Club has 220 members. The annual subscription is Rs. 4,500 per member.

(ii)     Depreciation to be provided on Furniture at 10% p.a. and on Sports equipment at 15% p.a.

(iii) On 31st March, 2008, stock of sports material in hand (after members use during the year) is valued at Rs. 78,000 and stock of stationery at Rs. 3,150. Rent for 1 month is outstanding. Unexpired insurance amounts to Rs. 9,600.

(iv) On 31st March, 2007 the Club had the following Assets:

FurnitureRs. 2,70,000
Sports equipmentRs. 1,80,000
Bank fixed depositRs. 4,50,000
Stock of stationeryRs. 1,500
Stock of sports materialRs. 73,500
Unexpired insuranceRs. 8,400
Subscription in arrearRs. 22,500

Note .’There was no liability on 31.3.2007 You are required to prepare:

(i) Income and Expenditure Account; and

(ii) Balance Sheet as at 31st March, 2008.

Solution:

Income & Expenditure A/c

ExpenditureRs.IncomeRs.
To Salary A/c3,15,000By Interest A/c45,000
To Ground Maintenances A/c22,120By Subscription A/c9,90,000
To Sundry Expenses A/c5,880
To Rent A/c1,62,000
To Stationery A/c1,800
To Sports Materials A/c3,00,000
To Insurance A/c37,200
To Depreciation A/c58,500
To Surplus1,32,500
10,35,00010,35,000

Balance Sheet as on 31.03.2008

LiabilityRs.AssetRs.
Trust Fund                   10,95,000Cash31,750
(+)Surplus                   1,32,50012,27,500Bank40,000
Advance Subscription4,500Sports Material Stock78,000
Rent Outstanding13,500Stationery Stock3,150
Prepaid Insurance9,600
Furniture                     2,70,000
(-)Depreciation            27.0002,43,000
Equipment                   2,40,000
(-) Depreciation           31,5002,08,500
Fixed Deposits6,00,000
Subscription Outstanding31,500
12,45,50012,45,500

Working Notes:-

Balance Sheet as on 31.03.2007

. LiabilityRs.AssetRs.
Trust Fund (Balancing figure)10,95,000Subscription Outstanding22,500
Cash39,100
Bank50,000
Furniture2,70,000
Equipment1,80,000
Fixed Deposits4,50,000
Stock (1,500+73,500)75,000
Prepaid Insurance8,400
10,95,00010,95,000

Subscription A/c

ParticularsRs.ParticularsRs.
To Opening Outstanding22,500By Cash/Bank A/c9,85,500
To Income & Expenditure A/c9,90,000By Closing Outstanding31,500
To Closing Advance c/f4,500
10,17,00010,17,000

Equipment A/c

ParticularsRs.ParticularsRs.
To Opening Balance1,80,000By Closing Balance2,40,000
To Cash/Bank A/c (purchase)60,000
2,40,0002,40,000

Fixed Deposits A/c

ParticularsRs.ParticularsRs.
To Opening Balance4,50,000By Closing Balance6,00,000
To Cash A/c1,50,000
6,00,0006,00,000

Rent A/c

ParticularsRs.ParticularsRs.
To Cash A/c1,48,500By Income & Expenditure A/c1,62,000
To Closing Outstanding Bal.13,500
1,62,0001,62,000

Insurance A/c

ParticularsRs.ParticularsRs.
To Opening Advance Balance8,400By Income & Expenditure37,200
To Cash A/c38,400By Closing Prepaid Balance9,600
46,80046,800

Sports Materials A/c

ParticularsRs.ParticularsRs.
To Opening Balance73,500By Income & Expenditure3,00,000
To Cash A/c (purchase)3,04,500By Closing Stock78,000
3,78,0003,78,000

Stationery A/c

ParticularsRs.ParticularsRs.
To Opening Balance1,500By Income & Expenditure1,800
To Cash A/c (purchase)3,450By Closing Balance3,150
4,9504,950

Workings:- Calculation of rent outstanding.

Rent for 1 month is outstanding, which implies that the rent paid is for 11 months. Rent outstanding =  = 13,500

Problem No. 11: (May 2011) (May 2010)

The following is the Receipt and Payment Account of Park View Club in respect of the year ended 31 st March, 2011:

ReceiptsRs.PaymentsRs.
To Balance b/d1,02,500By Salaries2,08,000
To subscriptions:By Stationery40,000
2009-104,500By Rent60,000
2010-112,11,000By Telephone Exp.10,000
2011-127.5002,23,000By Investment1,25,000
To Profit on sports meet1,55,000By Sundry Expenses92,500
To Income from investments1,00,000By Balance c/d45,000
5,80,5005,80,500

Additional information:

(i)   There are 450 members each paying an annual subscription of Rs. 500. On 1st April, 2010, outstanding subscription was Rs. 5,000.

(ii)     There was an outstanding telephone bill for Rs. 3,500 on 31st March, 2011.

(iii)  Outstanding sundry expenses as on 31st March, 2010 totalled Rs. 7,000.

(iv) Stock of stationery:

On 31st March, 2010               Rs. 5,000

On 31st March, 2011               Rs. 9,000

(v)  On 31st March, 2010 building stood in the books at Rs. 10,00,000 and it was subject to depreciation @5% per annum.

(vi) Investment on 31st March, 2010 stood at Rs. 20,00,000.

(vii) On 31st March, 2011, income accrued on the investments purchased during the year amounted to Rs. 3,750.

Prepare an Income and Expenditure Account for the year ended 31st March, 2011 and the Balance Sheet as at that date.

Solution:

Park View Club

Income and Expenditure Account

for the year ended on 31st March 2011

ExpenditureAmount (Rs.)IncomeAmount (Rs.)
To Salaries2,08,000By Subscriptions (W.N. 2)2,25,000
To Stationery consumed (W.N.3)36,000By Profit on sports meet1,55,000
To Rent60,000By Income on investment1,00,000
To Telephone expenses10,000Add. Income accrued3,7501,03,750
Add: Closing Outstanding3.50013,500
To Sundry expenses92,500
Less. Opening Outstanding(7,000)85,500
To Depreciation of building50,000
To Surplus (Carried to Capital fund)30,750
4,83,7504,83,750

Balance Sheet as at 31st March 2011

LiabilityAmount (Rs.)AssetsAmount (Rs.)
Capital fund (W.N.1)31,05,500Outstanding subscriptions14,500
Add: Surplus30,75031,36,250Investment
Subscriptions received in advance7,500(20,00,000+1,25,000)21,25,000
Outstanding telephone bills3,500Add: Interest accrued3.75021,28,750
Building10,00,000
Less-. Depreciation150.00019,50,000
Stock of stationery9,000
Cash balance45,000
31,47,25031,47,250

Working Notes:

(1) Calculation of Opening Capital Fund

Balance Sheet as at 31st March 2010

LiabilityAmount (Rs.)AssetsAmount (Rs.)
Outstanding sundry expenses7,000Building10,00,000
Capital fund (Balancing figure)31,05,500Investments20,00,000
Stock of stationery5,000
Cash balance1,02,500
Outstanding subscriptions5,000
31,12,50031,12,500

(2) Calculation of subscriptions accrued during the year

Subscription A/c

ParticularsAmount (Rs.)ParticularsAmount (Rs.)
To Opening Outstanding Subscriptions5,000By Cash A/c2,23,000
To Income & Expenditure A/c (450 @ 500)2,25,000(4,500 + 2,11,000 + 7,500)
By Closing Outstanding subscriptions14,500
To Subscriptions received in advance c/f7,500(Balancing figure)
2,37,5002,37,500

(3) Calculation of stationery consumed during the year

Rs.
Opening Stock of stationery5,000
Add. Purchased40,000
Total45,000
Less: Closing Stock of stationery(9,000)
Stationery consumed36,000

Problem No. 12: (Nov 2004)

The Accountant of Diana Club furnishes you the following Receipts and Payments account for the year ending 30th September, 2003:

ReceiptsAmount Rs.PaymentsAmount Rs.
Opening Balance:Honoraria to Secretary9,600
Cash and Bank16,760Misc. expenses3,060
Subscriptions21,420Rates and taxes2,520
Sale of old newspaper4,800Groundman’s wages1,680
Entertainment fees8,540Printing and Stationery940
Bank Interest460Telephone expenses4,780
Bar Receipts14,900Payment for Bar purchases11,540
Repairs640
New Car (Less sale proceeds of Old Car25,200
*Rs. 6,000)
Closing Balance:
Cash and Bank:6,920
66,88066,880

Additional Information:

01.10.2002 Rs.30.09.2003 Rs.
(i) Subscription due (not received)2,4001,960
(ii) Cheques issued, but not presented for payment of printing18060
(iii) Club premises at cost58,000
(iv) Depreciation on dub premises provided so far37,600
(v) Car at cost24,380
(vi) Depreciation on car20,580
(vii) Value of Bar stock1,4201,740
(viii) Amount unpaid for bar purchases1,180860

(ix) Depreciation is to be provided @5% p.a. on the written down value of the club premises and @15% p.a. on car for the whole year.

You are required to prepare an Income and Expenditure account of Diana Club for the year ending 30th September, 2003 and Balance Sheet as on that date.

Solution:

Income and Expenditure Account of Diana Club

for the year ended 30th September, 2003

ExpenditureAmount (Rs.)IncomeAmount (Rs.)
To Honoraria to secretary9,600By Subscriptions (W.N.3)20,980
To Misc. expenses3,060By Sale of old newspapers4,800
To Rates and taxes2,520By Entertainment fees8,540
To Groundman’s wages1,680By Bank interest460
To Printing and stationery940By Bar receipts14,900
To Telephone expenses4,780By Profit on sale of car (W.N.5)2,200
To Bar Consumption
Opening bar stock1,420
Add. Purchases (W.N. 2)11,220
12,640
Less: Closing bar stock1,74010,900
To Repairs640
To Depreciation
Club premises (W.N.4)1,020
Car (W.N.6)4.6805,700
To Surplus12,060
(transferred to Capital fund)
51,88051,880

Balance Sheet of Diana Club as on 30th September, 2003

LiabilitiesAmount (Rs.)AssetsAmount (Rs.)
Capital fund (W.N. 1)43,600Club Premises19,380
Add: Surplus12,06055,660Car26,520
Bar stock1,740
Bar Creditor860Outstanding subscription1,960
Cash and bank6,920
56,52056,520

Working Notes:

  1. Balance Sheet of Diana Club as on 1st October, 2002
LiabilitiesAmount (Rs.)AssetsAmount (Rs.)
Bar Creditor1,180Club premises58,000
Capital fund on 1.10.201043,600Less: Depreciation37,60020,400
(balancing figure)Car24,380
Less: Depreciation20,5803,800
Bar stock1,420
Outstanding subscription2,400
Cash at bank16,760
44,78044,780
  1. Calculation of bar purchases for the year:

Bar Creditor A/c

To Cash/Bank a/c (Paid during the year)11,540By Opening Outstanding b/f (Payable)1,180
To Closing outstanding C/f (payable)860By Income & Exp. A/c (Purchase: Bal. fig.)11,220
Total12,400Total12,400
  1. Calculation of subscriptions accrued during the year:
Dr.Subscription A/cCr.
ParticularsRs.ParticularsRs.
To Opening outstanding subscription2,400By Cash/Bank a/c (received)21,420
To I&E a/c (Income) (bal. fig.)20,980By Closing outstanding subscription1,960
23,38023,380
  1. Depreciation on club premises and written down value on 30th September, 2003:
Rs.
Written down value on 1.10.2002 (58,000-37,600)20,400
Less: Depreciation for the year 2002-2003 @ 5% p.a.1,020
19,380
  1. Calculation of profit on sale of car:
Rs.
Sale proceeds of old car6,000
Less: Written down value of old car:
Cost of car on 1.10,200224,380
Less: Depreciation upto 1.10.200220,5803,800
2,200
  1. 6. Depreciation on car and written down values on 30 September, 2003:
Rs.
Cost of new car purchased (25,200+6,000)31,200
Less: Depreciation for the year @15% p.a.4,680
Written down value on 30.9,200326,520

Note: The opening and closing balance of cash and bank shown in the Receipts and Payments Account (given in the question), include the bank balance as per cash book. Therefore, no adjustment has been made in the above solution on account of cheques issued, but not presented for payment of printing. This is a reconciliation item pending to be recorded by bank.

PREPARATION OF RECEIPT AND PAYMENT A/ C, INCOME & EXPENDITURE A/C AND BALANCE SHEET FROM INFORMATION

Problem No. 13: (Nov 2001)

Summary of Receipts and payments of Bombay Medical Aid Society for the year ended 31.12.2000 are as follows: Opening Cash balance in hand Rs.8,000, Subscription Rs. 50,000, Donation Rs. 15,000, Interest on Investments @ 9% p.a. Rs.9,000, Payments for medicine supply Rs.30,000, Honorarium to Doctors Rs.10,000, Salaries Rs. 28,000, Sundry Expenses Rs. 1,000, Equipment purchase Rs. 15,000, Charity show expenses Rs. 1,500, Charity show collections Rs. 12,500.

Additional information:

1.1.200031.12.2000
Subscription due1,5002,200
Subscription received in advance1,200700
Stock of medicine10,00015,000
Amount due for medicine supply9,00013,000
Value of equipment21,00030,000
Value of building50,00048,000

You are required to prepare Receipts and Payments Account and Income and Expenditure Account for the year ended 31.12.2000 and Balance Sheet as on 31.12.2000.

Solution:

Income and Expenditure A/c

Particular (Expenditure)Rs.Particular (Income)Rs.
To Hon. to Doctors10,000By Donation15,000
To Salaries28,000By Interest on investment9,000
To Expenses1,000By Charity show Income12,500
To Medicine consumed29,000(-) Expenses1.50011,000
To Depreciation (6000 + 2000)8,000By Subscription51,200
To Surplus10,200
86,20086,200

Balance sheet on date 31.12.2000

LiabilitiesRs.AssetsRs.
General fund1,80,300Equipment’s30,000
(+) Surplus10.2001,90,500Building48,000
Advance subscription700Investment1,00,000
Creditors for machines13,000Stock15,000
Subscription Outstanding2,200
Cash9,000
2,04,2002,04,200

Receipt and Payment A/c

ReceiptRs.PaymentRs.
To Opening balance8,000By Creditors30,000
To Subscription50,000By Honoranium to Doctors10,000
To Donation15,000By Salaries28,000
To Interest on investment9,000By Sundry expense1,000
To Charity show collection12,500By Equipment15,000
By Charity show expenses1,500
By closing Balance9,000
94,50094,500

Working note:

Balance sheet on date 1.1.2000

LiabilitiesRs.AssetsRs.
General fund (Bal. Fig.)1,80,300Cash8,000
Advance subscription1,200Investments1,00,000
Creditors for medicines9,000Subs. Outstanding1,500
Stock10,000
Equipment21,000
Building50,000
1,90,5001,90,500

Subscription A/c

ParticularRs.ParticularRs.
To Opening outstanding a/c1,500By Opening advance subscription a/c1,200
To I&E a/c51,200By Cash a/c50,000
To Closing advance subscription a/c700By Closing outstanding subscription a/c2,200
53,40053,400

Medicine Expenditure A/c

To Opening Stock a / c10,000By I&E a/c29,000
To Purchases a/c34,000By Closing stock a/c15,000
44,00044,000

Creditors for M.S. A/c

To Cash a/c30,000By Opening Outstanding a/c9,000
To Closing outstanding a/c13,000By Purchase (bal. fig.) a/c34,000
43,00043,000

Equipment A/c

To Opening balance21,000By Depreciation (bal. fig) a/c6,000
To Cash a/c15,000By Closing balance30,000
36,00036,000

Building A/c

To Opening balance50,000By Closing balance48,000
By Depreciation (bal. fig) a/c2,000
50,00050,000

Amount of Investment = Interest + Rate = 9,000 -s- 9/100 = 1,00,000

Problem No. 14: (Nov, 1998)

The following information’s were obtained from the books of Delhi Club as on 31.3.1998 at the end of the first year of the Club. You are required to prepare Receipts and Payments Account, Income and Expenditure Account for the year ended 31.3.1998 and a Balance Sheet as at 31.3.1998 on mercantile basis:

(i)     Donations received for Building and Library Room Rs. 2,00,000.

(ii)     Other revenue income and actual receipts:

Revenue Income Rs.Actual Receipts Rs.
Entrance Fees17,00017,000
Subscription20,00019,000
Locker Rents600600
Sundry Income1,6001,060
Refreshment Account16,000

(iii) Other revenue expenditure and actual payments:

Revenue Expenditure Rs.Actual Payments Rs.
Land (cost Rs. 10,000)10,000
Furniture (cost Rs. 1,46,000)1,30,000
Salaries5,0004,800
Maintenance of Play grounds2,0001,000
Rent8,0008,000
Refreshment Account8,000

Donations to the extent of Rs. 25,000 were utilized for the purchase of Library Books, balance was still unutilized. In order to keep it safe, 9% Govt. Bonds of Rs. 1,60,000 were purchased on 31.3.1998. Remaining amount was put in the Bank on 31.3.1998 under the term deposit. Depreciation at 10% p.a. was to be provided for the year on Furniture and Library Books.

Solution:

Delhi Club

Income and Expenditure Account

for the year ended 31st March 1998

ExpenditureRs.IncomeRs.
To Salary a/c (4,800+200)5,000By Entrance fees17,000
To Maintenance a/c (1,000+1,000)2,000By Subscription (19,000 + 1,000)20,000
To Rent a/c8,000By Locker rents600
To Depreciation a/c (14,600+2,500)17,100By Sundry income (1,060 + 540)1,600
To Surplus a/c15,100By Refreshment16,000
(-) Expenses8.0008,000
47,20047,200

Balance sheet on date 31.3.1998

LiabilitiesRs.AssetsRs.
Capital fund:Land,10,000
(Surplus)15,100Furniture1,46,000
Building and liability fund2,00,000(-) Depreciation14.6001,31,400
Creditors for furniture16,000Library books25,000
Salary outstanding200(-) Depreciation2.50022,500
Maintenance outstanding1,000Subs. Outstanding1,000
Bank overdraft1,08,140Sundry Income outstanding540
Investment of building fund
Govt. bond1,60,000
F.D.15.0001,75,000
3,40,4403,40,440

Receipt and Payments A/c for the year 31st March 1998

ReceiptsRs.PaymentsRs.
To Building and liability fund a/c2,00,000By Library book a/c25,000
To Entrance fees a/c17,000By Bond 9% govt. a/c1,60,000
To Subscription a/c19,000By Fixed deposit a/c15,000
To Locker rent a/c600By Land a/c10,000
To Sundry income a/c1,060By Furniture a/c1,30,000
To Refreshment a/c16,000By Salaries a/c4,800
To Bank outstanding a/c1,08,140By Maintenance of play grounds a/c1,000
By Rent a/c8,000
By Refreshment a/c8,000
3,61,8003,61,800

Problem No. 15: [May 2003]

The Receipts and Payments Account of Trustwell Club prepared on 31st March, 2008 is as follows:

Receipts and Payments A/c

Dr.Cr.
ReceiptsRs.PaymentsRs.
To Balance b/d450By Expenses (Including payment for6,300
To Annual Income from Subscription4,590Sports Material Rs. 2,700)
Add: Outstanding of last yearBy Loss on Sale of Furniture180
received this year180(Cost price Rs. 450)90,450
4,770By Balance c/d
Less: Prepaid of last Year904,680
To Other fees1,800
To Donation for Building90,000
96,93096,930

Additional Information:

Trustwell Club had balances as on 1.4.2007:-

Furniture Rs. 1,800; Investment at 5% Rs. 27,000; Sports Materials Rs. 6,660;

Balance as on 31.3.2008: Subscription Receivable Rs. 270; Subscription received in advance Rs. 90; Stock of Sports Material Rs. 1,800.

Do you agree with above Receipts and Payments Account? If not, prepare correct Receipt and Payments Account and Income and Expenditure Account for the year ended 31st March, 2008 and Balance Sheet as on that date. Solution:

 

 

Dr.

In the books of Trustwell Club

Corrected Receipts & Payment A/c

for the year ended 31st March, 2008

 

 

Cr.

ReceiptsRs.PaymentsRs.
To Balance b/d450By Expenses (Rs. 6,300 – Rs. 2,700)3,600
To Subscription (note 2)4,500By Sports Material2,700
To Other Fees1,800By Balance c/d (balancing figure)90,720
To Donation for Building90,000
To Sale of Furniture (Rs. 450 – Rs. 180)270
97,02097,020

 

 

Dr.

Income & Expenditure A/c

for the year ended 31st March, 2008

 

Cr.

ExpendituresRs.IncomesRs.
To Sundry Expenses3,600By Subscription4,590
To Sports Material used (note 3)7,560By Other Fees1,800
To Loss on Sale of Furniture180By Interest on Investment1,350
(5% on Rs. 27,000)
By Excess of Expenditure over income3,600
11,34011,340

Balance sheet of Trustwell Club as on 31st March, 2008

LiabilitiesRs.AssetsRs.
Capital Fund:Furniture1,800
Opening Balance (note 1)6,000Less: Sold4501,350
Less: Excess of Expenditure596 Investment27,000
Over Income3.60032,400Interest Accrued on Investments1,350
Building Fund90,000Sports Material1,800
Subscription Received in Advance90Subscription Receivable270
Cash in Hand & Bank90,720
1,22,4901,22,490

Working Notes:

1.

Balance Sheet of Trustwell Club as on 1st April, 2007

LiabilitiesRs.AssetsRs.
Subscription (received in advance) Capital90Furniture1,800
Fund (Balancing figure)36,000Investment27,000
Sports Material6,660
Subscription Receivable180
Cash in Hand & Bank450
36,09036,090

 

2. Dr.Subscription A/cCr.
ParticularsRs.ParticularsRs.
To Opening outstanding subscription180By Opening advance subscription90
To I&E a/c (Income)4,590By Cash/Bank a/c (received) (bal. fig.)4,500
To Closing advance subscription90By Closing outstanding subscription270
4,8604,860

3.

Sports Material Stock A/c

ParticularsRs.ParticularsRs.
To Balance b/d6,660By Materials used (Balancing figure)7,560
To Purchases A/c2,700By Balance c/d1,800
9,3609,360

Corrected Receipt Payment A/c, Income Expenditure A/c & Opening Closing Balance sheet

Problem No.16: (Nov. 2011)

Bear Bar Club was registered in a city and the accountant prepared the following Receipts and Payments Account for the year ended March 31, 2011 and showed a deficit of Rs. 14,520.

ReceiptsRs.PaymentsRs.
Subscriptions62,130Premises30,000
Fair receipts7,200Honorarium to Secretary12,000
Variety show receipts (net)12,810Rent2,400
Interest690Rate & Taxes3,780
Bar Collection22,350Printing & Stationery1,410
Excess Cash spent1,000Sundry Expenses5,350
Deficit14,520Wages2,520
Fair Expenses7,170
Bar purchases payments17,310
Repair960
New car (less proceeds of old car Rs. 9,000)37,800
1,20,7001,20,700

The following additional information are:

01-04-201031-03-2011
Cash in hand450
Bank balances as per pass book24,69010,440
Cheque issued not presented for sundry expenses27090
Subscriptions due3,6002,940
Premises at cost87,0001,17,000
Accumulated depreciation on premises56,400
Car at cost36,57046,800
Accumulated depreciation on car30,870
Bar stock2,1302,610
Creditors for the bar purchases1,7701,290

Cash excess spent represent honorarium, to secretary not withdrawn due to cash deficit. His annual honorarium is Rs. 12,000.

Depreciation on premises and car is to be provided at 5% and 20% on written down valued method.

You are required to prepare the correct Receipts and Payments Account, Income and Expenditure Account and Balance Sheet on March 31, 2011.

Solution :

Receipt & Payment Account for the year ended 31.03.2011

Particulars (Receipts)Rs.Particulars (Payments)Rs.
To Balance b/d. Cash450By Honorarium to Secretary11,000
Bank24,420A/c
To Subscription A/c62,130By Premises A/c30,000
To Fair receipt A/c7,200By Rent A/c2,400
To Variety Show Receipt A/c12,810By Rates & Taxes A/c3,780
To Interest A/c690By Printing & Stationery A/c1,410
To Bar collection A/c22,350By Sundry Expenses A/c5,350
To Car A/c (Sale)9,000By Wages A/c2,520
By Fair Expense A/c7,170
By Bar Purchase (Creditors on bar) A/c17,310
By Repairs A/c960
By New Car A/c46,800
By Balance c/d. Bank10,350
Cash (Bal. fig.)Nil
1,39,0501,39,050

Income and Expenditure Account for the year ended 31.03.2011

ExpenditureRs.IncomeRs.
To Honorarium to Secretary 11,000By Subscription A/c61,470
+ Outstanding1,00012,000By Fair receipts7,200
To Rent A/c2,400(-) Fair expenses7.17030
To Rates & Taxes A/c3,780By Variety show receipt12,810
To Printing & Stationery A/c1,410By Interest690
To Sundry Expenses A/c5,350By Profit on sale of Bar A/c6,000
To Wages A/c2,520By Profit on sale of Car3300
To Repairs A/c960
To Dep. on premises (1500+1530)3,030
To Depreciation on Car9,360
To Surplus of Income over43,490
expenditure (balancing figure)
84,30084,300

Balance sheet as on 31.03.2011

LiabilitiesAmountAssetsAmount
Bank Balance10,350
Capital Fund65,130Premises1,17,000
+ Surplus43,4901,08,620(-) Depreciation Reserve59,43057,570
1,000Subscription due2,940
Honorarium payable1,290Car46,800
Creditor for Bar(-) Depreciation Reserve9,36037,440
Bar Stock2,610
1,10,9101,10,910

Working Notes

Opening balance sheet (as on 01.04.2011)

ParticularsRs.ParticularsRs.
Capital Fund (Balancing figure)65,130Cash450
Bank24,420
Creditors for Bar1,770Car36,570
(-) Depreciation Reserve30,8705,700
Premises87,000
(-) Depreciation Reserve56,40030,600
Subscription receivable3,600
Bar stock2,130
66,90066,900

Bar A/c

To Opening stock2,130By Cash A/c (Bar Sale)22,350
To Creditor (purchase)16,830By Closing Stock2,610
To Gross profit (Bal. fig.)6,000
24,96024,960
Creditor for bar A/c
To Cash A/c17,310By Balance b/d1,770
To Balance c/d1,290By Purchase (Bal. fig.)16,830
18,60018,600
Old car A/c
To Opening Balance36,570By Cash A/c (Sale)9,000
To Income & Expenditure A/cBy Depreciation reserve A/c30,870
(Profit on Sale of Car) (Bal. fig.)3,300
39,87039,870
Depreciation reserve on car
To Car A/c (trans. as the car is sold)30,870By Balance b/d30,870
30,87030,870
New car A/c
To Cash A/c (purchased)46,800By Balance c/d46,800
46,80046,800
Premises A/c
To Opening Balance87,000By Closing Balance1,17,000
To Cash A/c (additions)30,000
1,17,0001,17,000
Depreciation reserve on premises
To Balance c/d59,430By Balance b/d56,400
By Depreciation a/c (5% on 30,600 WDV +3,030
5% on 30,000)
59,43059,430

Subscription A/c

To Op. bal. (Subscription due)3,600By Cash A/c62,130
To Income & Exp. A/c (Bal. fig. income)61,470By Subscription due/receivable c/f2,940
65,07065,070

Reconciliation statement (as on 01.04.2010)

ParticularsDebit Rs.Credit Rs.
Balance as per pass book (Deposit)24,690
Cheque issued but not presented for Sundry expenses270
Balance as per cash book24,420
24,69024,690

Reconciliation statement (as on 31.03.2011)

ParticularsDebit Rs.Credit Rs.
Balance as per pass book (Deposit)10,440
Cheque issued but not yet presented90
Balance as per cash book10,350
10,44010,440

Note: (1) Since there is no opening/closing balance of Debtors therefore we will consider that the amount of bar collection is bar cash sale.

(2)   In question balance as per pass book was given, hence by preparing BRS, balance as per cash book is ascertained and shown in the balance sheet.

(3)   Depreciation on addition to premises is taken for full year alternatively it can be taken for half year.

PREPARATION OF RECEIPT AND PAYMENT A/C FROM INCOME AND EXPENDITURE A/C AND OTHER BALANCES AND INFORMATION

Receipt Payment A/c & Opening & Closing Balance sheet

Problem No. 17: (Dec. 1997)

The following is the income and expenditure account of a club for the year ended 31st March, 1997:

Expenditure:Rs.
To Provision used:
Opening stock10,000
Add: Purchases1,40,000
1,50,000
Less: Closing stock5,0001,45,000
To Salaries18,000
To General expenses5,000
To Depreciation on equipment’s1,000
To Surplus, i.e. excess of income over expenditure28,000
1,97,000
Income:
By Subscriptions34,000
By Sale of provisions1,63,000
1,97,000

The following balance sheets are also given to you:

LiabilitiesOn 31.3.1996On 31.3.1997
Creditors for provisions8,00010,000
Capital fund47,00075,000
55,00085,000
Equipment’s (cost less depreciation)10,00025,000
Stock of provisions10,0005,000
Subscriptions receivable5,00010,000
Cash at bank and in hand30,00045,000
55,00085,000

Prepare the receipts and payments account of the club for the year ended 31st March, 1997.

Solution :

Receipt & Payment A/c

ReceiptsRs.PaymentsRs.
To Opening balance30,000By Salary a/c18,000
To Sale of Provisions a/c1,63,000By General expenses a/c5,000
To Subscription a/c29,000By Creditors a/c1,38,000
By Equipment a/c16,000
By Closing balance a/c45,000
2,22,0002,22,000
Working Notes:
Creditors A/c
ParticularsRs.ParticularsRs.
To Cash/Bank a/c1,38,000By Opening balance8,000
To Closing balance10,000By Purchase a/c1,40,000
1,48,0001,48,000
Equipment A/c
ParticularsRs.ParticularsRs.
To Opening balance10,000By Depreciation a/c1,000
To Cash/bank a/c16,000By Closing balance25,000
26,00026,000

Subscription A/c

ParticularsRs.ParticularsRs.
To Opening outstanding a/c5,000By Cash /Bank a/c29,000
To Income & Expenditure a/c34,000By Closing outstanding a/c10,000
39,00039,000

Receipt Payment A/c & Opening & Closing Balance sheet Problem No. 18: (Dec. 1996)

From the following particulars relating to Deena Nath Charitable Hospital, prepare (i) receipts and payments account for the year ended on 31st March, 1996; and (ii) balance sheet as on 31st March, 1996:

Income and Expenditure Account For the year ended 31st March, 1996

ExpenditureRs.IncomeRs.
To Medicines used29,980By Subscriptions56,000
To Honorarium to doctors12,000By Donations9,500
To Salaries27,500By Interest on investment @11%11,000
To Printing and stationery1,100By Income from film show:
To Electricity475Proceeds11,450
To Rent6,000Less: Expenses78010,670
To Depreciation on Furniture2,100
To Depreciation on equipment3,250
To Surplus i.e. excess of income over expenditure4,765
87,17087,170

Additional Information:

On 1.4.1995On 31.3.1996
(i)Subscription due120160
(ii)Subscriptions received in advance64100
(iii)Electricity bills unpaid92115
(iv)Stock of medicines7,8209,750
(v)Estimated value of equipment’s11,60013,900
(vi)Furniture and fixtures21,00018,900
(vii)Land10,000
(viii)Interest accrued on investments in 11% debentures costing Rs. 1,02,500 (face value: Rs. 1,00,000)3,7503,750
(ix)Cash in hand340160
(x)Cash at bank9,0007

Solution :

Receipt & Payment A/c

ReceiptRs.PaymentRs.
To Openiner balanceBy Honorarium to doctors a/c12,000
Cash340By Salary a/c27,500
Bank9,0009,340By Printing & Stationery a/c1,100
To Donation a/c9,500By Rent a/c6,000
To Charity show a/c11,450By Charity show a/c780
To Interest a/c11,000By Land a/c10,000
To Subscription a/c55,996By Equipment a/c5,550
By Electricity a/c452
By Medicine a/c31,910
By Closing balance
Cash160
Bank (balancing figure)1.8341,994
97,28697,286

Balance Sheet as on 31.3.96

LiabilitiesRs.AssetsRs.
Trust Fund1,55,974Subscription outstanding160
Surplus4.7651,60,739Stock of Medicine9,750
Advance subscription100Equipment13,900
Electricity outstanding115Furniture18,900
Land10,000
Interest (receivable)3,750
Investment1,02,500
Cash160
.Bank1,834
1,60,9541,60,954

Working Notes:

Balance Sheet as on 31.3.95

LiabilitiesRs.AssetsRs.
Advance subscription64Subscription outstanding120
Electricity outstanding92Stock of Medicine7,820
Trust Fund (Balancing figure)1,55,974Equipment11,600
Furniture21,000
Interest (receivable)3,750
Investment1,02,500
Cash340
Bank9,000
1,56,1301,56,130

Medicine A/c

ParticularsRs.ParticularsRs.
To Opening stock a/c7,820By Income & Expenditure29,980
To Cash /Bank a/c31,910By Closing stock9,750
39,73039,730

Electricity A/c

ParticularsRs.ParticularsRs.
To Cash/Bank a/c452By Opening outstanding92
To Closing outstanding a/c115By Income & Expenditure475
567567

Furniture A/c

ParticularsRs.ParticularsRs.
To Opening balance21,000By Depreciation a/c2,100
By Closing balance18,900
21,00021,000

Equipment A/c

ParticularsRs.ParticularsRs.
To Opening balance11,600By Depreciation a/c3,250
To Cash/Bank a/c5,550By Closing balance13,900
17,15017,150

Interest A/c

ParticularsRs.ParticularsRs.
To Opening outstanding3,750By Cash/Bank a/c11,000
To Income & Expenditure11,000By Closing outstanding3,750
14,75014,750

Subscription A/c

ParticularsRs.ParticularsRs.
To Opening outstanding120By Opening advance64
To Income & Expenditure56,000By Cash/Bank a/c ‘55,996
To Closing advance100By Closing outstanding160
56,22056,220

Receipt & Payment A/c & Opening & Closing Balance sheet

Problem No. 19: (May 2006)

Following is the Income and Expenditure Account of Victoria Club for the year ending 31st March, 2008

ExpendituresRs.IncomesRs.
To Salaries & Wages19,000By Subscription30,000
To Misc. Expenses (including Insurance)2,000By Entrance Fee Received1,000
To Audit Fees1,000By Annual Sports Income
To Chief Executives Honorarium4,000receipts6,000
To Printing & Stationery1,800Less: Expenses3,0003,000
To Annual Day Celebration Exp.6,000
Less: Donation4,0002,000
To Interest on Bank Loan600
To Depreciation on Sports Equipment1,200
To Excess of Income over Expenditure2,400
34,00034,000

Additional Information:

31.3.07 (Rs.)31.3.08 (Rs.)
(1) Subscription Outstanding2,4003,000
(2) Subscription received in advance1,8001,080
(3) Salaries Outstanding1,6001,800
(4) Sports equipment (after deducting depreciation)10,40010,800
(5) Prepaid Insurance240
(6) Cash in hand76,400

(7)   The Club owned a sports ground of Rs. 40,000

(8)   The Club took a loan of Rs. 8,000 from a bank during the year 2006-2007, which was not paid in 2007- 08.

(9)   Audit fee of 2007-08 was outstanding, but Audit fees of Rs. 800 for 2006-07 was paid in 2007-08

Prepare Receipts and Payments Account for the year ending 31st March, 2008 and a Balance Sheet as on that date.

Solution :

In the books of Victoria Club

Dr.Receipts and Payments Account for the year ended on 31st March, 2008Cr.
ReceiptsRs.PaymentsRs.
To Balance b/d (Balancing figure)5,560By Salaries and Wages (note 4)18,800
To Subscription (note 3)28,680By Audit Fee800
To Donation4,000By Sports Equipments (note 2)1,600
To Entrance fee1,000By Misc. Expenses2,000
To Receipt for Annual Sport6,000Add: Prepaid Insurance2402,240
By Chief Executive’s Honorarium4,000
By Printing & Stationery1,800
By Expenses on Annual Sports3,000
By Annual Day Celebration Expenses6,000
By Interest on Bank Loan600
By Balance c/d6,400
45,24045,240

Balance Sheet of Victoria Club

As on 31st March, 2008

LiabilitiesRs.AssetsRs.
Capital Fund:Cash6,400
Opening Balance (note 1)46,160Subscription Outstanding3,000
Add: Excess of IncomeSports Equipment10,400
Over Expenditure2.40048,560Add: Additions1.600
Salaries Outstanding1,80012,000
Audit Fee Outstanding1,000Less: Depreciation1.20010,800
Bank Loan8,000Sports Ground40,000
Subscription received in advance1,080Prepaid Insurance240
60,44060,440

Working Notes:

1.

Balance Sheet of Victoria Club

as on 31st March, 2007

LiabilitiesRs.AssetsRs.
Capital Fund (Balancing figure)46,160Cash5,560
Bank Loan8,000Sports Ground40,000
Subscription received in advance Salaries1,800Sport Equipment after Depreciation10,400
Outstanding1,600Subscription Outstanding2,400
Audit fee Outstanding800
58,36058,360
2.
Dr.                               Sports Equipment AccountCr.
ParticularsRs.ParticularsRs.
To Balance b/d

To Bank A/c (Balancing Figure)

10,400

1,600

By Depreciation A/c By Balance c/d1,200

10,800

12,00012,000
3. Dr.Subscription A/c.Cr.
ParticularsRs.ParticularsRs.
To Opening outstanding subscription2,400By Opening advance subscription1,800
To I&E a/c (Income)30,000By Cash/Bank a/c (received: bal. fig.)28,680
To Closing advance subscription1,080

33,480

By Closing outstanding subscription3,000

33,480

4. Dr.Salary & Wages AccountCr.
ParticularsRs.ParticularsRs.
To Cash/Bank a/c (Paid : Bal. fig.)18,800By Opening Outstanding b/f (Payable)1,600
To Closing outstanding C/f (payable)1,800By Income & Exp. A/c (Expense)19,000
20,60020,600

Receipt Payment A/c & Opening & Closing Balance sheet

Problem No.20: (May 2012)

From the following Income & Expenditure A/c of Premium Sports Club for the year ended 31st March, 2012, you are required to prepare Receipts & Payment A/c for the year ended 31st March, 2012 and Balance Sheet as on that date:

ExpenditureAmount

(Rs.)

IncomeAmount

(Rs.)

To Salaries1,18,800By Subscriptions4,20,000
To Rent2,16,000By Entrance Fee1,20,000
To Printing & Stationery28,000By Profit on sale of Sports
To Postage & Telephone41,600Material5,500
To Membership Fee3,200By Interest on 8%
To Electricity Charges38,500Government Bonds12,000
To Garden Upkeep19,300By Sale of Old Newspaper11,600
To Sports Material Utilized62,800
To Repairs & Maintenance18,700
To Depreciation13,000
To Miscellaneous Expenses5,700
To Surplus carried to Capital
Fund3,500
Total5,69,100Total5,69,100

(a) The following additional information is provided to you:

Balances As OnBalances As On
01.04,201101.04.2012
Fixed Assets2,40,000P
Bank Balance8,300
Stock of Sports Material43,45035,670
Outstanding Subscription1.0,2005,700
Subscription received in advance2,40049,000
8% Government Bonds1,50,0001,50,000
Outstanding Salaries16,00014,300
Outstanding Rent21,00015,000
Advance for Stationery1,3501,550
Outstanding Repairs & Maintenance1,200Nil
Creditors for purchase of Sports Material3,4004,200

(b)   Some of Fixed Assets were purchased on 01.10.2011 and depreciation is to be charged @ 5%p.a.

(c)   Sports Material worth Rs. 72,000 was purchased on credit during the year.

(d)   The Club became member of State Table Tennis Association on 01.01.2012 when it paid fee up to 31.12.2012.

(e)   50% of Entrance Fee is to be capitalized.

(f)    Interest on 8% Government Bonds was received for two quarters only.

(g)   A Fixed Deposit of Rs. 80,000 was made on 31st March, 2012.

Solution :

Receipt & Payment A/c for the year ended 31st March, 2012

ParticularsAmountParticularsAmount
To Opening Balance b/f8,300By Postage & Telephone41,600
To Interest on Bonds6,000By Electricity Charge38,500
To Sale of old News Paper11,600By Garden upkeep19,300
To Sports Material (sale)22,480By Miscellaneous Expenses5,700
To Subscription ‘4,27,000By Fixed Deposit80,000
To Entrance Fees2,40,000By Salary1,20,500
By Rent2,22,000
By Printing28,200
By Membership Fees Paid12,800
By Repairs19,900
By Fixed Asset Purchase40,000
By Creditors71,200
By Closing Balance c/f15,680
7,15,3807,15,380

Balance Sheet as on 31st March, 2012

LiabilitiesRs.AssetsRs.
Capital Fund: Balance4,09,300Fixed Assets2,67,000
+ Surplus3,500Stock of Sports Materials35,670
+ Entrance Fees1,20,0005,32,8008% Government Bonds1,50,000
Interest Receivable6,000
Advance Subscription4,900Fixed Deposit80,000
O/s Salaries14,300O/s Subscription5,700
O/s Rent15,000Advance for stationery1,550
Creditors4,200Prepaid Fees9,600
Cash Bank balance15,680
5,71,2005,71,200

Working Notes:

(1)

Salary A/c

ParticularsAmountParticularsAmount
To Bank (Balancing figure)1,20,500By Opening Outstanding Salaries16,000
To Closing Outstanding Salaries14,300By I & E (salary for the year)1,18,800
1,34,8001,34,800

(2)

Rent A/c

ParticularsAmountParticularsAmount
To Bank (Balancing figure)2,22,000By Opening Outstanding Rent21,000
To Closing Outstanding Rent15,000By I & E A/c2,16,000
2,37,0002,37,000

(3)

Printing & Stationery A/c

ParticularsAmountParticularsAmount
To Opening advance b/f1,350By I & E A/c28,000
To Bank (Balancing figure)28,200By Closing advance c/f1,550
29,55029,550

(4)

Membership Fee A/c

ParticularsAmountParticularsAmount
To Bank (Balancing figure) Paid for12,800By I & E A/c (3 month 1.1 to 31.3)3,200
12 month = 3,200/3 × 12By Closing prepaid 3,200/3 × 99,600
12,80012,800

(5)

Sports Material A/c

ParticularsAmountParticularsAmount
To Opening Balance (stock)43,450By Bank (Balancing figure) (Sale)22,480
To I & E (Profit on Sale)5,500By I & E (Consumed)62,800
To Creditors (Purchase)72,000By Closing Balance (stock)35,670
1,20,9501,20,950

Creditors for Sports Material A/c

ParticularsAmountParticularsAmount
To Bank (Balancing figure) Paid71,200By Opening balance b/f3,400
To Closing balance c/f4,200By Sports Material A/c (Purchase)72,000
75,40075,400

(6)

Repairs & Maintenance A/c

ParticularsAmountParticularsAmount
To Bank (Balancing figure) Paid19,900By Opening O/s1,200
By I & E18,700
19,90019,900

(7)

Fixed Assets A/c

ParticularsAmountParticularsAmount
To Opening Balance b/f2,40,000By Depreciation (12,000 + 1,000)13,000
To Bank (1,000/5 × 100/6 × 12)40,000By Closing Balance c/f2,67,000
2,80,0002,80,000

(8)

Total depreciation as per Income & Expenditure a/c13,000
Less: Depreciation on opening fixed asset 2,40,000 × 5%12,000
Balance is 6 month depreciation @ 5% on addition to Fixed asset1,000
Hence Addition to fixed asset = 1,000/6 × 12 = 2,000/5 × 100 = 40,000

(9)

Opening Balance Sheet as on 1.4.2011

ParticularsAmountParticularsAmount
Capital Fund (Balancing figure)4,09,300Fixed Assets2,40,000
Creditors for purchase of Sports Material3,400Bank Balance8,300
Advance Subscription2,400Sports material43,450
Outstanding Salaries16,000Outstanding Subscription10,200
Outstanding Rent21,0008% Government Bonds1,50,000
Outstanding Repairs & Maintenance1,200Advance for Stationery1,350
4,53,3004,53,300

(10)

Subscription A/c

ParticularsAmountParticularsAmount
To Opening Outstanding Subs.10,200By Opening advance Subscription2,400
To I & E A/c (Income)4,20,000By Bank A/c (Balancing figure)4,27,000
To Closing advance c/f4,900By Closing outstanding c/f5,700
4,35,1004,35,100

(11)

Entrance Fees A/c

ParticularsAmountParticularsAmount
To I & E A/c (50% only)1,20,000By Receipt & Payment
To Capital fund (50% capitalised)1,20,000(Balancing figure)2,40,000
2,40,0002,40,000

Problem No.21: (May 2013)

The Receipts and Payments Account, the Income and Expenditure Account and additional information of a sports club for the year ended 31st March, 2013 were as follows:

Receipts & Payment Account For the year ending on 31st March, 2013

ReceiptsRs.PaymentsRs.
To Balance b/d42,000By Secretary Salary10,000
To Entrance Fees 2011-1210,000By Printing & Stationery26,000
To Entrance Fees 2012-131,00,000By Advertising16,000
To Subscription 2011-126,000By Fire Insurance12,000
To Subscription 2012-131,50,000By 1296 Investments
To Subscription 2013-144,000(Purchased on 01-10-2012)2,00,000
To Rent Received24,000By Furniture20,000
To Interest Received6,000By Balance c/d58,000
Total3,42,000Total3,42,000

Income & Expenditure Account For the year ending on 31st March, 2013

ExpenditureRs.IncomeRs.
To Secretary Salary15,000By Entrance Fees1,05,000
To Printing & Stationery22,000By Subscription1,56,000
To Advertising16,000By Rent28,000
To Audit Fees5,000By Interest on Investments12,000
To Fire Insurance10,000
To Depreciation:
Sports Equipments90,000
Furniture5,000
To Surplus1,38,000
Total3,01,000Total3,01,000

Additional Information:

The assets and liabilities as on 31st March, 2012 include club Grounds & Pavilion Rs. 4,40,000, Sports Equipments Rs. 2,50,000, Furniture & Fixtures Rs. 40,000, Subscription in Arrear Rs. 8,000, Subscription received in advance Rs. 2,000 and Creditors for Printing & Stationery Rs. 5,000.

You are required to prepare the Balance Sheet of the Club as on 31st March, 2013.

Solution :

Balance Sheet of Sports Club As at 31st March 2013

LiabilitiesRs.AssetsRs.
Capital Fund:Fixed Assets:
Opening Balance (W.N.)7,83,000Club, Grounds & Pavilion4,40,000
Add. Surplus1,38,0009,21,000Furniture & Fixtures40,000
Current Liabilities:Add: Additions20,000
Outstanding Salary (15,000-10,000)5,00060,000
Outstanding Audit Fees5,000Less : Depreciation15,00055,000
Creditors for Printing & Stationery
[22,000-(26,000- 5,000)}1,000Sports Equipments2,50,000
Subscription received in advance4,000Less: Depreciation190,0001,60,000
Investments:
Investment (at cost)2,00,000
Current Assets:
Accrued Interest [Rs. 12,000 – Rs. 6,000]6,000
Accrued rent (28,000 – 24,000)4,000
Subscription receivable
For 2011-12 (8,000-6,000)2,000
For 2012-13 {(1,56,000-(1,50,000 + 2,000)}
4,0006,000
Entrance Fees Receivables (1,05,000-
1,00,000)5,000
Prepaid Insurance (12,000-10,000)2,000
Cash and bank58,000
9,36,0009,36,000

Alternatively accounts can be prepared to ascertain the missing figures.

Working Note:

Calculation of Capital Fund as on 1st April, 2012

Balance Sheet of Sports Club

As at 31st March 2012

LiabilitiesRs.AssetsRs.
Capital Fund (balancing figure)7,83,000Fixed Assets :
Current Liabilities:Club, Grounds & Pavilion4,40,000
Subscription received in advance2,000Furniture & Fixtures40,000
Creditors for Printing and Stationery5,000Sports Equipments2,50,000
Current Assets:
Entrance Fees receivables10,000
Subscription receivables8,000
Cash and Bank42,000
7,90,0007,90,000

 

*This article contains all topics about Financial Statements of Non Profit Organizations .

For notes on all CA foundation topics, you can visit this article CA foundation note

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