GSEB Class 11 Solutions Chapter 9 Accounts of Non-trading Concerns

 

Question 1. What kind of concern has not the aim of profit generation but to undertake activity of welfare and to provide service to members?
(a) Company
(b) Government
(c) Trading
(d) Non-trading
Answer: (d) Non-trading
In simple words: A non-trading concern is an organization that does not aim to make money but focuses on providing welfare and service to its members. Its main purpose is social benefit, not profit.

Exam Tip: Remember that non-trading concerns primarily focus on service and welfare, distinguishing them from businesses that operate for profit.

 

Question 2. Receipt-Payment Account is similar to ................ Account. While Income-Expenditure Account is similar to ................ Account.
(a) Profit and Loss, Cash
(b) ...et, Profit and Loss
(c) Profit and Loss, Balance Sheet
(d) Cash, Profit and Loss
Answer: (d) Cash, Profit and Loss
In simple words: The Receipt-Payment Account is like a Cash Account because it records all cash inflows and outflows. The Income-Expenditure Account is similar to a Profit and Loss Account as it shows the organization's surplus or deficit for a period.

Exam Tip: Understand the core function of each account: Receipt-Payment tracks cash movement, while Income-Expenditure assesses financial performance (surplus/deficit).

 

Question 3. Where are the capital type expenses disclosed?
(a) Asset side of Balance Sheet
(b) Liability side of Balance Sheet
(c) Debit side of Income-Expenditure A/c
(d) Debit side of Receipt-Payment A/c
Answer: (a) Asset side of Balance Sheet
In simple words: Capital expenses are large purchases that will be used for a long time, so they are shown on the assets side of the Balance Sheet, indicating they are investments for the future.

Exam Tip: Capital expenses increase asset value and provide long-term benefits, thus they appear on the asset side of the Balance Sheet, unlike revenue expenses.

 

Question 4. A significant expense of painting work is a ............ kind of expense.
(a) Revenue Expense
(b) Capital Expense
(c) Deferred Revenue Expense
(d) Administration Expense
Answer: (c) Deferred Revenue Expense
In simple words: When a big painting job happens, its cost is so high that its benefits last for many years. So, this cost is spread out over those years as a deferred revenue expense.

Exam Tip: Deferred revenue expenses are large, one-time expenditures with benefits extending beyond the current accounting period, requiring their cost to be spread out.

 

Question 5. Where to record capital income?
(a) Debit side of Income-Expenditure Account
(b) Credit side of Income-Expenditure Account
(c) Added to Capital fund in Balance Sheet
(d) Deducted from Capital fund in Balance Sheet
Answer: (c) Added to Capital fund in Balance Sheet
In simple words: Capital income, like large donations, increases the organization's overall capital. Therefore, it is added to the Capital Fund on the Balance Sheet, boosting the total funds available.

Exam Tip: Capital income directly contributes to the organization's long-term financial base and is thus reflected as an addition to the Capital Fund in the Balance Sheet.

 

Question 6. What is credit balance of the Income-Expenditure Account?
(a) Excess of Income over Expenditure
(b) Excess of Expenditure over Income
(c) Opening cash / Bank balance
(d) Closing cash/Bank balance.
Answer: (a) Excess of Income over Expenditure
In simple words: A credit balance in the Income-Expenditure Account means the organization earned more money than it spent. This situation is called a surplus, showing positive financial performance.

Exam Tip: A credit balance signifies a surplus (income > expenditure), while a debit balance indicates a deficit (expenditure > income).

 

Question 7. In which account interest on investments of permanent fund will be recorded?
(a) Will be added to permanent fund in Balance Sheet.
(b) Will be added to capital fund in Balance Sheet.
(c) Will be added to investments of permanent fund in Balance Sheet.
(d) Will be recorded at the credit side of the Income-Expenditure Account.
Answer: (d) Will be recorded at the credit side of the Income-Expenditure Account.
In simple words: Interest earned from investments that are part of a permanent fund is considered revenue. This income is shown on the credit side of the Income-Expenditure Account, boosting the total income.

Exam Tip: Interest from investments is typically revenue income, recorded on the credit side of the Income-Expenditure Account, unless specified otherwise for specific funds.

 

Question 8. Where will the prizes distribution recorded?
(a) Debited to Income-Expenditure Account
(b) Debited to Receipt-Payment Account
(c) Deducted from Prize fund in Balance Sheet
(d) Deducted from Prize fund investments in Balance Sheet.
Answer: (c) Deducted from Prize fund in Balance Sheet
In simple words: If an organization has a specific fund for prizes, any money spent on prize distribution is subtracted directly from that Prize Fund in the Balance Sheet. This ensures the fund balance correctly reflects remaining amounts.

Exam Tip: Expenses related to a specific fund (like a Prize Fund) are typically debited directly from that fund in the Balance Sheet, not treated as regular expenses in the Income-Expenditure Account.

 

Question 9. The credit balance of receipt and payment account of non-trading concern is
(a) Bank balance
(b) Cash balance
(c) Bank overdraft
(d) Excess of income over expenditure
Answer: (c) Bank overdraft
In simple words: If the Receipt and Payment Account has a credit balance, it means the organization has spent more cash than it received. This situation indicates a bank overdraft, where the bank account is in debit.

Exam Tip: A credit balance in the Receipt-Payment Account points to a bank overdraft, meaning the organization has overdrawn its bank account.

 

Question 10. The accounting treatment of depreciation is not recorded in
(a) Receipt-Payment Account
(b) Income-Expenditure Account
(c) Balance Sheet
(d) All of these three
Answer: (a) Receipt-Payment Account
In simple words: Depreciation is not a cash transaction, so it is not shown in the Receipt-Payment Account. This account only records actual money coming in and going out, not non-cash adjustments.

Exam Tip: Depreciation is a non-cash expense and is therefore excluded from the Receipt-Payment Account, which strictly tracks cash movements.

 

Question 2. Write the following questions in one sentence:
(1) In which account only cash transactions are recorded?
Answer: Only cash transactions are recorded in the Receipts-Payments Account.
In simple words: The Receipts-Payments Account is where only money movements, like cash coming in and going out, are written down.

Exam Tip: Always associate the Receipts-Payments Account exclusively with actual cash inflows and outflows, as it is a summary of the cash book.

 

Question 2. (2) What kind of income a charity is?
Answer: Charity is considered as a capital income.
In simple words: Money received as charity is seen as capital income. This means it is a large sum for long-term use, not regular earnings.

Exam Tip: Treat charity donations as capital income because they are often substantial, irregular, and intended for long-term assets or funds.

 

Question 2. (3) What is the debit balance of Income-Expenditure Account called?
Answer: The debit balance of the Income-Expenditure Account is called 'Excess of expenses over incomes (Loss)'.
In simple words: When the Income-Expenditure Account has a debit balance, it means the organization has spent more than it earned. This is called a deficit or a loss.

Exam Tip: A debit balance in the Income-Expenditure Account always indicates a deficit (expenses exceed income), while a credit balance shows a surplus.

 

Question 2. (4) What kind of expense is that which is incurred for a fixed asset for business?
Answer: An expense which is incurred for a fixed asset is known as capital expense or expenditure.
In simple words: When money is spent to buy a long-lasting item for the business, such as land or machinery, that cost is called a capital expense.

Exam Tip: Expenses related to acquiring or improving fixed assets are capital in nature, providing benefits over several accounting periods.

 

Question 2. (5) What kind of income is that which is regularly received and arise from routine activities?
Answer: The income which is received regularly and which arises from routine activities of an institution is known as revenue income.
In simple words: Income that an institution gets regularly from its normal operations, like fees or subscriptions, is called revenue income.

Exam Tip: Revenue income is recurring and generated from the core, day-to-day operations of the organization.

 

Question 2. (6) What is non-trading concern? Give its illustrations.
Answer: A concern which is not having an aim to generate profit but having the aim of social service, welfare of the members of the concern, to protect the interest of the members, to extend academic and sports activities, and to develop cultural activities is known as a non-trading concern.
Illustration: Clubs, Gymkhana, Chamber of Commerce, Association of Traders, Political Unions, Labour Associations, Medical Associations, Charitable Hospitals, Educational Institutions, Cultural Committees, and Red Cross Society are included in these concerns.
In simple words: A non-trading concern is an organization focused on social service or member welfare, not making profits. Examples include clubs, charities, and educational groups.

Exam Tip: When describing non-trading concerns, emphasize their service-oriented, non-profit motive and provide diverse examples to illustrate their scope.

 

Question 2. (7) Which are different main methods to maintain accounts of non-trading concern?
Answer: Generally, there are two main methods to maintain accounts of non-trading concerns:
1. Mercantile System
2. Cash System.
In simple words: Non-trading organizations generally use two main ways to keep their accounts: the Mercantile System and the Cash System.

Exam Tip: Remember these two primary accounting systems, Mercantile and Cash, as they form the fundamental basis for maintaining financial records in non-trading organizations.

 

Question 2. (8) What is mainly prepared in the accounts of non-trading concern?
Answer: Generally, non-trading concerns prepare their accounts as per the Mercantile System, mainly it prepares accounts as under:
• Receipt and Payment Account,
• Income and Expenditure Account and
• Balance Sheet.
In simple words: Usually, non-trading organizations prepare three main financial statements: the Receipt and Payment Account, the Income and Expenditure Account, and the Balance Sheet.

Exam Tip: Always list these three primary financial statements (Receipt and Payment Account, Income and Expenditure Account, Balance Sheet) when discussing accounts prepared by non-trading concerns.

 

Question 2. (9) What is legacy? Where is it recorded?
Answer: If the concern receives any assets or property by the will of a deceased person, then it is called legacy. This amount is a capital income and so it is added to the capital fund.
In simple words: A legacy is a gift of assets or property received by an organization through someone's will after their death. This gift is a capital income and is added to the organization's main capital fund.

Exam Tip: A legacy is a capital receipt (not revenue) and should always be added directly to the Capital Fund in the Balance Sheet, as it is a long-term resource.

 

Question 3. (A) Write short notes :
1. Specific purpose fund
Answer: The amount received for a specific purpose is credited to the fund account for which it is received and not to the capital fund account. For example, a Fund for building, President's felicitation fund, or Fund for prizes. If funds are received for a specific purpose then all the expenses relating to that fund are subtracted from the fund. For example, if a fund is received for prizes, then all expenses relating to prizes are subtracted from the prize fund. The expenses of the prize fund are not shown in the Income and Expenditure Account. If this amount of the fund is invested in specific securities then interest received on such investments are not credited to the Income and Expenditure Account but the amount of interest received is added to the respective fund.
In simple words: A specific purpose fund is money received for a particular goal, like building or prizes. This money and any interest earned on it go into its own fund, and related expenses are subtracted from it, not from the general income statement.

Exam Tip: Always remember that specific purpose funds are balance sheet items; receipts and related expenses are directly adjusted within the fund, and interest earned is added to it.

 

Question 3. (A) 2. Deferred Revenue Expense
Answer: Many times, huge amounts of revenue expenses are incurred and the benefit of which is received by the concern for a long period of time. This expense is treated as a revenue expense and is written off by allocating the same proportionately over a number of years in which, the benefit is likely to be received. Such types of expenses are known as Deferred Revenue Expenses. The portion which is not written off is shown in the Balance Sheet on the Assets side, which is known as a fictitious asset.
Illustrations: Preliminary expenses, Expenses on issue of shares or debentures, Repairing expenses on a large scale, underwriting commission, etc. are included in the Deferred Revenue expense.
In simple words: Deferred revenue expenses are large costs that give benefits for many years. These costs are spread out over those years. Any unwritten-off part is shown as a fictitious asset on the Balance Sheet. Examples include preliminary expenses or big repair costs.

Exam Tip: Focus on the key characteristics of deferred revenue expenses: large amount, long-term benefit, systematic write-off, and presentation as a fictitious asset on the Balance Sheet.

 

Question 3. (A) 3. Receipts-Payments Account
Answer: Meaning: A summary prepared by a non-trading concern, of cash receipts and cash payments effected during the year, is known as a Receipts-Payments Account.
Explanation:
• A Receipts-Payments Account is a type of Cash-book/Cash Account.
• Opening and closing cash balance and bank balance (or bank overdraft) are shown in this account.
• On its debit side, cash receipts and on the credit side, cash payments are recorded.
• In addition to cash transactions, bank transactions are also recorded in the account.
• This account is a short summary of cash transactions during the year.
Points to be kept in mind while preparing the Receipts-Payments Account:
1. Show the opening cash or bank balance on the debit side of the Receipts-Payments Account. If there is an opening bank overdraft, then show it on the credit side of this account.
2. On the debit side of the Receipts and Payments Account, all the cash and cheques received during the year are recorded.
3. On the credit side of the Receipts and Payments Account, all the payments made during the year in cash or by cheque are recorded.
4. In the Receipts and Payment Account, amounts received or paid for any year are included.
5. In the Receipts and Payments Account, both capital income and revenue incomes, and capital expense and revenue expense are recorded.
6. In the Receipts and Payments Account, outstanding incomes and expenses are not recorded.
7. The non-cash transactions are not recorded in the Receipts and Payments Account. For example, Depreciation, Bad-debts reserve, Credit purchase of assets, Taxation provision, etc.
8. While closing the Receipts and Payments Account:
• If the total of the debit side is more, then the difference is recorded on the credit side and is the closing balance.
• If the total of the credit side is more, the difference is recorded on the debit side and it is the closing bank overdraft.
In simple words: The Receipts-Payments Account tracks all cash coming in and going out for a non-profit. It includes both capital and revenue items, but only actual cash movements, not non-cash items like depreciation. It summarizes all cash activities for the year and helps find the closing cash or bank balance.

Exam Tip: Remember that the Receipts-Payments Account is a summary of all cash and bank transactions, regardless of their revenue or capital nature, and it excludes all non-cash items.

 

Question 3. (A) 4. Income-Expenditure Account
Answer: Meaning: The account which is prepared by non-trading concerns at the end of the year to know the result (Surplus or Deficit) of the institution, is known as the Income-Expenditure Account.
Explanation: On the debit side of this account, current year's revenue expenses and on the credit side, current year's revenue incomes are recorded. The non-cash transactions like bad debts, provision for doubtful debts, and depreciation are also recorded in this account. The main purpose to prepare this account is to know whether the expenses incurred during the relevant year or time period are within the rules and regulations.
Points to be kept in mind while preparing the Income-Expenditure Account:
• Keep in mind the year for which the Income-Expenditure Account has to be prepared.
• On the debit side of the Income-Expenditure Account, the current year's revenue expenses are recorded.
• On the credit side of the Income-Expenditure Account, the current year's revenue incomes are recorded.
• If the total of the credit side of the Income-Expenditure Account is more, then the difference is recorded on the debit side as 'Excess of income over expenses (profit)'.
• If the total of the debit side of the Income-Expenditure Account is more, then the difference is recorded on the credit side as 'Excess of expenses over incomes (loss)'.
Following particulars are not to be considered:
• The opening and closing balances of Receipts-Payments Account.
• All capital incomes and capital expenses.
• Last year's revenue income received in the current year.
• Revenue expenses of last year paid in the current year.
• Revenue income received for the next year in the current year.
• Revenue expenses paid for the next year in the current year.
Following details to be considered (which are not shown in the receipts and payments accounts):
• Depreciation, bad-debts reserve, provision for taxation, etc.
• Current year's outstanding income to be received and current year's expenses to be paid.
• Current year's revenue income which was received in the last year and current year's revenue expenses which were paid in the last year.
In simple words: The Income-Expenditure Account is made to find out if a non-profit organization had a surplus (profit) or deficit (loss) at year-end. It records only current year's revenue items, including non-cash expenses like depreciation, but ignores capital items and past or future year amounts.

Exam Tip: The Income-Expenditure Account is akin to a profit and loss account for non-trading concerns, focusing on matching current year's revenue incomes and expenses to determine surplus or deficit.

 

Question 3. (A) 5. Subscription
Answer: A specified amount is paid regularly every year by the members of the institution to continue their membership; it is known as subscription. Subscription is also known as annual membership fees. For institutions, subscription is a main revenue income. It means subscription is the main source of income of the institution. Subscription is recorded on the income side of the Income and Expenditure Account as revenue income.
In simple words: Subscription is the regular payment members make to keep their membership active. It is a key source of regular income for non-profit organizations and is shown on the income side of their Income and Expenditure Account.

Exam Tip: Subscriptions are generally treated as revenue income for non-trading concerns, representing a regular and significant source of their operational funds.

 

Question 3. (B) Explain differences :
1. Accounts of Trading Concern and Accounts of Non-Trading Concern

Exam Tip: When comparing trading and non-trading concerns, highlight differences in their primary objectives, accounting systems, and the names of their final accounts and financial statements.

 

Question 3. (B) 2. Capital Income and Revenue Income

Exam Tip: Distinguish between capital and revenue income by considering their regularity, purpose (long-term vs. short-term operations), and where they are presented in financial statements.

 

Question 3. (B) 3. Capital Expense and Revenue Expense

Exam Tip: Distinguish capital and revenue expenses based on their recurrence, the period of benefit, and their placement in financial statements (Balance Sheet for capital, Income-Expenditure Account for revenue).

 

Question 3. (B) 4. Receipts-Payments Account and Income-Expenditure Account

Exam Tip: Highlight that the Receipts-Payments Account is a cash summary (like a cash book), while the Income-Expenditure Account is an accrual-based summary (like a P&L), capturing the true financial performance.

 

Question 4. Explain classification of incomes of a non-trading concern with illustrations.
Answer: There are two types of incomes for a non-trading concern:
1. Revenue incomes and
2. Capital incomes.
1. Revenue income: Incomes received for the regular activities of the concern are known as revenue incomes or receipts. Revenue incomes are those incomes without which the activities of the concern cannot be carried out.
Illustrations: Admission fees of members, Subscriptions, Interest on investments, Incomes from various activities, Locker's rent, Rent of hall, Government grant or subsidy, Income from an entertainment programme, Small amounts of donations or charity, Sale of old newspapers, Sale of sports equipment, Discount, Commission, etc. These revenue incomes or receipts are recorded on the credit side of the Income and Expenditure Account. The objective of revenue incomes is to procure regular income.
2. Capital incomes: The incomes which are not received regularly or repeatedly and whose benefit is going to be received by the concern for a longer period, are known as capital incomes or receipts.
In simple words: Non-trading organizations get two types of income: revenue and capital. Revenue income is regular money from normal activities, like fees. Capital income is less frequent, larger sums for long-term use, such as big donations.

Exam Tip: Clearly differentiate between revenue (recurring, operational) and capital (non-recurring, long-term asset-building) incomes, providing relevant examples for each.

 

Question 5. Explain classification of expenses of a non-trading concern with illustrations.
Answer: There are three types of expenses for a non-trading concern:
(1) Revenue expenses,
(2) Capital expenses and
(3) Deferred revenue expenses.

1. Revenue expenses: These are costs incurred regularly to manage day-to-day operations or to keep assets in proper and efficient working condition. Their benefit is limited to the current year only, and they are called revenue expenses or expenditure.
Illustrations: Salary, Rent, Interest, Discount, Commission, Stationery expenses, Telephone bill, Subscription for newspapers and magazines, Expenses for entertainment, Depreciation on assets, etc., are recorded on the debit side of the Income-Expenditure Account. The main purpose of revenue expense is to run the concern's activities.
2. Capital expenses: These costs are not incurred regularly, and their benefit is received for a long period. They are made to purchase assets for the concern and are known as capital expenses or expenditures. In short, capital expense refers to costs for buying an asset, preparing it for use, or reducing production costs. These are effectively capital expenses or expenditures.
Illustrations: Expenses on sports equipment, Expenses for buying fixed assets like land, building, furniture, X-ray machines, etc. Capital expenses are shown on the Asset side of the Balance Sheet. The goal of capital expense is to acquire fixed assets and utilize them to create facilities or generate income.
3. Deferred revenue expense: Often, large revenue expenses are incurred whose benefits are received by the concern over a long period. This type of expense is treated as a revenue expense and is written off by distributing the cost proportionally over the number of years in which the benefit is expected. Such expenses are called Deferred Revenue Expenses. The unwritten portion is presented on the Assets side of the Balance Sheet, known as a fictitious asset.
Illustrations: Preliminary expenses, Expenses related to issuing shares or debentures, large-scale Repairing expenses, underwriting commission, etc., are included in Deferred Revenue expenses.
In simple words: Non-trading concerns have three main types of expenses: normal day-to-day costs (revenue), big purchases like buildings (capital), and costs spread over many years (deferred revenue). Each type is handled differently in their financial reports.

Exam Tip: When classifying expenses, focus on the regularity of the expense and the duration of its benefit. Regular, short-term benefits indicate revenue, while infrequent, long-term benefits suggest capital expenditure.

 

Question 6. Explain the meaning of Receipt-Payment Account. Write the points to be considered for the preparation of it.
Answer: Meaning: A summary prepared by a non-trading concern, showing all cash receipts and cash payments made during the year, is known as a Receipts-Payments Account.
Explanation:

• Receipts-Payments Account is a type of Cash-book or Cash Account.
• Opening and closing cash balance and bank balance (or bank overdraft) are shown in this account.
• Its debit side records cash receipts, and its credit side records cash payments.
• In addition to cash transactions, bank transactions are also recorded in this account.
• This account serves as a brief summary of cash transactions throughout the year.

Points to be kept in mind while preparing the Receipts-Payments Account:
1. Show the opening cash or bank balance on the debit side of the Receipts-Payments Account. If there is an opening bank overdraft, then show it on the credit side of this account.
2. On the debit side of the Receipts and Payments Account, record all cash and cheques received during the year.
3. On the credit side of the Receipts and Payments Account, record all payments made during the year in cash or cheque.
4. In the Receipts and Payment Account, amounts received or paid for any year are included.
5. Both capital income and revenue incomes, as well as capital expenses and revenue expenses, are recorded in the Receipts and Payments Account.
6. Outstanding incomes and expenses are not recorded in the Receipts and Payments Account.
7. Non-cash transactions are not recorded in the Receipts and Payments Account. For example, Depreciation, Bad-debts reserve, Credit purchase of assets, Taxation provision, etc.
8. While closing the Receipts and Payments Account:

• If the total of the debit side is more, the difference is recorded on the credit side and is the closing balance.
• If the total of the credit side is more, the difference is recorded on the debit side and it is the closing bank overdraft.

In simple words: The Receipts-Payments Account is like a cash summary for non-profit groups, listing all money received and paid out during the year. It includes both cash and bank transactions, showing opening and closing balances. It does not record non-cash items or outstanding amounts.

Exam Tip: Remember that a Receipts-Payments Account is essentially a cash book summary, so it records all cash and bank transactions, regardless of whether they are capital or revenue in nature or relate to the current or previous/next year.

 

Question 7. Explain the meaning of Income- Expenditure Account. Write the points to be considered for the preparation of it.
Answer: Meaning: The account prepared by non-trading concerns at the end of the year to determine the result (Surplus or Deficit) of the institution is known as the Income-Expenditure Account.
Explanation:
On the debit side of this account, current year's revenue expenses are recorded, and on the credit side, current year's revenue incomes are recorded. Non-cash transactions like bad debts, provision for doubtful debts, and depreciation are also included in this account. The primary goal of preparing this account is to know whether the expenses incurred during the relevant year or period are within the rules and regulations.
Points to be kept in mind while preparing the Income-Expenditure Account:

• Keep in mind the specific year for which the Income-Expenditure Account must be prepared.
• On the debit side of the Income-Expenditure Account, record the current year's revenue expenses.
• On the credit side of the Income-Expenditure Account, record the current year's revenue incomes.
• If the total of the credit side of the Income-Expenditure Account is more, the difference is recorded on the debit side as 'Excess of income over expenses (profit).'
  
• If the total of the debit side of the Income-Expenditure Account is more, then the difference is recorded on the credit side as 'Excess of expenses over incomes (loss).'
  

Following particulars are not to be considered:

• The opening and closing balances of Receipts-Payments Account.
• All capital incomes and capital expenses.
• Last year's revenue income received in the current year.
• Revenue expenses of last year paid in the current year.
• Revenue income received for the next year in the current year.
• Revenue expenses paid for the next year in the current year.

Following details to be considered (which are not shown in the receipts and payments accounts):

• Depreciation, bad-debts reserve, provision for taxation, etc.
• Current year's outstanding income to be received and current year's expenses to be paid.
• Current year's revenue income which was received in the last year and current year's revenue expenses which were paid in the last year.

In simple words: An Income-Expenditure Account for non-profits shows if they made a profit (surplus) or loss (deficit) for the year. It only records income and expenses related to that specific year, including non-cash items like depreciation, but excludes capital items or past/future year balances.

Exam Tip: Understand that the Income-Expenditure Account focuses strictly on the revenue and expenses of the *current accounting period*, making it distinct from a Receipts-Payments Account which includes all cash transactions irrespective of the period.

 

Question 8. Do as directed : 1. Classify the following details into revenue income, capital income, revenue expense and Capital Expense.
1. Membership fee
2. Prize fund
3. Life membership fee periodicals
4. Legacy
5. Donation
6. X-ray machine
7. Investment of prize fund
8. Subscription of periodicals
9. Annual day expense
10. Purchase of sports
11. Ground maintenance equipment
12. Sale of tickets of drama
13. Expense of drama
14. Government aid (subsidy)
15. Rent of locker
16. Purchase of National meal
17. Machine installation wages and expense
18. Annual meal expense
19. Contribution for annual
20. Entertainment Programme income
21. Annual function expense
22. Sale of sports equipment
23. Purchase of billiard table
24. Repairing expense
25. Entrance fee
26. Expense to bring an old asset in operation
27. Loss on sale of assets
28. Interest on Investments
29. Canteen income fund
30. Depreciation of asset
31. Charity expense
32. Purchase of HDFC bond
33. President felicitation Savings Certificate
34. President felicitation expense.
Answer:

In simple words: This table sorts different financial items into four groups: revenue income (regular earnings), capital income (one-time funds), revenue expense (regular costs), and capital expense (big purchases).

Exam Tip: When classifying, remember that revenue items are regular and short-term, while capital items are typically one-time or infrequent and provide long-term benefits or represent asset acquisition.

 

Question 2. Disclose the following information in the Income-Expenditure Account ending on 31-3-'15 and Balance Sheet as of that day. Subscription received in the year 2014-'15 is Rs 80,000.
Subscription outstanding 12,000
Subscription received in advance 8,000
Subscription outstanding 15,000
Subscription received in advance 6,000
Answer:

Income-Expenditure Account for the year ending on 31-3-'15 (Partial)

Balance Sheet as on 31-3-'15 (Partial)

In simple words: We adjusted the subscription amount to show only what belongs to this year. We also listed the advance and outstanding subscriptions on the Balance Sheet to reflect current financial positions.

Exam Tip: Always make sure to adjust subscription amounts in the Income-Expenditure Account for outstanding and advance receipts to reflect the income for the current year accurately. Show outstanding subscriptions as assets and subscriptions received in advance as liabilities on the Balance Sheet.

 

Question 3. Disclose the following information in Income-Expenditure Account for the year ending 31-3-'15:
(i) Subscription outstanding 2013-'14 : Rs 3,000; 2014-'15 : Rs 6,300.
(ii) Opening stock of stationery Rs 670 and closing stock Rs 250.
Answer:

Receipt-Payment Account for the Year ending 31-3-'15

Income-Expenditure Account for the year ending on 31-3-'15 (Partial)

In simple words: This solution updates the Income-Expenditure Account by including only the current year's subscription income and showing the actual stationery consumed, accounting for opening and closing stock.

Exam Tip: Remember to always adjust subscriptions for outstanding and advance amounts to get the accurate figure for the current year's Income and Expenditure Account. Stationery consumption is calculated by: Opening Stock + Purchases - Closing Stock.

 

Question 4. Disclose the following balances in the Balance Sheet of Vinayak Cricket Club:
Match fund 70,000
Interest on match fund investment 4,000
Investments of match fund 35,000
Donation received for match fund 16,000
Prize distribution to match winners 5,700
Permanent fund 1,05,000
Match expense 8,250
Investments of permanent fund
Answer:

Balance Sheet of Vinayak Cricket Club as on... (Partial)

In simple words: This balance sheet shows the permanent fund and the match fund, along with their related investments. All income specific to the match fund, like interest and donations, is added to it, and all expenses related to it, like prize distribution and match expenses, are subtracted.

Exam Tip: Funds created for specific purposes (like a match fund) are always shown as liabilities in the Balance Sheet, and all related income is added to them, while all related expenses are deducted from them, not shown in the Income-Expenditure Account.

 

Question 5. Income of subscription Rs 45,000 is disclosed in the Income-Expenditure Account for the year ending 31-3-'15. Other details of subscription are as follows:
Particulars 31-3-'14 Amount Rs 31-3-'15 Amount Rs
Subscription outstanding 2,700 3,600
Subscription received in advance 1,800 900
Disclose the amount of subscription in the Receipt-Payment Account for the year ending 31-3-'15.
Answer:

Explanation: Given reverse (opposite) effect of subscription of Income-Expenditure Account, forgetting the amount of subscription as per Receipt-Payment Account.
Subscription disclosed in the Income-Expenditure Account = Rs 45,000
+ Outstanding subscription (2013-'14) = Rs 2,700
+ Subscription received in advance (2014-'15) = Rs 900
- Subscription outstanding (2014-'15) = Rs 3,600
- Subscription received in advance (2013-'14) = Rs 1,800
Amount of subscription in the Receipt-Payment Account for the year ending on 31-3-'15 = Rs 43,200
In simple words: We calculated the total subscription money actually received during the year by adjusting the income statement figure for outstanding and advance payments from both the current and previous years.

Exam Tip: To find the subscription amount for the Receipts-Payments Account, work backward from the Income-Expenditure Account figure, adding previous year's outstanding and current year's advance, and subtracting current year's outstanding and previous year's advance.

 

Question 6. How would you disclose the following details on 31-3-'15, during the preparation of Annual Accounts?
Balance Sheet as on 1-4-'14
Liabilities Amount Creditors for sports equipment 300
Assets Amount Sports Equipments 400
Additional information: Sports equipments on hand on 31-3-'15 ? 1,100.
Answer:

Receipt-Payment Account for the year ending 31-3-'15

Income-Expenditure Account for the year ending on 31-3-'15 (Partial)

Balance Sheet as on 31-3-'15 (Partial)

Explanation: Depreciation on Sports equipments = Opening Balance + Purchase – (sales + Closing Balance) = \( 400 + 6,700 - (180 + 1,100) = 7,100 - 1,280 = 5,820 \).
In simple words: We've recorded the purchase and sale of sports equipment, calculated its depreciation for the year, and shown the remaining value on the balance sheet.

Exam Tip: When dealing with assets, ensure to track their opening balance, purchases, sales, and closing balance, and then calculate depreciation to be shown as an expense in the Income-Expenditure Account, with the net value on the Balance Sheet.

 

Question 9. From the following given information, prepare a receipt-payment account for the year ending 31-3-'15 of Omkar Club:
Particulars Amount Rs Particulars Amount Rs
Donation for club pavilion 70,000 Sale of old furniture (Book value 750) 1,000
Entrance fees (40% capitalized) 3,000 Cash balance (1-4-'14) 3,000
Membership fees: 2014-'15 20,000 Bank balance (1-4-'14) 2,000
2015-'16 5,000 25,000 Rent of hall paid 2,000
Income of lectures 3,000 Salary 10,000
Dinner party expense 4,000 Subscription of newspapers 2,000
Club pavilion construction expense 60,000 Sale of old newspapers 500
Electricity expense 1,000 Charity 8,000
Purchase of furniture 5,000 Dinner party contribution 5,000
Life membership fee 4,000 Purchase of national saving certificate 20,000
Purchase of sports equipment 15,000
Cash balance (31-3-'15) 1,000
Additional information :
(1) Salary outstanding Rs 10,000.
(2) Provide 10 % depreciation on sports equipment.
(3) Subscription outstanding Rs 2,500.
(4) Prepaid hall rent Rs 500.
Answer:

Receipt-Payment Account of Omkar Club for the year ending on 31-3-'15

Note: The total of the debit side of the Receipt-Payment Account is more. Thus, the difference of Rs 4,500 would appear on the credit side, which discloses the Bank balance.
Additional information given in the question are non-cash transactions and therefore they have no effect on Receipt-Payment Account.
In simple words: This table records all cash and bank inflows (receipts) and outflows (payments) for Omkar Club during the year. Non-cash adjustments like outstanding salary or depreciation are not included here because this account only tracks actual money movement.

Exam Tip: Remember that the Receipts-Payments Account is a summary of cash transactions only. Ignore any non-cash adjustments such as outstanding expenses, accrued income, or depreciation when preparing this account.

 

Question 10. From the following information prepare an Income-Expenditure Account for the year ending 31-3-'15 of Divya Cricket Club:
Particulars Amount Rs Particulars Amount Rs
Cash balance (1-4-'14) 30,000 Tournament fee received 1,35,000
Bank overdraft (1-4-'14) 24,000 Ground maintenance expense 27,000
Subscription received: Donation received 1,20,000
2014-'15 84,000 Honorarium to secretary 36,000
2015-'16 6,000 90,000 Sale of Memoir 72,000
Remuneration to cricket coach 36,000 Donation received for tournament 1,20,000
Salary of grounds men 15,000 Investment of tournament fund 1,20,000
Purchase of sports equipment (1-10-'14) 1,08,000 Expense of 'Kavi Sammelan' 42,000
Entrance fees (60% to be capitalized) 36,000 Stationery expense 15,000
Subscription from members participating in sports 24,000 Repairing expense 18,000
Wicket preparation expense 18,000 Bank interest received 3,000
Tournament prize distribution expense 54,000 Tournament expense 96,000
Income of 'Kavi Sammelan' 75,000 Umpire fee 24,000
Memoir printing expense 24,000 Main club affiliation fee 12,000
Taxes-Insurance 15,000
Int. on invest. of tournament fund 30,000
Additional information:
(1) Prepaid insurance is Rs 2,400.
(2) Subscription outstanding from members participating in sports Rs 6,000.
(3) Subscription outstanding from members for current year Rs 6,000.
(4) 10 % depreciation p.a. is to be provided on sports equipment.
(5) Salary outstanding is Rs 3,000.
Answer:

Income-Expenditure Account of Divya Cricket Club for the year ending on 31-3-'15

Explanation:
1. Purchases of Sports equipment and Investment of tournament fund are capital items; therefore, they are shown on the Assets side of a Balance Sheet.
2. Donation received for tournament is for a specific purpose. Therefore, tournament prize distribution expense, tournament fee received, and Interest on investment of tournament fund are shown on the Liabilities side of a Balance Sheet.
In simple words: This account lists all the regular income and expenses for Divya Cricket Club for the year, showing if they had more income than expenses (a surplus) or more expenses than income (a deficit). Capital items are not included here.

Exam Tip: For Income-Expenditure Accounts, only revenue items related to the current period are included. Remember to adjust for prepaid expenses, outstanding expenses, and outstanding income. Depreciation on assets is a non-cash expense that must be included.

 

Question 11. From the following information of Surabhi Club, prepare a Receipt-Payment and an Income-Expenditure Account:
Particulars Amount Rs
Subscription (including Rs 30,000 of 2013-'14) 3,00,000
Outstanding at the end of year 20,000
Donation (revenue) 30,000
Purchase of furniture 70,000
Purchase of sports equipment 40,000
Subscription of newspapers 15,000
Sale of old furniture (Book value of Rs 5,000) 2,000
Opening cash and Bank balance 60,000
Rent paid 28,000
Bank expense 1,000
Stationery and Printing (Inclusive a bill of Rs 5,000 of previous year) 20,000
Entrance fees (50% to be capitalized) 20,000
Legacies 50,000
Honorarium to secretary (Inclusive Rs 4,000 of previous year) 48,000
Outstanding 4,000
Postage and Telephone 10,000
Sundry expenses 10,000
Income of cultural programme 80,000
Expenses of cultural programme 60,000
Depreciation written off on furniture 5,000
Purchase of investment 1,00,000
Interest on investments 7,000
Answer:

Receipt-Payment Account of Surabhi Club for the year ending on 31-3-'15

Income-Expenditure Account of Surabhi Club for the year ending on 31-3-'15

Explanation:
1. The book value of furniture sold is deducted from the amount of furniture in the Balance Sheet, but the loss on sale of furniture is shown in the Income-Expenditure Account.
2. 50% amount of entrance fees is to be shown in the Income-Expenditure Account.
In simple words: These tables show the cash flow for Surabhi Club (Receipt-Payment Account) and its financial performance (Income-Expenditure Account) for the year. Only actual cash transactions appear in the first table, while the second table adjusts for all income and expenses belonging to the year, even if cash wasn't exchanged.

Exam Tip: Differentiate clearly between the Receipts-Payments Account (cash basis) and the Income-Expenditure Account (accrual basis). Ensure that only revenue items for the current period are included in the Income-Expenditure Account, with proper adjustments for outstanding and prepaid amounts.

 

Question 12. From the following information of Sanket Sports Club for the year ending 31-3-'15, prepare an Income-Expenditure account for the year ending on that date:
Receipt-Payment Account for the year ending 31-3-'15
Dr Income Amount Rs Expense Amount Rs Cr
To Balance b/d 8,000 By Salary 24,000
To Subscription 50,000 By Drama expense 10,000
To Entrance fees 4,000 By General expense 6,000
To Annual function income 10,000 By Audit fees 2,000
To Sale of scrap of old sports equipment 2,000 By Sports equipment 17,000
To Donation for sports prizes 10,000 By Honorarium to secretary 5,000
To Sale of tickets of drama 20,000 By Stationery-printing 4,000
By Annual function expense 8,000
By Bank interest expense 1,000
By Tournament expense 5,000
By Ground maintenance expense 6,000
By Repairing expense 3,000
By Sports prizes distribution 3,000
By Balance c/d 10,000
1,04,000 1,04,000
Adjustment:
Subscription includes, subscription of Rs 2,000 for the year 2015-'16.
Subscription outstanding Rs 3,000 for the year 2014-'15.
General expenses include, prepaid insurance of Rs 500.
Depreciation on sports equipment is to be provided Rs 3,000.
50% of entrance fees is to be capitalized.
Stationery stock 200.
Answer:

Income-Expenditure Account of Sanket Sports Club for the year ending on 31-3-'15

Explanation: Donation for sports prizes and sports prizes distribution are to be shown in the Balance Sheet.
In simple words: This Income-Expenditure Account for Sanket Sports Club shows the club's actual earnings and spending for the year, after adjusting for things like prepaid expenses, outstanding amounts, and depreciation, to reflect its true financial performance.

Exam Tip: Always make necessary adjustments for prepaid and outstanding items to accurately reflect the income and expenditure of the current period. Capitalize a portion of entrance fees and account for depreciation on fixed assets as a non-cash expense.

 

Question 13. From the Receipt-Payment Account for the year ending 31-3-'15 and other given information of Sheela Mahila Vikas Mandal, prepare an Income-Expenditure Account for the year ending 31-3-'15 and the Balance Sheet as of that day:

Additional information:
(1) Balance as on 1-4-'14: Building Rs. 90,000, Furniture Rs. 12,000, Books Rs. 30,000, Investments Rs. 1,20,000, Subscription outstanding Rs. 3,000 and permanent fund Rs. 2,64,000.
(2) Subscription included Rs. 1,500, subscription of the year 2015-'16.
(3) Subscription outstanding for the year 2014-'15 Rs. 2,100.
(4) Salary outstanding Rs. 1,800.
(5) Unused Stationery on 31-3-'15 was of Rs. 300.
(6) Provide 10 % depreciation on closing balance of Building, Furniture and Books.
(7) Interest outstanding on investment Rs. 1,500.
Answer:

Income-Expenditure Account of Sheela Mahila Vikas Mandal

Balance Sheet as on 31-3-'15

In simple words: To prepare these accounts, we use the given Receipt-Payment Account and extra information to create the Income-Expenditure Account and the Balance Sheet for the Sheela Mahila Vikas Mandal. We carefully adjust all figures for the correct year.

Exam Tip: Remember to capitalize only the specified percentage of entrance fees and correctly account for all outstanding and prepaid items to achieve accurate final balances.

 

Question 14. From the following information of Pankaj Sports Club, prepare an Income-Expenditure Account for the year ending 31-3-'15 and Balance Sheet as of that date:

Additional information :
(1) There are 300 members of club, each member pays annual subscription of Rs. 750.
(2) Opening capital fund is of Rs. 3,28,500.
(3) Outstanding salary on 31-3-'14 Rs. 12,500 and on 31-3-'15 Rs. 18,750.
(4) Opening stock of stationery was of Rs. 1,250 while at closing stock was of Rs. 1,875.
(5) The value of sports equipments was of Rs. 1,25,000 on 1-4-'14 while Rs. 1,75,000 on 31-3-'15.
Answer:

Income-Expenditure Account of Pankaj Sports Club

Balance Sheet as on 31-3-'15

Explanation:
(1) Opening stock of sports equipments Rs. 1,25,000 + Purchases during the year (1-10-'14) Rs. 75,000 \( = \) Rs. 2,00,000. Closing stock at the end of the year Rs. 1,75,000 \( \implies \) Depreciation on sports equipments Rs. 25,000
(2) Amount of 12% investments is calculated as under : If interest then investment Rs. 15,000 \( = \) 15,000 \( \times \) 100 \( \div \) 12 \( = \) Rs. 1,25,000
(3) Interest on Bank deposits: \( P = 62,500; R = 12\%: N = 3 \) months (from 1-1-'15 to 31-3-'15) and Interest \( (I) =? \)
Interest on bank deposits \( I = \frac { PRN }{ 100 } = 62,500 \times \frac { 12 }{ 100 } \times \frac { 3 }{ 12 } = \) Rs. 1,875.
In simple words: This solution shows how to prepare the Income-Expenditure Account and Balance Sheet for Pankaj Sports Club. It includes the necessary adjustments for subscriptions, salaries, stationery, sports equipment, and interest on investments and bank deposits.

Exam Tip: Always double-check calculations for depreciation and interest, especially when dealing with partial periods, to make sure all figures are exact.

 

Question 15. From the given below trail balance of Suresh Youth Club, prepare an Income-Expenditure Account and a Balance Sheet as of that day:

Trail balance as of 31-3-'15 of Kankuba Jivabhai Parivar Adarsh Vidyalaya

Adjustment:
(1) Subscription outstanding Rs. 2,000 for the year 2014-'15.
(2) \( \frac { 2 }{ 3 } \) Colourwork expense is to be carried forward to next year.
(3) Unused stationery is of Rs. 100.
(4) Provide 10% depreciation on building, sports equipments and furniture of club.
(5) Consider amount of donation as revenue income.
(6) Prepaid insurance is of Rs. 200.
Answer:

Income-Expenditure Account of Suresh Youth Club

Balance Sheet as on 31-3-'15

In simple words: We have created the Income-Expenditure Account and Balance Sheet for Suresh Youth Club. This was done using the provided trial balance and all the necessary adjustments for subscriptions, expenses, depreciation, and income classification.

Exam Tip: Pay close attention to adjustments like prepaid expenses and outstanding incomes/expenses, as these directly affect the current year's figures and overall financial position.

 

Question 16. From the trial balance as on 31-3-'15 and additional information of Kankuba Jivabhai Parivar Adarsh Vidyalaya given below, prepare an Income-Expenditure Account and a Balance Sheet:

Trail balance as of 31-3-'15 of Kankuba Jivabhai Parivar Adarsh Vidyalaya

Additional information:
(1) 50% entrance fees is to be capitalized.
(2) Tuition fees outstanding of Rs. 1,500.
(3) Salary outstanding is of Rs. 6,000.
(4) Book value of furniture sold is Rs. 2,500.
(5) Provide 10% depreciation on furniture and library 20% on laboratory and 5% on building.
Answer:

Income-Expenditure Account of Kankuba Jivabhai Parivar Adarsh Vidyalaya for the year ending on 31-3-'15

Balance Sheet as on 31-3-'15

Explanation: Book value of furniture sold is Rs. 2,500 and the date of sale is 1-10-'14. Therefore @ 10% for 6 months depreciation is Rs. 125 thereon. Thus, depreciated value of furniture sold is Rs. 2,375 (Rs. 2,500 - Rs. 125). But this furniture is sold of Rs. 1,750. \( \implies \) Loss on furniture sold = Rs. 2,375 - Rs. 1,750 = Rs. 625. On the remaining furniture, i.e., Rs. 29,000 - Rs. 2,500 (sold) = Rs. 26,500 @10% depreciation is Rs. 2,650.
In simple words: This solution provides the Income-Expenditure Account and Balance Sheet for Kankuba Jivabhai Parivar Adarsh Vidyalaya, using the trial balance and all the provided adjustments. It details the calculation of depreciation and loss on sale of furniture.

Exam Tip: Always remember to adjust for depreciation on all assets and account for any profit or loss arising from asset sales. This ensures the balance sheet reflects true asset values.

 

Question 17. Receipt-Payment Account for the year ending 31-3-'15 of Shardaben Hospital is as follows:

Other Information:From the above given Receipt-Payment Account and additional information, prepare an Income- Expenditure Account for the year ending 31-3-'15 and a Balance Sheet as on that day.
Answer:

Income-Expenditure Account of Shardaben Hospital

Balance Sheet as on 31-3-'15

In simple words: This solution presents the Income-Expenditure Account and Balance Sheet for Shardaben Hospital. It incorporates details from the Receipt-Payment Account and additional financial information to accurately reflect the hospital's financial status.

Exam Tip: Be careful with subscription calculations, ensuring that outstanding amounts from the current year are added and prior year amounts are excluded for accurate revenue recognition.

 

Question 18. From the information given below of Jamnadas Trust, prepare an Income-Expenditure Account for the year ending 31-3-'15 and a Balance Sheet as on that date:

Balance Sheet as on 31-3-'14 of Jamnadas Trust

Adjustment:
(1) Subscription outstanding for the year 2014-'15 Rs. 3,200.
(2) Expenses outstanding for the year 2014-'15 Rs. 1,000.
(3) Salary outstanding Rs. 2,000.
(4) Provide 5% p.a. depreciation on land-building and 10 % p.a. on furniture.
(5) 50% of entrance fees is to be capitalized.
Answer:

Income-Expenditure Account of Jamnadas Trust

Balance Sheet as on 31-3-'15

Explanation: Calculation of Capital Fund :
Capital fund \( = \) Opening balance \( + \) Excess of income over expenditure \( + \) Income expenditure account
(1-4-'14) (1-4-'14) (1-4-'14)
\( = \) Rs. 1,08,000 \( + \) Rs. 20,000 \( + \) Rs. 6,480 \( = \) Rs. 1,34,480
In simple words: This solution shows the Income-Expenditure Account and Balance Sheet for Jamnadas Trust. It includes adjustments for outstanding subscriptions, expenses, salaries, depreciation, and capitalizes 50% of the entrance fees.

Exam Tip: Always make sure to calculate the opening capital fund correctly, as it forms the base for preparing the balance sheet and ensuring it balances properly.