Step-by-Step Textbook Solutions for Class 12 Accountancy Chapter 01 Accounting for Not for Profit Organisation
Access comprehensive textbook solutions for Chapter 01 Accounting for Not for Profit Organisation using the official curriculum guides for Class 12 Accountancy. Designed to align with the 2026-27 NCERT standards, these detailed answers help students reinforce core academic concepts.
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Question 1. Explain the statement: “Receipt and Payment Account is a summarised version of Cash Book”.
Answer: The Receipts and Payments Account acts as a condensed version of the Cash Book, compiled by non-profit entities that follow the cash system of accounting. In this account, cash inflows are entered on the debit (Receipts) side, while outflows are placed on the credit (Payments) side. Its preparation is entirely based on cash and bank entries found in the Cash Book. It commences with the opening balances of cash and bank, concluding with their respective closing balances at the end of the financial year.
This statement records all cash and bank activities, encompassing both capital and revenue transactions. Furthermore, it logs transactions occurring in the current year, regardless of whether they belong to the current, preceding, or succeeding periods. It simply helps determine the net cash in hand and at bank, serving as the foundation for creating the Income and Expenditure Account.
Key points of similarity:
1. Nature: Much like the Cash Book, this is classified as a Real Account.
2. Nature of Transactions: It only documents cash and bank transactions, leaving out non-cash adjustments like depreciation or assets' sale profit/loss.
3. No distinction between Capital and Revenue items: Receipts and payments of both capital and revenue categories are listed without any separation.
4. Opening and closing balance: It starts with the beginning cash and bank figures and closes with the final balances.
5. Purpose: Both statements are designed to determine the net cash position of an organization.
In simple words: The Receipts and Payments Account is basically a shortcut version of the Cash Book. It lists all money received and spent during the year in one single place.
Exam Tip: Remember that Receipts and Payments Account is a Real Account and records both capital and revenue transactions, unlike the Income and Expenditure Account.
Question 2. “Income and Expenditure Account of a Not-for-Profit Organisation is akin to Profit and Loss Account of a business concern”. Explain the statement.
Answer: Just like a business prepares a Profit and Loss Account to determine its net profit or loss, a Not-for-Profit Organisation constructs an Income and Expenditure Account to determine its surplus or deficit for the financial year. Both systems follow the accrual basis of accounting, meaning income and expenses are recognized when they are earned or incurred, rather than when cash actually moves.
Key points of similarity:
1. Nature of Account: Both of these accounts are Nominal Accounts in nature.
2. Basis of Recording: They strictly record revenue incomes and revenue expenses, while keeping capital items out of the account.
3. Period: Both accounts only record entries relevant to the current accounting year, excluding any prior or future year transactions.
4. Adjustments: Adjustments for non-cash or outstanding items - such as depreciation, bad debts, prepayments, or accrued incomes - are treated identically in both formats.
In simple words: Both accounts are used to check if an organization earned more than it spent during the year. They only look at the current year's revenue transactions and adjust for outstanding items.
Exam Tip: Clearly mention that both are Nominal Accounts and are prepared using the accrual system. Highlighting this distinction gets full marks.
Question 3. Distinguish between Receipts and Payments Account and Income and Expenditure Account.
Answer: The primary differences between the Receipts and Payments Account and the Income and Expenditure Account are presented in the comparison table below:
| Basis of Difference | Receipts and Payments Account | Income and Expenditure Account |
|---|---|---|
| 1. Nature | It is a summary of cash and bank transactions | It is a summary of current year income and expenses |
| 2. Revenue and Capital | It records transactions related to both revenue and capital nature. | It records transactions related to revenue nature only. |
| 3. Debit Side | Debit side of this account records cash and bank receipts during an accounting period. | Debit side of this account records expenses and losses incurred in the current accounting period. |
| 4. Credit side | Credit side of this account records payments in cash and through cheques. | Credit side of this account records income and gains earned in the current accounting period. |
| 5. Type of account | It is a Real Account | It is a Nominal Account |
| 6. Period | It records receipts and payments made during the year that may be related to the current accounting period or the preceding period and the succeeding accounting period. | It only records income and expenditure made during the current accounting period. |
| 7. Object | This account depicts the cash position of an NPO. | This account shows the net result in terms of surplus or deficits due to the business activities during the year. |
| 8. Opening Balance | This account begins with the opening balance of cash in hand and cash at bank or overdraft. | Usually, it has no opening balance but sometimes surplus or deficits forwarded from the last accounting period (if not added to the Capital Fund) can be shown as the opening balance of this account. |
| 9. Closing balance | The balancing figure of this account is expressed in terms of the closing balance of cash in hand and cash at bank or overdraft. | The balancing figure is expressed in terms of either surplus (if incomes > expenses) or deficit (if expenses > incomes). |
| 10. Depreciation | It does not include non-cash items like depreciation, appreciation, etc. | It includes non-cash items like depreciation, bad-debts, provisions, etc. in order to ascertain the actual net profit or net loss. |
| 11. Adjustment | Receipts and Payments during the year can be adjusted before preparation of the financial statements. | Adjustments regarding both cash and non-cash transactions can be made. |
| 12. Transfer of Balance | The opening balance of this account is brought forward from the last year's Receipts and Payments Account and the closing balance of this account is carried forward to the subsequent year's Receipts and Payments Account and is shown in the Balance Sheet. | If the closing balance of this account is surplus then it is added to the Capital Fund in the Balance Sheet. If the closing balance is deficit then it is deducted from the Capital Fund in the Balance Sheet. |
| 13. System | It is prepared on cash basis. | It is prepared on accrual basis. |
In simple words: The Receipts and Payments Account tracks actual cash flowing in and out, while the Income and Expenditure Account matches revenue earned against expenses incurred to show the annual surplus or deficit.
Exam Tip: To secure full marks on distinction questions, present the comparison in a tabular form using clear 'Basis of Difference' parameters.
Question 4. Explain the basic features of Income and Expenditure Account and of Receipt and Payment Account.
Answer: The core features of both accounts are outlined below:
Features of Income and Expenditure Account:
1. Nature: It is a Nominal Account, meaning all expenses and losses go to the debit side, whereas revenues and gains are credited.
2. Basis of Preparation: It is drafted using the Receipts and Payments Account, transferring all revenue items.
3. Exclusion of Capital Transactions: Items of a capital nature are kept out. For example, we record only the gain or loss on selling a fixed asset, rather than the entire sale proceeds.
4. Similarity to Profit and Loss Account: It functions much like a profit and loss statement, helping to find the surplus or deficit instead of net profit or loss.
5. Focus on the Current Period: It only logs transactions belonging to the current year. Any previous or subsequent year items are omitted.
6. Treatment of Adjustments: Adjustments are made for outstanding, prepaid, or non-cash items like depreciation and bad debts.
7. Balancing Figure: The final balance shows either a surplus (when income exceeds expenditure) or a deficit (when expenses exceed income), which is then transferred to the Capital Fund.
Features of Receipts and Payments Account:
1. Nature: It is a Real Account that summarises the Cash Book.
2. Transaction Types: It only registers cash and bank movements, completely omitting non-cash items.
3. No Distinction between Capital and Revenue: All cash flows, whether capital or revenue in nature, are recorded without differentiation.
4. Opening and Closing Balances: It starts with the beginning cash/bank values and ends with the ending cash/bank balancing figure.
5. Objective: It reveals the general cash position and total money movements during the period.
In simple words: The Income and Expenditure Account lists the current year's revenue and expenses on an accrual basis. The Receipts and Payments Account is a simple summary of all cash received and paid, including capital items and other periods' transactions.
Exam Tip: In exams, clearly divide your answer into two distinct sections - one for the features of each account - and use numbered bullet points for clarity.
Question 5. Show the treatment of the following items by a Not-for-Profit Organisation: (i) Annual subscription (ii) Specific donation (iii) Sale of fixed assets (iv) Sale of old periodicals (v) Sale of sports materials (vi) Life membership fee
Answer: The accounting treatment for each item is explained as follows:
(i) Annual Subscription:
a) Total receipts (relating to any period) are debited to the Receipts and Payments Account.
b) Only the amount relevant to the current accounting year is credited to the Income and Expenditure Account.
c) Subscriptions received in advance for subsequent years are shown on the Liabilities side of the Balance Sheet.
d) Outstanding subscriptions due for the current year are shown on the Assets side of the Balance Sheet.
(ii) Specific Donation:
a) Debited to the Receipts and Payments Account as a cash receipt.
b) Shown on the Liabilities side of the Balance Sheet because it must be used only for its designated purpose.
(iii) Sale of Fixed Assets:
a) The total sale proceeds are debited as a receipt in the Receipts and Payments Account.
b) Any profit or loss resulting from the sale is credited or debited to the Income and Expenditure Account.
c) The book value of the disposed asset is subtracted from the asset's total value on the Assets side of the Balance Sheet.
(iv) Sale of Old Periodicals:
a) The amount received is debited in the Receipts and Payments Account.
b) Since it is a recurring revenue receipt, it is credited to the Income and Expenditure Account.
(v) Sale of Sports Materials:
a) Money received from the sale is debited in the Receipts and Payments Account.
b) It is treated as recurring revenue and credited to the Income and Expenditure Account.
(vi) Life Membership Fee:
a) Debited to the Receipts and Payments Account as a cash inflow.
b) Since it is a non-recurring capital receipt, it is added directly to the Capital Fund on the Liabilities side of the Balance Sheet.
In simple words: Regular revenue items are recorded in the Income and Expenditure Account, while one-time capital items (like life membership fees or specific donations) go directly to the Balance Sheet.
Exam Tip: Remember that life membership fees and specific donations are capital receipts and must be shown on the liabilities side of the Balance Sheet.
Question 6. Show the treatment of items of Income and Expenditure Account when there is a specific fund for those items.
Answer: Non-Profit Organisations often receive receipts for specific as well as general purposes. General receipts can be utilized freely, whereas specific receipts (like donations for constructing a building) must be spent only on their designated purpose. Consequently, specific receipts are capitalized and shown on the liabilities side of the Balance Sheet, rather than being credited to the Income and Expenditure Account.
Any income, interest, or dividends earned from investing these specific funds are added directly to the respective fund on the liabilities side. Similarly, any expenses related to this fund are subtracted from it. If the expenses exceed the total available fund, the excess deficit is debited to the Income and Expenditure Account. If the fund balance remains positive, the net amount stays in the Balance Sheet.
The ledger template and financial statement presentation are shown below:
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| (Tournament/Match/Prize, etc.) Fund Account | |||||||
| Date | Particulars | L.F. | Amount | Date | Particulars | L.F. | Amount |
| Expenses (expenses incurred like, match expenses, tournament expenses) | Balance b/d | ||||||
| Balance c/d (see explanation) | (a) | Incomes (income or interest earned on funds invested in the form of donation, interests, dividends, etc.) | |||||
| Income and Expenditure A/c (see explanation) | (b) | ||||||
Explanation (a)
If the receipts exceed the expenses for a specific purpose, then the difference between the two is shown on the Liabilities side of the Balance Sheet.
| Balance Sheet | |
|---|---|
| Liabilities | Assets |
| Specific Fund (i.e. Tournament, Match, Prize Fund, etc.) | Tournament Fund Investment |
Explanation (b)
If the expenses exceed the receipts for the specific purpose, then the difference between the two is shown on the Expenditure side of the Income and Expenditure Account.
| Income and Expenditure A/c | |||
|---|---|---|---|
| Expenditure | Amount | Income | Amount |
| Expenses (i.e. Tournament, Match, Prize Expenses etc. except capital expenditure like, i.e. expenses on construction of building) | |||
In simple words: Any special fund must have its expenses and earnings managed directly within that fund on the liabilities side of the Balance Sheet. If the fund runs out of money and expenses are higher, the remaining loss is put in the Income and Expenditure Account.
Exam Tip: If there is a specific fund, do not mix its expenses and incomes with general revenue items. Only transfer the net negative balance to the Income and Expenditure Account if expenses exceed the fund.
Question 7. What is Receipt and Payment Account? How is it different from Income and Expenditure Account?
Answer: The Receipts and Payments Account is a summarized Cash Book recording all cash and bank receipts and payments during a year, regardless of period or category (capital or revenue). The differences between this account and the Income and Expenditure Account are detailed below:
| Basis of Difference | Receipts and Payments Account | Income and Expenditure Account |
|---|---|---|
| 1. Nature | It is a summary of cash and bank transactions | It is a summary of current year income and expenses |
| 2. Revenue and Capital | It records transactions related to both revenue and capital nature. | It records transactions related to revenue nature only. |
| 3. Debit Side | Debit side of this account records cash and bank receipts during an accounting period. | Debit side of this account records expenses and losses incurred in the current accounting period. |
| 4. Credit side | Credit side of this account records payments in cash and through cheques. | Credit side of this account records income and gains earned in the current accounting period. |
| 5. Type of account | It is a Real Account | It is a Nominal Account |
| 6. Period | It records receipts and payments made during the year that may be related to the current accounting period or the preceding period and the succeeding accounting period. | It only records income and expenditure made during the current accounting period. |
| 7. Object | This account depicts the cash position of an NPO. | This account shows the net result in terms of surplus or deficits due to the business activities during the year. |
| 8. Opening Balance | This account begins with the opening balance of cash in hand and cash at bank or overdraft. | Usually, it has no opening balance but sometimes surplus or deficits forwarded from the last accounting period (if not added to the Capital Fund) can be shown as the opening balance of this account. |
| 9. Closing balance | The balancing figure of this account is expressed in terms of the closing balance of cash in hand and cash at bank or overdraft. | The balancing figure is expressed in terms of either surplus (if incomes > expenses) or deficit (if expenses > incomes). |
| 10. Depreciation | It does not include non-cash items like depreciation, appreciation, etc. | It includes non-cash items like depreciation, bad-debts, provisions, etc. in order to ascertain the actual net profit or net loss. |
| 11. Adjustment | Receipts and Payments during the year can be adjusted before preparation of the financial statements. | Adjustments regarding both cash and non-cash transactions can be made. |
| 12. Transfer of Balance | The opening balance of this account is brought forward from the last year's Receipts and Payments Account and the closing balance of this account is carried forward to the subsequent year's Receipts and Payments Account and is shown in the Balance Sheet. | If the closing balance of this account is surplus then it is added to the Capital Fund in the Balance Sheet. If the closing balance is deficit then it is deducted from the Capital Fund in the Balance Sheet. |
| 13. System | It is prepared on cash basis. | It is prepared on accrual basis. |
In simple words: The Receipts and Payments Account is a cash-based statement showing how money came in and went out, while the Income and Expenditure Account is an accrual-based statement showing the year's actual revenue performance.
Exam Tip: Focus on key points of difference like "Type of Account", "System", "Period", and "Depreciation" to make your comparison strong and clear.
Question 8. Following is the Receipt and Payment Account of Indian Sports Club, prepare Income and Expenditure Account, Balance Sheet as on December 31, 2017:
Receipt and Payment Account
for the year ending December 31, 2017
| Receipts | Amount Rs | Payments | Amount Rs |
|---|---|---|---|
| Balance b/d | 7,890 | Salary | 11,000 |
| Subscriptions | 52,000 | Electric charges | 5,500 |
| Life member ship fee | 2,200 | Billiard Table | 17,500 |
| Entrance fee | 3,200 | Office expenses | 4,100 |
| Tournament fund | 26,000 | Printing and Stationery | 2,300 |
| Locker Rent | 1,250 | Tournament expenses | 18,500 |
| Sale of old sports goods (Costing Rs 2,200) | 2,500 | Repair of ground | 2,000 |
| Sale of Old Newspaper | 750 | Furniture purchased | 7,700 |
| Legacy | 37,500 | Sports equipment’s | 12,000 |
| Cash in Hand | 12,690 | ||
| Cash at Bank | 10,000 | ||
| Fixed Deposit (on 1.10.17 for 10% p.a) | 30,000 | ||
| Total | 1,33,290 | Total | 1,33,290 |
Other Information:
Subscription outstanding was on December 31, 2016 Rs 1,200 and Rs 3,200 on December 31, 2017. Locker rent outstanding on December 31, 2017 Rs 250. Salary outstanding on December 31, 2017 Rs 1,000.
On January 1, 2017, club has Building Rs 36,000, furniture Rs 12,000, Sports equipment’s Rs 17,500. Depreciation charged on these items @ 10% (including Purchase).
Answer:
Indian Sports Club
Income and Expenditure Account
as on Dec. 31, 2017
| Dr. Cr. | |||
|---|---|---|---|
| Expenditure | Amount Rs | Income | Amount Rs |
| Salary 11,000 Add: Outstanding for 2017 1,000 | 12,000 | Subscriptions 52,000 Add: Outstanding for 2017 3,200 Less: Outstanding for 2016 (1,200) | 54,000 |
| Electric Charges | 5,500 | Locker Rent 1,250 Add: Outstanding for 2017 250 | 1,500 |
| Office Expenses | 4,100 | Entrance Fees | 3,200 |
| Printing and Stationery | 2,300 | Profit on Sale of Sports Equipment’s (Rs 2,500 - Rs 2,200) | 300 |
| Repair of Ground | 2,000 | Sale of Old Newspapers | 750 |
| Depreciation on: Furniture: 1,970 Building: 3,600 Sports Equipment’s: 2,730 | 8,300 | Accrued Interest | 750 |
| Surplus | 26,300 | ||
| Total | 60,500 | Total | 60,500 |
Balance Sheet
as on January 01, 2016
| Liabilities | Amount Rs | Assets | Amount Rs |
|---|---|---|---|
| Capital Fund (Balancing Figure) | 74,590 | Subscription Outstanding | 1,200 |
| Building | 36,000 | ||
| Furniture | 12,000 | ||
| Sports Equipment’s | 17,500 | ||
| Cash and Bank | 7,890 | ||
| Total | 74,590 | Total | 74,590 |
Balance Sheet
as on Dec. 31, 2017
| Liabilities | Amount Rs | Assets | Amount Rs |
|---|---|---|---|
| Salary Outstanding | 1,000 | Subscription Outstanding | 3,200 |
| Tournament Fund: 26,000 Less: Tournament Expenses (18,500) | 7,500 | Locker Rent Outstanding | 250 |
| Capital fund: 74,590 Add: Life Membership Fee 2,200 Add: Legacy 37,500 Add: Surplus 26,300 | 1,40,590 | Building: 36,000 Less: 10% Depreciation (3,600) | 32,400 |
| Furniture: 12,000 Add: Purchases 7,700 = 19,700 Less: 10% Depreciation (1,970) | 17,730 | ||
| Sports Equipments: 17,500 Add: Purchases 12,000 = 29,500 Less: Sales (2,200) = 27,300 Less: 10% Depreciation (2,730) | 24,570 | ||
| Billiard Table | 17,500 | ||
| Cash in hand | 12,690 | ||
| Cash at Bank | 10,000 | ||
| Fixed Deposit: 30,000 Add: Accrued Interest 750 | 30,750 | ||
| Total | 1,49,090 | Total | 1,49,090 |
In simple words: We first find the opening capital fund using the initial assets and cash balance. Then, we adjust all incomes, expenses, and asset values for the current year to draft the final accounts and Balance Sheet.
Exam Tip: To avoid errors, always calculate the opening Capital Fund first. Also, ensure that specific fund expenses are deducted directly from the fund itself rather than shown in the Income and Expenditure Account.
Question 9. From the following Receipt and Payment Account of Jan Kalyan Club, prepare Income and Expenditure Account and Balance Sheet for the year ending March 31, 2017.
Receipt and Payment Account
for the year ending March 31, 2017
| Receipts | Amount (Rs) | Payments | Amount (Rs) |
|---|---|---|---|
| Cash in hand as on 1.4.16 | 6,800 | Salaries | 24,000 |
| Subscription | 60,200 | Traveling Expenses | 6,000 |
| Donation | 3,000 | Stationery | 2,300 |
| Sale of furniture (Book value Rs 6000) | 4,000 | Rent | 16,000 |
| Entrance fee | 800 | Repair | 700 |
| Life membership fee | 7,000 | Books purchased | 6,000 |
| Interest on investment (@ 5% for full year) | 5,000 | Building purchased | 30,000 |
| Cash in hand as 31.3.2017 | 1,800 | ||
| Total | 86,800 | Total | 86,800 |
Additional Information:
| As on 1.04.2016 | As on 31.03.2017 | |
|---|---|---|
| (i) Subscription received in advance | 1,000 | 3,200 |
| (ii) Outstanding subscription | 2,000 | 3,700 |
| (iii) Stock of stationery | 1,200 | 800 |
| (iv) Books | 13,500 | 16,500 |
| (v) Furniture | 16,000 | 8,000 |
| (vi) Outstanding rent | 1,000 | 2,000 |
Answer:
Books of Jan Kalyan Club
Income and Expenditure Account for the year ended March 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Loss on Sale of Furniture (Rs 6,000 - Rs 4,000) | 2,000 | Subscription: 60,200 Less: Outstanding for 2016: (2,000) 58,200 Add: Outstanding for 2017: 3,700 61,900 Add: Advance in 2016: 1,000 62,900 Less: Advance in 2017: (3,200) | 59,700 |
| Salaries | 24,000 | Donation | 3,000 |
| Traveling Expenses | 6,000 | Entrance Fees | 800 |
| Stationery: 2,300 Add: Opening Stock: 1,200 3,500 Less: Closing Stock: (800) | 2,700 | Interest on Investments | 5,000 |
| Repairs | 700 | ||
| Rent: 16,000 Less: Outstanding for 2016: (1,000) 15,000 Add: Outstanding for 2017: 2,000 | 17,000 | ||
| Depreciation on Books | 3,000 | ||
| Depreciation on Furniture | 2,000 | ||
| Surplus (Excess of Income over Expenditure) | 11,100 | ||
| Total | 68,500 | Total | 68,500 |
Balance Sheet as on April 01, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Advance Subscription | 1,000 | Cash in Hand | 6,800 |
| Outstanding Rent | 1,000 | Investment [5,000 × (100 / 5)] | 1,00,000 |
| Capital Fund (Balancing figure) | 1,37,500 | Subscription Outstanding | 2,000 |
| Stock of Stationery | 1,200 | ||
| Books | 13,500 | ||
| Furniture | 16,000 | ||
| Total | 1,39,500 | Total | 1,39,500 |
Balance Sheet as on March 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Advance Subscription | 3,200 | Subscription Outstanding | 3,700 |
| Outstanding Rent | 2,000 | Stock of Stationery | 800 |
| Capital Fund: 1,37,500 Add: Life Membership Fees: 7,000 1,44,500 Add: Surplus: 11,100 | 1,55,600 | Investments | 1,00,000 |
| Books: 13,500 Add: Purchases: 6,000 19,500 Less: Depreciation: (3,000) | 16,500 | ||
| Building | 30,000 | ||
| Cash in Hand | 1,800 | ||
| Furniture: 16,000 Less: Sales: 6,000 10,000 Less: Depreciation: (2,000) | 8,000 | ||
| Total | 1,60,800 | Total | 1,60,800 |
In simple words: The Income and Expenditure Account records the current year's revenue items on an accrual basis, while capital receipts and payments are placed on the Balance Sheet. The capital fund represents the accumulated surplus from prior years.
Exam Tip: Be careful with the treatment of investments when the rate of interest is given; always calculate interest to check for any outstanding/accrued interest, and make sure to calculate depreciation based on the opening and closing book values.
Question 10. Receipt and Payment Account of Shankar Sports club is given below, for the year ended March 31, 2017. Prepare Income and Expenditure Account and Balance Sheet with help of following Information:
Subscription outstanding on March 31, 2016 is Rs 1, 200 and Rs 2,300 on March 31, 2017, opening stock of postage stamps is Rs 300 and closing stock is Rs 200, Rent Rs 1,500 related to 2015 and Rs 1,500 is still unpaid.
On April 01, 2016 the club owned furniture Rs 15,000, Furniture valued at Rs 22,500.
On March 31, 2017. The club took a loan of Rs 20,000 (@ 10% p.a.) in 2017.
Receipt and Payment Account
for the year ending March 31, 2017
| Receipts | Amount (Rs) | Payments | Amount (Rs) |
|---|---|---|---|
| Opening Cash in hand | 2,600 | Rent | 18,000 |
| Entrance fees | 3,200 | Wages | 7,000 |
| Donation for building | 23,000 | Billiard table | 14,000 |
| Locker rent | 1,200 | Furniture | 10,000 |
| Life membership fee | 7,000 | Interest | 2,000 |
| Profit from entertainment | 3,000 | Postage | 1,000 |
| Subscription | 40,000 | Salary | 24,000 |
| Cash in hand | 4,000 | ||
| Total | 80,000 | Total | 80,000 |
Answer:
Books of Shankar Sports Club
Income and Expenditure Account for the year ended December 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Rent: 18,000 Add: Outstanding for 2017: 1,500 19,500 Less: Outstanding for 2016: (1,500) | 18,000 | Entrance Fees | 3,200 |
| Wages | 7,000 | Locker Rent | 1,200 |
| Depreciation on Furniture | 2,500 | Profit from Entertainment | 3,000 |
| Interest | 2,000 | Subscription: 40,000 Less: Outstanding for 2016: (1,200) 38,800 Add: Outstanding for 2017: 2,300 | 41,100 |
| Postage: 1,000 Add: Opening Stock: 300 1,300 Less: Closing Stock: (200) | 1,100 | Deficit (Excess of Expenditure over Income) | 6,100 |
| Salaries | 24,000 | ||
| Total | 54,600 | Total | 54,600 |
Balance Sheet as on December 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Rent Outstanding | 1,500 | Cash in Hand | 2,600 |
| 10% Loan | 20,000 | Subscription Outstanding | 1,200 |
| Furniture | 15,000 | ||
| Stock of Postage Stamps | 300 | ||
| Capital fund Deficit (Balancing figure) | 2,400 | ||
| Total | 21,500 | Total | 21,500 |
Balance Sheet as on December 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Rent Outstanding | 1,500 | Subscription Outstanding | 2,300 |
| 10% Loan | 20,000 | Stock of Postage Stamps | 200 |
| Donation for Building | 23,000 | Billiard Table | 14,000 |
| Capital Fund: (2,400) Add: Life Membership Fee: 7,000 4,600 Less: Deficit: (6,100) Net Deficit (shown on Assets side): (1,500) | - | Furniture: 15,000 Add: Purchases: 10,000 25,000 Less: Depreciation: (2,500) | 22,500 |
| Cash in Hand | 4,000 | ||
| Capital Fund (Deficit) | 1,500 | ||
| Total | 44,500 | Total | 44,500 |
In simple words: When the Capital Fund is a negative balance (a deficit), it is presented on the assets side of the Balance Sheet. Similarly, any specific donation received (like for a building) is capitalized and shown as a liability.
Exam Tip: Always check if any special funds or building donations are received. These must be treated as liabilities and not mixed with the general Income and Expenditure Account. If the Capital Fund calculations result in a negative net value, present it on the assets side of the Balance Sheet as a Capital Fund Deficit to balance the accounts.
Question 11. Prepare Income and Expenditure Account and Balance Sheet for the year ended December 31, 2016 from the following Receipt and Payment Account and Balance Sheet of culture club:
Receipt and Payment Account
for the year ending March 31, 2016
| Receipts | Amount (Rs) | Payments | Amount (Rs) |
|---|---|---|---|
| Opening cash balance | 12,000 | Furniture | 4,000 |
| Subscription: 2014-2015: 2,000 2015-2016: 22,000 | 24,000 | Telephone expenses | 800 |
| Entrance fees | 2,800 | Salary: 2014-2015: 1,000 2015-2016: 4,000 | 5,000 |
| Locker rent | 1,000 | Newspapers | 700 |
| Life membership fee | 1,200 | Sundry expenses | 1,000 |
| Government grant | 11,000 | Defence bonds | 18,000 |
| Land | 20,000 | ||
| Closing cash balance | 2,500 | ||
| Total | 52,000 | Total | 52,000 |
Balance Sheet
for the year ending March 31, 2015
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Advance locker rent | 200 | Cash in hand | 12,000 |
| Subscription Received in Advance | 1,000 | Outstanding Expenses | 3,000 |
| Outstanding salary | 2,000 | Building | 35,000 |
| Loan | 10,000 | ||
| Capital fund | 36,800 | ||
| Total | 50,000 | Total | 50,000 |
Answer:
Books of Culture Club
Income and Expenditure Account for the year ended March 31, 2016
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Telephone Expenses | 800 | Subscription: 22,000 Add: Advance Received in 2015: 1,000 | 23,000 |
| Salary | 4,000 | Entrance Fees | 2,800 |
| Newspapers | 700 | Locker Rent: 1,000 Add: Advance Received in 2015: 200 | 1,200 |
| Sundry Expenses | 1,000 | Government Grants | 11,000 |
| Surplus (Balancing figure) | 31,500 | ||
| Total | 38,000 | Total | 38,000 |
Balance Sheet as on March 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Capital Fund: 36,800 Add: Life Membership Fees: 1,200 Add: Surplus: 31,500 | 69,500 | Subscription Still Outstanding for 2015 (Rs 3,000 - Rs 2,000) | 1,000 |
| Salary Still Outstanding for 2015 | 1,000 | Furniture | 4,000 |
| Loan | 10,000 | Defence Bonds | 18,000 |
| Land | 20,000 | ||
| Building | 35,000 | ||
| Cash in Hand | 2,500 | ||
| Total | 80,500 | Total | 80,500 |
In simple words: When receipts or payments of prior years are settled in the current year, any remaining unpaid or outstanding balances from those periods must still be carried forward to the current Balance Sheet.
Exam Tip: Pay close attention to multi-year transactions (like outstanding salaries or subscriptions from a prior year). Only the current year's portion goes to the Income and Expenditure Account, while the unpaid balance must be shown in the final Balance Sheet.
Question 12. From the following Receipt and Payment Account prepare final accounts of a Unity Club for the year ended March 31, 2017.
Receipt and Payment Accounts
for the year ending March 31, 2017
| Receipts | Amount (Rs) | Payments | Amount (Rs) |
|---|---|---|---|
| Balance b/d | 15,000 | Furniture | 18,000 |
| Sale of Old furniture (costing Rs 6,000) | 4,000 | Library books | 10,000 |
| Subscriptions: 2015-16: 18,000 2016-17: 60,000 2017-18: 12,000 | 90,000 | Salaries | 72,000 |
| Sale of old newspapers | 10,800 | General expenses | 18,000 |
| Profit from entertainment | 44,000 | Electric charges | 12,000 |
| Rent | 84,000 | Newspapers | 33,800 |
| Postage | 3,000 | ||
| Stationery | 40,000 | ||
| Audit fee | 8,000 | ||
| Balance c/d | 33,000 | ||
| Total | 2,47,800 | Total | 2,47,800 |
Balance Sheet as on March 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Outstanding Salary | 6,000 | Cash | 15,000 |
| Capital Fund | 6,94,000 | Outstanding subscription | 18,000 |
| Library Books | 30,000 | ||
| Furniture | 37,000 | ||
| Land and Building | 6,00,000 | ||
| Total | 7,00,000 | Total | 7,00,000 |
Additional Information:
1. The Club had 500 members each paying an annual subscription of Rs 150.
2. On 31.3.2017 salaries outstanding amounted to Rs 1,200 and salaries paid included Rs 6,000 for the year 2015-16.
3. Provide 5% depreciation on Land and Building.
Answer:
Books of Unity Club
Income and Expenditure Account for the year ended March 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Loss on Sale of Old Furniture (Rs 4,000 - Rs 6,000) | 2,000 | Subscription (500 members at Rs 150 each) | 75,000 |
| Salaries: 72,000 Add: Outstanding for 2016-17: 1,200 73,200 Less: Outstanding for 2015-16: (6,000) | 67,200 | Sale of Old Newspapers | 10,800 |
| General Expenses | 18,000 | Profit from Entertainment | 44,000 |
| Electric Charges | 12,000 | Rent | 84,000 |
| Newspapers | 33,800 | Deficit (Balancing figure) | 200 |
| Postage | 3,000 | ||
| Stationery | 40,000 | ||
| Audit Fees | 8,000 | ||
| Depreciation on Land and Building | 30,000 | ||
| Total | 2,14,000 | Total | 2,14,000 |
Balance Sheet as on March 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Advance Subscription (for 2017-18) | 12,000 | Subscription Outstanding | 15,000 |
| Salaries Outstanding | 1,200 | Furniture: 37,000 Add: Purchases: 18,000 55,000 Less: Sales: (6,000) | 49,000 |
| Capital Fund: 6,94,000 Less: Deficit: (200) | 6,93,800 | Library Books: 30,000 Add: Purchases: 10,000 | 40,000 |
| Land and Building: 6,00,000 Less: 5% Depreciation: (30,000) | 5,70,000 | ||
| Cash and Bank | 33,000 | ||
| Total | 7,07,000 | Total | 7,07,000 |
In simple words: When we are given the exact number of members and their annual fee, the total subscription income is calculated by multiplying these two numbers. Any difference between what was actually received and this total is recorded as outstanding subscription.
Exam Tip: Always calculate the total subscription income as (Number of Members × Subscription Rate). Any amount received in advance for the next year goes to the Liabilities side of the Balance Sheet, and any unpaid amount for the current year goes to the Assets side.
Question 13. Following is the information in respect of certain items of a Sports Club. You are required to show them in the Income and Expenditure Account and the Balance Sheet.
| Details | Amount (Rs) |
|---|---|
| Sports Fund as on April 1, 2016 | 80,000 |
| Sports Fund Investments | 80,000 |
| Interest on Sports Fund Investments | 8,000 |
| Donations for Sports Fund | 30,000 |
| Sports Prizes awarded | 16,000 |
| Expenses on Sports Events | 7,000 |
| General Fund | 2,00,000 |
| General Fund Investments | 2,00,000 |
| Interest on General Fund Investments | 20,000 |
Answer:
Income and Expenditure Account as on March 31, 2016
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Interest on General Fund Investments | 20,000 |
Balance Sheet as on March 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Sports Fund: 80,000 Add: Interest on Sports Fund Investments: 8,000 Add: Donation for Sports Fund: 30,000 1,18,000 Less: Sports Prizes Awarded: (16,000) Less: Expenses on Sports Events: (7,000) | 95,000 | Sports Fund Investments | 80,000 |
| General Fund | 2,00,000 | General Fund Investments | 2,00,000 |
In simple words: Specific funds (like a Sports Fund) are treated separately from general funds. All incomes (like interest or donations) and expenses (like prizes or event costs) related to that specific fund are adjusted directly within the fund on the liabilities side of the Balance Sheet. General fund interest, on the other hand, is a normal revenue income and is recorded in the Income and Expenditure Account.
Exam Tip: Remember that interest earned on specific fund investments must be added to that specific fund in the Balance Sheet, not credited to the Income and Expenditure Account. Only interest on General Fund Investments is treated as regular revenue income and credited to the Income and Expenditure Account.
Question 14. Receipt and Payment Account of Maitrey Sports Club showed that Rs 68,500 were received by way of subscriptions for the year ended on March 31, 2017.
The additional information was as under:
1. Subscription Outstanding as on March 31, 2016 were Rs 6,500,
2. Subscription received in advance as on March 31, 2016 were Rs 4,100,
3. Subscription Outstanding as on March 31, 2017 were Rs 5,400,
4. Subscription received in advance as on March 31, 2017 were Rs 2,500.
Show how that above information would appear in the final accounts for the year ended on March 31, 2017 of Maitrey Sports Club.
Answer:
Books of Maitrey Sports Club
Income and Expenditure Account for the year ended March 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Subscription: 68,500 Less: Outstanding on Mar. 31, 2016: (6,500) 62,000 Add: Advance on Mar. 31, 2016: 4,100 Add: Outstanding on Mar. 31, 2017: 5,400 71,500 Less: Advance on Mar. 31, 2017: (2,500) | 69,000 |
Balance Sheet as on March 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Subscription in Advance | 4,100 | Subscription Outstanding | 6,500 |
Balance Sheet as on March 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Subscription in Advance | 2,500 | Subscription Outstanding | 5,400 |
In simple words: To find the actual subscription income for the current year, we start with the total amount collected. Then, we subtract last year's outstanding and this year's advance collections, and add last year's advance and this year's outstanding amounts.
Exam Tip: Memorize the standard subscription adjustment formula: (Amount Received) - (Outstanding in Beginning) + (Outstanding at End) + (Advance in Beginning) - (Advance at End). Be sure to also show where these values appear in the opening and closing Balance Sheets.
Question 15. Following is the Receipt and Payment account of Rohatgi Trust:
| Receipts | Amount Rs | Payments | Amount Rs |
|---|---|---|---|
| Cash in hand | 14,000 | Rent | 6,000 |
| Cash at Bank | 60,000 | Salary | 12,000 |
| Subscriptions: 2016: 5,000 2017: 83,000 2018: 3,000 | 91,000 | Postage | 300 |
| Sale of Investment | 90,000 | Electricity charges | 6,000 |
| Interest on investment | 2,000 | Purchase of furniture | 20,000 |
| Sale of furniture (book value Rs 3,000) | 3,200 | Books | 3,000 |
| Defence Bonds | 1,50,000 | ||
| Help to needy students | 22,000 | ||
| Cash in hand | 10,900 | ||
| Cash at bank | 30,000 | ||
| Total | 2,60,200 | Total | 2,60,200 |
Prepare Income and expenditure account for the year ended December 31, 2017, and a balance sheet as on that date after the following adjustments: Subscription for 2017, still owing were Rs 7,000. Interest due on defence bonds was Rs 7,000, Rent still owing was Rs 1,000. The Book value of investment sold was Rs 80,000, Rs 30,000 of the investment were still in hand. Subscription received in 2017 included Rs 400 from a life member. The total furniture on January 1, 2017 was worth Rs 12,000. Salary paid for the year 2018 is Rs 2,000.
Books of Rohatgi Trust
Income and Expenditure Account for the year ended December 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Rent Add: Outstanding | 6,000 1,000 7,000 | Subscription Add: Outstanding for 2017 Less: Life Membership Fees | 83,000 7,000 90,000 (400) 89,600 |
| Salary Less: Advance for 2018 | 12,000 (2,000) 10,000 | Interest Accrued on Defence Bonds | 7,000 |
| Postage | 300 | Profit on Sale of Investment (Rs 90,000 - Rs 80,000) | 10,000 |
| Electricity Charges | 6,000 | Profit on Sale of Furniture (Rs 3,200 - Rs 3,000) | 200 |
| Help to Needy Students | 22,000 | Interest on Investments | 2,000 |
| Surplus (Balancing Figure) | 63,500 | ||
| Total | 1,08,800 | Total | 1,08,800 |
Balance Sheet as on December 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Capital fund (Balancing Figure) | 2,01,000 | Subscription Outstanding | 5,000 |
| Investment (Rs 80,000 + Rs 30,000) | 1,10,000 | ||
| Furniture | 12,000 | ||
| Cash in hand | 14,000 | ||
| Cash at bank | 60,000 | ||
| Total | 2,01,000 | Total | 2,01,000 |
Balance Sheet as on December 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Advance Subscription | 3,000 | Subscription Outstanding | 7,000 |
| Rent Outstanding | 1,000 | Defence Bonds Add: Accrued Interest | 1,50,000 7,000 1,57,000 |
| Capital Fund Add: Surplus Add: Life Membership Fees | 2,01,000 63,500 400 2,64,900 | Investment | 30,000 |
| Advance Salaries | 2,000 | ||
| Furniture Add: Purchases Less: Sales | 12,000 20,000 32,000 (3,000) 29,000 | ||
| Books | 3,000 | ||
| Cash in Hand | 10,900 | ||
| Cash at Bank | 30,000 | ||
| Total | 2,68,900 | Total | 2,68,900 |
Answer: The finalized statements for Rohatgi Trust are displayed above. We compute the initial capital fund of Rs 2,01,000 using opening items, followed by the year-end surplus of Rs 63,500 which is calculated through the Income and Expenditure Account.
In simple words: First, find the beginning capital fund by listing all last year's assets and liabilities. Then, determine the yearly surplus through our revenue and expense statement and update the values for the final balance sheet.
Exam Tip: Always make sure to deduct the book value of sold assets from the total asset pool in the Balance Sheet, and record any profit or loss arising from this transaction inside the Income and Expenditure Account.
Question 16. Following Receipt and Payment Account was prepared from the cash book of Delhi Charitable Trust for the year ending December 31, 2017
| Receipts | Amount Rs | Payments | Amount Rs |
|---|---|---|---|
| Balance b/d: Cash in hand Cash at bank | 11,500 12,600 | Charity | 11,500 |
| Donation | 9,000 | Rent and taxes | 3,200 |
| Subscription | 42,800 | Salary | 6,000 |
| Legacies | 18,000 | Printing | 600 |
| Interest on investment | 4,500 | Postage | 300 |
| Sale of old newspapers | 200 | Advertisements | 4,500 |
| Insurances | 2,000 | ||
| Furniture | 21,600 | ||
| Investment | 23,000 | ||
| Balance c/d: Cash in hand Cash at bank | 9,900 16,000 | ||
| Total | 98,600 | Total | 98,600 |
Prepare Income and expenditure account for the year ended December 31, 2017, and a balance sheet as on that date after the following adjustments:
(a) It was decided to treat one-third of the amount received on account of donation as income.
(b) Insurance premium was paid in advance for three months.
(c) Interest on investment Rs 1,100 accrued was not received.
(d) Rent Rs 600: salary Rs 900 and advertisement expenses Rs 1,000 outstanding as on December 31, 2017.
Books of Delhi Charitable Trust
Income and Expenditure Account for the year ended December 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Insurance Less: Prepaid {2,000 * (3/15)} | 2,000 (400) 1,600 | Donation {9,000 * (1/3)} | 3,000 |
| Charity | 11,500 | Interest on Investments Add: Accrued Interest | 4,500 1,100 5,600 |
| Rent and Taxes Add: Outstanding | 3,200 600 3,800 | Subscription | 42,800 |
| Salary Add: Outstanding | 6,000 900 6,900 | Sale of Old Newspapers | 200 |
| Printing | 600 | ||
| Postage | 300 | ||
| Advertisements Add: Outstanding | 4,500 1,000 5,500 | ||
| Surplus (Balancing figure) | 21,400 | ||
| Total | 51,600 | Total | 51,600 |
Balance Sheet as on December 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Capital Fund (Balancing figure) | 24,100 | Cash in Hand | 11,500 |
| Cash at Bank | 12,600 | ||
| Total | 24,100 | Total | 24,100 |
Balance Sheet as on December 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Capital Fund Add: Donation {9,000 * (2/3)} Add: Legacies Add: Surplus | 24,100 6,000 18,000 21,400 69,500 | Prepaid Insurance {2,000 * (3/15)} | 400 |
| Rent Outstanding | 600 | Investment Add: Accrued Interest | 23,000 1,100 24,100 |
| Salary Outstanding | 900 | Furniture | 21,600 |
| Advertisement Expenses Outstanding | 1,000 | Cash in Hand | 9,900 |
| Cash at Bank | 16,000 | ||
| Total | 72,000 | Total | 72,000 |
Answer: The required financial statements of Delhi Charitable Trust are fully compiled above. The calculated opening capital fund of Rs 24,100 is adjusted along with the yearly surplus of Rs 21,400 to prepare the updated year-end Balance Sheet.
In simple words: Only one-third of the donations are treated as revenue, while the rest are added to capital in the balance sheet. Unpaid amounts for rent, salaries, and advertisement costs are shown as outstanding liabilities at year-end.
Exam Tip: Pay special attention to prepaid calculations when the premium covers a multi-year/extended duration (like 15 months). Accrued interest on investment must be shown under assets in the Balance Sheet as well as added to investment income.
Question 17. From the following Receipt and Payment Account of a club, prepare Income and Expenditure Account for the year ended March 31, 2017 and the Balance Sheet as on that date.
| Receipts | Amount Rs | Payments | Amount Rs |
|---|---|---|---|
| Balance b/d | 3,500 | General expenses | 900 |
| Subscription: 2015-16: 2,000 2016-17: 70,000 2017-18: 3,000 | 75,000 | Salary | 16,000 |
| Sale of old Books (Costing Rs 3,200) | 2,000 | Postage | 1,300 |
| Rent from use of hall | 17,000 | Electricity charges | 7,800 |
| Sale of newspapers | 400 | Furniture | 26,500 |
| Profit from entertainment | 7,300 | Books | 13,000 |
| Newspapers | 600 | ||
| Meeting expenses | 7,200 | ||
| T.V. set | 16,000 | ||
| Balance c/d | 15,900 | ||
| Total | 1,05,200 | Total | 1,05,200 |
Additional Information:
(a) The club has 100 members each paying an annual subscription of Rs 900. Subscriptions outstanding on March 31, 2016 were Rs 3,600.
(b) On March 31, 2017, salary outstanding amounted to Rs 1,000, Salary paid included Rs 1,000 for the year 2016.
(c) On April 1, 2016 the club owned land and building Rs 25,000, furniture Rs 2,600 and books Rs 6,200.
Income and Expenditure Account for the year ended March 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| General Expenses | 900 | Subscription Add: Outstanding for 2017 (100 members at Rs 900 each) | 70,000 20,000 90,000 |
| Salary Add: Outstanding for 2017 Less: Outstanding for 2016 | 16,000 1,000 17,000 (1,000) 16,000 | Rent from use of hall | 17,000 |
| Loss on Sale of Old Books (Rs 3,200 - Rs 2,000) | 1,200 | Sale of Old News Papers | 400 |
| Electricity Charges | 7,800 | Profit from Entertainment | 7,300 |
| Newspapers | 600 | ||
| Meeting Expenses | 7,200 | ||
| Postage | 1,300 | ||
| Surplus (Balancing figure) | 79,700 | ||
| Total | 1,14,700 | Total | 1,14,700 |
Balance Sheet as on March 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Salary Outstanding | 1,000 | Subscription Outstanding | 3,600 |
| Capital Fund (Balancing figure) | 39,900 | Furniture | 2,600 |
| Books | 6,200 | ||
| Cash and Bank | 3,500 | ||
| Building | 25,000 | ||
| Total | 40,900 | Total | 40,900 |
Balance Sheet as on March 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Advance Subscription | 3,000 | Subscription Outstanding: 2017: 20,000 Add: 2016 (Still Outstanding) | 20,000 1,600 21,600 |
| Salary Outstanding | 1,000 | Building | 25,000 |
| Capital Fund Add: Surplus | 39,900 79,700 1,19,600 | Furniture Add: Purchases | 2,600 26,500 29,100 |
| Books Add: Purchases Less: Sales | 6,200 13,000 19,200 (3,200) 16,000 | ||
| T.V. Set | 16,000 | ||
| Cash and Bank | 15,900 | ||
| Total | 1,23,600 | Total | 1,23,600 |
Answer: The ledger accounts and balance sheets are completed above. By listing initial balances, the opening capital fund is determined as Rs 39,900, which is then updated to Rs 1,19,600 after adding the surplus of Rs 79,700 earned during the year.
In simple words: Since there are 100 members paying Rs 900 each, subscription income is exactly Rs 90,000. Out of last year's outstanding subscription of Rs 3,600, only Rs 2,000 was received, which leaves a balance of Rs 1,600 still outstanding in the final asset statement.
Exam Tip: Be mindful of last year's unpaid subscriptions. If a portion remains uncollected at the end of the year, that remaining amount must be included in the closing Balance Sheet as an asset under outstanding subscriptions.
Question 18. Following is the Receipt and Payment Account of Women’s Welfare Club for the year ended December 31, 2017:
| Receipts | Amount Rs | Payments | Amount Rs |
|---|---|---|---|
| Balance b/d | 7,250 | Salary | 12,500 |
| Subscriptions | 81,750 | Stationery | 1,700 |
| Donations | 3,000 | Electricity charges | 9,550 |
| Grant from Government | 15,000 | Insurance | 7,500 |
| Sale of newspapers | 300 | Equipments | 30,000 |
| Proceeds of charity show | 16,500 | Petty expenses | 500 |
| Interest on investments @ 10% for full year | 7,000 | Expenses on charity show | 12,900 |
| Sundries income | 400 | Newspapers | 1,000 |
| Lectures fee | 16,500 | ||
| Honorarium to Secretary | 12,000 | ||
| Balance c/d | 27,050 | ||
| Total | 1,31,200 | Total | 1,31,200 |
Additional Information:
| Particulars | 01.01.2017 Rs | 31.12.2017 Rs |
|---|---|---|
| Outstanding salaries | 1,200 | 1,800 |
| Insurance prepaid | 700 | 300 |
| Subscription outstanding | 3,750 | 2,500 |
| Subscription received in advanced | 1,750 | 1,000 |
| Electricity charges outstanding | - | 1,250 |
| Stock of stationery | 2,250 | 700 |
| Equipments | 25,600 | 50,200 |
| Building | 1,20,000 | 1,14,000 |
Prepare Income and Expenditure Account for the year ended December 31, 2017 and Balance Sheet as on that date.
Books of Women Welfare Club
Income and Expenditure Account for the year ended December 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Salary Add: O/s on Dec. 31, 2017 Less: O/s on Dec. 31, 2016 | 12,500 1,800 14,300 (1,200) 13,100 | Subscriptions Add: O/s on Dec. 31, 2017 Less: O/s on Dec. 31, 2016 Add: Advance on Dec. 31, 2016 Less: Advance on Dec. 31, 2017 | 81,750 2,500 84,250 (3,750) 80,500 1,750 82,250 (1,000) 81,250 |
| Stationery Add: Opening Stock Less: Closing Stock | 1,700 2,250 3,950 (700) 3,250 | Donations | 3,000 |
| Electric Charges Add: O/s on Dec. 31, 2017 | 9,550 1,250 10,800 | Grant from Government | 15,000 |
| Insurance Add: Prepaid in 2016 Less: Prepaid in 2017 | 7,500 700 8,200 (300) 7,900 | Sale of Newspapers | 300 |
| Depreciation on Equipments | 5,400 | Profit from Charity show (16,500 - 12,900) | 3,600 |
| Petty Expenses | 500 | Interest on Investments | 7,000 |
| Newspapers | 1,000 | Sundries Income | 400 |
| Lectures Fee | 16,500 | ||
| Honorarium to Secretary | 12,000 | ||
| Depreciation on Building | 6,000 | ||
| Surplus (Balancing Figure) | 34,100 | ||
| Total | 1,10,550 | Total | 1,10,550 |
Balance Sheet as on December 31, 2016
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Outstanding Salaries | 1,200 | Insurance Prepaid | 700 |
| Subscription in Advance | 1,750 | Subscription Outstanding | 3,750 |
| Capital Fund (Balancing Figure) | 2,26,600 | Stock of Stationery | 2,250 |
| Equipments | 25,600 | ||
| Building | 1,20,000 | ||
| Cash and Bank | 7,250 | ||
| Investments {7,000 * (100/10)} | 70,000 | ||
| Total | 2,29,550 | Total | 2,29,550 |
Balance Sheet as on December 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Outstanding Salaries | 1,800 | Equipments Add: Purchases Less: Depreciation | 25,600 30,000 55,600 (5,400) 50,200 |
| Subscription in Advance | 1,000 | Insurance Prepaid | 300 |
| Electricity Charges Outstanding | 1,250 | Subscription Outstanding | 2,500 |
| Capital Fund Add: Surplus | 2,26,600 34,100 2,60,700 | Stock of Stationery | 700 |
| Building Less: Depreciation | 1,20,000 (6,000) 1,14,000 | ||
| Cash and Bank | 27,050 | ||
| Investments | 70,000 | ||
| Total | 2,64,750 | Total | 2,64,750 |
Answer: The financial ledger accounts and balance sheets are shown in the tables above. The opening capital fund of Rs 2,26,600 was determined, which increases to Rs 2,60,700 by adding the current year's surplus of Rs 34,100.
In simple words: The opening investment of Rs 70,000 is determined from the interest amount (Rs 7,000 represents 10% of Rs 70,000). The consumption of stationery is calculated by taking the opening stock, adding the purchases, and subtracting the closing stock.
Exam Tip: If interest on investments is provided at a given rate but the investment principal is missing from the opening adjustments, calculate this hidden asset by capitalizing the interest: Interest * 100 / Rate.
Question 19. As at March 31, 2017 the following balances have been extracted from the books of the Indian Chartered Accountants Recreation Club and you are asked to prepare (1) Trading Account for ascertaining gross profit derived from running restaurant and dining room and (2) Income and Expenditure Account for the year ended March 31, 2017 (3) and a Balance Sheet as at that date.
| Debit Balances | Rs | Credit Balances | Rs |
|---|---|---|---|
| Stock-in-hand | 1,170 | Receipts Dining Room | 87,660 |
| Purchases | 24,660 | Subscriptions | 9,450 |
| Dining Room | 32,370 | Billiard's Receipts | 7,300 |
| Rent | 10,470 | Sunday Receipts | 410 |
| Wages | 18,690 | Interest on Fixed Deposit | 270 |
| Repairs and Renewals | 5,400 | Sundry Creditors | 5,310 |
| Fuel and Light | 5,280 | Grant from Institute (permanent) | 42,000 |
| Misc. Expenses | 4,050 | Income and Exp. A/c (1.4.16) | 1,380 |
| Cash in hand | 560 | Suspense A/c (See note) | 60 |
| Cash at bank | 2,760 | ||
| Fixed Deposit | 8,500 | ||
| Sundry Debtors | 2,250 | ||
| China glass, cutlery and linen | 600 | ||
| Billiard Table | 2,070 | ||
| Fixtures and Fittings | 870 | ||
| Furniture | 4,140 | ||
| Club Premises | 30,000 | ||
| Total | 1,53,840 | Total | 1,53,840 |
On March 31, 2016 stock of restaurant consisted of Rs 900 and Rs 60 respectively. Provide depreciations Rs 60 on fixtures and fittings, Rs 390 on billiard table and Rs 560 on furniture.
Books of Indian Chartered Accountants Recreation Club
Restaurant Trading Account
| Particulars | Amount (Rs) | Particulars | Amount (Rs) |
|---|---|---|---|
| Opening Stock | 1,170 | Receipts from Dining Room | 87,660 |
| Purchases | 24,660 | Closing Stock | 960 |
| Dining Room Exp. | 32,370 | ||
| Profit from Restaurant | 30,420 | ||
| Total | 88,620 | Total | 88,620 |
Income and Expenditure Account for the year ended March 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Rent | 10,470 | Subscriptions | 9,450 |
| Wages | 18,690 | Sundry Receipts | 410 |
| Repairs and Renewals | 5,400 | Interest on Fixed Deposits | 270 |
| Fuel and Light | 5,280 | Profit from Restaurant | 30,420 |
| Misc. Expenses | 4,050 | Billiards Receipts | 7,300 |
| Depreciation on: - Fixtures and Fittings: 60 - Billiards Table: 390 - Furniture: 560 | 1,010 | ||
| Surplus (Excess of Income over Expenditure) | 2,950 | ||
| Total | 47,850 | Total | 47,850 |
Balance Sheet as on March 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Sundry Creditors | 5,310 | Cash in Hand | 560 |
| Grant from Institute | 42,000 | Cash at Bank | 2,760 |
| Suspense | 60 | Fixed Deposit | 8,500 |
| Capital Fund (Income and Exp. A/c on Apr. 01, 2016) Add: Surplus | 1,380 2,950 4,330 | Sundry Debtors | 2,250 |
| China Glass, Cutlery and Linen | 600 | ||
| Billiards Table Less: Depreciation | 2,070 (390) 1,680 | ||
| Fixture and Fittings Less: Depreciation | 870 (60) 810 | ||
| Furniture Less: Depreciation | 4,140 (560) 3,580 | ||
| Club Premises | 30,000 | ||
| Stock of Restaurant | 960 | ||
| Total | 51,700 | Total | 51,700 |
Answer: The required Restaurant Trading Account, Income and Expenditure Account, and Balance Sheet are presented above.
Note 1: The credit side of the Trial Balance is short by Rs 60. Therefore, to make both sides equal, a Suspense Account has been created with this difference of Rs 60.
Note 2: Based on the additional information, the closing stock is calculated as Rs 960 (comprising Rs 900 and Rs 60).
In simple words: The restaurant operations are separated first to determine their net profit of Rs 30,420, which is then moved to our main income account. All depreciation rates are applied to the historical value of each asset before entering them in the final balance sheet.
Exam Tip: If the trial balance totals are unequal, the discrepancy is placed into a temporary Suspense Account on the shorter side. Make sure to combine any separate stock components (such as Rs 900 and Rs 60) to arrive at the true closing stock figure of Rs 960.
Question 19. As at March 31, 2017 the following balances have been extracted from the books of the Indian Chartered Accountants Recreation Club and you are asked to prepare (1) Trading Account for ascertaining gross profit derived from running restaurant and dining room and (2) Income and Expenditure Account for the year ended March 31, 2017 (3) and a Balance Sheet as at that date.
| Debit Balances | Rs | Credit Balances | Rs |
|---|---|---|---|
| Stock-in-hand | 1,170 | Receipts Dining Room | 87,660 |
| Purchases | 24,660 | Subscriptions | 9,450 |
| Dining Room | 32,370 | Billiard's Receipts | 7,300 |
| Rent | 10,470 | Sunday Receipts | 410 |
| Wages | 18,690 | Interest on Fixed Deposit | 270 |
| Repairs and Renewals | 5,400 | Sundry Creditors | 5,310 |
| Fuel and Light | 5,280 | Grant from Institute (permanent) | 42,000 |
| Misc. Expenses | 4,050 | Income and Exp. A/c (1.4.16) | 1,380 |
| Cash in hand | 560 | Suspense A/c (See note) | 60 |
| Cash at bank | 2,760 | ||
| Fixed Deposit | 8,500 | ||
| Sundry Debtors | 2,250 | ||
| China glass, cutlery and linen | 600 | ||
| Billiard Table | 2,070 | ||
| Fixtures and Fittings | 870 | ||
| Furniture | 4,140 | ||
| Club Premises | 30,000 | ||
| Total | 1,53,840 | Total | 1,53,840 |
On March 31, 2016 stock of restaurant consisted of Rs 900 and Rs 60 respectively. Provide depreciations Rs 60 on fixtures and fittings, Rs 390 on billiard table and Rs 560 on furniture.
Answer:
Important Note:
1. The credit total in the trial balance is Rs 60 lower than the debit total. To ensure both sides reconcile, a Suspense Account is created for this Rs 60 difference.
2. Based on the adjustments, the closing stock value must be taken as Rs 960 (by combining Rs 900 and Rs 60) rather than just Rs 900.
Books of Indian Chartered Accountants Recreation Club
Restaurant Trading Account
| Debit Particulars | Amount (Rs) | Credit Particulars | Amount (Rs) |
|---|---|---|---|
| Opening Stock | 1,170 | Receipts from Dining Room | 87,660 |
| Purchases | 24,660 | Closing Stock | 960 |
| Dining Room Exp. | 32,370 | ||
| Profit from Restaurant | 30,420 | ||
| Total | 88,620 | Total | 88,620 |
Income and Expenditure Account
as on March 31, 2017
| Expenditure | Amount (Rs) | Income | Amount (Rs) |
|---|---|---|---|
| Rent | 10,470 | Subscriptions | 9,450 |
| Wages | 18,690 | Sundry Receipts | 410 |
| Repairs an Renewals | 5,400 | Interest on Fixed Deposits | 270 |
| Fuel and Light | 5,280 | Profit from Restaurant | 30,420 |
| Misc. Expenses | 4,050 | Billiards Receipts | 7,300 |
| Depreciation on: - Fixtures and Fittings: 60 - Billiards Table: 390 - Furniture: 560 | 1,010 | ||
| Surplus (Excess of Income over Expenditure) | 2,950 | ||
| Total | 47,850 | Total | 47,850 |
Balance Sheet
as on March 31, 2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Sundry Creditors | 5,310 | Cash in Hand | 560 |
| Grant from Institute | 42,000 | Cash at Bank | 2,760 |
| Suspense | 60 | Fixed Deposit | 8,500 |
| Capital Fund (Income and Exp. A/c as on Apr. 01, 2016): 1,380 Add: Surplus: 2,950 | 4,330 | Sundry Debtors | 2,250 |
| China Glass, Cutlery and Linen | 600 | ||
| Billiards Table: 2,070 Less: Depreciation: (390) | 1,680 | ||
| Fixture and Fittings: 870 Less: Depreciation: (60) | 810 | ||
| Furniture: 4,140 Less: Depreciation: (560) | 3,580 | ||
| Club Premises | 30,000 | ||
| Stock of Restaurant | 960 | ||
| Total | 51,700 | Total | 51,700 |
In simple words: First, the Restaurant Trading Account determines the specific profit earned from dining services. Next, the primary Income and Expenditure Account tallies all other revenues and expenses to find the net surplus. Lastly, the Balance Sheet presents a final summary of what the club owns and owes at the end of the year.
Exam Tip: Pay close attention to permanent grants, which are of a capital nature and must be placed on the liabilities side of the Balance Sheet. Be sure to show individual inner-column calculations for all asset depreciations to ensure full credit from the examiner.
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