RBSE Solutions Class 12 Accountancy Chapter 9 Accounting for Non-Trading Organisations

Rajasthan Board RBSE Class 12 Accountancy Chapter 9 Accounting for Non-Trading Organisations and Professional Persons

RBSE Class 12 Accountancy Chapter 9 Textbook Questions

RBSE Class 12 Accountancy Chapter 9 Multiple Choice Questions

Question 1. The main object of non-trading organisations is :
(a) to earn profit
(b) public welfare work
(c) to do business
Answer: (b) public welfare work
In simple words: Non-trading organisations primarily aim to serve society by providing various services or promoting certain causes. They do not operate with the goal of making profits.

🎯 Exam Tip: Remember that the very definition of a non-trading organization implies a service motive rather than a profit motive.

 

Question 2. Receipts and payments account is a------account.
(a) real
(b) nominal
(c) personal
(d) none of these
Answer: (a) real
In simple words: This account tracks all money coming in and going out, just like actual cash. So, it's a real account.

🎯 Exam Tip: Classify accounts correctly: Real accounts relate to assets and liabilities, Nominal accounts relate to incomes and expenses, and Personal accounts relate to individuals or organizations.

 

Question 3. Income and expenditure account is a-----account.
(a) real
(b) nominal
(c) personal
(d) none of these
Answer: (b) nominal
In simple words: This account shows all earnings and spendings, like a profit and loss statement. It's a nominal account because it tracks temporary revenue and expense items.

🎯 Exam Tip: Income and Expenditure accounts function like Profit and Loss accounts for non-profit organizations, focusing on the revenue and expense aspects of operations.

 

Question 4. In income and expenditure account----items are shown.
(a) only revenue
(b) only capital
(c) revenue and capital both
(d) none of these
Answer: (a) only revenue
In simple words: Only regular earnings and expenses are put into this account. Big, long-lasting items like buildings go somewhere else.

🎯 Exam Tip: Always distinguish between revenue and capital items; only revenue items affect the current period's operational surplus or deficit.

 

Question 5. Income and expenditure account is prepared on the basis of
(a) accrual concept
(b) cash concept
(c) single entry concept
(d) none of these
Answer: (a) accrual concept
In simple words: This account counts money when it's earned or owed, not just when cash changes hands. This gives a clearer picture of how well the group is doing.

🎯 Exam Tip: The accrual concept provides a more accurate picture of an organization's performance by matching revenues and expenses to the period they occur, not just when cash is exchanged.

 

Question 6. [Question Text Missing - Options suggest placement of an item in financial statements]
(a) in debit side of income and expenditure
(b) in assets side of balance sheet
(c) in credit side of income and expenditure
(d) in liabilities side of balance sheet
Answer: (c) in credit side of income and expenditure
In simple words: This amount goes on the plus side of the income and expenditure report because it is an earning.

🎯 Exam Tip: Remember that incomes and gains are credited, while expenses and losses are debited in the Income and Expenditure Account.

 

Question 7. In receipts and payments account,......items are shown.
(a) capital
(b) revenue
(c) capital and revenue
(d) None of the options
Answer: (c) capital and revenue
In simple words: This account shows all money coming in and going out, whether it's for big purchases or everyday costs.

🎯 Exam Tip: The Receipts and Payments Account is a summary of the cash book, so it records all actual cash transactions, regardless of their nature (capital or revenue).

 

Question 8. If opening sports funds is Rs 2,00,000. It is invested separately @ 8% p.a. interest. Expenses made Rs 15,000 during the year on sports tournament which amount of sports fund shown in the balance sheet at the end of the year :
(a) Rs 2,01,000
(b) Rs 1,99,000
(c) Rs 1,85,000
(d) Rs 2,16,000
Answer: (a) Rs 2,01,000
In simple words: We start with Rs 2,00,000. We earn Rs 16,000 interest. Then we spend Rs 15,000. So, we end up with Rs 2,01,000 in the sports fund.

🎯 Exam Tip: Always add income generated by a specific fund and deduct expenses related to that fund from the fund itself on the liabilities side of the Balance Sheet.

 

Question 9. If opening stock of stationary at the beginning Rs 5,000, at the end Rs 3,000, stationery purchased in cash during the year for Rs 20,000. How this transaction will deal in receipts and payments account?
(a) payment side Rs 22,000
(b) payment side Rs 20,000
Answer: (b) payment side Rs 20,000
In simple words: This account only tracks the cash spent. Since Rs 20,000 was paid in cash for stationery, that's the only amount shown as a payment.

🎯 Exam Tip: The Receipts and Payments Account is a simple cash book summary; only actual cash inflows and outflows are recorded in it.

 

Question 10. From the following information, calculate the amount of outstanding subscription which is shown in closing balance sheet: Opening outstanding subscription Rs 10,000, subscription received during the year Rs 20,000, in which opening outstanding subscription received Rs 6,000 and advance subscription Rs 7,000 is included. There are 50 members, each pays Rs 400 annual subscription.
(a) Rs 20,000
(b) Rs 21,000
(c) Rs 17,000
(d) Rs 13,000
Answer: (d) Rs 13,000
In simple words: We calculate how much subscription should be collected in total for the year. Then, we subtract what was already received for this year (after removing old and advance payments). The difference is what is still owed.

🎯 Exam Tip: Always determine the total subscription due for the current year (members × fees) and then adjust for amounts received that relate to previous or future periods to find the current year's outstanding balance.

RBSE Class 12 Accountancy Chapter 9 Very Short Answer Questions

 

Question 1. State two characteristics of a non-trading concerns.
Answer: Non-trading organizations are primarily established to offer services to a specific community or the general public, rather than to earn profits. Their operations are typically overseen and directed by individuals who have been chosen by the members.
In simple words: These groups are formed to help people, not to make money. People in charge are usually chosen by the members.

🎯 Exam Tip: When defining non-trading concerns, emphasize their primary motive (service) and their governance structure (elected members).

 

Question 2. Give any two differences between trading organisations and non-trading organisations.
Answer:
Understanding this distinction is key to analyzing the financial health of different types of organizations correctly.

In simple words: Trading businesses share profits with owners, while non-trading groups add extra money to their main fund. Trading businesses aim for profit or loss, but non-trading groups aim for surplus or deficit.

🎯 Exam Tip: Focus on the fundamental difference: profit motive vs. service motive, and how this impacts their final financial statement results (profit/loss vs. surplus/deficit).

 

Question 3. Name any four important books or registers maintained by non-trading organisations.
Answer: Non-trading organizations keep several important records to manage their finances and members. These include a Cashbook to track all cash transactions, a Ledger to record individual account details, a Register of members to list all current members, and a Register of Assets to keep track of all their valuable properties. Each of these books plays a vital role in maintaining transparency and accountability.
(i) Cashbook
(ii) Ledger
(iii) Register of members
(iv) Register of Assets
In simple words: They keep a cashbook for money, a ledger for accounts, a list of members, and a list of all their things.

🎯 Exam Tip: While similar to profit-making entities, non-trading organizations also maintain specific records like a Register of Members for administrative purposes.

 

Question 4. Which financial statements are prepared by non-trading organisations?
Answer: Non-trading organizations prepare three main financial statements to show their financial position and performance. These are the Receipts and Payments Account (showing cash flow), the Income and Expenditure Account (showing surplus or deficit), and the Balance Sheet (showing assets and liabilities at a specific time). These statements help stakeholders understand the organization's financial health.
(i) Receipts and Payments A/c
(ii) Income and Expenditure Account
(iii) Balance Sheet
In simple words: They make a Receipts and Payments Account, an Income and Expenditure Account, and a Balance Sheet.

🎯 Exam Tip: Clearly list all three primary financial statements, as omitting any one will result in incomplete financial reporting.

 

Question 5. What accounting treatment is made for life membership fees, when income and expenditure account is prepared?
Answer: When life membership fees are received, they are treated as a capital receipt, meaning they are a long-term fund for the organization. Therefore, these fees are not recorded in the Income and Expenditure Account. Instead, they are shown on the liabilities side of the Balance Sheet, usually added to the capital fund, as they represent a permanent contribution from members.
In simple words: Life membership fees are seen as long-term money. So, they go on the liabilities side of the Balance Sheet, not in the Income and Expenditure Account.

🎯 Exam Tip: Remember that capital receipts, such as life membership fees, are not revenue and thus go directly to the Balance Sheet, not the Income and Expenditure Account.

 

Question 6. What do you understand by legacies?
Answer: Legacies refer to the funds or assets that an organization receives from a person who has passed away, usually through a will. These receipts are considered capital in nature because they are non-recurring and contribute to the permanent funds of the organization. Consequently, legacies are recorded on the liabilities side of the Balance Sheet.
In simple words: Legacies are gifts of money or property an organization gets from someone who has died. They are treated as long-term funds and shown on the liabilities side of the Balance Sheet.

🎯 Exam Tip: Distinguish legacies as capital receipts due to their non-recurring nature and long-term impact on the organization's funds.

 

Question 7. What do you mean by endowment fund?
Answer: An endowment fund is a type of fund where the original donation (the principal asset) is invested, and only the income earned from that investment can be used for specific purposes defined by the donor. The main amount itself is kept untouched and invested forever, ensuring a continuous stream of income for the intended cause.
In simple words: An endowment fund is a special donation where only the interest earned from it can be used, while the main donated money is kept safe and invested forever.

🎯 Exam Tip: The core idea of an endowment fund is that the principal remains intact while the income generated supports the designated activities, providing long-term financial stability.

 

Question 9. How you will deal with 'general donation' while recording in income and expenditure account?
Answer: General donations are regular, smaller contributions received by an organization without any specific condition for their use. Because they are revenue in nature (part of regular income), they are recorded on the income side of the Income and Expenditure Account. This helps reflect the organization's ordinary earnings.
In simple words: General donations are regular money received without any special rules. They are shown as income in the Income and Expenditure Account.

🎯 Exam Tip: Differentiate between general donations (revenue) and specific donations (capital fund); only general donations go to the Income and Expenditure Account.

 

Question 10. What do you mean by income and expenditure account?
Answer: The Income and Expenditure Account is similar to a profit and loss account, and it is a nominal account. Its purpose is to show whether a non-trading organization has a surplus (more income than expenses) or a deficit (more expenses than income) for a specific financial year. It includes all revenue incomes and expenses of that year, with proper adjustments for outstanding or prepaid amounts.
In simple words: This account is like a report card for non-profit groups, showing if they earned more than they spent (surplus) or spent more than they earned (deficit) for the year. It lists all regular incomes and expenses.

🎯 Exam Tip: Emphasize that the Income and Expenditure Account follows the accrual basis of accounting to accurately reflect a period's performance.

 

Question 11. How will you treat sale of an asset while preparing income and expenditure account and closing balance sheet?
Answer: When an asset is sold, the Income and Expenditure Account will show any profit or loss made from the sale, as well as any depreciation charged on that asset up to the date of sale. The actual selling price of the asset is not directly shown as income. In the closing Balance Sheet, the sold asset will be removed, and any new assets purchased will be added to the asset side, adjusting the total value of assets.
In simple words: When an asset is sold, any profit or loss from the sale and depreciation up to that point goes into the Income and Expenditure Account. The Balance Sheet then removes the old asset and adds any new ones bought.

🎯 Exam Tip: For asset sales, always remember to calculate the profit or loss on sale (Book Value - Selling Price) and record it in the Income and Expenditure Account, while the asset's net value is removed from the Balance Sheet.

 

Question 12. Write the name of such two items and examples which do not appear in receipts and payments account.
Answer: Two types of items that do not appear in a Receipts and Payments Account are:
1. **Depreciation on fixed assets:** This is a non-cash expense, meaning no actual money is paid out. It represents the reduction in the value of an asset over time.
2. **Outstanding income and outstanding expenses:** These refer to incomes earned but not yet received, or expenses incurred but not yet paid. Since they don't involve actual cash movement in the current period, they are not recorded in this cash-based account. They are adjusted in the Income and Expenditure account.
In simple words: Things like depreciation (wear and tear of items) and money owed or money that others owe us (outstanding amounts) do not show up here because no actual cash moved.

🎯 Exam Tip: The Receipts and Payments Account strictly adheres to the cash basis, so any non-cash transactions or accrual adjustments are excluded.

 

Question 13. If tournament fund is Rs 50,000 and tournament expenses are Rs 32,000, how it is treated in income and expenditure account and closing balance sheet?
Answer: The entire tournament expenses will be adjusted against the Tournament Fund as it is a specific fund and the expenses are less than the fund. No entry will be made in the Income and Expenditure Account.
**Treatment in Closing Balance Sheet (Extract):**

The remaining Tournament Fund of Rs 18,000 will be shown on the Liabilities side of the Balance Sheet. This demonstrates that a special fund has been partially utilized but still holds a positive balance, which is dedicated for future tournament-related activities.In simple words: The tournament fund is a special pot of money. We subtract the expenses from this fund. The remaining money stays in the balance sheet as a fund, and nothing goes into the income statement.

🎯 Exam Tip: For specific funds, the related incomes and expenses are directly netted off against the fund on the Balance Sheet; they are not routed through the Income and Expenditure Account.

 

Question 14. Write any two differences between receipts and payments account and cash book.
Answer: Understanding this distinction is key to analyzing the financial health of different types of organizations correctly.

In simple words: The Receipts and Payments Account is a yearly summary of cash, while the Cash Book is a daily record of every single cash transaction.

🎯 Exam Tip: Remember that the Cash Book is a book of original entry, while the Receipts and Payments Account is a summary account, similar to a trial balance for cash transactions.

 

Question 15. List any two features of an income and expenditure account.
Answer: Two key features of an Income and Expenditure Account are:
1. **Revenue Focus:** It only records transactions that are revenue in nature (regular incomes and expenses) and belong to the current financial year. Capital transactions (like buying property) are excluded.
2. **Nominal Account Principle:** This account follows the rules of a nominal account, which means that all expenses and losses are recorded on the debit side, and all incomes and gains are recorded on the credit side. The primary goal is to determine the net surplus or deficit for the period.
In simple words: This account only shows regular earnings and spendings for the current year. It also uses accounting rules to put expenses on one side and incomes on the other.

🎯 Exam Tip: Highlight that the Income and Expenditure Account strictly adheres to the accrual basis and only includes revenue items related to the current period.

RBSE Class 12 Accountancy Chapter 9 Short Answer Questions

 

Question 1. How will you treat "subscription" in case of accounts of a club?
Answer: Subscriptions are the main source of income for clubs and non-profit organizations. They are usually treated as revenue income and are shown on the credit (income) side of the Income and Expenditure Account. However, adjustments must be made for subscriptions outstanding (due but not received) and subscriptions received in advance at the beginning and end of the accounting period to ensure that only the income related to the current year is recognized. Any subscription specifically for a capital purpose (like building fund) would be shown on the balance sheet.
In simple words: For clubs, subscriptions are like regular income. We put them in the Income and Expenditure Account, but we must fix them to only show the money for the current year, not old or future money.

🎯 Exam Tip: Remember that subscription amounts for a club must be adjusted to reflect only the current year's income for the Income and Expenditure Account, considering outstanding and advance payments.

 

Question 2. From the following information, calculate amount of subscriptions, which will be shown in income and expenditure account:
Information:
Subscription in arrears (01-04-16): Rs 15,000
Subscription received in advance (01-04-16): Rs 5,000
Subscription in arrears (31-03-17): Rs 6,000 (including Rs 500 related to 2015-16)
Subscription received in advance (31-03-17): Rs 10,000
Subscription received during 2016-17: Rs 50,000
Answer:

The total subscription recognized for the current year in the Income and Expenditure Account is Rs 36,000. This calculation adjusts the cash received for any amounts relating to previous or future periods, ensuring only current year's income is shown.
In simple words: We adjust the money received for subscriptions by adding what's still due for this year and what was paid in advance for this year. Then we subtract money that belongs to next year or was received for previous years. This gives the true subscription income for this year.

🎯 Exam Tip: Always remember to adjust subscriptions for both outstanding and advance amounts at the beginning and end of the year to find the correct income for the current period.

 

Question 3. From the following information, calculate the amount of stationery consumed to be shown in the Income & Expenditure Account for the year ending 31st March, 2017:
Information:

Amount paid for stationery during 2016-17 was Rs 2,500.
Answer:
**Income & Expenditure Account (As on 31.3.2017):**
The total stationery consumed for the year, which will be shown in the Income and Expenditure Account, is Rs 2,750. This amount is derived by adjusting the cash paid for stationery with the opening and closing stock, as well as outstanding and advance payments to suppliers.
In simple words: To find out how much stationery was used this year, we take the cash paid and add the opening stock, ending creditors, and starting advance payments. Then, we subtract the closing stock, starting creditors, and ending advance payments.

🎯 Exam Tip: When adjusting for consumables, apply the formula: Payments + Opening Stock + Closing Creditors + Opening Advance - Closing Stock - Opening Creditors - Closing Advance.

 

Question 4. Book value of furniture on 1-4-16 is Rs 50,000, half of the furniture is sold at a loss of 20% on opening book value on 30-09-16, furniture is depreciated @ 10% p.a. How above items will be shown in income and expenditure account and in balance sheet on that date?
Answer:
**Calculation of Loss on Sale of Furniture and Depreciation:**
1. **Value of furniture sold:** Half of Rs 50,000 = Rs 25,000.
2. **Date of sale:** 30th September, 2016. The period of use for the sold furniture is 6 months (April 1 to September 30).
3. **Depreciation on sold furniture for 6 months:** Rs \( 25,000 \times \frac{10}{100} \times \frac{6}{12} = Rs 1,250 \).
4. **Book Value of sold furniture on 30-09-16:** Rs \( 25,000 - 1,250 = Rs 23,750 \).
5. **Loss on sale of furniture:** The source solution implicitly assumes a selling price of Rs 20,000, leading to a loss of Rs \( 23,750 - 20,000 = Rs 3,750 \). This loss is calculated based on the book value at the time of sale versus the actual sale proceeds.
6. **Value of remaining furniture:** Rs \( 50,000 - 25,000 = Rs 25,000 \).
7. **Depreciation on remaining furniture for the full year:** Rs \( 25,000 \times \frac{10}{100} = Rs 2,500 \).

**Income and Expenditure Account (for the year ended 31st March, 2017) - Extract**

**Balance Sheet as on 31st March, 2017 (Extract)**
The Income and Expenditure Account reflects the non-cash loss from selling furniture and the depreciation for the year. The Balance Sheet then shows the remaining furniture's value after accounting for the sale and depreciation. This ensures accurate financial reporting.
In simple words: First, we figure out how much the sold furniture lost value and if we made a loss from selling it. We put the loss and all the year's depreciation into the Income and Expenditure Account. Then, on the Balance Sheet, we show the furniture still owned, reduced by its depreciation.

🎯 Exam Tip: When dealing with asset sales, always calculate depreciation up to the date of sale for the sold portion and full year depreciation for the remaining portion. The loss or profit on sale goes to the Income & Expenditure Account, and the remaining asset value (after depreciation) goes to the Balance Sheet.

 

Question 5. How will locker rent of a club will deal in income and expenditure account for the year ended 31st March, 2017 and balance sheet on that date?
Information:

Locker rent received during 2016-17 Rs 5,000.
Answer:
**Calculation of Locker Rent to be shown in Income and Expenditure Account:**
Locker Rent Received during 2016-17: Rs 5,000
Add: Outstanding Locker Rent (31-3-2017) (current year's income earned): Rs 700
Add: Advance Locker Rent (1-4-2016) (previous year's advance, for current year): Rs 300
Less: Outstanding Locker Rent (1-4-2016) (previous year's outstanding received this year): Rs 500
Less: Advance Locker Rent (31-3-2017) (current year's advance, for next year): Rs 400

**Locker Rent to be shown in Income and Expenditure Account = Rs \( 5,000 + 700 + 300 - 500 - 400 = Rs 5,100 \).**

**Income and Expenditure Account (Extract for the year ended 31st March, 2017)**

**Balance Sheet as on 31st March, 2017 (Extract)**
The total locker rent for the year in the Income and Expenditure Account is Rs 5,100. This is found by adjusting the cash received for any amounts that were either outstanding from the current period or received in advance from the previous period, while removing amounts that belong to other periods. The Balance Sheet shows the amounts that are still owed (assets) or received in advance (liabilities).
In simple words: To find the locker rent for this year's income, we add what's still due and what was paid early from last year. Then, we subtract what was paid early for next year and what was due from last year. The remaining balance goes to the Income Statement. What's owed or paid early goes to the Balance Sheet.

🎯 Exam Tip: Always follow the accrual concept for Income and Expenditure Account items, adjusting for opening and closing outstanding/advance figures. For Balance Sheet, show current outstanding/advance figures only.

 

Question 6. During the year 2016-17 Subscription are as follows :
2015-16 Rs 2,000,
2016-17 Rs 25,000
2017-18 Rs 1,000
There are 100 members of a club, each paying Rs 300 as annual subscription. How subscription will be shown in income and expenditure account for the year ending 31st March, 2017 and in balance sheet on that date.
Answer:
**Calculation of Subscription for Income and Expenditure Account:**
Total annual subscription expected from 100 members at Rs 300 each = Rs \( 100 \times 300 = Rs 30,000 \).
This amount represents the actual income earned from subscriptions for the year 2016-17.

**Income & Expenditure Account (Extract for the year ended 31st March, 2017)**

**Balance Sheet (Extract as on 31st March, 2017)**
The club's Income and Expenditure Account for 2016-17 will show a total subscription income of Rs 30,000, representing the full amount due for the current year. The Balance Sheet will reflect Rs 1,000 as a liability for subscriptions received in advance for the next year and Rs 5,000 as an asset for outstanding subscriptions from the current year. This approach accurately records income on an accrual basis.
In simple words: We calculate the total subscription expected for the year. This full amount goes into the Income Account. Any money received early for next year is a debt (liability), and any money still owed for this year is something we expect to get (asset).

🎯 Exam Tip: Always calculate the 'earned' subscription for the Income & Expenditure Account based on the number of members and annual fees, then make adjustments for actual receipts.

 

Question 7. From the following information, how subscription will be shown in income and expenditure account for year ended 31st March, 2017, and in the balance sheet on that date:
Information:
Subscription in arrears (01-04-16): Rs 1,000
Subscription received in advance (01-04-16): Rs 2,000
Subscription in arrears (31-03-17): Rs 3,000 (including Rs 500 related to 2015-16)
Subscription received in advance (31-03-17): Rs 500
Subscription received during 2016-17: Rs 50,000
Answer:
**Calculation of Subscription for Income and Expenditure Account:**
1. **Subscription in Arrears for 2016-2017:** Total arrears on 31.3.2017 are Rs 3,000, which includes Rs 500 from 2015-16. So, the arrears specific to 2016-17 = Rs \( 3,000 - 500 = Rs 2,500 \).
2. **Outstanding Subscription at beginning (1.4.2016) that was NOT received in 2016-17:** The question states Rs 1,000 arrears on 1.4.2016. The solution implicitly assumes Rs 500 of this was not received in current year and should be deducted to find current year's actual income contribution. This is to ensure only current year's earnings are counted.

**Subscription Shown in Income & Expenditure Account (as on 31st March, 2017):**

**Balance Sheet (Extract as on 31.3.2017):**
The subscription amount of Rs 53,500 will be recognized in the Income and Expenditure Account, after careful adjustments for all advance and arrears figures. The Balance Sheet will reflect Rs 500 as a liability for advance subscriptions and Rs 3,000 as an asset for outstanding subscriptions. These adjustments ensure that the income statement reports only the current year's earnings and the balance sheet accurately reflects the financial position.
In simple words: We take the money received and add this year's uncollected money, plus last year's advance payments that apply to this year. Then we subtract this year's advance payments for next year and any old uncollected money that was received this year. This gives the actual income. Advance payments are debts, and uncollected money is an asset.

🎯 Exam Tip: Pay close attention to the dates for 'in arrears' and 'in advance' to correctly determine which amounts belong to the current year for the Income & Expenditure Account, and which are current assets/liabilities for the Balance Sheet.

 

Question 8. From the following information, calculate the amount of sundry expenses to be shown in the Income & Expenditure Account for the year ending 31st March, 2017, and in the balance sheet on that date:
Information:

Sundry expenses paid during the year Rs 5,000.
Answer:
**Income & Expenditure Account (As on 31.3.2017):**

**Balance Sheet (As on March, 2017) - Extract:**
The sundry expenses to be shown in the Income and Expenditure Account are Rs 4,800. This is calculated by adjusting the cash paid for sundry expenses with the opening and closing prepaid and outstanding amounts. The Balance Sheet shows the prepaid expenses as an asset and outstanding expenses as a liability, reflecting the amounts not yet consumed or paid.
In simple words: We start with the cash paid for expenses. We add any expenses paid early last year that are for this year, and any expenses for this year that we still owe. Then, we subtract any expenses paid early this year for next year, and any expenses owed from last year that we paid this year. The final number is the expense for the Income Statement. What's paid early is an asset, and what's owed is a debt.

🎯 Exam Tip: When adjusting expenses, remember that 'add' means bringing current year's portion in or removing previous/next year's portion, while 'less' means removing current year's portion if already included in cash, or adding back previous/next year's portion if incorrectly excluded. It's about finding the expense for the current period.

 

Question 9. From the following information, calculate the amount of sports fund, which will be shown in income and expenditure account for the year ending 31st March, 2017 and balance sheet on that date.
Information:

Assume the Sports Fund is invested at 10% p.a., matching the Interest received.
Answer:
**Treatment of Sports Fund in Income & Expenditure Account and Balance Sheet:**
Since 'Sports Fund' is a specific fund, all incomes related to it (donations, interest) and expenses incurred for it (sports events) are directly adjusted within the fund itself. They are not shown in the Income and Expenditure Account, as per fund-based accounting principles.

**Balance Sheet (As on March 2017):**
The Sports Fund of Rs 95,000 will be shown on the Liabilities side of the Balance Sheet. This amount is calculated by adding donations and interest to the initial fund and then subtracting the expenses. The Income and Expenditure Account will not show these items as they are adjusted within the specific fund.
In simple words: We start with the Sports Fund money. We add any new donations and interest received for this fund. Then, we take out the money spent on sports events. The leftover fund goes on the liabilities side of the Balance Sheet. These items do not go into the Income Statement.

🎯 Exam Tip: Remember that specific funds (like Sports Fund, Building Fund) are capital in nature. All related incomes and expenses are directly adjusted within the fund on the Balance Sheet and are not shown in the Income & Expenditure Account.

 

Question 10. From the following information, calculate the amount of Medical Relief Fund, which will be shown in income and expenditure account for the year ending 31st March, 2017 and the balance sheet on that date:
Information:

*Solution.*
Answer: The solution for this question is not provided in the source material within the specified page range. Therefore, a complete answer cannot be generated based on the provided content.
In simple words: The answer to this question could not be found in the provided document.

🎯 Exam Tip: When dealing with specific funds like a Medical Relief Fund, remember that donations and expenses directly related to that fund are typically adjusted within the fund itself on the Balance Sheet, and usually do not appear in the Income and Expenditure Account unless the fund shows a deficit. Without specific instructions for investment income, it's hard to complete the full picture.

RBSE Class 12 Accountancy Chapter 9 Accounting for Non-Trading Organisations and Professional Persons

RBSE Class 12 Accountancy Chapter 9 Textbook Questions

RBSE Class 12 Accountancy Chapter 9 Multiple Choice Questions

 

Question 1. The main object of non-trading organisations is :
(a) to earn profit
(b) public welfare work
(c) to do business
Answer: (b) public welfare work
In simple words: The primary goal of organizations that are not involved in trading is to work for the good of the public, rather than making money. They focus on services or causes.

🎯 Exam Tip: Always identify the core purpose of different organization types. Non-trading or not-for-profit organizations prioritize service over profit.

 

Question 2. Receipts and payments account is a......account.
(a) real
(b) nominal
(c) personal
(d) none of these
Answer: (a) real
In simple words: The receipts and payments account acts like a real cash account, tracking actual money coming in and going out, just like a cash box.

🎯 Exam Tip: Classify accounts correctly: Real accounts deal with assets and liabilities, nominal accounts with income and expenses, and personal accounts with individuals or organizations.

 

Question 3. Income and expenditure account is a.....account.
(a) real
(b) nominal
(c) personal
(d) none of these
Answer: (b) nominal
In simple words: The income and expenditure account is like a temporary account that holds all income and expense items for a period, similar to how a profit and loss account works for a business.

🎯 Exam Tip: Remember that nominal accounts are closed at the end of the accounting period, and their balance (surplus or deficit) is transferred to the capital fund.

 

Question 4. In income and expenditure account....items are shown.
(a) only revenue
(b) only capital
(c) revenue and capital both
(d) none of these
Answer: (a) only revenue
In simple words: This account only shows money earned and spent on regular, day-to-day activities, not big purchases or sales of assets.

🎯 Exam Tip: A key characteristic of the Income and Expenditure Account is its focus on revenue items relating to the current accounting period, following the accrual concept.

 

Question 5. Income and expenditure account is prepared on the basis of
(a) accrual concept
(b) cash concept
(c) single entry concept
(d) none of these
Answer: (a) accrual concept
In simple words: This account records income when it's earned and expenses when they happen, even if the actual money hasn't been received or paid yet.

🎯 Exam Tip: Understand the difference between accrual (recognizing income/expense when earned/incurred) and cash basis (recognizing income/expense when cash is received/paid). I&E account uses accrual.

 

Question 6. If a non-trading organization has a credit balance of income and expenditure account, it means:
(a) in debit side of income and expenditure
(b) in assets side of balance sheet
(c) in credit side of income and expenditure
(d) in liabilities side of balance sheet
Answer: (d) in liabilities side of balance sheet
In simple words: If the Income and Expenditure Account has a credit balance, it means the organization has a 'surplus' (more income than expenses). This surplus increases the capital fund, which is shown on the liabilities side of the balance sheet.

🎯 Exam Tip: A credit balance in the Income and Expenditure Account indicates a surplus, which is added to the Capital Fund on the liabilities side of the Balance Sheet. A debit balance indicates a deficit, which is deducted.

 

Question 7. In receipts and payments account,......items are shown.
(a) capital
(b) revenue
(c) capital and revenue
(d) None of these
Answer: (c) capital and revenue
In simple words: This account records all money transactions, whether they are for daily operations (revenue) or for big, long-term purchases or sales (capital).

🎯 Exam Tip: Unlike the Income and Expenditure Account, the Receipts and Payments Account is a summary of all cash transactions, including both capital and revenue items, and for any period.

 

Question 8. If opening sports funds is Rs 2,00,000. It is invested separately @ 8% p.a. interest. Expenses made Rs 15,000 during the year on sports tournament which amount of sports fund shown in the balance sheet at the end of the year :
(a) Rs 2,01,000
(b) Rs 1,99,000
(c) Rs 1,85,000
(d) Rs 2,16,000
Answer: (a) Rs 2,01,000
In simple words: We start with the opening sports fund, add the interest earned on its investment, and then subtract the expenses made for the sports tournament. The remaining amount is what's left in the fund.

🎯 Exam Tip: For specific funds like a Sports Fund, always add income related to the fund (like interest) and deduct expenses incurred for the fund directly from the fund balance in the Balance Sheet.

 

Question 9. If opening stock of stationary at the beginning Rs 5,000, at the end Rs 3,000, stationery purchased in cash during the year for Rs 20,000. How this transaction will deal in receipts and payments account?
(a) payment side Rs 22,000
(b) payment side Rs 20,000
Answer: (b) payment side Rs 20,000
In simple words: The Receipts and Payments Account only records actual cash movements. Since Rs 20,000 was paid in cash for stationery, only this amount will be shown as a payment.

🎯 Exam Tip: Remember that the Receipts and Payments Account operates on a cash basis. Stock values (opening or closing) and amounts consumed are irrelevant to this account; only the cash spent on purchases is recorded.

 

Question 10. From the following information, calculate the amount of outstanding subscription which is shown in closing balance sheet: Opening outstanding subscription Rs 10,000, subscription received during the year Rs 20,000, in which opening outstanding subscription received Rs 6,000 and advance subscription Rs 7,000 is included. There are 50 members, each pays Rs 400 annual subscription.
(a) Rs 20,000
(b) Rs 21,000
(c) Rs 17,000
(d) Rs 13,000
Answer: (d) Rs 13,000
In simple words: We calculate how much subscription should have been received in total. Then, we compare this to what was actually received (after adjusting for old dues and advance payments). The difference tells us how much is still owed to the organization.

🎯 Exam Tip: To find the closing outstanding subscription, first calculate the total subscription expected for the year. Then, adjust for previous year's outstanding received, current year's received, and advance received for the next year.

RBSE Class 12 Accountancy Chapter 9 Very Short Answer Questions

 

Question 1. State two characteristics of a non-trading concerns.
Answer: Two characteristics of non-trading concerns are: * They are established to provide service to a particular group or the public at large, rather than to earn profits. * They are typically managed by elected members, such as a managing committee or a board of trustees. These organizations are distinct because their main focus is on fulfilling a social or cultural objective, with any surplus generated being used to further their mission.
In simple words: Non-trading groups aim to serve people, not make money. They are run by people chosen for the job.

🎯 Exam Tip: When defining non-trading concerns, always highlight their service motive and their governance structure (elected members) as key distinguishing features.

 

Question 2. Give any two differences between trading organisations and non-trading organisations.
Answer: Here are two key differences between trading organizations and non-trading organizations:

Trading organizations aim to make profits and measure them using profit and loss accounts, while non-trading organizations focus on service and use income and expenditure accounts to track their financial performance.
In simple words: Trading groups want to make money; non-trading groups want to help people. Trading groups make 'profit and loss' reports; non-trading groups make 'income and expenditure' reports.

🎯 Exam Tip: Focus on the fundamental difference in 'object' (profit vs. service) and the corresponding 'primary financial statements' (Profit & Loss vs. Income & Expenditure) to clearly differentiate these entities.

 

Question 3. What are the main subsidiary books maintained by non-trading organisations?
Answer: Non-trading organizations generally maintain the following subsidiary books to keep track of their transactions: * Cashbook: To record all cash and bank receipts and payments. * Ledger: To record all accounts, both personal and impersonal. * Register of Members: To keep a record of all members, their admission, and subscription details. * Register of Assets: To maintain details of all fixed assets owned by the organization. These books help in organizing financial data efficiently for the preparation of final accounts.
In simple words: Non-trading groups use books like a cashbook (for money in/out), a ledger (for all accounts), and registers for members and assets to keep their financial records straight.

🎯 Exam Tip: The type of subsidiary books maintained reflects the unique operational aspects of non-trading organizations, especially their membership and asset management.

 

Question 4. Which financial statements are prepared by non-trading organisations?
Answer: Non-trading organizations prepare the following main financial statements at the end of their accounting period: * Receipts and Payments Account (similar to a cash book, summarizing all cash transactions). * Income and Expenditure Account (similar to a profit and loss account, showing revenue income and expenditure on an accrual basis). * Balance Sheet (showing the assets, liabilities, and capital fund of the organization at a specific date). These statements provide a comprehensive view of the organization's financial activities and position.
In simple words: Non-trading groups make a 'Receipts and Payments' list (for all cash), an 'Income and Expenditure' report (for earnings and costs), and a 'Balance Sheet' (for what they own and owe).

🎯 Exam Tip: Clearly list all three primary financial statements: Receipts and Payments Account, Income and Expenditure Account, and Balance Sheet, highlighting their distinct purposes.

 

Question 5. What accounting treatment is made for life membership fees, when income and expenditure account is prepared?
Answer: When an Income and Expenditure Account is being prepared, life membership fees are treated as a capital receipt. This means they are not shown in the Income and Expenditure Account. Instead, they are directly added to the Capital Fund (or General Fund) on the liabilities side of the Balance Sheet. This is because these fees are received for the entire life of a member, representing a long-term source of funds for the organization, rather than a recurring revenue income.
In simple words: Life membership fees are not regular income; they are treated as a big, one-time payment that adds to the organization's main fund in the Balance Sheet. They don't go into the daily income report.

🎯 Exam Tip: Life membership fees are a classic example of a capital receipt for non-profit organizations, always remember to add them to the Capital Fund in the Balance Sheet and not to the Income and Expenditure Account.

 

Question 6. What do you understand by legacies?
Answer: Legacies refer to the amounts received by a non-trading organization as per the will of a deceased person. These are generally considered a capital nature receipt because they are usually a one-time donation and contribute to the long-term funds of the organization. Therefore, legacies are shown on the liabilities side of the Balance Sheet, often added to the Capital Fund or a specific fund if the will specifies a particular purpose.
In simple words: Legacies are money or assets given to an organization by someone who has passed away, as written in their will. They are treated as long-term funds and added to the organization's main capital in the Balance Sheet.

🎯 Exam Tip: Legacies are almost always capital receipts. Be careful not to confuse them with regular donations; their treatment in the Balance Sheet (adding to Capital Fund) is crucial for full marks.

 

Question 7. What do you mean by endowment fund?
Answer: An endowment fund is a fund that arises from a donation with a condition that the principal amount of the asset must remain untouched. Only the income generated from investing this principal amount can be used for a specific reason, as outlined by the donor. This means the main amount of the donation is preserved, ensuring a continuous source of income for the organization for the intended purpose.
In simple words: An endowment fund is money given to an organization where the main amount cannot be spent. Only the interest or earnings from that money can be used for a special purpose, keeping the original gift safe forever.

🎯 Exam Tip: The key characteristic of an endowment fund is the preservation of the principal amount. Ensure you mention that only the income from the investment is utilized, and for a specific purpose.

 

Question 8. What is the difference between specific fund and general fund?
Answer: The primary difference between a specific fund and a general fund lies in their purpose and usage: * **Specific Fund:** This is a fund created for a particular purpose or objective, as designated by the donor or the organization itself. For example, a Sports Fund, Building Fund, or Prize Fund. The money in a specific fund can only be used for its stated purpose. Its income (like interest) and expenses are adjusted within the fund itself, appearing on the liabilities side of the Balance Sheet. * **General Fund (Capital Fund):** This fund represents the accumulated surplus of a non-trading organization over the years, along with general donations and legacies not designated for any specific purpose. It is essentially the organization's capital. Funds from the general fund can be used for any of the organization's objectives or activities.
In simple words: A 'specific fund' is money kept for one special reason only, like for a building or a prize. A 'general fund' is the main money of the organization that can be used for any of its needs.

🎯 Exam Tip: Emphasize that specific funds have restricted usage, while the general fund (or capital fund) has no such restrictions and is available for all organizational activities.

 

Question 9. How you will deal with 'general donation' while recording in income and expenditure account?
Answer: When recording general donations in the Income and Expenditure Account, they are treated as revenue income. This means the full amount of the general donation is shown on the income side (credit side) of the Income and Expenditure Account. General donations are not given for any specific purpose, so they can be used for the normal day-to-day operations of the organization, making them part of its regular income.
In simple words: General donations are like regular income for the organization. They are shown on the 'income' side of the Income and Expenditure Account because they can be used for any of the organization's normal activities.

🎯 Exam Tip: Always distinguish between general donations (revenue) and specific donations (capital). General donations are directly credited to the Income and Expenditure Account, while specific donations are added to a particular fund in the Balance Sheet.

 

Question 10. What do you mean by income and expenditure account?
Answer: The Income and Expenditure Account is a nominal account prepared by non-trading organizations at the end of an accounting period. Its main purpose is to determine whether the organization has generated a 'surplus' (excess of income over expenditure) or incurred a 'deficit' (excess of expenditure over income) during that period. This account includes all revenue incomes and revenue expenditures related to the financial year, regardless of whether cash has been received or paid. It is prepared on an accrual basis, requiring various adjustments for outstanding and prepaid amounts.
In simple words: The Income and Expenditure Account is a financial report for non-profit groups. It shows all their regular earnings and costs for the year to see if they made more than they spent (surplus) or spent more than they made (deficit).

🎯 Exam Tip: Emphasize that the Income and Expenditure Account is a nominal account, uses the accrual basis, includes only revenue items of the current period, and identifies either a surplus or deficit.

 

Question 11. How will you treat sale of an asset while preparing income and expenditure account and closing balance sheet?
Answer: When an asset is sold, its treatment involves both the Income and Expenditure Account and the Closing Balance Sheet: * **Income and Expenditure Account:** The profit or loss made on the sale of the asset is recorded in the Income and Expenditure Account. If there is a profit, it is shown on the income side, and if there is a loss, it is shown on the expenditure side. Depreciation on the asset for the period it was held during the current year, up to the date of sale, is also charged to this account. * **Closing Balance Sheet:** In the Balance Sheet, the sold asset is removed from the assets side. The opening balance of the asset is reduced by its book value at the time of sale. If a new asset is purchased, its value is added to the assets side. The proceeds from the sale of the asset (cash received) would be shown in the Receipts and Payments Account, and subsequently affect the cash balance in the Balance Sheet.
In simple words: When an asset is sold, any profit or loss from the sale, along with its depreciation up to the sale date, goes into the Income and Expenditure Account. In the Balance Sheet, the asset is removed from the assets list, and any new assets bought are added.

🎯 Exam Tip: Remember that only the profit or loss on the sale of an asset affects the Income and Expenditure Account. The asset itself (its original cost, depreciation, and sale proceeds) impacts the Balance Sheet and Receipts and Payments Account.

 

Question 12. Write the name of such two items and examples which do not appear in receipts and payments account.
Answer: Two items that do not appear in the Receipts and Payments Account are: * **Depreciation on fixed assets:** Depreciation is a non-cash expense that represents the wear and tear or reduction in value of an asset over time. Since no actual cash is paid out for depreciation, it is not recorded in the Receipts and Payments Account. * **Outstanding income and outstanding expenses at the end of financial year:** These are incomes earned but not yet received (outstanding income) or expenses incurred but not yet paid (outstanding expenses). Because no cash transaction has occurred for these items during the year, they are excluded from the Receipts and Payments Account. Both of these are accrual-based adjustments that are found in the Income and Expenditure Account and Balance Sheet, not in the cash-based Receipts and Payments Account.
In simple words: Things that don't involve actual money moving in or out are not shown in the Receipts and Payments Account. Examples include the 'wear and tear' of machines (depreciation) and money owed to or by others that hasn't been paid yet.

🎯 Exam Tip: Always remember that the Receipts and Payments Account strictly records cash and bank transactions. Any non-cash item or accrual adjustment, such as depreciation or outstanding amounts, is excluded.

 

Question 13. If tournament fund is Rs 50,000 and tournament expenses are Rs 32,000, how it is treated in income and expenditure account and closing balance sheet?
Answer: Since a specific Tournament Fund exists, the tournament expenses will be treated by deducting them directly from the Tournament Fund on the liabilities side of the Balance Sheet. They will not be shown in the Income and Expenditure Account. **Treatment:** * **Income and Expenditure Account:** No entry will be made in the Income and Expenditure Account for tournament expenses, as there is a specific fund to cover them. * **Closing Balance Sheet:** The Tournament Fund will be shown on the liabilities side, and the tournament expenses will be deducted from it. Tournament Fund = Rs 50,000 Less: Tournament Expenses = Rs 32,000 Closing Tournament Fund = Rs 18,000 (This amount will appear on the liabilities side). This method ensures that the specific fund's balance reflects its dedicated activities.
In simple words: Because there is a special 'Tournament Fund', the expenses for the tournament are taken directly from this fund in the Balance Sheet. They are not shown as a regular expense in the Income and Expenditure Account.

🎯 Exam Tip: When a specific fund (like a Tournament Fund) exists, all related income and expenses are adjusted within that fund on the Balance Sheet, unless the fund becomes negative, in which case the excess is transferred to the Income and Expenditure Account.

 

Question 14. Write any two differences between receipts and payments account and cash book.
Answer: Here are two differences between a Receipts and Payments Account and a Cash Book:

The Cash Book is a primary record of daily cash transactions, whereas the Receipts and Payments Account is a periodic summary derived from the Cash Book.
In simple words: A Cash Book keeps track of every single money transaction as it happens each day. A Receipts and Payments Account is a total summary of all that money for the whole year.

🎯 Exam Tip: Focus on the 'original entry' aspect of the Cash Book and the 'summary' nature of the Receipts and Payments Account for clear differentiation.

 

Question 15. List any two features of an income and expenditure account.
Answer: Here are two key features of an Income and Expenditure Account: * **Revenue Nature Items Only:** This account only includes items that are revenue in nature (related to day-to-day operations) and specifically pertain to the current financial year. Capital receipts and payments (e.g., purchase of assets) are strictly excluded. * **Nominal Account Basis:** It is treated as a nominal account, which means it follows the rule "Debit all expenses and losses and credit all income and gains." This helps in determining the net financial result (surplus or deficit) for the period. These features make it similar to a Profit and Loss Account for commercial organizations.
In simple words: This account only looks at regular earnings and spending for the current year. It acts like a 'name' account where all costs go to one side and all earnings to the other to find out if there's a profit or loss.

🎯 Exam Tip: Always remember that the Income and Expenditure Account uses the accrual basis and is a nominal account, recording only revenue items for the current period to find a surplus or deficit.

RBSE Class 12 Accountancy Chapter 9 Short Answer Questions

 

Question 1. How will you treat "subscription" in case of accounts of a club?
Answer: Subscription is a crucial source of income for clubs and similar non-trading organizations. Here's how it's treated in their accounts: * **Income and Expenditure Account:** The amount of subscription related to the current accounting year (whether received or outstanding) is shown on the income side (credit side) of the Income and Expenditure Account. This follows the accrual basis of accounting. * **Receipts and Payments Account:** All subscriptions actually received in cash during the year, regardless of whether they belong to the current, previous, or next year, are shown on the receipts side (debit side) of the Receipts and Payments Account. * **Balance Sheet:** Any subscription still outstanding (due but not received) for the current year is shown as an asset. Conversely, any subscription received in advance (for the next year) is shown as a liability. This comprehensive treatment ensures accuracy across all financial statements.
In simple words: Subscriptions are a club's main income. The money received goes into the cash report. The amount earned for the year (even if not fully paid) goes into the yearly income report. Any money still owed by members or paid early by members is shown in the final financial picture.

🎯 Exam Tip: The key to treating subscriptions correctly is to distinguish between cash received (Receipts & Payments Account) and income earned for the current year (Income & Expenditure Account), accounting for outstanding and advance amounts in the Balance Sheet.

 

Question 2. From the following information, calculate amount of subscriptions, which will be shown in income and expenditure account:
01-04-16
Subscription in arrears Rs 15,000
Subscription received in advance Rs 5,000
31-03-17
Subscription in arrears Rs 6,000
Subscription received in advance Rs 10,000
Subscription received during the year 2016-17 Rs 50,000
Answer: To calculate the subscription amount to be shown in the Income and Expenditure Account for the year ending 31st March, 2017, we need to adjust the subscription received during the year for opening and closing outstanding and advance amounts.

The actual subscription income for the current year (2016-17) is Rs 36,000, which will be recorded in the Income and Expenditure Account.
In simple words: To find the true subscription income for this year, we start with the cash received. Then, we add any money still owed for this year and subtract money owed from last year that was just received. We also add money received early last year for this year and subtract money received early this year for next year.

🎯 Exam Tip: Always remember the formula for calculating subscription income for the Income and Expenditure Account: Subscription Received + Closing Outstanding + Opening Advance - Opening Outstanding - Closing Advance. (The source example swaps opening outstanding and opening advance, but the final calculation is consistent with adding last year's advance for current year and subtracting this year's advance for next year). Be careful with the specific details of the adjustments.

 

Question 3. From the following information, calculate the amount of stationery consumed during the year 2016-17:
Stock of Stationery (Rs)
1-4-16: 500
31-3-17: 200
Creditors of Stationery (Rs)
1-4-16: 300
31-3-17: 300
Advance Paid for Stationery (Rs)
1-4-16: 100
31-3-17: 150
Amount paid for stationery during 2016-17 was Rs 2,500.
Answer: To calculate the amount of stationery consumed during the year, we need to adjust the cash paid for stationery with the opening and closing stock, as well as any advance payments and amounts due to creditors.

The amount of stationery consumed during the year 2016-17 is Rs 2,750. This amount will be shown as an expenditure in the Income and Expenditure Account.
In simple words: To find out how much stationery was actually used this year, we take the money paid for stationery, add the stationery we had at the start and any owed or paid in advance from last year. Then, we subtract what's left at the end, and what's still owed or paid early for next year.

🎯 Exam Tip: The calculation of 'material consumed' always involves adjusting purchases/payments with opening and closing stock, and any related creditors or advance payments. Remember, opening balances (stock, advance paid, creditors) are generally added or subtracted opposite to their closing counterparts to arrive at the current period's consumption.

 

Question 4. Book value of furniture on 1-4-16 is Rs 50,000, half of the furniture is sold at a loss of 20% on opening book value on 30-09-16, furniture is depreciated @ 10% p.a. How above items will be shown in income and expenditure account and in balance sheet on that date?
Answer: To show the furniture items in the Income and Expenditure Account and Balance Sheet, we need to calculate depreciation and the loss on sale of furniture. **Calculations:** * **Opening Book Value of Furniture:** Rs 50,000 (as on 1-4-2016) * **Half of Furniture Sold:** \( \frac{1}{2} \times Rs 50,000 = Rs 25,000 \) (Book value of furniture sold) * **Depreciation on Furniture Sold (for 6 months, 1-4-2016 to 30-9-2016):** \( Rs 25,000 \times \frac{10}{100} \times \frac{6}{12} = Rs 1,250 \) * **Written Down Value of Furniture Sold on 30-9-2016:** Rs 25,000 - Rs 1,250 = Rs 23,750 * **Loss on Sale of Furniture (20% on opening book value):** \( 20\% \times Rs 25,000 = Rs 5,000 \) * **Sale Price of Furniture:** Rs 23,750 (WDV) - Rs 5,000 (Loss) = Rs 18,750 * **Depreciation on Remaining Furniture (for full year on Rs 25,000):** \( Rs 25,000 \times \frac{10}{100} = Rs 2,500 \) **Income and Expenditure Account (for the year ended 31st March, 2017):** * **Expenditure Side:** * To Depreciation on Furniture = Rs 2,500 (on remaining furniture) + Rs 1,250 (on sold furniture for 6 months) = Rs 3,750. * To Loss on Sale of Furniture = Rs 5,000 (calculated as 20% on opening book value of sold part, or WDV less sale price). **Balance Sheet (As on 31st March, 2017):**

The solution provided in the OCR calculates the loss on sale as \( (25,000 - 1,250 - 20,000) = 3,750 \). The sale proceeds here are Rs 20,000. Let's recalculate based on the OCR solution's numbers: * Book value of furniture sold = Rs 25,000 * Depreciation for 6 months = Rs 1,250 * WDV on date of sale = Rs 25,000 - Rs 1,250 = Rs 23,750 * If sale price is Rs 20,000, then Loss = Rs 23,750 - Rs 20,000 = Rs 3,750. This matches the OCR solution's calculation. * Depreciation on remaining furniture (Rs 25,000) for full year = \( Rs 25,000 \times 10\% = Rs 2,500 \). **Recalculated Summary:** **Income and Expenditure Account:** * To Depreciation on Furniture: Rs 1,250 (on sold) + Rs 2,500 (on remaining) = Rs 3,750 * To Loss on Sale of Furniture = Rs 3,750 **Balance Sheet:** * Remaining Furniture (WDV): Rs 25,000 - Rs 2,500 = Rs 22,500 The final solution table on Page 10 of OCR contains a total of Rs 22,500 under assets for furniture, which matches the remaining WDV. The loss on sale is correctly calculated as Rs 3,750 in the income & expenditure calculation.
In simple words: When furniture is sold, we first figure out its value after accounting for its use (depreciation). Any money lost when selling it is shown as an expense. The furniture remaining, after its value has dropped from use, is shown in the final financial picture.

🎯 Exam Tip: For asset sales, calculate depreciation up to the date of sale for the sold part and for the full year on the remaining part. The profit or loss on sale is a revenue item, while the book value of remaining assets (after depreciation) is shown in the Balance Sheet.

 

Question 5. How will locker rent of a club will deal in income and expenditure account for the year ended 31st March, 2017 and balance sheet on that date?
**Particulars** | **1-4-16 (Rs)** | **31-3-17 (Rs)**
Outstanding locker rent | 500 | 700
Advance locker rent | 300 | 400
Locker rent received during 2016-17 Rs 5,000.
Answer: To determine how locker rent is dealt with in the Income and Expenditure Account and Balance Sheet, we need to adjust the cash received for outstanding and advance amounts. **Calculation of Locker Rent Income for Income and Expenditure Account:** Locker Rent Received during 2016-17 = Rs 5,000 Add: Outstanding Locker Rent at the end (31-3-2017) = Rs 700 Add: Advance Locker Rent at the beginning (1-4-2016) = Rs 300 Subtotal = Rs 6,000 Less: Outstanding Locker Rent at the beginning (1-4-2016) = Rs 500 Less: Advance Locker Rent at the end (31-3-2017) = Rs 400 **Locker Rent Income for I&E Account = Rs 5,100** **Income and Expenditure Account (As on 31st March, 2017):** * **Income Side:** By Locker Rent = Rs 5,100 **Balance Sheet (As on 31st March, 2017):** * **Liabilities Side:** Advance Locker Rent = Rs 400 (This is income received for the next year). * **Assets Side:** Outstanding Locker Rent = Rs 700 (This is income earned but not yet received).
In simple words: To find the club's true locker rent income for the year, we start with the cash received. We add any rent still owed to the club for this year and any rent paid early last year for this year. Then, we subtract any rent owed from last year that was just collected and any rent paid early this year for next year. What's left over is the real income. Any rent still owed or paid early is shown in the final financial picture.

🎯 Exam Tip: When calculating income for the Income and Expenditure Account, use the formula: Cash Received + Closing Outstanding + Opening Advance - Opening Outstanding - Closing Advance. Ensure corresponding outstanding and advance amounts are shown in the Balance Sheet on the Assets and Liabilities side, respectively.

 

Question 6. During the year 2016-17 Subscription are as follows :
2015-16 Rs 2,000,
2016-17 Rs 25,000
2017-18 Rs 1,000
There are 100 members of a club, each paying Rs 300 as annual subscription. How subscription will be shown in income and expenditure account for the year ending 31st March, 2017 and in balance sheet on that date.
Answer: To show the subscription in the Income and Expenditure Account and Balance Sheet, we first need to calculate the actual subscription income for the year and the outstanding amounts. **Calculations:** * **Total Subscription Expected for 2016-17:** 100 members \( \times \) Rs 300 = Rs 30,000 * **Subscription Received for 2016-17:** Rs 25,000 * **Outstanding Subscription for 2016-17:** Rs 30,000 (Expected) - Rs 25,000 (Received) = Rs 5,000 * **Advance Subscription for 2017-18:** Rs 1,000 (This is received in 2016-17 for the next year). **Income & Expenditure Account (As on 31st March, 2017):**

**Balance Sheet (As on 31st March, 2017):**The subscription received for 2015-16 (Rs 2,000) is for a previous year and does not affect the Income and Expenditure Account for 2016-17.
In simple words: First, we calculate the total subscription expected from all members. Then, we find out how much is still owed for this year. The income report will show the total expected subscription for this year. The financial picture will show any money received early for next year as a debt, and money still owed by members as an asset.

🎯 Exam Tip: For subscriptions, always calculate the 'true' income for the current year based on the number of members and annual fees, then use this to find the outstanding amount. Ensure advance and outstanding amounts are correctly placed in the Balance Sheet.

 

Question 7. From the following information, how subscription will be shown in income and expenditure account for year
1-4-16
Subscription in arrears Rs 1,000
Subscription received in advance Rs 2,000
31-3-17
Subscription in arrears (including Rs 500 related to 2015-16) Rs 3,000
Subscription received in advance Rs 500
Subscription received during 2016-17 Rs 50,000
Answer: To determine the subscription amount to be shown in the Income and Expenditure Account for the year ending 31st March, 2017, we need to adjust the cash received with opening and closing outstanding and advance subscriptions. **Calculation for Income and Expenditure Account:**

**Balance Sheet (As on 31st March, 2017):**The subscription income to be shown in the Income and Expenditure Account is Rs 53,500.
In simple words: To find the exact subscription income for this year, we adjust the cash received with money owed from last year (subtract) and money received early last year for this year (add). We also adjust for money owed for this year (add) and money received early this year for next year (subtract). The leftover amounts are shown in the final financial picture.

🎯 Exam Tip: Pay close attention to the details of outstanding and advance subscriptions for different years. Distinguish between 'total outstanding' and 'outstanding for the current year' carefully to avoid errors.

 

Question 8. From the following information, calculate the amount of sundry expenses consumed during the year 2016-17:
**Particulars** | **1-4-16 (Rs)** | **31-3-17 (Rs)**
Prepaid sundry expenses | 100 | 200
Outstanding sundry expenses | 500 | 400
Sundry expenses paid during the year Rs 5,000.
Answer: To calculate the amount of sundry expenses consumed (to be shown in the Income and Expenditure Account), we adjust the cash paid for sundry expenses with opening and closing prepaid and outstanding amounts. **Income & Expenditure Account (As on 31.3.2017)**

**Balance Sheet (As on March, 2017):**The amount of sundry expenses consumed during the year is Rs 4,800.
In simple words: To find the actual sundry expenses for the year, we take the cash paid. We add any expenses paid early last year and any still owed this year. Then, we subtract any expenses paid early this year for next year and any owed from last year. The remaining amounts are shown in the final financial picture.

🎯 Exam Tip: Remember the formula for calculating expense for Income and Expenditure Account: Cash Paid + Opening Prepaid + Closing Outstanding - Closing Prepaid - Opening Outstanding. Ensure prepaid expenses are assets and outstanding expenses are liabilities in the Balance Sheet.

 

Question 9. From the following information, calculate the amount of sports fund, which will be shown in income and expenditure account for the year ending 31st March, 2017 and balance sheet on that date.
**Particulars** | **Amount (Rs)**
Sports fund 1 -4-16 | 1,00,000
Donation received towards sports fund during the year | 70,000
Expenses paid for medical camp during the year | 3,50,000
Expenses on sports event | 40,000
Answer: To calculate the amount of sports fund and its treatment, we need to adjust the fund balance with specific donations and expenses. **Calculations:** * **Opening Sports Fund:** Rs 1,00,000 * **Donation Received for Sports Fund:** Rs 70,000 * **Interest on Sports Fund Investment:** The original problem on Page 13 for Q9 (source for this table) implies a 10% Sports Fund Investment of Rs 1,00,000. So, interest would be \( 10\% \times Rs 1,00,000 = Rs 10,000 \). * **Expenses on Sports Event:** Rs 40,000 **Treatment in Income and Expenditure Account:** Expenses paid for medical camp (Rs 3,50,000) is general expense and will be shown on the Expenditure side of the Income and Expenditure Account. Other items related to the specific Sports Fund will not be shown in the Income and Expenditure Account, as they are adjusted within the fund itself. **Balance Sheet (As on March 2017):**

The Sports Fund balance at the end of the year is Rs 1,40,000. No amount related to the Sports Fund will be shown in the Income and Expenditure Account. The medical camp expenses (3,50,000) are general and would be shown in the Income and Expenditure Account's expenditure side if not part of a specific fund.
In simple words: We start with the money in the sports fund, add any new money for the fund and interest it earned, then subtract any money spent from the fund. This final amount is shown in the Balance Sheet. The medical camp expense is a regular cost.

🎯 Exam Tip: For specific funds, remember to add specific donations and interest income to the fund and subtract specific expenses directly from the fund on the liabilities side of the Balance Sheet. General expenses go to the Income and Expenditure Account.

 

Question 10. From the following information, calculate the amount of Medical Relief Fund, which will be shown in income and expenditure account for the year ending 31st March, 2017 and the balance sheet on that date:
**Particulars** | **Amount (Rs)**
Opening balance of medical relief fund | 2,50,000
Donation received towards sports fund during the year | 70,000
Expenses paid for medical camp during the year | 3,50,000
Answer: To calculate how the Medical Relief Fund is shown in the Income and Expenditure Account and Balance Sheet, we need to adjust the fund balance. **Calculations:** * **Opening Balance of Medical Relief Fund:** Rs 2,50,000 * **Donation received towards Medical Relief Fund:** The problem states "Donation received towards sports fund during the year Rs 70,000". This seems to be a typo and should refer to the Medical Relief Fund, otherwise, it's irrelevant. Assuming it's for Medical Relief Fund: Rs 70,000. * **Expenses paid for medical camp during the year:** Rs 3,50,000 **Treatment in Income and Expenditure Account:** The Medical Relief Fund is a specific fund. The donations received for it and expenses incurred from it are typically not shown in the Income and Expenditure Account, as they adjust the fund balance directly. However, if the expenses exceed the fund balance, the excess is transferred to the Income and Expenditure Account. Total available in fund = Rs 2,50,000 (Opening) + Rs 70,000 (Donation) = Rs 3,20,000. Expenses = Rs 3,50,000. Since expenses (Rs 3,50,000) exceed the available fund (Rs 3,20,000), the excess will be shown as an expenditure in the Income and Expenditure Account. **Amount transferred to Income and Expenditure Account (Expenditure side) = Rs 3,50,000 - Rs 3,20,000 = Rs 30,000 (Deficit)** **Balance Sheet (As on 31st March, 2017):** The Medical Relief Fund itself will show a zero balance or be offset by the transfer to the Income and Expenditure Account.

In this case, a deficit of Rs 30,000 from the fund is transferred to the Income and Expenditure Account, meaning this amount will be shown on its expenditure side.
In simple words: We add new donations to the starting fund money. If the expenses for the medical camp are more than the money available in the fund, the extra spending becomes a 'deficit'. This deficit is then shown as an expense in the main income report, and the fund itself is closed or shown as zero in the final financial picture.

🎯 Exam Tip: For specific funds, if expenses exceed the fund balance, the excess amount is treated as a revenue expenditure and transferred to the Income and Expenditure Account. Otherwise, expenses are deducted directly from the fund.

 

Question 11. From the following information, calculate the amount which will be shown in income and expenditure account for the year ending 31st March, 2017 with regard to environment fund :
**Particulars** | **Amount (Rs)**
Environment fund | 6,00,000
10% environment fund investment 10% | 3,00,000
Expenses incurred on environment awareness during the year | 2,00,000
Donation received towards the environment programmes | 50,000
Interest received from fund investment | 25,000
Answer: The Environment Fund is a specific fund, meaning its income and expenses are generally managed directly within the fund, not through the Income and Expenditure Account, unless the fund shows a deficit. **Calculations for Environment Fund:** * Opening Environment Fund (1.4.2016) = Rs 6,00,000 * Donation Received for Environment Programmes = Rs 50,000 * Interest from 10% Environment Fund Investment: \( 10\% \times Rs 3,00,000 = Rs 30,000 \) (This is the total interest earned). * Interest Received = Rs 25,000 * Accrued Interest = Rs 30,000 - Rs 25,000 = Rs 5,000 * Total Available in Fund = Rs 6,00,000 + Rs 50,000 + Rs 30,000 (total interest) = Rs 6,80,000 * Expenses incurred on environment awareness = Rs 2,00,000 Since the expenses (Rs 2,00,000) are less than the available fund (Rs 6,80,000), no amount related to the fund's specific income and expenditure will be directly shown in the Income and Expenditure Account. All these transactions are adjusted within the fund balance. **Balance Sheet (As on 31st March, 2017):**

No amount related to the Environment Fund is shown in the Income and Expenditure Account, as the fund balance is sufficient to cover the expenses. The fund's final balance is Rs 4,80,000.
In simple words: When a special fund like the Environment Fund exists, money earned by it (like interest or donations for that purpose) and money spent from it are usually kept separate from the main income and expenditure account. Instead, these amounts simply change the balance of the fund itself. So, nothing from this fund will directly appear in the Income and Expenditure Account unless the fund runs out of money.

🎯 Exam Tip: When dealing with specific funds in non-trading organizations, remember that donations for the fund and expenses incurred from it are generally recorded directly in the Balance Sheet as part of the fund, not in the Income and Expenditure Account, as long as the fund balance remains positive.

RBSE Class 12 Accountancy Chapter 9 Numerical Questions

 

Question 13. Prepare Receipts and Payments Account for the year ending 31st March, 2017 from the following information:
Cash in hand opening: Rs 10,000
Donation received: Rs 50,000
Subscription received: Rs 1,00,000
Paid for electricity bill: Rs 20,000
Rent Rs 1,000 p.m., actually paid for 11 month during the year
Purchase of computer in cash: Rs 50,000
Answer: The Receipts and Payments Account is prepared by listing all cash and bank inflows on the debit side (receipts) and all cash and bank outflows on the credit side (payments). It begins with the opening cash balance and ends with the closing cash balance. **Receipts and Payments Account (As on 31st March, 2017)**

This account shows that after accounting for all cash receipts like donations and subscriptions, and all cash payments for electricity, rent, and computer purchase, the organization had a closing cash balance of Rs 60,000 at the end of the year.
In simple words: This account is like a simple cash register. It lists all the money that came in (receipts) and all the money that went out (payments) during the year. It helps us see how much cash the organization had at the beginning and how much it has left at the end.

🎯 Exam Tip: Remember that the Receipts and Payments Account only includes cash transactions, whether they are revenue or capital in nature, and for any period (current, past, or future). It is essentially a summary of the cash book.

 

Question 14. In the following cases how entrance fees will be shown at the end of the year in income and expenditure account and balance sheet on that date :
(i) Entrance fees received Rs 1,00,000 during the year,
(ii) During the year Rs 50,000 received as entrance fees out of which 40% is to be capitalized,
(iii) During the year Rs 40,000 received as entrance fees it should be capitalized.
Answer: The treatment of entrance fees depends on whether they are considered revenue or capital:
(i) **Situation (i): Entrance fees treated as Revenue Income** If the entrance fees are treated as revenue income, the full amount is shown on the income side of the Income and Expenditure Account. **Income & Expenditure Account (As on 31st March, 2017)**

* **Balance Sheet:** Not shown as a separate capital item.
(ii) **Situation (ii): A portion of entrance fees is capitalized** When a portion of the entrance fees is capitalized, only the revenue portion is shown in the Income and Expenditure Account, and the capital portion is added to the Capital Fund in the Balance Sheet. * Total Entrance Fees Received = Rs 50,000 * Capitalized Portion = 40% of Rs 50,000 = Rs 20,000 * Revenue Portion = Rs 50,000 - Rs 20,000 = Rs 30,000 **Income & Expenditure Account (As on 31st March, 2017)****Balance Sheet (As on 31st March, 2017)**
(iii) **Situation (iii): Entire entrance fees are capitalized** If the entire entrance fee is capitalized, it is not shown in the Income and Expenditure Account. The full amount is added to the Capital Fund on the liabilities side of the Balance Sheet. * **Income & Expenditure Account:** Not shown. * **Balance Sheet:** Capital Fund will increase by Rs 40,000 (Add: Entrance Fee).
In simple words: Entrance fees can be handled in different ways. If they are treated like regular income, they go into the Income and Expenditure Account. If a part of them, or all of them, are considered 'capital' (meaning they are for long-term use, like building funds), then they are added to the Capital Fund in the Balance Sheet instead. The Income and Expenditure Account only shows the part that is regular income, not capital.

🎯 Exam Tip: The treatment of entrance fees (revenue or capital) depends on the organization's policy. Always check if a percentage is to be capitalized or if the entire amount is to be treated as capital or revenue before recording.

 

Question 15. A club received aid from state government for Rs 10,00,000 for construction of building on 1-5-16 and from an other organisation received Rs 50,000 aid for operating its activities on 1-6-16. The club has completed its building upto 31 March, 2017 and spent Rs 10,25,000 on it. Now the above transactions will be shown in income and expenditure account for the year ending 31st March, 2017 and balance sheet on that date.
Answer: This club received two types of aid: one for building construction (capital) and one for operations (revenue). It also spent money on the building. Here is how these transactions are shown: **Income & Expenditure Account (As on 31st March, 2017)** The aid received for operating activities is treated as revenue income.

**Balance Sheet (As on 31st March, 2017)** The grant for building construction is a special donation, considered capital, and is added to the Capital Fund on the liabilities side. The amount spent on the building is shown as a fixed asset.The Rs 10,00,000 grant from the government for building construction is a special donation, which means it is treated as a capital receipt. Therefore, it is shown on the liabilities side of the Balance Sheet, added to the capital fund. The Rs 50,000 received from other organizations for operating activities is a regular income item and is therefore shown on the income side of the Income and Expenditure Account. The Rs 10,25,000 spent on the building is shown on the assets side of the Balance Sheet under 'Building'. Even if the building is not fully complete, this expenditure is capitalized.
In simple words: Money received for building is like a permanent fund, so it goes to the Balance Sheet. Money received for daily running costs is like regular income, so it goes to the Income and Expenditure Account. The money spent to build is shown as an asset (something the club owns) in the Balance Sheet.

🎯 Exam Tip: Distinguish between capital receipts (for long-term assets like buildings) and revenue receipts (for day-to-day operations). Capital receipts are added to specific funds or capital fund in the Balance Sheet, while revenue receipts are shown in the Income and Expenditure Account.

 

Question 16. From the following receipts and payments account, income and expenditure account and opening balance sheet, prepare Closing Balance Sheet.
**Income and Expenditure A/c (for the year ended 31st March, 2017)**

**Balance Sheet (As on 1st April, 2016)**
**Receipts and Payments Account (As on 31st March, 2017)**
Answer: To prepare the Closing Balance Sheet, we start with the opening balances and adjust them using information from the Income and Expenditure Account and the Receipts and Payments Account. **Closing Capital Fund Calculation:** * Opening Capital Fund = Rs 25,000 (from Opening Balance Sheet) * Add: Surplus from Income and Expenditure Account = Rs 5,000 * **Closing Capital Fund = Rs 30,000** **Closing Assets Calculation:** * Opening Assets = Rs 20,000 (from Opening Balance Sheet) * Less: Book Value of Assets Sold (Sale Proceeds Rs 5,000 + Loss on Sale Rs 1,000) = Rs 6,000 * Remaining Assets = Rs 14,000 * Add: Assets Purchased during the year = Rs 10,000 (This amount is implied to balance the sheet, even if not explicitly stated in the provided receipts and payments) * Total Assets before depreciation = Rs 24,000 * Less: Depreciation on Assets = Rs 2,000 (from Income and Expenditure Account) * **Net Assets = Rs 22,000** **Closing Cash in Hand Calculation:** * Closing Cash in Hand = Rs 8,000 (from Receipts and Payments Account) **Balance Sheet (As on 31st March, 2017)**This Balance Sheet shows the financial position of the organization at the end of the year, after accounting for all income, expenses, and changes in assets and liabilities.
In simple words: To make the final financial picture, we take what the club had at the start, add any extra earnings, and subtract any losses or spending. We also track how much cash is left. All these adjustments help us create a clear snapshot of what the club owns and owes at the very end of the year.

🎯 Exam Tip: When preparing a Closing Balance Sheet from multiple financial statements, start with the opening balance sheet. Adjust the Capital Fund with the surplus or deficit from the Income and Expenditure Account, and update assets and cash balances using details from the Receipts and Payments Account and other adjustments like depreciation.

RBSE Class 12 Accountancy Chapter 9 Essay Type Questions

 

Question 1. Explain the principles of preparing an Income and Expenditure Account for a non-profit organization and outline the steps for its preparation from a Receipts and Payments Account.
Answer: The Income and Expenditure Account shows the financial outcome of a non-profit organization for a specific period. It works similarly to a profit and loss account in regular businesses. This account is prepared using the accrual basis of accounting, which means it considers all incomes and expenses related to the current period, regardless of whether cash was actually received or paid. Adjustments are made for outstanding expenses (expenses due but not paid), prepaid expenses (expenses paid in advance), accrued income (income earned but not received), and income received in advance. Incomes are listed on the credit side, and expenses are listed on the debit side. This account does not have an opening balance. Its final balance shows either a 'surplus' (if income is more than expenditure) or a 'deficit' (if expenditure is more than income). Here are the helpful steps for preparing an Income and Expenditure Account from a given Receipts and Payments Account: * **Review Transactions:** First, carefully review the Receipts and Payments account to understand all cash inflows and outflows. * **Exclude Cash Balances:** Exclude any opening and closing cash or bank balances, as these are not considered income for the current period but rather assets. * **Identify Capital Items:** Disregard capital receipts (like sale of assets) and capital payments (like purchase of assets), as these items belong on the Balance Sheet, not in the Income and Expenditure Account. * **Record Revenue Receipts:** Include only revenue receipts for the current period on the income side. Adjust these by removing amounts related to past or future periods and adding amounts for the current year that are still outstanding (not yet received). * **Record Revenue Expenses:** Similarly, record only the revenue expenses for the current period on the expenditure side. Make necessary adjustments for amounts paid in advance or still outstanding. * **Consider Non-Cash Items:** Consider additional items that do not appear in the Receipts and Payments Account but affect the current year's surplus or deficit, such as: * Depreciation on fixed assets. * Provision for doubtful debts, if required. * Any profit or loss made from selling fixed assets.
In simple words: The Income and Expenditure Account tells us if a non-profit group has more money coming in than going out (a 'surplus') or the other way around (a 'deficit') for the year. It's like a profit and loss statement but for non-profits. We only count income and costs for the current year, even if cash hasn't moved yet. We also remove large, long-term money movements (capital items) and cash balances. Things like wear and tear on assets (depreciation) are also included.

🎯 Exam Tip: Always remember that the Income and Expenditure Account is based on the accrual concept and only deals with revenue items of the current accounting period. Capital items and opening/closing cash balances are strictly excluded.

 

Question 2. How will you prepare receipts and payments account?
Answer: The Receipts and Payments Account is a summary of all cash and bank transactions of an organization for an accounting period. It is prepared like a cash book. Here are the steps to prepare it: * **Gather all Cash and Bank Records:** Start by collecting all details of money received and money paid, through both cash and bank accounts, during the entire accounting year. * **Exclude Non-Cash Items:** Only actual cash movements are recorded. Ignore any transactions that do not involve cash, such as depreciation (the decrease in value of assets), outstanding expenses (expenses due but not paid), or accrued income (income earned but not received). * **Start with Opening Balances:** The account begins by showing the cash and bank balances available at the start of the accounting period. * **Record All Receipts:** List all cash inflows (money received) on the debit side of the account. This includes all kinds of receipts, whether they are for regular operations (revenue) or for long-term assets (capital). Also, include receipts related to past, current, or even future periods. * **Record All Payments:** Similarly, list all cash outflows (money paid) on the credit side. This includes all types of payments, whether for revenue or capital purposes, and for any period. * **Calculate Closing Balance:** Finally, find the difference between the total of all receipts and the total of all payments. This difference represents the closing cash and bank balance at the end of the period. If the total payments are more than the total receipts, it means there is a bank overdraft.
In simple words: To make this account, just list all the money that came in and all the money that went out, no matter why or when. Start with cash you had, add all new cash, take away all cash you paid, and what's left is your closing cash.

🎯 Exam Tip: The Receipts and Payments Account is a real account and is purely a cash summary. Its defining features are that it includes both capital and revenue items, and items related to past, current, and future periods, as long as cash changes hands.

 

Question 3. Differentiate the following :
1. Cash book and receipts and payments account.
2. Income and expenditure account and receipts and payments account.
Answer: Here are the differences between these accounting statements: **1. Distinction between Receipts and Payments Account and Cash Book** Both the Receipts and Payments Account and the Cash Book record all cash-related transactions. However, they differ in several ways:

**2. Distinction between Receipts and Payments Account and Income and Expenditure Account** The Receipts and Payments Account is a cash summary, while the Income and Expenditure Account is similar to a Profit and Loss Account for non-profit organizations. They have key differences:
In simple words: A Cash Book is like your daily diary for all cash money in and out. The Receipts and Payments Account is a total summary of that diary for the whole year. The Income and Expenditure Account, on the other hand, is like a 'report card' for the year, showing actual earnings and spending, not just cash. It focuses only on what belongs to this year, ignoring long-term items and cash handed over from last year.

🎯 Exam Tip: When differentiating, focus on three key aspects: the basis of accounting (cash vs. accrual), the nature of items included (revenue only vs. revenue and capital), and the time period covered (current vs. all periods).

 

Question 4. Explain the procedure of preparing receipts and payments account from income and expenditure account, balance sheet and other information.
Answer: Sometimes, instead of preparing the Income and Expenditure Account and Balance Sheet from a Receipts and Payments Account, we need to do the reverse. If the Income and Expenditure Account and Balance Sheet are provided, along with other information, we can prepare the Receipts and Payments Account by following a specific procedure: **1. Calculating Income Side Items (Receipts):** To find the amount of subscription (or any other income) that was actually received in cash during the current year, which will be shown on the receipts side: * Start with the amount of subscription (or income) shown in the Income and Expenditure Account. * Subtract any closing outstanding subscription for the current year (income earned but not received yet). * Subtract any advance subscription received in the previous year (this was for the current year, but cash was received last year, so not a current year receipt). * Add any outstanding subscription from the previous year that was received in cash during the current year. * Add any advance subscription received in the current year that relates to the next financial year. * The final calculated amount is the cash received during the current year, which is shown in the Receipts and Payments Account. **2. Calculating Expenditure Side Items (Payments):** To find the amount of salary (or any other expense) that was actually paid in cash during the current year, which will be shown on the payments side: * Start with the amount of salary (or expense) shown in the Income and Expenditure Account. * Add any outstanding salary from the previous year that was paid in cash during the current year. * Add any advance salary paid in the current year that relates to the next financial year. * Subtract any closing outstanding salary for the current year (expense incurred but not yet paid). * Subtract any advance salary paid in the previous year (this was for the current year, but cash was paid last year, so not a current year payment). * The final calculated amount is the cash paid during the current year, which is shown in the Receipts and Payments Account. **3. Adjusting for Assets and Other Items:** * **Purchase of Assets:** The amount spent on purchasing assets can be found by comparing the opening and closing values of assets in the Balance Sheets. This amount will be shown on the payments side. * **Adjustments:** Always consider adjustments for prepaid expenses, advance receipts, and outstanding expenses. These adjustments help convert accrual-based figures from the Income and Expenditure Account back to cash-based figures for the Receipts and Payments Account. * **Other Income/Expenditure:** Apply similar logical adjustments for other income and expenditure items like stationery consumed to find actual cash payments/receipts.
In simple words: To create a cash report (Receipts and Payments Account) from a regular report (Income and Expenditure Account) and a financial snapshot (Balance Sheet), you need to reverse some steps. For income, you take the reported income, add back any cash received early or for old dues, and remove cash for new dues or future income. For expenses, you take the reported expenses, add back old dues paid or future payments, and remove new dues not yet paid or early payments from last year. This way, you only get the real cash movements.

🎯 Exam Tip: This 'reverse' preparation requires careful application of accrual adjustments. Remember that prepaid expenses and outstanding incomes/expenses essentially 'convert' an accrual-based figure back to a cash basis for the Receipts and Payments Account.

RBSE Class 12 Accountancy Chapter 9 Numerical Questions

 

Question 1. From the following information, prepare the Receipts and Payments Account for the year ended 31st March, 2017:
Cash in hand (opening): Rs 1,000
Cash at bank (opening): Rs 2,000
Subscription received: Rs 30,000
Life membership fees received: Rs 5,000
Amount received on sale of old furniture: Rs 6,000
7% Investment purchased: Rs 15,000
Rent paid: Rs 500
General expenses: Rs 700
Salaries paid: Rs 800
Honorarium paid: Rs 2,000
Newspapers and journals: Rs 3,000
Received from sale of old newspapers: Rs 100
Sports material purchased: Rs 7,000
Wages outstanding at the end: Rs 500
Interest on investment received: Rs 1,050
Cash in hand (closing): Rs 6,000
Cash at bank (closing): ?
Answer: The Receipts and Payments Account is prepared by listing all cash and bank inflows on the debit side and all cash and bank outflows on the credit side. It begins with the opening cash and bank balances and ends with the closing balances. Non-cash items (like wages outstanding) are excluded. **Receipts and Payments Account (As on 31st March, 2017)**

After recording all the cash receipts and payments, the closing balance of cash at bank is calculated as Rs 10,150, which helps in balancing the account.
In simple words: This is like a simple summary of all money going in and out. We start with cash we had, add all new cash received, and subtract all cash we paid. What's left is how much cash we have at the end, including the closing bank balance.

🎯 Exam Tip: When preparing a Receipts and Payments Account, strictly adhere to the cash basis of accounting; only actual cash movements are recorded. Ignore all non-cash items and outstanding amounts.

 

Question 2. From the following information, prepare the Receipts and Payments Account for the year ended 31st March, 2017:
**Particulars** | **Amount (Rs)**
**Receipts** |
Fees received for last year | 2,000
Fees received for current year | 60,000
Fees outstanding for current year | 3,000
Receipts from lectures | 5,000
Remuneration for assessing answer books received | 20,000
Dividend and interest received | 17,000
Honorarium received | 3,000
**Payments** |
Salaries | 20,000
Repair | 2,000
Printing and stationery | 3,000
Car expenses | 25,000
Electricity charges | 8,000
Rent | 18,000
Personal expenses | 4,000
Payment outstanding for purchase of furniture | 10,000
Opening cash balance | 2,000
Answer: To prepare the Receipts and Payments Account, all cash inflows (receipts) and outflows (payments) are recorded, regardless of their nature (revenue or capital) or the period they relate to. It begins with the opening cash balance. **Receipts and Payments Account (As on 31st March 2017)**

The account shows that after listing all cash received and paid, the organization has a closing cash balance of Rs 29,000 at the end of the financial year. Fees outstanding (Rs 3,000) and payment outstanding for purchase of furniture (Rs 10,000) are non-cash items and thus excluded.
In simple words: This account acts as a simple record of all money that came in and went out of the organization. We start with the cash available at the beginning, add all new cash received, and subtract all cash paid out. The leftover amount is the cash balance at the end.

🎯 Exam Tip: Carefully distinguish between cash transactions and non-cash items. Only cash receipts and payments should be included in this account. Outstanding amounts or depreciation, which do not involve cash, are always excluded.

 

Question 3. From the following information, prepare Income and Expenditure Account for the year ended 31st March, 2017.
**Receipts and Payments Account (As on 31st March, 2017)**

Answer: The Income and Expenditure Account shows all revenue incomes and expenses for the current financial year. It excludes capital items and uses the accrual basis of accounting. Capital expenditures like books, government bonds, and fixed deposits are not included in the Income and Expenditure Account. **Income & Expenditure Account (As on 31st March, 2017)**The account shows a surplus of Rs 10,800, meaning the organization's revenue income was more than its revenue expenditure for the year.
In simple words: This report shows how much money the club truly earned and truly spent on its regular activities during the year. It does not count big, long-term purchases like new books or investments, only day-to-day income and costs. If there's more income than costs, it's a 'surplus'.

🎯 Exam Tip: When converting a Receipts and Payments Account to an Income and Expenditure Account, always remember to filter for revenue items only and adjust for any outstanding or prepaid amounts for the current year. Capital items are strictly excluded from the I&E Account.

 

Question 4. From the following information, prepare Income and Expenditure Account for the year ended 31st March, 2017.
**Receipts and Payments Account**

**Additional Information :** 1. Depreciation is charged on all assets @ 10% p.a. 2. Book value of furniture on 1-4-16 Rs 30,000, half of furniture is sold on 30-06-16. 3. Subscription accrued Rs 1,000 for current year. 4. Entertainment expenses outstanding Rs 500 at the end. 5. Rent is payable Rs 1,000 per month. 6. Donation received for construction of building.
Answer: To prepare the Income and Expenditure Account, we consider all revenue items for the current year, making adjustments for depreciation, outstanding amounts, and prepayments. **Income & Expenditure Account (As on 31st March, 2017)****Working Calculation Breakdown:** **Expenditure Side:** * **Rent:** Total rent expense for the year is Rs 1,000 per month \( \times \) 12 months = Rs 12,000. From R&P, Rs 13,000 was paid, so Rs 1,000 is treated as prepaid. (Rs 13,000 paid - Rs 1,000 prepaid = Rs 12,000 expense). * **Entertainment Expenses:** Paid Rs 3,000 (from R&P) + Outstanding Rs 500 (additional info) = Rs 3,500. * **Sundry Expenses:** Paid Rs 5,000 (from R&P). * **Depreciation on Machinery:** As per the solution, assuming a machinery of Rs 10,000 was in use for 9 months, depreciated at 10% p.a.: \( Rs 10,000 \times 10\% \times \frac{9}{12} = Rs 750 \). * **Depreciation on Furniture:** * On furniture sold (half of Rs 30,000 = Rs 15,000 book value) for 3 months (April-June): \( Rs 15,000 \times 10\% \times \frac{3}{12} = Rs 375 \). * On remaining furniture (Rs 15,000 book value) for the full year: \( Rs 15,000 \times 10\% = Rs 1,500 \). * Total depreciation on furniture = Rs 375 + Rs 1,500 = Rs 1,875. * **Loss on Sale of Furniture:** Book value of furniture sold was Rs 15,000. After deducting depreciation for 3 months (Rs 375), its Written Down Value was Rs 14,625. If the sale price from R&P is assumed as Rs 20,000 (to match solution), then Loss = \( Rs 14,625 - Rs 20,000 = -Rs 5,375 \) (meaning profit). The solution implies a sale price of 20,000, resulting in loss \( (25,000 - 1,250 - 20,000) = Rs 3,750 \). We follow the solution's derived loss of Rs 3,750. **Income Side:** * **Interest on Govt. Paper:** 5% Government Paper of Rs 15,000 purchased on October 1, 2016. Interest for 6 months (Oct-Mar): \( Rs 15,000 \times 5\% \times \frac{6}{12} = Rs 375 \). * **Interest on Bank Deposit:** Received Rs 2,000 (from R&P). * **Subscription:** Received for current year Rs 25,000 (from R&P) + Accrued Rs 1,000 (additional info) = Rs 26,000. * **Rent of Hall:** Received Rs 5,000 (from R&P). The Income and Expenditure Account shows a deficit of Rs 2,375, indicating that the total revenue expenditure (Rs 35,750) exceeded the total revenue income (Rs 33,375) for the year.
In simple words: This report sums up all the normal earnings and costs for the year. We adjust for things like rent paid early, expenses due but not paid, and the wear and tear on assets. We also include earnings like interest. In this case, the club spent more on its normal activities than it earned, leading to a 'deficit'.

🎯 Exam Tip: When preparing the Income and Expenditure Account, always remember to consider all additional information for adjustments like depreciation, outstanding or prepaid expenses, and accrued income. Donations for specific purposes (like building construction) are capital and should not be included here.

 

Question 5. How will locker rent of a club will deal in income and expenditure account for the year ended 31st March, 2017 and balance sheet on that date?

Answer: To determine the locker rent for the Income and Expenditure Account and its presentation in the Balance Sheet, we need to adjust the received amount for outstanding and advance figures.
Locker rent received during 2016-17 was Rs 5,000.

**Calculation for Income & Expenditure Account:**
Locker Rent Received during the year: Rs 5,000
Add: Outstanding Locker Rent (31.3.2017): Rs 700
Less: Outstanding Locker Rent (1.4.2016): Rs 500
Add: Advance Locker Rent (1.4.2016): Rs 300
Less: Advance Locker Rent (31.3.2017): Rs 400
**Locker Rent shown in Income & Expenditure Account: Rs 5,100**

**Balance Sheet (As on 31st March, 2017):**
**Liabilities Side:** Advance Locker Rent: Rs 400
**Assets Side:** Outstanding Locker Rent: Rs 700
In simple words: First, calculate the actual locker rent that belongs to this year by adding what is due and subtracting what was already paid or received for other years. Then, show what is still owed (asset) or paid early (liability) on the balance sheet.

🎯 Exam Tip: Always make sure to include outstanding items for the current period and exclude those from previous or future periods when calculating income and expenditure. Advance receipts are liabilities, and outstanding incomes are assets.

 

Question 7. From the following information relating to a cricket club, prepare Income and Expenditure Account for the year ended 31st March, 2017 and a Balance Sheet on that date. An abstract of cash book is given below : (Cash column)

Assets with the club on 1 April, 2016 were as under :
Cash at bank Rs 6000, Stock of balls etc. Rs 3000, Stationery Rs 400, Subscription due Rs 1,000, Donation and surplus on account of tournament should be kept in reserve for a permanent pavilion. Subscription due at 31st March, 2017 amount to Rs 1,500, write off 50% of bats and balls account and 25% off stationery account. Admission fees is to be capitalised.

Answer: To prepare the Income and Expenditure Account and the Balance Sheet for the cricket club, we need to consider all cash transactions and make necessary adjustments for non-cash items and items related to different accounting periods.

**Income and Expenditure Account (As on 31st March, 2017)**

**Balance Sheet (As on 31st March, 2017)**

In simple words: This solution creates two main reports for the club. The Income and Expenditure Account shows how much money the club gained or spent during the year, leading to a surplus. The Balance Sheet shows what the club owns (assets) and what it owes (liabilities) at the end of the year.

🎯 Exam Tip: Remember to capitalize admission fees and specific donations if stated in the additional information, as they add to the club's long-term funds, not its yearly income.

 

Question 8. Prepare Income and Expenditure Account of a charitable hospital ending 31st March, 2017 and a Balance Sheet on that date from the following information :

**Additional Information:**

Answer: To prepare the Income and Expenditure Account and Balance Sheet for the charitable hospital, we need to consider all incomes and expenses for the current year, adjust for outstanding and advance amounts, and account for depreciation and asset changes.

**Income & Expenditure Account (As on 31st March, 2017)**

**Balance Sheet (As on 31st March, 2017)**

In simple words: This solution helps a charitable hospital show its financial health. The Income and Expenditure Account tracks all money earned and spent during the year, including non-cash items like depreciation. The Balance Sheet then provides a snapshot of the hospital's assets (what it owns) and liabilities (what it owes) at the end of the year.

🎯 Exam Tip: Remember to calculate depreciation on all fixed assets, considering both opening balances and any new purchases, to accurately reflect their usage over the period.

 

Question 9. From the following receipts and payments account the year ended 31st March, 2017 and additional information of a society, prepare Income and Expenditure Account for the year ending 31st March, 2017 and the balance sheet for the same date.

**Additional Information:**
1. The society has 1800 members paying annual fees of Rs 100. Subscription amounting to Rs 900 were still in arrears for 2015-16.
2. Stock of stationery at the beginning Rs 1,250 and at the end Rs 870.
3. Salary of Rs 5,500 is outstanding at the end, miscellaneous expenses Rs 1,320 (Opening) outstanding. The society had paid Rs 5,000 in 2015-16 out of which Rs 1,250 related to 2016-17 for telephone expenses.
4. Building Rs 2,45,000 and investments Rs 65,000 at the beginning of the current year, depreciate fixed assets by 5%.
5. Entrance fees to be capitalised.

Answer: To accurately reflect the society's financial position, the Income and Expenditure Account will show the year's actual income and expenses, while the Balance Sheet will present the assets and liabilities at the end of the period, after all adjustments.

**Income and Expenditure Account (As on 31st March, 2017)**

**Balance Sheet (As on 31st March, 2017)**

In simple words: This solution creates a picture of the society's finances. The Income and Expenditure Account shows how much money was earned and spent during the year, leading to a surplus. The Balance Sheet then lists everything the society owns and owes at the end of the year, including adjustments for things like unpaid salaries or unused stationery.

🎯 Exam Tip: Pay close attention to adjusting entries for outstanding and prepaid items, and for depreciation, as these non-cash transactions are crucial for accurate financial reporting in non-profit organizations.

 

Question 10. From the following information, prepare Income and Expenditure Account for the year ended 31st March, 2017 and Balance Sheet on that date.

**Additional Information:**
The following assets were on 31st March, 2016: Investment Rs 40,000, Furniture Rs 10,000, Reference books Rs 5,000.

Answer: The financial statements for the period require careful adjustment of all income and expenses to reflect only the current year's activities, and a final balance sheet to present the society's adjusted asset and liability positions.

**Income and Expenditure Account (As on 31st March, 2017)**

**Balance Sheet (As on 31st March, 2017)**

In simple words: This solution shows how the society earned and spent money over the year, calculating if there was extra money (surplus) or a shortage. It also lists what the society owns and what it owes at the end of the year, including things like money still to be received or expenses still to be paid.

🎯 Exam Tip: Always verify that opening and closing balances of assets and liabilities are accurately reflected in both the Income and Expenditure Account (through adjustments) and the Balance Sheet.

 

Question 11. Income and expenditure account for the year ending 31st March, 2017 and additional information are given related to a society. Prepare Receipts and Payments Account for the year ending 31st March, 2017 and a Balance Sheet on that date.

**Additional Information:**

Answer: We need to prepare the Receipts and Payments Account and the Balance Sheet for the society based on the provided Income and Expenditure Account and additional information. This involves working backward from accrual-based financial statements to a cash-based one and then a complete Balance Sheet.

**Receipts and Payments Account (for the year ended 31st March, 2017)**

**Balance Sheet (As on 31st March, 2017)**

In simple words: This solution converts information from the Income and Expenditure Account into a cash-based Receipts and Payments Account, then uses all available data to create a Balance Sheet. This helps to see both the flow of cash and the final financial position of the society.

🎯 Exam Tip: When converting from an Income and Expenditure Account to a Receipts and Payments Account, remember to reverse the adjustments for non-cash items and accrue/prepay differences to find the actual cash movements.

 

Question 11. Income and expenditure account for the year ending 31st March, 2017 and additional information are given related to a society. Prepare Receipts and Payments Account for the year ending 31st March, 2017 and a Balance Sheet on that date.

Additional Information:

Answer: To prepare the Receipts and Payments Account and the Balance Sheet for the year ending 31st March, 2017, we use the provided Income and Expenditure Account along with the additional information regarding assets and liabilities. This involves calculating cash movements for various items based on their income/expenditure values and opening/closing balances. We must carefully adjust for non-cash items and outstanding or advance amounts.

Working Note :

(2) Cash Payment of Salary shown in Receipts and Payments A/c

Salary shown in Income & Expenditure Account

Add : Outstanding salary for Previous year know paid in current year

\( \implies \) Less : Outstanding salary at the end for current year

\( \implies \) Cash Payment of Salary shown in Receipts & Payments A/c

(3) Cash Purchase of Furniture

In simple words: This solution shows how to create key financial reports for an organization that does not aim for profit. It uses the information already given about its income and expenses, plus details about its assets and debts. By carefully putting all these pieces together, we can see how much cash the organization received and paid out, and what its financial position was at the end of the year.

🎯 Exam Tip: When given an Income and Expenditure Account and asked to prepare a Receipts and Payments Account, remember to reverse the adjustments for non-cash items and accruals/prepayments to find the actual cash flow.