After studying this chapter, you will be able to
Understand the Meaning and the Salient Features of Not-for-Profit Organisations (NPO)
Understand the Meaning and Features of Receipts and Payments Account
Prepare Receipts and Payments Account
Understand the Meaning and Main Features of Income and Expenditure Account
Distinguish Between a Receipt and Payments Account and an Income and Expenditure Account
Understand the Accounting Treatment of Special Items in the Preparation of Income and Expenditure Account
Prepare Income and Expenditure Account from the Given Receipts and Payments Account
Prepare Opening Balance Sheet and Closing Balance Sheet from the Given Receipts and Payments Account and Income and Expenditure Account
Prepare Receipts and Payments Account from a Given Income and Expenditure Account with Additional Information and Balance Sheet
Prepare Receipts and Expenditure Account for Professionals.
The very name of the chapter may raise eyebrows, as they are captioned as “Not-for-Profit,” then what is the necessity of preparation for final accounts for such organisations. The main motive of any organizations (business) is to earn profit. Such profit or loss has to be ascertained by proper accounting procedure. But here, we have to prepare financial statements, even though their motive is not to earn profit. These NPOs are mainly voluntary in nature. Their motive is to promote art, culture, education, health and other social activities among humanity. Some types of recreation clubs, sports club and professional associations also belong to this category. These organisations get funds from others and fees from its members. They too have to maintain proper records of accounts. Even though profit may not be the motive, they have to get some surplus money (excess of income over expenditure) to promote their activities consistently. But here, a different set of records has to be maintained. The preparation of final accounts differs from other trading concerns. A proper and different accounting system has to be maintained in order to avoid misuse of money obtained from its members, other institutions and public. The main constituents of final accounts of NPOs are Receipts and Payments Account, Income and Expenditure Account and Balance Sheet. Special features of these accounts and their preparation are discussed in detail in this chapter.
Entities that are formed to promote any useful activities or to render any service to humanity are usually termed as NPO.
Examples: Charitable institutions (health, education, etc.), social service slubs, games clubs, religious institutions and professional associations (Medical Council, Bar Council and so on).
One may ask, if profit-making is not the main motive of these organisations then what is the necessity of preparing final accounts. In order to ascertain the members, the donors and the society, it is necessary to prepare final accounts, in particular, about their activities. Misuse or non-utilisation of income can be detected only by keeping proper accounting procedure. Proper accounting facilitates the task of further growth of such entities. So it has become a necessity to prepare such accounts. More or less the same accounting system is adopted as in the case of profit-making entities. The final accounts of a NPO consists of the following three parts:
“The Receipts and Payments Account” is a summary of cash and bank transactions of a NPO for a specified accounting period.
Model Category, Model Number and Illustration Numbers
Model No. | Model: Category Wise – Caption | Illustration No. |
---|---|---|
1 |
Preparation of Receipts and Payments Account from bare facts |
1 |
1A |
Preparation of Income and Expenditure Account: treatment of accounting methods for individual items |
2–13 |
2 |
Preparation of Income and Expenditure Account from a given Receipts and Payments Account |
14, 16–19 |
3 |
Preparation of Income and Expenditure Account from a given Receipts and Payments Account with additional information and Balance Sheet |
14, 16 – 19 |
3A |
Bank reconciliation adjustments |
20 |
4 |
Preparation of Income and Expenditure Account and a Balance Sheet from a Trial Balance |
21 |
5 |
Preparation of Balance Sheets |
15, 15A |
6 |
Preparation of Receipts and Payments Account from a given Income and Expenditure Account with additional information and Balance Sheet |
22–26 |
7 |
Preparation of Restaurant/Bar Trading Account |
27 |
8 |
Correction of wrong statements |
28 |
9 |
Preparation of Receipts and Expenditure Account for professionals – individuals |
29, 30 |
10 |
concerns – Partnership Firms |
31,32 |
Important Note
Format
Receipts and Payments Account of……………
for the year ending………………
Important Note
Illustration: 1
From the following information, prepare Receipts and Payments Account of Rajasekaran Club, Delhi for the year ending on Dec 31, 2008:
|
Rs |
Cash as at Jan 1, 2008 |
2,500 |
Subscription received (including Rs 100 for 2007 and Rs 200 for 2009) |
4,700 |
Upkeep of Fields |
450 |
Admission Fees |
100 |
Salaries |
1,000 |
Drama Expenses |
750 |
Life Membership Subscription |
1,000 |
Newspapers Purchased |
200 |
Books Purchased |
500 |
Donations Received (Aug 1, 2008) |
4,000 |
Subscription for Tournament received on Aug 1, 2008 |
3,000 |
Municipal Taxes |
500 |
Charity Given |
500 |
Sale of Old Newspapers |
50 |
Sale of Old Bats |
100 |
12% General Investments made on Aug 1, 2008 |
3,000 |
Tournament Expenses |
2,000 |
Sale of Old Furniture (cost Rs 2,000) |
500 |
Bats and Balls Purchased |
1,000 |
Proceeds of Drama Tickets |
2,500 |
Interest on 12% General Investment received |
150 |
12% Tournament Fund Investments (on Aug 1, 2008) |
6,000 |
Interest on 12% Tournament Fund and Investment received |
300 |
Printing and Stationery |
350 |
Furniture |
2,000 |
Subscription received for Governor’s party |
7,500 |
Depreciation: (Furniture) |
200 |
(Books) |
50 |
Solution
Keep in mind, the procedure explained in preparation of Receipts and Payments Account and enter the items accordingly.
Receipts and Payments Account of Rajasekaran Club for the year ending on Dec 31, 2008
Important Notes
An Income and Expenditure Account is the (Final Account) Profit and Loss Account of NPOs. It is a nominal account that shows the classified summary of revenue incomes, revenue expenses and losses for the current accounting period, along with the (net result) balance of this account – surplus or deficit is to be transferred to the Balance Sheet.
Surplus is to be added to the Capital Fund.
Deficit has to be deducted from the Capital Fund in the Balance Sheet.
Important Note
Even though transactions relating to capital receipts and expenditures are not included in this account, it is very important to note that profit or loss on sale of fixed assets is to be recorded. Such profit is to be recorded on the credit side and any such loss has to be recorded on the debit side of Income and Expenditure Account.
Pro forma or Format of Income and Expenditure Account for the Year ending on ……………
A Balance Sheet is to be accompanied after the preparation of Income and Expenditure Account.
Balance Sheet of NPOs is prepared as follows:
On assets side, the following have to be recorded:
Pro forma or Format of Balance Sheet as on ………….
Category I: Periodical (yearly) subscriptions.
Format: Computation of Subscription Income for the Current Accounting Period
Particulars | Rs | Rs |
---|---|---|
Subscriptions received during the current year |
|
|
Add: |
|
|
(i) Advance subscriptions in the beginning of the year |
— |
— |
(ii) Outstanding subscriptions at the end of the current year |
— |
— |
Less: |
|
|
(i) Outstanding subscriptions in the beginning of current year |
— |
— |
(ii) Advance subscriptions at the end of current year |
— |
— |
|
|
xx |
The subscription so arrived has to be credited to Income and Expenditure Account. The same may be computed in the Account Form, by preparing a Subscription Account as follows:
Subscription Account
Illustration: 2
Compute the income from subscription for the year 2008 from the following particulars.
Subscription received during the year 2008 is Rs 2,18,700
|
Jan 1, 2008 Rs |
Dec 31, 2008 Rs |
Outstanding Subscriptions |
12,700 |
9,300 |
Advance Subscriptions |
4,400 |
8,600 |
Solution
The income from Subscription may be computed in any of the following two methods.
Method I: Statement Form
Step 1: |
Draw the format |
Step 2: |
Subscriptions received during the accounting period, i.e. 2008, has to be recorded. (This is the basic figure.) |
Step 3: |
Since it is on an accrual basis, only those incomes which relate to current accounting period (i.e., 2008) have to be computed first and then credited to Income and Expenditure Account. For this, the following steps have to be followed. |
Step 4: |
Outstanding subscription at the end of the year (i.e., Dec 31, 2008) has to be added to the basic figure, even if it is not actually received yet. |
Step 5: |
Advance subscription received in the beginning of the year, i.e. Jan 1, 2008 (it may also be termed as at the end of the previous year, i.e. Dec 31, 2007), has to be added to the basic figure. |
Step 6: |
Similarly, outstanding subscription in the beginning of the year, i.e. Jan 1, 2008, is not related to this year 2008. So that amount has to be deducted. |
Step 7: |
Advance subscription at the end of the year (i.e., Dec 31, 2008) has to be deducted as that amount actually belongs to next year, i.e. 2009. |
Step 8: |
Net amount arrived after these adjustments is the subscription income for the year 2008. |
Step 9: |
Only this net figure has to be transferred and credited to Income and Expenditure Account for income from “Subscriptions.” |
Note: If the income is related to this year (i.e., 2008), it has to be included in this year irrespective of the year in which it is received. Similarly, if it does not relate to this year, even if it is received this year, it has to be deducted. Incomes pertaining to this accounting period alone have to be taken into account after making the above adjustments.
Computation of Subscription Income
Particulars | Rs | Rs |
---|---|---|
Subscriptions received during 2008 |
|
2,18,700 |
Add: (i) Outstanding Subscription as on Dec 31, 2008 |
9,300 |
|
(ii) Advance Subsections as on Jan 1, 2008 |
4,400 |
13,700 |
|
|
2,32,400 |
Less: (i) Outstanding Subscription as Jan 1, 2008 |
12,700 |
|
(ii) Advance Subscription as at Dec 31, 2008 |
8,600 |
21,300 |
Subscription Income for the year 2008 |
|
2,11,100 |
(to be credited to Income and Expenditure Account) |
|
|
Method II
The same may be computed by preparing a subscription account as follows:
Subscription Account
Note: For students convenience, to arrive at the balancing figure, that Income and Expenditure Account is entered as a last item but according to strict accounting principles it is not so.
Illustration: 3
Prepare the subscription amount from the following items for the year ending on Mar 31, 2008.
Solution
Step 1: |
Accounting year has to be clearly written first. Here 2007–2008 is the accounting period. |
Step 2: |
If subscription in arrears for a period other than the accounting period is given, an adjustment has to be made as follows: |
In this problem,
Subscription in arrears as on Mar 31, 2007 is given as Rs 500
Total Subscription received: Note that including Rs 400 for 2006–2007 is given.
So net outstanding subscription has to be computed and that amount alone has to be shown in “Outstanding Subscription” for the year 2006–2007 in Subscription Account.
Here it is Rs 100/– i.e. (Outstanding – Received) for 2006–2007
(Rs 500 – Rs 400) = Rs 100
Step 3: |
Format is drawn and the particulars are transferred to Subscription Account as follows: |
Step 4: |
Rs 35,300 has to be transferred and credited to Income and Expenditure Account under the head “Subscription.” |
Illustration: 4
From the following extracts of Receipts and Payments Account and additional information you are required to calculate the income from subscriptions for the year ending Dec 31, 2008 and show them in the Income and Expenditure Account and the Balance Sheet of a recreation club in Delhi.
Extract of Receipts and Payments Accounts for the Year Ended Dec 31, 2008
Additional information
Solution
|
|
Rs |
1. |
Subscription received during 2008 (this is taken from the Receipt and Payment A/c extract in the problem) |
30,000 |
2. |
Subscription received in advance on Dec 31, 2007 means it pertains to the year 2008 and hence added (given in additional information) |
6000 |
|
|
36,000 |
3. |
Subscription outstanding as on Dec 31, 2008 has also to be added. But a light adjustment has to be worked out. Rs 5000 is given in additional information. But actual outstanding for the previous year has to be deducted Here for 2007: Rs 6,000 – 5,000 = Rs 1,000 Hence, for 2008: Rs 5,000 – 1,000 = Rs 4,000 |
4,000 |
4. |
Subscription income to be included in Income and Expenditure Account |
_____ |
Extract of Income and Expenditure Account for the Year Ended Dec 31, 2008
Extract of Balance Sheet of Delhi Recreation Club for the Year Ended Dec 31, 2008
Illustration: 5
From the following, find out the amount of subscription to be included in the Income and Expenditure Account for the year ended Mar 31, 2008.
Subscriptions received during the year 2007–2008.
For the year ending 2006–2007: Rs 10,000
For the year ending 2007–2008: Rs 2,00,000
For the year ending 2008–2009: Rs 20,000
Subscriptions outstanding as on Mar 31, 2007 were Rs 25,000, out of which Rs 3,000 were considered irrecoverable. On the same date, subscriptions received in advance for 2007–2008 were Rs 10,000. Subscriptions still outstanding as on Mar 31, 2008 amounted to Rs 50,000.
Solution
For this type of problem, outstanding subscriptions for the accounting period (i.e., 2007–2008) have to be calculated first.
Computation of Outstanding Subscriptions for 2007–2008
|
Rs |
Stage I: |
|
• Subscriptions outstanding on Mar 31, 2007 (i.e., previous year) |
25,000 |
• (From this irrecoverable amount has to be deducted) |
|
Less: Written off |
3,000 |
|
22,000 |
• (Subscriptions received in year 2007–2008 has to be deducted) |
10,000 |
Less: Received in 2007–2008 |
|
Subscriptions still outstanding as on Mar 31, i.e. 2006–2007 year |
12,000 |
Stage II: |
|
• Total subscriptions outstanding as on Mar 31, 2008 |
50,000 |
• [Amount arrived at Stage I, i.e. Subscriptions still outstanding for the year ending Mar 31, 2007 (i.e., previous year) has to be deducted] |
|
Less: Still outstanding for the year ending Mar 31, 2007 |
12,000 |
Outstanding subscriptions for the accounting period 2007–2008 |
38,000 |
Stage III: |
|
Now, the amount of subscriptions to be included in the Income and Expenditure Account has to be calculated |
|
• Subscriptions received for 2007–2008 |
2,00,000 |
• Add: Subscriptions received in advance in 2006–2007 for the year 2007–2008 |
10,000 |
|
2,10,000 |
• Add: Subscriptions outstanding for the year 2007–2008 |
38,000 |
(Refer Stage II) |
|
Amount to be credited to Income and Expenditure Account |
2,48,000 |
Illustration: 6
From the following extracts of Receipts and Payments Account and the additional information, you are required to compute the income from subscriptions for the year ending on Dec 31, 2008 and show the subscriptions items in the Income and Expenditure Account and the Balance Sheet as on Dec 31, 2008.
Extract of Receipts and Payments Account for the Year Ending on Dec 31, 2008
Additional Information
Subscriptions outstanding as on Dec 31, 2007: Rs 13,000
Subscriptions received in advance as Dec 31, 2007: Rs 14,500
(including Rs 2,500 for 2008)
There are 1,600 members each paying an annual subscription of Rs 100.
Solution
This is a different type of problem.
Note: Here, in additional information one important item about the total number of members and annual subscription amount is given.
Step I
Total Number of Members × Annual Subscriptions
1,600 × Rs 100 = Rs 1,60,000
Extract of Income and Expenditure Account for the Year Ending on Dec 31, 2008
Step 2: Computation of Subscriptions Outstanding as on Dec 31, 2008
Subscription Account
* Result: Outstanding Subscriptions as on Dec 31, 2008 (i.e., at the end of the year) is Rs 19,000.
Step 3: Finally, Balance Sheet has to be drawn
Extract of Balance Sheet as on Dec 31, 2008
Note: These figures can easily be transferred from the Subscription Account to Balance Sheet.
Illustration: 7
There are 500 members in a club, each paying a subscription of Rs 100. On Mar 31, 2007, subscription in arrears totalled Rs 1,000. Subscriptions received during the year ended Mar 31, 2008 amounted to Rs 45,000 including Rs 750 for the year 2006–2007 and Rs 2,000 for the year 2008–2009.
You are required to calculate the amount of subscriptions in arrears as on Mar 31, 2008 by preparing Subscriptions Account.
Solution
Subscriptions Account
Notes:
In some not-for-profit entities, members may make a lump sum payment, i.e. life membership, instead of periodical payment as subscription. Usually, such a large sum is not treated entirely as revenue income. It is usually treated as deferred revenue receipts and transferred to Life Membership Fund Account.
An amount representing the normal annual subscription is treated as revenue receipts and credited to Income and Expenditure Account and the balance appears on the liabilities side of the Balances Sheet till the amount is exhausted or till the membership ceases, whichever is earlier. Such amount to be treated as normal revenue receipt is determined by the entity. So, students have to follow the instructions given in the problem.
Illustration: 8
Extract of Receipts and Payments Account of a Social Club for the Year Ended Dec 31, 2008
Additional information:
Life Membership Fees is for 10 years
Solution
Extract of Receipts and Payments Account of a Social Club for
the Year Ended Dec 31, 2008
Balance Sheet as on Dec 31, 2008
Illustration: 9
Show how will you deal with the following items while preparing for the final accounts of a NPO for the year ending on Mar 31, 2008 in each of the following cases.
Solution
Case (a)
Extract of Balance Sheet as on Mar 31, 2008
Case (b)
Extract of Balance Sheet as on Mar 31, 2008
Important Note (Specific Fund) (Prize Fund Investments is an asset. Appears on the Asset side of Balance Sheet).
Case (c)
Extract of Income and Expenditure Account for the Year Ending Mar 31, 2008
Illustration: 10
Show how you will deal with the following items while preparing the final accounts for the year ending Mar 31, 2008.
Case (a)
Expenditure on construction of a pavilion is Rs 5,00,000. The construction work is in progress and has not yet completed. Capital Fund as on Mar 31, 2007 is Rs 12,00,000.
Case (b)
Expenditure on construction of a pavilion: Rs 5,00,000. The construction work is in progress and has not yet completed. Pavilion fund as on Mar 31, 2007 is Rs 7,00,000. Donation for pavilion received on Apr 30, 2007 is Rs 9,00,000. Capital Fund as on Mar 31, 2007 is Rs 12,00,000.
Solution:
Case (a)
Extract of the Balance Sheet as on Mar 31, 2008
Case (b)
Notes:
Extract of Balance Sheet as on Mar 31, 2008
(Expenditure on construction → Work-in-Progress → transferred to Capital Fund)
Important Note
However, students are advised to follow the instructions given in the problem for classification. If the question is silent (i.e., no instructions are given), students have to follow the above procedure.
According to Eric. L. Kohler, it is a fund arising through a bequest or gift and such income is earmarked for a specific purpose.
It is to be treated as a Capital Receipt. As such it has to be recorded on the Liabilities side of the Balance Sheet.
Important Note
This is the authorised accounting principle, now in force.
So far, we have discussed various items of income that are of capital nature (Capital Receipts). Now we have to see how capital expenditures are to be treated.
Money spent on the purchase of any assets (durable for a lengthy period) may be called as capital expenditures.
Examples
Depreciation amount has to be deducted and only then such amount has to be transferred to the Balance Sheet. However, do not forget to transfer the depreciation amount to Income and Expenditure Account.
Examples: stationery, sports material, medicines, and so on. Accounting Treatment:
Illustration: 11
How will you deal with the following items while preparing the Income and Expenditure Account for the year ending on Mar 31, 2008 and a Balance Sheet as on that date.
Case (a)
|
As on Apr 1, 2007 |
As on Mar 31, 2008 |
|
Rs |
Rs |
Creditors for Sports Materials |
3,000 |
1,500 |
Stock of Sport Materials |
5,000 |
500 |
During 2007–2008, the payment made to these creditors was Rs 20,750. There was no cash purchase.
Case (b)
|
As on Apr 1, 2007 |
As on Mar 31, 2008 |
|
Rs |
Rs |
Creditors for Sports Materials |
4,000 |
9,000 |
Stock of Sport Materials |
10,000 |
25,000 |
During 2007–2008, the payment made to these creditors amounted to Rs 35,000 and cash payments amounted to Rs 10,000.
Solution:
Consumption of sports material is of revenue nature.
Step 1: As creditors are given in the problem first, Creditors for Sports Materials account has to be prepared to ascertain credit purchases made during the year.
Creditors for Sports Materials Account
Step 2: Then Stock of Sports Materials Account has to be prepared. Opening Stock of materials as on Apr 1, 2007 Rs 5,000 has to be debited as Balance b/d. Creditors for sports materials amount has to be transferred from the above A/c, i.e. Rs 18,250 has to be debited. Then Stock of Materials as on Mar 31, 2008 has to be credited to this account as Closing Balance c/d. The balancing amount appearing in this account is the amount spent on sports materials consumed.
Stock of Sports Materials Account
Step 3: An Extract of Income and Expenditure A/c for the Year Ending on Mar 31, 2008
Finally, the Balance Sheet has to be drawn up.
Step 4:
An Extract of Balance Sheet as on Mar 31, 2008
In this problem, an additional information, i.e. cash purchases is given. In such cases, only one additional adjustment has to be made in the Stock of Sports Materials Account as follows:
Case (b)
In that account, this cash purchases amount Rs 10,000 has to be debited as “To Bank/Cash Account” and then the balancing figure is arrived. All the other procedures remain the same as in the above case (a).
Step 1
Creditors for Sports Materials Account
Step 2
Stock of Sports Material Account
Note: Cash purchases entered in this account.
Step 3
Extract of Income and Expenditure Account for the year ending on Mar 31, 2008
Step 4
Extract of Balance Sheet as on Mar 31, 2008
Illustration: 12
From the following information, compute the amount of stationery to be debited to Income and Expenditure Account for 2008.
|
Rs |
Stock of Stationery on Jan 1, 2008 |
5,000 |
Creditors for stationery on Jan 1, 2008 |
2,500 |
Advance paid for stationery carried forward from 2007 |
600 |
Amount paid for stationery during 2008 |
15,500 |
Stock on stationery on Dec 31, 2008 |
1,500 |
Creditors for stationery for 2008 |
4,400 |
Advance paid for stationery on Dec 31, 2008 |
500 |
Solution:
The same type of problem may be solved by adopting “Statement Form” to ascertain the amount of stationery consumed during the year.
Statement showing the calculation of the amount of stationery consumed during the year 2008
|
|
Rs |
|
Stock of Stationery on Jan 1, 2008 |
5,000 |
|
Add: Payments made for stationery in 2008 |
15,500 |
|
|
20,500 |
|
Less: Payments made from creditors of 2007 |
2,500 |
|
(since this belongs to last year, deducted) |
|
|
|
18,000 |
|
Add: Payments made in 2007 but belonging to 2008 |
600 |
|
|
18,600 |
|
Add: Creditors for stationery for the year 2008 |
4,400 |
|
|
23,000 |
|
Less: Payments made in advance at the end of 2008 |
500 |
|
|
22,500 |
|
Less: Stock of stationery on Dec 31, 2008 |
1,500 |
|
Amount of stationery actually used in 2008 |
21,000 |
The amount thus obtained has to be transferred and debited to Income and Expenditure Account.
Balance Sheet as on Dec 31, 2008 shows
Creditors for stationery for 2008 – Liability
Advance paid at the end – Asset
Closing Stock at Dec 31, 2008 – Asset
Illustration: 13
In 2008, the actual salaries paid amounted to Rs 17,800. Ascertain the amount chargeable to Income and Expenditure Account for the year ending on Dec 31, 2008 from the following additional information.
|
|
Rs |
|
Pre-paid salaries on Dec 31, 2007 |
1,500 |
|
Pre-paid salaries on Dec 31, 2008 |
300 |
|
Outstanding salaries on Dec 31, 2007 |
700 |
|
Outstanding salaries on Dec 31, 2008 |
1,200 |
Solution
Calculation of current year’s salaries
|
|
Rs |
|
Total salaries paid in 2008 |
17,800 |
|
Add: Pre-paid salaries on Dec 31, 2007 |
|
|
(this amount pertains to 2008) |
1,500 |
|
|
19,300 |
|
Less: Pre-paid salaries on Dec 31, 2008 |
|
|
(this belongs to 2009) |
300 |
|
|
19,000 |
|
Less: Outstanding salaries on Dec 31, 2007 |
700 |
|
|
18,300 |
|
Add: Outstanding salaries on Dec 31, 2008 |
1,200 |
|
(this belongs to 2008) |
_____ |
|
Amount spent on salaries during the year 2008 |
19,500 |
This amount has to be transferred and debited to Income and Expenditure Account under the head “Salaries.” The same procedure has to be adopted for other expenses also like wages, rent, amount spent on consumable materials, and so on.
It is of regular nature and income arising on such sale of old sports materials is always credited to Income and Expenditure Account. (In this case, book value of sports material is not taken into account and it is treated as Nil.)
In this case, sale of such old newspapers, magazines, periodicals (not books) is always credited to Income and Expenditure Account. Purchase of newspapers and periodicals are revenue expenditure and has to be debited to Income and Expenditure Account. But it is to be remembered that purchase of books is of capital nature.
Payment in the form of honorarium has to be treated as revenue nature and it has to be debited to Income and Expenditure Account.
Any expenses incurred in the day-to-day performance and is of recurring nature is treated as revenue expenditure.
If the expenses relate to
Examples: Rent, printing, subscription to newspapers and periodicals, insurance advertisements, interests, repair, depreciation, etc.
(Note: Most of the complicated items were discussed by way of separate illustrations, and other ordinary items are explained in course of preparation of Final Accounts).
Steps
Items relating to revenue nature alone have to be transferred to Credit side of Income and Expenditure Account.
Adjustments
(i) Income received in advance in the beginning of the year (or sometimes it is also shown as on the end of the previous year) |
: ……… |
(ii) Outstanding income at the end of the current year |
: ……… |
(iii) Advance income at the end of the current year |
: ……… |
(ii) Outstanding income in the beginning of the current year |
: ……… |
For each revenue receipts such adjustment has to be made and then credited to Income and Expenditure Account.
(i) Pre-paid expenses in the beginning of the current year (or at the end of last year) |
||
|
: xxxx |
|
(ii) Outstanding expenses at the end of the current year |
: xxxx |
….. |
(i) Outstanding in the beginning of the current year |
: xxxx |
|
(ii) Pre-paid expenses at the end of the current year |
: xxxx |
….. |
for each revenue expense, (if necessary) adjustments as above have to be made and then the Net Amount (D) has to be transferred to the Debit side of Income and Expenditure Account.
If the total of credit side exceeds the total of debit side, enter that difference amount on debit side. This is surplus or excess of income over expenditure and close the account.
If the total of debit side exceeds the total of credit side, enter the difference amount on credit side. This is deficit or excess of expenditure over income and close the account.
Important Note
Some important points to be noted while preparing the Income and Expenditure.
Net Surplus (i.e., collection amount – amount spent) is to be treated as revenue receipts and credited to Income and Expenditure Account. In some cases, entire collections are shown on income side and entire expenses for such specific events are shown on the expenditure side of Income and Expenditure Account.
The above steps are shown in the following (diagram) simple format for easy comprehension:
A. Receipts and Payments Account for the year ended on Mar 31, 2008
Illustration 14:
From the following Receipts and Payments Account of a social club and from the information, you are required to prepare an Income and Expenditure Account, for the year ended 31st December, 2008
Receipts and Payment Account for the Year Ending Dec 31, 2008
Information
Solution:
In the problem, the total members in the club and annual subscription for each member are given in the additional information. In such case, subscription to be included in the Income and Expenditure Account is calculated as Total Members × Annual Subscription = 100 × Rs 25
Only this Rs 2,500 has to be recorded and no adjustment is necessary for this type of problem in the preparation of Income and Expenditure Account.
(It is better to prepare all workings in advance. Experts in this field never agree to show such working notes in the beginning of the solution. They exhibit working notes only at the end of solution, after recording all accounts, though the figures to be shown for respective items can be arrived at only after working notes. In this edition, in order to make the subject easy for students, working notes are shown in the beginning itself. As this edition is intended mainly for the students, experts in the field may kindly excuse the author for deviating the established procedure.)
Thus, the above “Receipt Items” have to be transferred and recorded on the credit side of Income and Expenditure Account.
Salaries: Rs 2,400 (given in the account) |
: |
2,400 |
Add: Outstanding = Rs 250 (Refer information) |
: |
250 |
|
: |
2,650 |
Less: Salaries for 2007: Rs 500 (shown in information) |
: |
500 |
Amount spent on salaries for 2008 |
: |
2,150 |
Income and Expenditure Account for the year ending Dec 31, 2008
Note: Balance Sheet has also to be accompanied for any Income and Expenditure (so, the next stage is preparation of Balance Sheet).
A Balance Sheet is the statement of assets and liabilities of an entity at a particular date, usually closing date of that accounting period. For preparing final accounts of NPOs, usually two Balance Sheets have to be prepared to ascertain the financial position. One should be prepared at the beginning of the current accounting period and the other (i.e., Another Balance sheet) at the end of the current accounting period. The first one, prepared at the beginning of the accounting period is termed as “Opening Balance Sheet.” The second one, prepared at the end of the accounting period is termed as “Closing Balance Sheet.”
Step 1: |
Take Receipts and Payments Account given in the problem as a base. |
Step 2: |
First item appearing on the receipts side is “Balance b/d” It might also have been shown as cash in hand and cash at bank. This is an asset at the beginning of the year. So, this amount has to be transferred and posted to the Assets side of the Balance Sheet. |
Step 3: |
The opening balance of assets of items (sometimes have to be taken from receipts and payments account and at times from additional information given in the problem), items relating to previous accounting period, have to be entered one by one on the Assets side of the Balance Sheet, with necessary adjustments. |
Step 4: |
After this, Opening Balances of liabilities are to be transferred and recorded on the Liabilities side of the Balance Sheet. |
Step 5: |
After recording all items, both sides are totaled. Excess of “Assets Side” over “Liabilities Side” (Balancing figure) has to be recorded as “Capital Fund.” |
Step 1: |
“Capital Fund” is arrived at the preparation of Opening Balance Sheet has to be recorded first on the Liabilities side of the Balance Sheet. |
Step 2: |
Refer the Income and Expenditure Account prepared by you. “Surplus” to be added to this capital Fund. “Deficit” to be deducted from this Capital Fund. |
Step 3: |
After this, capitalised incomes, e.g. entrance fees, life membership fees, legacies, specific donations, specific funds (with necessary additions or deductions) have to be recorded on the Liabilities side. |
Step 4: |
Incomes received in advance to be recorded. |
Step 5: |
Outstanding expenses to be recorded. |
Step 6: |
Other current liabilities – Bank Overdraft and Creditors to be recorded. |
Step 7: |
After recording all relevant items on the Liabilities side (as described above), items relating to assets have to be recorded one by one on the Assets side of the Balance Sheet as described below. Fixed Assets after adjustments have to be shown on the Assets side. |
Example: Furniture
|
Opening Balance |
: xxxx |
|
Add: Additions during the year |
: ........ |
|
Less: Sales during the year |
: ........ |
|
Less: Depreciation |
: xxxx |
|
Value to be taken to Balance Sheet |
: xxxx |
Likewise, each item relating to fixed assets have to be entered on the Assets side, after necessary adjustments.
Step 8: |
Investments (e.g., specific fund investments, government securities, fixed deposits, and so on.) have to be shown on the Assets side. |
Step 9: |
Current Assets such as outstanding subscriptions, accrued interest, accrued rent, any outstanding income has to be recorded. |
Step 10: |
Closing Balance given in the Receipts and Payments Account – (Cash Balance) has to be recorded. |
Important Notes
Format of Balance Sheet of NPOs Balance Sheet as at
Illustration: 15
Taking the same information as given in Illustration 14, prepare Opening and Closing Balance Sheets.
Solution
Balance Sheet of as at Jan 1, 2008
Note: Assets and liabilities as on the beginning of the accounting year, i.e. Jan 1, 2008 shall be shown in the Opening Balance Sheet.
Now, moving to the second part of the question, Closing Balance Sheet, i.e. Balance Sheet at the end of the accounting year, i.e. as on Dec 31, 2008 has to be prepared.
|
4. Furniture: Opening Balance |
Rs 5,000 |
|
Less: Depreciation @ 10% |
Rs 500 |
|
Value of furniture to be transferred |
Rs 4,500 |
|
5. Books: Opening Balance |
Rs 4,000 |
|
Add: Purchases |
Rs 1,500 |
|
|
Rs 5,500 |
Subscriptions outstanding, after the following adjustments have to be recorded on the Assets side of the Closing Balance Sheet.
Subscription Outstanding
|
|
|
Rs |
For 2007 |
: |
|
|
Rs 600 |
|
Rs 500 |
=100 |
↓ |
|
↓ |
|
(given in information (a)) |
– |
(Refer Receipts and |
|
Add: For the year 2008 |
: |
|
|
Rs 2,500 |
|
Rs 2,000 |
|
↓ |
|
↓ |
|
(Rs 100 × Rs 25) − (Refer Receipts and Payments Account) |
|
||
|
|
|
=500 |
Subscriptions Outstanding for 2008: |
600 |
Balance Sheet of as on Dec 31, 2008
Illustration: 15A
The secretary of a social club provides you with the following Receipts and Payments Account and the Income and Expenditure Account for the year ended Mar 31, 2009.
Receipts and Payments Account for the Year Ending Mar 31, 2009
Income and Expenditure Account for the year ending Mar 31, 2009
The club had the following assets on Mar 31, 2008:
|
Investments |
Rs 80,000 |
|
Furniture |
Rs 20,000 |
|
Reference Books |
Rs 10,000 |
You are required to prepare the Balance Sheets of the club as on Mar 31, 2008 and Mar 31, 2009.
–B. Com (Modified)
Solution:
Balance Sheet as on Mar 31, 2008
Step 6: Preparation of Closing Balance Sheet
Balance Sheet as on Mar 31, 2009
Preparation of Income and Expenditure Account and Balance Sheet from a given Receipts and Payments Account and additional information.
Illustration: 16
From the following information and Receipts and Payments Account of a club, prepare Income and Expenditure Account for the year ending Dec 31, 2008 and a Balance Sheet on that date.
Receipts and Payments Account for the year ending Dec 31, 2008
Additional Information
Solution
Note: Students are asked to go through the steps explained in detail in preparation of Income and Expenditure Account and Balance Sheet as shown in Illustrations number 14 and 15 (again and again)
Besides that the following working notes facilitate to prepare the final accounts.
Rent: In the additional information, it was given that the club paid three months rents in advance.
Rent shown in Receipts and Payments Account: Rs 2,400
This is for a year |
|
So, 1 month’s rent |
Rs 2400/12 = Rs 200 |
2 months rent |
Rs 200 × 2 = Rs 400 |
This amount, i.e. Rs 400 has to be added as pre-paid in the beginning and again Rs 420 has to be deducted as pre-paid at the end of the year.
Interest
Income and Expenditure Account of a Club for the year ending Dec 31, 2008
Until the students learn thoroughly the techniques involved in preparation of Final Accounts of NPOs, it is better to prepare the Opening Balance Sheet and then (final) Closing Balance Sheet.
Balance Sheet of a Club as on Jan 1, 2008
Preparation of Closing Balance Sheet Balance Sheet of a Club as on Dec 31, 2008
Illustration: 17
Prepare Income and Expenditure Account for the year ending Dec 31, 2008 and a Balance Sheet on that date from the following Receipts and Payments Account and the Balance Sheet.
Receipts and Payments Account for 2008
Balance Sheet as on Dec 31, 2007
Solution
Income and Expenditure Account for the Year Ended Dec 31, 2008
Balance Sheet as on Dec 31, 2008
Sometimes questions may also be asked by providing extracts of Cash Book (Receipt and Payments) with additional information. Students need not confuse over it. As mentioned earlier, steps involved in the preparation of Income and Expenditure Account and Balance Sheet are same as explained earlier in Illustration 14 and Illustration 15. Some more calculations have to be made to arrive at certain missing figures.
Illustration: 18
From the following information of a club, prepare Income and Expenditure Account for year ending Mar 31, 2008 and Balance Sheet as on that date.
|
|
Rs |
|
Assets on Apr 1, 2007 |
|
|
Cash at Bank |
5,000 |
|
Stock of balls, bats, etc. |
3,000 |
|
Printing and Stationery (stock) |
500 |
|
Subscription Due |
1,000 |
Information
Solution
|
1. |
In information (a) it is instructed to keep in reserve for a Permanent Pavilion. So the following calculations |
Step 1: A: Surplus on account of tournament
|
|
Rs |
|
Subscription received for tournament |
1,800 |
|
(refer Receipts side) |
|
|
Less: Expenses regarding tournament |
1,000 |
|
(refer Payments side) |
|
|
Surplus on account of tournament |
800 |
Step 2: B: Donations |
16,000 |
|
|
(refer Receipts side in the problem) |
|
As per the instructions, these two A + B will have to be kept in reserve. This means Rs 16,000 + Rs 800 = Rs 16,800 will have to be kept as reserve from a permanent pavilion. (So, these items need not be shown in Income and Expenditure Account. But this total amount has to be recorded in the Closing Balance Sheet as on Dec 31, 2008.)
Step 3
|
2. |
From the Cash Book, it can be seen that an item at the end of payments side appears as “Deposit in Bank.” So, Closing Balance has to be calculated as follows: |
|
|
Rs |
|
Opening Balance |
5,000 |
|
(Ref. Assets as on Apr 1, 2007) |
|
|
Add: Cash deposited |
23,000 |
|
|
28,000 |
|
(Ref. Last items on Payments side) |
|
|
Less: Cash withdrawn from Bank |
5,000 |
|
(Ref. Receipts side in the problem) |
|
|
Closing Balance of Cash at Bank |
23,000 |
Step 4
Calculation of Capital Fund as on Apr 1, 2007 (Opening Balance Sheet) Balance Sheet as on Apr 1, 2007
Note: As it is shown separately as assets on Apr 1, 2007 in the problem itself, all such items are to be transferred to the assets side of Opening Balance Sheet and Capital Fund is computed.
Now, we have to go to the main part of preparation of Income and Expenditure Account and Closing Balance Sheet.
Step 5
Income and Expenditure Account of the Club for the year ending on Mar 31, 2008
Step 6
Balance Sheet as on Dec 31, 2008
Illustration: 19
Prepare Income and Expenditure Account for the year ending on Mar 31, 2009 and Balance Sheet on that date from the following:
Receipts and Payments Account for the Year Ending on Mar 31, 2009
Information
Particulars |
Apr 1, 2008 |
Mar 31, 2009 |
|
Rs |
Rs |
Sports Materials |
5,000 |
6,000 |
Furniture |
70,000 |
– |
10% Prize Fund Investments (face value Rs 20,000) |
19,000 |
– |
Creditors for Sports Materials |
1,500 |
3,000 |
Subscriptions in arrears |
5,000 |
– |
Subscription in advance |
2,000 |
– |
Prize fund |
20,000 |
– |
Rent paid in advance |
– |
1,500 |
Outstanding Rent |
1,500 |
– |
Outstanding Miscellaneous Expenses |
2,500 |
4,500 |
Miscellaneous Expenses paid in Advance |
1,000 |
2,000 |
Additional Information
(C.A. – Modified)
Solution:
Before going to the main account, we have to prepare various accounts, separately, to ascertain the actual amount for each such time for the accounting year, i.e. Apr 1, 2008 to Mar 31, 2009. Only after this, the Income and Expenditure Account and the Balance Sheet can be prepared.
Step 1
Subscription Account
Step 2
Miscellaneous Expenses Account
Step 3
Rent Account
Step 4
Furniture Account
Step 5
Creditors for Sports Materials Account
Step 6
Stock of Sports Materials Account
Step 7
Balance Sheet as on Mar 31, 2008
Step 8
Income and Expenditure Account for the Year Ending on Mar 31, 2009
Note: *2 *3 *4 *6 all transferred from their respective accounts prepared earlier
Step 9
Balance Sheet as on Mar 31, 2009
Illustration: 20
Summary of Bank Transactions of a Club for the Year Ending Mar 31, 2008
Information
|
Apr 1, 2007 |
Mar 31, 2008 |
|
Rs |
Rs |
Unpresented cheque, being payment for Rent |
200 |
100 |
Interest on fixed deposit of Rs 10,000 |
|
|
not entered in Pass Book |
– |
1,000 |
Entry in respect of bank charges was not |
|
|
passed through the Cash Book |
– |
100 |
A member deposited subscription for 2008–2009, |
|
|
direct into bank, not passed through the Cash Book |
– |
50 |
Cheques deposited for subscription but |
|
|
not yet cleared by the bank |
2,000 |
1,000 |
Required: Prepare Income and Expenditure Account for the year ending Mar 31, 2008 and Balance Sheet on that date.
Solution:
In this problem, summary of bank transactions is shown in Receipts and Payments.
Further information reveals that value of transactions may differ between Cash Book and Pass Book. So, Bank Reconciliation statement has to be prepared from the beginning of the year and at the end of the year to ascertain balance as per Cash Book.
Step 1
Bank Reconciliation Statement as on Mar 31, 2007
Particulars | Rs | |
---|---|---|
1. |
Balance as per Pass Book |
5,000 |
|
(shown on Receipts side of the problem) |
|
2. |
Less: Cheque issued for Rent (unpresented) |
200 |
|
(shown in information (i)) |
|
3. |
Add: Cheque deposited for subscription (shown in information (v)) |
4,800 |
4. |
Balance as per Cash Book |
2,000 |
|
(1 − 2 + 3 = 4) |
6,800*1 |
*1 This amount has to be transferred and entered in the Opening Balance Sheet as Cash at Bank as per Cash Book.
Step 2
Opening Balance Sheet (or) Calculation of Capital Fund Balance Sheet as on Mar 31, 2007
Step 3
Subscription Account
Step 4
Now, Bank Reconciliation Statement at the end of the year has to be prepared to ascertain Closing Balance of Cash at Bank as per Pass Book.
Bank Reconciliation Statement as on Mar 31, 2008
Step 5
Income and Expenditure Account for the year ending Mar 31, 2008
Step 6
Balance Sheet as on Mar 31, 2008
Illustration: 21
The following is the Trial Balance of a Public School on Mar 31, 2005
Depreciation of Building @ 2%, furniture @ 10% and Books @ 20%. The investments were made against various funds commonly.
Prepare Income and Expenditure Account for the year ending Mar 31, 2005 and the Balance Sheet on that date.
– [B. Com (Hons) Delhi 2004]
Solution:
In this problem, Trial Balance is given. So, the following procedure has to be adopted step by step as discussed below:
Income and Expenditure of Public School for the Year Ending Mar 31, 2008
Note: Only Nominal Accounts are recorded.
As Opening Balance is not needed and prepared, only Closing Balance Sheet is prepared.
Balance Sheet of a Public School as on Mar 31, 2008
Note: As the investments were made against various funds commonly, here the interest received Rs 77,000 is apportioned and added to the respective funds on the basis of fund.
invested, i.e. 2,00,000 |
3,00,000 |
2,00,000 |
↓ |
↓ |
↓ |
(Profit Fund) |
(Tournament) |
(General Reserve) |
2 |
3 |
2 |
for Rs 77,000 = Rs 22,000: Rs 33,000: Rs 22,000 :
Step 1: |
Item: Opening Cash and Bank Balance: Particulars for this item is not found in Income and Expenditure. So, to prepare Receipts and Payments Account the amount has to be ascertained. It may be obtained either from the Opening Balance Sheet or Additional Information given in the problem. Such opening cash and bank balance are to be debited to Receipts and Payments Account. In case for any Bank Overdraft it has to be credited (credit side) to Receipts and Payments Account. |
Step 2: |
Item: Income: Items appearing on the income side of Income and Expenditure Account relate to revenue nature only. Further, they pertain to the current accounting period only. So necessary adjustments have to be made to arrive at the figure to be recorded in Receipts and Payments Accounts for each item. (Just the reverse procedure has to be followed. What is followed in the preparation of Income and Expenditure Account from Receipts and Payments Account). Incomes relating to past, current or future periods are immaterial. But whatever is received whether they relate to any year has to be recorded and the following adjustment has to be made. |
|
Rs |
Rs |
A: Income (Revenue) as per Income and Expenditure A/c |
|
….. |
B: Add: (i) Outstanding income in the beginning of the year |
….. |
|
(ii) Advance income at the end of current year |
….. |
….. |
C: Less: (i) Outstanding income at the end of the year |
….. |
|
(ii) Advance income in the beginning of current year |
….. |
….. |
D: Receipts received during the current year |
….. |
….. |
This type of adjustment has to be carried on for every item shown in Receipts and Payments Account.
Step 3: |
Item: Expenses: Items appearing on the Expenditure side of Income and Expenditure Account are of revenue nature only. As they confine to current accounting period only, adjustments have to be made to include all such amounts, whether they relate to past, present or future, if they received in the current accounting period. For this the following adjustment has to be made. |
A: Expenses (Revenue) as per Income and Expenditure A/c |
= |
….. |
B: Add: (i) Outstanding Expenses in the beginning of current year |
….. |
|
(ii) Pre-paid Expenses at the end of current year |
….. |
….. |
C: Less: (i) Outstanding Expenses at the end of current year |
….. |
|
(ii) Pre-paid Expenses in the beginning of current year |
….. |
….. |
D: Payments (Revenue) during the current year |
= |
….. |
Step 4: Item: Capital Receipts:
All Capital Receipts have to be ascertained. This can be obtained from Opening Balance Sheet and additional information given in the problem. Such Capital Receipts (i.e., fixed assets, special funds, etc.) are entered on the Debit side of Receipts and Payments Account.
Step 5: |
Item: Capital Expenditures: Items relating to capital expenses have to be ascertained and recorded on the Credit side of Receipts and Payments Account. |
Step 6: |
Item: Depreciation Provision for doubtful debts (non-cash items) surplus or deficit, accrued items in the preparation of Receipts and Payments A/c. |
Step 7: |
Item: Purchase of fixed assets: To ascertain the amount spent on the purchase of an asset, compare the value of the asset on two dates (opening and closing) after considering depreciation, the difference is the amount spent on purchase of an asset. This too has to be adjusted. |
Step 8: |
Item: Closing Balance of cash and bank is to be calculated. The difference between the total of debit side and total of credit side has to be found out. |
If the total of debit side exceeds the total of credit side show the cash balance (if the bank balance is given) or the bank balance (if the cash balance is given) on the Credit side of the Receipts and Payments Account. If the total of credit side exceeds the total of debit side, Bank Overdraft is shown on the Debit side of Receipts and Payments Account.
Illustration: 22
From the following information, extracted from Income and Expenditure Account, prepare a statement showing subscriptions received in 2007–2008 as per Receipts and Payments Account.
|
Rs |
(i) Income as per Income and Expenditure A/c |
90,000 |
(ii) Subscriptions Advance Subscriptions received in 2006–2007 |
5,000 |
(iii) Subscriptions outstanding at the end of 2007–2008 |
10,500 |
(including Rs 500 for 2006–2007) |
|
(iv) Advance Subscriptions received for 2008–2009 |
3,000 |
(a) Subscription written off in 2007–2008 |
1,000 |
(v) Subscriptions receivable on Apr 1, 2007 |
7,500 |
(vi) Subscriptions collected for 2007–2008 by |
1,500 |
the Treasurer but not deposited |
|
Solution
|
|
Rs |
Rs |
Step 1: |
A subscription income as per Income and Expenditure Account for 2007–2008 |
|
90,000 |
Step 2: |
B. Add: (i) Outstanding subscriptions in the beginning |
7,500 |
|
|
(ii) Advance subscriptions |
3,000 |
10,500 |
Step 3: |
C. Less: (i) Subscriptions outstanding as on 2007–2008 (10,500 − 500) |
10,000 |
1,00,500 |
|
(ii) Advance subscriptions in the beginning (2006–2007) |
5,000 |
|
|
(iii) Subscriptions written off: |
1,000 |
|
|
(iv) Subscriptions collected but not deposited |
1,500 |
|
|
|
17,500 |
17,500 |
Step 4: |
D. Subscriptions received as per Receipts and Payments A/c in 2007–2008 |
|
83,000 |
Illustration: 23
Calculate the total amount of salary paid in cash in 2008, from the following Income and Expenditure Account extract, to be included in Receipts and payments Account for the year ending Dec 31, 2008.
|
Rs |
Salary paid as per Income and Expenditure A/c for 2008 |
95,000 |
Outstanding Salary on Dec 31, 2008 |
15,000 |
Advance Salaries paid in 2007 |
7,500 |
Outstanding Salary on Jan 1, 2008 |
9,000 |
Advance Salary paid in 2008 |
16,500 |
Solution:
Refer the procedure explained and computation of “Salary” has to be made as follows:
Statement showing calculation of Salaries Paid in 2008 to be Included in Receipts and Payments Account for the Year Ending Dec 31, 2008.
|
|
Rs |
Rs |
Step 1: |
A Salaries as per Income and Expenditure A/c |
|
95,000 |
Step 2: |
B. Add: (i) Outstanding Salary in the beginning (i.e.) Jan 1, 2008 |
9,000 |
|
|
(ii) Advance Salary paid in 2008 |
16,500 |
25,500 |
Step 3: |
C. Less: (i) Outstanding Salary at the end (i.e.) Dec 31, 2008 |
15,000 |
1,20,500 |
|
(ii) Advance Salaries paid in 2007 |
7,500 |
22,500 |
Step 4: |
D. Salaries paid in 2008 to be included in Receipts and Payments A/c |
|
98,000 |
Illustration: 24
In extract of Income and Expenditure Account for the year ending 2008 is shown below:
|
Rs |
(i) Expenditures stationery as per Income and Expenditure Account for 2008 |
75,000 |
(ii) Stock of stationery on Jan 1, 2008 |
15,000 |
(iii) Creditors for stationery on Jan 1, 2008 |
30,000 |
(iv) Creditors for stationery on Dec 31, 2008 |
12,000 |
(v) Advance payments for stationery in 2008 |
2,500 |
(vi) Stock of stationery on Dec 31, 2008 |
5,500 |
(vii) Advance payments for stationery on Jan 1, 2008 |
1,000 |
Calculate amount spent on stationeries to be included in Receipts and Payments Account for the year ending on Dec 31, 2008.
Solution:
Statement Showing Calculation of Total Amount Spent on Stationeries in Receipt and Payments A/c for the Year Ending on Dec 31, 2008.
|
|
Rs |
Rs |
Step 1: |
Expenditure on stationery as per Income and Expenditure A/c |
|
75,000 |
Step 2: |
Add: (i) Advance payment for stationery in 2008 |
2,500 |
|
|
(ii) Creditors for stationery on Jan 1, 2008 (paid in 2008) |
30,000 |
|
|
(iii) Stock of stationery on Dec 31, 2008 |
5,500 |
38,000 |
|
|
|
1,13,000 |
Step 3: |
Less: (i) Stock of stationery on Jan 1, 2008 |
15,000 |
|
|
(ii) Creditors for stationery on Dec 31, 2008 |
12,000 |
|
|
(iii) Advance payments on stationery on Jan 1, 2008 |
1,000 |
|
|
|
|
28,000 |
Amount spent on stationery for 2008 to be |
85,000 |
||
included in Receipts and Payments Accounts |
|
Illustration: 25
You are required to prepare Receipts and Payments Account from the following Income and Expenditure A/c for the year 2008.
Information
|
Cash Balance as on Jan 1, 2008 |
Rs 3,000 |
|
Cash Balance as on Dec 31, 2008 |
Rs 25,000 |
|
Bank Balance as on Jan 1, 2008 |
Rs 2,000 |
Solution:
Note:
Remember the procedure discussed in the preparation of Receipts and Payments Account from Income and Expenditure Account, as discussed earlier.
Care should be taken to include all transactions whether they belong to capital natural or revenue nature.
Care should be taken while working out the balancing figure.
Receipts and Payments Account for the year ending Dec 31, 2008
Notes:
60% of Entrance Fees |
= Rs 12,000 |
100% of Entrance Fees |
= Rs 12,000 × 100/60 |
|
= Rs 20,000 |
40% is revenue nature
60% is capitalised as per instructions
40% of Life Membership Fees |
= Rs 4,000 |
100% of Life Membership Fees |
= Rs 4,000 × 100/60 |
|
= Rs 10,000 |
As furniture was purchased on the very first day of the accounting year its cost has to be recorded.
As Depreciation @ 10% amounted to Rs 3,000
Cost of Furniture = 100/10 × Rs 3000 = Rs 30,000
As building exists for a long time, its value is ignored for the current accounting period.
(Sometimes this balancing figure may be debited, i.e. Receipts side. Such balance has to be written as Bank OverDraft).
Illustration: 26
The Income and Expenditure Account of the Chennai Club for the year ending at Mar 31, 2008 is as follows:
The account has been prepared after the following adjustments.
|
Mar 31, 2007 |
Mar 31, 2008 |
|
Rs |
Rs |
Subscription Outstanding |
10,000 |
12,000 |
Subscription received in Advance |
9,000 |
8,000 |
Salaries Outstanding |
4,000 |
6,000 |
Audit Fee Outstanding |
1,000 |
2,000 |
Land and Buildings |
1,50,000 |
1,50,000 |
Sports Equipments |
40,000 |
54,000 |
|
|
(after 10% Depreciation) |
Loan |
50,000 |
50,000 |
Cash in Hand |
– |
20,000 |
You are required to prepare Receipts and Payments Account of the Chennai Club for the year 2007–2008 and the Balance Sheet as on Mar 31, 2008.
Solution:
Notes:
Step 1: |
Subscription Account of the actual Subscription Amount Collected (balancing figure). |
Step 2: |
Salaries Account to ascertain the amount spent on salaries (balancing figure). |
Step 3: |
Sports Equipment Account to calculate the how much was purchased (balancing figure). |
Step 4: |
Opening Balance Sheet (i.e) as on 31st Mar 2007 is prepared to compute Capital Fund (balancing figure). |
Step 5: |
Receipts and Payments Account is to be prepared. The balancing figure on the receipts side is the Opening Balance of cash, i.e. Cash in Hand as on Mar 31, 2007. (This figure has to be transferred to Opening Balance Sheet.) |
Step 6: |
Finally, Balance Sheet as on Mar 31, 2008 has to be prepared. |
Subscription Account
*1 This is the actual Subscription Amount received, to be transferred to Receipts and Payments Account.
Salaries Account
*2 This is the actual (really) amount spent on salaries during the accounting period, which has to be transferred to Receipts and Payments Account.
Sports Equipment Account
*3 This is the actual amount spent during the period to purchase sports equipment, which has to be recorded in Receipts and Payments Account.
Balance Sheet as on Mar 31, 2007
Note:
*This figure is obtained after preparing Receipt and Payment Account (refer Step. V).
Receipts and Payments Account for the year ending as at Mar 31, 2008
Balance Sheet as on Mar 31, 2008
So far, we have discussed accounting treatment of various items relating to Not-for-Profit entities.
Illustration: 27
Bharat Club provides you the following information – Stock in Restaurant on Mar 31, 2007 Rs 3,900 and on Mar 31, 2008, Rs 4,500. Restaurant Takings Rs 3,61,600. Restaurant Purchases Rs 2,04,800 Wages (including Rs 50,000 for restaurant) Rs 92,300 fuel Rs 17,700. China Glass Cutlery on Mar 31, 2007 Rs 2,500. Depreciation @ 20% is to be provided on China Glass Cutlery.
Required: Show how you will deal with the above items while preparing Restaurant Trading Account, Income and Expenditure Account and Balance Sheet.
Solution:
First, Trading Account has to be prepared
Restaurant Trading Account for the Year Ending at Mar 31, 2008
Note:
Opening Stock, as usual is entered on the debit side, followed by all expenses relating to the restaurant. Similarly, incomes (receipts) are entered on the credit side with closing stock. Difference between debit side and credit side is profit, here and is recorded as surplus. (Reverse the procedure if loss occurs and record it as deficit.)
Extract of Income and Expenditure Account for the Year Ended Mar 31, 2008
Extract of Balance Sheet as on Mar 31, 2008
When Wrong Statements are Given
Illustration: 28
The following is the so-called Income and Expenditure Account of Pearl City Club prepared by an account aspirant. It is submitted to you for audit.
Income and Expenditure Account as on Dec 31, 2008
Additional Information
Solution:
This is a different type of problem, which can be best explained through illustration. This account relates to NPO. Account is prepared by a novice.
Corrected statement: Income and Expenditure Account for the year ending Dec 31, 2008.
Such items are recorded here.
So they have to be deleted and a fresh Income and Expenditure has to be prepared.
This is not correct.
So they have to be recorded vice versa and a correct new Income and Expenditure A/c has to be prepared.
Following are the revised final accounts:
Stage I: Preparation of Opening Balance Sheet
Balance Sheet as on Dec 31, 2007
(i.e., informations (items) relating to this date are recorded here).
Stage II: Preparation of Receipts and Payments Account
Receipts and Payments Account for the year ending Dec 31, 2008
Stage III: Preparation of Income and Expenditure Account
Income and Expenditure Account for the year ending Dec 31, 2008
Stage IV: Closing Balance Sheet has to be prepared
Balance Sheet as on Dec 31, 2008
Illustration: 29
Correction of wrong statements
Modern (India) Citizens Club was registered in a city and the accountant prepared the following Receipts and Payments Account for the year ended on Mar 31, 2008 and showed a deficit of Rs 14,520:
Information
|
Apr 1, 2007 |
Mar 31, 2008 |
Cash in Hand |
450 |
– |
Bank Balance as per Pass Book |
24,690 |
10,440 |
Cheque issued not presented for Sundry Expenses |
270 |
90 |
Subscriptions Due |
3,600 |
2,940 |
Premises at Cost |
87,000 |
1,17,000 |
Accumulated Depreciation on Premises |
5,64,000 |
– |
Car at Cost |
36,570 |
46,800 |
Accumulated Depreciation – Car |
30,870 |
– |
Bar Stock |
2,130 |
2,610 |
Creditors for Bar Purchases |
1,770 |
1,290 |
Required: Prepare the correct Receipts and Payments Account, Income and Expenditure Account for the year 2007–2008 and Balance Sheet as Mar 31, 2008.
[l.C.W.A (Inter) – Modified]
Solution: In order to prepare the correct Receipts and Payments Account, all the following workings have to be made as follows:
Step 1
Balance Sheet as on Mar 31, 2007
Note:
Students should note that adjustment for depreciation is made in the Opening Balance Sheet itself because in the information as at Apr 1, 2007 shows accumulated depreciation, i.e. in the beginning of the accounting period itself. (Depreciation on Premises 5% and on Car @ 20% is calculated later).
Step 2
Subscription Account
Step 3
Creditors for Bar Account
Step 4
Bar Stock Account
Step 5
|
Rs |
Original Cost as on Apr 1, 2007 |
87,000 |
Less: Accumulated Depreciation (on Apr 1, 2007) |
56,400 |
Add: Purchases during the year |
30,600 |
|
30,000 |
Less: Depreciation @ 5%. |
60,600 |
Cost of Premises to be shown in the Balance Sheet as on Mar 31, 2008 |
3,030 |
|
57,570 |
Step 6
|
Rs |
Original Cost (as on Apr 1, 2007) |
36,570 |
Less: Accumulated Depreciation as on Apr 1, 2007 |
30,870 |
|
5,700 |
Profit = Sale Price – Cost |
|
Rs 9,000 – 5,700 |
3,300 |
(Given) (Worked out) |
|
Profit on Sale of Car |
3,300 |
Step 7
Purchase Price = (Rs 37,800 + Rs 9,000) |
46,800 |
Less: Depreciation @20% |
9,630 |
|
37,440 |
And now, main answers to question:
Receipts and Payments Account for the year ending on Mar 31, 2008
Income and Expenditure Account for the Year Ending on Mar 31, 2008
Balance Sheet as on Mar 31, 2008
Step 1: |
First, the Income and Expenditure Account is to be prepared in the usual manner, in addition, the following have to be recorded: |
(i) |
In the beginning, value of incomplete work is to be shown on expenditure side. |
(ii) |
Value of incomplete work at the end has to be recorded as the last item on income side. |
(iii) |
All fees and charges for completed work have to be recorded properly. |
Step 2: |
“Surplus” from income and expenditure has to be transferred to “Receipts and Expenditure Account” and credited (i.e., enter on the Credit side of Receipt and Expenditure Account). |
Step 3: |
Items relating to “Provision for Outstanding Fees and Charges” for the completed works and for the value of incomplete work – at the end of the year is to be recorded on the Expenditure side of Receipts and Expenditure as the first item (debited to Receipt and Expenditure A/c). |
Step 4: |
Similarly, items relating to “Provision for Outstanding Fees and Charges” for completed work and for the value of incomplete work at the beginning of the year is to be recorded on the Receipts (income) side of the account as a last item (credited to Receipts and Expenditure Account). |
Step 5: |
In case of partnership firms, make credit to partners for their share, if any. |
Step 6: |
Finally, “Surplus” is apportioned among the partners in the agreed ratio. |
Format of Income and Expenditure of a Professional Firm for the Year Ending on……….
Receipts and Expenditure Account for the ending on………….
Important Note
Illustration: 29
Dr. Kashyap is a neuro surgeon. The Receipts and Payments Account for the year 2008 is as follows:
Information
His position stood at Jan 1, 2008 is as follows:
Equipment: Rs 2,00,000; Medicines: Rs 30,000
Fees outstanding Rs 5,000; Books: Rs 40,000
Provide 10% Depreciation on Equipments and 20% on Books.
Further Information
Fees still outstanding (at the end): Rs 10,000
Salaries Still Payable (at the end): Rs 6,000
Stock of Medicines: Rs 4,000
You are required to prepare
Solution
Receipts and Expenditure Account of Dr. Kashyap for the Year Ending Dec 31, 2008
Note 1: Working notes for depreciation
|
Rs |
|
(i) Equipment |
2,00,000 |
(shown in information) |
Add: Purchase |
40,000 |
(from payment side) |
|
2,40,000 |
|
Less: Sale |
40,000 |
(Cost Value) |
|
2,00,000 |
|
Depreciation at 10% |
20,000 |
|
(ii) Books |
40,000 |
(from information) |
Add: Purchases |
20,000 |
(from payment side) |
|
60,000 |
|
Depreciation at 20% |
12,000 |
|
Note 2: As outstanding income is not included in principle, for practice it is added on Receipts side and the same amount is recorded as reserve on Expenditure side of this account.
Note 3: But outstanding expenses are recorded as visual. So salaries outstanding is shown without any further adjustments (same procedure as adopted for Income and Expenditure Account).
Balance Sheet as on Dec 31, 2007
Balance Sheet as on Dec 31, 2008
Illustration: 30
Dr. V.P.B. Singh is a doctor by profession. The receipts and payments for the year 2008 is as follows:
Information as on Jan 1, 2008
Equipment : |
Rs 2,00,000; Medicines |
: Rs 30,000 |
Fees Outstanding : |
Rs 5,000; Books |
: Rs 20,000 |
Provide Depreciation @10% on Equipment and 20% on Books.
Further information at the end of the year
Salaries still payable |
: |
Rs 5,500 (to attendants) |
Fees Outstanding |
: |
Rs 12,000 |
Stock of Medicines |
: |
Rs 5,000 |
Required: Receipts and Expenditure Account for the year ending on Dec 31, 2008 and Balance Sheet on that date.
Solution
Receipts and Expenditure Account of Dr. V.P.B. Singh for the Year Ending at Dec 31, 2008
Balance Sheet as on Dec 31, 2007 or Jan 1, 2008
Balance Sheet as on Dec 31, 2008
Professional Concerns
Illustration: 31 (Partnership firm)
X and Y are in partnership practicing as chartered accountants under the name EXY & Co. sharing profits and losses. They close their accounts on Mar 31 every year. The following was their Balance Sheet as on Mar 31, 2007.
Balance Sheet as on Mar 31, 2007
The following is the summary of their cash bank transactions for the year ending Mar 31, 2008:
Further Information | Rs | |
---|---|---|
1. |
Audit fees Receivable |
|
|
X’s Clients |
35,000 |
|
Y’s Clients |
45,000 |
2. |
Audit fees collected in Advance |
|
|
Y’s Clients |
15,000 |
3. |
Outstanding Liability for Salary on Mar 31, 2008 |
17,000 |
4. |
Depreciation to be provided on |
10% |
|
Furniture |
10% |
|
Office Machinery |
10% |
|
Library Books |
20% |
|
Car |
|
|
5. |
It has been agreed that 60% of audit fees and 50% of fees for other services should be transferred to Income and Expenditure Account in respect of each partner’s account, the balance being credited directly to the capital accounts, you are required to prepare Income and Expenditure Account for the year ended Mar 31, 2008 and a Balance Sheet as on Mar 31, 2008. |
[C.A. (Modified)]
Solution
Note:
These important points have to be kept in mind and computation is carried step by step as follows:
Important Note: As profit/ loss ratio among the partners is not mentioned in the question, Net Surplus has to be apportioned among the partners equally.
Step 1
Computation of Audit Fees
Particulars | Rs | Rs |
---|---|---|
Collection (given in question) (Receipt) |
3,90,000 |
2,65,000 |
Add: Outstanding on Mar 31, 2008 |
35,000 |
45,000 |
Add: Received Last Year |
15,000 |
— |
Less: Outstanding on Mar 31, 2007 (from Balance Sheet) |
4,40,000 |
3,10,000 |
|
40,000 |
30,000 |
Less: Received in advance on Mar 31, 2008 (from information) |
4,00,000 |
2,80,000 |
|
− |
15,000 |
Add: Provisions (Opening Balance) |
4,00,000 |
2,65,000 |
|
40,000 |
30,000 |
Less: Provisions (Closing Balance) |
4,40,000 |
2,95,000 |
|
35,000 |
45,000 |
|
4,05,000 |
2,50,000 |
*160% to be transferred to Income and Expenditure Account |
2,43,000 |
1,50,000 |
*240% to be transferred to Capital Account of Partners |
1,62,000 |
1,00,000 |
*1 This is the amount received for audit fees to be credited in Income and Expenditure Accounts.
*2 This amount has to be transferred to Capital Account of partners.
Step 2
Computation of fees for other services
|
|
Rs |
Rs |
|
Collections (from receipts and payments A/c) |
55,000 |
35,000 |
1. |
Less: 50% there of to be transferred to Income and |
27,500 |
17,500 |
|
Expenditure A/c |
|
|
2. |
Balance 50% taken to capital Account |
27,500 |
17,500 |
Capital Accounts
Step 4
EXY & CO Chartered Accountants Income and Expenditure Account for the Year Ended Mar 31, 2008
EXY & CO Balance Sheet as on Mar 31, 2008
Illustration: 32
M/s Sagar and Boond are a firm of solicitors whose partners Anand and Ashok share profits in equal shares after charging a management fee of 5% there of to Anand. For the year ended on Mar 31, 2008, the books maintained by the firm reveal the following particulars.
The following additional information is also available.
Required: Prepare Receipts and Expenditure Account of the firm for the year ended on Mar 31, 2008 and a Balance Sheet on that date.
Solution
Receipts and Payment Account for the year ending on Mar 31, 2008
Note: Management fee for Anand is calculated as:
Total receipts: Rs 1,55,200 before entering this and Net Profit, total expenses = Rs 89,400. Profit before Anands fee = Rs 1,55,200 – 89,400 = Rs 68,800. 5% of this is Rs 3,440.
Balance Sheet of M/s Sagar & Boond as at Mar 31, 2008
Deficit Account: Excess of expenditures over income, i.e. the balance of account in Income and Expenditure Account. This has to be deducted from the Capital Fund in the Balance Sheet.
Donation: The amount given to an NPO by any person without getting any benefit from an NPO.
Endowment Fund or Capital Fund: This fund represents the net assets of the NPOs. The term “Capital Fund” is used instead of “Capital in the Balance Sheet.” This is also known as General Fund or Accumulated Fund.
Income and Expenditure Account: It is otherwise called as the Profit and Loss Account of NPOs.
Legacy: A capital receipt gifted to NPOs in cash or property as per the will of a deceased person.
Life Membership fees: Members of an NPO by paying a single substantial payment to attain membership (instead of paying annual subscription) can enjoy the facilities of NPO for life time. Such payment is Life Membership Fees, usually capitalised.
Not-for-Profit Organisations (NPO): Voluntary organisations or agencies or institutions founded to promote art, culture education, recreation, sports and other social and charitable purposes without profit motive.
Receipts and Expenditure Account: In this account, income is determined on cash basis and expenditure on accrual basis, suitable for professional concerns.
Receipt and Payment Account: A summary of cash/bank transactions of a NPO for a specified accounting period.
Subscription Fees: Amount paid by members of NPO periodically at regular intervals.
Surplus: Excess of income over expenditure, i.e. the balance of account in Income and Expenditure Account. This has to be transferred and added to Capital Fund in the Balance Sheet.
Trial Balance: A list of all accounts in the general ledger with their balances.
Anthony R.N. and J.S. Reece, “Accounting Principles,” Richard D. Irwin, Inc.
Gupta, Nirmal, “Financial Accounting,” Sahitya Bhawan, Agra.
Gupta R.L. “Advanced Financial Accounting,” M. Radhaswamy and Sultan Chand & Sons, New Delhi (2002).
Gupta R.L. and M. Radhasamy, “Advanced Accounting,” Vol. I, Sultan Chand & Co., New Delhi, 2002.
Horngree, Sundem, Elliott, “Introduction to Financial Accounting,” Pearson Education, New Delhi, 2005.
Iyengar S.P. “Studies in Advanced Accountancy,” Sultan Chand & Sons, New Delhi, 2005.
Jain S.P. and K.L. Narang, “Financial Accounting,” Kalyani Publishers, New Delhi, 2004.
Kieso D.E. and J.J. Weygardt, “Intermediate Accounting,” John Wiley, New York, 1969.
Maheswari S.N. and S.K. Maheswari, “Financial Accounting,” Vikas publishing House, New Delhi, 2006.
Metcalf R.W. and P.L. Titard, “Principles of Accounting,” W B Saunders, Philadelphia, 1976.
Monga J.R., “Financial Accounting: Concepts and Applications,” Mayoor Paper Backs, New Delhi, 2007–08.
Sehgal, Ashok and Deepak Sehgal, “Advanced Accounting Part I, Taxmann Applied Services, New Delhi, 2004.
Shukla M.C., T.S. Grewal and S.C. Gupta, “Advanced Accounts,” Vol. I, Sultan Chand & Co., New Delhi, 2008.
Tulsian P.C., “Financial Accounting,” Pearson Education, New Delhi, 2004.
I Multiple Choice Questions
The amount to be debited to Income and Expenditure Account is
Answers:
II State whether the following statements are True or False
Answers:
1. True |
2. False |
3. False |
4. False |
5. False |
6. False |
7. True |
8. False |
9. True |
10. False |
11. False |
12. True |
13. False |
14. False |
15. False |
16. True |
17. False |
18. True |
19. False |
20. False |
21. True |
22. False |
23. False |
24. True |
|
III Fill in the blanks with appropriate word(s)
Answers:
IV Very Short Answer Questions
1. In 2008, the subscriptions received by the Golden Club, Jajpur were Rs 30,750 including Rs 250 for 2007 and Rs 500 for the year 2009 at the end of 2008. Subscriptions outstanding for 2008 were Rs 1,000. The subscriptions due but not received at the end of the previous year, i.e. Dec 31, 2007 were Rs 300 while subscriptions received in advance on the same date were Rs 750. Calculate the amount of subscriptions to be credited to Income and Expenditure Account for the year ending Dec 31, 2008.
Answer: Rs 31,450
2. From the above information draw an extract of Balance Sheet on Dec 31, 2008.
Answer:
Balance Sheet: Liabilities: Subscriptions received in advance Rs 500
Assets: Subscriptions outstanding Rs 1,000
3. From the following extracts of Receipts and Payments Account and additional information, you are required to calculate the income from subscriptions for the year ending Dec 31, 2008.
Receipts and Payments Account for the Year Ending Dec 31, 2008
Answer: Rs 32,000
4. From the above sum, prepare the Balance Sheet as on Dec 31, 2008.
Answer:
Balance Sheet: Liabilities: Subscriptions received in advance Rs 5,000
Assets: Subscriptions outstanding Rs 6,000
5. From the following calculate the amount of subscriptions to be included in the Income and Expenditure account for the year ended Mar 31, 2008.
For the year ending 2006–2007: Rs 15,000
For the year ending 2007–2008: Rs 2,00,000
For the year ending 2008–2009: Rs 25,000
Subscriptions outstanding as on Mar 31, 2007 were Rs 40,000 out of which Rs 3,000 were considered irrecoverable. On the same date, subscriptions received in advance for 2007–2008 were Rs 20,000, Subscriptions still outstanding as on Mar 31, 2008 amounted to Rs 50,000.
Answer:
Subscriptions Account: Amount to be included in the Income & Expenditure Account = Rs 2,48,000
6. There are 500 members of a club, each paying annual subscription of Rs 100. On Mar 31, 2007, subscription in arrears amounted to Rs 7,500 subscriptions received during the year ended Mar 31, 2008 amounted to Rs 48,000 including Rs 3,000 for the year 2006–2007 and Rs 8,000 for the year 2007–2008 calculate the amount of subscription in arrears as on Mar 31, 2008 by preparing the subscriptions accounts.
Answer: Rs 14,500
7. Calculate the income from subscription for the year 2008 from the following particulars of a club:
Jan 1, 2008 Rs |
Dec 12, 2008 Rs |
||
Outstanding Subscription |
14,500 |
11,000 |
|
Advance Subscription |
3,200 |
6,000 |
|
Subscription received during 2008: Rs 2,20,500 |
Answer: Rs 2,14,200
8. Prepare Income and Expenditure Account for the year ending on Dec 31, 2008 and the Balance Sheet on that date from the following particulars.
Extract of Receipts and Payments Account for the Year Ending at Dec 31, 2008
The club has 50 members each paying an annual subscription of Rs 100. Subscriptions outstanding on Dec 31, 2008 were Rs 1,600.
Answer:
Income & Expenditure A/c: Subscriptions (Income): Rs 5,000
Balance Sheet: Liabilities: Subscriptions received in advance Rs 750
Assets: Outstanding Subscriptions Rs 1,600
9. How will you deal with the following items while preparing the final accounts for the year 2008 of a NPO?
Answer:
Income & Expenditure A/c: Subscriptions (Income): Rs 81,000
Balance Sheet: Liabilities: Subscriptions received in advance Rs 7,500
Assets: Outstanding Subscriptions Rs 6,000
10. Prepare Subscription Account from the following items for the year ending on Mar 31, 2008.
Answer: Rs 47,800
11. From the following extract of Receipts and Payments Account and the Additional Information, prepare Income and Expenditure Account for the year ending on Dec 31, 2008 and the Balance Sheet on that date.
Extract of Receipts and Payments Account for the Year Ending on Dec 31, 2008
Additional Information
Subscription outstanding as on Dec 31, 2007: Rs 11,000
Subscription received in advance as on Dec 31, 2007: Rs 5,400
(including Rs 1,400 for 2008).
There are 1,000 memberships each paying an annual subscription of Rs 100.
Answer:
Income & Expenditure A/c: Subscriptions (Income): Rs 1,00,000
Balance Sheet: Liabilities: Subscriptions received in advance Rs 11,500
Assets: Outstanding Subscriptions Rs 11,000
12. Prepare the final accounts of a sports club with the following particulars for the year ended Mar 31, 2008.
Prizes awarded: Rs 4,000
Prize fund as on Mar 3l, 2007: Rs 25,000
Donations for prizes received during 2007–2008: Rs 6,000
10% Prize Fund Investments as on Mar 31, 2007: Rs 38,000
Interest received on Prize Fund Investments: Rs 3,800
Answer: Balance Sheet: Liability: Prize Fund: Rs 30,800
13. How will you deal with the following particulars while preparing the final account for the year ending on Mar 31, 2009?
Expenditure on construction of a pavilion Rs 5,00,000, pavilion fund as at Mar 31, 2008: Rs 7,50,000
Donations to Pavilion fund received on May 31, 2008: Rs 10,00,000.
Capital funds as on Mar 31, 2008: Rs 9,75,000
Answer:
Balance Sheet: Liabilities
14. How will you deal with the following while preparing the final accounts for the year ending on Mar 31, 2008. Sports equipments as on Mar 31, 2007 Rs 1,50,000 Equipments (book value on Apr 1, 2007 Rs 40,000) sold at a loss of 25% on Sep 1, 2007 provide 10% depreciation on equipments. Equipments costing Rs 2,00,000 were purchased on Dec 31, 2007.
Answer:
Equipment Account: Rs 2,94,000; Total: Rs 3,50,000
15. Prepare Income and Expenditure Account for the year ending on Mar 31, 2009 and the Balance Sheet on that date with the following items:
Balance as on Apr 1, 2008: Rs 7,500
Donations Received for Tournament during the year Rs 51,600
Answer:
Balance Sheet: Liability:
16. Prepare the Office Machinery Account for the year ending on Mar 31, 2009.
Office Machinery as on Mar 31, 2008: Rs 80,000
Office Machinery (having book value as Apr 1, 2008 of Rs 30,000) sold at a loss of 25% on Sep 1, 2008
Machinery is to be depreciated at 10% p.a.
Machinery costing Rs 75,000 was purchased on Jan 1, 2009
Answer:
Machinery Account: Rs 1,18,125; Total: Rs 1,55,000
17. Prepare final accounts from the following particulars for the year ending on Mar 31, 2009.
|
|
As on Apr 1, 2008 Rs |
As on Mar 31, 2009 Rs |
|
Creditors for Sports Materials |
3,000 |
7,500 |
|
Stock of Sports Materials |
9,000 |
18,000 |
During the year 2008–2009, the payments made to these creditors amounted to Rs 30,000 and cash purchases were Rs 10,000.
Answer:
Assets: Stock – Sports Materials: Rs 18,000
18. Salaries paid by a club during 2008 amounted to Rs 24,000. With the following further information prepare Income and Expenditure Account.
|
|
Dec 31, 2007 Rs |
Dec 31, 2008 Rs |
|
Pre-paid Salary |
2,000 |
3,500 |
|
Unpaid Salary |
5,000 |
2,000 |
Answer:
Income & Expenditure A/c: Salaries (Expenditure): Rs 19,500
19. How will you deal with the following items while preparing the final accounts for the year 2008?
|
|
Dec 31, 2007 Rs |
Dec 31, 2008 Rs |
|
Outstanding Locker Rent |
800 |
1,200 |
|
Advance Locker Rent |
750 |
900 |
|
Locker Rent Received during the year 2008: Rs 4,800 |
Answer:
Income & Expenditure A/c: Salaries (Expenditure): Rs 19,500
20. Calculate the amount of stationery posted to Income and Expenditure Account for the year ending on Dec 31, 2008.
|
|
Jan 1, 2008 Rs |
Dec 31, 2008 Rs |
|
Stock of Stationery |
500 |
200 |
|
Creditors for Stationery |
400 |
250 |
|
Advance Paid for Stationery |
100 |
150 |
|
Amount Paid for Stationery during the year 2008: Rs 2,200. |
Answer:
Income & Expenditure A/c: Stationary (Expenditure): Rs 2,300
21. Compute the amount of stationery to be shown in the Income and Expenditure Account for the year ending at Dec 31, 2008.
|
|
Rs |
|
Stock of Stationery as on Jan 1, 2008 |
4,500 |
|
Unpaid during the year ending |
500 |
|
Unpaid during the year ending on Dec 31, 2008 |
1,700 |
|
Pre-paid during the year ending on Dec 31, 2007 |
1,000 |
|
Pre-paid during the year ending on Dec 31, 2008 |
1,300 |
|
Payments to stationery during the year 2008 |
20,550 |
Answer:
Income & Expenditure A/c: Stationary (Expenditure): Rs 25,950
22. Explain the treatment for entrance fees with the following items while preparing the final accounts for the year ending on Mar 31, 2009.
Entrance fees received during the year 2008–2009: Rs 3,50,000. 60% of the entrance fees is to be capitalised.
Answer:
Balance Sheet: Liability: Rs 2,10,000
Income & Expenditure: Income: Rs 1,40,000
23. Explain the Accounting Treatment for the following items for the year ending on Mar 31, 2009.
|
Particulars |
Debit Rs |
Credit Rs |
---|---|---|---|
|
Tournament Fund |
– |
8,000 |
|
Tournament Fund Investment |
8,000 |
|
|
Income from Tournament Fund |
– |
1,600 |
|
Investment |
|
|
|
Tournament Expenses |
1,000 |
– |
Answer:
Balance Sheet: Liabilities: Rs 8,600
Assets: Rs 8,000
24. Prepare Restaurant Trading Accounts.
Stock in Restaurant on Mar 31, 2008: Rs 6,000 and on Mar 31, 2009: Rs 11,000. Restaurant purchases Rs 4,50,000. Restaurant takings Rs 7,80,000. Wages (including Rs 75,000 for the Restaurant) Rs 1,20,000. Fuel Rs 27,500. Cooking utensils on Mar 31, 2008: Rs 10,000. Depreciate cooking vessels @10%.
Answer:
Restaurant Trading Account:
Surplus: Rs 2,31,500
(Note: In this problem, cost of boarding expenses of general staff is not given)
25. From the following particulars prepare the Income and Expenditure Account for the year ending at Dec 31, 2008.
|
|
Rs |
|
Subscriptions received during the year |
9,000 |
|
Subscriptions outstanding at Dec 31, 2008 |
1,700 |
|
Subscriptions received in advance at Dec 31, 2008 |
200 |
|
Life membership fees |
2,500 |
|
Donations received |
3,000 |
|
Interest received |
250 |
|
Printing, postage and stationery |
750 |
|
Office Expenses |
1,200 |
|
Investments purchased |
4,000 |
|
Outstanding office expenses at Dec 31, 2008 |
600 |
Answer:
Income & Expenditure A/c: Surplus: Rs 11,200
Hint: Life Membership Fee & Investment: Capitalised
26. Prepare Receipts and Payments Account of Leo Club, Delhi for the year ending on Dec 31, 2008.
|
|
Rs |
|
Cash at Jan 1, 2008 |
3,275 |
|
Subscriptions received (including Rs 200 for the year 2007 and Rs 250 for the year 2009) |
9,725 |
|
Salaries |
1,000 |
|
Life Membership subscription |
500 |
|
Newspapers purchased |
300 |
|
Books purchased |
1,000 |
|
Donations received |
2,000 |
|
Taxes Paid |
250 |
|
Sale of Old Newspaper |
50 |
|
Sale of Old Sports Materials |
100 |
|
10% Tournament Fund Investments |
5,000 |
|
Subscription for Tournament Received |
5,000 |
|
Tournament Expenses |
700 |
|
Sale of Old Machine |
|
|
Sports Materials purchased |
1,000 |
|
Interest on Tournament Fund Investment |
125 |
|
Printing and Stationery |
200 |
|
Furniture |
500 |
Answer: Receipts & Payments A/c: Balance c/d Closing Balance: Rs 11,580 Total: Rs 21,530
27. Prepare Income and Expenditure Account for the year ending on Dec 31, 2008
|
|
Rs |
|
Subscriptions received (including Rs 5,000 for 2007 and Rs 4,000 for 2009) |
65,000 |
|
Sports Equipment purchased |
20,000 |
|
Printing and Stationery |
3,200 |
|
Salary paid (including Rs 100 for 2007) |
12,000 |
|
Donations received |
5,000 |
|
Rent Paid |
6,000 |
|
Salary outstanding for 2008 |
700 |
|
Tournament Expenses |
2,300 |
|
Entrance Fees (60% to be capitalised) |
8,000 |
|
Entertainment Expenses |
1,800 |
|
Subscriptions due but not received for 2008 |
7,500 |
Answer: Income & Expenditure A/c: Surplus: Rs 46,700 Total: Rs 71,700
28. Summary of Cash Book: Prepare Income and Expenditure Account
Subscriptions due for the year are Rs 1,500 and received in advance for year 2009 are Rs 700. The written down value of scooter sold Rs 4,000. Depreciate the value of scooter @ 10%.
Answer: Income & Expenditure A/c: Surplus: Rs 13,950Total: Rs 20,100
1. From the following particulars you are required to prepare Income and Expenditure Account of Kolkata Golf Club for the year ending on Dec 31, 2008 and the Balance Sheet as on Dec 31, 2008.
(B.Com Kolkata — Modified)
Answer:
Hint: Entrance fees Revenue item outstanding subscription: Rs 2,000
2. From the following Receipts and Payments Account of Stars Cricket Club, prepare Income and Expenditure Account for the year ending Dec 31, 2008 and the Balance Sheet as on that date.
In addition to the above, the following further details are available from the accounts of the club:
[B.Com (Hons) Delhi 2004 — Modified]
Answer:
[As book value of furniture (sold) is not given in the question, either profit on sale nor loss on sale was recorded in the entire and expenditure account. The entire sale value was adjusted in the final Balance Sheet]
3. The following is the Trial Balance of a pubic school on Mar 31, 2009.
Depreciate Building @ 2% furniture @ 10% and Books @ 20%. The investments were made against various funds commonly.
Prepare Income and Expenditure Account for the year ending Mar 31, 2009 and the Balance Sheet as on that date.
[B. Com (Hons) Delhi 2004 – Modified]
Answer:
Hints:
4. Mr. Prani and Mr. Proper are in partnership as proprietors of a boarding school, sharing profits Mr. Praini Rs 3/5 and Mr. Proper Rs 2/5. The Trial Balance extracted from their Books as on Mar 31, 2009 which coincident with the end of the last terms of the year was as follows:
Additional Information
Prepare the revenue account for the year ended Mar 31, 2009 and the Balance sheet on that date:
(B.Com – Madras modified)
Answer:
5. From the following Trial Balance of the People’s Education Society as at Mar 31, 2009, prepare an Income and Expenditure Account for the year ending at Mar 31, 2009 and a Balance Sheet on that date:
Additional Information
(I.C.W.A – Modified)
Answer:
6. The following particulars relate to the cosmopolitan club for the year ended Dec 31, 2008. You are required to prepare Income and Expenditure Account for the year ended Dec 31, 2008 and a Balance Sheet as on Dec 31, 2008.
The assets and literalities on Jan 1, 2008 were as follows: Utensils: Rs 1,600, furniture Rs 5,000, consumable stores: Rs 700, Creditors: Rs 2,400.
On Dec 31, 2008 value of consumable stores was Rs 1,400 creditors amounted to Rs 1,100, the subscriptions outstanding were Rs 150; and the interest accrued on fixed deposit was Rs 50.
[B. Com (Madras) – Adapted]
Answer:
Hint:
7. The following balances is obtained from the books of Jaipur Cricket as on Mar 31, 2008 and on Mar 31, 2009.
|
|
Mar 31, 2008 Rs |
Mar 31, 2009 Rs |
|
Building |
1,60,000 |
1,71,000 |
|
Furniture |
80,000 |
61,200 |
|
Advance Subscription |
3,000 |
2,000 |
|
Pre-paid Expenses |
1,600 |
2,000 |
|
Outstanding Expenses |
6,000 |
2,400 |
|
Arrears of Subscriptions |
6,000 |
10,000 |
|
Sports Equipments |
48,000 |
43,200 |
|
Investments |
— |
24,000 |
|
Books |
30,000 |
32,400 |
|
Cash |
32,000 |
34,200 |
Consider the following information relevant to the year 2008–2009:
Building |
: |
Rs 9,000 |
Furniture |
: |
Rs 6,800 |
Sports Equipment |
: |
Rs 10,800 |
Books |
: |
Rs 3,600 |
[B. com (Hons), Delhi – Modified]
Answer:
Hint:
310 × Rs 30 × 6 = 55,800 (for last 6 months)
300 × Rs 30 × 6 = 54,000 (for last 6 months)
1,09,800
8. From the following trial balance and other information given below, prepare Income and Expenditure Account for the year ended Dec 31, 2008 and a Balance Sheet as on Dec 31, 2008.
Fees yet to be received for the year are Rs 5,000; Salaries yet to be paid Rs 6,000, Furniture costing Rs 7,500 was purchased on July 1, 2008. The book value of the furniture sold was Rs 10,000, on Jan 1, 2008. Depreciation is to be charged @10% p.a. on furniture 15% p.a. on library Books and 5% p.a. on building.
[B.Com. (Hons) Delhi 2005 – Modified]
Answer
Hints: |
B.V. on Dec 31, 2008 |
Rs 20,000 |
|
Less Sold B.V. Rs 10,000 |
Rs 10,000 |
|
Depreciation on Rs 2,500 for 1 year |
Rs 250 |
|
Depreciation on Rs 7,500 for 6 months |
Rs 375 |
|
(Purchased on July 1, 2008) |
Rs 625 |
9. The following is the Receipts and Payments Account of an Amusement Club, Mumbai Receipts and Payments NC for the year ended Dec 31, 2008
Current Assets and Liabilities:
|
|
Dec 31, 2008 Rs |
Dec 31, 2008 Rs |
|
Subscriptions in arrears |
400 |
900 |
|
Subscriptions in advance |
600 |
1,200 |
|
Furniture |
4,000 |
1,200 |
Depreciation was 10% p.a on the furniture left after selling a part of it.
50% of legacies may be capitalised. Prepare Income and Expenditure Account for the year ending on Dec 31, 2008 and the Balance Sheet on that date.
[B.Com (Hons) Delhi – Modified]
Answer
Hints
10. Prepare Income and Expenditure for the year ending Mar 31, 2009 and a Balance Sheet on that date from the following details of Rock City Tennis Club, Tiruchirapalli.
Receipts and Payments Account for the year ending as at Mar 31, 2009
Information
|
|
|
Rs |
|
Freehold Club House |
: |
50,000 |
|
Cash at Balance |
: |
18,000 |
|
Equipment |
: |
27,000 |
|
Cash in Hand |
: |
520 |
Answer
Hints
11. Prepare Receipts and Payments Account for the year ending Mar 31, 2009 and the Balance Sheet on that date from the following.
Income and Expenditure Account for the year ending Dec 31, 2008
|
Mar 31, 2008 |
Mar 31, 2009 |
|
|
Cash in Hand and at Bank |
|
11,850 |
|
Shares and Debentures |
1,40,000 |
1,40,000 |
|
(Face Value of Rs 1,50,000) |
|
|
|
Subscription Outstanding |
3,500 |
5,000 |
|
Subscription received in advance |
600 |
800 |
|
Salaries Outstanding |
250 |
500 |
|
Properties |
1,50,000 |
1,48,125 |
|
Furniture |
1,000 |
990 |
|
Investments |
500 |
500 |
|
Books |
1,750 |
1,950 |
|
Stationery Expenses Due |
100 |
150 |
|
Stock of Stationery |
500 |
400 |
(B.Com – Modified)
Answer
Hints
|
|
|
Rs |
|
1. Subscription A/c (B.F) |
: |
11,200 |
|
2. Salaries A/c (B.F) |
: |
14,500 |
|
3. Stock of Stationery |
: |
2,400 (Purchase) |
|
4. Creditors for Stationery |
: |
2,350 |
|
5. Books NC (Purchase) |
: |
250 |
|
6. Furniture A/c (Purchase) |
: |
50 |
12. From the following particulars relating to R.M. Charitable Hospital, prepare (1) Receipts and Payments Account for the year ended Dec 31, 2008, and the Balance Sheet as on that date.
Income and Expenditure Account for the Year Ended Mar 31, 2008
Additional Information | Dec 31, 2007 Rs |
Dec 31, 2008 Rs |
Subscriptions Due |
240 |
320 |
Subscriptions Received in Advance |
128 |
200 |
Electricity and Water Bills Unpaid |
184 |
230 |
Stock of Medicines |
15,640 |
19,500 |
Estimated Value of Equipment |
23,200 |
27,800 |
Furniture and Fixtures (Cost less Depreciation) |
42,000 |
37,800 |
Land |
— |
20,000 |
Interest Accrued on Investment in 11% |
— |
|
Debentures costing Rs 2,05,000 |
7,500 |
7,500 |
Cash in Hand |
680 |
320 |
Cash at Bank |
18,000 |
— |
[B.Com (Hons) Delhi – Modified]
Answer
Hints
|
|
|
|
Rs |
|
(i) |
Subscriptions A/c Subscription received |
: |
1,11,992 |
|
(ii) |
Electricity and Water NC |
: |
904 |
|
(iii) |
Equipment NC Cash Purchases |
: |
11,100 |
|
(iv) |
Balance Sheet as on Dec 31, 2007 |
: |
3,11,948 |
13. The Income and Expenditure Account of Chennai Club for the year ended Mar 31, 2009 is as follows:
The Income and Expenditure Account has been prepared after the following adjustments.
|
|
Rs |
|
Subscriptions outstanding on Mar 31, 2008 |
6,000 |
|
Subscriptions received in advance on Mar 3, 2008 |
4,500 |
|
Subscription outstanding on Mar 3, 2009 |
4,000 |
|
Subscription received in advance on Mar 31, 2009 |
7,000 |
Salaries outstanding at the beginning of the year and at the end of the year were Rs 2,000 and Rs 1,500, respectively.
Audit fees for the year has not been paid. Previous years audit fees Rs 750 was paid during the year.
The clubs assets on Mar 31, 2008 were as follows:
Freehold land Rs 50,000; sports equipments Rs 13,000.
At the end of the year, after the depreciations the equipments amounted to Rs 13,500. Bank loan of Rs 5,000 as on Mar 31, 2008 was still due at the end of current year. On Mar 31, 2009, Cash at Bank amounted to Rs 34,850.
You are required to prepare the Receipts and Payments Account for the year ended Mar 31, 2009 and the Balance Sheet on that date.
(C.A. Inter – Modified)
Answer
Hints |
Capital fund |
Rs 59,000 |
|
Sports Equipment Purchased |
Rs 1,750 |
|
Subscriptions |
Rs 69,500 |
14. Following is the Income and Expenditure Account of Hyderabad Club for the year ended on Mar 31, 2009.
The above account is prepared after the adjustments from:
|
Mar 31, 2008 Rs |
Mar 31, 2009 Rs |
Building |
2,00,000 |
1,95,000 |
Sports Ground |
2,00,000 |
2,00,000 |
Sports Equipment |
12,000 |
18,000 |
Furniture |
10,000 |
— |
Fixed Deposits |
16,000 |
16,000 |
Bank A/c – savings |
— |
50,000 |
Subscriptions Outstanding |
10,000 |
4,000 |
Subscriptions received in advance |
6,000 |
2,000 |
Stock of Stationery |
500 |
1,000 |
Audit Fee Outstanding |
400 |
500 |
Salaries Outstanding |
1,000 |
2,000 |
Affiliation fee paid in Advance |
— |
500 |
Cash on hand on Mar 31, 2008 was Rs 2,500. New Furniture of Rs 18,000 has been purchased on credit but not entered in books. Depreciate the furniture @ 5%.
Prepare Receipts and Payments Account for the year ended on Mar 31, 2009 and the Balance Sheet on that date.
(ICWA – Modified)
Answer
Receipts and Payments A/c Cash Balance : Rs 500
Balance Sheet as on Mar 31, 2009 : Rs 5,02,100
Hints
Subscriptions: Rs 92,000, Salaries: Rs 30,500
Stationery: Rs 3,000, Capital Fund: Rs 4,43,600
15. The following is the Receipts and Payments Account of a club for the year ended Mar 31, 2009.
Additional Information
Cost overspent represents amount of honorarium to the treasurer not drawn due to shortage of funds. But the total salary payable to him for the year was already included in Rs 9,600.
Depreciation is to be provided @ 5% p.a. on the written down value of the premises and @ 15% p.a. on two wheeler for the whole year.
You are required to adjust Bank Balance according to Cash Book and prepare an Income and Expenditure Account for the year ended Mar 31, 2009 and the Balance Sheet on that date.
(PE Examination – Modified)
Answer
(i) Surplus Rs 12,180 (ii) Balance Sheet Rs 56,500
Hints
16. Moon Club provides the following information: Stock in Restaurant on Mar 31, 2008 Rs 7,800, and on Mar 31, 2009 Rs 9,000; Restaurant taking Rs 7,22,200; Restaurant Purchases Rs 4,09,600 wages (including Rs 1,00,000 for Restaurant) Rs 1,84,600 fuel: Rs 35,400; China Glass Cutlery Rs 5,000, Depreciation @ 20% is to be provided on China Glass cutlery. The cost of boarding expenses of the staff is estimated or Rs 55,000 of which Rs 40,000 is to be charged to the restaurant.
Prepare Restaurant Trading Account and Income and Expenditure Account for the year ended Mar 31, 2009.
Answer: Restaurant Trading Account Rs, 1,93,400
(Surplus – transfer to Income and Expenditure Account Profit)
17. How will you deal with the following items while preparing the Restaurant Trading Account and Income and Expenditure Account of a club for the year ending on Mar 31, 2009.
|
|
Apr 1, 2008 Rs |
Mar 31, 2009 Rs |
|
Stock of provisions |
1,500 |
19,000 |
|
Dues from members for provisions |
1,500 |
2,000 |
|
Creditors to provisions |
5,000 |
2,500 |
Creditors to Provisions
Information: Payments made to creditors for provisions: Rs 52,500; Collection from credit members for Provisions Rs 44,500; cash sales being 10% of total sales. Cash purchases being 1/1 1 of the total purchases, wages, fund, etc. Rs 2,500.
Answer: Restaurant Trading Account Profit Rs 10,000
Hints
18. The following is summary of the cash book for the year ending Mar 31, 2009
On Apr 1, 2008 the clubs assets were furniture Rs 96,000; restaurant stock Rs 5,200, stock of prizes Rs 1,600, Rs 10,400 was owing for supplies to the restaurant on Mar 31, 2009, the restaurant stock Rs 6,000, prizes in hand were Rs 1,000, while the club owed Rs 11,200 for restaurant supplies. It was also found that subscriptions unpaid at Mar 31, 2009 amounted to Rs 2,000, and that the figure of Rs 59,440 shown in the cash took included Rs 1,400, in respect of previous year and Rs 800 paid in advance for the following year.
Prepare an account showing the profit or loss made on the restaurant and a General Income and Expenditure Account for the year ended Mar 31, 2009 together with a Balance Sheet as on that date, after writing 10% off the furniture.
[B.Com (Hons) – Kolkata – Modified]
Answer:
19. Vasant sport and social clubs financial year on Mar 31. The assets and liabilities of the club at dates stated as follows:
|
|
As on Mar 31, 2008 Rs |
As on Mar 31, 2009 Rs |
|
Equipment |
50,000 |
56,000 |
|
Subscription in Arrears |
4,000 |
3,600 |
|
Subscription in Advance |
2,600 |
2,200 |
|
Creditors for Bar Stocks |
7,000 |
8,600 |
|
Bar Stocks |
16,000 |
12,000 |
|
Electricity Owning |
2,010 |
2,800 |
|
Lottery Fund |
1,000 |
— |
|
Bank Balance |
14,460 |
— |
|
||
|
Subscriptions (including Rs 1,200 of arrears from previous year) |
42,000 |
|
Bar Trading |
82,000 |
|
Annual Dinner/Dance Sale of Tickets |
48,000 |
|
Sale of Lottery Tickets |
3,600 |
|
In the same period the following payments have been made |
|
|
Affiliation Fees (for four years) |
2,000 |
|
Purchase of Equipment |
16,000 |
|
Bar Stocks |
41,000 |
|
Barman’s Wages |
15,000 |
|
Catering (dinner/dance) |
28,800 |
|
Hair of Baud |
6,000 |
|
Lottery Prizes |
1,200 |
|
Rent of Hall |
30,000 |
|
Printing and Postage |
4,000 |
|
Electricity |
11,620 |
|
Honorary Secretary’s Expenses |
2,440 |
|
Repairs to Equipment |
6,000 |
Note: Subscription arrears of previous year written off Rs 800
Prepare:
(1) Bar Trading Account (2) Income and Expenditure Account for the year ending Mar 31, 2009 and (3) Balance Sheet as on that date.
[B. Com (Hons) Delhi – Modified]
Answer:
20. Following is the summary of bank transactions of a club during the year 2008.
Receipts and Payments Account
Additional Information
|
Jan 1, 2008 |
Dec 31, 2008 |
200 |
100 |
|
Interest on fixed deposit of Rs 20,000 not entered in the Pass Book |
– |
1,200 |
Entry in respect of bank charges was not passed through the cash book |
– |
60 |
A member deposited subscription for 2009, direct into bank, not passed through cash book |
– |
40 |
Cheque deposited for subscription but not yet cleared by the bank. |
1,600 |
1,200 |
You are required to prepare Income and Expenditure Account for the year ending Dec 31, 2008 and Balance Sheet as on that date.
Answer
Hints
21. An amusement club in a city prepared the following Receipts and Payment Account for the year ended on Dec 31, 2008 which showed a deficit of Rs 7,260:
|
Rs |
Rs |
---|---|---|
Receipts: |
|
|
Subscriptions |
31,065 |
|
Fair Receipts |
3,600 |
|
Variety Show Receipts |
6,405 |
|
Interest |
345 |
|
Bar Collections |
11,175 |
|
Cash Spent more |
500 |
|
|
53,090 |
|
Payments: |
|
|
Premises |
15,000 |
|
Honorarium to Secretary |
6,000 |
|
Rent |
1,200 |
|
Rates and Taxes |
1,890 |
|
Printing and Stationery |
705 |
|
Sundry Expenses |
2,675 |
|
Wages |
1,260 |
|
Fair Expenses |
3,585 |
|
Bank Purchases and Payments |
8,655 |
|
Repairs |
480 |
|
New Moped (Less: Proceeds of old moped of Rs 4,500.00) |
18,900 |
60,350 |
Deficit |
7,260 |
|
|
Jan 1, 2008 Rs |
Dec 31, 2008 Rs |
Cash in Hand |
225 |
– |
Bank Balance as per Pass book |
12,345 |
5,220 |
Cheque issued not presented for Sundry Expenses |
135 |
45 |
Subscriptions Due |
1,800 |
1,470 |
Premises at Cost |
43,500 |
58,500 |
Accumulated Depreciation on Premises |
28,200 |
– |
Moped at Cost |
18,285 |
23,400 |
Accumulated Depreciation Moped |
15,435 |
– |
Bar Stock |
1,065 |
1,305 |
Creditors for Bar Purchases |
885 |
645 |
Prepare the correct Receipts and Payments A/c, Income and Expenditure A/c and Balance Sheet (for Dec 31, 2008).
(ICWA – 1979)
Answer: Income and Expenditure A/c Surplus: Rs 50,910 Balance Sheet as on Dec 31, 2008, Rs 55,455 (total) Capital Fund: Rs 32,565
22. Following is the receipts and payments of a club prepared by an accounting aspirant.
Receipts and Payments Account
Additional Information
Club had on Jan 1, 2008, furniture Rs 400, investments at 5% Rs 6,000, sports material Rs 1,480.
On Dec 31, 2008, subscription outstanding Rs 60, subscription pre-paid Rs 20, stock of sports material Rs 400. Prepare the correct Receipts and Payments Account, Income and Expenditure Account and Balance Sheet.
Answer
23. The Income and Expenditure Account of a club is given below (perhaps prepared by one who does not thoroughly knows the accounting principles).
Income and Expenditures as on Dec 31, 2008
Additional Information
You are called upon to give your comments on this. Then you are required to prepare the revised final accounts of the items shown in the problem.
Answer: Comments
These mistakes should be corrected, and recorded properly.
Final Accounts
24. From the following so-called Balance Sheet, you are required to correct the mistakes and make proper final accounts of the social club for the year ending Dec 31, 2008.
Balance Sheet for the year 2008
Answer
25. From the figures given below prepare an Income and Expenditure Account for 2008.
Subscriptions for 2008 still receivable were Rs 700 interest due on savings certificates Rs 100 and rent unpaid but due was Rs 60.
(B.Com, Madras)
(Only year changed)
Answer: Excess of income over expenditure Rs 1,400
26. Given below is the Receipts and Payments Account of the Indian Gymkhana for the year ended Dec 31, 2008.
Subscriptions outstanding for 2008: Rs 300; salaries outstanding for Dec 2008: Rs 200.
Prepare an Income and Expenditure for the period and the Balance Sheet as on Dec 31, 2008.
(B.Com Madras – Modified)
Answer: Excess of income over expenditure Rs 770 Balance sheet Total: Rs 64,170
27. The following are the items of Receipts and Payment of the Bengal Club as summarised from the books of account maintained by the secretary.
It was ascertained from enquiry that the following represented a fair picture of Income and Expenditure of the club for the year 2008 for audit purpose.
Value of fixed assets as on Dec 31, 2007 were building Rs 44,000; cricket equipments Rs 25,000 and furniture Rs 4,000. The rates of depreciation are on building 5%, cricket equipments 10% and furniture 6%. You are required to prepare the Balance Sheets of the club as on Dec 31, 2007 and Dec 31, 2008.
[B.Com (Hons)]
(Kolkatta University Modified)
Answer
|
|
Rs |
|
(i) Balance Sheet as on Dec 31, 2007 = total |
: 78,800 |
|
Capital Fund |
: 78,000 |
|
(ii) Balance Sheet as on Dec 31, 2008= total |
: 97,960 |
28. Prepare Receipts and Payments Account for the year ending Mar 31, 2009 and the Balance Sheet on that date from the following:
Income and Expenditure Account for the Year Ending Mar 31, 2009
Dr. |
Cr. |
Other Information | Mar 31, 2008 (Rs) | Mar 31, 2009 (Rs) |
---|---|---|
Cash in Hand and at Bank |
– |
11,850 |
Shares and Debentures |
1,40,000 |
1,40,000 |
Subscription Outstanding |
3,500 |
5,000 |
Subscription Received in Advance |
600 |
800 |
Salaries Outstanding |
250 |
500 |
Furniture |
1,000 |
990 |
Investments |
500 |
500 |
Properties |
1,50,000 |
1,48,125 |
Books |
1,750 |
1,950 |
Stationery Expenses Due |
100 |
150 |
Stock of Stationery |
500 |
400 |
Answer
|
Hints |
|
Rs |
|
(i) |
Balance Sheet as on Mar 31, 2008, |
3,05,150 (Total) |
|
|
Capital Fund |
3,04,200 |
|
(ii) |
Subscription A/c – Bank A/c |
11,200 |
|
(iii) |
Salaries A/c – Bank A/c |
14,500 |
|
(iv) |
Stock of Stationery A/c – Purchases |
2,400 |
|
(v) |
Creditors for Stationery Ac – Bank A/c |
2,350 |
|
(vi) |
Books A/c Purchases |
250 |
|
(vii) |
Furniture A/c Bank A/c |
100 |
29. The following is the Income and Expenditure Account of the Pals Tennis Club for the year ended Mar 31, 2009.
The following further information is made available:
|
|
Balances |
Balances |
|
|
As on Mar 31, 2008 |
As on Mar 31, 2009 |
|
|
Rs |
Rs |
(i) |
Sundry Assets |
88,000 |
– |
|
Bank Balance |
9,600 |
– |
|
Subscriptions in arrear |
9,500 |
7,000 |
|
Subscription received in advance |
2,800 |
5,200 |
|
4% Investments (Face value Rs 30,000) |
24,000 |
24,000 |
(ii) |
Expenses Outstanding |
|
|
|
Salaries |
1,200 |
2,400 |
|
Rent |
1,800 |
3,600 |
|
Rates and Taxes |
Nil |
1,200 |
|
Tennis Court Maintenance |
1,560 |
640 |
(iii) |
Outstanding for Purchase of Sports Materials |
2,800 |
5,900 |
(iv) |
Prize Fund |
9,200 |
6,500 |
(v) |
The book value, as on Apr 1, 2008 of Sports Goods sold in the year was |
|
8,000 |
(vi) |
Prize fund is separately maintained. |
|
5,600 |
|
All receipts are credited to it directly and expenditure is met out of the fund directly. |
|
|
|
During the year, credits to the account amounted to |
|
|
(vii) |
Interest received in the year was only for two quarters |
|
|
(viii) |
The club was admitted as a member of all India Lawn |
|
|
|
Tennis Federation on Oct 1, 2008 when it paid subscription fi ll Sep 30, 2009. |
|
|
(ix) |
Advertisement charges on brochure yet to be collected |
|
900 |
(x) |
A fi xed deposit was made on Mar 31, 2009 for |
|
50,000 |
You are required to prepare the Receipts and Payments A/c for the year ended on Mar 31, 2009 and the Balance Sheet as on that date.
(B.Com. Delhi – Modified)
|
|
Rs |
|
Answer: Receipts and Payments A/c balance Rs 1590 and total |
1,99,650 |
|
Balance Sheet as on Mar 31, 2009 |
1,72,890 |
|
Balance Sheet as on Mar 31, 2008 capital fund |
1,11,740 |
30. From the following Receipts and Payments Account of Bangalore Club, prepare Income and Expenditure Account for the year ended Dec 31, 2008 and its Balance Sheet on that date.
Information
[C.A. (Foundation) – Modified]
|
Answer |
Rs |
|
(i) Income and Expenditure A/c: Excess of income over expenditure |
28,300 |
|
(ii) Balance Sheet as on Dec 31, 2008 |
1,06,080 |
|
|
(Total) |
|
(iii) Balance Sheet as on Jan 1, 2008 Capital fund |
72,000 |
31. The following information was obtained from the books of Chennai Club as on Mar 31, 2009 at the end of the first year of the club. You are required to prepare
Revenue Income Rs. | Actual Receipts Rs. | |
---|---|---|
Entrance Fees |
8,500 |
8,500 |
Subscription |
10,000 |
9,500 |
Locker Rents |
300 |
300 |
Sundry Income |
800 |
530 |
Refreshment Account |
– |
8,000 |
Other Revenue Expenditure and Actual Payments: Land (Cost Rs 5,000) |
– |
5,000 |
Furniture (Cost Rs 73,000) |
– |
65,000 |
Salaries |
2,500 |
2,400 |
Maintenance of Play Grounds |
1,000 |
500 |
Rent |
4,000 |
4,000 |
Refreshment Account |
– |
4,000 |
Donations to the extent of Rs 12,500 were utilised for the purchase of library books, balance was still to be utilised. In order to keep it saber, 9% Govt. Bonds were purchased on Mar 31, 2009 for Rs 80,000. Remaining amount was put in the bank on Mar 31, 2009 under the term deposit. Depreciation @10% p.a. was to be provided for the whole year on furniture and library books.
[C.A. (foundation) – Modified]
Answer
32. From the following prepare the Income and Expenditure for the year ended Dec 31, 2008 and a balance sheet as on that date:
The club has 250 members each paying an annual subscription of Rs 100. Rs 500 is still in arrears for subscriptions for 2007. Ten members had paid their subscriptions for 2008 as well.
Salaries paid included Rs 1,000 for 2007 and Rs 1,500 for 2009. Outstanding salaries for 2008 amounted to Rs 2,000.
On Jan 1, 2008, the club owned land and building valued at Rs 1,00,000 and furniture valued at Rs 11,000.
Interest for 3 months @6% p.a. as accrued on investments.
[B.Com (Hons) Delhi – Modified]
Answer
33. The Receipts and Payments Account and the Income and Expenditure Account of a recreation club for the year ended Dec 31, 2008 were as follows:
Receipts and Payments Account
Income and Expenditure Account
The club’ assets as on Jan 1, 2008 were as follows:
Building Rs 1,50,000, Books Rs 1,00,000
Furniture Rs 10,000, Investments Rs 1,00,000
Literalities as on the date were Rs 500 for advertisement and Rs 1,000 for salary
You are required to prepare the Balance Sheets
(B.Com Delhi University – Modified)
Answer
34. The accounts set out below are submitted to you for audit. Pass comments and prepare corrected and proper final accounts for the year ending Dec 31, 2008.
Income and Expenditure Account as on Dec 31, 2008
Treasurers Note
Subscriptions in arrears amount to Rs 1,200. Sundry traduces bills Rs 420 were outstanding on Dec 31 but have since been paid. The secretary’s salary has not yet been paid. The 3½12; % G.P. notes of the face value of Rs 20,000 were purchased at Rs 960 the lease of the club premises costs Rs 21,240, the balance of the bank loan now outstanding is Rs 10,000, secured by mortgage on the leasehold premises.
Answer
35. From the following particulars, which relate to a commercial and literacy society, prepare Receipts and Payments Account, Income and Expenditure Account and Balance Sheet as on Dec 31, 2008.
Balance Sheet as on Dec 31, 2007
The transactions for the year 2008 were as follows:
Received from subscriptions Rs 25,000, proceeds from entertainment and lectures Rs 10,000, received from interest on securities Rs 4,750, entrance fee received Rs 5,000, sale proceeds of old chairs Rs 750.
Paid for rent Rs 6,000, for printing Rs 1,500, for advertising Rs 2,000, for petty disbursements Rs 550 and for purchase of government securities Rs 25,000.
Paid for outstanding creditors Rs 4,250, for furniture Rs 4,000, for library books Rs 3,000; for cost of entertainment Rs 7,500.
On Dec 31, 2008, the following liabilities were outstanding for printing Rs 750 and for rent Rs 1,000.
There were also outstanding on account of interest on securities Rs 1,500 and subscriptions Rs 3,250.
[B.Com (Madras University)]
Answer
36. Mrs Parul Vasanth is an advocate by Profession and her receipts and payments for the year ending Mar 31, 2009 are as follows:
You are required to prepare the Receipts and Expenditure of MRs Parul Vasanth for the year 2008–2009 and the Balance Sheet as on Mar 31, 2009.
Answer
Hints
37. Dr. Renu is a practicing surgeon. The Receipts and Payments Account for the year 2008 is as follows:
Her position stood on Jan 1, 2008 as:
Equipment Rs 1,50,000; medicines Rs 20,000; fees outstanding Rs 4,000; books Rs 20,000.
Fees still outstanding Rs 10,000, salaries to nurses still payable Rs 4,000; stock of medicines Rs 4,000.
Depreciate Equipment by 10% and Books @ 20.
You are required to prepare Receipts and Expenditure Account of Dr Renu for the year ending Dec 31, 2008 and a Balance Sheet on that date.
Answer
Hints
Capital Rs 2,10,000
38. Shree & Co is a firm of solicitors whose partners Vasanth and Sekar share profits equally after charging a management fee of 5% from the Vasanth for the year ended on Mar 31, 2009, the books maintained by the firm reveal the following particulars.
Information
You are required to prepare the Receipts and Expenditure Account for the year ended on Mar 2009 and a Balance Sheet of the firm on that date.
Answers
39. Sathyan & Shree is in partnership practicing as Chartered Accountants under the name and style SSS Co sharing profits/losses equally. They close their accounts on Mar 31 every year. The following was their Balance Sheet as on Mar 31, 2008.
Balance Sheet as on Mar 31, 2008
The following is the summary of their cash/bank transactions for the year ended Mar 31, 2009.
It has been agreed that 80% of audit fees and 40% of fees for other services should be transferred to Income and Expenditure Account in respect of each partners account, the balance being credited directly to the capital accounts.
You are required to prepare Income and Expenditure A/c for the year ended Mar 31, 2009 and a Balance Sheet as on that date.
(C.A. Modified)
Answers
40. From the following trial balance and accompanying notes for adjustments, prepare Income and Expenditure Account for the year ended Dec 31, 2008 and a Balance Sheet as on that date of a club:
Note for adjustments
Answer
13.59.232.9