Study Note 3, Page 114-142

FINANCIAL ACCOUNTING114

ACCOUNTING FOR NON-PROFIT SEEKING ORGANISATIONS

STUDY NOTE – 3


This study note includes -

● Final Accounts and Balance Sheet of Non-Profit Seeking Concerns

3.1. FINAL ACCOUNTS AND BALANCE SHEET OF NON-PROFIT SEEKING CONCERNS

Certain concerns like Clubs, Charitable Institutions, Medical Association, Societies, etc. do notintend to earn profit. They render service to the society or to their members. Their members donot get any share of profit or dividend. These concerns are known as non-profit concerns astheir transactions arc service-based but not profit-based.

Their annual accounts are regularly prepared to convey their financial affairs to their mem-bers or others like (govt. etc.) for seeking financial grants. If the size of the concern is small,the accounting records are usually kept under single entry system. Complete double entrysystem is followed only in big concerns. In any case they all prepare — (A) Receipts & Pay-ments Account for a financial period; (B) Income & Expenditure Account for a financialperiod and (C) Balance Sheet at the end of the financial period.

A. Receipts & Payments Account

1. It is an Account which contains all Cash and Bank transactions made by a non-profit organization during a particular financial period.

2. It starts with the opening balances of Cash and Bank. All Cash Receipts both capital &revenue during the period are debited to it.

3. All Cash Payments both capital & revenue during the period are credited to this Ac-count. It ends with the closing Cash and Bank Balances.

4. While recording the Cash and Bank transactions all entries are made on Cash Basis.

5. It is a summary of Cash Book.

6. It follows Real Account

FINANCIAL ACCOUNTING 115

B. Income & Expenditure Account

1. It follows Nominal Account.

2. All expenses of revenue nature for the particular period are debited to this Accounton accrual basis.

3. Similarly all revenue incomes related to the particular period are credited to this ac-count on accrual basis.

4. All Capital incomes and Expenditures are excluded.

5. Only current year’s incomes and expenses are recorded. Amounts related to otherperiods are deducted. Amounts outstanding for the current year are added.

6. Profit on Sale of Asset is credited. Loss on Sale of Asset is debited. Annual Depre ciationon Assets is also debited.

7. If income is more than expenditure, it is called a Surplus, and is added with Capital orGeneral Fund etc. in the Balance Sheet.

8. If expenditure is more than in come, it is a deficit, and is deducted from Capital orGeneral Fund etc. in the Balance Sheet.

Receipts Amount Amount Payments Amount AmountRs. Rs. Rs. Rs.

To Balanceb/d By SundryCash in hand xxx Payments xxxCash at Bank xxx (Both Capital &

Revenue )To Sundry Receipts xxx By Balancec/d(Both Capital &Revenue ) Cash in hand xxx

Cash at Bank xxxxxx xxx

PROFORMA RECEIPTS & PAYMENTS ACCOUNT

In the Books of ...........Receipts & Payments Account for the year ended........

Dr. Cr.



C. Balance Sheet

The Balance Sheet is prepared in the similar way as followed in a Trading concern. Themarshalling of the assets and liabilities may be made in order of liquidity or in order ofpermanence.

Calculation of opening capital Fund : ( If not mentioned)

Opening Capital Fund = Openeng Assets - Opening Liabilites.

Expenditure Amount Amount Income Amount AmountRs. Rs. Rs. Rs.

To Revenue Expenses xxx By RevenueIncomes xxx

To Surplus ( Excess of By DeficitIncome over ( Excess ofExpenditure Expenditure

over Income xxx

xxx xxx

PROFORMA INCOME & EXPENDITURE ACCOUNT

In the Books of ...........Income & Expenditure Account for the year ended........

Dr. Cr.


Some Important Considerations

1 Capital Fund : It is also called “General Fund” or “Accumulated Fund.” It is actuallythe Capital of a non-profit concern. It may be found out as the excess of assets overliabilities. Usually “Surplus” or “Deficit” during a period is added with or deductedfrom it. A portion of Capitalised incomes like donations may be added with it.

2. Special Fund: It may be created out of special donation or subscription or out of a por-tion of the “Surplus”. For example a club may have a “Building Fund”. It may be usedfor meeting some specific expenses or for acquiring an asset. If any income is derivedout of investments made against this fund or if any profit or loss occurs due to sale ofsuch investments, such income or profit or loss is transferred to this fund.

Distinction between Receipts & Payment Account and Income & Expenditure Account

Receipts & Payments Account Income & Expenditure Account 1 It is a summarised Cash Book. It closely resembles the Profit & Loss

Account of a Trading concern. 2. Receipts are debited and Payments are

credited. Incomes are credited and Expenditures

are debited. 3. Transactions are recorded on Cash

basis. Transactions are recorded on Accrual

basis 4. Amounts related to previous period or

future period may remain included. Outstanding amount for current year is excluded.

Transactions are recorded on accrual basis. All amounts not related to the current period are excluded. Outstanding amounts of current period are added.

5. It records both Capital and Revenue transactions.

It records of Revenue transactions only.

6. It serves the purpose of a Real Account. It serves the purpose of a Nominal Account.

7. It starts with opening Cash and Bank Balances and ends with closing Cash and Bank Balances.

It does not record such balances,rather its final balance shows a surplus or a deficit for the period.

8. It does not record notional loss or non-cash expenses like bad debts, depreciations etc.

It considers all such expenses for matching against revenues

9. Its closing balance is carried forward to the same account of the next accounting period.

Its closing balance is transferred to Capital Fund or General Fund or Accumulated Fund in the same period’s Balance Sheet.

10. It helps to prepare an Income & Expenditure A/c.

It helps to prepare a Balance Sheet.



Other Treatments

(a) If the Special Fund is used to meet an expense

Special Fund A/c Dr.

To Bank A/c (amt. of expense)

The balance of the Fund is shown as a liability.

If the balance is transferred to Capital Fund, the entry will be—


To Capital Fund A/c (Balance of Special Fund )

(b) If the Special Fund is used to purchase an asset

Asset A/c Dr.

To Bank A/c (Cost of the asset )


To Capital Fund A/c (Special Fund closed)

3. Donations

(a) Donation received for a particular purpose should be credited to Special Fund. Forexample, Donation received for Building should be credited to Building Fund A/c.

(b) For other donations received the by-laws or rules of the concern should be followed.

(c) If there is no such rule, donations received of non-recurring nature should be credited toCapital Fund. Recurring donations received should be credited to Income & Expendi-ture Account.

(d) Donation paid by the concern should be debited to Income & Expenditure Account.

4. Legacy received : It is to he directly added with Capital Fund after deduction of tax,( ifany). It is a kind of donation received according to the will made by a deceased person.

5. Entrance Fees or Admission Fees

(a) The rules or by-laws of the concern should be followed.

(b) If there is no such rule, Admission or Entrance Fees paid once by members for acquiringmembership should be added with Capital Fund.

(c) If such fees are of small amounts covering the expenses of admission only, the fees maybe credited to Income & Expenditure Account.

6. Subscriptions(a) Annual subscriptions are credited to Income & Expenditure Account on accrual basis.(b) Life membership subscription is usually credited to a separate account shown as a liabil-

ity. Annual Subscription apportioned out of that is credited to Income & ExpenditureAccount and deducted from the liability. Thus the balance is carried forward till thecontribution by a member is fully exhausted. If any mem ber dies before hand, the bal-ance of his life Membership contribution is trans ferred to Capital Fund or General Fund.


Illustration 1 :

Special Points : (a) Preparation of Income & Expenditure Account and calculation ofClosing Capital Fund; (b) Loss on Sale of Asset; (c) Donation to a Specific Fund.

The following is the Receipts and Payments Account of a Club for the year ended 31st De-cember. 2007 Receipts Cash in hand (1.1.07) Rs. 1,000; Cash at Bank (1.1.07) Rs. 4,000;Donation for Building

Rs. 10,000; Sale of Furniture (Balance on 1.1.07 Rs. 100) Rs. 80; Sale of Newspapers Rs. 200;Subscriptions Rs. 20,000.

Payments : Sports Materials Rs. 2,500; Salaries Rs. 3,250; Furniture Rs. 1,600;NewspapersRs. 500

Building Fund Investment Rs. 10,000; Tournament Expenses Rs. 11,000; Postage Rs. 200;Cash in hand (closing balance) Rs. 1,030;Cash at Bank (Closing Balance) Rs. 5,200.

The following adjustments are to be made

Of the Subscriptions collected Rs. 2,000 was outstanding for 2006; (ii) on 1.1.07 Stock ofRaw Materials was Rs. 500 and 31.12.07 it was Rs. 700.Prepare the Income and Expenditure Account for the year ended 31st December,2007and show the Capital Fund of the Club as on that date.

Solution:Dr . Income & Expenditure Account for the year ended 31.12.2007 Cr.

Expenditure Amount Amount Income Amount AmountRs. Rs. Rs. Rs.

To Salaries 3,250 By Subscription 20,000 ,, Purchase of Newspapers 500 Less :Received

for last year 2,000 18,000,, Tournament Expenses 11,000 By Sale of old

Newspapers 200,, Postage 200,, Use of Sports MaterialsOpening Stock 500Add: Purchase 2500

3,000Less : Closing Stock 700 2,300,,Loss on Sale of Furniture[100 — 80] 20,,Surplus (Excess of Incomeover Expenditure) 930

18200 18,200



Statement Showing Capital Fund as on 31.12.07

Amount AmountRs. Rs.

Assets as on 1.1.07

Cash in hand 1,000Cash at Bank 4,000Furniture 100Sports Materials Subscriptions 500Outstanding for 2006 2000 7,600

Less : Liabilities on 1.1.07 Nil

Capital Fund on 1.1.07 7600Add : Surplus for the year

ended on 31.12.07 930Capital Fund on 31.12.07 8,530

Notes

(a) Donation Received for Building should be credited to Building Fund Account

(b) Both opening and closing stocks of Sports Materials as given. So the use or consumptionof sports materials during the year has been debited to I & E Account.

Illustration 2 : The Dreamers’ Club makes up its accounts to 31st December in each year. On31st December, 2007 the cashier of the club absconded leaving behind no information orcash. An examination of the records showed that the books had not been written up for aconsiderable time and it was decided to reconstruct the figures from 1.1.2007.

A summary of the Bank Account for the year showed that :

Receipts Amt. Rs. Payments Amt. Rs.

Balance on 1.1.2007 420 Rent & Rates 460

Bank Deposits 42,610 Insurance 40

Light & Heat 156

Bar Purchases 35,067

Telephone 59

Cash Withdrawn 5,848

Balance as on31.12.07 1,400

43,030 43,030


The following information is also obtained :

I. The Barman places takings in the bank night safe on his way home for crediting to theclub account. The bartakings totalled Rs. 44,610 for the year. The treasurer had no ac-cess to bar takings.

2. The receipt counterfoils for members subscriptions totaled Rs. 3,050 for the year.

3. A summary of expenditure for petty cash and wages revealed Glasses, crockery maintenance— Rs. 1,310; Wages—Rs. 2,650; Sundry Expenses—Rs. 475

4. Outstanding or Prepaid Amounts were :

31.12.06 31.12.07

Prepaid Rates Rs. 26 Rs. 28

Outstanding Expenses Rs. 64 Rs. 100

The Bar Stock on 1.1.2007 was Rs. 3,607 and 31.12.07 Rs. 2,916. Opening Cash with theCashier at the beginning of the year 2007 was Rs. 35 only.

Prepare an Income & Expenditure Account of the club for the year ended 31.12.2007.

Working Notes:

1. Cash Defalcation by Cashier :

Particulars Amount Rs.


To Balance b/f Subscriptions

Bank (Withdrawals from Bank)

35 3,050 5,848

By Bank [Difference in deposited amount 44,610 — 42,610)

Glasses, Crockery etc. Wages

Sundry Expenses Defalcation of

Cash (Balance Figure)

2,000

1,310 2,650

475 2,498

8,933 8,933

Dr. Cash Account Cr.



2.Rent & Rates

Paid from Bank 460

+ Prepaid as on 31.12.06 (relating to current year) 26

486

— Prepaid Rates as on 31.12.07(relating to next year) 28

458

Dreamers’ Club

Dr. Income and Expenditure Account for the year ended 31.12.2007 Cr.

Rs.


Amount Rs.


Amount Rs..

To Rent & Rates [Note 2] 458 By Subscriptions 3,050 “ Insurance 40 By Bar Trading A/c

(Profit from Bar ) 8,852

Light & Heat Telephone Charges

156 59

“ Glass and Crockery Maintenance

1,310

“ Wages 2,650 “ Sundry Expenses 475

Add Outstanding for ‘07 100 575

Less : Outstanding for ‘06 64 511 ‘’ Defalcation of Cash 2,498 “ Surplus (Excess of Income 4,220 over expenditure) 11,902 11,902

Dr. Bar Trading Account for the year ended 31.12.07 Cr.

Particulars Amt. Rs. Particulars Amt. Rs.

To Opening Stock 3,607 By Bar takings 44,610

To Purchases 35,067

To Income & By Closing Stock 2,916

Expenditure A/c 8,852

Profit of the bar transferred

47,526 47,526


Illustration 3 :

(a) Preparation of Receipts & Payments Account and Balance Sheet from Income &Expenditure Account and other information; (b) Opening Cash balance not given

Joggers Club

Income & Expenditure Account for the year ended 31.12.2007

Expenditure Amt. Rs. Income Amt. Rs.

To Salaries 47,500 By Subscriptions 75,000

“ General Expenses 5,000 “ Entrance Fees 2,500

“ Audit Fees 2,500 “ Contribution for

Annual Dinner 10,000

“ Secretary’s Honorarium 10,000 “ Profit on Annual Sports 7,500

“ Printing & Stationery 4,500

“ Annual Dinner Expenses 15000

“ Interest and Bank Charges 1,500

Depreciation on Sports

“ Equipments 3,000

“ Surplus (excess of income 6,000over expenditure)

95,000 95,000

The account had been prepared after the following adjustments : Subscriptions outstandingat the end of 2006—Rs. 6,000; Subscriptions received in advance on 31.12.2006—Rs. 4.500;Subscriptions received in advance on 31.12.2007—Rs. 2,700; Subscriptions outstanding on31.12.2007—Rs. 7,500

Salaries outstanding at the beginning of ‘07 and at the end of ‘07 were respectively Rs. 4,000and Rs. 4,500. General expenses include insurance prepaid to the tune of Rs. 600. Audit Feefor 2007 is as yet unpaid. During 2007 Audit Fees for 2006 amounting to Rs. 2,000 was paid.

The club owned a football ground valued at Rs. 1,00,000. It had Sports Equipments of Rs.26,000 on 1.1.2007. On 31.12.2007 such Sports Equipments after depreciation amounted toRs. 27,000. In 1994 the club raised a bank loan of Rs. 20,000 which remained outstandingthroughout 2007. On 31st December, 2007Cash in hand amounted to Rs. 16,000.

Prepare the Receipts & Payments Account for the year ended 2007 and a Balance Sheet ason 31.12.2007.

Dr. Cr.



Solution :

Working Note :

1. Subscription Received in Cash

Dr. Subscription Account Cr

Particulars Amount Particulars AmountRs Rs.

To Subscription receivable A/c By Subscription received in(Opening Balance as on 1.1.07 6,000 Advance A/c (Opening

Balance as on 1.1.07 4,500

To Income & Expending A/c By Bank A/c (received during(Income for the year given) 75,000 the year-balancing figure 71,700

To Subscription received in advanceClosing balance as on 31.12.07 2,700 By Subscription receivable

closing balance as on 31.12.07 7,50083,700 83,700

2. Purchase of Sports EquipmentDr. Sports Equipments Account Cr.

Particulars Amount Particulars AmountRs. Rs

To Balance b/d 26,000 By Depreciation 3,000

To Cash (Purchases Balance Figure) 4000 “ Balance c/d 27,000

30,000 30,000

3. Salaries Paid by CashDr. Salary Account Cr.

Particulars Amount Particulars AmountRs. Rs.

To Cash A/c (Balancing figure- By Outstanding salary A/c

paid during the year) 47,000 (as on 1.1.07) 4,000

To Outstanding salary A/c By Income & expenditure

(as on 31.12.07 4,500 A/c (given) 47,50051,500 51,500


Joggers Club

Dr. Receipts & Payments Account for the year ended 31.12.2007 Cr.

Receipts Amount Rs.

Payments Amount Rs.

To Cash in hand “ Subscription [Note 1] “ Entrance Fees “ Contribution to Annual “ Dinner “ Profit on Annual Sports

13,900 71,700 2,500

10,000

7,500

1,05,600

By Salaries [Note 3] “ General Expenses (5,000 + 600) “ Audit Fees (2006) “ Sports Equipments “ Secretary’s Honorarium “ Printing & Stationery “ Annual Dinner Expenses “ Interest and Bank Charges “ Cash in hand

47,000 5,600 2,000 4,000

10,000 4,500

15,000 1,500

16,000

1,05,600

4. Capital Fund on 1.1.2007

Liabilities Amount Assets AmountRs. Rs.

Outstanding Audit Fees 2,000 Cash in hand 13,900Outstanding Salaries 4,000 [Balance Figure]Subscription Received in Adv. 4,500 Outstanding Subscription 6,000Bank Loan 20,000 Sports Equipments 26,000Capital Fund (Excess of Football Ground 1,00,000

Assets over Liabilities) 1,15,400

1,45,900 1,45,900

Balance Sheet as at 1.1.2007



Balance Sheet as on 31.12.2007

Liabilities Amount Amount Assets Amount Amount

Rs. Rs. Rs. Rs.

Outstanding Salaries 4,500 Cash in hand 16,000

Outstanding Audit Fees 2,500 Insurance Paid in Adv. 600

Prereceived Subscription 2,700 Accrued Subscription 7,500

Bank Loan 20,000 Sports Equipment 26000

Accumulated Fund : Add : Purchase 4000

Opening Balance 1,15,400 30,000

Add: Surplus 6,000 1,21,400 Less : Depreciation 3,000 27,000

Football Ground 1,00,000

1,51,100 1,51,100

Ilustration 4 :

The Accountant of City Club furnished the following information about the Receipts andPayments of the club for the year ended 31st March, 2008 :

Receipts Rs. Payments Rs.

To Subscriptions 62,130 By Premises 30,000

“ Fair Receipts 7,200 “ Rent 2,400

“ Variety show Receipts (net) 12,810 “ Rates and Stationery 3,780

“ Interest 690 “ Printing & Stationery 1,410

“ Bar Collections 22,350 “ Sundry Expenses 5,350

“ Wages 2,520

“ Fair Expenses 7,170

“ Honorarium to Secretary 11,000

“ Bar Purchases (Payment) 17,310

“ Repairs 960

“ New Car (less proceeds of old carRs.9,000) 37,800


The following additional information could be obtained :

1.4.07(Rs.) 31.3.08 (Rs.)

Cash in hand 450 NIL

Bank Balance as per Cash Book 24,420 10,350

Cheque issued for Sundry Expenses not presented 270 90

to the bank (entry has been duly made in the Cash

book)

Subscriptions Due 3,600 2,940

Premises at cost 87,000 117,000

Provision for Depreciation on Premises 56,400

Car at cost 36,570 46,800

Accumulated Depreciation on Car 30,870

Bar Stock 2,130 2,610

Creditors for Bar Purchases 1,770 1,290

Annual Honorarium to Secretary is Rs. 12,000 Depreciation on Premises is to be provided at5% on written down value. Depreciation on new car is to be provided at 20%.

You are required to prepare Receipts and Payments Account and Income and ExpenditureAccount for the year ended 31.3.08.

Solution :

Working Notes :

Rs.

(1) Depreciation on New Car :

Net Amount 37,800

Add : Sale proceeds of Old Car 9,000

Actual Cost 46,800

Less : Depreciation @ 20% 9,36037,440

(2) Profit on sale of Old Car :

Sale proceeds 9000

Less: Written Down Value : Cost - 36,570

Provision for Depreciation - 30,870

5700

Profit on Sale 3300



(3)Cheques issued for Sundry Expenses not presented to the Bank need not be considered asBank Balance as per Cash Book is given and the entry for the expenses have been duly madein the Cash Book.

(4) Calculation of Bar ParchasesDr. Creditors for Bar Purchases Account Cr

Particulars Rs Particulars Rs

31.3.08 To cash Payment for 1.4.07 By Balance b/d 1,770Bar Purchases 17,31031.3.08 To Balance c/d 1,290 31.3.08 By Purchases

(Balance Figure) 16,830

18,600 18,600

(5)Dr. Cr

Particulars Rs Particulars RsTo Opening stock 2,130 By Bar collections 22,350To Bar Purchases 16,830 By Close stock 2,610To Income & Expenditure A/cprofit from Bar transfered 6,000

24,960 24,960

Bar Trading Account for the year ended 31.03.08

Dr Cr.Receipts Amount Payments Amount

Rs. Rs. ToBalance b/d : By Premises 30,000

“ Cash in hand 450 “ Rent 2,400 “ Cash at Bank 24,420 “ Rates & Taxes 3,780 “ Subscriptions 62,130 “ Printing & Stationery 1,410

“ Sundry Expenses 5,350 “ Fair Receipts 7,200 “ Wages 2,520 “ Variety Show Receipts (Net) 12,810 “ Fair Expenses 7,170 “ Interest 690 “ Honorarium to Secretary 11,000 “ Bar Collections 22,350 “ Payments for Bar Purchases 17,310 “ Sale Proceeds of Old Car 9,000 “ Repairs 960

“ Cost of New Car 46,800“ Balance c/d : Cash at Bank 10,350

1,39,050 13,9050

Receipts and Payments Account for the year ended 31 March, 2008City Club


City Club

Income and Expenditure Account for the year ended 31st March, 2008

Dr. Cr

Expenditure Amount Amount Income Amount Amount

Rs. Rs. Rs. Rs.

ToRent 2,400 By Subscription 62,130

Rates & Taxes 3,780 Add: Amount Due

On 31.3.08 2,940

“ Printing & Stationery 1,410 65,070

“ Wages 2,520 Less: Amount Due

“ Honorarium to Secy. 11000 On 31.3.07 3,600 61470

“ Add: O/S on 31.3.08 1000 12,000 “ Profit on Sale of

“ Sundry Expenses 5,350 Old Car [Note 1] 3300

“ Repairs 960 “ Profit from Bar

“ Depreciation : [Note 5] 6000

On Car [Note 1] 9360 “ Variety Show

On Premises

[5% of 60600] 3030 12,390 Receipts (net) 12810

“ Income from Fair :

“ Surplus (Excess of Receipts 7200Incomes over Less : Expenses 7170 30

Expenditure, transfer 43,490 “ Interest 690

to Capital Fund)

84,300 84,300

Ilustration 5 :

Progressive Education Society submits to you the following Receipts & Payments Accountand Income & Expenditure Account for the year ended 31st March, 2008.



Dr. Cr.

Receipts Amt. Rs Payments Amt. Rs.

To Balance b/d 450 By Printing Charges 75

“ Interest : 2006-07 100 “ Advertisement 141

2007-08 150 250 “ Salary to staff 1,300

“ Tuition Fees : (including payment

2007-08 1000 for 2006-07)

2008-09 100 1,100 “ Rent 520

“ Entrance Fees : “ Miscellaneous Expenses 110

2007-08 420 “ Furniture Purchased 670

“ Membership Fees : “ Balance c/d 1,374

2006-07 300

2007-08 1150

2008-09 390 1,840

“ Miscellaneous Income 130

4,190 4,190

Income and Expenditure Account for the year ended 31.3.08

Expenditure Rs. Income Rs.

To Printing Charges 80 By Tuition Fees 1100

“ Advertisement 150 “ Membership Fees 1150

“ Rent 600 “ Miscellaneous Income 130

“ Salary to Staff 1200 “ Interest 160

“ Miscellaneous Expenses 110

“ Excess of Income over

Expenditure 400

2540 2540

Receipts and Payments Account for the year ended 31.3.08

Dr. Cr.


You are asked to prepare the Balance Sheet of the Society as on 31st March , 2007 and 31stMarch , 2008 :

Additional information :

As on 31st March , 2007, the society had :

Investment Rs. 4000; Furniture Rs. 2000; Library Books : Rs.1,500

Working Note :

A. For the Balance Sheet as on 31.3.2007

i) Salary to staff

Rs.

Payment as per R & P A/c (including payment for 2007-08) 1300

Less: Payment for 2007-08 as per Income & Expenditure A/c 1200

Outstanding on 31.3.2008 100

ii) Membership Fees of 2006-07 received in 2007-08 Rs. 300

Membership Fees Receivable (or due to be received) on 2007 = Rs. 300

iii) Interest Rs. 100 for 2006-07 received in 2007-08

Outstanding Interest Receivable Rs. 100

B. For the Balance Sheet as on 31.3.2008

i) Outstanding/prepaid Expenses

Amount payable Amount paid Prepaid Outstanding to

as per I & E A/c as per R & P A/c be paidRs. Rs. Rs. Rs.

Printing Charges 80 75 — 5

Advertisement 150 141 — 9

Rent 600 520 — 80



ii) Acerued income / Income Received in advance :

Amount payable Amount paid Received Accrued

as per I & E A/c as per R & P A/c in advance incomeRs. Rs. Rs. Rs.

Tuition Fees 1,100 1000 — 100

— 100 (2008-09) 100 —

Membership Fees 1,150 1150 — —

— 390 (2008-09) 390 —

Interest 160 150 — 10

iii) Entrance Fees Rs. 420 recorded in R & P A/c but not in I & E A/c Entrance FeesCapitalised Rs. 420

Solution :

Progressive Education Society


Liabilities Amount Assets AmountRs. Rs.

Capital Fund 8,250 Furniture 2,000

(Excess of Assets over Liabi.) Investments 4,000

Outstanding Salary 100 Library Books 1,500

Interest Receivable 100

Membership Fees Receivable 300

Cash 450

8,350 8,350



Liabilities Amount Amount Assets Amount AmountRs. Rs. Rs. Rs.

Capital Fund 8250 Furniture 2000

Add : Surplus 400 Add : Purchase 670 2670

Entrance Fees

Capitalised 420 9070 Investments 4000

Incomes Received in Library Books 1500Advance :

Tuition 100 Interest Receivable 10

Membership Fees 390 490 Tuition Fees

Receivable 100

OutstandingLiabilities for : Cash 1374

Printing Charges 5

Advertisement 9

Rent 80 94

9654 9654

Ilustration 6 :

Preparation of R & P A/c, I & E A/c and Balance Sheet for the initial/starting year of a clubfrom information given.

The following information were obtained from the books of Delhi Club as on 31.3.2008 at theend of the first year of the club. You are required to prepare Receipts and Payments Account,Income and Expenditure Account for the year ended 31.3.2008 and a Balance Sheet as at31.3.2008 on mercantile basis :

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

ii) Other revenue income and actual receipts :



Revenue Income Actual Receipts

Rs. Rs.

Entrance Fees 17,000 17,000

Subscription 20,000 19,000

Locker Rents 600 600

Sundry Income 1,600 1,060

Refreshment Account — 16,000

iii) Other expenditure and actual payments :

Revenue Expenditure Actual Payments

Rs. Rs.

Land (Cost Rs. 10,000) — 10,000

Furniture (Cost Rs. 1,46,000) — 1,30,000

Salaries 5,000 4,800 Maintenance of Playgrounds 2,000 1,000

Rent 8,000 8,000

Refreshment Account — 8,000

Donation to the extent of Rs. 25,000 were utilised for the purchase of Liabrary Books, bal-ance was still un utilised. In order to keep it safe, 9% Govt. Bonds of Rs. 1,60,000 werepurchased on 31.3.2008. Remaining amount was put in the Bank on 31.3.2008 under theterm deposit. Depreciation at 10% p.a. was to be provided for the whole year on Furnitureand Library Books.

Please note that :

1. This is the first year. The Club has no Capital Fund at the beginning.

2. Donation must be capitalized as it has been made towards Building and LibraryRoom.

3. The Investments in 9% Govt. Bonds have been made on the closing day of the year.So no interest has accrued.


Solution :

Dr. Cr.

Receipts Amount Payments Amount

Rs. Rs.

To Donations for Building By Land 10,000

and Library Room 2,00,000 “ Furniture 1,30,000

“ Entrance Fees 17,000 “ Salaries 4,800

“ Subscription 19,000 “ Maintenance of

Playgrounds 1,000

“ Locker Rents 600 “ Rent 8,000

“ Sundry Incomes 1,060 “ Payments for Refreshments 8,000

“ Receipts from

Refreshment “ Library Books 25,000

Account 16,000 “ 9% Govt. Bonds 1,60,000

“ Balance c/f :

Overdraft 1,08,140 “ Term Deposit with Bank 15,000

3,61,800 3,61,800

Delhi ClubReceipts and Payments Account for the year ended 31 March, 2008



Dr. Cr

Expenditure Amount Amount Income Amount Amount

Rs. Rs. Rs. Rs.

ToSalaries 4,800 By Entrance Fees 17,000

Add:- Outstanding 200 5000 Less:- Capitalised —— 17,000

“ Maintenance of

Playground 1,000 “ Locker Rent 600

Add:- Outstanding 1,000 2,000

“ Rent 8,000 “ Sundry Incomes 1,060

Add: Accrued 540 1,600

“ Depreciation on:- “ Net Income from

Refreshment:

Furniture @ 10%p.a. 14,600 Receipts 16,000

Library Books@10%p.a 2,500 17,100 Less:- Payment 8,000 8,000

‘ Surplus (Excess of Subscriptions 19,000

Income over Add: Receivable

Expenditure) 15,100 On 31.3.08. 1,000 20,000

47,200 47,200

Income and Expenditure Account for the year ended 31 March, 2008


Balance Sheet as on 31.3.2008

Liabilities Amount Amount Assets Amount Amount

Rs. Rs. Rs. Rs.

Capital Fund Land 10,000

Opening Balance Nil Furniture 1,46,000

Add : Surplus 15,100 15,100 Less:Depreciation 14,600 1,31,400

Building &

Library Fund 2,00,000 Library Books 25,000

Creditors for Furniture 16,000 Less:- Depreciation 2,500 22,500

Creditors for Term Deposit

Liabilities for: with Bank 15,000

Salaries 200 9% Govt. Bonds 1,60,000

Maintenance of

Playground 1,000

Bank Overdraft 1,08,140 Subscription 1,000

ReceivableAccrued

Sundry Income 540 1,540

3,40,440 3,40,440



EXERCISEProblem 1 :

A summary of Receipts and Payments of Bakers Club for the year ended 31st March, 2008


To Opening Balance 3,000 By Salaries & Rent 1,500

“ Subscription 20,000 “ Electric Charges 300

“ Donations 5,000 ‘’ Sports Expenses 1,000

“ Entrance Fees 1,000 “ Sports goods purchase 9,000

“ Interest 100 ‘‘ Books purchase 5,000

“ Charity show Receipts 2,400 “ Miscellaneous Expenses 700

“ Charity show Expenses 2,000

“ Investment 8,000

“ Closing balance 4,000

31,500 31,500

Following information are available at the end of the year :

(i) Of the total subscriptions received Rs. 500 for 2006-07 and Rs. 600 for 2008-09 butRs. 100 is due for 2007-08.

(ii) The total sum received on Entrance fees is to be transferred to Capital Fund.

(iii) Salary is remaining due to be paid Rs. 300.

(iv) Interest is receivable Rs. 500.

The club had the following assets on the opening day of the year Sports goods Rs. 3,000;Books Rs. 2,000; Investment Rs. 6,000.

As on 31.3.08 : spors goods valued at Rs. 10,000.

From the above information prepare an Income and Expenditure Account for the year ended31.3.08 and Balance sheet as on that date.(Ans & Hints : Surplus Rs. 14,200. Balance sheet come Rs. 35,600)

Opening capital Fund Rs.14,500


Problem 2.

Receipts and Payments Account Monster Club for the year ended 31st March, 2008.

Dr. Cr.


To Cash in hand 50 By Salaries 2,400

“ Cash at Bank 565 “ Rent 720

“ Subscription “ Postage 30

“ (including Rs. 150 for 06-07 “ Printing & Stationery 255

“ and Rs. 100 for 08-09) 4,550 “ Electricity charges 300

“ Interest on Investments 2,000 “ Meeting Expenses 150

“ Bank Interest 25 “ Purchase of library books 1,000

“ Sale of Furniture 200 “ Investment in bonds 1,000

“ Cash in hand 155

“ Cash at Bank 1,380

7,390 7,390

The following additional information is supplied to you—

1. On 1st April. 2007 the club had the following assets and liabilities : (a) Investments Rs.40,000; (b) Furniture Rs. 3,000; (c) Library Books Rs. 5,000; (d) Liabilityfor Rent Rs.60 and Salary Rs. 200.2. On 31st March, 2008 Rent Rs. 80 and Salary Rs. 300 were in arrear.

3. The book value of furniture sold was Rs. 250.

4. The club has has 45 members with an annual subscription of Rs. 100 each.

Prepare the Income & Expenditure Account of the Club for the year ended 31st March, 2008and the Balance Sheet as on that date.

(Ans: SurplusRs.2,500; Total of Balance Sheet on 31.3.08. Rs. 51,485]

Capital Fund (as on 1.4.07) Rs. 48,505.

Problem 3.

The following particulars relate to International Club for the year ended 30.608. You arerequired to prepare therefrom an Income and Expenditure Account for the year and a Bal-ance Sheet as on 30.6.08.



Cash Book

Rs.. Rs.

To Balance b/d 2,350 By Salaries 1200

“ Entrance Fees 300 “ Electricity 120

“ Subscription “ Newspapers and Journals 525

2006-07 50 “ Fixed deposits 2,500

2007-08 3,500 “ Utensils 200

2008-09 75 3,625 “ Payment to creditors 1,000

“ Profit from Refreshment 100 “ Balance carried c/d 1,150

“ Locker Rent 200

“ Sundry Income 120

6,695 6,695

Entrance fees to be Capitalised.

The assets and liabilities on 1st July 2007 were Utensils. Rs. 800 Furniture Rs. 2.500:Consum-able stores Rs. 350 and Creditors Rs. 1,200.

On 30.6.08 value of consumable stores was Rs. 700; creditors amounted to Rs. 550: the sub-scriptions outstanding were Rs. 75 for 2007-08 toRs. 100 for 2006-07 and the interest ac-crued on fixed deposit was Rs, 25.

(Ans: Surplus 2,050 ; Capital Fund on 1.7.07 Rs. 4,950; Total of Balance Sheet on 30.06.08Rs.7,925)

Consumable stors Purchased during the year Rs. 350; Consumable stores used during yearRs. 100

Problem 4.

From the following particulars related to Anand Charitable Hospital, prepare an Incomeand Expenditure Account for the year ended 30th June, 08 and a Balance Sheet on that date.

Dr. Cr.


Receipts & Payments Account for the year ended 30.6.08


Balance in hand on 1.7.07 7,130 Payments for Medicines 30,590

Subscriptions 48,000 Honorarium to Medical staff 9,000

Donations 14,500 Salaries to House Staff 27,500

Interest on Investment @ 7% 7,000 Petty Expenses 460

Proceeds from Annual Day 10,450 Equipment Purchase 15,000

Expenses for Annual Day 751

Closing Balance (30.6.08) 3,779

87,080 87,080

Additional information :

On 30.6.07(Rs.) On 30.6.08 (Rs.)

Subscription Receivable 240 280

Subscription Received in Advance 64 100

Stock of Medicines 8,810 9,740

Value of equipment 21,200 31,600

Buildings 40,000 38,000

Outstanding liability to Medicine suppliers 10,000 8,000

(Ans: Deficit Rs. 6,517; Capital Fund on 1.7.07 Rs. 1,67,316; Total of Balance Sheet on 30.6.08

Rs, 1,83,399; Medicine consumed during the year Rs.27,660)

Dr. Cr.



Problem 5.D Literary Society showed the following position on 31st December. 2007 Balance Sheet asat 31st December, 2007

Liabilities Rs. Assets Rs.

Capital Fund 79,300 Electrical Fittings 15,000

Outstanding Expenses 700 Furniture 5,000

Books 40,000

Investment in

Securities 15,000

Cash at Bank 2,500

Cash in hand 2, 500

80,000 80,000

Receipts and Payments Account for the year ending on 31st December, 2007

Receipts Rs. Payments Rs.To Balance b/d By Electric Charges 720Cash at Bank 2,500 ‘’ Postage & Stationery 500Cash in hand 2,500 Telephone charges 500Entrance Fees 3,000 Books Purchased (1.1.07) 6,000Membership Subscriptions 20,000 Outstanding Expenses 700Sale proceeds of Old Rent Account 8,800Newspapers 150 Investment in SecuritiesHire of lecture Hall 2,000 (1.7.07) 4,000Interest on Securities 800 Salaries A/c 6,600

Balance c/d : Cash at Bank 2,000Cash in hand 1,130

30,950 30,950You are required to prepare an Income & Expenditure Account for the year ending on31.12.2007 and a Balance Sheet on that date after incorporating the following adjustments

(i) Membership subscriptions included Rs. 1.000 received in advance.(ii) Provide for outstanding Rent Rs. 400 and Salaries Rs. 300.(iii) Books to be depreciated @ 10% including additions. Electrical Fittings and

Furniture are also to be depreciated at the same rate.(iv) 75% of the Entrance Fees are to be capitalised.(v) Interest on Securities to be calculated at 5% p.a.[Ans: Deficit Rs. 1670; Total ol Balance Sheet an 31.12.07 As. 81,580]

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