Question 2 OR
Income and Expenditure Account and Balance Sheet of a club
10 marks
- Time to write
- About 20 minutes
From an older CBCS paper
Question
Question 2 OR · 10 marksThe Receipts and Payments Account below, for the year ending 31st December 2016, is presented to you:
| Receipts | ₹ | Payments | ₹ | |
|---|---|---|---|---|
| Balance b/d | 24,000 | Salaries | 3,60,000 | |
| Subscriptions | Stationery | 96,000 | ||
| 2017 | 19,200 | Telephone | 14,400 | |
| 2016 | 5,06,400 | Rent | 18,000 | |
| 2015 | 9,600 | 5,35,200 | Upkeep of Lawn | 18,000 |
| Receipts from sports meet | 60,000 | Furniture | 72,000 | |
| Interest on investments | 24,000 | Balance c/d | 64,800 | |
| 6,43,200 | 6,43,200 |
Further information is available:
The members number 450, and the annual subscription per member is ₹ 1,200. At the start of 2016, ₹ 10,800 was in arrear for 2015.
The opening Stock of stationary was ₹ 4,200, and the closing one ₹ 6,000.
At the close of 2016, rent for 3 months had been prepaid. (Monthly rent ₹ 1,200)
| Outstanding expenses | as on 31.12.2015 | as on 1.12.2016 |
|---|---|---|
| Staff salaries | 3,600 | 7,200 |
| Telephone bills | 1,200 | 2,160 |
| Upkeep of lawn | 720 | 3,360 |
The buildings stood in the books at ₹ 24,00,000, and you are to write off depreciation on them at 5% p.a.
On 31.12.2016 the Investments were ₹ 4,80,000, carrying interest @ 6% p.a..
You are required to prepare, for the year ending 31st December, 2016, the Income and Expenditure Account and a Balance Sheet on that date. 10
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- prepare, … AccountProper formats (heading, date, both sides): post the plain items, then each adjustment, and balance last.
What the paper leaves open
- The expense table is headed "as on 31.12.2015" and "as on 1.12.2016"; the second date is read as 31.12.2016, the year end.
- Interest on investments: 6% for the year on the investments held at the year end, the shortfall accrued.
- "Stationary" is kept as printed.
Write it in this order
- Read the data; tick every adjustment as you plan it 1 min
- 1 Workings and opening capital fund 2 marks 4 min
- 2 Income and Expenditure Account 4 marks 7 min
- 3 Balance Sheet 4 marks 7 min
- Check: every adjustment used, both sides agree, dates in 1 min
Try it first. About 20 minutes for 10 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Basis. The Income and Expenditure Account records only the revenue items of the current year: receipts and payments of earlier or later years are left out, and incomes and expenses of the year are included whether received or paid. Only the current year's subscription is income; arrears received settle an asset, and advances are a liability. Readings (paper note): the second date of the expense table is 31.12.2016; interest is 6% on the ₹4,80,000 of investments, the shortfall being accrued.
| Item | Working | ₹ |
|---|---|---|
| Subscription income for 2016 | 450 members × 1,200 | 5,40,000 |
| Subscriptions outstanding for 2016 | 5,40,000 − 5,06,400 received | 33,600 |
| Subscriptions outstanding for 2015 | 10,800 − 9,600 received | 1,200 |
| Stationery consumed | 96,000 + 4,200 − 6,000 | 94,200 |
| Rent for the year | 18,000 − 3,600 prepaid (3 × 1,200) | 14,400 |
| Interest accrued | 6% × 4,80,000 − 24,000 received | 4,800 |
Capital fund on 1 January 2016
| Particulars | ₹ |
|---|---|
| Cash | 24,000 |
| Subscriptions outstanding for 2015 | 10,800 |
| Stock of stationery | 4,200 |
| Buildings | 24,00,000 |
| Investments | 4,80,000 |
| Less: outstanding expenses (3,600 + 1,200 + 720) | 5,520 |
| Capital fund | 29,13,480 |
Income and Expenditure Account for the year ended 31 December 2016
| Expenditure | ₹ | Income | ₹ |
|---|---|---|---|
| To Salaries (3,60,000 − 3,600 + 7,200) | 3,63,600 | By Subscriptions (450 × 1,200) | 5,40,000 |
| To Stationery consumed | 94,200 | By Receipts from sports meet | 60,000 |
| To Telephone (14,400 − 1,200 + 2,160) | 15,360 | By Interest on investments (received 24,000 + accrued 4,800) | 28,800 |
| To Rent | 14,400 | ||
| To Upkeep of lawn (18,000 − 720 + 3,360) | 20,640 | ||
| To Depreciation on buildings (5% of 24,00,000) | 1,20,000 | ||
| To Surplus (excess of income over expenditure) | 600 | ||
| 6,28,800 | 6,28,800 |
Balance Sheet as at 31 December 2016
| Liabilities | ₹ | ₹ | Assets | ₹ | ₹ |
|---|---|---|---|---|---|
| Capital fund (1.1.2016) | 29,13,480 | Buildings | 24,00,000 | ||
| Add: Surplus | 600 | 29,14,080 | Less: Depreciation | 1,20,000 | 22,80,000 |
| Subscriptions received in advance (2017) | 19,200 | Furniture | 72,000 | ||
| Outstanding expenses: salaries | 7,200 | Investments | 4,80,000 | ||
| Telephone | 2,160 | Interest accrued on investments | 4,800 | ||
| Upkeep of lawn | 3,360 | 12,720 | Subscriptions outstanding (2016 33,600 + 2015 1,200) | 34,800 | |
| Stock of stationery | 6,000 | ||||
| Rent prepaid | 3,600 | ||||
| Cash in hand | 64,800 | ||||
| 29,46,000 | 29,46,000 |
The furniture of ₹72,000 bought during the year is capital expenditure and goes to the balance sheet, not to the Income and Expenditure Account.
Where the 10 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Workings and opening capital fund | 2 |
| 2 | Income and Expenditure Account | 4 |
| 3 | Balance Sheet | 4 |
| Total | 10 |
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