Question 3 OR (a)
Prize fund and other club items in the final statements
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 3 OR (a) · 6 marksOrion club has the following balances as on 1 January, 2025.
| Prize fund | ₹1,20,500 |
| 12% Sports fund investments (Face value 1,50,000 fully paid) | ₹1,20,500 |
| Transactions during the year | |
| Donation for prize fund received during the year | ₹20,000 |
| Prizes awarded during the year | ₹9,000 |
| Interest received on prize fund investments during the year | ₹14,000 |
| Expenses incurred on sports events during the year | ₹5,000 |
| Interest received on general fund investments during the year | ₹25,000 |
In what way will you treat the above items when drawing up the income and expenditure account for the year ended 31st December 2025 and the Balance sheet on that date. Show the extracts of the final statements.
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
What the paper leaves open
- The investments are labelled "Sports fund investments", but the only fund given is the prize fund and the interest is received "on prize fund investments"; we read them as the prize fund's own investments.
- The coupon on face value (12% of ₹1,50,000 = ₹18,000 in our version) is more than the ₹14,000 received; we treat the ₹4,000 difference as interest accrued, added to the prize fund and shown as an asset.
- No sports fund is given, so the expenses on sports events (₹5,000) are read as ordinary expenditure of the club, charged to the Income and Expenditure Account; if they were met from the prize fund, the fund would close at ₹1,44,500 instead of ₹1,49,500.
Write it in this order
- Read the data; note exactly what is asked 1 min
- 1 Prize fund: donation and interest credited to the fund, prizes debited to it 2 marks 3 min
- 2 Interest accrued added to the fund and shown as an asset 1 mark 2 min
- 3 General-fund interest as income; sports-event expenses as expenditure 1 mark 2 min
- 4 Balance Sheet extract: fund 2 marks 3 min
- Check: arithmetic, units (₹, %), final answer underlined 1 min
Try it first. About 12 minutes for 6 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.
The rule. A receipt for a special purpose, such as a donation for a prize fund, is not income; it is shown in the Balance Sheet as a liability. Everything earned or spent on the fund's account goes through the fund. Expenses met from a specific fund are set against it, and only an excess of such expenses over the fund would reach the Income and Expenditure Account, as the CBSE examiner key does with a tournament fund (school-board convention, not a DU key); here the prizes awarded are well within the fund. The Income and Expenditure Account takes the club's own revenue items: the expenses of the current year are debited to it, so the expenses on sports events, for which no fund exists, are charged there.
Interest on the fund's investments. The coupon is 12% of the ₹1,50,000 face value, ₹18,000 for the full year, but only ₹14,000 was received. The ₹4,000 balance is interest accrued: it belongs to the prize fund, and, like any income due but not yet received, it is shown on the assets side of the Balance Sheet (paper note).
Prize Fund Account
| Dr | ₹ | Cr | ₹ |
|---|---|---|---|
| To Prizes awarded | 9,000 | By Balance b/d (1 January 2025) | 1,20,500 |
| To Balance c/d | 1,49,500 | By Donation for prize fund | 20,000 |
| By Interest received on prize fund investments | 14,000 | ||
| By Interest accrued on prize fund investments | 4,000 | ||
| Total | 1,58,500 | Total | 1,58,500 |
| Dr | ₹ |
|---|---|
| To Prizes awarded | 9,000 |
| To Balance c/d | 1,49,500 |
| Total | 1,58,500 |
| Cr | ₹ |
| By Balance b/d (1 January 2025) | 1,20,500 |
| By Donation for prize fund | 20,000 |
| By Interest received on prize fund investments | 14,000 |
| By Interest accrued on prize fund investments | 4,000 |
| Total | 1,58,500 |
Income and Expenditure Account for the year ended 31st December 2025 (extract)
| Expenditure | ₹ | Income | ₹ |
|---|---|---|---|
| To Expenses on sports events | 5,000 | By Interest on general fund investments | 25,000 |
Balance Sheet as on 31st December 2025 (extract)
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Prize Fund (as above) | 1,49,500 | 12% Prize (sports) fund investments, face value ₹1,50,000 | 1,20,500 |
| Interest accrued on prize fund investments | 4,000 |
The fund's investments (₹1,20,500) and its accrued interest (₹4,000) back ₹1,24,500 of the ₹1,49,500 fund. The rest of the fund's money (donation and interest received, less prizes paid) is held in the club's general cash.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Prize fund: donation and interest credited to the fund, prizes debited to it | 2 |
| 2 | Interest accrued (₹4,000) added to the fund and shown as an asset | 1 |
| 3 | General-fund interest as income; sports-event expenses as expenditure | 1 |
| 4 | Balance Sheet extract: fund ₹1,49,500; investments ₹1,20,500; accrued interest ₹4,000 | 2 |
| Total | 6 |
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