Question 3 OR

Club: Income and Expenditure Account and Balance Sheet

18 marks

Time to write: About 36 minutes
Topic: Not-for-profit organisations
Notes: Crux notes

Question

Question 3 OR · 18 marks

Given below is the receipt and payment account of Riverside Club for the year ended 31st March 2024:

Receipts	Rs.	Payments	Rs.
To Balance b/d	23,136	By Salaries	57,600
To Subscriptions	1,37,280	By Rent and Electricity	42,720
To Proceeds from party hall	64,800	By Library Books	14,400
To Bar collections	46,200	By Magazine and Newspaper	15,180
To Miscellaneous Income	3,360	By Sundry Expenses	74,640
To Interest on fixed deposit	8,400	By Sports Equipment	34,200
		By Furniture	25,800
		By Balance c/d	18,636
	2,83,176		2,83,176

Other information:

	31st March 2023	31st March 2024
Outstanding salaries	6,720	3,360
Outstanding Rent and Electricity	3,900	4,608
Outstanding Magazine and Newspaper	1,488	2,220
Fixed Deposits with Bank (@ 10% p.a. Interest Rate)	96,000	96,000
Subscription outstanding	4,800	5,760
Subscription advance	6,120	7,560
Prepaid sundry expenses	1,992	2,700
Furniture	46,080	?
Sports Equipment	34,560	?
Library Books	24,000	?

The closing value of the furniture, the sports equipment and the library books are to be found after charging depreciation at 10% p.a. each on the furniture and the books and 20% p.a. on the sports equipment, inclusive of any additions (charge a full year's depreciation on an addition), if any. You are required to prepare the income and expenditure account for the year ended 31st March 2024 and Balance Sheet as on that date.

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

36 minfor 18 marks

Read from the question

prepare the income and expenditure accountProper formats (heading, date, both sides): post the plain items, then each adjustment, and balance last.

Write it in this order

Working notes first: they feed the statements.

Read the data; tick every adjustment as you plan it 2 min
1 Adjustments: subscriptions, outstanding and prepaid items, interest 5 marks 9 min
2 Depreciation on additions 2 marks 4 min
3 Income and Expenditure Account 5 marks 9 min
4 Opening capital fund 2 marks 3 min
5 Closing Balance Sheet 4 marks 7 min
Check: every adjustment used, both sides agree, dates in 2 min

12345

Easy marks

The workings (steps 1 and 2) carry 7 of the 18 marks. Each earns its marks on its own, even if the final statement is left unfinished.

Final answer

Check your own figures against these.

Surplus: ₹48,468
Balance sheet total: ₹2,78,556

Try it first. About 36 minutes for 18 marks. Write it out, then open the solution and check your figures against the final answer.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Basis of the answer

The Receipts and Payments Account is a summary of cash; the Income and Expenditure Account is a nominal account that takes only the income and expenditure of the year, on the accrual basis. So each item is adjusted for amounts outstanding, prepaid or received in advance; capital payments (furniture, sports equipment, library books) go to the Balance Sheet; and depreciation is charged.

Working notes

Item	Paid / received	Less	Add	For the year (₹)
Subscriptions (received + closing due − opening due + opening advance − closing advance)	1,37,280	opening due 4,800; closing advance 7,560	closing due 5,760; opening advance 6,120	1,36,800
Salaries	57,600	opening outstanding 6,720	closing outstanding 3,360	54,240
Rent and Electricity	42,720	opening outstanding 3,900	closing outstanding 4,608	43,428
Magazines and Newspapers	15,180	opening outstanding 1,488	closing outstanding 2,220	15,912
Sundry Expenses (paid + opening prepaid − closing prepaid)	74,640	closing prepaid 2,700	opening prepaid 1,992	73,932

Subscriptions received in advance are a liability at the year end and income of the next year; the subscription credited is the amount received adjusted for these, as in the DU text's worked example. Interest on the fixed deposit: 10% of 96,000 = 9,600; received 8,400, so 1,200 is accrued.

Depreciation (a full year, on the opening value plus additions): Furniture (46,080 + 25,800) × 10% = 7,188; Sports Equipment (34,560 + 34,200) × 20% = 13,752; Library Books (24,000 + 14,400) × 10% = 3,840.

Income and Expenditure Account for the year ended 31st March 2024

5 marks

Expenditure	₹	Income	₹
To Salaries	54,240	By Subscriptions	1,36,800
To Rent and Electricity	43,428	By Proceeds from party hall	64,800
To Magazines and Newspapers	15,912	By Bar collections	46,200
To Sundry Expenses	73,932	By Miscellaneous Income	3,360
To Depreciation on Furniture	7,188	By Interest on fixed deposit (8,400 + accrued 1,200)	9,600
To Depreciation on Sports Equipment	13,752
To Depreciation on Library Books	3,840
To Surplus (excess of income over expenditure)	48,468
	2,60,760		2,60,760

Opening capital fund (Balance Sheet as at 31st March 2023)

2 marks

Liabilities	₹	Assets	₹
Capital Fund (balancing figure)	2,12,340	Cash	23,136
Outstanding and advance items (6,720 + 3,900 + 1,488 + 6,120)	18,228	Fixed Deposits	96,000
		Subscriptions outstanding	4,800
		Prepaid sundry expenses	1,992
		Furniture	46,080
		Sports Equipment	34,560
		Library Books	24,000
	2,30,568		2,30,568

Balance Sheet as at 31st March 2024

Liabilities	₹	Assets	₹
Capital Fund (2,12,340 + surplus 48,468)	2,60,808	Cash	18,636
Outstanding salaries	3,360	Fixed Deposits	96,000
Outstanding rent and electricity	4,608	Interest accrued	1,200
Outstanding magazines and newspapers	2,220	Subscriptions outstanding	5,760
Subscriptions received in advance	7,560	Prepaid sundry expenses	2,700
		Furniture (71,880 − 7,188)	64,692
		Sports Equipment (68,760 − 13,752)	55,008
		Library Books (38,400 − 3,840)	34,560
	2,78,556		2,78,556

Result: surplus ₹48,468; balance sheet total ₹2,78,556.

Where the 18 marks sit

#	Component	Marks
1	Adjustments: subscriptions, outstanding and prepaid items, interest	5
2	Depreciation on additions	2
3	Income and Expenditure Account	5
4	Opening capital fund	2
5	Closing Balance Sheet	4
	Total	18

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