Question 3 OR (b)
Prize Endowment Fund in a club's final accounts
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 3 OR (b) · 6 marksHow would you deal with the items below, when the final accounts of a social club are prepared for the year ending 31st March 2025:
| Particulars | ₹ |
|---|---|
| Prize awarded | 1,68,000 |
| Prize Endowment Fund | 16,80,000 |
| 8% Prize Endowment Fund Investment on 1st April 2024 | 16,80,000 |
| Donation received for prize Endowment Fund | 2,40,000 |
| Interest received on Prize Endowment Fund Investment | 1,00,800 |
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
- HowHow it works or is done, step by step.
What the paper leaves open
The interest of 8% on the fund investment is for a full year from 1st April 2024; the part not received is shown as accrued.
Write it in this order
- Read the data; note exactly what is asked 1 min
- 1 Donation and interest added to the fund, accrued interest shown 3 marks 5 min
- 2 Prizes charged to the fund; Balance Sheet extract 3 marks 5 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.
Treatment. A Prize Endowment Fund is a specific fund: the donation received for it, the income earned on its investment and the prizes paid out of it all go to the fund, not to the Income and Expenditure Account. Special receipts of this kind are shown in the Balance Sheet as a liability; expenses met from a specific fund are set against it, and only an excess would go to the Income and Expenditure Account.
- Donation received for the fund (₹2,40,000): added to the fund.
- Interest on the fund investment: 8% of ₹16,80,000 for the full year from 1st April 2024 = ₹1,34,400, credited to the fund. Of this, ₹1,00,800 is received and ₹33,600 is accrued; income due but not received is shown on the assets side.
- Prizes awarded (₹1,68,000): charged to the fund.
- The investment (₹16,80,000) is shown on the assets side.
Balance Sheet extract as at 31st March 2025
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Prize Endowment Fund (opening) | 16,80,000 | 8% Prize Endowment Fund Investment | 16,80,000 |
| Add: donation received for the fund | 2,40,000 | Interest accrued on the fund investment | 33,600 |
| Add: interest on the fund investment | 1,34,400 | ||
| Fund before prizes | 20,54,400 | ||
| Less: prizes awarded | (1,68,000) | ||
| Prize Endowment Fund (closing) | 18,86,400 |
Nothing from these items appears in the Income and Expenditure Account.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Donation and interest added to the fund, accrued interest shown | 3 |
| 2 | Prizes charged to the fund; Balance Sheet extract | 3 |
| Total | 6 |
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