Question 3 OR
Club: Income and Expenditure Account and Balance Sheet
18 marks
- Time to write
- About 36 minutes
- Notes
- Crux notes
Question
Question 3 OR · 18 marksGiven below is a club's Receipts and Payments Accounts for the year ended 31st March 2024:
| Receipts | ₹ | Payments | ₹ |
|---|---|---|---|
| To Balance b/d | 14,460 | By Salaries | 36,000 |
| To Subscriptions | 85,800 | By Rent and Electricity | 21,660 |
| To Miscellaneous Income | 2,100 | By Library Books | 3,000 |
| To Interest on Fixed Deposits | 6,000 | By Magazines and Newspapers | 6,516 |
| By Sundry Expenses | 30,834 | ||
| By Sports Equipment | 3,000 | ||
| By Balance c/d | 7,350 | ||
| 1,08,360 | 1,08,360 |
Other Information
| ₹ 31st March 2023 | ₹ 31st March 2024 | |
|---|---|---|
| Outstanding Salaries | 2,130 | 510 |
| Outstanding Rent and Electricity | 2,592 | 2,919 |
| Outstanding magazines & News paper | 678 | 1020 |
| Fixed Deposits (10%) with Bank | 60,000 | 60,000 |
| Subscription Outstanding | 3000 | 3600 |
| Subscription receivable | 3,789 | 4,725 |
| Prepaid Expenses | 1251 | 1,860 |
| Furniture | 28,800 | |
| Sports Equipments | 21,600 | |
| Library books | 15,000 |
The Closing Value of the Furniture and sports equipments are to be found after charging depreciation at 10% and 20% respectively, inclusive of any additions during the year, if any. The library books are revalued at the end of each year, and their value at the end of 31st March 2024 was ₹15,750.
Prepare the Income and Expenditure Account for the year ended 31st March 2024 and the 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
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.
What the paper leaves open
- "Subscription Outstanding" and "Subscription receivable" are both read as amounts due from members, so the subscriptions due at each date are their total. The answer also shows the figures if one of the rows were subscriptions received in advance.
- Interest on the fixed deposits at 10% is for a full year.
- Depreciation on furniture and sports equipment includes a full year on the year's additions, as printed.
- The library books are shown at their revalued figure; the fall in value is their depreciation.
- The opening capital fund is the balancing figure of the opening balance sheet.
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 5 marks 9 min
- 2 Depreciation and revaluation 3 marks 5 min
- 3 Income and Expenditure Account 4 marks 7 min
- 4 Opening capital fund 2 marks 4 min
- 5 Closing Balance Sheet 4 marks 7 min
- Check: every adjustment used, both sides agree, dates in 2 min
Easy marks
- The workings (steps 1 and 2) carry 8 of the 18 marks. Each earns its marks on its own, even if the final statement is left unfinished.
Try it first. About 36 minutes for 18 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 of the answer
The Income and Expenditure Account is a nominal account of the year's income and expenditure, unlike the Receipts and Payments Account, which summarises cash. Each item is adjusted for amounts outstanding and prepaid; capital payments (library books, sports equipment) go to the Balance Sheet; depreciation is charged, including on the year's additions, as the question directs. The library books are taken at their revalued figure, the fall being their depreciation. Both subscription rows are read as amounts due from members (paper note), so subscriptions due are 3,000 + 3,789 = 6,789 at the start and 3,600 + 4,725 = 8,325 at the end. The amount credited is the subscription received adjusted for amounts due at the two dates, as in the DU text's worked example.
Working notes
Working notes
| Item | Paid / received ₹ | Adjustment | For the year ₹ |
|---|---|---|---|
| Subscriptions | 85,800 | − due at start 6,789 + due at end 8,325 | 87,336 |
| Salaries | 36,000 | − outstanding at start 2,130 + at end 510 | 34,380 |
| Rent and Electricity | 21,660 | − outstanding at start 2,592 + at end 2,919 | 21,987 |
| Magazines and Newspapers | 6,516 | − outstanding at start 678 + at end 1,020 | 6,858 |
| Sundry Expenses | 30,834 | + prepaid at start 1,251 − prepaid at end 1,860 | 30,225 |
Interest on the fixed deposits: 10% of 60,000 = 6,000, all received. Depreciation: furniture 28,800 × 10% = 2,880; sports equipment (21,600 + 3,000) × 20% = 4,920; library books 15,000 + 3,000 − revalued 15,750 = 2,250.
Income and Expenditure Account for the year ended 31st March 2024
4 marks| Expenditure | ₹ | Income | ₹ |
|---|---|---|---|
| To Salaries | 34,380 | By Subscriptions | 87,336 |
| To Rent and Electricity | 21,987 | By Miscellaneous Income | 2,100 |
| To Magazines and Newspapers | 6,858 | By Interest on Fixed Deposits | 6,000 |
| To Sundry Expenses | 30,225 | By Deficit (excess of expenditure over income) | 8,064 |
| To Depreciation on Furniture | 2,880 | ||
| To Depreciation on Sports Equipment | 4,920 | ||
| To Depreciation on Library Books | 2,250 | ||
| 1,03,500 | 1,03,500 |
Opening capital fund (Balance Sheet as at 31st March 2023)
2 marks| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Outstanding salaries, rent and electricity, magazines (2,130 + 2,592 + 678) | 5,400 | Cash | 14,460 |
| Capital Fund (balancing figure) | 1,42,500 | Fixed Deposits | 60,000 |
| Subscriptions due (3,000 + 3,789) | 6,789 | ||
| Prepaid Expenses | 1,251 | ||
| Furniture | 28,800 | ||
| Sports Equipment | 21,600 | ||
| Library Books | 15,000 | ||
| 1,47,900 | 1,47,900 |
Balance Sheet as at 31st March 2024
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital Fund (1,42,500 − deficit 8,064) | 1,34,436 | Cash | 7,350 |
| Outstanding salaries | 510 | Fixed Deposits | 60,000 |
| Outstanding rent and electricity | 2,919 | Subscriptions due (3,600 + 4,725) | 8,325 |
| Outstanding magazines and newspapers | 1,020 | Prepaid Expenses | 1,860 |
| Furniture (28,800 − 2,880) | 25,920 | ||
| Sports Equipment (24,600 − 4,920) | 19,680 | ||
| Library Books (revalued) | 15,750 | ||
| 1,38,885 | 1,38,885 |
The other reading
| Reading of the two subscription rows | Subscriptions ₹ | Deficit ₹ | Opening capital fund ₹ |
|---|---|---|---|
| This answer: both are amounts due | 87,336 | 8,064 | 1,42,500 |
| "Subscription receivable" is subscription received in advance | 85,464 | 9,936 | 1,34,922 |
| "Subscription Outstanding" is subscription received in advance | 86,136 | 9,264 | 1,36,500 |
Subscription received in advance would be a liability and the income of the next year.
Where the 18 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Adjustments: subscriptions, outstanding and prepaid items | 5 |
| 2 | Depreciation and revaluation | 3 |
| 3 | Income and Expenditure Account | 4 |
| 4 | Opening capital fund | 2 |
| 5 | Closing Balance Sheet | 4 |
| Total | 18 |
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