Study Note 3, Page 148-196

RECEIPTS & PAYMENTS AND INCOME & EXPENDITURE ACCOUNTS
STUDY NOTE 3
RECEIPTS & PAYMENTS AND
INCOME & EXPENDITURE ACCOUNTS
This study note includes -
Final Accounts and Balance Sheet of Non-Profit Seeking Concerns
3.1. FINAL ACCOUNTS AND BALANCE SHEET OF NON-PROFIT

SEEKING CONCERNS
Certain concerns like Clubs, Charitable Institutions, Medical Association, Societies, etc. do not
intend to earn profit. They render service to the society or to their members. Their members do
not get any share of profit or dividend. They get medical, educational, cultural or sports facili-
ties. These concerns arc known as non-profit concerns as their transactions arc service-based
but not profit-based.
Their annual accounts are regularly prepared to convey their financial affairs to their members
or others like (govt. etc.) for seeking financial grants. If the size of the concern is small, the
accounting records are usually kept tinder single entry system. Complete double entry system
is followed only in big concerns. In any case they all prepare (A) A Receipts & Payments
Account for a financial period; (B) An Income & Expenditure Account for a financial period
and (C) A Balance Sheet at the end of the financial period.
A. Receipts & Payments Account
1. It is an Account which contains all Cash and Bank transactions made by a non-
profit organization during a particular financial period.
2. It starts with the opening balances of Cash and Bank. All Cash Receipts during the
period are debited to it.
3. All Cash Payments during the period are credited to this Account. It ends with the
closing Cash and Bank Balances.
4. While recording the Cash and Bank transactions all entries are made on Cash Basis.
No distinction is made between capital and revenue items. No adjustment is made
for outstanding or prepaid amounts.
5. It is simply a summary of Cash Book.
148 FINANCIAL ACCOUNTING

B. Income & Expenditure Account
1. Its form is similar to that of a Profit & Loss Account.
2. All expenses of revenue nature for the particular period are debited to this Account o n
accrual basis.
3. Similarly all revenue incomes related to the particular period are credited to this account
on accrual basis.
4. All Capital incomes and Expenditures are excluded.
5. Only current years incomes and expenses are recorded. Amounts related to other p e -
riods are deducted. Amounts outstanding for the current year are added.
6. Profit on Sale of Asset is credited. Loss on Sale of Asset is debited. Annual Depre ciation
on Assets is also debited.
7. The final balance of this account is a credit balance. it is called a Surplus of incomes over
Expenditure and added with Capital or General Fund etc. in the Balance Sheet.
8. If the final balance is a debit balance it shows a deficit or Shortage and is deducted from
Capital or General Fund etc. in the Balance Sheet.
C. Balance Sheet
The Balance Sheet is prepared in the similar way as followed in a Trading concern. The mar-
shalling of the assets and liabilities may be made in order of liquidity or in order of perma-
nence.
Nots For solving problems a student may have to prepare an opening Balance Sheet also, to
fing out opening Capital Fund of a period
FINANCIAL ACCOUNTING 149

Distinction between Receipts & Payment Account and income & Expenditure Account
Receipts & Payments Account Income & Expenditure Account

1 It closely resembles the Cash Book of a 1 It closely resembles the Profit & Loss
Trading concern is simply a summarised Account of a Trading concern.
Cash Book.
2. Incomes are debited and Expenditures 2 Incomes are credited and Expenditures
are credited. are debited.
Transactions are recorded on Cash basis.
3. Amounts related to previous period or 3 Transactions are recorded on accrual
future period may remain basis. All amounts not related to the
included. Outstanding amount for current period are excluded.
current year is excluded. Outstanding amounts of current period
are added.
4. It records both Capital and Revenue 4 It records only items of Revenue.
items.
5. It serves the purpose of a Real Account. 5 It serves the purpose of a Nominal
Account.
6. It starts with opening Cash and Bank 6 It does not record such balances.
Balances and ends with dosing Cash and Rather its final balance shows a surplus
Bank Balances. or a deficit for the period.
7. It does not record notional loss or non- 7 It considers all such expenses for
cash expenses like bad debts, matching against revenues
depreciations etc.
8. Its dosing balance is carried forward to 8 Its closing balance is transferred to
the same account of the next accounting Capital Fund or General Fund or
period. Accumulated Fund in the same
periods Balance Sheet.
9. It helps to prepare an Income & 9 It helps to prepare a Balance Sheet.
Expenditure A/c.
Some Important Considerations
1 Capital Fund : it is also called General Fund or Accumulated Fund. it is actually the
Capital of a non-profit concern. It may be found out as the excess of assets over
liabilities. Usually Surplus or Deficit during a period is added with or deducted from
it. A portion of Capitalised incomes like donations may be added with it.
2. Special Fund It may be created out of special donation or subscription or out of a por-
tion of the Surplus For example a club may have a Building Fund. It may be s e d
for meeting some specific expenses or for acquiring an asset. If any income is derived out
of investments made against this fund or if any profit or loss occurs due to sale of such
investments, such income or profit or loss is transferred to this fund.

Other Treatments
(a) If the Special Fund is used to meet an expense
Special Fund A/c Dr.
To Bank A/c (amt. of expense)
The balance of the Fund is shown as a liability. If the balance is transferred to Capital
Fund, the entry will be
To Capital Fund A/c (Balance of Special Fund )
(b) If the Special Fund is used to purchase an asset
Asset A/c Dr.
To Bank A/c (Cost of the asset I
To Capital Fund A/c (Special Fund closed)
3. Donations
(a) Donation received for a particular purpose should be credited to Special Fund. For ex-
ample, Donation received for Building should be credited to Building Fund A/c.
(b) For other donations received the by-laws or rules of the concern should be followed.
(c) If there is no such rule, donations received of non-recurring nature should be credited to
Capital Fund. Recurring donations received should be credited to Income & Expenditure
Account.
(d) Donation paid by the concern should be debited to Income & Expenditure Account.
4. Legacy received It is to he directly added with Capital Fund alter deduction of tax, if any).
It is a kind of donation received according to the will made by a deceased person.
5. Entrance Fees or Admission Fees

(a) The rules or by-laws of the concern should be followed.
(b) If there is no such rule, Admission or Entrance Fees paid once by members for acquiring
membership should be added with Capital Fund.
(c) If such fees are of small amounts covering the expenses of admission only, the fees may be
credited to Income & Expenditure Account.
6. Subscriptions
(a) Annual subscriptions are credited to Income & Expenditure Account on accrual basis.

(b) Life membership subscription is usually credited to a separate account shown as a liabil-
ity. Annual Subscription apportioned out of that is credited to Income & Expenditure
Account and deducted from the liability. Thus the balance is carried forward till the
contribution by a member is fully exhausted. If any mem ber dies before hand, the balance
of his life Membership contribution is trans ferred to Capital Fund or General Fund.
A. Income & Expenditure Account
1. Ignore opening and closing Cash and Bank Balances.
2. Ignore Capital Receipts and Capital Payments.
3. Debit Revenue payments (from the credit side of the R & P A/c). Add outstand ing ex-
penses of current year. Deduct expenses related to last year or next year.
4. Credit Revenue receipts (from the debit side of the R & P A/c). Add outstand ing incomes
of current year. Deduct incomes related to next year or last year.
5. Debit Depreciation for current year. Also debit loss on sale of any fixed asset. Credit profit
on sale of any fixed asset.
6. Remember that the debit side of this Account stands for Expenditure and its credit side
represents Incomes. If the final balance is a credit balance, it is SurpIus~ [because In-
comes are morel. If the final balance is a debit balance, it is Deficit [because expenses
are morel.
B. Balance Sheet
1. First check up whether the opening Capital Fund is given. If not, prepare an open i n g
Balance Sheet. Record opening Cash and Bank Balances (as given in the R & P A/c). Also
record other opening assets and liabilities (as given in the information). The excess of
assets over liabilities is Capital or General or Accumulated Fund.
2. Prepare the Closing Balance Sheet at the end of the year with
(i) Closing Cash and Bank Balances (as given in the R & P A/c)
(ii) Other Closing assets and liabilities (ascertained from information).
(iii) Capital Payments and Receipts not shown in Income. & Expenditure Account.
(iv) Add purchase of asset, deduct sale of asset during the year. Deduct deprecia-
tion.
(v) Add surplus with and deduct deficit from opening Capital Fund. You get Clos-
ing Capital Fund.
(vi) Make other adjustments as asked for.
llustration .
Special Points : (a) Preparation of Income & Expenditure Account and calculation of Closing
Capital Fund; (b) Loss on Sale of Asset; (c) Donation to a Specific Fund.

The following is the Receipts and Payments Account of a Club for the year ended 31st Decem-
ber. 1995 Receipts Cash in hand (1.1.95) Rs. 1,000; Cash at Bank (1.1.95) Rs. 4.000; Donation for
Building
Rs. 10.000; Sate of Furniture (Balance on 1.1.95 Rs. 100) Rs. 80; Sale of Newspapers Rs. 200;
Subscriptions Rs. 20,000.
Payments : Sports Materials Rs. 2.500; Salaries Rs. 3,250; Furniture Rs. 1.600: Newspapers Rs.
500:
Building Fund Investment Rs. 10.000; Tournament Expenses Rs. 11.000; Postage Rs. 200; Cash
in hand (closing balance) Rs. 1.030: Cash at Bank (Closing Balance) Rs. 5.200.
The following adjustments are to be made
6) Of the Subscriptions collected Rs. 2,000 was outstanding for 1994; (ii) on 1.1.95 Stock of
Raw Materials was Rs. 500 and 1.1.96 it. was Rs. 700.
Prepare the Income and Expenditure Account for the year ended 31st December. 1995 and
show the Capital Fund of the Club as on that date.
Solution:
Dr . Income & Expenditure Account for the year ended 31.12.1995 Cr.
Expenditure Amount Amount Income Amount Amount

Rs. Rs. Rs. Rs.
To Salaries 3,250 By Subscription 20,000
,, Purchase of Newspapers 500 Less :Received
for last year 2,000 18,000
,, Tournament Expenses 11,000 By Safe of old
Newspapers 200
,, Postage 200
,, Use of Sports Materials
Opening Stock 500
Add: Purchase 2500
3,000
Less : Closing Stock 700 2,300
,,Loss on Sale of Furniture
[100 80] 20
,,Surplus (Excess of Income
over Expenditure) 930
18200 18,200

Statement Showing Capital Fund as on 31.12.95
Amount Amount
Rs. Rs.
Assets as on 1.1.95
Cash in hand 1,000

Cash at Bank 4,000
Furniture 100
Sports Materials Subscriptions 500
Outstanding for 1994 2000 7,600
Less : Liabilities on 1.1.95 Nil
Capital Fund on 1.1.95 7600

Add : Surplus for the year
ended on 31.12.95 930
Capital Fund on 31.12.95 8,530
Notes
Donation Received for Building should be credited to Building Fund Account
(b) Both opening and dosing stocks of Sports Materials as given. So the use or consumption of
sports materials during the year has been debited to I & E Ac.
(c) Preparation of Income & Expenditure Account from Relevant Information
Illustration. The Comrades Club makes up its accounts to 31st December in each year. On 31st
December. 1995 the cashier of the club absconded leaving behind no information or cash. An
examination of the records showed that the books had not been written up for a considerable
time and it was decided to reconstruct the figures from 1.1.1995.
A summary of the Bank Account for the year showed that
Amt. Rs. Amt. Rs.

Balance on 1.1.1995 420 Rent & Rates 460
Bank Deposits 42,610 Insurance 40
Light & Heat 156
Bar Purchases 35,067
Telephone 59
Cash Withdrawn 5,848
Balance as on31.12.95 1,400
43,030 43,030

The following information is also obtained
I. The barman places takings in the bank night safe on his way home for crediting to the club
account. The duplicate paying-in-slips totaled Rs. 40,610 for the year. The treasurer had
no access to bar takings.
2. The receipt counterfoils for members subscriptions totaled Rs. 3,050 for the year.
3. A summary of expenditure for petty cash and wages revealed Glasses, crockery main
tenance Rs. 1,310; WagesRs. 2,650; Sundry ExpensesRs. 475
4. Outstanding or Prepaid Amounts were
31.12.94 31.12.95
Prepaid Rates Rs. 26 Rs. 28
Outstanding Expenses Rs. 64 Rs. 100
The Bar Stock on 1.1.1995 was Rs. 3,607 and 31.12.95 Rs. 2,916. Opening Cash with the Cashier
at the beginning of the year 1995 was Rs. 35 only.
Prepare an Income & Expenditure Account of the club for the year ended 31.12.1995.
Working Notes:
1. Cash Defalcation by Cashier
Dr. Cash Account Cr.
Particulars Amount Particulars Amount

Rs. Rs.
To Balance b/f 35 By Bank [Difference in 2,000
Subscriptions 3,050 deposited amount 42,610
Bank (Withdrawals from Bank) 5,848 40,610)
Glasses, Crockery etc. 1,310
Wages 2,650
SundryExpenses 475
Defalcation of 2,498
Cash (Balance Figure)
8,933 8,933

Rent & Rates

Rs.
Paid from Bank 460
+ Prepaid of last year 26
486
Prepaid Rates of current year 28
458
Profit from Bar Rs.
Bar Sales (Deposited by Barman] 40,610
+ Closing Bar Stock 2,916
43,526
Opening Stock 3,607
39,919
Purchases 35,067
4,852
Solution
Comrades Club
Dr. Income and Expenditure Account for the year ended 31.12.1995 Cr.
Particulars Amount Amount Particulars Amount Amount

Rs. Rs. Rs. Rs..
To Rent & Rates [Note 2] 458 By Subscriptions 3,050
Insurance 40 Profit from Bar 4,852
Light & Heat 156
Telephone Charges 59
Glass and Crockery 1,310
Maintenance
Wages 2,650
Sundry Expenses 475
Add Outstanding for 95 100
575
Less : Outstanding for 94 64 511
Defalcation of Cash 2,498
Surplus (Excess of Income 220
over expenditure)
7,902 7,902

Illustration
(a) Preparation of Receipts & Payments Account and Balance Sheet from Income &
Expenditure Account and other information; (b) Opening Cash balance not given
The Income & Expenditure Account of Delight Club for the year 1995 was as follows
Particulars Amt. Rs. Particulars Amt. Rs.
To Salaries 47,500 By Subscriptions 75,000
General Expenses 5,000 Entrance Fees 2,500
Audit Fees 2,500 Contribution for
Annual Dinner 10,000
Secretarys Honorarium 10,000 Profit on Annual Sports 7,500
Printing & Stationery. 4,500
Annual Dinner Expenses 15000
Interest and Bank Charges 1,500
Depreciation on Sports
Equipments 3,000
Surplus 6,000
95,000 95,000
The account had been prepared after the following adjustments : Subscriptions outstanding at
the end of 1994Rs. 6,000; Subscriptions received in advance on 31.12.1994Rs. 4.500; Sub-
scriptions received in advance on 31.12.1995Rs. 2,700; Subscriptions outstanding on
31.12.1995Rs. 7.500
Salaries outstanding at the beginning of 95 and at the end of 95 were respectively Rs. 4,000
and Rs. 4,500. General expenses include insurance prepaid to the tune of Rs. 600. Audit Fee for
1995 is as yet unpaid. During 1995 Audit Fees for 1994 amounting to Rs. 2,000 was paid.
The club owned a football ground valued at Rs. 1,00,000. It had Sports Equipments of Rs.
26,000 on 1.1.1995. On 31.12.1995 such Sports Equipments after depreciation amounted to Rs.
27,000. In 1994 the club raised a bank loan of Rs. 20,000 which remained outstanding through-
out 1995. On 31st December, 1995 Cash in hand amounted to Rs. 16,000.
Prepare the Receipts & Payments Account for 1995 and a Balance Sheet as on 31.12.1995.
Working Notes : [Unlike the previous illustrations, here accounts are being shown to find out
missing figures]

Subscription Received in Cash In 1995
Dr. Subscription Account Cr

Rs Rs.
To Balance b/f (0/S on 1.1.95) 6,000 Balance c/f (OIS on 31.12.95) 4,500
Subscription Recd. in Advance 2,700 Cash (Balance Figure) 71,700
Income & Expenditure A/c (given) 75,000 Balance c/f (OIS on 31.12.95 7,500
83,700 83,700
Purchase of Sports Equipment
Dr. Sports Equipments Account Cr.

Rs. Rs
To Balance b/f 26,000 By Depreciation 3,000
Cash (Purchases Balance Figure) 4000 Balance c/f 27,000
30,000 30,000
Salaries Paid by Cash

Dr. Salary Account Cr.

Rs. Rs.
To Cash (Paid = Balance Figure) 47,000 By Balance b/f
(0/S on 1.1.95) 4,000
Balance c/f (0/S on 31.12.95) 4,500 Income & Expenditure
A/c (given) 47,500
51,500 51,500

Capital Fund on 1.1.1995
Balance Sheet as on 1.1.1995
Liabilities Amount Assets Amount
Rs. Rs.
Outstanding Audit Fees 2,000 Cash in hand 13,900

Outstanding Salaries 4,000 (Balance Figure of R & P A/c]
Subscription Received in Adv. 4,500 Outstanding Subscription 6,000
Bank Loan 20,000 Sports Equipments 26,000
Capital Fund (Excess of Football Ground 1,00,000
Assets over Liabilities) 1,15,400
1,45,900 1,45,900
Solution
Delight Club
Dr. Receipts & Payments Account for the year ended 31.12.1995 Cr.
Receipts Amount Payments Amount
Rs. Rs.
To Balance b/f (Bal. figure) 13,900 By Salaries [Note 3] 47,000
Subscription (Note 1] 71,700 General Expenses (5,000 + 600) 5,600
Entrance Fees 2,500 Audit Fees (1994) 2,000
Contribution to Annual 10,000 Sports Equipments 4,000
Dinner Secretarys Honorarium 10,000
Profit on Annual Sports 7,500 Printing & Stationery 4,500
Annual Dinner Expenses 15,000
Interest and Bank Charges 1,500
Balance c/f 16,000
1,05,600 1,05,600


Liabilities Amount Amount Assets Amount Amount
Rs. Rs. Rs. Rs.
Outstanding Salaries 4,500 Cash in hand 16,000

Outstanding Audit Fees 2,500 Insurance Paid in Adv. 600
Prereceived Subscription 2,700 Accrued Subscription 7500
Bank Loan 20,000 Sports Equipment 26000
Accumulated Fund : Add : Purchase 4000
Opening Balance 1,15,400 30,000
Add: Surplus 6,000 121400 Less : Depreciation 3000 27000
Football Ground 100000
151100 151100
Ilustration
Preparation of Receipts & Payments Accounts and Preparation of Income & Expenditure Ac-
count.
The accountant of City Club gave the following information about the receipts and payments
of the club for the year ended 31st March, 1994.
Receipts Rs. Payments Rs.
Subscriptions 62,130 Premises 30,000
Fair Receipts 7,200 Rent 2,400
Variety show Receipts (net) 12,810 Rates and Stationery 3,780
Interest 690 Printing & Stationery 1,410
Bar Collections 22,350 Sundry Expenses 5,350
Wages 2,520
Fair Expenses 7,170
Honorarium to Secretary 11,000
Bar Purchases (Payment) 17,310
Repairs 960
New Car (less proceeds of old car) 37,800

The following additional information could be obtained :
1.4.93 (Rs.) 31.3.94 (Rs.)
Cash in hand 450 nil

Bank Balance as per Cash Book 24,420 10,350
Cheque issued for Sundry Expenses not presented 270 90
to the bank (entry has been duly made in the Cash
book)
Subscriptions Due 3,600 2,940
Premises at cost 87,000 117,000
Provision for Depreciation on Premises 56,400
Car at cost 36,570 46,800
Accumulated Depreciation on Car 30,870
Bar Stock 2,130 2,610
Creditors for Bar Purchases 1,770 1,290
Annual Honorarium to Secretary is Rs. 12,000 Depreciation on Premises is to be provided at
5% on written down value. Depreciation on new car is to be provided at 20%.
You are required to prepare Receipts and Payments Account and Income and Expenditure
Account for the year ended 31.3.94.
Working Notes :
1.Particulars of Car :
Rs.
New Car
Net Amount 37,800
Add : Sale proceeds of Old Car 9,000
Actual Cost 46,800
Less : Depreciation @ 20% 9,360
37,440
Old Car
Sale proceeds 9000
Less: Written Down Value : Cost -
Provision for Depreciation or,
[36,570 30,870] 5700
Profit on Sale 3300

Cheques issued for Sundry Expenses not presented to the Bank need not be considered as
Bank Balance as per Cash Book is given and the entry for the expenses have been duly made in
the Cash Book.
Solution :
City Club
Receipts and Payments Account for the year ended 31 March, 1994
Dr. Cr.

Rs. Rs.
ToBalance b/f : By Premises 30000
Cash on hand 450 Rent 2400
Cash at Bank 24420 Rates & Taxes 3780
Subscriptions 62130 Printing & Stationery 1410
Sundry Expenses 5350
Fair Receipts 7200 Wages 2520
Variety Show Receipts (Net) 12810 Fair Expenses 7170
Interest 690 Honorarium to Secretary 11000
Bar Collections 22350 Payments for Bar Purchases 17310
Sale Proceeds of Old Car 9000 Repairs 960
Cost of New Car 46800
Balance c/f : Cash at Bank 10350
139050 139050

City Club
Income and Expenditure Account for the year ended 31 March, 1994
Dr. Cr
Rs. Rs. Rs. Rs.
To Rent 2400 By Subscription 62130

Rates & Taxes 3780 Add: Amount Due
On 31.3.94. 2940
Printing & Stationery 1410 65070
Wages 2520 Less: Amount Due
Honorarium to Secy. 11000 On 31.3.93 3600 61470
Add: O/S on 31.3.94 1000 12000 Profit on Sale of
Sundry Expenses 5350 Old Car [Note 1] 3300
Repairs 960 Profit from Bar
Depreciation : [Note 2] 6000
On Car [Note 1] 9360 Variety Show
On Premises
[5% of 60600] 3030 12390 Receipts (net) 12810
Income from Fair :
Surplus (Excess of Receipts 7200
Incomes over Less : Expenses 7170 30
Expenditure, transfer 43490 Interest 690
to Capital Fund)
84300 84300
Ilustration
Chanditala Audit Education Society submits to you the following Receipts & Payments Ac-
count and Income & Expenditure Account for the year ended 31st March, 1996.

Receipts and Payments Account (1995-96)
Dr. Cr.
Receipts Amt. Rs Payments Amt. Rs.
To Balance b/d 450 By Printing Charges 75
Interest : 1994-95 100 Advertisement 141
1995-96 150 250 Salary to staff 1300
Tuition Fees : (including payment
1995-96 1000 for 1994 -95)
1996-97 100 1100 Rent 520
Entrance Fees : Miscellaneous Expenses 110
1995-96 420 Furniture Purchased 670
Membership Fees : Balance c/d 1374
1994-95 300
1995-96 1150
1996-97 390 1840
Miscellaneous
Income 130
4190 4190
Income and Expenditure Account (1995-96)
Expenditure Rs. Income Rs.
To Printing Charges 80 By Tuition Fees 1100
Advertisement 150 Membership Fees 1150
Rent 600 Miscellaneous Income 130
Salary to Staff 1200 Interest 160
Miscellaneous Expenses 110
Excess of Income over
Expenditure 400
2540 2540

You are asked to prepare the Balance Sheet of the Society as on 31st March , 1995 and 31st
March , 1996 :
Additional information :
The Society has the following assets on 31st March , 1995 :
Investment Rs. 4000; Furniture Rs. 2000; Liability Rs. 1500.
Working Note :
A. For the Balance Sheet as on 31.3.1995
i) Salary to staff
Rs.
Payment as per R & P A/c (including payment for 1995-96) 1300
Less: Payment for 1995-96 as per Income & Expenditure A/c 1200
Outstanding on 31.3.1995 100
ii) Membership Fees of 1994-95 received in 1995-96 Rs. 300
Membership Fees Receivable (or due to be received) on 31.3.1995 = Rs. 300
iii) Interest Rs. 100 for 1994-95 received in 1995-96
Outstanding interest Receivable Rs. 100
B. For the Balance Sheet as on 31.3.1996
i) Outstanding/prepaid Expenses
Amount payable Amount paid Prepaid Outstanding to
as Per I & E A/c as Per R & P A/c be paid
Rs. Rs. Rs. Rs.
Printing Charges 80 75 5
Advertisement 150 141 9
Rent 600 520 80

ii) Outstanding/prepaid income

Amount payable Amount paid Prepaid Outstanding to
as Per I & E A/c as Per R & P A/c be paid
Rs. Rs. Rs. Rs.
Tuition Fees 1100 1000 100

100 (96-97) 100
Membership Fees 1150 1150
390 (96-97) 390
Interest 160 150 10
iii) Entrance Fees Rs. 420 recorded in R & P A/c but not in I & E A/c Entrance Fees
Capitalised Rs. 420
Solution :
Chanditala Audit Education Society
Liabilities Amount Assets Amount

Rs. Rs.
Capital Fund 8250 Furniture 2000

(Excess of Assets over Liabi.) Investments 4000
Outstanding Salary 100 Library Books 1500
Interest Receivable 100
Membership Fees Receivable 300
Cash 450
8350 8350


Rs. Rs. Rs. Rs.
Capital Fund 8250 Furniture 2000
Add : Surplus 400 Add : Purchase 670 2670
Entrance Fees
Capitalised 420 9070 Investments 4000
Incomes Received in Library Books 1500
Advance :
Tuition 100 Interest Receivable 10
Membership Fees 390 490 Tuition Fees
Receivable 100
Outstanding
Liabilities for Cash 1374
Printing Charges 5
Advertisement 9
Rent 80 94
9654 9654
Ilustration
Preparation of R & P A/c, I & E A/c and Balance Sheet for the initial/starting year of a club
from information given.
The following information were obtained from the books of Delhi Club as on 31.3.1998 at the
end of the first year of the club. You are required to prepare Receipts and Payments Account,
Income and Expenditure Account for the year ended 31.3.1998 and a Balance Sheet as at31.3.1998
on mercantile basis :
i) Donations received for Building and Library Room Rs. 200000.
ii) Other revenue income and actual receipts :

Revenue Income Actual Receipts

Rs. Rs.
Entrance Fees 17000 17000

Subscription 20000 19000
Locker Rents 600 600
Sundry Income 1600 16000
Refreshment Account 16000
iii) Other revenue expenditure and actual payments :

Revenue Expenditure Actual Payments
Rs. Rs.
Land (Cost Rs. 10000) 10000
Furniture (Cost Rs. 146000) 130000
Salaries 5000 4800
Maintenance of Playgrounds 2000 1000
Rent 8000 8000
Refreshment Account 8000
Donation to the extent of Rs. 25000 were utilised for the purchase of Liabrary Books, balance
was still utilised. In order to keep it safe, 9% Govt. Bonds of Rs. 160000 were purchased on
31.3.1998. Remaining amount was put in the Bank on 31.3.1998 under the term deposit. Depre-
ciation at 10% p.a. was to be provided for the whole year on Furniture and Library Books.
Please Note That

1. This is the first year. The Club has no Capital Fund at the beginning.
2. Donation must be capitalized as it has been made towards Building and Library
Room.
3. The Investments in 9% Govt. Bonds have been made on the closing day of the year.
So no interest has accrued.
4. The cost of Furniture purchased is 146000 whereas payments made are Rs. 13000. It
means Credit Purchase is Rs. 16000.

Solution :
Delhi Club
Receipts and Payments Account for the year ended 31 March, 1998
Dr. Cr.
Rs. Rs.
To Donations for Building By Land 10000
and Library Room 200000 Furniture 130000
Entrance Fees 17000 Salaries 4800
Subscription 19000 Maintenance of
Playgrounds 1000
Locker Rents 600 Rent 8000
Sundry Incomes 1060 Payments for Refreshments 8000
Receipts from
Refreshment Library Books 25000
Account 16000 9% Govt. Bonds 160000
Balance c/f :
Overdraft 108140 Term Deposit with Bank 15000
361800 361800

Income and Expenditure Account for the year ended 31 March, 1998
Dr. Cr
Rs. Rs. Rs. Rs.
To Salaries 4800 By Entrance Fees 17000
Add:- Outstanding 200 5000 Less:- Capitalised 17000
Maintenance of
Playground 1000 Locker Rent 600
Add:- Outstanding 1000 2000
Rent 8000 Sundry Incomes 1060
Add: Outstanding 540 1600
Depreciation on:- Income from
Refreshment:
Furniture @ 10%p.a. 14600 Receits 16000
Library Books@10%p.a 2500 17100 Less:- Payment 8000 8000
Surplus (Excess of Subcriptions 19000
Income over Add: Outstanding
Expenditure) 15100 On 31.3.94. 1000 20000
47200 47200

Rs. Rs. Rs. Rs.
Capital Fund Land 10000

Opening Balance Nil Furniture 146000
Add : Surplus 15100 15100 Less:Depreciation 14600 131400
Building &
Library Fund 200000 Library Books 25000
Creditors for Furniture 16000 Less:- Depreciation 2500 22500
Creditors for Term Deposit
Liabilities for: with Bank 15000
Salaries 200 9% Govt. Bonds
(Investment) 160000
Maintenance of Outstanding
Playground 1000 Income for :
Bank Overdraft 108140 Subscription 1000
Sundry Income 540 1540
340440 340440
EXERCISE
Problem I.
Preparation of only Income and Expenditure Account
A summary of receipts and payments of Agragami Club for one year is given below (year
ended 31st March, 1991)


To Opening Balance 3,000 By Salaries & Rent 1,500
Subscription 20,000 Electric Charges 300
Donations 5,000 Sports Expenses 1,000
Entrance Fees 1,000 Sports goods purchase 9,000
Interest 100 Books purchase 5,000
Charity show Receipts 2,400 Miscellaneous Expenses 700
Charity show Expenses 2,000
Investment 8,000
Closing balance 4,000
31,500 31 500
Following information are available at the end of the year :

(i) Of the total subscriptions received Rs. 500 for 198990 and Rs. 600 for 1991-92 but
Rs. 100 is due for 1990-91.
(ii) The total sum received on Entrance fees is to be transferred to Capital Fund.
(iii) Salary is remaining due to be paid Rs. 300.
(iv) Interest is receivable Rs. 500.
The club had the following assets on the opening day of the year Sports goods Rs. 3,000; Books
Rs. 2,000; Investment Rs. 6,000.
From the above information prepare an Income and Expenditure Account for the year
(1990-91)
(Ans & Hints : Surplus Rs. 21,200
(a) Donations have been treated as revenue receipts as these have not been made to
any special fund,
(b) Sports goods Purchases, Investment and Books Purchases are to be treated as
Capital Expenditure]

Problem 2.
Preparation of income & Expenditure Account and Balance Sheet
Following is the Receipts and Payments Account of a club for the year ended 31st March, 1996
Cash in hand 50 Salaries 2,400
Cash at Bank 565 Rent 720
Subscription Postage 30
(including Rs. 100 for 94-95 Printing & Stationery 255
and Rs. 150 for 96-97) 4,550 Electricity charges 300
Interest on Investments 2,000 Meeting Expenses 150
Bank Interest 25 Purchase of library books 1,000
Sale of Furniture 300 Investment in bonds 1,000
Cash in hand 155
Cash at Bank 1,480
7,490 7,490
The following additional information is supplied to you
1. On 1st April. 1995 the club had the following assets and liabilities : (a) Invest
ments costing Rs. 40,000; (b) Furniture Rs. 3,000; (C) Library Books Rs. 5,000;
(d) Liability for rent Rs. 60 and Salary Rs. 200.
2. On 31st March, 1996 rent Rs. 60 and Salary Rs. 200 were in arrear.
3. The book value of furniture sold was Rs. 250.
Prepare the Income & Expenditure Account of the Club for the year ended 31st March, 1996
and the Balance Sheet as at that date.
(Ans: SurplusRs.2,520; Total of Balance Sheet on 31.3.96. Rs. 51,385]
Problem 3.
The following particulars relate to International Club for the year ended 31.12.95. You are
required to prepare therefrom an Income and Expenditure Account for the year and a Balance
Sheet as on 31.12.95.

Summary of Cash Book

Rs.. Rs.
Balance from last year 2,350 Salaries 1200
Entrance Fees 300 Electricity 120
Subscription Newspapers and Journals 525
1994 50 Fixed deposits 2,500
1995 3,500 Utensils 200
1996 75 3,625 Payment to creditors 1,000
Profit from Refreshment 100 Balance carried forward 1,150
to next year
Locker Rents 200
Sundry Income 120
6,695 6,695
The assets and liabilities on 1st January 1995 were Utensils. Rs. 800 Furniture Rs~ 2.500:Con-
sumable stores Rs, 350 and Creditors Rs. 1,200.
On 31 .12.95 value of consumable stores was Rs. 700; creditors amounted to Rs. 550: the
subscriptions outstanding were Rs. 75 and the interest accrued on fixed deposit was Rs, 25.
(Ans: Surplus 2,475 (after crediting entrance fees); Capital Fund on 1.1.95 Rs. 4,850; Total of
Balance Sheet on 31.12.95 As. 7,950)
Problem 4.
Calculation of Medicine purchase and calculation of depreciation from balances of asset ac-
counts.
From the following particulars related to Vcnkataswamy Charitable Hospital, prepare an

Income and Expenditure Account for the year ended 31st December, 1995 and a Balance
Sheet on that date.

Balance in hand on 1.1.95 7,130 Payments for Medicines 30,590
Subscriptions 48,000 Honorarium to Medical staff 9,000
Donations 14,500 Salaries to House Staff 27,500
Interest on Investment @ 7% 7,000 Petty Expenses 460
Proceeds from Annual Day 10,450 Equipment Purchase 15,000
Expenses for Annual Day 751
Closing Balance 3,779
87,080 87,080
Additional information :
On 31.12.94 (Rs.) On 3L12.95 (Rs.)
Subscription Due 240 280
Subscription Received in Advance 64 100
Stock of Medicines 8,810 9,740
Value of equipment 21,200 31,600
Buildings 40,000 38,000
Outstanding liability to Medicine suppliers 10,000 8,000
(Ans: Surplus Rs. 7,983; Capital Fund on 1.1.95 Rs. 1,67,316; Total o( Balance Sheet on 31.12.95
Rs, 1,83,399)
(Hints : This problem has a close similarity with Illustration No. 4.)
(a) Calculate medicine purchased. Then calculate medicine used. It is Rs. 27,660.
(b) Calculate depreciation on Equipment and Buildings :
Depreciation Op. Balance + Purchase - Closing Balance
Depreciation on Equipment Rs. 4,600 and on Buildings Rs. 2.000
(C) Calculate Capital Fund on 1.1.95)

Problem 5.
D Literary Society showed the following position on 31st December. 1995 Balance Sheet as at
31st December, 1994
Liabilities Rs. Assets Rs.
Capital Fund 79,300 Electrical Fittings 15,000
Outstanding Expenses 700 Furniture 5,000
Books 40,000
Investment in
Securities 15,000
Cash at Bank 2,500
Cash in hand 2, 500
80,000 80,000
Receipts and Payments Account for the year ending on 31st December, 1995

To Balance b/d By Electric Charges 720
Cash at Bank 2,500 Postage & Stationery 500
Cash in hand 2,500 Telephone charges 500
Entrance Fees 3,000 Books Purchased (1.1.95) 6,000
Membership Subscriptions 20,000 Outstanding Expenses 700
Sale proceeds of Old Rent Account 8,800
Newspapers 150 Investment in Securities
Hire of lecture Hall 2,000 (1.7.95) 4,000
Interest on Securities 800 Salaries A/c 6,600
Balance c/d : Cash at Bank 2,000
Cash in hand 1,130
30,950 30,950
You are required to prepare an Income & Expenditure Account for the year ending on
31.12.1995 and a Balance Sheet on that date after incorporating the following adjustments

(i) Membership subscriptions included Rs. 1.000 received in advance.
(ii) Provide for outstanding Rent Rs. 400 and Salaries Rs. 300.
(iii) Books to be depreciated @ 10% including additions. Electrical Fittings and
Furniture are also to be depreciated at the same rate.
(iv) 75% of the Entrance Fees are to be capitalised.
(v) Interest on Securities to be calculated at 5% p.a.
[Ans: Deficit Rs. 1670; Total ol Balance Sheet an 31.12.95 As. 81,580]
Hints (I) Outstanding Expenses paid for last year wit not appear In I & E A/cJ
Problem 6.
Partly Trading and Partly Non-Trading Concern
On 1.4.95 the financial position of Babu Sangshad. a cultural club was as follows
Capital Fund 4.200 Equipments 1,640

Creditor for expenses 160 Furniture 1,160
Bar Stock 880
Outstanding Subscription
for 94.95 240
Cash. 440
4,360 4,360
Its Receipts and Payments for the year ended 31st March, 1996 were
Receipts Rs. Payment Rs.
Opening Balance 440 Creditors for expenses for 94-95 160

Subscriptions : General Expenses 9,240
1994-95 . 160 Printing & Postage 600
1995-96 8,160 Equipments Purchases (31.3.96) 640
1996-97 120 Lighting & Rent 1,080
Bar Sales 10,240 Purchase of Bar goods 5,840
Receipts from Annual Day 800 Annual Day Expenses 1,280
Closing Balance (31.3.96) 1,080
19,920 19,920

Addilional Information : (a) Rs. 264 is yet to be received as subsription for 1995-96; (b) Bar
Stock on 3 1.3.96 Rs. 840; Furniture to be written down by Rs. 100; (c) Depreciation on Equip-
ments to be provided at 25% pa.
Prepare the Bar Trading Account and Income and Expenditure Account for the year ended
31.3.1996 and a Balance Sheet on that date.
[Ans: Surplus Rs. 874; Total Balance Sheet As. 5,194]
[Hints:(a)Subscription for 94-9 5 still outstanding on 31.3.96 Rs.240 - RS.16O=RS.80]
Problem 7.
From the following particulars relating to S. M. Charitable Hospital. prepare Income & Expen-
diture
Account for the year ended 31st December, 1995 and a Balance Sheet on that date.
Dr. Receips & Payments Account for the year endEd 31st December, 1995 Cr.
To Balance b/d 7,130 By Medicines 30,590
Subscriptions 47,996 Doctors Honorarium 9,000
Donations 14,500 Salaries 27,500
Interest on Investments 7,000 Petty Expenses 461
(@ 7% for full year) Equipment 15,000
Proceeds from Charity Show 10,450 Expenses on Charity Show 750
Balance c/d 3,775
87,076 87,076
Additional Information
1.1.95 (Rs.) 31.12.95 (Rs.)
(i) Subscriptions due 240 280
(ii) Subscriptions received in advance 64100
(iii) Stock of Medicines 8,810 9.740
(iv) Estimated Value of Equipments 2 1.200 31,600
(v) Buildings (cost less depreciation) 40,000 38,000
(Ans : N Donation sc fully Capitalized, Deficit Ra 8,521; Depreciation on Equipment 4,600)

Problem. 8.
Correction of Receipts & Payments Account before preparation of Income & Expenditure Ac-
count etc.
The Receipts & Payments Account of your local club could not be correctly drawn because of
the following additional information :
The Club had on 1.1.1995 : Furniture Rs. 200; 6% Investments Rs. 3.000; Sports Materials Rs.
740.
On 3 1.12.95 the club had Outstanding Subscription Rs. 30. Subscription paid in advance Rs.
10.
Stock of Sports materials Rs. 200. The Interest on Investment for the year remained due.
Rectify the following Receipts & Payments Account for the year ended 31.12.95. Draw the
Income & Expenditure Account for the year ended 31.12.95 and a Balance Sheet as on that date.
Dr. Receipts & Payments Account for the year ended 31st December, 1995 Cr.

To Balance b/d 50 By Expenses [including payment 700
Subscriptions 510 for sports materials Rs. 300]
Add: Outstanding 20 Loss on Sale of Furniture 20
530 (Cost Price Rs. 50)
Less: Pre-Received 10
last year 520 Balance c/d 10,050
Other Fees 200
Donations for Building 10,000
10,770 10,770
Assume that there is no error in cash balances and that no depreciation is to be charged on
fixed assets.
(Ans: Total of Redrafted Receipts & Payrnents Account Ra 10,750; Surplus Rs 370 Balance
Sheet Total Rs. 13,640; Opening Capital Fund Rs. 4,000]
Problem 9.
The following is the Receipts & Payments Account for Tamil Mandalam for the year ended
31st March 1996 :


To Cash at Bank 12,500 By Salaries 2,500
Subscriptions 52,500 Printing & Stationery 1,250
To Annual Day Receipts 26,800 By Annual Day Expenses 1,500

Symposium Receipts 22,500 Symposium Expenses 10,000
Dividends on Shares 2,500 Telephone Charge 2,500
Sundry Expenses 2,000
Shares Purchased 75,000
Postage & Telegrams 2.200
Building Maintenance 6,340
Cash at Bank 13,510
1,16,800 1,16,800
Following further information isfurnished :

1. The value of Building owned bythe society stood at Rs. 50.000 on 1st April. 1995.Depre-
ciation @ 5% p.a. is to be provided.
2. There were 200 members paying subscription @ Rs. 250 per annum each.
3. As on 1st April, 1995 no subscription had been received in advance but sub scriptions
were outstanding to the extent of Rs. 1000. As at 31st March, 1996 Subscriptions outstand-
ing were Rs. 1,500.
4. Postage stamps worth Rs. 250 were with the secretary at the beginning of the year and the
stamps at the end of the year were of the value of Rs. 150.
5. The Investment in shares at the beginning of the year were to the extent of Rs. 5.000.
6. An amount of Rs. 250 in respect of the Annual Day Receipts was yet to be received.
7. Hire of telephone paid in advance Rs. 300.
8. Outstanding amount of symposium receipts on 31.3.1996 Rs. 2,500. Prepare the Income &
Expenditure Account for the year ended 31st March, 1996 and the Balance Sheet as on
that date.
[Ans: Excess of Income Over Expenditure Rs, 68.960)

(Hints : Total of Balance Sheet on 31.3.96 As. 1,43210; Opening Capital/Accumulated Fund
As. ~8,750; Subscriptions Recd in Advance = 53,000 200 x 250 = As. 3.000.; Profit on
Symposium 22,500 10,000 2.500 (o/s rent) As. 10,000)
Problem 10.
Dr. Following Receips & Payments Account of Calcutta Club for the year ended 31st March
1996 Cr.
To Balance b/f By Secretarys Remuneration 6,000
Cash 2,000 Salary to Staff 5,000
Bank 10,000 Canteen Expenses 12,000
Subscriptions : Construction of Buildings 15,000
For 1994-95 200 Balance c/f:
For 1995-96 5,000 Cash 800
For 1996-97 100 5,300 Bank 2,000
Interest @ 5% on Govt.
Securities 2,000
(Bought in the past at
1% discount)
Sale of Old Furniture 1,000
Sale of New papers 500
Canteen Receipts 10,000
Donation to Building Fund 10,000
40,800 40,800
From the additional information given below, prepare the Income & Expenditure Account
for the year ended 31st March, 1996 and a Balance Sheet on that date

Balance on 313.95 Balance on 31.3.96

Rs. Rs
(a) Subscriptions Receivable 1,000 ?
(b) Subscriptions Received in Advance 200 100
(c) Outstanding Staff Salary 2,000 1,000
(d) Canteen Expenses Paid in
Advance (Subsidy to canteen) 1,000 500
(e) Furniture 10,000 ?
(f) Construction Expenses
Outstanding - 2,000
(g) Subscription receivable for

95-96 was Rs. 5,500
(h) The book value of furniture sold
was R.s. 3.000
(i) Depreciation to be charged on
furniture @ 10%.
[Ans: Deficit Rs. 7,200, Total of Balance of Balance Sheet on 31.3.96 Rs. 67,300]
(Hints : (I) Value of Govt Securities(ii) Subscnption receivable on 31 .3.96 Rs. Rs.
Total Amount Receivable 5,500
Received for 95-96 5,000
Nominal Value = 2000/0.05
= Rs. 40000 Received for 94-95 200 5,200
Less :1% Discount = 400 Due for 95-96 300
+Due for 94-95 [Rs.1,000 -
Received Rs. 200) 800
At Cost Rs. 39600 Total Due 1,100
Problem 11. The Receipts & Payments Account of Vinod Nursing Society for the year
ended 31st December, 1995 was as follows :

To Balance at Bank on 1.1.95 : By Salaries 7,150
(a) Deposit on Building Fund 19,000 Medicines 2,100
(b) Current Account 1,260 Rent, Rates & Taxes 900
Members Subscriptions : Electricity 600
Annual 12,900 Telephone, postage etc. 400
Life 5,000 General Expenses 1,700
Fees from Non-Members 1,200 Car Expenses 350
Grants from local Authority 2,500 Cost of Second-hand car 8.860
Donations for Building Fund 5,000 Balance at Bank on 31.12.95
Interest on Deposit on
Building Fund 1,140 (a) Deposit on Building Fund 25,140
(b) Current Account 800
48,000 48,000
Additional Information available
(a) In 1995 the society purchased a plot of Freehold Land costing Rs. 8.000.
(b) Fees from non-members include Rs. 50 as fees received in advance for 1995.
(c) Rent of Rs. 50 for January, 1996 was paid on 15th December. 1995.
(d) Salaries of Rs. 650 for December. 1995 remained due to be paid on 31.12.95.
(e) Members annual subscriptions include Rs: 200 due for 1994.
(f) It is decided to allocate life members subscriptions, arising for the first time in
1995. to revenue over a ten year peiod.
Prepare the Income & Expenditure Account for the year ended December 31, 1995 and a Bal-
ance Sheet as on that date.
[Ans: Suplus Rs. 3050; Total of Balance Sheet Rs. 42,850)
Preparation of Income & Expenditure Account etc. from Trial Balance/Other Information
Problem 12.
From Bank and Cash Summary
The Bank and Cash Summary of Evergreen Club for the year ended 31.12.1995 was as fol-
lows :

Rs Rs
Balance at Bank on 1.1.95 9,970 Bar Purchases 41,290
Cash in hand on 1.1.95 210 Wages 7,410
Joining Fees 560 Electricity 1,100
Subscriptions 4,120 Rent 2,300
Bar Sales 52,000 Postage & Stationery 750
Receipts from Cricket Festivals 3,100 Ground Expenses 560
Interest on W. B. Govt. Loan 350
Expenses of Cricket
Tournament 1,140
New Mowing Machine 760
General Expenses 1,020
Purchase of Rs.10,000
7% W. B. Govt. Loan 10,000
Cash in hand on 31.12.95 360
Balance at Bank on 31.12.95 3,620
70,310 70,310
Additional Information Provided :

1. Bar Stock valued at cost Rs. 4.260 on 31.12.95 was Rs. 290 higher than the value of stock on
1.1.95.
2. On 31.12.95 outstanding rent was Rs. 350, outstanding electricity Rs. 120 and rates paid in
advance was 210.
On 31.12.94 outstanding rent was Rs. 200, outstanding electricity Rs. 140 and rates paid in
advance Rs. 190.
3. Fixtures & Fittings on 31st December, 1994 amounted to Rs. 5,040. Depreication is to be
provided @ 121/2% p.a.
4. The new Mowing machine purchased on 1st may. 1995 represented the net payment after
taking ml consideration a trade-in-allowance of Rs. 140 on the old machine included Rs.
200 for the old machine. Depreciation on machines and equipments is
to be provided @ 20% p.a.
Prepare an Income & Expenditure Account for the year ended 31st December, 1995 a n d
a Balance Sheet as on that date.

[Ans : Surplus Rs. 3,010; Total of Balance Sheet on 31.12.95 25,080)
[Hints (i) Opening Capital Fund = Rs. 21,040
(ii) Trade-in-allowance denotes the Selling Price of old asset exchanged with the
net asset. So Cost of New Machine = 760 + 140 = Rs. 900, And Selling Price of
old machine = Ra. 140.
The old machine was used for 4 months (1.1.95 to 30.4.95). Its Depreciation
=200 x20/100 x 4/12. =13.
its W.D.Valueon 1.5.95=20013= Rs.187... Loss on sale was Rs.187-Rs.140 = Rs.47.
(iii) DepreciatIon on Machines and Equipments
On sold asset = Rs. 13
On rest of Old assets (2,000 200) x 20/100 = Rs. 360
On new Machine (1.5 to 31.12) 900 x20/100 x 8/12 = Rs. 120
Rs. 493
Problem 13.
Defalcation of Cash
The Managing Committee of Social Club is concerned about the clubs financial position
following It sudden disappearnce of the treasurer on 31st December, 1995, the annual ac-
counting date.
On 31.12.1994 the clubs Balance Sheet had shown the following position
Liabilites Rs. Assets Rs.

Capital Fund 1,20,490 Furniture and Equipment
at cost 60,000
Creditors for Provisions 20,600
Subscription in Advance 1,000 Less : Depreciation 30,000
30,000
Stock of Provisions 25,000
Subscriptions Due 2,000
Balance with Bank 83,000
Cash in hand 2,090
1,42,090 1,42,090

You also obtained the following information :

1. Members pay an annual subscription of Rs. 100. An examination of duplicate receipt book
showed that during the year ended 31st December, 1995. 480 members had paid the cur-
rent years subscription; five members had paid off arrears of previous year and ten mem-
bers had paid in advance for 1996. Five members had resigned without pay ing the previ-
ous years subscription and at the end of the year there were 500 members on the register.
2. The Cash Book has not been written up but an analysis of petty cash vouchers for the Year
showed the following expenditure : Purchase of ProvisionsRs. 59.400: SalariesRs.
36.000; Stationery and PostageRs. 2,000; RepairsRs. 3,600; Miscella
neous ExpensesRs. 3.400
3. The Refreshment Room-in-charge had handed over the takings daily to the treasurer with
till rolls which cannot be found. However he states that average gross profit on Sales
would be 40%. The stock of provisions on 31st December, 1995 was Rs. 28,400 and Cash in
hand Rs. 4,360.
4. A summary of Bank Statement for the year showed the following :
Rs. Rs.
Opening Balance 83,000 Payments for Provisions 2,60,000
Deposits 4,15,780 Salary 1,06,500
Rent and Rates 60,000
Light & Power 20,000
Telephone 2,900
Repairs 18,600
Balance on 31.12.95 30,780
4,98,780 4,98,780
5. A bundle of unpaid bills has been found in the treasurers desk, which has been
summarised as follows : Purchase of ProvisionRs. 64.600; Electric BillsRs. 1,600;
Printing & Stationery Rs. 2,100; TelephoneRs. 600
6. Depreciation is to be provided on Furniture and Equipment @ 20% on original cost.
You are required to prepare : (I) Cash Account for the year ended 31st December,
1995; (2) An Income & Expenditure Account for the year ended 31st December, 1995
and (3) A Balance Sheet on that date.
(Ans: (a) Profit front Provisions Sale As. 2,4O.OO (b) Defalcation of Cash As. 1,27,050
(C) Deficit (Excess Expenditure) Rs 1,O685O debiting defalcation of cash as a loss; (d)
Balance Sheet Total Rs 83,540)

Problem 14.
A comprehensive problem
Punnya Trust runs a charitable hospital and a dispensary and for the year ended 31st March.
1996, the following balances were extracted from its books
Dr. (Rs.) Cr. (Rs)

Capital Fund 18,00,000
Donations Received in the yearl 2,00,000
Fees received from patients 6,00,000
Recovery for amenitiesrent etc. 5,50,000
Recovery for food supplies 2,80,000
Surgical Equipments 9,10,000
Buildings, Theatres etc 6,40,000
Consumption of:
Medicines 2,40,000
Food scuffs 1,80,000
Chemicals etc. 60,000
Closing Stock of:
Medicines etc. 40,000
Food Stuffs. 8,000
Chemicals etc. 2,000
Sale of medicines (dispensary) 6,20,000
Opening Stock of medicines (dispensary) 1,10,000
Purchases of medicines (dispensary) 6,00,000
Salaries
Administration Staff 60,000
Doctors, Nurses, Orderlies etc. 3,00,000
Assistants at Dispensary 30,000
Electricity & Power Charges
Hospital 2,10,000

Dr. (Rs.) Cr. (Rs)

Dispensary 4,000
Furniture, Fittings and Equipments 1,60,000
Ambulance 60,000
Postage, telephone charges etc.
less recovery 52,000
Subscription to Medical Journals 42,000
Ambulance Maintenance Charges
less recoveries 1,600
Consumption of linen, bed sheets etc. 1,80,000
Fixed Deposits (made on 10.8.94) for
3 years at interest of 11% p.a.) 10,00,000
Cash in hand 12,100
Cash at Bank 70,500
Sundry Debtors (Dispensary) 1,21,000
Sundry Creditors (Dispensary) 82,000
Remuneration to trustees and trust
office expenses etc. 42,000
Additional Information
(i) The dispensary supplies medicines to hospitals on requisition and delivery notes for which
no adjustment has been made in the books. Cost of supplies in the year was Rs. 1,20.000.
(ii) Stock of medicines at close at dispensary was Rs. 80,000.
(iii) Stock of medicines on 31st March, 1996 at the hospital included Rs. 8,000 worth of medi-
cines belonging to the patients; this has not been considered in arriving at the figure of
consumption of medicines.
(iv) Donations were received towards the corpus of the trust.
(v) One of the wel-wishers donated Surgery equipment, whose market value was Rs. 80,000
on 15th August, 1995.
(vi) The hospital is to receive a grant of 25% of the amount spent on treatment of poorpatients,
from the local Branch of the Red Cross Society, Such expenditure for the year was
Rs. 1,00,000.

VII) Out of the fees recovered from the patients, 10% is to be given to specialists retained; (viii)
Depreciation on closing balances of assets to be provided as Sur gical Equipments20%;
Buildings 5%; Furniture and Fittings10%; Ambulance30%
Prepare the Income & Expenditure Statement of the dispensary, trust and the hospital for
the year end March, 1996 and statement of affairs of the trust as at that date.
(Ans: Profit from Dispensary As. 76,000; Excess of Expenditure over Income (Deficit) of Hospital
As. 2,67,400; Net Deficit of I? Trust Rs. 175,400; Total of Statement of Affairs Rs. 30.46,600]
[Hints : (a) Net Purchase of Medicines at Dispensary As. 6,00,000 As. 1,20,000 (being
cost of medicines supplied to hospital, = Rs. 4,80,000
(b) Debit Op. Stock As, 1,10,000, Net Purchase As. 480,000, Salaries 10 Assistants As. 30,000,
Electric Charges As. 4,000 And Credit Sales As. 6,20,000 and Closing Stock As. 80,000 to
Dispensary Trading /Pl. Ac. You get Profit As. 76,000.
(C) For Hospital I & E A/c debit Items are consurnption of Medicines (2,40,000 + 8,000 +
1.20,000) As. 3,68,000, Foodstuff Rs. 1,80,000, Chemicals 60.00Cr, Salaries to Doctors etc. &
Administration Staff As. 3,60,000; Fees to specialists Rs. 60,000; Electricity etc. 2,10,000;
Subs. to Medical Journals As. 42,000; Consumption of linen, bedsheets etc. 1,80,000; De-
preciation on Surgical Equipments Rs.1,98,000, on Building As. 32,000, Furniture etc. 16,000,
Ambulance Rs. 18,000.
Credit Items are : Fees from Patients; Recovery of Rent; Recovery for foods, Ambulance
Receipts, grant from Red Cross (25% of 1,00.000).
(d) For Trust I & E Nc debit Deficit From Hospital, Trustees Remuneration etc. and Postage,
Telephone Charges etc. Credit Profit from Dispensary Interest on FixedDeposit. (11% of
10,00,000).
(e) Surgical Equipment 9,10,000 + 80,000 = 9,90,000
Depreciation 20% = 1,98,000

7,92,000
Problem I5.
Preparation of Receipts and Payments

Prepare Receipts & Payments Account for the year ended 31st December, 1996 from the
following
The Income & Expenditure Account for the year ending 31st December, 1996

Rs. Rs.
Salaries 12,000 By Subscription 20,000
Printing & Stationery 3,000 Donation 10.000
Deprciation on Fixed Assets 5,000 Sundry Income 1,000
Surplus 11,000
31,000 31,000
Other information : Cash in hand on 1.1.1996 Rs. 6,000; Donation Capitalised @ 50%; Subcription
due 15 Rs. 2,000; Sundry Incomes Accrued Rs. 200; Subscription due for 1996 Rs. 1,000; Salaries
due for s. 1,000; Subscription received in advance in 1996 Rs. 500; Salaries due for 1996 Rs.
1,200; Printing stationery prepaid Rs. 200.
[Closing Balance of R & P A/c.Rs. 33.300]

Preperation of Receipts and payment Account
Problem 16.
Preperation of Receipts and Payments Account -
Rock City Sports Club gives you the following informations
Income and Expenditure Account for the year ended~ 31st march, 1996

Coach Remuneration 9,000 By Subscription 50.000
Stuff Salaries 12,000 Bar Receipts 12,000
Rent for ground 6,000 Less:Expenses 10,000 2,000
Repairs 6,500 Sale of used kits 2,000
Sundry Expenses 3,500 ~ Rent of Hall 6,000
Guround Maintenance 9,000
Depreciation on Furniture 1,500
Excess opf Income
over Expenditure 12,500
60,000 60,000

Balance Sheets as at 31.3.95 and 31.3.96
31.3.95 Liabilities 31.3.96 31.3.95 Assets 31.3.96
44,000 Capital Fund 62,500 21,000 Furniture 19500
4,000 Subscription
Received
in Advance 3,000 6,000 Outstanding
Subscription 8,000
1,500 Sundry Expenses 1,000 5,000 Cash in hand 4,000
2,000 Staff Salaries 3,000 22,500 Fixed Deposit 30,000
3,000 Rent of ground 2,000 Cash at Bank 10,000
54,500 71,500 54,500 71,500
Stall Salaries, Sundry Expenses and Ground Rent due in March, 1995 had been paid during the
year ended 313.96. Subscription received in advance is in respect of subsequent year. Subscrip-
tion due in March 1995 was received in full before March. 1996.
The increase in Capital Fund was due to receipt of entrance for of Rs. 6,000 during the year
ended 1.3.96 in addition to the surplus earned.
Prepare the Receipts and Payments Account of Rock City Club for the year ended 31st March,
1996.
[Ans : Cash in hand and Cash at Bank as also Fixed Deposits on 31.3.95 (opening) and on
31.3.96 (Closing) are given, so the totals of the debit side and Credit side of the Receipts and
Payments Account should be the same.]
(Hints : Subscriptions received: For 1994-95 = As. 6,000; For 1995-96 = As. 38,000; For 1996-97 =
Rs. 3,000]
Problem 17.
The Income & Expenditure Account of Bharat Bhermi Club for the year ended 31st March,
1996 is given below:

Rs. Rs.
To Salaries 24,000 By Subscription 72,000
Rent 10.800 Entrance Fees 8,000
Rates & Taxes 600 Surplus on Publications
of Souvenirs 4,500
Postage & Telephones 720 Profit on Sale of Sports
Materials 1200
Affiliation Fees to All India Interest on Investments 600
Hanball Association 1,200 Miscellaneous Income 225
Sports Materials 15,750
Electric Charges 1,200
Repairs & Maintenance of
Handball Court 9,600
Depreciation on Assets
@ 10% 4,800
Surplus 17,855
86,525 86,525
The following further information is made available
Balance on 31.3.95 Rs. Balance on 31.3.96 Rs.
Sundry Assets 44,000 ?
Bank Balance 4,800 ?
Subscription in Arrear 4.750 3,500
Subscription Received in
Advance1 400 2,600
5% Investments 12,00 12,000
Outstanding Expenses :
Salaries 600 1,200
Rent900 1,800
Rates & Taxes Nil 600
Court Maintenance 780 320
Outstanding Amounts for
Purchase of Sports Materials 1,400 2,950
Prize Fund 4,600 3,250

Problem 19.
From the following, prepare the Receipts & Payments Account of Padatik Club for the year
ended 31st December, 1995.
Income and Expenditure Account For the year ended 31.12.1995

Expenditure Rs. Incomes Rs.
To Maintenance 682 By Subscription 4,000
Match Expenses 1,325 Less : For last year 600
Salaries 1,100 3,400
Add: Outstanding 100 1,200 Add: Outstanding at end 800 4,200
Conveyance 80 Donation 500
Upkeep of Lawn 425 Interest on Deposits 90
Postage Purchases 105 Add: Accrual 90 180
Add : Opening Stock 75 Profit on Sale of Crockery 80
(Selling Price Rs. 180)
Less : Closing Stock 90 90 Excess Expenditure over Income 55
Cricket Expenditure 972
Add:Stock at begining 321
1293
Less : Stock at end 280 1,013
Sundries 200
5,015 5,015


Entrance Fees 275 Cash in hand 220
Outstanding Salary 100 Cash at Bank 2,331
Tournament Fund 2000 Investments 3,000
Less : Expenses 1,880 120 Crockery in deposits 265
Capital Fund 7,266 Investment in Shares 570
Less: Excess of Expendi. 55 Postage (Stock) 90
Over Income 7,211 Stock of Cricket Good 280
Subscription outstanding
1994 60
1995 800 860
Accrual Interest 90
7,706 7,706
Miscellaneous
Problem 20.
Preparation of Balance Sheets
The Receipts and Payments Account and the Income and Expenditure Account of Sabbath
Recreation Club for the year ended 31st December, 1995 were as follows :
To Balance b/f 1,500 By Books Purchased 1,000

Subscription : 1994 600 Printing and stationery 200
1995 4,300 4,900
Salary 1,500
Interest 500 Advertisement 200
Donation for special Fund 300 Electric charges 400
Rent : 1994 150 Balance c/f 4,350
1995 300 450
7,650 7,650

Dr. Income And Expenditure Account Cr.
To Salary 1,800 By Interest 400

Tent Hire 200 Subscriptions 4,800
Electric charges 400 Rent 300
Depreciation on Buildings 750
Printing and stationary 200
Advertisement 150
Surplus 2,000
5,500 5,500
The clubs assets on 1st January, 1995 were :
Buildings Rs. 15,000; Books Rs. 10,000; Furniture Rs. 1,000 and Investments Rs. 10,000
Liabilities as on that date were Rs. 50 for advertisement and Rs. 100 for salary.
You are required to prepare the Balance Sheets of the club on 31. 12. 1994 and 31. 12. 1995.
[Ans : Opening Capital Fund Rs. 38,100; Balance Sheet Totals on 31. 12. 1994 Rs. 38,250 on 31.
12. 1995 Rs. 41,100]
Problem 21.
Preparation of Receipts & Payments Account, Income & Expenditure Account and Balance
Sheet.
The following balance have been entracted from the books of xyz club for the year ended 31st
march, 1996.
Rs.
Restaurant Stock on 31st March, 1995 3,900
Furniture as at 31st March, 1995 8,400
Additions to furniture during the year 5,400
Billiards Table and other accessories on 31st March, 1995 8,900
China Glass, Cutlery and linen as on 31st March, 1995 2,500

Restaurant Receipts during the year 3,61,600

Receipts from Billiards Room during the year 25,600
Subscriptions Received during the year 31,500
Interest on Deposit received during the year 1,500
Secretarys honorarium 30,000
Purchases for Restaurant 2,07,800
Rent & Rates 34,900
Wages (restaurant Rs. 50,000) 92,300
Repairs & Renewals 17,900
Fuel . 17,700
Lighting 2,200
Sundry Expenses 13,400
Cash in hand as on 31st March, 1995 1,350
Bank Balance as on 31st March, 1995 9,150
Bank Deposit @ 10% as on 31st March, 1995 30,000
Capital Fund as on 31st March, 1995 66,000
The payment for purchases includes Rs. 3,000 for the year ended 31st March, 1995. Restaurant
stocks on 31st March, 1996 were Rs. 4,500. Included in the subscriptions received were Rs.
4,800 for previous year and Rs. 1,200 for the year ended 31st March, 1997. Subscriptions out-
standing on 31st March, 1996 were Rs 5.000.
Depreciation should be provided as follows
China glass, cuttery and linen @ 20%, furniture @ 10% and Billiards Table & Accessories @
15%. The cost of the boarding expenses of the staff amounted to Rs. 27,500 of which Rs. 20,000
is to be charged to restaurant.
Prepare the Receipts & Payments Account, Income & Expenditure Account and Balance Sheet
showing the working of the restaurant separately. Cash in hand on 31st March, 1996 amounted
to Rs. 2,600.
(Ans: Restaurant Profit As. 96,700; Excess of Income Over Expenditure Rs., 4,885; Balance
Sheet Total on 31. 3. 1996 As. 72,085)

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Study Note 3, Page 148-196

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RECEIPTS & PAYMENTS AND INCOME & EXPENDITURE ACCOUNTS

Final Accounts and Balance Sheet of Non-Profit Seeking Concerns

3.1. FINAL ACCOUNTS AND BALANCE SHEET OF NON-PROFIT

A. Receipts & Payments Account

5. It is simply a summary of Cash Book.

148 FINANCIAL ACCOUNTING

1. Its form is similar to that of a Profit & Loss Account.

4. All Capital incomes and Expenditures are excluded.

FINANCIAL ACCOUNTING 149

Receipts & Payments Account Income & Expenditure Account

Some Important Considerations

150 FINANCIAL ACCOUNTING

5. Entrance Fees or Admission Fees

FINANCIAL ACCOUNTING 151

1. Ignore opening and closing Cash and Bank Balances.

2. Ignore Capital Receipts and Capital Payments.

152 FINANCIAL ACCOUNTING

Expenditure Amount Amount Income Amount Amount

FINANCIAL ACCOUNTING 153

Statement Showing Capital Fund as on 31.12.95

Cash in hand 1,000

Capital Fund on 1.1.95 7600

Amt. Rs. Amt. Rs.

154 FINANCIAL ACCOUNTING

1. Cash Defalcation by Cashier

Dr. Cash Account Cr.

Particulars Amount Particulars Amount

FINANCIAL ACCOUNTING 155

Rent & Rates

Particulars Amount Amount Particulars Amount Amount

156 FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING 157

Subscription Received in Cash In 1995

Dr. Subscription Account Cr

Particulars Amount Particulars Amount

Subscription Recd. in Advance 2,700 Cash (Balance Figure) 71,700

Purchase of Sports Equipment

Dr. Sports Equipments Account Cr.

Particulars Amount Particulars Amount

To Balance b/f 26,000 By Depreciation 3,000

Cash (Purchases Balance Figure) 4000 Balance c/f 27,000

Salaries Paid by Cash

Particulars Amount Particulars Amount

158 FINANCIAL ACCOUNTING

Outstanding Audit Fees 2,000 Cash in hand 13,900

FINANCIAL ACCOUNTING 159

Balance Sheet as on 31.12.1995

Outstanding Salaries 4,500 Cash in hand 16,000

160 FINANCIAL ACCOUNTING

Cash in hand 450 nil

FINANCIAL ACCOUNTING 161

Receipts Amount Payments Amount

162 FINANCIAL ACCOUNTING

To Rent 2400 By Subscription 62130

FINANCIAL ACCOUNTING 163

Receipts and Payments Account (1995-96)

164 FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING 165

ii) Outstanding/prepaid income

Tuition Fees 1100 1000 100

Liabilities Amount Assets Amount

Capital Fund 8250 Furniture 2000

166 FINANCIAL ACCOUNTING

Liabilities Amount Amount Assets Amount Amount