ACCOUNTING FOR

ORGANISATIONS
NON-PROFIT

CHAPTER – 09

FINANCIAL STATEMENTS OF NOT-FOR-PROFIT

ORGANISATIONS

Meaning of Not-For-Profit Organisation: 1. Subscriptions from members

All trading and business organisations are profit 2. Life-membership fees
organizations since their main objective is to earn profit. Not- 3. financial assistance from government in form of
For-Profit Organisations are those organizations whose main grant-in-aid
aim/objective is to rendering service to their members or the 4. Donations
society at large and not the earning of profits. 5. Legacies
Their main aim is to provide services to its members or the 6. Grant-in-aid
society at large. The funds, raised by such organizations are 7. Income from investments etc.
represented as capital funds or general funds. The main 5. Separate Entity: Not for profit organisations are treated
source; of their income usually are subscriptions from their as separate entity distinct from its members. In other
members, donations, grants, income from investment, etc. words, it is not effected by admission of new members
These organization keeps the accounting records to meet the and the death or insolvency of a existing member.
statutory requirements and controlling utilization of their 6. Surplus Added to Capital Fund: The surplus generated
funds. They usually prepare them at the end of the financial in the form of excess income over expenditure is simply
year to ascertain their income and expenditure and the added to the capital fund or general fund and is not
financial position of the organization and submit them to the distributed amongst its members.
statutory authority i.e. Registrar of Societies. 7. Form of Accounts: The accounting records of these
organizations are totally different from the trading or
Characteristics of Not-For-Profit Organisation: business organization. They are not prepared financial
1. Service Motive-Such organisations are set up to provide statements like Trading Account and Profit and Loss
services to a specific group or public at large such as Account, instead, they prepare Receipts and Payment
education, health care etc. The main aim of these Account and Income and Expenditure Account. The
organisations is to provide service either free or at preparation of the Balance Sheet is the same in both
nominal rates and not to earn profit. organizations.
2. Form: Not-For-Profit Organisations are organized as
charitable trusts or societies. The subscribers to such 8. Accounts: These organisations also have to maintain
trust or societies are called its members. proper accounts to meet the legal requirement and to
3. Managed by Elected Members: These organisations are exercise proper control over utilisation of their funds.
usually managed by a managing or executive committee
elected by its members. Distinction between Not-for-Profit Organisations and
4. Source of Income: The main source of income of these Profit Earning Organisations
organizations are:
 Profit Earning As they are non-profit making entities, so they are not
Not-for-Profit
Basis of distinction Organisation or required to make Trading and Profit and Loss Account but
Organisation
Business firm instead of these accounts to know whether the income during
1. Primary Motive Primary motive of Primary motive of the year was enough to meet the expenses or not they
such organisations such organisations
prepare:
is to provide is to earn profits.
service.
1. Receipts and Payment Account,
2. Capital vs Capital They do not They maintain a 2. Income and Expenditure Account, and
Fund maintain any capital account. 3. Balance Sheet.
Capital fund. For the preparation of these financial statements, the
Instead they general principles of accounting are fully applicable. The
maintain ‘Capital
statements provide the necessary financial information to
Fund’, comprising
life membership members, donors, and to the Registrar of Societies.
fees, legacies, Along with all these, Not-For-Profit organizations also
surpluses etc. prepare a trial balance for checking the accuracy of ledger
3. Financial Financial Financial accounts. The trial balance also facilitates the preparation of
Statements statements of such statements of such
an accurate Receipt and Payment Account as well as the
organisations organisations
include: include:
Income and Expenditure Account and the Balance Sheet.
(i) Receipts and (i) Manufacturing
Payments Account Account Receipts and Payment Account:
(ii) Income and (ii) Trading A Receipts and Payments Account is a summary of cash
Expenditure Account transactions. It is prepared at the end of the accounting
Account (iii) Profit and Loss period from the cash receipts journal and cash payment
(iii) Balance Sheet Account journals.
(iv) Balance Sheet
4. Surplus vs Profit The net result The net result “Receipts and Payment Account is nothing more than a
shown by Income shown by Profit summary of the cash book (Cash and Bank transactions) over
and Expenditure and Loss account is a certain period, analyzed and classified under the suitable
Account is either either net profit or heading. It is the form of account most commonly adopted by
surplus or deficit. net loss. the treasurers of societies, clubs, associations, etc. When
5. Distribution of Surplus or deficit Profit or loss preparing the results of the year’s working.” – William Pickles
Profit is not distributed distributed among
among its the owners of the In ‘other words, the Receipt and Payment Account simply
members. It is business. is a summary of cash and bank transactions under various
adjusted in Capital heads. On the debit side, it begins with an opening balance of
fund. cash and bank and records all the items of receipts
irrespective of whether they are of capital or revenue nature
Accounting Records of Not-For-Profit Organisations: or whether they pertain to the current or past or future
As we know that Not-For-Profit Organisations are not accounting periods.
engaged in any trading or business activity normally. Their
The payments are recorded on the credit side without
main source of income is subscriptions/donations, financial
making any distinction between items of revenue and capital
assistance or grant from the government, etc. Most of their
nature and whether they belong to the current or past or
transactions are in form of cash or through the bank. These
future accounting period(s). It may be noted that this account
organizations are required by law to keep proper accounting
does not show any non-cash item like depreciation.
records and keep proper control over the utilization of their
At the end of the period, this account is balanced to
funds.
ascertain the balance of cash in hand or cash at the bank. The
For maintaining accounting records these organizations annual totals of various items of receipts and payments are
usually keep a cash book to record all receipts and payments found from their respective accounts in the ledger or from the
and maintain ledger accounts of all income, expenses, assets, cash book and are then entered in the Receipts and Payment
and liabilities. In addition, they maintain a stock register to Account.
keep records of all fixed assets and consumables.
In place of the capital account, they maintain a capital Salient Features of Receipts and Payment Account:
fund or general fund that goes on increases due to surpluses, 1. Real Account: It is a real account, so the rule of a real
life membership fees, donations, legacies, etc. received from account i.e. ‘Debit what comes in and credit what goes
year to year. out, is followed. Thus receipts are recorded on the Debit
Final Accounts or Financial Statements of Not-For-Profit side and the payments are recorded on the Credit side.
Organisations: 2. It starts with opening balance of cash in hand and
bank: Cash in hand always shows a debit balance and
 will, therefore, be written on its debit side. Cash at bank at the end of the year, by entering the closing balance of
may show a debit or favourable balance, in which case it cash in hand and at bank, on the credit side. However, if
will be written on its debit side. But if bank balance is an the closing balance is bank overdraft it shall be shown on
overdraft or unfavourable balance, it will be placed on the debit side.
credit side. 6. Do not show non-cash items: Non-cash items like
3. Nature of items recorded on Dr. side- It is a summary depreciation, outstanding expenses, accrued income, etc.
of Cash Book. All cash receipts are shown on the debit are not shown in this account. This account records only
side of this account irrespective of the fact whether they the actual receipts and payments of cash.
are of capital nature or of revenue nature or whatever 7. Purpose: This account does not tell us whether the
they relate to previous year, current year or next year. current incomes exceed the current expenditure or vice
versa. It merely shows the closing balance of cash in hand
4. Nature of items recorded on Cr. Side: Likewise, all cash
payments are shown on its credit side, irrespective of the and at bank. In order to ascertain the net income or loss
fact whether they are of capital nature or of revenue of a particular period, Income and Expenditure Account
has to be prepared with the help of Receipts and
nature and whether they relate to current year, previous
year or next year. Payments Account and after considering various
adjustments.
5. Closing balance of this account shows closing balance
of Cash in hand and at Bank: This account is balanced
Format of Receipts and Payments Account
Receipts and Payments Account
Dr. for the year ended… Cr.
Receipts Amt (₹) Payments Amt (₹)
To Balance b/d (Opening balance) By Balance b/d (Opening) …
Cash in Hand … (In case of bank overdraft)
Cash at Bank … Revenue Payments
Revenue Receipts By Salaries …
To Subscriptions (Present, past and future) … By Rent …
To Entrance Fees (In recurring nature) … By Postage Expenses …
To General Donations … By Advertisement Expenses …
To Locker’s Rent … By Newspapers and Magazines, etc. …
To General Grants … By Repairs …
To Sale of Newspapers, Grass, etc. … By Audit Fee …
To Interest on Investments … By Entertainment Expenses …
To Sale of Old Used Sports Materials … By Maintenance Expenses …
To Proceeds from Entertainment … By Insurance …
To Income from Concerts/Lectures … By Secretary’s Honorarium …
To Receipts from Show … By Lecturer’s Honorarium …
To Dividends … By Municipal Tax …
To Rent … By Gardening …
To Interest … By Prize Distributed …
To Miscellaneous Receipts … By Office Expenses …
Capital Receipts By Expenses on Show …
To Life Membership Fees … By Miscellaneous Payments …
To Subscriptions for Specific Purpose … Capital Payments
To Donation for Specific Purpose … By Purchase of Fixed Assets (e.g. Furniture) …
To Grant for Specific Purpose … By Sports Equipment …
To Entrance Fees (Non-recurring) … By Investments …
To Legacies … By Books …
To Endowment Fund … By Loan (Repayment) …
To Sale of Fixed Assets … By Building Construction …
To Receipts on Account of Special Fund, By Balance c/d (Closing balance)
i.e., Match Fund, Prize Fund, etc. … Cash in Hand …
To Balance c/d (closing) … Cash at Bank …
(in case of bank overdraft)
… …
Income and Expenditure Account: amount received from sale of furniture will not be
It is a nominal account of the Not-For-Profit Organisation recorded in it but the profit earned or loss suffered on
equivalent to the profit and loss account of the trading sale of furniture will be recorded in it.
concerns. The terms profit is substituted by the words excess 3. Omission of opening and closing balance of cash: No
of income over expenditure (surplus) and the loss is opening and closing balance of cash and bank are
expressed as an excess of expenditure over income (deficit). recorded in it.
It reveals the surplus or deficit arising out of the 4. Adjustments: This account is prepared in the same
organization’s activities during an accounting period. This manner in which a Profit and Loss account is prepared.
account is prepared on an accrual basis and includes only As such, all adjustments relating to current year such as
items of revenue nature. All the revenue items relating to the depreciation, earned income etc. are taken into
current period are shown in this account, the expenses and consideration while preparing the income and
losses on the expenditure side (debit side), and incomes and expenditure account.
gains on the income side (credit side) of the account. It shows 5. It records income and expenditure of current period:
the net operating result in the form of surplus or deficit, It excludes all items, of income and expenditure which do
which is transferred to the capital fund shown in the balance not pertain to the current period. In other words all items
sheet. relating to previous years and future years are excluded
Salient Features of Income and Expenditure Account: in it.
1. Nominal Account: It is a nominal account, therefore the 6. Purpose: The closing statement balance of this
rule of nominal account i.e. “Debit all expenses and losses statement reveals surplus or deficit. If the credit side
and credit all incomes and gains” is followed. exceeds the debit, it revels the surplus and on the other
2. Ignore Items of Capital Nature: In this account, only hand, if the debit side exceeds the credit, it revels deficit.
items of revenue nature are to be considered and all the The surplus is added to the capital fund and deficit is
items of capital nature should be ignored. For example, deducted from it.
Format of Income and Expenditure Account
Income and Expenditure Account
Dr. for the year ending … Cr.
Expenditure Amt (₹) Income Amt (₹)
To Salaries … By Subscriptions …
(+) Outstanding at the End … (+) Outstanding at the End …
… (+) Advance in the Beginning …
(–) Outstanding in the Beginning (…) … …
To Rent … (–) Outstanding in the Beginning (…)
To Insurance Premium …
(–) Prepaid (…) … (–) Advance at the End (…) …
To Audit Fees … By Entrance Fees (Only that amount …
To Printing and Stationery … which is treated as revenue
To Honorarium … By Donations …
To Telephone Expenses … By Sale of Old Newspapers …
To Repairs … By Hall Rent …
To Depreciation on Building … By Sundry Receipts …
To Sports Material Used … By Deficit (Excess of Expenditure …
To Surplus (Excess of Income over … over Income)*
Expenditure)*
… …
*Either of the two will appear.

Distinction between Income and Expenditure Account and Receipt and Payment Account
Basis of
Income and Expenditure Account Receipts and Payments Account
Distinction
Nature It is a summary of cash book. It is like Profit and Loss account of profit
seeking entity.
Sides Debit side of this account records receipts and Debit side of this account records expenses
credit side records payments. and losses and credit side records incomes and
gains.
Types of It is a real account. It is a nominal account
Account
 Opening Balance It starts with the opening balance of cash and It has no opening balance.
bank.
Closing Balance Closing balance of this account represents the Closing balance of this account indicates either
closing cash in hand and at bank or overdraft at excess of income over expenditure or excess of
bank. expenditure over income.
Capital and It records receipts and payments both of It records income and expenditure of only
Revenue items capital and revenue nature. revenue nature.
Period of It records all receipts and payments made It records incomes and expenditures of
Incomes and during the year whether they relate to current, current year only.
Expenses previous or next year.
Adjustments Adjustments are not considered while It is necessary to consider adjustments while
preparing it, because it is prepared on cash preparing it, because it is prepared on accrual
bases of accounting. basis of accounting.
Balance Sheet It need not necessarily be accompanied by a Balance sheet must accompany this account
Balance Sheet because all revenue as well as because it includes only revenue items,
capital items are included in it. whereas the Balance sheet contains the
remaining balance.
Transfer of Closing balance of this account is transferred to Closing balance of this account is transferred
Closing Balance the receipt and payments account of the next to the capital fund in the balance sheet.
period.

Balance Sheet: (2) Prepaid expenses, accrued incomes and investments

Not-For-Profit organizations prepare a Balance Sheet at the
should be shown on the assets side.
end of an accounting period to ascertain the financial position
of the organization. The preparation of their Balance Sheet is (3) The closing balance of cash and bank as shown by the
the same as that of the business or trading entities. It is Receipts and Payments Account should be shown on the
prepared in the usual way showing assets on the ‘right-hand assets side. However if there is overdraft balance of bank,
side’ and the liabilities on the ‘left-hand side. However, the it will be shown on the liabilities side.
term capital is not to be found.
Instead, there will be a capital fund or a general fund, or an Liabilities:
accumulated fund, and the surplus or deficit as per Income (1) The loans appearing on the liabilities side of the previous
and Expenditure Account shall be added to or deducted from year's should be seen and Receipts and Payments
this fund. Some capitalized items like legacies, entrance fees, Account should be scanned to find out whether any new
and life membership fees directly (added) in the capital fund. loan has been raised or the old loans have been repaid.
Only the net amount of loan will be shown on the
In absence of a trial balance, the following points should be liabilities side of the Balance Sheet
kept in consideration while preparing a balance sheet:
Assets: (2) If any loan has been raised it will be found on the debit
(1) Fixed assets appearing in the previous year's Balance side of the Receipts and Payments Account. It should also
Sheet (also known as the Opening Balance Sheet) should be shown on the liabilities side.
be adjusted for assets purchased, sold and depreciation (3) If there is a special receipt like donations for building, it
during the year. Only the adjusted amount will appear in will be shown on the liabilities side Similarly, special
the closing Balance Sheet. The adjustment in the fixed funds created for meeting expenses such as prize fund,
assets will be made as under: tournament or sports fund will be shown on the
(i) If some new asset has been purchased during the liabilities side.
year the payment for such asset must have been (4) Outstanding expenses and the incomes received for next
shown on the credit side of the Receipts and year (unearned incomes) will be shown on the liabilities
Payments Account. Such assets must be added to side.
the previous year's assets and shown on the assets (5) Any excess of Assets over Liabilities in case of a non-profit
side of the current year's Balance Sheet seeking organisation is called Capital Fund. It occupies
(ii) If some asset has been sold during the year it must the same position which the capital account occupies in
be appearing on the debit side of Receipts and case of profit seeking entities. First of all, opening capital
Payments Account. The book value of such asset fund is calculated by deducting the opening liabilities
should be deducted from the concerned asset of the from opening assets and then the current year's surplus
previous year. as shown by Income and Expenditure Account will be
(iii) If some depreciation is to be provided, it should be added to it or the deficit, if any, will be deducted from it.
deducted accordingly
 The net amount of Capital Fund will be shown on the
liabilities side.
Format of Balance Sheet
Balance Sheet
as at…
Liabilities Amt (₹) Assets Amt (₹)
Capital Fund Fixed Assets
Opening Balance … Building
(+) Surplus [or(–) Deficit] …/(…) Opening Balance ...
… (+) Additions …
(+) Entrance Fees
(Capitalised amount) … … (–) Depreciation (…) …
Building Fund Furniture
Opening Balance … Opening Balance …
(+) Donation for Building … (+) Additions …
Income from Building Fund … (–) Depreciation (…)
Investments … … Sale (…) …
Sports Fund Current Assets
Opening Balance … Cash in Hand …
(+) Donation for Sports Fund … Cash at Bank …
Interest on Sports Fund … Subscriptions in Arear …
Investments … Accrued Interest …
… Investments
(–) Sports Prize Awarded (…) … Building Fund Investments …
Current Liabilities Sports Fund Investments …
Outstanding Expenses Prepaid Expenses
Rent … Insurance …
Salaries … Rent …
Electricity/Water Charges … …
Subscriptions Received in Advance …
… …

1. In the case of organizations like clubs and some

Important Items relating to Non-Profit seeking charitable institutions, where the membership is
organisation limited and the amount of Entrance Fees is quite
1. Subscription: It is the main source of income of a non- large. It is treated as a non-¬recurring item and
profit entity. It will be appearing on the debit side of added directly to Capital Fund in the Balance Sheet
Receipts and Payments Account and out of it the and also shows in the receipt side of the Receipt and
subscription belonging to current year will be posted to Payment Account.
the credit side of Income and Expenditure Account. 2. For some organizations like educational institutions
the entrance fee is a regular income and the amount
2. Life Membership Fees: In order to become a member of
is quite small. So it is treated as the recurring item
an organization for the whole of the life, some members
pay the fee in lump sum i.e. once in their lifetime. It is a and shown in the income side of the Income and
receipt of non-recurring nature since the members will Expenditure Account. It is also shown on the receipt
side by the Receipt and Payment Account.
not be required to pay the fees regularly. It is shown on
the receipt side of the Receipt and Payment Account and From the examination point of view, if there is no
added to the Capital Fund in the Balance Sheet. It should specific instruction about Entrance Fees, it should be
treated as revenue receipt and may be shown on the
not be credited to the Income and Expenditure Account.
Liabilities side of Current year’s Balance Sheet.
3. Endowment Fund: “It is a fund arising from a bequest or
5. Donations: It is a type of gift in cash or in property
gift, the income of which is devoted for a specific purpose.
received from some person, firm, or company. The
– Eric L. Kohler
Thus, Endowment Fund is a capital receipt and is shown donation can be for specific purposes or for general
on the liabilities side of the Balance Sheet. purposes. Both the donation received appears on the
receipts side of the Receipts and Payments Account.
4. Entrance Fees: The entrance fee also known as the (a) Specific Donations: If the amount received as the
Admission Fee is paid only once the member at the time donation is for a specific purpose such as a donation
of becoming a member. for extension of the existing building, donation for
 the library, for construction of new computer (i) Opening Balance Sheet: It is prepared to ascertain the
laboratory, etc., it is capitalized and is shown in the amount of 'Capital Fund' at the beginning of the year
liabilities side of Balance Sheet. (ii) Income & Expenditure Account : It is prepared more
(b) General Donations: It is of two types: or less in the same manner in which the Profit & Loss
(i) General Donation of Big Amount: It is shown Account is prepared.
on the liability side of the Balance Sheet because (iii) Closing Balance Sheet:
it is non-recurring in nature as the donations of
huge amounts cannot be expected every year. The above statements may be drawn up by means of the
(ii) General Donation of Small Amount: These are following procedure
treated as revenue receipts as it is a regular (1) The opening balance of cash in hand and at bank appears
source of income hence, it is taken to the income at the start on the Debit side of Receipts and Payments
side of the Income and Expenditure Account of Account. It should not be taken to the Income &
the current year. Expenditure Account but written on the assets side of the
Opening Balance Sheet.
6. Legacies: It is in the nature of a gift, received in cash or
(2) Similarly, the closing balance of cash in hand and at bank
in the property as per the will of a deceased person. It is
appears at the end of the Credit side of Receipts and
not treated as an income because it is not of recurring Payments Account. It should be taken to the Assets side
nature. Such receipts come very rarely and therefore it is of the Closing Balance Sheet
of a capital nature and is shown on the liabilities side of
the Balance Sheet. It appears on the receipt side of the (3) After this, the items appearing on the debit side of
Receipts and Payments Account should be classified into
Receipts and Payments Account and is directly added to
two parts:
Capital Fund in the Balance Sheet. However, legacies of
the small amount may be treated as income and show on (A) Capital Receipts
the income side of the Income and Expenditure Account.
(B) Revenue Receipts
7. Sale of Old Assets: Receipt from the sale of the old asset
appears in the receipt side of Receipt and Payment (A) Capital Receipts: It includes those receipts which will
yield benefits to the not for profit organisation in the
Account. It is a capital receipt and as such should not be
current year as well as in future years. They are of non-
transferred to Income and Expenditure account.
recurring nature or in other words, they are not received
However, the profit or loss on the sale of asset must be at regular intervals.
taken to Income and Expenditure account. They include :
8. Sale of Old Newspapers and Sports Materials: It (i) Life Membership Fees
appears on the debit side of income and expenditure (ii) Endowment Fund Receipts
account and is transferred to credit side of Income and (iii) Donations for specific purposes such as construction
Expenditure Account due to fact that selling newspapers of building, special contribution for Silver Jubilee
and used sports materials like old bats, balls etc. is a Celebration, Donation for club pavilion etc.
(iv) Legacies, i.e the amount received under a will.
regular feature of any non-profit seeking institution.
All the four receipts mentioned above should be shown
9. Payment of Honorarium: It is the payment made to a
on the liabilities side of the Balance Sheet .
person for his specific services rendered by him, not as a
regular employee. This is an item of expense and is All Reserves: Any receipt related to a specific fund or
shown in the ‘debit or expenditure side’ of the Income reserve is treated as capital receipt such as Charity Fund,
and Expenditure Account. Match Fund, Prize Fund, Sports Fund, Tournament Fund.
Pension Fund etc. All these reserves or funds should be
shown on the liabilities side of the Balance Sheet after
General and Specific Funds
deducting the expenses in respect of these funds. For
In case of non-profit organisations there is no Capital A/c. example, tournament expenses are deducted from
The difference between the assets and outside liabilities is Tournament Fund, prizes paid are deducted from Prize
known by the name ‘Capital Fund’ and the difference of Fund, Charity expenses are deducted from Charity Fund
income and expenditure is transferred to this fun every year. and so on.
This ‘Capital Fund’ is also known as the ‘General Fund’ to
(v) Sale of Assets: For example, if out of machinery of
distinguish it from any special fund which the organization
the book value of ₹5,000, machinery of the book
may create for any specific purpose.
value of ₹1,000 is sold for ₹1,100; ₹100 is the
revenue receipt which will be shown on the credit
Preparation of Income and Expenditure Account and side of Income and Expenditure Account and ₹1,000
Balance Sheet is the capital receipt which will be deducted from
from Receipts and Payments Account machinery on the assets side of the Balance Sheet.
 Thus, machinery appearing in the Balance Sheet will the necessary adjustments in respect of outstanding
be ₹4,000 (₹5,000 less sold ₹1,000). expenses and prepaid expenses.
(B) Revenue Receipts
Remaining items appearing on the debit side of Receipts (A) Example of Outstanding Expenses -
Rent paid during the year xxxx
and Payments Account are treated as revenue receipts
Add: Outstanding Rent at the end of the year xxxx
such as Subscriptions, Rent received, Interest received,
Less: Outstanding Rent at the beginning of the year
Entrance fees, Sale of old newspapers etc. These should
xxxx
be posted to the credit side of Income and Expenditure
Net amount to be transferred to the xxxx
Account after making necessary adjustments.
Dr. side of Income & Expenditure A/c
For example, there may be four adjustments in respect of The amount of outstanding rent at the end of the year
subscriptions received during the year will also be shown on the liabilities side of the Closing
(i) Subscription Outstanding at the end of the current Balance Sheet and the outstanding rent at the beginning
year: It will be (i) added to the amount of subscriptions of the year will be shown on the liabilities side of the
on the credit side of Income and Expenditure Account, Opening Balance Sheet
and (ii) will also be shown on the assets side of the (B) Example of Prepaid Expenses
closing Balance Sheet. Insurance Charges paid during the year xxxx
(ii) Subscription Outstanding at the beginning of the Less: Prepaid Insurance at the end of the year xxxx
current year: It will be Add: Prepaid Insurance at the beginning of the year xxxx
(i) deducted from the amount of subscriptions on the Net amount to be transferred to the Dr. side of xxxx
credit side of Income and Expenditure Account, and Income & Expenditure A/c
(ii) will also be shown on the assets side of the Opening The amount of prepaid insurance at the end of the year
Balance Sheet. will also be shown on the assets side of closing balance
(iii) Subscription Received in advance at the end of sheet and the prepaid insurance at the beginning of the
the current year: It is an income pertaining to the year will be shown on the assets side of the opening
next year As such, it will be (i) deducted from the balance sheet.
amount of subscription on the credit side of Income
and Expenditure Account, and (ii) will also be shown (4) If the total of credit side of the Income and Expenditure
on the liabilities side of the closing Balance Sheet. Account exceeds the debit, the difference will be termed
(iv) Subscription Received in advance at the as surplus or excess of income over expenditure and will
beginning of the current year: This amount was be added to the Capital Fund on the liabilities side of the
received in the preceding year as an advance for the Balance Sheet. On the contrary, if the debit side of the
current year As such, it is the income of current year Income and Expenditure Account exceeds the credit, the
and will be (i) added in the amount of subscription difference is known as deficit or excess of expenditure
on the credit side of Income and Expenditure over income and will be deducted from the Capital Fund
Account, and (ii) will also be shown on the liabilities on the liabilities side
side of the Opening Balance Sheet.
The rules mentioned as above will also be applicable Calculation of Cost of Consumable Goods
to other incomes. There are some items, of which the opening and closing stock
is given in the question and also the payment made for such
Next, the items appearing on the credit side of Receipts and items is given in the Receipts and Payments Account. Such
Payments Account should be scanned in order to identify the items are known as 'Consumable Goods' In other words, the
items of capital expenditure and revenue expenditure items are consumed during the year such as Foodstuffs,
separately. If some item of expenditure is useful only for the Medicines, Sports Materials, Postage, Stationery etc. The
current year it is known as revenue expenditure and hence amount to be shown in Income and Expenditure Account in
taken to the debit side of Income and Expenditure Account.
respect of such items will be calculated as follows:
On the other hand, if the amount is useful for more than one
year, it is known as capital expenditure such as the amount Payment made for consumable goods xxxx
spent on the purchase of crockery curtains, electric Add: Opening Stock xxxx
installation, investments etc. All such expenditures of capital Less: Closing stock xxxx
nature are shown on the assets side after providing the usual Balance (to be shown in Income & Expenditure A/c) xxxx
depreciation. Revenue expenditures are taken to the debit Opening Stock of such goods is also shown on the assets side
side of Income and Expenditure Account after providing for of the Opening Balance Sheet and the Closing Stock is shown
on the assets side of the Closing Balance Sheet.
 Solved Examples
Q1. Show how will you deal with the following items while preparing the Balance Sheet of a Club as at 31st March, 2018.
₹
Sports Fund 5,00,000
10% Sports Fund Investments on 1st April, 2017 5,00,000
Interest Received on Sports Fund Investments 37,500
Donations for Sports Fund 1,20,000
Sports prizes awarded 1,00,000
Expenses on sports events 15,000
Solution: BALANCE SHEET
as at 31st March, 2018
Liabilities ₹ Assets ₹
Sports Fund 5,00,000 Sports Fund Investments 5,00,000
Add: Interest received Interest Accrued 12,500
on sports fund
Investments 37,500
Add: Interest Accrued 12,500
Add: Donations for
Sports fund 1,20,000
6,70,000
Less: Sports prizes
Awarded 1,00,000
5,70,000
Less: Expenses on
Sports events 15,000 5,55,000
Working Note:
Total Interest due on 10% Sports Fund Investments: ₹
10% on ₹5,00,000 = 50,000
Less : Received during the year = 37,500
Interest Accrued 12,500
Interest Accrued will be added to Sports Fund and will also be shown on Assets side.

Q2. Show how you would deal with the following items while preparing the Income & Expenditure Account for the year
ending on 31st March 2017 and a Balance Sheet as at that date in each of the following alternative cases:
Case (i): Prizes awarded ₹5,000.
Case (ii): Prizes awarded ₹5,000; Prize Fund as on 31st March 2016 ₹40,000; Donations for prizes received during
the year 2016–17 ₹7,200.
Case (iii): Prizes awarded ₹5,000; Prize Fund as on 31st March 2016 ₹40,000; Donations for prizes received during
the year 2016-17 ₹7,200; 9% Prize Fund Investments as on 31st March 2016 ₹40,000; Interest received on
Prize Fund Investments ₹2,700.
Solution:
Cash (i) INCOME & EXPENDITURE ACCOUNT
Dr. for the year ended 31st March, 2017 Cr.
.Expenditure ₹ Income ₹
To Prizes awarded 5,000
Prizes awarded are taken to income & expenditure account because there does not exist a prize fund.

Case (ii) BALANCE SHEET

as at 31st March, 2017
Liabilities ₹ Assets ₹
Prize Fund:
Opening Balance 40,000
 Add : Donations received 7,200
47,200
Less : Prizes awarded 5,000 42,200

Case (ii) BALANCE SHEET

as at 31st March, 2017
Liabilities ₹ Assets ₹
Prize Fund: 9% Prize Fund Investments 40,000
Opening Balance 40,000 Interest accrued on 9% Prize Fund

Add : Donations Received 7,200 Investments(1) 900

Add: Interest on prize fund
investments (₹2,700 +₹900) 3,600
50,800
Less: Prizes awarded 5,000 45,800

Note: (1) Total Interest on Prize Fund Investments of ₹ 40,000 @ 9% p.a. 3,600
Less : Received during the year 2,700
Accrued Interest 900

Q3. Savera Club decided to impart Marshal training and safety tips to all girls and women of the city to protect them against
rising crime and empowering them to protect themselves in dangerous situations. Following is the information
relating to subscriptions for the year ended 31st March, 2016 of the club :
₹
Subscriptions received during 2015-16 70,000
Subscriptions outstanding on 31st March, 2015 17,000
Subscriptions received in Advance on 31st March, 2015 3,250
Subscriptions received in Advance on 31st March, 2016 4,670
Subscriptions outstanding on 31st March, 2016 11,250
Show the subscription in Income and Expenditure A/c for the year ended on 31st March, 2016 and in the Balance
Sheet as at that date.
Solution:
Books of Savera Club
Income and Expenditure Account
Dr. for the year ending 31st March, 2016 Cr.
Expenditure ₹ Income ₹
By Subscriptions 70,000
Less : Outstanding on
March 31, 2015 17,000
53,000
Add : Outstanding on
March 31, 2016 11,250
64,250
Add : Received in
Advance on
March 31, 2015 3,250
67,500
Less : Received in
Advance on
March 31, 2016 4,670 62,830
Alternatively, income received from subscriptions can be calculated by preparing a Subscription A/c as under:
 Dr. Subscription Account Cr.
₹ ₹
To Balance b/d (Outstanding on By Balance b/d (Advance on March
March 31, 2015) 31, 2015) 3,250
17,000
To Income and Expenditure A/c By Receipts & Payments A/c 70,000
(Balancing figure) 62,830
By Balance c/d (Outstanding on
To Balance c/d (Advance on March 31, 2016) 11,250
March 31, 2016) 4,670
84,500 84,500
Relevant items of subscription can be shown in the opening and closing balance sheet as under:
BALANCE SHEET
as at March 31, 2015
Liabilities ₹ Assets ₹
Subscription received in advance 3,250 Subscription Outstanding 17,000

BALANCE SHEET
as at March 31, 2016
Liabilities ₹ Assets ₹
Subscription received in advance 4,670 Subscription Outstanding 11,250

Q4. From the following cash transactions relating to Royal Club, Green Park, prepare Income and Expenditure account for
the year ended 31st March, 2014 and a Balance Sheet as at that date:
Receipts ₹ Payments ₹
To Cash in hand on 1st April, 2013 4,900 By Salaries 20,100
To Subscriptions (including ₹800 By Travelling Expenses 8,600
for the year ending 31.3.2015) 52,100 By Printing & Stationery 1,720
To Donations 6,000 By Rent 16,600
To Proceeds from charity show 16,200 By Repairs 450
To Sale of Furniture By Building purchased 30,000
(Book value ₹4,000) 1,600 By Government Bonds 5,000
To Life membership fees 9,000 By Balance c/d on 31.3.2014 32,130
To Interest on Investments
(Cost of Investments ₹40,000) 4,800
To Sale of old car 20,000
1,14,600 1,14,600
On 1-4-2013, the club owned land and building valued at ₹40,000 and furniture valued at ₹10,500. There were 150
life members on that date, each of whom pad paid subscription of ₹100. The book value of car was ₹25,000.
Subscriptions due on 31st March, 2013 and on 31st March, 2014 were ₹3,400 and ₹2,000 respectively. Similarly,
interest on Investments due at the beginning of the year was ₹800 and at the end of the year was ₹1,000.
Solution: OPENING BALANCE SHEET
as at 1st April, 2013
Liabilities ₹ Assets ₹
Life Membership Fees Cash in hand 4,900
(150 members @ ₹100 each) 15,000 Outstanding Subscriptions 3,400
Capital Fund (Balancing figure) 1,09,600 Accrued interest 800
Investments 40,000
Land and Building 40,000
Furniture 10,500
Car 25,000

1,24,600 1,24,600
 INCOME AND EXPENDITURE ACCOUNT
Dr. for the year ended 31st March, 2014 Cr.
Expenditure ₹ Income ₹
To Salaries 20,100 By Subscriptions 52,100
To Travelling Expenses 8,600 Less : Advance Subscrip-
To Printing and Stationery 1,720 tion received for the
To Rent 16,600 year ending 31.3.2015 800
To Repairs 450 51,300
To Loss on sale of Less : Outstanding
Furniture
(₹4,000 – ₹1,600) 2,400 Subscription for 2013 3,400
To Loss on sale of Car 47,900
(₹25,000 – ₹20,000) 5,000 Add : Outstanding
To Excess of Income over Subscription for 2014 2,000 49,900
Expenditure (Surplus) 22,230 By Donations 6,000
By Proceeds from Charity show 16,200
By Interest on Investments 4,800
Less : Accrued interest
at the beginning 800
4,000
Add : Accrued interest
at the end 1,000 5,000
77,100 77,100

BALANCE SHEET
as at 31st March, 2014
Liabilities ₹ Assets ₹
Subscriptions for the year ending Cash in hand 32,130
31st March, 2015 Outstanding Subscriptions 2,000
received in Advance 800 Accrued interest 1,000
Life Membership Fees 15,000 Investments 40,000
Add : Life Membership Government Bonds 5,000
fees of current year 9,000 24,000 Land and Building 40,000
Capital Fund 1,09,600 Add: Additions 30,000 70,000
Add: Surplus 22,230 1,31,830 Furniture 10,500
Less: 4,000 6,500
1,56,630 1,56,630

Q5. On the basis of the information given below calculate the amount of Stationery to be debited to the ‘Income and
Expenditure Account’ of Good Health Sports Club for the year ended 31st March 2017:

April 1, 2016 March 31, 2017

₹ ₹
Stock of Stationery 8,000 6,000
Creditors for Stationery 9,000 11,000
Stationery purchased during the year ended 31-3-2017 was ₹47,000.

Solution: INCOME AND EXPENDITURE ACCOUNT

Dr. for the year ended 31st March, 2017 Cr.
Expenditure ₹ Income ₹
To Stationery Consumed:
Purchases of
Stationery during
the year 2016-17 47,000
Add : Stock in the
Beginning 8,000
55,000
 Less : Stock at the end 6,000 49,000
Note: Creditors for Stationery will be ignored because stationery purchased (and not the amount paid for stationery)
during the year is given in the question.
Alternate Solution:
Dr. STOCK OF STATIONERY ACCOUNT Cr.
₹ ₹
To Balance b/d 8,000 By Income & Expenditure A/c
To Creditors for Stationery A/c (Balancing figure, being
(Stationery purchased) 47,000 stationery consumed during
the year 2016-17) 49,000
By Balance c/d 6,000
55,000 55,000

Q6. Following is the Receipt and Payment Account of Literacy Club for the year ended 31-3-2016:
Receipts ₹ Payment ₹
Balance b/d 19,550 Salary 3,000
Subscriptions: Newspapers 2,050
2014-2015 1,200 Electricity Bill 1,000
2015-2016 26,500 Fixed deposit
2016-2017 500 28,200 (on 1-7-2015 @ 9% p.a.) 20,000
Sale of old newspapers 1,250 Books 10,600
Government Grants 10,000 Rent 6,800
Sale of old furniture Furniture 10,500
(Book value ₹7,000) 5,700 Balance c/d 11,200
Interest on fixed deposits 450
65,150 65,150
Additional Information:
(i) Subscriptions outstanding as on 31-3-2015 were ₹2,000 and on 31-3-2016 ₹2,500.
(ii) On 31-3-2016 salary outstanding was ₹600 and rent outstanding was ₹ 1,200.
(iii) The Club owned furniture ₹15,000 and books ₹7,000 on 1-4-2015.
Prepare Income and Expenditure Account of the Club for the year ended 31-3-2016 and ascertain ‘Capital Fund’ on
31-3-2015 . Also prepare a Balance Sheet as at 31st March, 2016.
Solution: BALANCE SHEET
as at 31st March, 2015
Liabilities ₹ Assets ₹
Capital Fund (Balancing figure) 43,550 Cash in Hand 19,550
Subscription Outstanding 2,000
Furniture 15,000
Books 7,000
43,550 43,550
INCOME & EXPENDITURE ACCOUNT
Dr. for the year ending 31st March, 2016 Cr.
Expenditure ₹ Income ₹
To Salary 3,000 By Subscriptions 26,500
Add : Outstanding 600 3,600 Add : Outstanding for
To Newspapers 2,050 2015-16* 1,700 28,200
To Electricity Bill 1,000 By Sale of old newspapers 1,250
To Rent 6,800 By Government Grants 10,000
Add : Outstanding 1,200 8,000 By Interest on Fixed Deposit 450
To Loss on sale of furniture Add : Accrued Interest 900 1,350
(₹7,000 – ₹5,700) 1,300
To Excess of Income over
Expenditure 24,850
40,800 40,800
 * Subscription outstanding on 31-3-2016 is ₹2,500 which includes the subscription outstanding for the year 2014-15
₹800 (i.e. ₹2,000 – ₹1,200 received during 2015-16). Hence, the subscription outstanding for 2015-16 is ₹1,700 (i.e.
₹2,500 – ₹800). It should be noted that there is a difference between subscription outstanding on 31-3-2016 and
subscription outstanding for 2015-16 (which indicates subscription outstanding only for 2015-16).
BALANCE SHEET
as at 31st March. 2016
Liabilities ₹ Assets ₹
Salary Outstanding 600 Cash in Hand 11,200
Rent Outstanding 1,200 Subscription Outstanding:
Subscription Received in for 2014-15
Advance 500 (₹2,000 – 1,200) 800
Capital Fund (31-3-2015) 43,550 for 2015–16 1,700 2,500
Add : Excess of Income Fixed Deposit 20,000
over Expenditure 24,850 68,400 Accrued Interest Fixed Deposit 900
Furniture (₹15,000 – 7,000)
+ 10,500) 18,500
Books (₹7,000 + 10,600) 17,600
70,700 70,700

QUESTIONS FOR PRACTICE

2022-23 10,400
MCQ The club has 300 members, paying annual subscription
of ₹ 400 each. Subscription outstanding on 31st March,
1. There are 500 members in Diamond Club, paying an 2021 was ₹ 8,000.
annual subscription of ₹50 each. Subscription received Calculate the amount of subscription to be shown in the
during the year ₹20,000 including ₹2,000 for next year. income and expenditure account?
Calculate amount to be shown as outstanding (a) ₹96,000 (b) ₹1,11,400
subscription. (c) ₹1,20,000 (d) ₹91,000
(a) ₹ 7,000 (b) ₹ 5,000
(c) ₹ 25,000 (d) 18,000 6. What amount of rent will be transferred to debit side of
income and expenditure account, if rent paid during the
2. In the final account of non-profit organisation, closing year was ₹70,000, rent outstanding at the end of the year
balance of cash will be recorded in ₹6,000 and rent outstanding at the beginning of the year
(a) receipt and payment account only ₹8,000?
(b) balance sheet only (a) ₹60,000 (b) ₹68,000
(c) income and expenditure account (c) ₹70,000 (d) ₹72,000
(d) receipt and payment account and balance sheet both
7. On 15th April, 2021, assets of Ashish club was as follows
3. Consider the following statements Assets : Land and building ₹ 1,00,000, Cash in hand ₹
I. Income and expenditure records both capital and 30,000, Furniture ₹ 65,000, Subscription receivable ₹
revenue items. 30,000.
II. Receipt and payment account records only revenue Liabilities: Bank overdraft ₹ 1,25,000,
items during the year. Outstanding salaries ₹ 15,000.
Choose the correct option Capital fund as on 1st April, 2021 will be
(a) Both are incorrect (b) Both are correct (a) ₹ 85,000 (b) ₹ 75,000
(c) ₹ 1,10,000 (d) ₹ 8,000
(c) Only (i) is correct (d) Only (ii) is correct
4. Find the cost of medicines consumed, if Opening stock of 8. Consider the following information
medicines ₹ 30,000, Purchases during the year ₹ 50,000 Sports fund investment ₹ 70,000
Closing stock ₹ 20,000 Donation for sports fund ₹ 15,000
(a) ₹ 80,000 (b) ₹ 60,000 Sports prizes awarded ₹ 10,000
(c) ₹ 50,000 (d) ₹ 40,000 Expenses on sports events ₹ 8,000
Income from sports fund investment ₹ 5,000
5. For the year ending 31st March, 2022, the following
Calculate amount of sport fund that will be shown in
entries appeared related to subscription received
liability side of balance sheet.
Amt
(a) ₹ 40,000 (b) ₹ 38,000
2020-21 5,000
(c) ₹ 45,000 (d) ₹ 72,000
2021-22 96,000
9. Calculate the amount of locker rent to be transferred to 15. Which of the following will be recorded in credit side of
income and expenditure account. receipts and payments account?
31st March, 31st March, (a) ₹300 received from entrance fees
Particulars (b) Cash purchases of books ₹700
2021 (₹) 2022 (₹)
Outstanding Locker Rent 9,200 12,600 (c) Donation received ₹800
Advance Locker Rent 6,000 8,000 (d) Outstanding ₹300 for repair
Locker rent received during the year 2021-22, ₹ 64,000. 16. Pass the journal entry for Royal Dance Club, whose deficit
(a) ₹65,400 (b) ₹66,500 is calculated ₹91,000 during 2019-20.
(c) ₹66,000 (d) ₹73,000 (a) Income and Expenditure A/c Dr 91,000
10. Opening balance of prize fund was ₹ 16,400. During the To Deficit A/c 91,000
year, donations received towards this fund amounted to (b) Deficit A/c Dr 91,000
₹ 7,700, while amount spent on prizes was ₹6,150 and To Income and Expenditure A/c 91,000
interest received on prize fund investment was ₹ 2,000. (c) Cash A/c Dr 91,000
The closing balance of prize fund will be To Income and Expenditure A/c 91,000
(a) ₹28,250 (b) ₹32,250 (d) None of the above
(c) ₹19,950 (d) ₹15,950 17. A non-profit organisation normally prepares …….. before
11. Capital fund in non-profit organisation will be preparing balance sheet.
(a) Total Assets — Total Liabilities (a) income and expenditure account
(b) Total Assets — External Liabilities (b) real account
(c) Total Assets — Internal Liabilities (c) trading account
(d) Total Fund — Total External Liabilities (d) None of the above
12. Item that should be debited in the income and 18. Debit balance in receipts and payments account was
expenditure account of a college is shown as ₹80,000, subscription received amounted to
(a) tuition fees received from students ₹9,600 out of which ₹3,000 is related to next year.
(b) equipment purchased for science laboratory According to you, what amount will be shown in receipts
(c) amount of reward and payments account?
(d) fines collected from students (a) ₹ 80,000 (b) ₹89,600
(c) ₹9,600 (d) ₹86,600
13. Which of the following cannot be recorded in the receipt
and payment account of a club? 19. What is an accounting treatment of cash received for life
(a) Payment made to workers membership fees?
(b) Sale of old newspaper (a) Debit in income and expenditure account
(b) Credit in income and expenditure account
(c) Loss on sale of fixed asset
(c) To be shown in liabilities column of balance sheet
(d) All of the above
(d) To be shown in assets column of balance sheet
14. Uttam Charitable gets surplus from his income and 20. Which of the following is/are account(s) in NPO where
expenditure account of ₹65,000 in 2018-19. It will be outstanding expenses, prepaid expenses, etc. are not
recorded in debit side of the ………… account. recorded?
(a) receipts and payments (b) income and expenditure (a) Income and expenditure account
(c) Both (a) and (b) (d) None of these (b) Balance Sheet
(c) Receipts and payments account
(d) All of the above
SUBJECTIVE QUESTIONS

1. How the following items for the year ended 31st March, 2018 will be presented in the financial statements of Aisko Club:
Particulars Dr. (₹) Cr. (₹)
Tournament Fund 1,50,000
Tournament Fund Investment 1,50,000
Income from Tournament Fund Investments 18,000
Tournament Expenses 12,000
Additional Information:
Interest accrued on Tournament Fund Investments ₹6,000.
2. Show how would you deal with the Building Fund of Heritage Club:
Particulars (₹)
Capital Fund as on 31st March, 2017 20,00,000
Building Fund as on 31st March, 2017 10,00,000
9% p.a. Building Fund Investment as on 31st March, 2017 10,00,000
Donations collected for Building during the year 2017-18 5,00,000
Interest received on Building Fund Investments for 2017-18 45,000
Expenditure made on construction of Auditorium for 2017-18 (The construction work is in 4,50,000
progress and has not completed yet)

3. There are 300 members of a Club each paying ₹500 per annum. Subscriptions received during the year ₹1,00,000.
Subscriptions received in advance in the beginning of the year is ₹25,000 and at the end of the year ₹10,000. Calculate
Subscriptions outstanding at the end of the year.
4. From the following information related to a ‘Health Club’, calculate the amount of subscriptions received during the year
ended 31st March, 2018:
Particulars ₹
Income from subscriptions for the year ended 31st March, 2018 1,20,000
Subscriptions received in advance during the year ended 31st March, 2018 10,000
Subscriptions outstanding on 1st April, 2017 27,000
Subscriptions outstanding on 31st March, 2018 22,000
Subscriptions received in advance on 1st April, 2017 8,000
5. From the following information, calculate the amount of subscription to be credited in the Income and Expenditure Account
of Bharat Sports Club for the year ending 31st March, 2018:

Particulars For the year ended For the year ended

31st March, 2017 (₹) 31st March, 2017 (₹)
Advance Subscriptions 8,000 9,500
Outstanding Subscriptions 7,000 12,500
During the year, the club received ₹ 1,20,000 as subscription which included ₹5,000 for the year ended 31st March, 2017.
6. From the following information, calculate the amount of subscriptions for the year ending 31 st March, 2018 and show the
same in Income and Expenditure Account for the year ending 31st March, 2018 and Balance Sheets of a club as at 31st March,
2017 and 2018:
Receipts and Payment Account
Dr. for the year ended 31st March, 2018 Cr.
Particulars Amount Particulars Amount
To Subscriptions 26,000

Additional information:
(i) Subscriptions outstanding on 31st March, 2017 ₹5,200.
(ii) Subscriptions outstanding on 31st March, 2018 ₹8,400.
(iii) Subscriptions received in advance on 31st March, 2017 ₹4,800.
(iv) Subscriptions received in advance on 31st March, 2018 ₹4,000.
7. Calculate the amount of stationery to be posted to Income and Expenditure Account of Indian Cultural Society for the year
ending 31st March, 2018 from the following information:
Particulars 1st April, 2017 (₹) 1st April, 2018 (₹)
Stock of Machinery 21,000 18,000
Creditors of Machinery 11,000 23,000
Stationery purchased during the year ended 31st March, 2018 was ₹75,000.
Also, present the relevant items in the Balance Sheet of the society as at 31st March, 2018.
8. Janta Kalayan Club has 1,250 members each paying an annual subscription of ₹150. During the year ended 31 st March,
2018 the club did not receive subscription from 45 members and received subscriptions in advance from 46 members for
the year ending 31st March, 2019. On 31st March, 2017 the outstanding subscriptions were ₹15,000 and subscriptions
received in advance were ₹3,000.
Calculate the amount of subscription that will be debited to the ‘Receipts and Payments Account’ for the year ended 31 st
March, 2018.
9. Calculate the amount to be debited to Income and Expenditure Account from the following information for 2017-18:
Particulars 1st April, 2017 (₹) 31st March. 2018
Stock of Sports Material 2,600 4,600
Creditors for Sports Material 2,400 2,660
Amount paid for Sports Material during 2017–18 is ₹5,780.
10. A charitable organisation provides vocational training to youngsters to make a career in the competitive world. The
organisation uses computers to train them. From the following information, prepare Computers Account. You are also
required to show the item ‘Computer’ in the books of a not-for-profit organisation as at 31st March, 2018:
Computers as on 1st April, 2017 ₹1,50,000, 2 computers (having a book value as on 1st April, 2017 – ₹ 60,000) were sold
for ₹65,000 on 1st July, 2017. Three more computers were purchased on 1st January, 2018 for ₹85,000. Depreciation is to
be charged @20% p.a.

HOMEWORK
(b) Loss on sale of fixed asset
MCQ (c) Payment made to worker
(d) None of these
1. Choose Non-Profit Organisation (NPO) from the 8. Life membership fees received by club is shown in the
following. ...............
(a) Oscar Pvt. Ltd. (b) Rajesh exports (a) income and expenditure account
(c) Infosys foundation (d) Private hospital (b) balance sheet
(c) receipts and payment account
2. Which of the following is not a revenue expenditure? (d) profit and loss account
(a) Insurance (b) Lecturer’s honorarium
(c) Municipal tax (d) Purchase of fixed asset 9. What amount of salary is to be transferred to income and
expenditure account, if salary paid during the year was ₹
3. There are 450 members in Cheema club, paying an 80,000 and salary outstanding at the end of the year
annual subscription of ₹ 100 each. Subscription received ₹10,500 and salary outstanding at the beginning of the
during the year was ₹ 25,000 including ₹ 4,000 for next year ₹6,545?
year. The amount to be shown as an outstanding (a) ₹76,045 (b) ₹83,955
subscription will be .................... (c) ₹97,045 (d) ₹62,955
(a) ₹20,000 (b) ₹66,000
(c) ₹70,000 (d) ₹24,000 10. Match fund of ₹1,500 exists in the books. Match expenses
for the year amount to ₹2,000. ......... will be shown in the
4. Donation received for a special purpose: income and expenditure account.
(a) Should be credited to Income and Expenditure (a) ₹3,500 (b) ₹500
Account (c) ₹2,000 (d) ₹1,500
(b) Should be credited to separate account and shown in
balance sheet 11. Calculate the amount of locker rent to be transferred to
(c) Should be shown on the assets side income and expenditure account.
(d) Should not be recorded at all
Particulars 31st March, 31st March,
5. Sports Star Charitable Club has income of ₹16,000 and 2019(₹) 2020(₹)
‘deficit’ debited to capital fund of ₹4,300 for the year
Outstanding Locker rent 9,200 12,600
2019-20, then expenditure for the year 2019-20 is
Advance Locker rent 6,000 8,000
(a) ₹11,700 (b) ₹4,300
Locker rent received during the year 2019-20, ₹64,000.
(c) ₹20,300 (d) None of these
(a) ₹65,400 (b) ₹66,500
6. Which of the following statements is not true for receipts (c) ₹66,000 (d) ₹73,000
and payments account?
12. Consider the following statements.
(a) It is a summary of the cash book.
(i) Income and expenditure records both capital and
(b) It records receipts and payments of revenue nature
revenue items.
only.
(ii) Receipts and payments account record revenue and
(c) The receipts and payments may relate to current,
capital items during the year.
preceding or succeeding accounting periods.
Alternatives
(d) Depreciation is not shown in it.
(a) Only (ii) correct (b) Only (i) correct
7. Which of the following is not to be recorded in receipts (c) Both are correct (d) Both are incorrect
and payments account of a club?
13. Find incorrect combination.
(a) Sale of old newspaper
 (a) Opening capital–opening balance sheet (b) Both Assertion (A) and Reason (R) are true, but Reason
(b) Subscription–source of income (R) is not the correct explanation of Assertion (A)
(c) Sports club–non-profit organisation (c) Assertion (A) is true, but Reason (R) is false
(d) Receipts and payments account – nominal account (d) Assertion (A) is false, but Reason (R) is true
14. Match column I with the column II and select correct 15. Assertion (A): The main objective of non-profit
answer using the codes given below. organisation is to serve the society at
Column -I Column -II free of cost or a nominal cost.
A. Endowment Fund (i) Posted to credit side of Reason (R): It is managed by the managing
income and expenditure committee who is elected by its
account members.
B. Entrance Fees (ii) Any income or loss 16. Assertion (A): Opening and closing balances are
adjusted in the income recorded in income and expenditure
and expenditure account account.
C. Sale of old assets (iii) Sometimes Reason (R): It is prepared at the end of accounting
capitalised and year.
sometimes treated as
revenue receipt 17. Assertion (A): Income and expenditure account is
D. Sale of old newspaper (iv) Permanent means of prepared on accrual basis of accounting.
support Reason (R): The transactions related to current year
are added and those relate to previous or
A B C D
followed year are to be subtracted.
(a) (iv) (iii) (ii) (i)
(b) (i) (ii) (iii) (iv) 18. Assertion (A): Balance sheet shows the financial
(c) (iii) (iv) (i) (ii) position of the company.
(d) (iii) (iv) (ii) (i) Reason (R): Receipts and payments records cash
receipts and cash expenditures.
Directions (Q. Nos. 15 to 19) There are two statements 19. Assertion (A): NGOs are charitable trusts or societies
marked as Assertion (A) and Reason (R). and subscribers to such organisation are
Read the statements and choose the appropriate option from called members.
the options given below. Reason (R): Profits are distributed among its
(a) Both Assertion (A) and Reason (R) are true and Reason members.
(R) is the correct explanation of Assertion (A)
Direction Read the following case study and answer the question no. 20 to 23 on the basis of the same. Following is the receipts
and payments account of Sears Club, Noida as on 31st March, 2020.
Receipts and Payments Account of Sears Club
Dr. For the year ended 31st March, 2020 Cr.
Receipts Amt(₹) Payments Amt (₹)
To Balance b/d 20,000 By Stationery 23,400
To Subscriptions BY 12% Investments 8,000
2018-19 40,000 By Electricity Expenses 10,600
2019-20 94,000 BY Expenses on Lectures 30,000
2020-21 7,200 1,41,200 By Sports Equipment 59,000
To Donations for Building 40,000 By Books 40,000
To Interest on Investments 800 By Balance c/d 50,000
To Government Grant 17,400
To Sale of Old Furniture 1,600
(Book value ₹ 4,000)
2,21,000 2,21,000
Additional Information
(a) The club has 200 members each paying an annual subscription of ₹ 1,000. ₹60,000 were in arrears for last year and 25
members paid in advance in the last year for the current year.
(b) Stock of stationery on 1st April, 2019 was ₹3,000 and 31st March, 2020 was ₹4,000.
20. Loss on the sale of old furniture is ............
(a) ₹1,600 (b) ₹5,600
(c) ₹2,400 (d) Insufficient data
21. Stationery consumed during the year was .............
 (a) ₹30,400 (b) ₹16,400
(c) ₹22,400 (d) ₹26,400
22. How much interest on investment should be received during the year?
(a) ₹960 (b) ₹160
(c) ₹800 (d) ₹1,080
23. The total annual subscription of the firm will be:
(a) ₹25,000 (b) ₹2,00,000
(c) ₹50,000 (d) ₹1,00,000
Direction: Read the following case study and answer the question no.24 to 27 on the basis of the same. Namanjyot Society
showed the following position
Balance Sheet
as at 31st March, 2018
Liabilities Amt(₹) Assets Amt(₹)
Capital Fund 72,000 Furniture 40,000
Subscriptions Received in Advance 6,000 Cash at Bank 30,000
Cash in Hand 8,000
78,000 78,000
Receipts and Payments
Dr. for the year ending 31st March, 2018 Cr.
Receipts Amt (₹) Payments Amt (₹)
To Balance b/d By Computers (1st October, 2018) 1,00,000
Cash at Bank 30,000 BY Office Expenses 29,000
Cash in Hand 24,000 54,000 By Electric Charges 15,000
To Sale Proceeds of Old Newspapers 900 By Postage and Stationery 9,000
To Locker’s Rent 7,000 By 10% Investments (on 1st December, 60,000
2017)
To Interest on Investments 1,600 By Balance c/d
To Entrance fees 50,000 Cash at bank 80,000
To Life Membership Fees 1,00,000 Cash at Bank 35,500 1,15,500
To Membership Subscriptions 98,000
To Subscriptions for Relief Fund 17,000
3,28,500 3,28,500

Additional Information
(a) Computers were to be depreciated @ 60% p.a. and furniture @ 10% p.a.
(b) Membership subscription included ₹20,000 received in advance.
(c) Electric charges outstanding ₹10,000.
24. How much depreciation is to be charged on computers?
(a) ₹60,000 (b) ₹30,000
(c) ₹1,00,000 (d) None of these
25. Accrued interest on investment will be ............
(a) ₹4,400 (b) ₹6,000
(c) ₹2,000 (d) ₹400
26. Subscription for relief fund will be transferred to
(a) income and expenditure account
(b) balance sheet
(c) Both (a) and (b)
(d) added in membership subscription
27. Out of the total subscription received, current year subscription will be
(a) ₹84,000 (b) ₹1,01,000
(c) ₹72,000 (d) ₹1,24,000
28. Match the following items in NPO:
(i) Service Motive A. Assets side
(ii) Accrued Interest B. Profit Earning Organisation
(iii) Subscription received C. Liabilities Side
in advance
(iv) Profit Motive D. Non Profit Organisation
(a) i – A, ii – B, iii – C, iv – D
(b) i – D, ii – A, iii – C, iv – B
(c) i – B, ii – A, iii – C, iv – D
(d) i – C, ii – B, iii – A, iv – D
29. Subscription received by a school for organising annual function is treated as:
(a) Capital receipt (i.e. Liability)
(b) Revenue receipt (i.e. Income)
(c) Assets.
(d) Earned income.
30. Salary paid in cash during the current year was ₹80,000; Outstanding salary at the end was ₹4,000. Salary paid in advance
last year pertaining to the current year was ₹3,200; paid in advance during current year for next year was ₹5,000. The
amount debited to Income and Expenditure Account will be:
(a) ₹85,800 (b) ₹77,800
(c) ₹82,200 (d) ₹74,200

SUBJECTIVE QUESTIONS

1. Following are the extracts from the Receipts and Payments Account of a sports club. You are required to show the different
items in the Income and Expenditure Account and Balance Sheet of the club after taking into account the additional
information given:
Receipts and Payments Account
Dr. for the year ended 31st March, 2018 Cr.

Additional Information:
(i) Amount spent on Pavilion ₹10,000.
(ii) Outstanding subscription for Governor’s party ₹500.
2. From the following information prepare the Income and Expenditure Account of Active Recreation Club as at 31 st March,
2018:

3. Following is the summary of cash transactions of Good Health Club for the year ending 31st March, 2018:
Particulars (₹)
Opening Balance – Cash 70,000
Bank 3,00,000
 Subscriptions Received:
2016 – 2017 40,000
2017 – 2018 3,75,000
2018 – 2019 20,000
Donations for Gym 1,64,000
Admission Fees 14,000
Life Membership Fees 45,000
Wages and Salaries 55,000
Locker Rent 11,000
Invested in 9% Debentures of XYZ Ltd. 2,40,000
Health Journals 5,000
Stationery 12,500
Insurance Premium 6,760
Courier Charges 800
Municipal Taxes 9,570
Machinery Purchased 38,000
Sales of Old Newspapers 300
Interest of Bank Balance 1,740
Cash in Hand 43,000
From the above summary, prepare a Receipts and Payments Account of Good Health Club for the year ending 31 st March,
2018.
4. Following is the Receipts and Payments Account of Literacy Club for the year ended 31st March, 2016:

Receipts (₹) Payments (₹)

To balance b/d 19,550 By Salary 3,000
To Subscriptions By Newspapers 2,050
2014-15 1,200 By Electrcity Bill 1,000
2015-16 26,500 By Fixed Deposit 20,000
2016-17 500 28,200 (on 1st July, 2015 @9%p.a.)
To Sale of old newspapers 1,250 By Books 10,600
To Government Grants 10,000 By Rent 6,800
To Sale of old furniture 5,700 By Furniture 10,500
(Book value ₹7,000) 11,200
To Interest on Fixed Deposits 450
65,150 65,150
Additional Information:
(i) Subscriptions outstanding as on 31.3.2015 were ₹2,000 and on 31.3.2016 ₹2,500.
(ii) On 31.3.2016 salary outstanding was ₹ 600 and rent outstanding was ₹ 1,200.
(iii) The Club owned furniture ₹ 15,000 and books ₹ 7,000 on 1.4.2015.
Prepare Income and Expenditure Account of the Club for the year ended 31.3.2016 and ascertain ‘Capital Fund’ on
31.3.2015.
5. From the following Receipts and Payments Account and additional information, prepare Income and Expenditure Account
and Balance Sheet of Sears Club, Noida as on March 31, 2018:
Receipts and Payments Account of Sears Club
for the year ended 31st March, 2018
Receipts (₹) Payments (₹)
To Balance b/d 20,000 By Stationery 23,400
To Subscriptions By 12% Investments 8,000
2016–17 40,00 By Electricity expenses 10,600
2017–18 94,000 By Expenses on lectures 30,000
2018–19 7,200 1,41,200 By Sports equipment 59,000
To Donations for building 40,000 By Books 40,000
To Interest on Investments 800 By Balance c/d 50,000
To Government Grant 17,400
To Sale of old furniture
 (Book value ₹ 4,000) 1,600
2,21,000 2,21,000

Additional Information:
(i) The club has 200 members each paying an annual subscription of ₹1,000. ₹60,000 were in arrears for last year and 25
members paid in advance in the last year for the current year.
(ii) Stock of stationery on 1st April, 2017 was ₹3,000 and on 31st March, 2018 was ₹4,000.
6. Following Receipts and Payments Account was prepared from the cash book of Delhi Charitable Trust for the year ending
31st March, 2018:
Receipts and Payments Account
Dr. for the year ended 31st March, 2018 Cr.
Receipts ₹ Payments ₹
To Balance b/d: By Charity 11,500
Cash in hand 11,500 By Rent and taxes 3,200
Cash at bank 12,600 By Salary 6,000
To Donation 9,000 By Printing 600
To Subscriptions 42,800 By Postage 300
To Legacies 18,000 By Advertisement 4,500
To Interest on investment 4,500 By Insurances 2,000
To Sale of old newspapers 200 By Furniture 21,600
By Investment 23,000
By Balance c/d
Cash in Hand 9,900
Cash at Bank 16,000
98,600 98,600
Prepare Income and Expenditure Account for the year ended March 31, 2018, and a Balance Sheet as at that date after the
following adjustments.
(i) It was decided to treat one-third of the amount received on account of donation as income.
(ii) Insurance premium was paid in advance ₹500.
(iii) Interest on investment ₹1,100 accrued was not received.
(iv) Rent ₹600, salary ₹900 and advertisement expenses ₹1,000 outstanding as on March 31, 2018.
7. From the following Receipts and Payments Account and opening Balance Sheet, prepare final accounts of the Progress Club
for the year ended 31st March, 2018:
Receipts and Payments Account
Dr. for the year ended 31st March, 2018 Cr.
Receipts ₹ Payments ₹
To Balance b/d 22,500 By Furniture and Fixtures 27,000
To Sale of Old Furniture (costing 6,000 By Library books 15,000
₹9,000)
To Subscriptions; By Salaries 90,000
2016-17 27,000 By Honorarium 18,000
2017-18 90,000 By General expenses 27,000
2018-19 18,000 1,35,000 By Electricity changes 18,000
To Sale of old newspapers 16,200 By Newspapers and Periodicals 50,700
To Profit from Charity Show 66,000 By Postage 4,500
To Rent of Hall 1,26,000 By Stationery 60,000
By Audit free 12,000
By Balance c/d 49,500
3,71,700 3,71700
 Balance Sheet
as at 31st March, 2017

Additional Information:
(i) The Club had 500 members each paying an annual Subscriptions of ₹225.
(ii) On 31st March, 2018 salaries outstanding amounted to ₹1,800 and salaries paid included ₹9,000 for the year 2016-17.
(iii) Provide 5% depreciation on Land and Building.
8. From the following Receipts and Payments Account and the additional information of Jan Kalyan Club, prepare Income and
Expenditure Account and Balance Sheet for the year ending 31st March, 2018.
Receipts and Payments Account
Dr. for the year ending on 31st March, 2018 Cr.

Additional Information:
Particulars As on 1st April, 2017 As on 31st March, 2018
(₹) (₹)
(i) Subscription received in advance 1,000 3,200
(ii) Outstanding Subscripttion 2,000 3,700
(iii) Stock of Stationery 1,200 800
(iv) Books 13,500 16,500
(v) Furniture 16,000 8,000
(vi) Outstanding Rent 1,000 2,000

9. (a) During the year 2016-17, the subscriptions received were ₹11,000. These subscriptions include ₹600 for the year 2015-
16 and ₹400 for 2017-18. On 31st March, 2017 subscriptions due but not received were ₹ 1,000. The amount of outstanding
subscription on 31st March, 2016 was ₹700. What amount of Subscriptions should be credited to Income and Expenditure
Account for the year 2016-17?
(b) From the following extracts of Receipts and Payments Account and additional information, you are required to calculate
the income from subscriptions for the year ending 31st March, 2018 and show them in Income and Expenditure Account
and the Balance Sheet of Royal Club:
 Receipts and Payments Account
Dr. for the year ending 31st March, 2018 Cr.

Additional information:
(i) Subscriptions outstanding on 31st March, 2017 ₹6,000;
(ii) Subscriptions outstanding on 31st March, 2018 ₹5,000;
(iii) Subscriptions received in advance on 31st March, 2017 ₹6,000.
10. From the following Receipts and Payments Account and additional information of Swachh Bharat Club, New Delhi for the
year ended 31st March, 2018, prepare Income and Expenditure Account and Balance Sheet:
Receipt and Payments Account of Swachh Bharat Club
Dr. for the year ended 31st March, 2018 Cr.

Additional Information: Assets on 1st April, 2017 were : Books ₹50,000; Computers ₹75,000. Liabilities and Capital fund
on 1st April, 2017 were: Creditors ₹ 60,000; Capital fund ₹ 1,28,000.
SOLUTION FOR PRACTICE QUESTIONS

SOLUTION FOR MCQ QUESTIONS

1. (a): Annual Subscription Amount (500 × 50) = 25,000
(–) Subscription Received for Current Year = (18,000)
(20,000 – 2,000)
Outstanding Subscription = ₹ 7,000
2. (d):
3. (a):
4. (b): Cost of Medicines Consumed = Opening Stock + Purchases – Closing Stock
= 30,000 + 50,000 – 20,000
= ₹ 60,000
5. (c): No item, either revenue or expenditure, pertaining to the past period or future period is entered in the income and
expenditure account. Only current period items are recorded.
∴ 300 Members × 400 each = ₹ 1,20,000
6. (b): Rent paid during the year = 70,000
(+) Rent outstanding at the end = 6,000
(–) Rent outstanding at the beginning = (8,000)
Rent amount to be transferred to income
and expenditure account = ₹ 68,000
7. (a): Assets = Land and Building + Subscription Receivables + Furniture + Cash in Hand
= 1,00,000 + 30,000 + 65,000 + 30,000
= ₹ 2,25,000
Liability = Bank Overdraft + Outstanding Salary
= 1,25,000 + 15,000 = ₹ 1,40,000
Capital Fund = Assets – Liabilities
= 2,25,000 – 1,40,000 = ₹ 85,000
8. (d): Sports Fund = 70,000
(+) Donation = 15,000
(–) Sports prizes = (10,000)
(–) Expenses = (8,000)
(+) Income from investment = 5,000
= 72,000
9. (a): Locker rent paid during the year = 64,000
(+) Locker rent outstanding at
Year end 2022 = 12,600
(+) Advance locker rent received in
The year 2021 = 6,000
(–) Outstanding locker rent in the
Year 2021 = (9,200)
(–) Advance locker rent received
year end 2022 = (8,000)
Locker rent to be shown in income
and expenditure account = ₹ 65,400
10. (c): Closing Balance
= Opening Balance + Donations Received
+ Interest Received – Expenses
= 16,400 + 7,700 + 2,000 – 6,150 = ₹ 19,950
11. (a) 12. (b) 13. (c)
14. (b) 15. (b) 16. (b)
17. (a)
18. (b): Amount transferred to receipts and payments account will be = 80,000 + 9,600 = ₹ 89,600
19. (c)
20. (c)
 SOLUTIONS FOR SUBJECTIVE
QUESTIONS

1. Balance Sheet of Aisko Club (An Extract)

as at 31st March, 2018

2. Balance Sheet of Heritage Club (An Extract)

as at 31st March, 2018

Working Notes:
1. Total Interest on ₹10,00,000 @ 9% 90,000
Less: Received during the year 45,000
Accrued Interest 45,000
2. Any expenditure of capital nature (e.g., construction expenditure on auditorium) is subtracted from special fund (e.g.,
building fund) should be shown on assets side of Balance Sheet and an amount equal to capital expenditure should be
added to Capital Fund.

3. Table showing Calculation of Subscriptions

4. Calculation of amount of Subscriptions received

 Particulars ₹
Income from Subscriptions (As per Income and Expenditure Account) 1,20,000
Add: Advance receipt as on 31st March, 2018 10,000
Add: Outstanding Subscriptions as on 1st April, 2017 27,000
1,57,000
Less: Advance receipt as on 1st April, 2017 (8,000)
Less: Outstanding Subscriptions as on 31st March, 2018 (22,000)
Subscriptions received during the year 1,27,000
5. Statement showing calculation of Subscriptions

6.
(₹)
Subscriptions as per Receipts and Payments Account 26,000
Add: Subscriptions outstanding on 31st March, 2018 8,400
34,400
Less: Subscriptions outstanding on 31st March, 2017 5,200
29,200
Add: Subscriptions received in advance on 31st March, 2017 4,800
34,000
Less: Subscriptions received in advance on 31st March, 2018 4,000
Amount to be credited to Income and Expenditure Account for the year ending 31st March, 2018 30,000

Alternatively, a Subscriptions Account may be prepared as follows:

Dr. Subscriptions Account Cr.
Particulars ₹ Particulars ₹
To Outstanding Subscriptions A/c 5,200 By Subscriptions Received in Advance A/c 4,800
(Outstanding of last year) (Advance received in 2017)
To Income and Expenditure A/c (Bal. fig.) 30,000 By Cash/Bank A/c 26,000
To Subscriptions Received in Advance A/c 4,000 By Outstanding Subscriptions A/c 8,400
(Advance received in current year) (Outstanding of current year)
39,200 39,200
Income and Expenditure Account
Dr. for the year ending 31st March, 2018 Cr.

Balance Sheet of Club (An Extract)

as at 31st March, 2017

Balance Sheet of Club (An Extract)

as at 31st March, 2018
 7. Dr. Stationery Account Cr.

Alternatively:
(₹)
Opening stock of stationery = 21,000
Purchases made = 75,000
= 96,000
Less: Closing stock = 18,000
Amount to be debited to Income and Exp. Account = 78,000
Balance Sheet
as at 31st March, 2018
Liabilities (₹) Assets (₹)
Creditors for Stationery 23,000 Stock of Stationery 18,000
Note: In question, stationery purchased during the year is given, it means creditors are already adjusted in it and therefore,
no treatment is given to creditors.
8. Statement showing subscription to be debited to Receipts and Payments Account
for the year ending 31st March, 2018
Particulars (₹)
Subscriptions for 2017–18 (1,250 × ₹ 150) 1,87,500
Add: Subscriptions Outstanding on 31st March, 2017 15,000
Subscriptions received in advance for 2018–19 (46 × ₹ 150) 6,900
Less : Subscriptions Outstanding for 2017–18 (45 × ₹ 150) (6,750)
Received in Advance on 31st March,2017 (3,000)
Subscription received during 2017–18 1,99,650

9. Amount debited to Income and Expenditure Account

Particulars (₹)
Amount paid for Sports Material during the year 5,780
Add: Stock of Sports Material in the beginning 2,600
Creditors for Sports Material at the end 2,660
11,040
Less: Stock of Sports Material at the end 4,600
Creditors for Sports Material in the beginning 2,400 7,000
Amount to be debited to Income and Expenditure Account 4,040
10.
Dr. Computers Account Cr.
Date Particulars (₹) Date Particulars (₹)
2017 2017
Apr. 1 To Balance b/d 1,50,000 July 1 By Depreciation A/c 3,000
July 1 To Income and Expenditure 8,000 By Bank A/c (Sale) 65,000
A/c
(profit on sale)
2018 2018
Jan. 1 To Bank A/c (Purchase) 85,000 Mar. 31 By Depreciation A/c 18,000
(1,50,000-60,000)×20/100
By Depreciation A/c 4,250
(85,000 × 20/100 × 3/12)
By Balance c/d 1,52,750
2,43,000 2,43,000
Income and Expenditure Account
Dr. for the year ended 31st March, 2018 Cr.
Expenditure (₹) Income (₹)
To Depreciation on Computers 25,250 By Profit on Sale of Computers 8,000
 (18,000 + 4,250 + 3,000)

Balance Sheet
as at 31st March, 2018
Liabilities (₹) Assets (₹)
Computers 1,52,750

SOLUTION FOR HOMEWORK QUESTIONS

SOLUTION FOR MCQ QUESTIONS

1. (c)
2. (d)
3. (d): Annual Subscription = 450 × 100 = 45,000
(-) Subscription received for current year (25,000-4,000) = (21,000)
Subscription Outstanding = 24,000

4. (b) 5. (c) 6. (b) 7. (b) 8. (b)

9. (b):

10. (b)
11. (a):
Locker rent paid during the year = 64,000
(+) Locker rent outstanding at year end 2020 = 12,600
(+) Advance Locker rent received in the year 2019 = 6,000
(-) Outstanding locker rent in the year 2019 = (9,200)
(-) Advance locker rent received in the year end 2020 = (8,000)
Locker rent to be shown in income and expenditure account = 65,400

12. (a) 13. (d) 14. (a) 15. (b) 16. (d)
17. (a) 18. (b) 19. (c)

20. (c): 4,000-1,600 = ₹2400

21. (c): 3,000 + 23,000 – 4,000 = ₹ 22,400
22. (a): Total Interest on Investment = 8,000 × 12/100 = ₹960
23. (b): 200 members × 1,000 each = ₹2,00,000
24. (d)
25. (d): Interest on investment = 60,600 × 10/100 × 4/12 = ₹2,000
Accrued interest = 2,000-1,600 = ₹400
26. (b)
27. (a): Current year subscription = Total subscription received – Subscription received in advance for the next year +
Subscription received in last year for current year
= 98,000 – 20,000 + 6,000 = ₹84,000
28. (b) 29. (a) 30. (c)
 SOLUTION FOR SUBJECTIVE QUESTIONS
1. Income and Expenditure Account
Dr. for the year ended 31st March, 2018 Cr.

Balance Sheet
as at 31st March, 2018

Notes:
(i) The amount of donations received for pavilion is a specific donation and, therefore, has been taken to the Balance Sheet
on the liabilities side.
(ii) The subscriptions received for Governor’s Party is also for a specific purpose, and therefore, has been taken to the
Balance Sheet. The amount of outstanding subscriptions has also been added to this amount and has been shown on both
sides of the Balance Sheet.
(iii) The expenditure of ₹10,000 incurred on construction of pavilion has been shown as an asset in the Balance Sheet.

2. Active Recreation Club

Income and Expenditure Account
Dr. for the year ended 31st March, 2018 Cr.

Notes:
1. Donations are capitalised and therefore are to be shown in the Balance Sheet as a liability.
2. Salary is adjusted for the current year.
3. Purchase of books is treated as a capital asset.
4. Since, there is no tournament fund, these expenses will be taken to the income and expenditure account.
5. Since life membership fees is a non-recurring receipt, it will be capitalised.
3. Receipts and Payments Account of Good Health Club
Dr. for the year ended 31st March, 2018 Cr.
Receipts (₹) Payments (₹)
To Balance b/d By Wages and Salaries 55,000
Cash 70,000 By Investment in 9% Deb. Of XYZ Ltd. 2,40,000
 Bank 3,00,000 By Health Journals 5,000
To Subscription Received By Stationery 12,500
2016-17 40,000 By Insurance Premium 6,760
2017-18 3,75,000 By Courier Charges 800
2018-19 20,000 4,35,000 By Municipal Taxes 9,570
To Donations for Gym 1,64,000 By Machinery purchased 38,000
To Admission Fees 14,000 By Balance c/d
To Life Membership Fees 45,000 Cash in hand 43,000
To Locker rent 11,000 Bank (Balancing Figure) 6,30,410
To Sale of old Newspapers 300
To Interest on Bank Balance 1,740
10,41,040 10,41,040

4. Income and Expenditure Account

Dr. for the year ended 31st March, 2016 Cr.

Balance Sheet
as at 31st March, 2015

Working Note:
Subscriptions outstanding on 31st March, 2016 ₹2,500
Less: Subscriptions outstanding for 2014–15 ₹800
[₹2,000 – ₹1,200 (received during the year)]
Subscriptions outstanding for 2015–16 ₹1,700

5. Income and Expenditure Account

Dr. for the year ended 31st March, 2018 Cr.
 Balance Sheet of Sears Club
as at 31st March, 2018

Working Notes:
Balance Sheet of Sears Club
as at 31st March, 2017

2. Outstanding Subscription for 2016–17 = 60,000 – 40,000 = 20,000

Outstanding Subscription for 2017–18 = 2,00,000 – (94,000 + 25,000) = 81,000
6.
Income and Expenditure Account
Dr. for the year ended 31st March, 2018 Cr.
Expenditure (₹) Income (₹)
To Charity 11,500 By Donations (one-third as income) 3,000
To Rent and Taxes 3,200 By Subscriptions 42,800
Add : Outstanding 600 3,800 By Interest on Investment 4,500
To Salary 6000 Add: Accrued 1,100 5,600

Add : Outstanding 900 6,900 By Sale of old newspapers 200

To Printing 600
To Postage 300
To Advertisement 4,500
Add: Outstanding 1,000 5,500
To Insurance 2,000
Less: 500 1,500
To Surplus 21,500
51,600 51,600
Balance Sheet
as at 31st March, 2018
Liabilities (₹) Assets (₹)
Donation 6,000 Cash 9,900
Legacies 18,000 Bank 16,000
Capital Fund 24,100 Prepaid Insurance 500
Add: Surplus 21,500 45,600 Furniture 21,600
Outstanding Rent 600 Investment 23,000
Outstanding Salary 900 Accrued Interest on Investment 1,100
Outstanding Advertisement 1,000
72,100 72,100
 Working Note:
Balance Sheet (opening)
as at 31st March, 2017

7.
Income and Expenditure Account
Dr. for the year ended on 31st March, 2018 Cr.

Balance Sheet
as at 31st March, 2018

Working Notes:
1. Dr. Furniture and Fixtures Account Cr.

2. Dr. Library Books Account Cr.

 3. Dr. Land and Building Account Cr.

8.
Jan Kalyan Club
Income and Expenditure Account
Dr. for the year ending on 31st March, 2018 Cr.
Expenditure (₹) Income (₹)
To Salaries 24,000 By Subscriptions 60,200
To Travelling Expenses 6,000 Add: Advance in 2016-2017 1,000
To Stationery (WN2) 2,700 Outstanding for 2017-2018 3,700
To Rent 16,000 64,900
Add: O/s for Current year 2,000 Less: Advance in 2017-2018 (3,200)
18,000 O/s for 2016-2017 (2,000) 59,700
Less: O/s for previous year 1,000 17,000 By Donation 3,000
To Repair 700 By Entrance Fee 800
To Depreciation: By Interest on Investment 5,000
Books(WN3) 3,000
Furniture (WN4) 2,000 5,000
To Loss on Sale of Furniture 2,000
To Surplus 11,100
68,500 68,500

Balance Sheet
as at 31st March, 2018

Working Notes:
Balance Sheet (Opening)
1. as at 1st April, 2017
 2. Dr. Stationery Account Cr.

3. Dr. Books Account Cr.

4. Dr. Furniture Account Cr.

Particulars (₹) Particulars (₹)
To Balance b/d 16,000 By Bank A/c (sale) 4,000
By Income and Exp. A/c (loss on sale) 2,000
By Depreciation A/c (bal. fig.) 2,000
By Balance c/d 8,000
16,000 16,000
9. (a) (₹)
Subscriptions received in year 2016–17 (total cash amount) 11,000
Less: Received for year 2015-16 (600)
Less: Received for year 2017-18 (400)
10,000
Add: Outstanding Subscriptions for the year 2016-17 [1,000 – (700 – 600)](Note) 900
Subscriptions to be credited to Income and Expenditure Account 10,900
Note: On 31st March, 2017, Subscriptions due but not received were ₹1,000. It also includes subscriptions due but not
received for the year 2015-16 amounted to ₹100 [₹700 (outstanding) – 600 (received outstanding amount during current
year)]. The subscriptions outstanding for the current year (2016-17) amounted to ₹900 only.
It should be noted that whenever it is said ‘Subscriptions due but not received’ till the current year’s last day, such an
amount also includes the subscriptions due for previous years too. Therefore, to arrive at Subscriptions outstanding for
current year the amount due but not received for previous year should be deducted from the total of Subscriptions due at
the end of the current year.
(b): The amount to be credited to Income and Expenditure Acount can be worked out by preparing Subscriptions Account
as follows:
Dr. Subscriptions Account Cr.
Particulars (₹) Particulars (₹)
To Outstanding Subscriptions A/c 6,000 By Subscriptions Received in Advance A/c 6,000
To Income and Expenditure A/c (b.f.) 40,000 By Cash A/c (Receipts & Payments A/c) 41,000
To Subscriptions Received in Advance A/c 6,000 By Outstanding Subscriptions 5,000
52,000 52,000

Income and Expenditure Account

Dr. for the year ending 31st March, 2018 Cr.
Expenditure (₹) Income (₹)
By Subscriptions 40,000

Balance Sheet of Royal Club

as at 31st March, 2017
Liabilties (₹) Assets (₹)
Subscription Received in Advance 6,000 Oustanding Subscriptions 6,000
 Balance Sheet of Royal Club
as at 31st March, 2018
Liabilties (₹) Assets (₹)
Subscription Received in Advance 6,000 Oustanding Subscriptions
2016-17 1,000
2017-18 4,000 5,000
Note: Outstanding Subscriptions include subscription outstanding for the year 2016-17 ₹1,000 [i.e., ₹6,000 – ₹5,000 received
during 2017-18] and outstanding subscription for the year 2017-18 ₹4,000.
10.
Income and Expenditure Account
Dr. for the year ending 31st March, 2018 Cr.
Expenditure (₹) Income (₹)
To Campaign Expenses 1,30,000 By Subscriptions 1,80,000
To Office Rent 40,000 By Govt. Grant 2,00,000
To Salary 10,000 By Interest accrued on Fixed 16,000
Deposit
To Furniture hire rent 12,000
To Advertisement 15,000
To Loss on sale of old Furniture 1,000
To Surplus (Excess of income 1,88,000
over Expenditure)
3,96,000 3,96,000
Balance Sheet
as at 31st March, 2018