Accounting for Non Profit Organisation | CMA Inter syllabus

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Preparation of Financial Statements of Not-for-Profit Organisation

Some of the organizations or institutions are constituted to provide valuable services to the society and not with the primary objective of earning profit.

Non-profit Organisations

The organizations which are primarily formed with the objective of offering some specific services to the society and not with profit motive only are referred to as Non-profit Organisations. Such organisations include educational institutions, public medical organisations, social clubs, charitable trusts, trade unions, Cultural clubs like Rotary or Lions club Religious institutions etc. Their main objective is to operate for adding value to different sections of the society.

Features of Non-profit Organisations

The salient features of such non-trading estitis are:

 ● This organization is governed by elected body or trustee board.
 ● Its operation is not driven by any profit motive unlike trading concerns.
 ● Main purpose of the organization is to provide social service.
 ● Main source of their income comes from donation and membership subscription.
 ● The funds are utilized maximum for the benefits of the society.
 ● The membership process for this concern is non-transferable.
 ● The method of accounting that is followed here is entity concept.

Items of incomes and expenses of Non-profit Organisations    

These organisations get their funds in the form of contributions by way of entrance fees, life membership fees, annual subscriptions, donations, grants, legacies etc. The accounting of such organisations is based on similar principles followed by the other organisations. Given the nature of these institutions, there are certain items of revenue and expenses that need special understanding so that accounting treatment could be correctly decided. There are certain items of income and expenditures which are unique for the non-trading entities. They could be listed as:

Income items	Expenditure items
Donations	Upkeep of grounds
Entrance fees	Tournament expenses
Subscriptions	Prizes
Grants received	Events

 The accounting treatment of some of these items of inflows are as follows:

1. Entrance Fees – These are received at the time of admission of a new member and thus are one-time fees. They are non-recurring in nature. It could be either capitalized as they are non-recurring or taken as revenue as per the rules of the institution. There’s a view that addition of member is an ongoing activity and thus every year the institute will get entrance fees. So it may be taken as a normal revenue receipt.
2. Donations – They could be used for meeting capital or revenue expenses. If donations are received for a special purpose, the amount is credited to a fund from which the amounts are disbursed. The fund may be invested in specified securities. Income from such investments is credited to the fund A/c only. Small donation amounts which are not earmarked for any specific purpose may be treated as revenue receipts.
3. Legacy – Many times trusts are formed in the memory of certain persons by their will. In such case after the demise of the person, the funds pass on to the institution. Such legacies are of course one-time and therefore should be taken to the capital fund.
4. Endowments – Sometimes, donations are also in the form of endowments to be used as per instructions of the donor. These are to be treated as capital receipts.
5. Life membership fees – These could be taken as capital receipts and every year a charge is debited based on some logic. In other words, when received, it could be treated as deferred receipt in the balance sheet and every year a specific amount is credited to Income & Expenditure A/c.
6. Subscriptions – These are annual receipts and therefore taken as revenue receipts. These must be recognised as revenue on the accrual concept.

Financial Statements of Non-profit Organisations

The different components of the financial statements of non-profit organisations are:
 ● Receipts & Payments Account;
 ● Income & Expenditure Account; and 
 ● Balance Sheet.

3.2.1 Preparation of Receipts and Payments Account

This is the summarized form of the cash book of a non-profit organisation. Entries are made on cash basis and items pertaining to previous year or current year or subsequent years are also recorded. It is a memorandum account in which the receipts are shown on left side and payments are shown on the right side. Capital as well as revenue items are entered in the Receipts and Payments Account. This account is real account in nature. No provisions are recorded in this account. The account begins with the opening balance of cash and bank and ends with the closing balance of cash and bank.

The proforma of a typical Receipts and Payments Account is as under:

Receipts	(₹)	Payments	(₹)
Starts with opening balance
All receipts - capital or revenue		All payments - Capital or revenue
May be related to any period previous, current or subsequent.		May be related to any period previous, current or subsequent.
		Ends with closing balance

Features of Receipts and Payments Account

1. It is an account which contains all Cash and Bank transactions made by a nonprofit organization during a particular financial period.
2. It is a memorandum account.
3. It is Real Account by nature.
4. It starts with the opening balances of Cash and Bank.
5. It is a summary of Cash Book. Summary of all Cash Receipts both capital & revenue during the period are debited to it. All Cash Payments both capital & revenue during the period are credited to this Account. It ends with the closing Cash and Bank Balances.
6. While recording the Cash and Bank transactions all entries are made on Cash Basis.

3.2.2 Preparation of Income and Expenditure Account

This is the income statement of the non-profit organisation. As the name suggests only revenue items i.e. revenue incomes and revenue expenditures are recorded herein. Incomes are recorded on the credit side, while the expenses are recorded in the debit side. Both incomes and expenses must be taken on the basis of accrual concept. This account should reflect only items that are pertaining to current period. The balance of this account shows either a surplus or deficit. Excess of income over expenditure is called surplus and excess of expenditure over income is called as deficit.

Expenses	(₹)	Income	(₹)
Only revenue expenses		Only revenue receipts
Only related to current period		Only related to current period
Shows either surplus		Or shows deficit

Features of Income and Expenditure Account

1. It is by nature Nominal Account.
2. All expenditures of revenue nature for the particular period are debited to this account on accrual basis.
3. 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 year’s incomes and expenses are recorded. Amounts related to other periods 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 Depreciation on Assets is also debited.
7. If income is more than expenditure, it is called a Surplus, and is added with Capital or General Fund etc. in the Balance Sheet.
8. If expenditure is more than income, it is a deficit, and is deducted from Capital or General Fund etc. in the Balance Sheet.

3.2.3 Preparation of Balance Sheet

It is prepared as on the last day of the accounting period. It also has assets and liabilities and prepared based on accounting equation. But, there’s no capital account. Instead there is a capital fund. The surplus or deficit from Income & Expenditure A/c is adjusted against this capital fund at the end of the year.

Receipts & Payments Account	Income & Expenditure Account
1. It is a summarised Cash Book	1. It closely resembles the Profit & Loss Account of a Trading concern.
2. Receipts are debited and Payments are credited.	2. Incomes are credited and Expenditures are debited.
3. Transactions are recorded on Cash basis.	3. Transactions are recorded on Accrual Basis
4. Amounts related to previous period or future period may remain included. Outstanding amount for current year is excluded.	4. Transactions are recorded on accrual basis. All amounts not related to the current period are excluded. Outstanding amounts of current period are added.
5. It records both Capital and Revenue transactions.	5. It records Revenue transactions only.
6. It serves the purpose of a Real Account.	6. It serves the purpose of a Nominal Account.
7. It starts with opening Cash and Bank Balances and ends with closing Cash and Bank Balances.	7. It does not record such balances, rather its final balance shows a surplus or a deficit for the period.
8. It does not record notional loss or noncash expenses like bad debts, depreciations etc.	8. It considers all such expenses for matching against revenues
9. Its closing balance is carried forward to the same account of the next accounting Period.	9.   Its closing balance is transferred to Capital Fund or General Fund or Accumulated Fund in the same period’s Balance Sheet.
10. It helps to prepare an Income & Expenditure A/c.	10. It helps to prepare a Balance Sheet.

Fund Asset Accounting and its peculiarities:

Following are the concepts of some funds which are generally maintained by non-profit organizations:

1. Capital Fund : It is also called “General Fund” or “Accumulated Fund.” It is actually the Capital of a nonprofit 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 portion of the “Surplus”. For example a club may have a “Building Fund”. It may be used 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.
   If the Special Fund is used to meet an expense, the following entry is passed

Special Fund A/c                                           Dr.

To, Bank A/c (amt. of expense)

NB: The balance of the Fund is shown as a liability in the Balance Sheet

Finally, when the balance is transferred to Capital Fund, the entry will be:

Special Fund A/c                                           Dr.

To, Capital Fund A/c  (Balance of Special Fund)

If the Special Fund is used to purchase an asset

Asset A/c                                                      Dr.

To, Bank A/c (Cost of the asset )

Special Fund A/c                                          Dr.

To, Capital Fund A/c  (Special Fund closed)

(iii) Donations

1. Donation received for a particular purpose should be credited to Special Fund. For example, Donation received for Building should be credited to Building Fund A/c.
2. For other donations received the by-laws or rules of the concern should be followed.
3. 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.
4. Donation paid by the concern should be debited to Income & Expenditure Account.

(iv) Legacy received 

It is to be directly added with Capital Fund after deduction of tax,( if any). It is a kind of donation received according to the will made by a deceased person.

(v) Entrance Fees or Admission Fees

1. The rules or by-laws of the concern should be followed.
2. If there is no such rule, Admission or Entrance Fees paid once by members for acquiring membership should be added with Capital Fund.
3. If such fees are of small amounts covering the expenses of admission only, the fees may be credited to Income & Expenditure Account.

(vi) Subscriptions

1. Annual subscriptions are credited to Income & Expenditure Account on accrual basis.
2. Life membership subscription is usually credited to a separate account shown as a liability.

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 member dies before hand, the balance of his life Membership contribution is transferred to Capital Fund or General Fund.

Illustration 13

On 31st March 2021, a club had subscription in arrears of ₹. 28,000 and in advance ₹. 4,000. During the year ended 31st March 2022, the club received subscription of ₹. 2,08,000 of which ₹. 12,500 was related to 2022-23. On 31st March, 2021, there were 5 members who had not paid subscription for 2022 @ ₹. 1,600 per person. Prepare the Subscription Account for the year 2021-22.

Solution:

Subscription Account

Particulars	(₹ )	Particulars	(₹ )
To, Balance b/d (arrears)	28,000	By, Balance b/d (advance)	4,000
To, I & E A/c (income for 2021-22)[B/fig]	1,79,500	By, R & P A/c (received)	2,08,000
To, Balance c/d (advance)	12,500	By, Balance c/d (arrears- ₹1600 × 5)	8,000
	2,20,000		2,20,000

Illustration 14

The City Sports Club of Surat had received in 2021-2022 ₹ 50,000 towards subscription. Subscription for 2020-21 unpaid on 1.4.2021 were ₹ 5,000.

Subscriptions paid in advance on 31.3.2021 were ₹ 1,250 and the same on 31.3.2022 was ₹ 1,000. Subscriptions for 2021- 2022 unpaid on 31.3.2022 were ₹ 2,250.

Show a statement showing the amount of subscriptions that would appear in Income and Expenditure Account of the club for the year ended 31.03.2022.

Solution:

Particulars	(₹)
Subscriptions received during the year 20X1-20X2	50,000
Add : Subscription outstanding on 31.3.20X2	2,250
	52,250
Less : Subscription outstanding on 1.4.20X1	5,000
	47,250
Add : Subscription paid in advance on 31.3.20X1	1,250
	48,500
Less : Subscription received in advance on 31.3.20X2	1,000
Subscription for 20X1-20X2	47,500

 Illustration 15

The following is the Income and Expenditure Account of GB Club for the year ended 31st March. 2022:

Income and Expenditure Account of GB Club

for the year ended 31st March, 2022

Expenditure	(₹)	Income	(₹)
To, Salaries	19,500	By, Subscription	68,000
To, Rent	4,500	By, Donation	5,000
To, Printing	750
To, Insurance	500
To, Audit Fees	750
To, Games & Sports	3,500
To, Subscriptions written of	350
To, Miscellaneous Expenses	14,500
To, Loss on sale of Furniture	2,500
To, Depreciation:
Sports Equipment	6,000
Furniture	3,100
To, Excess of income over expenditure	17,050
	73,000		73,000

Additional Information: 

	31-03-2021 (₹)	31-03-2022 (₹)
Subscription in arrears	2,600	3,700
Advance Subscriptions	1,000	1,500
Outstanding expenses:
Rent	500	800
Salaries	1,200	350
Audit Fee	500	750
Sports Equipment less depreciation	25,000	24,000
Furniture less depreciation	30,000	27,900
Prepaid Insurance	-	150

Book value of furniture sold is ₹ 7,000. Entrance fees capitalized ₹ 4,000. On 1st April, 2021 there was no cash in hand but Bank Overdraft was for ₹ 15,000. On 31st March, 2022 cash in hand amounted to ₹ 850 and the rest was Bank balance.

Prepare the Receipts and Payments Account of the GB Club for the year ended 31st March, 2022.

Solution:

Receipts and Payments of GB Club Account
for the year ended 31.3.2022

Receipt	(₹)	Payments	(₹)
To, Subscription A/c (W.N.1)	67,050	By, Balance b/d (Bank overdraft)		15,000
To, Donation No	5,000	By, Salary	19,500
To, Entrance Fees A/c	4,000	Add: Outstanding of last year	1,200
To, Furniture A/c  (Sale of furniture) (7,000 - 2,500)	4,500	Less: Outstanding of this year	(350)	20,350
		By, Rent	4,500
		Add: Outstanding of last year	500
		Less: Outstanding of this year	(800)	4,200
		By, Printing		750
		By, Insurance	500
		Add: Prepaid in this year	150	650
		By, Audit Fees	750
		Add: Outstanding of last year	500
		Less: Outstanding of this year	(750)	500
		By, Games and Sports		3,500
		By, Miscellaneous Expenses		14,500
		By, Sports Equipment  (Purchased) (W.N.2)		5,000
		By, Furniture (Purchased) (W.N.3)		8,000
		By, Balance c/d
		Cash		850
		Bank (Bal. fig.)		7,250
	80,550			80,550

Working Notes:
1. Calculation of subscription received during the year 2021-2022 

Particulars	(₹)	(₹)
Subscription as per Income and Expenditure A/c		68,000
Less: Arrears of 2021-2022	3,700
Advance in 2020-2021	1,000	(4,700)
		63,300
Add: Arrears of 2020-2021	2,600
Advance for 2021-2022	1,500	4,100
		67,400
Less: Written off during 2021-2022		(350)
		67,050

2. Calculation of Sports Equipment purchased during 2021-2022

Sports Equipment Account

Particulars	(₹)	Particulars	(₹)
To, Balance b/d	25,000	By, Income & Expenditure A/c (Depreciation)	6,000
To, Receipts & Payments A/c  (Purchases) (bal. fig.)	5,000	By, Balance c/d	24,000
	30,000		30,000

3. Calculation of Furniture purchased during 2021-2022 

Furniture Account

Particulars	(₹)	Particulars	(₹)
To, Balance b/d	30,000	By, Receipts & Payments A/c	4,500
To, Receipts and Payments A/c (Purchases) (Bal. fig.)	8,000	By, Income and Expenditure A/c (Loss on sale)	2,500
		By, Income and Expenditure A/c (Depreciation)	3,100
		By, Balance c/d	27,900
	38,000		38,000

Illustration 16:

The Income and Expenditure account of an association for the year ended 31 March 2022 is as under:

Particulars	(₹)	Particulars	(₹)
To, Salaries	1,20,000	By, Subscription	1,70,000
To, Printing and Stationery	6,000	By, Entrance fee	4,000
To, Telephone	1,500	By, Contribution for Dinner	36,000
To, Postage	500
To, General expenses	12,000
To, Interest and bank charges	5,500
To, Audit fees	2,500
To, Annual Dinner Expenses	25,000
To, Depreciation	7,000
To, Surplus	30,000
	2,10,000		2,10,000

The aforesaid Income and Expenditure account has been prepared after the following adjustments: 

	(₹)
Subscription outstanding as on 31st March 2021	16,000
Subscription outstanding as on 31st March 2022	18,000
Subscription received in advance as on 31st March 2021	18,000
Subscription received in advance as on 31st March 2021	8,400
Salaries outstanding as on 31st March 2021	6,000
Audit fees for 2020-21 paid during 2021-22	8,000
Audit fees for 2020-21 paid during 2021-22	2,000
Audit fee for 2021-22 not paid	2,500
The building owned by the association since 2004 costs	1,90,000
Equipment as on 31st March, 2021 valued at	52,000
At the end of the year after depreciation of ₹ 7,000, equipment amounted to	63,000
In 2020-21, the association raised a bank loan of which is still not paid	30,000
Cash in hand as on 31st March 2022	28,500
Cash in hand as on 31st March 2021	13,600
Capital Fund as on 31st March 2021	2,20,600

You are required to prepare Receipts and Payment Account of the association for the year ended 31st March 2022 and the Balance Sheet as at that date.

Solution:

Receipts and Payments for the year ended 31st March, 2022

Receipts	(₹)	Payments	(₹)
To, Balance b/d	13,600	By, Salaries W.N. (2)	1,18,000
To, Subscription (WN.3)	1,63,400	By, Printing & Stationery	6,000
To, Subscription (WN.3)	4,000	By, Postage	500
To, Annual Dinner Contribution	36,000	By, Telephone	1,500
		By, General Expenses	12,000
		By, Audit Fees	2,000
		By, Dinner Expenses	25,000
		By, Interest	5,500
		By, Equipments W.N. (1)	18,000
		By, Balance c/d	28,500
	2,17,000		2,17,000

Balance Sheet as at 31st March, 2022

Liabilities	(₹)	(₹)	Assets	(₹)
Capital (W.N.- 4)	2,20,600		Buildings	1,90,000
Add: Surplus	30,000	2,50,600	Equipments	63,000
Bank Loan		30,000	Cash in Hand	28,500
Creditors : Salaries		8,000	Subscription Receivable	18,000
Audit Fees O/S		2,500
Subscription Received in Advance		8,400
		2,99,500		2,99,500

Working Notes:

(1)

Equipment Account

Dr.			Cr.
Particulars	(₹)	Particulars	(₹)
To, Balance b/d	52,000	By, Depreciation	7,000
To, Bank A/c (B/f)	18,000	By, Balance c/d	63,000
	70,000		70,000

(2)

Salaries Account

Dr.			Cr.
Particulars	(₹)	Particulars	(₹)
To, Salary O/S (2021 - 22)	8,000	By, Income & Expenditure A/c	1,20,000
To, Bank A/c (Bal. fig.)	1,18,000	By, Salary O/S (2020-21)	6,000
	1,26,000		1,26,000

(3)

Subscription Account

Dr.			Cr.
Particulars	(₹)	Particulars	(₹)
To, Subscription Receivable (2020-21)	16,000	By, Subscription Receive in Advance  (2020-21)	13,000
To, Subscription Received in Advance  (2022-23)	8,400	By, Subscription Receivable (2021-22)	18,000
To, Income & Expenditure A/c	1,70,000	By, Bank A/c (Bal. fig.)	1,63,400
	1,94,400		1,94,400

(4)

Balance Sheet as at 31st March, 2021

Liabilities	(₹)	Assets	(₹)
Capital fund (Bal. fig.)	2,20,600	Building	1,90,000
Bank loan	30,000	Equipment	52,000
Creditors Salaries	6,000	Cash in hand	13,600
Audit Fees O/S	2,000	Subscription Receivable	16,000
Subscription Received in Advance	13,000
	2,71,600		2,71,600

 Illustration 17

JB Club furnishes you the Receipts and Payments Account for the year ended 31.03.2022: 

Receipts	(₹)	Payments	(₹)
To, Cash in hand (1.4.2021)	40,000	By, Salary	20,000
To, Cash at Bank (1.4.2021)	1,00,000	By, Repair expenses	5,000
To, Donations	50,000	By, Furnitures	60,000
To, Subscriptions	1,20,000	By, Investments	60,000
To, Entrance fee -	10,000	By, Misc. Expenses	5,000
To, Interest on Investments	1,000	By, Insurance Premium	2,000
To, Interest from Banks,	4,000	By, Billiards table and other Sports Items	80,000
To, Sale of Old Newspaper	1,500	By, Stationery Expenses	1 ,500
To, Sale of Drama Tickets	10,500	By, Drama Expenses	5,000
		By, Cash in Hand (31.03.2022)	26,500
		By, Cash at Bank (31.03.2022)	72,000
	3,37,000		3,37,000

Additional information:

(a) Subscriptions in arrear for 2021-22 ₹ 9,000 and subscription in advance for the year 2022-23 ₹ 3,500.

(b) ₹ 400 was the insurance premium outstanding as on 31.03.2022.

(c) Miscellaneous expenses prepaid ₹ 900.

(d) 50% of donation is to be capitalized.

(e) Entrance fees to be treated as revenue income.

(f) 8% interest has accrued on investments for five months.

(g) Billiards table and other sports equipments costing ₹ 3,00,000 were purchased in the financial year 2020-21 and of which ₹ 80,000 was not paid 31.03.2021. There is no charge for Depreciation to, be considered. 

You are required to prepare Income and Expenditure Account for the year ended 31.03.2022 and Balance sheet of the Club as at 31.03.2022. 

Solution:

JB Club

Income and Expenditure Account

for the year ended 31.03.2022

Expenditure	(₹)	Income	(₹)
To, Salary	20,000	By, Subscription  (₹ 1,20,000 + ₹ 9,000 - ₹ 3,500)	1,25,500
To, Repair Expenses	5,000	By, Donation @ 50%	25,000
To, Misc. Expenses (5,000 – 900) (less prepaid)	4,100	By, Entrance Fee	10,000
To, Insurance Premium (incl. Outstanding)	2,400	By, Sale of Old Newspaper	1,500
To, Stationery Expenses	1,500	By, Bank Interest	4,000
To, Drama Expenses	5,000	By, Interest on Investments  (60,000 × 8% × 5/12) + 1,000	3,000
To, Excess of Income over Expenditure	1,41,500	By, Sale of Drama Tickets	10,500
	1,79,500		1,79,500

Balance Sheet as at 01.04.2021

Liabilities	(₹)	Assets	(₹)
Capital Fund (Bal. fig)	3,60,000	Cash in Hand	40,000
Billiards Table Outstanding	80,000	Cash at Bank	1,00,000
		Billiards Table and Other Sports Equipments	3,00,000
	4,40,000		4,40,000

Balance Sheet as at 31.03.2022 

Liabilities	(₹)	(₹)	Assets	(₹)	(₹)
Capital Fund	3,60,000		Cash in Hand		26,500
Add: Donations	25,000		Cash at Bank		72,000
Excess of Income over Expenditure	1,41,500	5,26,500	Investments	60,000
			Accrued Interest	2.000	62,000
Subscriber in Advance		3,500	Furniture		60,000
Insurance Premium Outstanding		400	Prepaid Misc. Exp.		900
			Subscription Arrear		9,000
			Billiards Table and Other Sports Equipments		3,00,000
		5,30,400			5,30,400

 Illustration 18

OB Library Society showed the following position on 31st March, 2021: 

Balance Sheet as on 31st March, 2021 

Liabilities	(₹)	Assets	(₹)
Capital Fund	7,93,000	Electrical Fittings	1,50,000
Expenses Payable	7,000	Furniture	50,000
		Books	4,00,000
		Investments in Securities	1,50,000
		Cash at Bank	25,000
		Cash in Hand	25,000
	8,00,000		8,00,000

The Receipts and Payment Account for the year ended on 31st March, 2022 is given below:

Receipts	(₹)	(₹)	Payments	(₹)
To, Balance b/d			By, Electric Charges	7,200
Cash at Bank	25,000		By, Postage and Stationery	5,000
Cash in Hand	25,000	50,000	By, Telephone Charges	5,000
To, Entrance Fees		30,000	By, Books Purchased (Apr, 2021)	60,000
To, Membership Subscription		2,00,000	By, Outstanding Expenses Paid	7,000
To, Sale Proceeds of Old Papers		1,500	By, Rent	88,000
To, Hire of Lecture Hall		20,000	By, Investment in Securities	40,000
To, Interest on Securities		8,000	By, Salaries	66,000
			By, Balance c/d
			Cash at Bank	20,000
			Cash in Hand	11,300
		3,09,500		3,09,500

You are required to prepare Income and Expenditure Account for the year ended 31st March, 2022 and a Balance Sheet as at 31st March, 2022 after making the following adjustments:

(a) Membership subscription included ₹ 10,000 received in advance.

(b) Provide for outstanding rent ₹ 4,000 and salaries ₹ 3,000.

(c) Books to be depreciated @ 10% including additions. Electrical fittings and furniture are also to be depreciated at the same rate.

(d) 75% of the entrance fees is to be capitalized.

(e) Interest on securities is to be calculated @ ₹ 5% p.a. including purchases made on 01.10.2021 for ₹ 40,000. 

Solution:

Income & Expenditure Account of OB Library Society 

for the year ended 31-3-2022 

Particulars	(₹)	(₹)	Particulars	(₹)	(₹)
To, Electricity Charges		7,200	By, Entrance Fees (30,000 × 25%)		7,500
To, Postage & Stationery		5,000	By, Membership Subscription	2,00,000
To, Telephone Charges		5,000	Less: Advance	10,000	1,90,000
To, Rent	88,000		By, Sale of Old Papers		1,500
Add: Outstanding	4,000	92,000	By, Hire of Lecture Hall		20,000
To, Salaries	66,000		By, Interest on Securities	8,000
Add: Outstanding	3,000	69,000	Add. Accrued Interest	500	8,500
To, Depreciation on:			[5% on 1,50,000 + (5% on 40,000) × 1/2 * 8,000]
Books (10% on 4,60,000)		46,000
Electrical fittings (10% on 1,50,000)		15,000	By, Deficiency		16,700
Furniture (10% on 50,000)		5,000
		2,44,200			2,44,200

Balance Sheet of OB Library as on 31.03.2022

Liabilities		(₹)	Assets	(₹)
Capital Fund	7,93,000		Electrical Fitting (1,50,000 – 15,000)	1,35,000
Add: Entrance fees	22,500		Furniture (50,000 – 5,000)	45,000
	8,15,500		Books (4,60,000 – 46,000)	4,14,000
Less: Excess of Expenditure over Income	16,700	7,98,800	Investment in securities (1,50,000 ÷ 40,000)	1,90,000
Outstanding Expenses:			Accrued Interest	500
Rent	4,000		Cash at Bank	20,000
Salaries	3,000	7,000	Cash in Hand	11,300
Membership Subscription in Advance		10,000
		8,15,800		8,15,800

 Illustration 19

Following is the summary of Receipts and Payments of RR Clinic for the year ended 31st March, 2022:

	(₹)
Opening Cash Balance	56,000
Donation Received (including 50,000 for Building Fund)	1,55,000
Payment to Creditors for Medicines Supply	2,10,000
Salaries	70,000
Purchase of Medical Equipments	1,05,000
Medical Camp Collections	87,500
Subscription Received	3,50,000
Interest on Investments @ 9% p.a.	63,000
Honorarium to Doctors	1,90,000
Telephone Expenses	6,000
Medical Camp Expenses	10,500
Miscellaneous Expenses	7,000

Additional Information: 

SI.		01.04.2021 (₹)	31.03.2022 (₹)
1	Subscription Due	10,500	15,400
2	Subscription Received in Advance	8,400	4,900
3	Stock of Medicine	70,000	1,05,000
4	Medical Equipments	1,47,000	2,14,200
5	Building	3,50,000	315,000
6	Creditor for Medicine Supply	63,000	91,000
7	Investments	7,00,000	7,00,000

You are required to prepare Receipts and Payments Account and Income and Expenditure Account for the year ended 31st March, 2022 and the Balance Sheet as on 31st March, 2022. 

Solution:

Receipts and Payments Account of RR Clinic
for the year ended 31.03.2022

Receipts	(₹)	Payments	(₹)
To, Cash in Hand (Opening)	56,000	By, Medical Supply	2,10,000
To, Subscription	3,50,000	By, Honorarium to doctors	1,90,000
To, Donation	1,55,000	By, Salaries	70,000
To, Interest on Investment	63,000	By, Misc. Expenses	7,000
To, Medical Camp collections	87,500	By, Purchase of Equipment	1,05,000
		By, Telephone Expenses	6,000
		By, Medical Camp Expenses	10,500
		By, Cash in Hand (Closing)	1,13,000
	7,11,500		7,11,500

Income and Expenditure Account of RR Clinic

for the year ended 31.03.2022

Expenditure		(₹)	Income		(₹)
To, Medicine Consumed		2,03,000	By, Subscription		3,58,400
To, Honorarium to Doctors		1,90,000	By, Donation		1,05,000
To, Salaries		70,000	By, Interest on Investments		63,000
To, Telephone Expenses		6,000	By, Profit on Medical camp:
To, Misc. Expenses		7,000	Collections	87,500
To, Depreciation on:			Less: Expenses	10,500	77,000
Medical Equipment	37,800
Building  (3,50,000 – 3,15,000)	35,000	72,800
To, Surplus-excess of Income over Expenditure		54,600
		6,03,400			6,03,400

Balance Sheet of RR Clinic as on 31st March, 2022

Liabilities	(₹ )	(₹ )	Assets	(₹ )	(₹ )
Capital Fund:			Building	3,50,000
Opening Balance	12,62,100		Less: Depreciation:	(35,000)	3,15,000
Add: Surplus	54,600	13,16,700	Medical Equipment	1,47,000
Building Fund		50,000	Add: Purchase	1,05,000
Subscription Received in Advance		4,900		2,52,000
Creditors for Medicine Supply		91,000	Less: Depreciation	(37,800)	2,14,200
			Stock of Medicine		1,05,000
			Investments		7,00,000
			Subscription  Receivable		15,400
			Cash in hand		1,13,000
		14,62,600			14,62,600

 

		(₹)	(₹)
1	Subscription for the year ended 31.03.2022
	Subscription received during the year		3,50,000
	Less: Subscription receivable on 01.04.2021	10,500
	Less: Subscription received in advance on 31.03.2022	4,900	(15,400)
	Add: Subscription receivable on 31.03.2022	15,400	3,34,600
	Add: Subscription received in advance on 01.04.2021	8,400	23,800
	Subscription for the year 2021-22		3,58,400
2	Purchase of Medicine
	Payment of Medicine Supply		2,10,000
	Less: Amount due for Medicine Supply 01.04.2021		(63,000)
			1,47,000
	Add: Amount due for Medicine Supply on 31.03.2022		91,000
	Purchase of Medicine during 2021-22		2,38,000
3	Medicine Consumed
	Stock of Medicine on 01.04.2021		70,000
	Add: Purchase of Medicine during the year		2,38,000
			3,08,000
	Less: Stock of Medicine on 31 03.2022		(1,05,000)
	Medicines Consumed		2,03,000
4	Depreciation on Equipment
	Value of Equipment on 01.04.2021		1,47,000
	Add: Purchase of Equipment during the year		1,05,000
			2,52,000
	Less: Value of Equipment on 31.03.2022		(2,14,200)
	Depreciation on Equipment for the year		37,800

Balance Sheet of Radix Clinic as on 31st March, 2021 

 

Liability	(₹)	Assets	(₹)
Capital Fund: (balancing Figure)	12,62,100	Building	3,50,000
Subscription Received in Advance	8,400	Medical Equipment	1,47,000
Creditors for Medicine Supply	63,000	Stock of Medicine	70,000
		Investments	7,00,000
		Subscription Receivable	10,500
		Cash in Hand	56,000
	13,33,500		13,33,500

 Illustration 20

The following information provided by the New Youth Club, Delhi for the first year ended 31st March, 20X2: 

(i) Donations Received for Building ₹ 25,00,000;

(ii) Other Incomes and Receipts were:

(₹ in ‘000) 

Particulars	Capital Income	Revenue Income	Actual Receipt
	(₹)	(₹)	(₹)
Entrance Fees		251	251
Life Membership Fees	105		105
Subscription		1,160	1,151
Play Ground Rent		120	110
Refreshment Account		115	115
Sundry Incomes		62	49

(iii) Expenditures and actual payments were:

(₹ in ‘000)

Particulars	Capital  Expenditure	Revenue  Expenditure	Actual Payment
	(₹)	(₹)	(₹)
Land	800		800
Books	236		202
Furniture	345		315
Honorarium and Salaries		165	131
Maintenance of Play Ground		52	50
Refreshment Account		79	79
Insurance Premium		12	15
Insurance Premium		70	65

Others:

Donation were utilized to the extent of ₹ 13 Lakh in construction of building, balance were unutilized. In order to keep in safe, 8% Government Securities were purchased on 31st December, 20X1 for ₹ 10.50 Lakh. Remaining amount was put in bank as term deposit on 31st March, 20X2. During the year 20X1-X2, Subscription received in advance ₹ 52,000 for the year 20X2-X3.

Depreciation to be charged on Building and Furniture @ 10% and on Books @ 15%.

You are required to prepare the Receipts & Payments Account, Income & Expenditure Account and Balance Sheet as on 31st March, 20X2.

Solution:

New Youth Club Receipts & Payments Account for the year ending 31st March, 20X2 

(₹ in 000)

Dr.			Cr.
Receipts	(₹)	Payments	(₹)
To, Donations	2,500	By, Land	800
To, Entrance fees	251	By, Building	1,300
To, life Membership fees	105	By, Books	202
To, Subscription	1,151	By, Furniture	315
To, Play Ground rent	110	By, Honorarium and Salaries	131
To, Refreshment account	115	By, Maintenance of Play Ground	50
To, Sundry incomes	49	By, Maintenance of Play Ground	79
		By, Insurance Premium	15
		By, Sundry Expenses	65
		By, Govt. Securities	1,050
		By, Term Deposits	150
		By, Balance c/d	124
	4,281		4,281

Income & Expenditure Account for the year ending 31st March, 20X2

(₹ in 000)

Dr.					Cr.
Expenditure	(₹)	(₹)	Income	(₹)	(₹)
To, Honorarium and Salaries	131		By, Subscription	1,151
Add: Outstanding	34	165	Less: Received in Advance	52
To, Maintnc. of Play Ground.	50			1,099
Add: Outstanding	2	52	Add: Outstanding	61	1,160
To, Insurance Premium	15		By, Entrance Fees		251
Less: Prepaid	3	12	By, Play Ground Rent	110
To, Sundry Expenses	65		Add: Outstanding	10	120
Add: Outstanding	5	70	By, Prof it on Refreshment		36
To, Depreciation			By, Sundry Incomes	49
On Building-10% on ₹ 13 Lakh		130	Add: Outstanding	13	62
On Fumiture-10% on ₹ 3,45,000		34.50	By, Interest on Govt. Securities (Accrued)		21
On Books- 15% on ₹ 2,36000		35.40
To, Surplus		1,151.10
		1,650			1,650

Balance Sheet as on 31st march, 20X2

(₹ in 000) 

Liabilities		(₹)	Assets	(₹)
Capital Fund			Land	800
Add: Life Membership fees	105.00		Building (₹ 13 Lakh- ₹ 13 Lakh)	1,170
Add: Surplus	1,151.10	1,256.10	Books (₹ 2,36,000 - ₹ 35,400)	200.6
Donations for Building		2,500	Furniture (₹ 3,45,000 - ₹ 34,500)	310.5
Creditors for Books		34	8% Govt. Securities	1,050
Creditors for Furniture		30	Out. Int. on Govt. Securities	21
Creditors for Furniture		34	Outstanding Subscription	61
Outstanding Hon. and salaries		2	Prepaid Insurance Premium	3
Outs. Maintenance of play ground		5	Play Ground rent- Outstanding	10
Outstanding Sundry expenses		52	Sundry incomes - Outstanding	13
Outstanding Sundry expenses			Term Deposits	150
			Cash and Bank	124
		3,913.10		3,913.10

Working Notes:

(1) Donation received for building has been treated as capital item.

(2) Amount of Term Deposit = Donations Received – (Cost of Building + 8% Govt. Securities) ₹ 25 Lakh – (₹ 13 Lakh + ₹ 10.50 Lakh) = ₹ 1 ,50,000

(3) Profit on Refreshment = ₹ 1,15,000 - ₹ 79,000 = ₹ 36,000

(4) Outstanding Subscription=₹ 11,60,000 - (₹ 11,51,000 – ₹ 52,000) = ₹ 61,000

(5) Accrued Interest on Govt. Securities: ₹ 10,50,000 × 8% × 3/12= ₹ 21,000

Restaurant Trading and Bar Trading

Some clubs have Restaurant and Bar facilities for members and outsiders. Under the circumstances, Restaurant Trading or Bar Trading Account is opened to ascertain the Restaurant or Bar profit, it is just like Trading Account which is opened in case of a trading concern. The Restaurant or Bar profit so ascertained from Restaurant Trading or Bar Trading is transferred to the Income and Expenditure Account as we generally transfer the Gross Profit from Trading Account to Profit and Loss Account in case of Trading concern. Hence, the method of preparing a Restaurant or Bar Trading Account is just like the method of preparing a Trading Account.

 Illustration 21

The following summary of the Cash Book has been prepared by the treasurer of a club:

Receipts	Amount (₹)	Payments	Amount (₹)
To Balance b/d	4,740	By Wages – outdoor staff	13,380
To Subscriptions	29,720	By Restaurant Purchase	50,400
To Entrance Fees	3,200	By Rent – 18 months’ to July 30, 20X2	7,500
To Restaurant Receipts	5,6800	By Rates	2,700
To Games & Competition Receipts	13,640	By Secretary’s Salary	3,120
To Due to Secretary for Petty	80	By Lighting	7,200
Expenses		By Competition Prizes	4,000
		By Printing & Postage etc.	6,000
		By Placed in Fixed Deposit	8,000
		By Balance c/d	5,880
	1,08,180		1,08,180

On April 1, 20X1 the club’s assets were:- Furniture ₹ 48,000, Restaurant stock ₹ 2,600; Stock of prizes ₹ 800; ₹ 5,200 was owing for supplies to the restaurant.

On March, 31, 20X2, the Restaurant stocks were ₹ 3,000 and prizes in hand were ₹ 500, while the club owed ₹ 5,600 for restaurant supplies.

It was also found that subscriptions unpaid at March 31, 20X2, amounted to ₹ 1,000 and that the figure of ₹ 29,720 shown in the Cash Book included ₹ 700 in respect of previous year and ₹ 400 paid in advance for the following year.

Prepare an account showing the Profit or Loss made on the Restaurant and a General Income and Expenditure Account for the year ended 31.3.20X2, together with a Balance Sheet as at that date, after writing 10% off the Furniture.

Solution:

Restaurant Trading Account

For the year ended 31st March, 20X2

Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Opening Stock A/c		2,600	By Restaurant Receipts A/c		56,800
To Purchases A/c	50,400		By Closing Stock A/c		3,000
To Add: Outstanding for 31.3.X2	5,600
	56,000
Less: Outstanding for 01.04.X1	5,200	50,800
To Income & Expenditure A/c (G.P. transferred)		6,400
		59,800			59,800

Balance Sheet

as at 1st April, 20X1

Liabilities	Amount (₹)	Assets	Amount (₹)
Accumulated Fund: (bal. fig.)	50,390	Furniture and Equipment	48,000
Owing for supplies to Restaurant	5,200	Restaurant Stock	2,600
Outstanding Rent (Jan. to March 20X1)	1,250	Stock of Prize	800
		Outstanding Subscriptions	700
		Cash and Bank	4,740
	56,840		56,840

Income and Expenditure Account

For the year ended 31st March, 20X2

Expenditure	Amount (₹)	Amount (₹)	Income	Amount (₹)	Amount (₹)
To Wages		13,380	By Subscription : Subscription already received	29,720
To Rent	7,500		Less: Outstanding for 1.4.X1	700
To Less: Outstanding on 1.4.20X1	1,250			29,020
	6,250		Add: Outstanding for 20X2	1,000
To Less: Prepaid for 3 months (7,500 x 3/18)	1,250	5,000		30,020
To Rates		2,700	Less: Received in advance	400	29,620
To Secretary’s Salary		3,120	By  Games Competition Receipts		13,640
To Lighting, Cleaning, Services		7,200	By Restaurant Trading – Gross Profit		6,400
To Competition Prize	4,000
To Add: Opening Stock	800
	4,800
To Less: Closing Stock	500	4,300
To Printing, Postage and Sundries		6,000
To Dep. on Furniture and Equipment @ 10%		4,800
To Surplus – Excess of income over expenditure		3,160
		49,660			49,660

Balance Sheet as at 31st March, 20X2

Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Accumulated Fund:			Furniture and Equipment	48,00
Balance on 1.4.20X1	50,390		Less: Depreciation	4,800	43,200
Add: Surplus	3,160	53,550	Restaurant Stock		3,000
Entrance fees		3,200	Stock of Prize		500
Subscription received in advance		400	Outstanding Subscriptions		1,000
Owing for supplies to Restaurant		5,600	Prepaid Rent		1,250
Outstanding Petty Expenses		80	Fixed Deposit with Bank		8,000
			Cash and Bank		5,880
		62,830			63,830

Preparation of opening and closing Balance Sheet from a given Receipt & Payment Account and Income & Expenditure Account

While drafting the balance sheet the follow points are to be noted:

A. While preparing opening Balance Sheet

1. At first, take the opening balance of Cash and Bank which are given in the Receipts and Payments Account as “Balance b/d”. The same will appear in the assets side of the opening Balance Sheet.
2. All the opening assets will appear in the assets side of the opening Balance Sheet which are given in the form of adjustments. Similarly, all the opening liabilities will also appear in the liabilities side of the opening Balance Sheet.
3. Ascertain the difference between the assets side and the liabilities side of the opening Balance Sheet which will be treated as “Capital Fund”.

B. While preparing closing Balance Sheet

1. At first, take the closing balance of Cash and Bank which are given in the Receipts and Payments Account as “Balance c/d”. The same will appear in the asset side of the closing Balance Sheet.
2. All the opening fixed asset which have appeared in the asset side of the opening Balance Sheet (after charging all adjustments), if not sold or cost, including addition, if any.
3. All the closing current liabilities including capital fund, surplus or deficit (which we get from income and Expenditure Account), other funds like,Donation, Entrance Fees etc. also appear in the liabilities side of the closing Balance Sheet.
4. Now, each individual item of Receipts and Payments Account should be compared with each individual item of Income and Expenditure Account and the same is to be adjusted accordingly. It must be remembered that items which are appeared in the credit side of the Receipts and Payments Account must be compared with the items which is appeared in the debit side of Income and Expenditure and vice-versa.

 Illustration 22

The following are the items of Receipts and Payments of the BJ Club as summarized from the books of account maintained by the Secretary:

Receipts	(₹)	Payments	(₹)
Opening Balance 1.1.2022	4,200	Manager’s Salary	1,000
Entrance Fees: For 2021	1,000	Printing and Stationery	2,600
For 2022	10,000	Advertising	1,800
Subscriptions: For 2021	600	Fire Insurance	1,200
For 2022	15,000	Investments Purchased	20,000
Interest Received on Investments	3,000	Closing Balance 31.12.2022	7,600
Subscriptions 2023	400
	34,200		34,200

It was ascertained from enquiry that the following represented a fair picture of the Income and Expenditure of the Club for the year 2022 for audit purpose:

Expenditure	(₹)	(₹)	Income	(₹)
Manager’s Salary		1,500	Entrance Fees	10,500
Printing & Stationery	2,000		Subscription	15,600
Add: Accrued	400	2,400	Interest on Investments	4,000
Advertising (accrued Nil)		1,600
Audit Fees		500
Fire Insurance		1,000
Depreciation		4,940
Excess of Income over Expenditure		18,160
		30,100		30,100

You are required to prepare the Balance Sheet of the Club as on 31.12.2021 and 31.12.2022, it being given that the values of the Fixed Assets as on 31.12.2021 were: Building ₹ 44,000, Cricket Equipment ₹ 25,000 and Furniture ₹ 4,000. The rates of depreciation are Building 5%, Cricket Equipments 10%, Furniture 6%.

Your are entitled to make assumptions as may be justified.

Solution:

BJ Club
Balance Sheet as at 31st December, 2021 

Liabilities	(₹)	Assets	(₹)
Outstanding Liabilities:		Building	44,000
Advertisement (₹1,800 – ₹1,600)	200	Furniture	4,000
Printing and Stationery (₹2,600 – ₹2,000)	600	Cricket Equipment	25,000
Capital Fund (Bal. fig.)	78,000	Entrance Fees in arrear	1,000
		Subscription in arrear	600
		Cash	4,200
	78,800		78,800

BJ Club
Balance Sheet as at 31st December, 2022 

Liabilities	(₹ )	(₹ )	Assets	(₹ )	(₹ )
Capital Fund:			Building	44,000
Balance on 1.1.2021	78,000		Less: Depreciation 5%	2,200	41,800
Add: Excess of Income over Expenditure	18,160	96,160	Furniture	4,000
Subscription Received in Advance		400	Less: Depreciation 6%	240	3,760
Outstanding Liabilities:			Cricket Equipment	25,000
Printing and Stationery		400	Less: Depreciation 10%	2,500	22,500
Manager’s Salary: (1,500 – 1,000)		500	Investments		20,000
Audit Fees		500	Subscriptions in Arrear (15,600 – 15,000)		600
			Entrance Fees in Arrear  (10,500 – 10,000)		500
			Accrued Interest on Investments (4,000 – 3,000)		1,000
			Prepaid Insurance (1,200 – 1,000)		200
			Cash		7,600
		97,960			97,960

Note: Advertisement expenses and Printing and Stationery which were paid in excess over Income and Expenditure A/c are assumed to be outstanding for the previous year.

 

Exercise

Theoretical Questions:

Multiple Choice Questions

1. In case of a Club, the excess of expenditure over income is called as :
   (a)  Surplus 
   (b)  Deficit 
   (c)  Capital Fund 
   (d)  Investment in Fixed Assets
   
   
2. Due to retrospective effect on revision of salary of employees, the arrears of salary relating to past years, payable in current year is
   (a) Prior - period item 
   (b) Extra - ordinary item 
   (c) Ordinary item requiring separate disclosure 
   (d) Contingent item
   
   
3. Income statement of a Charitable Institution is known as 
   (a)  Statement of profit and loss 
   (b)  Receipts and Payments Account 
   (c)  Income and Expenditure Account 
   (d)  Profit and Loss Account

Answer:

1

b

2

c

3

c

Numerical Questions 

Multiple Choice Questions

Subscription of  ₹ 6,25,000 had been shown in the Income and Expenditure Account prepared for the year ending 31st March, 2021. Additional information is as below:

Particulars	On 31st March, 2020 (₹)	On 31st March, 2021 (₹)
Subscription Outstanding	55,000	72,000
Subscription Received in Advance	31,000	37,000

The amount of subscription received during the year 2020-21would be :
(a) ₹ 6,36,000 
(b) ₹ 6,02,000
(c) ₹ 6,14,000 
(d) ₹ 6,48,000

Answer:

1

c

CMA book unsolved questions solution

1. The following is the Receipts and Payments Account of Galaxy Women’s Cricket Club for the year ended December 31, 2021:

Receipts	(₹)	Payments	(₹)
To Balance b/d:		By Ground Maintenance	5,250
Cash at bank	8,500	By Salaries	9,000
Cash in hand	3,000	By Gym Equipments	25,000
To Subscriptions	61,250	By Sports Expenses	11,750
To Life Membership Fees	7,500	By Coaches’ Remuneration	10,000
		By General Expenses	2,750
		By Travelling expenses	2,000
		By Balance c/d:
		Cash at bank	10,250
		Cash in hand	4,250
	80,250		80,250

Additional information: 

(a) Interest on savings bank account for ₹ 880 has not been entered in the Cash Book.

(b) 80% of the Life Membership Fees is to be capitalized.

(c) An old gym equipment (WDV ₹ 20,000) was exchanged at an agreed price of ₹ 12,500 for a new gym equipment costing ₹ 37,500. 

(d) The balances of some accounts are as under:

	31.12.2021	31.12.2020
Outstanding Salaries	750	1,500
Arrear Subscriptions	8,000	5,250
Advance Subscriptions	6,750	3,500
Prepaid Ground maintenance	2,250	3,000
Gym Equipments	57,500	45,000

You are required to prepare the Income and Expenditure Account of the club for the year ended on December 31, 2021.

Solution:

Galaxy Women’sCricketClub

Income & Expenditure Account

for the year ended Dec. 31, 2021

Dr.			Dr.
Expenditure	₹	Income	₹
To Ground Maintenance [WN : 1]	6,000	By Subscription [WN : 1]	60,750
To Salaries [WN : 2]	8,250	By Entrance Fees [7,500 x 20%]	1,500
To Sports Expenses	11,750	By Interest on Savings Bank	880
To Coach’s Remuneration	11,000
To General Expenses	2,750
To Travelling expenses	2,000
To Loss on Exchange of Gym Equipment [WN: 4]	7,500
To Depreciation on Equipment [WN : 4]	5,000
To Surplus	9,880
	63,130		63,130

WORKINGS:

1. Subscriptions for 2021

Subscriptions Account

Dr.			Cr.
Particulars	₹	Particulars	₹
To Arrear Subscriptions A/c	5,250	By Advance Subscriptions A/c	3,500
To Income & Expenditure A/c (B/Fig.)	60,750	By Bank A/c	61,250
To Advance Subscriptions A/c	6,750	By Arrear Subscriptions A/c	8,000
	72,750		72,750

2. Ground Maintenance for 2021

Ground Maintenance Account

Dr.			Cr.
Particulars	₹	Particulars	₹
To Balance b/f	3,000	By Income & Expenditure A/c	6,000
To Bank A/c (paid for 2011)	5,250	By Balance c/f	2,250
	8,250		8,250

3. Salaries for 2021

Salaries Account

Dr.			Cr.
Particulars	₹	Particulars	₹
To Balance A/s	9,000	By Balance b/f	1,500
To Balance c/f	750	By Income & Expenditure A/c	8,250
	9,750		9,750

4. Loss on Exchange of Equipment

	₹
WDV of Equipment Exchanged (given)	20,000
Less: Agreed price of exchange	12,500
Loss on exchange of Equipment	7,500

5. Depreciation on Gym Equipments

Gym Equipments Account

Dr.			Cr.
Particulars	₹	Particulars	₹
To Balance b/f	45,000	By Creditors for Equipment A/c (Agreed Price of Equipment exchanged)	12,500
To Creditors for Equipment A/c (New equipment purchased)	37,500	By Loss on Exchange A/c	7,500
		By Depreciation A/c (B/fig)	5,000
		By Balance c/f	57,500
	82,500		82,500

2.The following is the Receipts & Payments Account of Citizen Sports Club for the year ended December 31,2021:

Receipts	(₹)	Payments	(₹)
To Balance (1.1.2018)	2,40,000	By Upkeep of ground	2,10,000
To Subscriptions	8,70,000	By Secretary’s Salary	3,60,000
To Entrance Fees	50,000	By Wages of groundsmen	2,40,000
To Proceeds of Concerts	1,50,000	By Ground rent	15,000
To Interest on Investments	50,000	By Printing & Stationery	20,000
		By Sundry Expenses	17,500
		By Balance (31.12.2018)	4,97,500
	13,60,000		13,60,000

Additional Information:

(a) Subscriptions include arrear subscription brought over from previous year ₹ 50,000.

(b) Interest on Investments includes ₹ 10,000 in respect of interest accrued in the preceding period. 

(c) Upkeep of ground and Wages of groundsmen include ₹ 30,000 and ₹ 15,000 respectively applicable to the preceding year. 

(d) Other ledger balances at the commencement of the financial period were: Capital Fund ₹ 40,10,000; Surplus brought forward ₹ 8,90,000; Club Premises and Grounds (as per valuation) ₹ 30,00,000; Investments ₹ 10,00,000; Sports materials ₹ 2,45,000; Furniture ₹ 4,00,000. 

(e) Entrance fees are to be capitalised.

(f) Outstanding liabilities on 31.12.2021: Wages of groundsmen ₹ 20,000; Printing ₹ 10,000. 

(g) Interest accrued and outstanding on investments was ₹ 12,000. 

(h) Depreciation to be provided on Club Premises by 2%, Furniture by 5% and Sports Equipment by 33.33%

Prepare the Income & Expenditure Account for the year ended December 31, 2021 and Balance Sheet as on that date.

Solution:

Citizen Sports Club

Income & Expenditure Account

for the year ended Dec. 31, 2021

Dr.					Cr.
Expenditure	₹	₹	Income	₹	₹
To Upkeep of ground	2,10,000		By Subscriptions	8,70,000
Less: Outstanding on 31.12.2021	30,000	1,80,000	Less: Arrear on 31.12.21	50,000	8,20,000
To Secretary’s Salary		3,60,000	By Proceeds of Concerts		1,50,000
To Wages of groundsmen	2,40,000		By Interest on Investments	50,000
Less: Outstanding on 31.12.2021	(15,000)		Less: Accrued on 31.12.21	10,000
Add: Outstanding on 31.12.2022	20,000	2,45,000		40,000
To Ground rent		15,000	Add: Accrued on 31.12.2022	12,000	52,000
To Printing & Stationery	20,000
Add: Outstanding on 31.12.2022	10,000	30,000
To Sundry Expenses		17,500
To Depreciation:
Club Premises	60,000
Furniture	20,000
Sports Equipments	81,667	1,61,667
To Surplus		12,833
		10,22,000			10,22,000

Balance Sheet

as at Dec. 31, 2022

Liabilities	₹	₹	Assets	₹	₹
Capital Fund as on 31.12.2021	40,10,000		Club Premises and Grounds	30,00,000
Add: Entrance fees capitalised	50,000		Less: Depreciation	60,000	29,40,000
Add: Surplus of 2021	8,90,000		Furniture	4,00,000
Add: Surplus of 2022	12,833	49,62,833	Less: Depreciation	20,000	3,80,000
Outstanding Liabilities:			Sports materials	2,45,000
Wages of groundsmen	20,000		Less: Depreciation	81,667	1,63,333
Printing	10,000	30,000	Investments		10,00,000
			Outstanding interest on investments		12,000
			Cash & Bank		4,97,500
		49,92,833			49,92,833

3. The following is the Income and Expenditure Account of Moon Club for the year ending 31st March, 2022: 

Expenditure		(₹)	Income	(₹)
To Provisions used:			By Subscription	68,000
Opening Stock	20,000		By Sale of Provisions	3,26,000
Add : Purchases	2,80,000
	3,00,000
Less : Closing Stock	10,000	2,90,000
To Salaries & Wages		36,000
To General Expenses		10,000
To Depreciation on Equipment		2,000
To Surplus		56,000
		3,94,000		3,94,000

The following Balance Sheets are also provided:

Liabilities	31.3.22	31.3.21	Assets	31.3.22	31.3.21
Suppliers for provisions	16,000	20,000	Equipment  (Cost Less Depreciation)	20,000	50,000
Capital Fund	94,000	1,50,000	Stock of Provisions	20,000	10,000
			Arrear Subscription	10,000	20,000
			Cash at Bank & in hand	60,000	90,000
	1,10,000	1,70,000		1,10,000	1,70,000

 From the above details prepare the Receipt and Payments Account for the year ended 31.3.2022 of the club.

Solution:

Moon Club

Receipts & Payments Account

for the year ended Mar. 31, 2022

Receipts	₹	Payments	₹
To Balance b/f:		By Payment to Suppliers [WN: 2]	2,76,000
Cash at Bank & Cash in Hand (given)	60,000	By Salaries & Wages	36,000
To Subscriptions [WN: 4]	58,000	By General Expenses	10,000
To Sale of Provisions	3,26,000	By Equipments [WN: 3]	32,000
		By Balance c/f: Cash and Bank	90,000
	4,44,000		4,44,000

WORKINGS:

1. Payment to Suppliers for Provisions

Creditors for Provisions Account

Dr.			Cr.
Particulars	₹	Particulars	₹
To Bank A/c [B/Fig.]	2,76,000	By Balance b/f	16,000
To Balance c/f	20,000	By Provisions A/c [Purchase]	2,80,000
	2,96,000		2,96,000

2. Equipments purchased during 2021-22

Equipments Account

Dr.			Cr.
Particulars	₹	Particulars	₹
To Balance b/f	20,000	By Income & Expenditure A/c	2,000
To Bank A/c [B/Fig.]	32,000	By Balance c/f	50,000
	52,000		52,000

3. Subscriptions received during 2021-22

Subscriptions Account

Dr.			Cr.
Particulars	₹	Particulars	₹
To Arrear Subscriptions A/c	10,000	By Bank A/c [B/Fig.]	58,000
To Income & Expenditure A/c	68,000	By Arrear Subscriptions A/c	20,000
	78,000		78,000