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NCERT Solutions for Class 11 Accountancy

Financial Accounting Part-2 Chapter 4

Accounting for Not-for-Profit Organisation

Short answers : Solutions of Questions on Page Number : 474

Q1 :
State the meaning of 'Not-for-Profit' Organisations.

Answer :

Not-for-Profit Organisations (NPO) are set up with the prime objective of providing services and not to earn profit thereby enhancing
the welfare of society. Such organisations include schools, hospitals, trade unions, religious organisations, etc. The person/s or the
groups of individuals who govern and manage the working of an NPO are known as trustees. NPO's main sources of income are
donations, subscriptions, life membership fees, grants etc. As these organisations are not set up with profit motive, they do not
prepare Trading and Profit and Loss Account. Instead, they maintain Receipt and Payments Account, Income and Expenditure
Account and Balance Sheet.

Q2 :
State the meaning of Receipt and Payment Account.

Answer :

Receipts and Payments Account is a summary of the Cash Book. All cash receipts are recorded on the Receipts side (i.e. Debit
side) and all cash payments are recorded on the Payments side (i.e. Credit side) of Receipts and Payments Account. It is prepared
on the basis of cash and bank transactions recorded in the Cash Book. It begins with the opening balance of cash and bank and
ends with the closing balances of cash and bank (balancing figure) at the end of the accounting period. It records all cash and bank
transactions both of capital and revenue nature. It not only records the cash and bank transactions relating to the current accounting
period, but also the cash and bank receipts (or payments) received during the current accounting period that may be related to the
previous or next accounting period.

This account only helps us to ascertain the closing balance of the cash and bank and helps in assessing the cash position of an
NPO.

Q3 :
State the meaning of Income and Expenditure Account.

Answer :

Income and Expenditure Account (I&E) is similar to the Profit and Loss Account in the sense that while the former is prepared to
ascertain surplus or deficit during an accounting period, the latter is prepared to ascertain net profit or net loss incurred during an
accounting period. I&E Account is a nominal account and is prepared on the accrual basis. It records all transactions of revenue
nature that are related to the current accounting period (whether outstanding or prepaid) for which the books are maintained. All
expenses and losses are recorded on the debit side (Expenditure side) and all income and gains are recorded on the credit side
(Income side) of I&E Account. The closing balance or the balancing figure of I&E Account is termed as surplus (or deficit), if the sum
total of the Income side exceeds (is lesser than) the sum total of the Expenditure side.

Q4 :

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What are the features of Receipt and Payment Account?

Answer :

The following are the features of Receipt and Payment Account:

1. Nature: It is a Real Account. It is a summarised version of Cash Book.

2. Nature of Transactions: It records only cash and bank transactions. Transactions other than cash and bank like depreciation,
loss/ profit on sale of assets, etc. are not recorded in this account.

3. No distinction between Capital and Revenue items: It records all cash and bank receipts and payments of both capital and
revenue nature.

4. Opening and closing balance: It begins with the opening balance of cash and bank and ends with the closing balance of the
cash and bank (balancing figure) at the end of the accounting period.

5. Purpose: It reveals the cash position of an organisation. It helps to ascertain the total amount paid and received during an
accounting period.

Q5 :
What steps are taken to prepare Income and Expenditure Account from a Receipt and Payment Account?

Answer :

The following steps are taken to prepare Income and Expenditure Account (I&E) from Receipts and Payment Account (R&P).

Step 1: All the revenue expenditures paid for the current accounting period are transferred from the Payments side of R&P to the
Expenditure side of I&E.

Step 2: All the revenue receipts for the current accounting period are transferred from the Receipts side of R&P to the Income side
of I&E.

Step 3: Expenses outstanding for the current period and expenses paid in advance (prepaid expenses) for the current period in the
preceding accounting periods are to be added (adjusted) to their related expenses in the Step 1.

Step 4: Income outstanding (accrued income) for the current period and income received in advance for the current period in the
preceding accounting periods are to be added (adjusted) to their related incomes in Step 2.

Step 5: Non-cash items like depreciation, appreciation for the current accounting period are to be adjusted in the I&E.

Step 6: After adjusting all the revenue items for the current accounting period, the Income and the Expenditure sides are totaled. If
the sum total of the Income side exceeds (or is lesser than) the sum total of the Expenditure side, then the balancing figure is
termed as surplus (or deficit).

Q6 :
What is subscription? How is it calculated?

Answer :

Subscription is the main source of income for an NPO besides entrance fees, donations, grants,
etc. Subscriptions refer to the amount of money paid by the members on periodic basis for
keeping their membership with the organisation alive. It is paid monthly, quarterly, half yearly or
annually by the members.
It is shown in the debit side of the Receipt and Payment Account with the total amount received
during the year that may be related to the current period and to the previous and next accounting
period.

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While calculating subscription for the current period, advance subscription received for the
current period in the previous period and outstanding subscription for the current period are
added to the subscription received during the current period. Whereas, on the other hand,
advance subscription received for the next accounting period during the current period and
outstanding subscription for the preceding period are deducted from the subscription received
during the current period.
Calculation of Subscription
Subscription received during the year ***
Add: Subscription received (in advance) during previous year for ***
current year
Add: Subscription outstanding at the end of the year ***
***
Less: Subscription received in advance for the next year ***
Less: Subscription outstanding for the previous year *** ***
## Subscription shown in Income and Expenditure Account ***
## This subscription is related to the current accounting period and is shown in the Income side
of the Income and Expenditure Account.

Q7 :
What is Capital Fund? How is it calculated?

Answer :

Capital fund is the excess of NPOs' assets over its liabilities. In other words, the excess of assets
over the liabilities for a profit earning organisation is termed as capital and the same for an NPO
is termed as capital fund. Any surplus or deficit ascertained from Income and Expenditure
account is added to (deducted from) the capital fund. It is also termed as Accumulated Fund.
Calculation of Capital Fund
Capital Fund at the beginning of the year **
Add: Surplus from Income and Expenditure Account **
Add: Subscription Amount (Capitalised amount) **
Add: Life membership fee. ** **
Less: Deficit from Income and Expenditure Account **
Capital Fund at the end of the year ***

<< Previous Chapter 3 : Accounts from Incomplete RecordsNext Chapter 5 : Applications of Computers in Accounting >>
Numerical questions : Solutions of Questions on Page Number : 474
Q1 :

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From the following particulars taken from the Cash Book of a health club, prepare a
Receipts and Payments Account.
Particulars Rs
Opening balance:
Cash in Hand 5,000
Cash at Bank 25,000
Subscriptions 1,65,000
Donations 35,000
Investment Purchased 80,000
Rent Paid 20,000
General Expenses 21,500
Postage and stationery 2,000
Courier charges 1,000
Sundry Expenses 2,500
Closing Cash in Hand 12,000

Answer :

Books of Health Club

Receipt and Payment Account
Dr. Cr.
Amount Amount
Receipts Rs Payments Rs
Balance b/d Investment 80,000
Cash in Hand 5,000 Rent 20,000
Cash at Bank 25,000 30,000 General Expenses 21,500
Subscriptions 1,65,000 Postage and Stationery 2,000
Donations 35,000 Courier Charges 1,000
Sundry Expenses 2,500
Balance c/d
Cash in Hand 12,000
Cast at Bank 91,000 1,03,000
(Balancing figure)
2,30,000 2,30,000

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Q2 :
The Receipt and Payment Account of Harimohan charitable institution is given:
Receipt and Payment Account for the year ending March 31, 2007
Amount Amount
Receipts Payments
Rs Rs
Balance b/d: Furniture 3,000
Cash at Bank 22,000 Investments 55,000
Cash in Hand 8,800 Advance for building 20,000
Donations 32,000 Charities 60,000
Subscriptions 50,200 Salaries 10,400
Endowment Fund 60,000 Rent and Taxes 4,000
Legacies 24,000 Printing 1,000
Interest on Investment 3,800 Postage 300
Interest on Deposits 800 Advertisements 1,100
Sale of old newspapers 500 Insurance 4,800
Balance c/d:
Cash at Bank 32,000
Cash in Hand 10,500
2,02,100 2,02,100

Prepare the Income and Expenditure Account for the Year ended on March 31, 2007 after
considering the following:
(i) It was decided to treat Fifty per cent of the amount received on account of Legacies
and Donations as income.
(ii) Liabilities to be provided for are:
Rent Rs 800; Salaries Rs 1,200; advertisement Rs 200.
(iii) Rs 2,000 due for interest on investment was not actually received.

Answer :

Books of Harimohan Charitable Institution

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Income and Expenditure Account

Dr. Cr.
Amount Amount
Expenditure Income
Rs Rs
Rent and Taxes 4,000 Donations 16,000
Add: Outstanding 800 4,800 Legacies 12,000
Subscriptions 50,200
Salaries 10,400 Interest on Investment 3,800
Add: Outstanding 1,200 11,600 Add: Accrued Interest 2,000 5,800

Advertisement 1,100 Interest on Deposits 800

Add: Outstanding 200 1,300 Sale of Old Newspapers 500

Charities 60,000
Printing 1,000
Postage 300
Insurance 4,800

Surplus (Excess of Income over 1,500

Expenditure)

85,300 85,300

NOTE: As per the solution, Excess of Income over Expenditure is Rs 1,500; however, as per the
book, it is Rs 2,500.

Q3 :

From the following particulars, prepare Income and Expenditure account:

Amount
Details
Rs
Fees collected, including Rs 80,000 on account of the previous year 5,20,000
Fees for the year outstanding 30,000
Salary paid, including Rs 5,000 on account of the previous year 68,000

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Salary outstanding at the end of the year 3,000

Entertainment expenses 8,000
Tournament expenses 25,000
Meeting Expenses 18,000
Traveling Expenses 7,000
Purchase of Books and Periodicals, including Rs 31,000 for purchase of 40,000
Books
Rent 15,000
Postage, telegrams and telephones 6,000
Printing and Stationery 18,000
Donations received 25,000

Answer :

Income and Expenditure Account

Dr. Cr.
Amount Amount
Expenditure Income
Rs Rs
Salaries 68,000 Fees Collected 5,20,000
Less: Previous Less: Previous
(5,000) (80,000)
year's Outstanding year's Outstanding
63,000 4,40,000
Add: Current year's Add: Current year's
30,000 4,70,000
Outstanding 3,000 66,000 Outstanding
Entertainment Donations 25,000
Expenses 8,000
Tournament Expenses 25,000
Meeting Expenses 18,000
Traveling Expenses 7,000
Purchases of Periodicals
(40,000 - 31,000) 9,000
Postage, Telegrams and 6,000
Telephone's
Rent 15.000
Printing and Stationery 18,000
Surplus (Excess of Income 3,23,000

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over Expenditure)

4,95,000 4,95,000

NOTE: As per the solution, Excess of Income over Expenditure is Rs 3,23,000; however, as per
the book, it is Rs 3,07,000.

Q4 :
Following is the information given in respect of certain items of a Sports Club. Show these
items in the Income and Expenditure Account and the Balance Sheet of the Club:
Particulars Rs
Sports Fund as on 1.4.2005 35,000
Sports Fund Investments 35,000
Interest on Sports Fund 4,000
Donations for Sports Fund 15,000
Sports Prizes awarded 10,000
Expenses on Sports Events 4,000
General Fund 80,000
General Fund Investments 80,000
Interest on General Fund Investments 8,000

Answer :

Books of Sports Club

Income and Expenditure Account
Dr. Cr.
Amount Amount
Expenditure Income
Rs Rs
Interest on General Fund 8,000
Investments

Balance Sheet
Liabilities Amount Assets Amount

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Rs Rs
Sports Fund 35,000 Sports Fund Investments 35,000
Add: Interest on Sports
Fund 4,000 General Fund Investments 80,000
Add: Donations for
Sports Fund 15,000
54,000
Less: Expenses on Sports
Event (4,000)
Less: Prize Awarded (10,000) 40,000
General Fund 80,000

Q5 :
How will you deal with the following items while preparing for the Bombay Women
Cricket Club its income and expenditure account for the year ending 31.3.2007 and its
Balance Sheet as on 31.3.2007:
Rs
(a) Donation received during the year for the construction of a permanent 12,25,000
Pavilion
Expenditure incurred up to 31.3.2007 on its construction 10,80,000
The total estimated expenditure on construction of Pavilion being 25,00,000

(b) Tournament Fund:

Balance as on 1.4.2006 10,700
Subscriptions for tournament received during the year 65,800
Expenditure incurred during the year on conducting tournaments 72,400

(c) Life Membership fee received during the year 28,000

Give reasons for your answers

Answer :

(a)
Books of Bombay Women Cricket Club
Balance Sheet

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as on March 31, 2007

Amount Amount
Liabilities Assets
Rs Rs
Construction of Pavilion
Donation for Pavilion 12,25,000 in Progress 10,80,000
Less: Exp. On (10,80,000) 1,45,000
construction of
Pavilion

Capital
Add: Pavilion
Construction 10,80,000 10,80,000

Reason
Donation for construction of Pavilion is a donation for specific purpose.
Expenses on construction on Pavilion is a capital expenditure.
(b)
Balance Sheet
as on March 31, 2007
Amount Amount
Liabilities Assets
Rs Rs
Tournament Fund 10,700
Add: Subscription for 65,800
Tournament

76,500
Less: Tournament Expenses (72,400) 4,100

Reason
All funds received are treated as capital receipts and expenses related to any fund are deduced
from the concerned funds.
(c)
Balance Sheet
as on March 31, 2007
Amount Amount
Liabilities Rs Assets Rs

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Life Membership Fees 28,000

Reason
Life Membership Fees are considered as capital receipts and are shown on the Liabilities side of
the Balance Sheet, if nothing is specified about its treatment. But if it is to be treated as revenue
item, then it is shown on the credit side of the Income and Expenditure Account.

Q6 :
From the following receipts and payments and information given below, Prepare Income
and Expenditure Account and opening Balance Sheet of Adult Literacy Organisation as on
December 31, 2006.
Receipt and Payment Account for the year ending
as on December 31, 2006
Amount Amount
Receipts Payments
Rs Rs
Balance b/d General Expenses 3,200
Cash in hand 4,000 News paper 1,850
Cash at Bank 15,550 Electricity 3,000
Subscriptions Fixed deposit with bank 18,000
2005 1,200 (on 31.06.2006) @ 10%
p.a.
2006 26,500 Books 7,000
2007 500 28,200 Salary 3,600
Sale of old newspapers 1,250 Rent 6,500
Govt. grant 12,000 Postage charges 300
Sale of old furniture (book 3,700 Furniture (purchased) 10,500
value Rs5000)
Interest received on FD 450 Balance c/d
Cash in Hand 3,000
Cash at Bank 8,200
65,150 65,150

Information:
(i) Subscription outstanding as on 31.12.2005 Rs 2,000 and on December 31, 2006 Rs
1,500.

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(ii) On December 31, 2006 Salary outstanding Rs 600, and one month Rent paid in
advance.
(iii) On Jan. 01, 2005 organisation owned Furniture Rs 12,000, Books Rs 5,000.

Answer :

Books of Adult Literacy Organisation

Income and Expenditure Account
as on Dec. 31, 2006
Dr.
Amount
Expenditure Income
Rs

Loss on Sale of Old Furniture 1,300 Subscription 2

General Expenses 3,200 Add: Outstanding for 2006
Newspapers 1,850
Electricity 3,000 Sale of Old Newspapers
Salary 3,600 Government Grant
Add: Outstanding for 2006 600 4,200 Interest received on F.D.
Add: Accrued Interest
Rent 6,500
Less: Prepaid for 2007 {6,500 x (1/13)} (500) 6,000
Postages Charges 300
Surplus (Excess of Income over Expenditure) 22,300

42,150

Balance Sheet
as on Dec. 31, 2005
Amount
Liabilities Assets
Rs
Capital Fund on Dec. 31, 2005 (Balancing Figure) 38,550 Subscription Outstanding
Cash in Hand
Cash at Bank
Furniture

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Books
38,550

Balance Sheet
as on Dec. 31, 2006
Amount
Liabilities Assets
Rs
Capital 38,550 Prepaid Rent
Add: Surplus 22,300 60,850 Books
Add: Purchases
Salary Outstanding 600
Subscription Received in Advance for 2007 500 Furniture 1

Add: Purchases 1
2
Less: Sale (5

Fixed Deposit 1
Add: Accrued Interest

Cash in Hand
Cash at Bank
Subscription Outstanding for 2006
Add: Outstanding for 2005

61,950

Q7 :
The following is the account of cash transactions of the Nari Kalayan Samittee for the year
ended December 31, 2006:
Amount Amount
Receipts Payments
Rs Rs
Balance from last year 2,270 Rent 6,600

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Subscriptions 32,500 Electric charges 3,200

Life membership fee 3,250 Lecturer's fee 730
Donation 2,500 Office expenses 1,480
Profit from entertainment 7,250 Printing and Stationery 1,050
Sale of old Books (books value 750 Legal fee 1,870
Rs1,000)
Interest 350 Books 6,500
Furniture purchased 8,600
Expenses on Nukar Drama 1,300
Cash in Hand 8,040
Cash at Bank 9,500

48,870 48,870

You are required to prepare an Income and Expenditure Account after the following
adjustments:
(a) Subscription still to be received are Rs 750, but subscription include Rs 500 for the year
2007.
(b) In the beginning of the year the Sangh owned building Rs 20,000 and furniture Rs
3,000 and Books Rs 2,000.
(c) Provide depreciation on furniture @ 5% (including purchase), books @ 10% and
building @ 5%.

Answer :

Books of Nari Kalyan Samittee

Income and Expenditure Account
as on Dec. 31, 2006
Dr.
Amount Am
Expenditure Income
Rs
Rent 6,600 Subscription 32,500
Electric Charges 3,200 Add: Outstanding for 2006 750
Lecturer's fee 730 33,250
Office Expenses 1,480 Less: Advance for 2007 (500) 3
Printing and Stationery 1,050 Donation

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Legal Fee 1,870 Profit from Entertainment

Depreciation on: Interest
Books 750
Furniture 580
Building 1,000 2,330
Expenses on Nukar Drama 1,300
Loss on Sale of Books 250
Surplus 24,040

42,850 4

Balance Sheet
as on Dec. 31, 2005
Amount Am
Liabilities Assets
Rs
Capital Fund as Dec. 31, 2005 27,270 Building 2
(Balancing Figure) Furniture
Books
Cash and Bank

27,270 2

Balance Sheet
as on Dec. 31, 2006
Amount Am
Liabilities Assets
Rs
Capital Fund 27,270 Building 20,000
Add: Life Membership Fees 3,250 Less: 5% Depreciation (1,000) 1
Add: Surplus 24,040 54,560
Furniture 3,000
Advance Subscription for 2007 500 Add: Purchases 8,600

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11,600
Less: 5% Depreciation 580 1

Books 2,000
Add: Purchases 6,500
8,500
Less: Sales 1,000
7,500
Less: 5% Depreciation 750

Q8 :
Following is the Receipt and Payment Account of Indian Sports Club, prepared Income
and Expenditure Account, Balance Sheet as on December 31, 2006:
Receipt and Payment Account
for the year ending December 31, 2006
Amount Amount
Receipts Payments
Rs Rs
Balance b/d 7,890 Salary 11,000
Subscriptions 52,000 Electric charges 5,500
Life member ship fee 2,200 Billiard Table 17,500
Entrance fee 3,200 Office expenses 4,100
Tournament fund 26,000 Printing and Stationery 2,300
Locker Rent 1,250 Tournament expenses 18,500
Sale of old sports goods (Costing 2,500 Repair of ground 2,000
Rs 2,200)
Sale of Old Newspaper 750 Furniture purchased 7,700
Legacy 37,500 Sports equipments 12,000
Cash in Hand 12,690
Cash at Bank 10,000
Fixed Deposit (on 1.10.06 30,000
for 10% p.a)

1,33,290 1,33,290

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Other Information:
Subscription outstanding was on December 31, 2005 Rs 1,200 and Rs 3,200 on December
31, 2006. Locker rent outstanding on December 31, 2006 Rs 250. Salary outstanding on
December 31, 2006 Rs 1,000.
On January 1, 2006, club has Building Rs 36,000, furniture Rs 12,000, Sports equipments
Rs 17,500. Depreciation charged on these items @ 10% (including Purchase).

Answer :

Indian Sports Club

Income and Expenditure Account
as on Dec. 31, 2006
Dr.
Amount Am
Expenditure Income
Rs
Salary 11,000 Subscriptions 52,000
Add: Outstanding for 2006 1,000 12,000 Add: Outstanding for 2006 3,200
Electric Charges 5,500 55,200
Office Expenses 4,100 Less: Outstanding for 2005 (1,200) 5
Printing and Stationery 2,300
Repair of Ground 2,000 Locker Rent 1,250
Depreciation on: Add: Outstanding for 2006 250
Furniture 1,970
Building 3,600 Entrance Fees
Sports Equipments 2,730 8,300 Profit on Sale of Sports
Surplus 26,300 Equipments (Rs 2,500 - Rs 2,200)
Sale of Old Newspapers
Accrued Interest
60,500 6

Balance Sheet
as on January 01, 2006
Amount Am
Liabilities Assets
Rs

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Capital Fund (Balancing Figure) 74,590 Subscription Outstanding

Building 3
Furniture 1
Sports Equipments 1
Cash and Bank
74,590 7

Balance Sheet
as on Dec. 31, 2006
Amount Am
Liabilities Assets
Rs
Salary Outstanding 1,000 Subscripting Outstanding
Tournament Fund 26,000 Locker Rent Outstanding
Less: Tournament Expenses 18,500 7,500 Building 36,000
Less: 10% Depreciation (3,600) 3
Capital fund 74,590
Add: Life Membership Fee 2,200 Furniture 12,000
Add: Legacy 37,500 Add: Purchases 7,700
Add: Surplus 26,300 1,40,590 19,700
Less: 10% Depreciation (1,970) 1

Sports Equipments 17,500

Add: Purchases 12,000
29,500
Less: Sales (2,200)
27,300
Less: 10% Depreciation (2,730) 2

Billiard Table 1

Q9 :

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From the following Receipt and Payment Account of Jan Kalyan Club, prepare Income
and Expenditure Account and Balance Sheet for the year ending December 31, 2006.
Receipt and Payment Account
for the year ending December 31, 2006
Receipts Amount Payments Am
Rs
Cash in hand as on 1.1.06 6,800 Salaries 2
Subscription 60,200 Traveling Expenses
Donation 3,000 Stationery
Sale of furniture (Book value Rs 6000) 4,000 Rent 1
Entrance fee 800 Repair
Life membership fee 7,000 Books purchased
Interest on investment (@ 5% for full year) 5,000 Building purchased 3
Cash in Hand as 31.12.2006

86,800 8

Additional Information:
As on As on
1.01.2006 31.12.200
(i) Subscription received in advance 1,000 3,2
(ii) Outstanding subscription 2,000 3,7
(iii) Stock of stationery 1,200 8
(iv) Books 13,500 16,5
(v) Furniture 16,000 8,0
(vi) Outstanding rent 1,000 2,0

Answer :

Books of Jan Kalyan Club

Income and Expenditure Account
as on 31 Dec. 2006
Dr.
Expenditure Amount Income Am

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Rs R
Loss on Sale of Furniture (Rs 6,000 - Rs 4,000) 2,000 Subscription 60,200
Salaries 24,000 Less: Outstanding for 2005 (2,000)
Traveling Expenses 6,000 58,200
Stationery 2,300 Add: Outstanding for 2006 3,700
Add: Opening Stock 1,200 61,900
3,500 Add: Advance in 2005 1,000
Less: Closing Stock (800) 2,700 62,900
Less: Advance in 2006 (3,200) 59
Repairs 700
Rent 16,000 Donation 3
Less: Outstanding for 2005 (1,000) Entrance Fees
15,000 Interest on Investments 5
Add: Outstanding for 2006 2,000 17,000
Depreciation on Books 3,000
Depreciation on Furniture 2,000
Surplus 11,100

68,500 68

Balance Sheet
as on January 01, 2006
Amount Am
Liabilities Assets
Rs
Advance Subscription 1,000 Cash in Hand
Outstanding Rent 1,000 Investment {5,000 x (100/5)} 1,0
Capital Fund (Balancing figure) 1,37,500 Subscription Outstanding
Stock of Stationery
Books 1
Furniture 1
1,39,500 1,3

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Balance Sheet
as on Dec. 31, 2006
Amount Am
Liabilities Assets
Rs R
Advance Subscription 3,200 Subscription Outstanding
Outstanding Rent 2,000 Stock of Stationery
Capital Fund 1,37,500 Investments 1,0
Add: Life Membership Fees 7,000
Add: Surplus 11,100 1,55,600 Books 13,500
Add: Purchases 6,000
19,500
Less: Depreciation (3,000) 1

Building 3
Cash in Hand
Furniture

Q10 :
Receipt and Payment Account of Shankar Sports club is given below, for the year ended
December 31, 2006
Receipt and Payment Account
for the year ending December 31, 2006
Amount Am
Receipts Payments
Rs
Opening Cash in hand 2,600 Rent 1
Entrance fees 3,200 Wages
Donation for building 23,000 Billiard table 1
Locker rent 1,200 Furniture 1
Life membership fee 7,000 Interest
Profit from entertainment 3,000 Postage
Subscription 40,000 Salary 2
Cash in hand 4,000
80,000 8

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Prepare Income and Expenditure Account and Balance Sheet with help of following
Information:
Subscription outstanding on 31st December 2005 is Rs 1, 200 and Rs 2,300 on 31.12.2006,
opening stock of postage stamps is Rs 300 and closing stock is Rs 200, Rent Rs 1,500 related
to 2005 and Rs 1,500 is still unpaid.
On January 1, 2006 the club owned furniture Rs 15,000, Furniture valued at Rs 22,500
On 31.12.2006. The club took a loan of Rs 20,000 (@ 10% p.a.) in 2005.

Answer :

Books of Shankar Sports Club

Income and Expenditure Account
as on 31 Dec. 2006
Dr.
Amount Am
Expenditure Income
Rs R
Rent 18,000 Entrance Fees
Add: Outstanding for 2006 1,500 Locker Rent
19,500 Profit from Entertainment
Less: Outstanding for 2005 (1,500) 18,000
Subscription 40,000
Wages 7,000 Less: Outstanding for 2005 (1,200)
Depreciation on Furniture 2,500 38,800
Interest 2,000 Add: Outstanding for 2006 2,300 4
Postage 1,000 Deficit (Balancing Figure)
Add: Opening Stock 300
1,300
Less: Closing Stock (200) 1,100
Salaries 24,000

54,600 5

Balance Sheet
as on December 31, 2005

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Amount Am
Liabilities Assets
Rs R
Rent Outstanding 1,500 Cash in Hand
10% Loan 20,000 Subscription Outstanding
Furniture 1
Stock of Postage Stamps
Capital fund Deficit (Balancing figure)

21,500 2

Balance Sheet
as on December 31, 2006
Amount Am
Expenditure Income
Rs R
Rent Outstanding 1,500 Subscription Outstanding
10% Loan 20,000 Stock of Postage Stamps
Donation for Building 23,000 Billiard Table 1
Capital Fund (2,400) Furniture 15,000
Add: Life Membership Fee 7,000 Add: Purchases 10,000
Less: Deficit (6,100) 25,000
Less: Depreciation (2,500) 2
Cash in Hand
** Capital Fund (Deficit)
44,500 4

NOTE 1: As per the solution, Deficit is Rs 6,100 and the total of the Balance Sheet as on Dec.
31, 2006 is Rs 44,500. However, as per the book, Deficit is Rs 8,100 and the total of the Balance
Sheet as on Dec. 31, 2006 is Rs 53,500.
** NOTE 2:
Capital Fund (2,400)
Add:Life Membership Fees 7,000
Less:Deficit (6,100)

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Net Deficit (1,500)

Q11 :
Prepare Income and Expenditure Account and Balance Sheet for the year ended December
31, 2006 from the following Receipt and Payment Account and Balance Sheet of culture
club:
Receipt and Payment Account
for the year ending December 31, 2006
Amount Am
Receipts Payments
Rs R
Opening cash balance 12,000 Furniture
Subscription Telephone expenses
2005 2,000 Salary
2006 22,000 24,000 2005
Entrance fees 2,800 2006
Locker rent 1,000 Newspapers
Life membership fee 1,200 Sundry expenses
Government grant 11,000 Defence bonds 1
Land 2
Closing cash balance
52,000 5

Balance Sheet
for the year ending December 31, 2005
Amount Am
Liabilities Assets
Rs R
Advance locker rent 200 Cash in hand 1
Subscription Received in Advance 1,000 Outstanding Expenses
Outstanding salary 2,000 Building 3
Loan 10,000
Capital fund 36,800
50,000 5

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Answer :

Books of Culture Club

Income and Expenditure Account
as on December 31, 2006
Dr.
Amount Am
Expenditure Income
Rs R
Telephone Expenses 800 Subscription 22,000
Add: Advance Received in
Salary 4,000 2005 1,000 2
Newspapers 700
Sundry Expenses 1,000 Entrance Fees
Locker Rent 1,000
Surplus (Balancing figure) 31,500 Add: Advance Received in 2005 200
Government Grants 1

38,000 3

Balance Sheet
as on December 31, 2006
Amount Am
Liabilities Assets
Rs R
Capital Fund 36,800 Subscription Still Outstanding for 2005
Add: Life Membership Fees 1,200 (Rs 3,000 - Rs 2,000)
Add: Surplus 31,500 69,500 Furniture
Defence Bonds 1
Salary Still Outstanding for 2005 1,000 Land 2
Loan 10,000 Building 3
Cash in Hand
80,500 8

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Q12 :
From the following Receipt and Payment Account prepare final accounts of a Unity Club
for the year ended March 31, 2007.
Receipt and Payment Accounts
for the year ending March 31, 2007
Amount Am
Receipts Payments
Rs R
Balance b/d 15,000 Furniture 1
Sale of Old furniture (costing Rs 6,000) 4,000 Library books 1
Subscriptions: Salaries 7
2005-06 18,000 General expenses 1
2006-07 60,000 Electric charges 1
2007-08 2,000 90,000 Newspapers 3
Sale of old newspapers 10,800 Postage
Profit from entertainment 44,000 Stationery 4
Rent 84,000 Audit fee
Balance c/d 3
2,47,800 2,4

Balance Sheet
as on March 31, 2006
Amount Am
Liabilities Assets
Rs R
Outstanding Salary 6,000 Cash 1
Capital Fund 6,94,000 Outstanding subscription 1
Library Books 3
Furniture 3
Land and Building 6,0
7,00,000 7,0

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Additional Information:
1. The Club had 500 members each paying an annual subscription of Rs 150.
2. On 31.3.2007 salaries outstanding amounted to Rs 1,200 and salaries paid included Rs 6,000 for the year 200
06.
3. Provide 5% depreciation on Land and Building.

Answer :

Books of Unity Club

Income and Expenditure Account
as on March 31, 2007
Dr.
Amount Am
Expenditure Income
Rs R
Loss on Sale of Old Furniture (4,000 - 6,000) 2,000 Subscription
500 members at Rs 150 each 7
Salaries 72,000 Sale of Old Newspapers 1
Add: Outstanding for 2006-07 1,200 Profit from Entertainment 4
73,200 Rent 8
Less: Outstanding for 2005-06 (6,000) 67,200
General Expenses 18,000 Deficit (Balancing figure)
Electric Charges 12,000
Newspapers 33,800
Postage 3,000
Stationery 40,000
Audit Fees 8,000
Depreciation on Land and Building 30,000
2,14,000 2,1

Balance Sheet
as on 31 March 2007
Amount Am
Liabilities Assets
Rs R
Advance Subscription (for 2007-08) 12,000 Subscription Outstanding 1

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Salaries Outstanding 1,200 Furniture 37,000

Capital Fund 6,94,000 Add: Purchases 18,000
Less: Deficit (200) 6,93,800 55,000
Less: Sales (6,000) 4

Library Books 30,000

Add: Purchases 10,000 4

Land and Building 6,00,000

Less: 5% Depreciation (30,000) 5,7

Cash and Bank 3

7,07,000 7,0

Note: As per the solution, Deficit is Rs 200 and the total of the Balance Sheet as on March 31,
2007 is Rs 7,07,000. However, the Surplus given in the book is Rs 14,000 and the total of the
Balance Sheet as on March 31, 2007 is Rs 7,27,000

Q13 :
Following is the information in respect of certain items of a Sports Club. You are required
to show them in the Income and Expenditure Account and the Balance Sheet.
Amount
Details
Rs
Sports Fund as on April 1, 2005 80,000
Sports Fund Investments 80,000
Interest on Sports Fund Investments 8,000
Donations for Sports Fund 30,000
Sports Prizes awarded 16,000
Expenses on Sports Events 7,000
General Fund 2,00,000
General Fund Investments 2,00,000
Interest on General Fund Investments 20,000

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Answer :

Income and Expenditure Account

as on December 31, 2006
Dr.
Amount Am
Expenditure Income
Rs R
Interest on General Fund Investments 20

Balance Sheet
as on March 31, 2006
Amount Am
Liabilities Assets
Rs R
Sports Fund 80,000 Sports Fund Investments 8
Add: Interest on Sports Fund General Fund Investments 2,0
Investments 8,000
Add: Donation for Sports Fund 30,000
1,18,000
Less: Sports Prizes Awarded (16,000)
Less: Expenses on Sports Events (7,000) 95,000

General Fund 2,00,000

Q14 :
Receipt and Payment Account of Maitrey Sports Club showed that Rs 68,500 were received by way of subscriptions for the
year ended on March 31, 2006.

The additional information was as under:

1. Subscription Outstanding as on March 31, 2005 were Rs 6,500,

2. Subscription received in advance as on March 31, 2005 were Rs 4,100,

3. Subscription Outstanding as on March 31, 2006 were Rs 5,400,

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4. Subscription received in advance as on March 31, 2006 were Rs 2,500.

Show how that above information would appear in the final accounts for the year ended on March 31, 2006 of Maitrey
Sports Club.

Answer :

Books of Maitrey Sports Club

Income and Expenditure Account
as on March 31, 2006
Dr.
Amount Am
Expenditure Income
Rs R
Subscription 68,500
Less: O/s on Mar. 31, 2005 (6,500)
62,000
Add: Advance on Mar. 31, 2005 4,100
Add: O/s on Mar. 31, 2006 5,400
71,500
Less: Advance on Mar. 31, 2006 (2,500) 6

Balance Sheet
as on March 31, 2005
Amount Am
Liabilities Assets
Rs R
Subscription in Advance 4,100 Subscription Outstanding

Balance Sheet
as on March 31, 2006
Amount Am
Liabilities Assets
Rs R
Subscription in Advance 2,500 Subscription Outstanding

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Q15 :
Following is the Receipt and Payment account of Rohatgi Trust :
Receipt and Payment Account
for the year ending December 31, 2006
Amount Am
Receipts Payments
Rs R
Cash in hand 14,000 Rent
Cash at Bank 60,000 Salary 1
Subscriptions: Postage
2005 5,000 Electricity charges
2006 83,000 Purchase of furniture 2
2007 3,000 91,000 Books
Sale of Investment 90,000 Defence Bonds 1,5
Interest on investment 2,000 Help to needy students 2
Sale of old furniture (book value Rs 3,000) 3,200 Cash in hand 1
Cash at bank 3
2,60,200 2,6

Prepare Income and expenditure account for the year ended December 31, 2006, and a
balance sheet as on that date after the following adjustments: Subscription for 2006, still
owing were Rs 7,000. Interest due on defence
bonds was Rs7,000, Rent still owing was Rs 1,000. The Book value of investment sold was
Rs 80,000, Rs 30,000 of the investment were still in hand. Subscription received in 2006
included Rs 400 from a life member. The total furniture on January 1, 2006 was worth Rs
12,000. Salary paid for the year 2007 is Rs 2,000.

Answer :

Books of Rohatgi Trust

Income and Expenditure Account
as on December 31, 2006
Dr.
Amount Am
Expenditure Income
Rs R

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Rent 6,000 Subscription 83,000

Add: Outstanding 1,000 7,000 Add: Outstanding for 2006 7,000

90,000
Salary 12,000 Less: Life Membership Fees (400) 8
Less: Advance for 2007 (2,000) 10,000
Interest Accrued on Defence Bonds
Profit on Sale of Investment
Postage 300 (Rs 90,000 - Rs 80,000) 1
Profit on Sale of Furniture
Electricity Charges 6,000 (Rs 3,200 - Rs 3,000)
Help to Needy Students 22,000 Interest on Investments
Surplus (Balancing Figure) 63,500
1,08,800 1,0

Balance Sheet
as on December 31, 2005
Amount Am
Liabilities Assets
Rs R
Capital fund (Balancing Figure) 2,01,000 Subscription Outstanding
Investment (Rs 80,000 + Rs 30,000) 1,1
Furniture 1
Cash in hand 1
Cash at bank 6
2,01,000 2,0

Balance Sheet
as on December 31, 2006
Amount Am
Expenditure Income
Rs R
Advance Subscription 3,000 Subscription Outstanding
Rent Outstanding 1,000 Defence Bonds 1,50,000

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Add: Accrued Interest

Capital Fund 2,01,000 on Defence Bonds 7,000 1,5
Add: Surplus 63,500
Add: Life Membership Fees 400 2,64,900 Investment 3
Advance Salaries
Furniture 12,000
Add: Purchases 20,000
32,000
Less: Sales (3,000) 2
Books
Cash in Hand 1
Cash at Bank 3
2,68,900 2,6

NOTE: As per the solution, Surplus is Rs 63,500; however, as per the book, the Surplus is Rs
59,900.

Q16 :
Following Receipt and Payment Account was prepared from the cash book of Delhi
Charitable Trust for the year ending December 31, 2007
Receipt and Payment Account
for the year ending December 31, 2007
Amount Am
Receipts Payments
Rs R
Balance b/d Charity 1
Cash in Hand 11,500 Rent and taxes
Cash at Bank 12,600 Salary
Donation 9,000 Printing
Subscription 42,800 Postage
Legacies 18,000 Advertisements
Interest on investment 4,500 Insurances
Sale of old newspapers 200 Furniture 2
Investment 2

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Balance c/d:
Cash in Hand
Cash at Bank 1
98,600 9

Prepare Income and expenditure account for the year ended December 31, 2006, and a
balance sheet as on that date after the following adjustments:
(a) It was decided to treat one-third of the amount received on account of donation as
income.
(b) Insurance premium was paid in advance for three months.
(c) Interest on investment Rs1,100 accrued was not received.
(d) Rent Rs600: salary Rs900 and advertisement expenses Rs1,000 outstanding as on
December 31, 2007.

Answer :

Books of Delhi Charitable Trust

Income and Expenditure Account
as on December 31, 2007
Dr.
Amount Am
Expenditure Income
Rs R
Insurance 2,000 Donation {9,000 x (1/3)}
Less: Prepaid {2,000 x (3/15)} (400) 1,600 Interest on Investments 4,500
Add: Accrued Interest 1,100
Charity 11,500
Rent and Taxes 3,200 Subscription 4
Add: Outstanding 600 3,800 Sale of Old Newspapers

Salary 6,000
Add: Outstanding 900 6,900
Printing 600
Postage 300
Advertisements 4,500

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Add: Outstanding 1,000 5,500

Surplus (Balancing figure) 21,400
51,600 5

Balance Sheet
as on December 31, 2007
Amount Am
Liabilities Assets
Rs R
Capital Fund (Balancing figure) 24,100 Cash in Hand 1
Cash at Bank 1
24,100 2

Balance Sheet
as on December 31, 2007
Amount Am
Liabilities Rs Assets R
Capital Fund 24,100 Prepaid Insurance {2,000 x (3/15)}
Add: Donation {9,000 x (2/3) 6,000 Investment 23,000
Add: Legacies 18,000 Add: Accrued Interest 1,100 2
Add: Surplus 21,400 69,500 Furniture 2
Rent Outstanding 600 Cash in Hand
Salary Outstanding 900 Cash at Bank 1
Advertisement Expenses Outstanding 1,000
72,000 7

Note:
i. per the solution, Surplus and the total of the Closing Balance Sheet are Rs 21,400 and Rs 72,000 respectiv
however as per the answer given in the book is Rs 21,500 and Rs 72,100. Thus, in order to match the answ
that of the book, Rent paid of Rs 2,000 is assumed for 12 months instead of 15 months.
ii. question asks us to prepare Income and Expenditure Account for the year ended December 31, 2006; how
solution has been prepared according to the date of Receipt and Payment Account which is December 31

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Q17 :
From the following Receipt and Payment Account of a club, prepare Income and
Expenditure Account for the year ended December 31, 2006 and the Balance Sheet as on
that date.
Receipt and Payment Account
for the year ending December 31, 2006
Amount Am
Receipts Payments
Rs R
Balance b/d 3,500 General expenses
Subscription: Salary 1
2005 1,800 Postage
2006 70,000 Electricity charges
2007 3,000 75,000 Furniture 2
Sale of old Books 2,000 Books 1
(Costing Rs 3,200) Newspapers
Rent from use of hall 17,000 Meeting expenses
Sale of newspapers 400 T.V. set 1
Profit from entertainment 7,300 Balance c/d 1

1,05,200 1,0

Additional Information:
(a) The club has 100 members each paying an annual subscription of Rs900. Subscriptions outstanding on Dece
31, 2005 were Rs 3,600.
(b) On December 31, 2006 , salary outstanding amounted to Rs 1,000, Salary paid included Rs 1,000 for the yea
2005.
(c) On January 1, 2006 the club owned land and building Rs 25,000, furniture Rs 2,600 and books Rs 6,200.

Answer :

Income and Expenditure Account

as on December 31, 2006
Dr.
Expenditure Amount Income Am

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Rs
General Expenses 900 Subscription 70,000
Salary 16,000 Add: Outstanding for 2006 20,000 9
Add: Outstanding for 2006 1,000 (100 members at Rs 900 each)
17,000 Rent from use of hall 1
Less: Outstanding for 2005 (1,000) 16,000 Sale of Old News Papers
Profit from Entertainment
Loss on Sale of Old Books 1,200
Electricity Charges 7,800
Newspapers 600
Meeting Expenses 7,200
Postage 1,300
Surplus (Balancing figure) 79,700
1,14,700 1,1

Balance Sheet as on December 31, 2005

Amount Am
Liabilities Rs Assets R
Salary Outstanding 1,000 Subscription Outstanding
Capital Fund (Balancing figure) 40,100 Furniture
Books
Cash and Bank
Building 2
41,100 4

Balance Sheet
as on December 31, 2006
Amount Am
Liabilities Assets
Rs R
Advance Subscription 3,000 Subscription Outstanding

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Salary Outstanding 1,000 2006 20,000

Add: 2005 (Still Outstanding) 1,800 2
Capital Fund 40,100 Building 2
Add: Surplus 79,700 1,19,800 Furniture 2,600
Add: Purchases 26,500 2

Books 6,200
Add: Purchases 13,000
19,200
Less: Sales 3,200
T.V. Set
Cash and Bank

1,23,800 1,2

NOTE: In order to match the answer with that of given in the book, Subscription Outstanding on
December 31, 2005 has been taken as Rs 3,800 instead of Rs 3,600.

Q18 :
Following is the Receipt and Payment Account of Women's Welfare Club for the year
ended December 31, 2007:
Receipt and Payment Account
for the year ending December 31, 2007
Amount Am
Receipts Payments
Rs R
Balance b/d 7,250 Salary 1
Subscriptions 81,750 Stationery
Donations 3,000 Electricity charges
Grant from Government 15,000 Insurance
Sale of newspapers 300 Equipments 3
Proceeds of charity show 16,500 Petty expenses
Interest on investments @ 10% for full year 7,000 Expenses on charity show 1
Sundries income 400 Newspapers
Lectures fee 1
Honorarium to Secretary 1

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Balance c/d 2
1,31,200 1,3

Additional Information:
01.01.2007 31.12.200
Rs Rs
Outstanding salaries 1,200 1,80
Insurance prepaid 700 30
Subscription outstanding 3,750 2,50
Subscription received in advanced 1,750 1,00
Electricity charges outstanding - 1,25
Stock of stationery 2,250 70
Equipments 25,600 50,20
Building 1,20,000 1,14,00
Prepare Income and Expenditure Account for the year ended December 31, 2007 and
Balance Sheet as on that date.

Answer :

Books of Women Welfare Club

Income and Expenditure Account
as on December 31, 2007
Dr.
Amount Am
Expenditure Income
Rs R
Salary 12,500 Subscriptions 81,750
Add: O/s on Dec. 31, 2007 1,800 Add: O/s on Dec. 31, 2007 2,500
14,300 84,250
Less: O/s on Dec. 31, 2006 (1,200) 13,100 Less: O/s on Dec. 31, 2006 (3,750)
80,500
Stationery 1,700 Add: Advance on Dec. 31, 2006 1,750
Add: Opening Stock 2,250 82,250
3,950 Less: Advance on Dec.31, 2007 (1,000) 8
Less: Closing Stock (700) 3,250
Donations

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Electric Charges 9,550 Grant from Government 1

Add: O/s on Dec. 31, 2007 1,250 10,800 Sale of Newspapers
Profit from Charity show (16,500-12,900)
Insurance 7,500 Interest on Investments
Add: Prepaid in 2006 700 Sundries Income
8,200
Less: Prepaid in 2007 (300) 7,900
Depreciation on Equipments 5,400
Petty Expenses 500
Newspapers 1,000
Lectures Fee 16,500
Honorarium to Secretary 12,000
Depreciation on Building 6,000
Surplus (Balancing Figure) 34,100

1,10,550 1,1

Balance Sheet
as on December 31, 2006
Amount Am
Liabilities Assets
Rs R
Outstanding Salaries 1,200 Insurance Prepaid
Subscription in Advance 1,750 Subscription Outstanding
Stock of Stationery
Capital Fund (Balancing Figure) 2,26,600 Equipments 2
Building 1,2
Cash and Bank
Investments {7,000 x (100/10)} 7

2,29,550 2,2

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Balance Sheet
as on December 31, 2007
Amount Am
Liabilities Assets
Rs R

Outstanding Salaries 1,800 Equipments 25,600

Subscription in Advance 1,000 Add: Purchases 30,000

Electricity Charges Outstanding 1,250 55,600

Capital Fund 2,26,600

Q19 :
As at March 31,2008 the following balances have been extrated from the books of the
Indian Chartered Accountants Recreation Club and you are asked to prepare (1) Trading
Account for ascertaining gross profit derived from running restaurant and dining room
and (2) Income and Expenditure Account for the year ended March 31, 2008 (3) and a
Balance Sheet as at that date.
Debit Balances Rs Credit Balances R
Stock-in-hand 1170 Receipts Dining Room 87
Purchases 24,660 Subscriptions 9
Dining Room 32,370 Billiard's Receipts 7
Rent 10,470 Sunday Receipts
Wages 18,690 Interest on Fixed Deposit
Repairs and Renewals 5,400 Sundry Creditors
Fuel and Light 5,280 Grant from Institute (permanent) 42
Misc. Expenses 4,050 Income and Exp. A/c (1.4.07) 1
Cash in hand 560 Suspense A/c (See note)
Cash at bank 2,760
Fixed Deposit 8,500
Sundry Debtors 2,250
China glass, cutlery and linen 600
Billiard Table 2,070
Fixtures and Fittings 870
Furniture 4,140
Club Premises 30,000
1,53,840 1,53

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On March 31,2008 stock of restaurant consisted of Rs 900 and Rs 60 respectively. Provide

depreciations Rs 60 on fixtures and fittings, Rs 390 on billiard table and Rs 560 on
furniture.

Answer :

Important Note:
1. Credit side of the Trial Balance of the question is short by Rs 60. Thus, in order to tally
both sides of the Trial Balance, Suspense Account will be opened with the difference
amount of Rs 60.
2. In the adjustment, Closing Stock should be Rs 960 instead of Rs 900.
Books of Indian Chartered Accountants Recreation Club
Restaurant Trading Account
Dr.
Amount Am
Particulars Particulars
Rs R
Opening Stock 1,170 Receipts from Dining Room 8
Purchases 24,660 Closing Stock
Dining Room Exp. 32,370
Profit from Restaurant 30,420
88,620 8

Income and Expenditure Account

as on March 31, 2008
Dr.
Amount Am
Expenditure Income
Rs R
Rent 10,470 Subscriptions
Wages 18,690 Sundry Receipts
Repairs an Renewals 5,400 Interest on Fixed Deposits
Fuel and Light 5,280 Profit from Restaurant 3
Misc. Expenses 4,050 Billiards Receipts
Depreciation on
Fixtures and Fittings 60
Billiards Table 390

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Furniture 560 1,010

Surplus (Excess of Income over Expenditure) 2,950

47,850 4

Balance Sheet
as on March 31, 2008
Amount Am
Liabilities Assets
Rs
Sundry Creditors 5,310 Cash in Hand
Grant from Institute 42,000 Cash at Bank
Suspense 60 Fixed Deposit
Capital Fund (Income and Exp. A/c
as on Apr.01, 2007) 1,380 Sundry Debtors
Add: Surplus 2,950 4,330 China Glass, Cutlery and Linen
Billiards Table 2,070
Less: Depreciation (390)

Fixture and Fittings 870

Less: Depreciation (60)

Furniture 4,140
Less: Depreciation (560)

Club Premises 3
Stock of Restaurant
51,700 5

<< Previous Chapter 3 : Accounts from Incomplete RecordsNext Chapter 5 : Applications of Computers in Accounting >>
Long answers : Solutions of Questions on Page Number : 474

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Q1 :
Explain the statement: “Receipt and Payment Account is a summarised version of Cash Book”.

Answer :

Receipts and Payments Account is a summary of the Cash Book. This account is prepared by those organisations which maintain
their books on cash basis. All cash receipts are recorded on the Receipts side (i.e. Debit side) and all cash payments are recorded
on the Payments side (i.e. Credit side) of Receipts and Payments Account. It is prepared on the basis of cash and bank transactions
recorded in the Cash Book. It begins with the opening balance of cash and bank and ends with the closing balances of cash and
bank (balancing figure) at the end of the accounting period. It records all the cash and bank transactions both of capital and revenue
nature. It not only records the cash and bank transactions relating to the current accounting period, but also cash and bank receipts
(or payments) received during the current accounting period that may be related to the previous or next accounting period. This
account only helps us to ascertain the closing balance of the cash and bank and helps in assessing the cash position of an NPO. It
also forms the basis for the preparation of Income and Expenditure Account.

Similarities between Receipt and Payments Account and Cash Book

The following are the features of Receipt and Payment Account that are common to those of Cash Book:

1. Nature: It is a summarised version of the Cash Book. Similar to the Cash Book, the Receipt and Payment Account is also a Real
Account.

2. Nature of Transactions: It records only cash and bank transactions similar to a Two-Column Cash Book. Transactions other
than cash and bank like depreciation, loss/ profit on sale of assets, etc. are not recorded in this account.

3. No distinction between Capital and Revenue items: It records all the cash and bank receipts and payments of both capital and
revenue nature. Likewise, the transactions recorded in the Cash Book are also of both capital and revenue nature.

4. Opening and closing balance: It begins with the opening balance of cash and bank and ends with the closing balance of the
cash and bank (balancing figure) at the end of the accounting period.

5. Purpose: It reveals the cash position of an organisation. It helps to ascertain the total amount paid and received during an
accounting period. Similarly, a Cash Book also helps us to assess the cash position of an organisation.

Thus, on the basis of the above mentioned points and similarities, the statement 'Receipt and Payment Account is a summarised
version of Cash Book' is justified.

Q2 :
“Income and Expenditure Account of a Not-for-Profit Organisation is akin to Profit and Loss Account of a business
concern”. Explain the statement.

Answer :

Income and Expenditure Account (I&E) is similar to Profit and Loss Account (P&L), in the sense that the former is prepared by Not-
for-profit-Organisations and the latter is prepared by profit earning organisations. Both the accounts are prepared on the accrual
basis.

Similar to the P&L, all the expenses and losses pertaining to the current accounting period are recorded on the debit side
(Expenditure side) and all the gains and income of the current accounting period are recorded on the credit side (Income side) of the
I&E. The balancing figure of the I&E is surplus or deficit and that of the P&L is net profit or net loss. Both the accounts record only
revenue items which are related to the current accounting period.

Similarities between Income and Expenditure Account and Profit and Loss Account

I&E Account of an NPO is akin to the Profit and Loss Account of a profit earning business in the following manners.

1. Nature of Account: Both the concerned accounts are nominal in nature.

2. Basis of Recording: Both the accounts record only revenue expenses and revenue income related to the current accounting
period. The items of capital nature are not ignored while preparing these accounts.

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3. Period: Transactions related to current year are recorded in Income and Expenditure account in the same manner in which profit
and loss account is prepared. Transactions related to previous year or next year are excluded.

4. Adjustments: The treatment of adjustments like, outstanding expenses, prepaid expenses, income received in advance, income
due but not received, depreciation, bad debts etc. is same as that in Profit and Loss Account. Thus, both the accounts are prepared
on the accrual basis.

Q3 :
Distinguish between Receipts and Payments Account and Income and Expenditure Account.

Answer :

Basis of Difference Receipts and Payments Account Income and Expend

1. Nature It is a summary of cash and bank transactions It is a summary of current year
2. Revenue and Capital It records transactions related to both revenue and It records transactions related t
capital nature.
3. Debit Side Debit side of this account records cash and bank Debit side of this account recor
receipts during an accounting period. incurred in the current accounti
4. Credit side Credit side of this account records payments in cash Credit side of this account reco
and through cheques. earned in the current accountin
5. Type of account It is a Real Account It is a Nominal Account
6. Period It records receipts and payments made during the It only records income and exp
year that may be related to the current accounting the current accounting period.
period or the preceding period and the succeeding
accounting period.
7. Object This account depicts the cash position of an NPO. This account shows the net resu
or deficits due to the business a
year.
8. Opening Balance This account begins with the opening balance of Usually, it has no opening bala
cash in hand and cash at bank or overdraft. surplus or deficits forwarded fr
period (if not added to the Capi
as the opening balance of this a
9. Closing balance The balancing figure of this account is expressed in The balancing figure is express
terms of the closing balance of cash in hand and surplus (if incomes > expenses
cash at bank or overdraft. > incomes).
10. Depreciation It does not include non-cash items like It includes non-cash items like
depreciation, appreciation, etc. debts, provisions, etc. in order
net profit or net loss.
11. Adjustment Receipts and Payments during the year can be Adjustments regarding both ca
adjusted before preparation of the financial transactions can be made.
statements.

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12. Transfer of Balance The opening balance of this account is brought If the closing balance of this ac
forward from the last year's Receipts and Payments is added to the Capital Fund in
Account and the closing balance of this account is the closing balance is deficit th
carried forward to the subsequent year's Receipts the Capital Fund in the Balance
and Payments Account and is shown in the Balance
Sheet of the current accounting period.
13. System It is prepared on cash basis. It is prepared on accrual basis.

Q4 :
Explain the basic features of Income and Expenditure Account and of Receipt and Payment Account.

Answer :

Income and Expenditure Account (I&E) Account is a Nominal Account and is prepared on the accrual basis. It records all
transactions of revenue nature that are related to the current accounting period (whether outstanding or prepaid) for which the books
are maintained. All expenses and losses are recorded on the debit side (Expenditure side) and all income and gains are recorded
on the credit side (Income side) of I&E Account. The closing balance or the balancing figure of I&E Account is termed as surplus (or
deficit), if the sum total of the Income side exceeds (is lesser than) the sum total of the Expenditure side.

The following are the basic features of Income and Expenditure Account

1. Nature: It is a Nominal Account. The debit side of I&E records all expenses and losses and the credit side records all incomes
and gains related to the current accounting period.

2. Basis: It is prepared on the basis of Receipt and Payment Account (R&P). All the revenues items whether incomes or
expenditures are transferred from R&P.

3. Excludes Capital Transactions: The transactions those are capital in nature are excluded from this account. For example, only
profit or loss on sale of fixed assets is recorded but the total amount of sales is not recorded since sale of fixed asset is considered
as a capital receipt.

4. Akin to Profit and Loss Account: Income and Expenditure Account (I&E) is similar to the Profit and Loss Account in the sense
that while the former is prepared to ascertain surplus or deficit during an accounting period the latter is prepared to ascertain net
profit or net loss incurred during an accounting period.

5. Records only Current Year's items: This account records only those transactions that are related to current accounting year. In
other words, transactions related to the preceding or succeeding accounting period are excluded even if these transactions are
realised in the current period.

6. Adjustments: Various cash and non-cash items like, outstanding expenses, prepaid expenses, income received in advance,
income due but not received, depreciation, bad debts, etc. can be adjusted in this account.

7. Balancing Figure: The balancing figure of this account is expressed in terms of either surplus (if incomes > expenses) or deficit
(if expenses > incomes). The surplus balance, if any, is added to the Capital Fund, whereas, the deficit balance, if any, is deducted
from the Capital Fund.

Receipts and Payments Account is a summary of the Cash Book. All the cash receipts are recorded on the Receipts side (i.e. Debit
side) and all the cash payments are recorded on the Payments side (i.e. Credit side) of Receipts and Payments Account. It is
prepared on the basis of cash and bank transactions recorded in the Cash Book. It begins with the opening balance of cash and
bank and ends with the closing balances of cash and bank (balancing figure) at the end of the accounting period. It records all the
cash and bank transactions both of capital and revenue nature. It not only records the cash and bank transactions relating to the
current accounting period but also cash and bank receipts (or payments) received during the current accounting period that may be
related to the previous or next accounting period.

The following are the features of Receipt and Payment Account.

1. Nature: It is a Real Account. It is a summarised version of the Cash Book.

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2. Nature of Transactions: It records only cash and bank transactions. Transactions other than cash and bank like depreciation,
loss/ profit on sale of assets, etc. are not recorded in this account.

3. No distinction between Capital and Revenue items: It records all cash and bank receipts and payments of both capital and
revenue nature.

4. Opening and closing balance: It begins with the opening balance of cash and bank and ends with the closing balance of the
cash and bank (balancing figure) at the end of the accounting period.

5. Purpose: It reveals the cash position of an organisation. It helps to ascertain the total amount paid and received during an
accounting period.

Q5 :
Show the treatment of the following items by a Not-for-Profit Organisation:
(i) Annual subscription
(ii) Specific donation
(iii) Sale of fixed assets
(iv) Sale of old periodicals
(v) Sale of sports materials
(vi) Life membership fee

Answer :

i) Annual Subscription
a) Subscriptions received during an accounting year (whether related to the current year or
previous and subsequent year) are shown on the debit side of the Receipts and Payments
Account.
b) Subscription amount related to the current accounting year only, whether received or yet to
be received are shown on the credit side of the Income and Expenditure Account.
c) Subscriptions received in advance for the subsequent year are shown on the Liabilities side
of the Balance Sheet.
d) Subscriptions due but not received are shown in the Assets side of the Balance Sheet.
ii) Specific donation
a) The amount received for specific donation is shown on the debit side of the Receipts and
Payments Accounts.
b) The amount received for specific donation is shown on the Liabilities side of the Balance
Sheet as it is used for the specific purpose for which it is received.
iii) Sale of fixed assets
a) The amount received from the sale of fixed assets are recorded on the debit side of the
Receipts and Payments Account.
b) Profit (or loss) on the sale of fixed assets is credited (or debited) to the Income and
Expenditure Account.

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c) The book-value of the fixed assets sold is deducted from its respective assets on the Assets
side of the Balance Sheet.
iv) Sale of old periodicals
a) The amount received from the sale of old periodicals are shown on the debit side of the
Receipts and Payments Account.
b) As the sale of old periodicals by any organisation is considered as revenue receipts, so it is
shown on the credit side of the Income and Expenditure Account.
v) Sale of sport Materials
a) The amount received from the sale of sport materials are debited to the Receipt and
Payments Account.
b) As the sale of sport materials by any sport club is considered as revenue income, so it is
shown on the credit side of the Income and Expenditure Account.
vi) Life Membership Fees
a) The amount paid by a person to become a member of an organisation is called life
membership fees. As this is a receipt for an NPO, so it is debited to the Receipt and Payment
Account.
b) Life Membership fees is not recurring in nature and received once for a whole life from a
member. Thus, as Life Membership Fees are capital receipts, so these are added to the Capital
Fund on the Liabilities side of the Balance Sheet.

Q6 :
Show the treatment of items of Income and Expenditure Account when there is a specific fund for those items.

Answer :

There are various sources of receipts like donations, subscriptions, government grants, etc. to an
NPO. Some receipts are specific while others are general. While the former can only be used for
the specific purpose for which they are received, the latter can be used for any purpose. For
example, if donation is received for construction of buildings, then this donation is a specific
donation and thereby can only be used for construction of the building. The specific receipts are
not considered as revenue income for the NPO and hence are not shown in the Income and
Expenditure Account. In fact, such receipts are considered as liabilities to the NPO as these
amounts are received for specific purpose and cannot be used for any other purpose. Specific
receipts are shown in the Liabilities side of the Balance Sheet, until and unless they are fully set
off against the purpose for which they are received. On the other hand, if these amounts are
invested outside the organisations (in the form of shares, debentures, etc.), then these are called
funds like, match funds, prize fund, etc. The interest and income earned on such investments are
not credited to the Income and Expenditure Account but in fact are credited to the respective
Fund Account. Similarly, the expenses incurred for such funds are not debited to the Income and
Expenditure Account but, in fact, are debited to the respective Fund Account. These special
funds are shown in the Liabilities side of the Balance Sheet. In case, if the related expenses
exceed the related receipts of the fund, then the difference is shown in the income and
Expenditure Account.

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Treatment
(Tournament/Match/Prize, etc.) Fund Account

Dr. Cr.

Date Particulars L.F. Amount Date Particulars L.F. Amount

Expenses Balance b/d

(expenses incurred
like, match
expenses,
tournament
expenses)

Incomes
(income or interest
earned on funds
invested in the form
of donation,
interests, dividends,
etc.)

Balanace c/d (a) Income and (b)

(see explanation) Expenditure A/c (see
explanation)

Explanation (a)
If the receipts exceed the expenses for specific purpose then the difference between the two is
shown in the Liabilities side of the Balance Sheet
Balance Sheet

Specific Fund (i.e. Tournament, Tournament Fund Investment

Match, Prize Fund, etc.)

Explanation (b)
If the expenses exceed the receipts for the specific purpose then the difference between the two is
shown in the Expenditure side of the Income and Expenditure Account.
Income and Expenditure A/c

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Expenditure Amount Income Amount

Expenses
(i.e. Tournament, Match, Prize
Expenses etc. except capital
expenditure like, i.e. expenses
on construction of building)

Q7 :
What is Receipt and Payment Account? How is it different from Income and Expenditure Account?

Answer :

Receipts and Payments Account is a summary of the Cash Book. All the cash receipts are
recorded on the Receipts side (i.e. Debit side) and all the cash payments are recorded on the
Payments side (i.e. Credit side) of Receipts and Payments Account. It is prepared on the basis of
cash and bank transactions recorded in the Cash Book. It begins with the opening balance of cash
and bank and ends with the closing balances of cash and bank (balancing figure) at the end of the
accounting period. It records all cash and bank transactions both of capital and revenue nature. It
not only records cash and bank transactions relating to the current accounting period, but also
cash and bank receipts (or payments) received during the current accounting period that may be
related to the previous or next accounting period.
Distinguish between Receipts and Payments Account and Income and Expenditure
Account
Basis of Receipts and Payments Income and Expenditure
Difference Account Account
1. Nature It is a summary of cash and It is a summary of current year
bank transactions income and expenses
2. Revenue and It records transactions related It records transactions related to
Capital to both revenue and capital revenue nature only.
nature.
3. Debit Side Debit side of this account Debit side of this account records
records cash and bank receipts expenses and losses incurred in
during an accounting period. the current accounting period.
4. Credit side Credit side of this account Credit side of this account
records payments in cash and records income and gains earned
through cheques. in the current accounting period.
5. Type of account It is a Real Account It is a Nominal Account
6. Period It records receipts and It only records income and

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payments made during the expenditure made during the

year that may be related to the current accounting period.
current accounting period or
the preceding period and the
succeeding accounting period.
7. Object This account depicts the cash This account shows the net result
position of an NPO. in terms of surplus or deficits due
to the business activities during
the year.
8. Opening This account begins with the Usually, it has no opening
Balance opening balance of cash in balance, but sometimes surplus
hand and cash at bank or or deficits forwarded from the
overdraft. last accounting period (if not
added to the Capital Fund) can be
shown as the opening balance of
this account.
9. Closing balance The balancing figure of this The balancing figure is expressed
account is expressed in terms in terms of either surplus (if
of the closing balance of cash incomes > expenses) or deficit (if
in hand and cash at bank or expenses > incomes).
overdraft.
10. Depreciation It does not include non-cash It includes non-cash items like
items like depreciation, depreciation, bad-debts,
appreciation, etc. provisions, etc. in order to
ascertain the actual net profit or
net loss.
11. Adjustment Receipts and Payments during Adjustments regarding both cash
the year can be adjusted and non-cash transactions can be
before preparation of the made.
financial statements.
12. Transfer of The opening balance of this If the closing balance of this
Balance account is brought forward account is surplus then it is added
from the last year's Receipts to the Capital Fund in the
and Payments Account and Balance Sheet. If the closing
the closing balance of this balance is deficit then it is
account is carried forward to deducted from the Capital Fund
the subsequent year's Receipts in the Balance Sheet.
and Payments Account and is
shown in the Balance Sheet of
the current accounting period.
13. System It is prepared on the cash It is prepared on the accrual
basis. basis.

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