Non Profit Organizations

Non Profit Organizations Question Answer Question Answer Question Answer What is Non-Profit Entities & What are its Characteristics? A non profit Organization is a legal and accounting entity that is operated for the benefit of the society as a whole, rather that for the benefit of a sole proprietor or a group of partners or shareholders. Their main objectives are to provide service to the members or beneficiaries. The main idea is to spend the funds of the organization in such a fashion that provides maximum benefit to the members. Characteristics of Non Profit Organization: (1) Entity: The entity concept can well be applied to non-profit organization because these organizations have no owners. (2) Service: Non-profit organization render services to members of the public the members may range from a limited number of citizens of a community to almost the entire population of a city, state or nation. (3) Form: Their main objective may be social, educational, religious or charitable and they take the form of clubs, societies or charitable bodies and so on. Many government activities fall into this category such as hospitals, schools, colleges, and the like. (4) No profit motivation: Non-profit organizations do not operate with the objective of earning a profit. Their main objectives are to provide service to the members or beneficiaries. The surplus of these organizations is not distributed among its members. (5) Financing: Many a time, these organizations are to depend on the donations given by members or outsiders, because revenue received from the members may not cover all their operating costs. (6) Funds: It is quit possible that a substantial portion of the resources of a non-profit organization are donated, the organization must account for the resources and to the spend the funds of the organization in such a fashion that provides maximum benefit to the members. (7) Budget: It is very important for a non-profit organization to prepare an annual budget. Among the characteristics of non-profit organizations that resemble those of business enterprises are the following: (1) Governance by elected members: A non-profit organization is governed by elected members in the same way a business corporation is governed by a board of directors. (2) Recognition of revenue and measurement of cost expirations: Allocation of costs including depreciation and recognition of revenue to the appropriate accounting period is a common characteristic of non-profit entities and business enterprises. (3) Use of accrual basis of accounting: A non-profit organization employs the same accrual basis of accounting used by the business enterprise. What are Accounting Procedures of? Non-profit organizations must prepare regularly annual accounts reflecting the financial affairs of the organization for submitting to the members and government departments for financial grants and the like these organization prepare, at the year end, the following three keys statements: 1. Receipts & Payments Account. 2. Income & Expenditure Account. 3. Balance Sheet. Receipts and payments account highlights total Income and expenditure. The features of an receipts & payments account are as following: 1. It is the summary of the cash & bank transactions like cash book, all the receipts (capital or revenue) are debited, similarly, all the premiums (capital or revenue) are credited. 2. It starts with opening cash & bank balances (though sometimes they are merged) & also ends with their closing balances. 3. This account is usually not a part of the doubt entry system. It is a duplicate of cash book in concise form. 4. It includes all cash & bank receipts and payments, whether they are related to current, past or future period. 5. Surplus or deficit for an accounting period can not be ascertained from this account, since, it shows only the cash position & excludes all non cash items. 6. It starts with the opening balance of cash in hand and cash at bank. 7. It is debited with all sums received. 8. It is credited with all sums paid out. 9. It records all receipts and payments whether they are of revenue nature or capital nature 10. It records all receipts and payments whether they relate to the previous, current or following

Question Answer Question Answer Question Answer Question Answer accounting year. 11. It does not record non-cash items (e.g. depreciation) 12. It ends with closing balance of Cash in hand and Cash at bank. Only revenue items are disclosed in Income and Expenditure account. The Features of an Income & Expenditure Account are the following: 1. It is a revenue account prepared at the end of the financial period for finding out the surplus or deficit of that period. 2. It is prepared by matching expenses against the revenue of the period concerned. 3. Both cash and non cash items, such as depreciation, are taken into consideration. 4. All capital expenditures and incomes are excluded. 5. Only current year s income and expenses are considered. 6. It is debited with the expenses and losses. 7. It is credited with the incomes. 8. It records only those incomes, expenses and losses which are of revenue nature. 9. It records only those incomes, expenses and losses which relates to current accounting year. 10. It records non-cash items also (e.g. depreciation) 11. Its balance at the end which represents either, the net surplus (if credit side exceeds debit side) or net deficit (if debit side exceeds Credit side) is transferred to the Credit Fund in the Balance Sheet. Give meaning of Capital fund in? It is nothing but the capital of non-profit organizations. It represents the surplus of assets over liabilities of the organization. It may be made up in part by special donation or by capitalizing admission fees etc. This fund is in increased (or decreased) by any surplus (or deficit) on the income and expenditure account. It is also called General Fund or Accumulated fund. What is Meant by Life-Membership Fees. Fees received for life membership is a capital receipt, as it is of non-recurring nature. It is directly added to capital fund or general fund. Sometimes, Life membership fees is amortized over a period of time. In that case, a separate life membership fund is created. Them, an amount either equal to the normal annual subscription or calculated either on the basis of age and average life of members or based on some king of amortization schedule given. Explain the accounting treatment of donation received for specific purpose in the case of charitable society. Donations received for specific purposes are capitalized and recorded on liabilities side of the balance sheet. These include donation for building, donation for extension of library hall, donation for library books, donation for seminar room, donation for sports activities etc. When the donation is utilized for the purpose, the amount of donation is transferred to capital fund. When the purpose for which donation is to be utilized is not mentioned, it is called general donation and treated as income. However, if the amount of general donation is very large, it can be treated as capital receipt. Thus, general donations of relatively small amount, are credited to income and expenditure account and general donation of relatively large amount and specific donations are recorded on liabilities side of the balance sheet. On completion of the purpose for which specific donation fund should be transferred to capital/ general fund. Question Write treatment of the following. Answer 1. Honorarium: Payment to non-employees for services received is called honorarium. It is a revenue item and debited to income and expenditure account. 2. Legacy: Amount received by non-profit organization as per Will of a deceased person is called legacy. As this item is of non-recurring nature, it is treated as capital receipt and recorded on liabilities side of the balance sheet. However, if the amount is small, it can be credited to income and expenditure account. 3. Endowment Fund: It refers to a fund from a bequest or gift, the fund contains assets donated by the donor, with stipulation, that income earned by these assets but not the gift itself can be used for principal activities of the organization. Hence, the gift is a restricted fund from the point of view of organization. Sometimes, income may also be restrictions must properly be reflected in the financial statements. The fund is treated as capital receipt and recorded on the liability side. Question What is Fund Based Accounting under non-profit organizations? Answer Non-business organizations, particularly educational institutions, sometimes, maintain separate account, fund for any specific activity of the organization such as sports, prizes, refreshments etc. and in that case, presentation of information in financial statements is made fund-wise. In such cases, contributions and donations for, income from and expenses on those activities are not recorded in income and expenditure account but are directly adjusted in specific fund account. For example, match fund balance

of, income from matches and match expenses 1 are shown on liabilities side of balance sheet as follows: Match fund Add: Income from Matches 1 Less: Match Expenses 1 However, if after adjustment of incomes and expenses related to a specific fund, fund balance is negative, it is transferred to debit side of income and expenditure account or adjusted as per instructions given in the problem. A fund may also be created for construction/ purchase of an asset such as building, library books, sports equipment etc. For example adjusted in building fund, created for construction of a building are all receipts and expenditure related to construction of a building. On completion of the building, it is recognized as an asset in balance sheet and portion of the building fund utilized for construction of the building is transferred to capital/general fund. Question Write treatment of the following. Answer 1. Subscription: Subscription received from members is treated as revenue income. In Income and Expenditure Account subscription for current year will be shown. If total subscription received during the year is given, adjustment will be made for following items to fund out correct figure for Income and Expenditure account. Outstanding subscription in the beginning of the year. Advance subscription in beginning of the year. Outstanding subscription at the end of the year. Advance subscription at the end of the year. 2. Consumable Items: If institution consumes certain items such as medicines by hospital, or sports goods by clubs, relevant figures for Receipt and Payment Account and Income and Expenditure account and expenditure Account will be calculated. The value of goods consume is shown in Income and Expenditure account and amount paid to creditors is shown in Receipt and payment account. Value of stock and balance of creditors account are in the balance sheet. Question Answer Question Answer Explain Receipts and Expenditure Account Professional Firms. Professional firms generally do not follow accrual bases and prepare receipts and expenditure account to calculate its profit/loss based on hybrid system of accounting. It recognizes income from completed works when it is received. In order to recognize its income from completed works on receipt basis. It ascertains income from completed works and in completed works as usual on accrual basis and then creates a Reserve for Outstanding Fees and Reserve for Incomplete works to recognize the outstanding fees and work-in-progress recognized earlier. Thus, income is recognized only when- It is earned: The work is complete, and It is received in cash However, income received in advance is treated as usual and so are the expenses incurred. The reserve for outstanding fees and incomplete works at the end of the year is shown in the closing balance sheet, as a deduction from the outstanding fees and cost of incomplete works on the asset side. Alternatively, it may be shown on the liability side of the balance sheet. The closing reserve of the current year becomes the opening reserve of the next year and is shown as income of the next year. The reserve for outstanding fees and incomplete works may be recorded in the income and expenditure account separately or may be adjusted in fees for the year to be shown in the income and expenditure account. Alternatively, professional firm can prepare a Receipt and Expenditure Account in addition to the usual income and expenditure account. The surplus or deficit is transferred from the income and expenditure account to the receipts & expenditure account. The account is credited with the opening balance of the reserve for outstanding fees and incomplete works & debited with the closing balance of the reserve for outstanding fees & incomplete works. The net surplus or deficit is transferred to the capital fund account in the closing balance sheet. The following entry is passed for creating reserve in the receipts & expenditure account: Receipts & Expenditure A/c Dr. To Reserve for Outstanding Fees A/c To Reserve for Incomplete works A/c Give Distinction between Receipt and Payment Account and Income and Expenditure Account. The receipts & expenditure account of a professional firm differs from the income & expenditure account of a non-businesses organization in the following respect: Receipt and Payment Account Income and Expenditure Account This is summary of cash book. This is similar to P & L A/c.

This account shows both opening and closing balance of cash and bank balance. In this account all receipts and payments during the year are shown. In this account both revenue and capital items are shown. Adjustments are not shown in this account. In this account receipts are shown in the debit side and payments in credit side. This is an independent statement. Only cash transactions are recorded in this account. Any reserve or provision is not credited in this account. Closing balance of this account becomes opening balance of cash and bank next year. It is based on accrual system of accounting. It recognizes income when it is earned irrespective of cash inflow. It is prepared in one part only. There is no opening balance in this account. This account discloses only closing balance, which represents either surplus or deficit. In this account all revenue expenses and expenses and incomes related to current year are shown whether expense has been paid or is outstanding or income is received or accrued. In this account only revenue items are as shown. All adjustments related to current year are shown in this account. In this account expenses are shown in the debit side and income in credit side. Balance sheet is prepared along with this account. Cash and Credit both types of transactions are recorded in this account. All reserve and provisions created during the year are shown in this account, such as provision for bad debts, provision for depreciation etc. Closing balance of this account is added to or deducted from opening capital fund. It is based on hybrid system of accounting. It recognizes income when it is earned and received. It is generally prepared in two parts, adjusting reserves for outstanding fees & incomplete works in the second part. Practical Problems Q.1. The following information were obtained from the books of Delhi Club as on 31.3.1998 at the end of the first year of the Club. You are required to prepare Receipts and payments Account, Income and Expenditure Account for the year ended 31.3.1998 and a Balance Sheet as at 31.3.1998 on mercantile basis: (1) Donations received for Building and Library Room 2,00,000. (2) Other revenue income and actual receipts: Entrance Fees Subscription Locker Rents Sundry Income Refreshment Account Revenue Income 17,000 600 1,600 -- Actual Receipts 17,000 19,000 600 1,060 16,000 (3) Other revenue expenditure and actual payments: Land (cost ) Furniture (cost 1,46,000) Salaries Maintenance of Playgrounds Revenue Expenditure -- -- Actual Payments 1,30,000 4,800

Rent 8,000 8,000 Refreshment Account -- 8,000 Donations to the extent of 2 were utilized for the purchase of Library Books balance was stall unutilized. In order to keep it safe. 9% Govt. Bond of 1,60,000 were purchased on 31.3.1998. Remaining amount was put in the Bank on 31.3.1998 under the term deposit. Depreciation at 10% p.a. was to be provided for the whole year on Furniture and Library Books. Answer: Delhi Club Receipts and Payments Account for the year ended 31 st March, 1998 Receipts Payments To Donations for Buildings and Library Room To Entrance Fees To Subscription To Locker Rents To Sundry Income To Refreshment Account To Balance c/d: Overdraft 2,00,000 17,000 19,000 600 1,060 16,000 1,08,140 By Land By Furniture By Salaries By Maintenance of Playgrounds By Rent By Refreshment Account By Library Books By 9% Govt. Bonds By Bank Term Deposit 1,30,000 4,800 8,000 8,000 2 1,60,000 1 3,61,800 3,61,800 Income and Expenditure Account for the year ended 31 st March, 1998 Expenditure Income To Salaries Add: Outstanding To Maintenance of Playgrounds Add: Outstanding To Rent To Depreciation Furniture Library Books To Surplus: Excess of Income over Expenditure 4,800 14,600 2, 8,000 17,100 By Entrance Fees By Subscription Add: Outstanding By Locker Rents By Sundry Income Add: Outstanding By Refreshment Account (16,000 8,000) 19,000 1,060 540 17,000 600 15,100 47, 47, Note: Students should give note about the treatment of Entrance fee. Balance Sheet as on 31 st March, 1998 Liabilities Assets Capital Fund (Surplus) Building & Library Room Fund Creditors for Furniture Creditors for Expenses: Salaries Outstanding Maintenance of Playgrounds Bank Overdraft 15,100 2,00,000 16,000 Land Furniture Less: Depreciation Library Books Less: Depreciation 9% Govt. Bonds Bank Term Deposit Subscription Receivable Sundry Income Receivable 1,46,000 14,600 2 2, 1,600 8,000 1,31,400 22, 1,60,000 1, 1 1,08,140 540 3,40,440 3,40,440 Q.2. A and B are in partnership practicing Chartered Accountants under the name and style AB & Co. sharing profits/loss in the manner stated below. They close their accounts on 31 st March every year. The following was their Balance Sheet as at 31 st March, 1995: Balance Sheet as at 31 st March, 1995 Liabilities Rs Assets

Partners Capital A B Audit Fees Collected in Advance (A s client) Liability for Salary Provision against Outstanding Audit Fees 6 40,000 1,0 Furniture Office Machinery Library Books Car Outstanding Audit Fees A s Client B s Client Cash at Bank Cash in hand 30,000 1 8,000 60,000 50,000 50,000 1 1,70,000 1,70,000 The following is the summary of their cash/bank transactions for the year ended 31 st March, 1996: Receipts Payments Opening: Bank Balance Cash Balance Audit Fees: 1 2,60,000 3 2 18,000 A s Clients B s Clients Fees for other Services: A s Clients B s Clients Miscellaneous Income 2,80,000 1,80,000 50,000 49,000 4,60,000 90,000 4,000 1 7,000 1 16,000 Salary Charges Car Expenses Travelling Expenses Printing and Stationery Postage Expenses Telephone Subscription for Journals Library Books Fax Machine Membership Fees Drawings: A B Cash at Bank Cash in hand 7 60,000 1,3 48,000 5,7 5,7 The following further information is available: 1. Audit Fees Receivable: A s Clients 30,000 B s Clients 50,000 2. Audit Fees Collected in Advance B s Client 3. Outstanding Liability for Salary on 31 st March, 1996 4. Depreciation to be provided on: Furniture 10% Office Machinery 20% Library Books 10% Car 20% 5. It has been agreed that 80% of audit fees and 40% of fees for other services should be transferred to income and expenditure account in respect of each partners account, the balance being credited directly to the capital accounts. Profit/Losses to be divided between A and B in the ratio of 2:1 respectively. You are required to prepare Income and Expenditure Account for the year ended 31 st March, 1996 and a Balance Sheet as at 31 st March, 1996. Answer AB & Co. Chartered Accountants Income and Expenditure Account for the year ended 31 st March, 1996 Expenditure Income To Salary Charges (2,60,000 + ) To Car Expenses To Travelling Expenses 2,7 3 2 By Audit Fees By Fees from other Services By Miscellaneous Income 3,60,000 36,000 4,000

To Printing & Stationery To Postage Expenses To Telephone To Subscription for Journals To Membership Fees To Depreciation: Furniture Office Machinery 6, Library Books Car 1 To Profit: A s Share 1, B s Share 600 18,000 1 7,000 22, 1,800 4,00,000 4,00,000 Balance Sheet as on 31 st March, 1996 Liabilities Assets Partner s Capital: A 82, B 36,600 Audit Fee collected in Advance (B s Client) Liability for Salary provision against outstanding Audit Fees (80,000 + ) Working Notes: 1. Audit Fees: Collections Add: Outstanding on 31.3.96 Add: Received last year Less: Outstanding on 31.3.95 Less: Received in Advance 31.3.96 Add: Provision (opening bal.) Less: Provision (closing bal.) 80% of it transferred to Income & Expenditure A/c 20% of it taken to Capital A/c 2. Fees for other Services: Collections Furniture Less: Depreciation 18,800 Office Machinery 1 Add: Addition 16,000 3 1,00,000 Less: Depreciation 6, 24,800 Library Books 8,000 Add: Additions 1 Less: Depreciation 18,000 Car 60,000 Less: Depreciation 1 48,000 Outstanding Audit Fees: A s Client 30,000 B s Client 50,000 80,000 Cash at Bank Cash in hand 48,000 2,38,800 2,38,800 A () 2,80,000 30,000 3, 30,000 2,90,000 -- 2,90,000 30,000 3, 30,000 2,90,000 2,3 58,000 2,90,000 A () 50,000 B () 1,80,000 50,000 -- 2,30,000 2, 1,90,000 2, 50,000 1,60,000 1,28,000 3 1,60,000 B () 40,000

Less: 40% of it transferred to Income & Expenditure A/c 60% of it taken to Capital A/c 30,000 16,000 24,000 3.. Capital Accounts Particulars A (Rs) B (Rs) Particulars A (Rs) B (Rs) To Drawings To Balance c/d 7 82, 60,000 36,600 By Balance b/d By Audit Fee (20%) By Fee for other Services (60%) By Share of Profit 6 58,000 30,000 1, 40,000 3 24,000 660 1,54, 96,600 1,54, 96,600 Q.3. Dr. Magazine is a practicing orthopedic surgeon. The Receipts and Payments Account for the year ending 31 March 1999 is as follows: Balance b/d Fees Miscellaneous receipts Sale of old equipments (Cost of 1) 1,50,000 2, Salaries Rent Journal etc. Books for Library Purchase of instruments Stationery Conveyance Purchase of medicines Furniture Drawings Cash in hand 1 8,000 1, 2 2, 7 18, 1,72, 1,72, His position Stood on 1.4.1998 as: Equipment 7; Medicines Fee outstanding Books ; Depreciate equipment by 10% and books by 20%. Fees still outstanding ; Salaries to Compounds still payable : Stock of medicines Required: Receipts and Expenditure Account. Answer: Receipts and Expenditure Account 1 For the year ending 31 March, 1999 Expenditure Receipts Salaries Add: Outstanding Rent Journals etc. Conveyance Stationery Loss on the sale of equipment Medicines used Depreciation on: Equipment Books Reserve for outstanding fees Surplus 1 8,000 3,600 17,000 1, 3 11,600 77, Fees received Add: Outstanding Miscellaneous receipts 1,50,000 1,5 2, 1,57, 1,57, Balance Sheet as on 1 st April 1998 Liabilities Assets Reserve for outstanding fees Capital (Balancing figure) 1,0 Cash in hand Equipment Medicines Fees outstanding 7

Books 1,07,000 1,07,000 Balance Sheet as on 31 st March, 1999 Liabilities Assets Capital Add: Surplus Less: Drawings Reserve for fees outstanding Salaries outstanding 1,0 77, 1,82, 7 1,07, Cash in hand Equipment Add: Purchase Less: Sale Less: Depreciation Books Add: Purchases 7 95, 1 80,000 8,000 8,000 18,000 3,600 18, 7 Less: Depreciation 14,400 Medicines Fees outstanding Furniture 2, 1,14, 1,14, Q.4. From the following Receipts and Payments Accounts of Excellent Recreation Club for the year ended 31.3.1996 and additional information given, prepare an Income and Expenditure Account for the year ended 31.3.1996 and Balance Sheet as on 31.3.1996: Receipts Payments Opening Balance: Cash in hand and at Bank Subscription Sale of Old Newspapers Legacies Interest on Investments Endowment Fund Receipts Proceeds of Sport and Concerts Advertisement in the Year Book 3,180 18,000 2, 4,000 4,020 Secretary s Salary Salaries to Staff Charities Printing and Stationery Postage Expenses Rates and Taxes Upkeep of the Land Purchase of Sports Materials Telephone Expenses Closing Balance: Cash in hand and at Bank 1 2 600 120 1, 3,480 58,700 Total 58,700 Assets and Liabilities as on 31.3.1995 and 31.3.1996 were as follows: 31.3.1995 31.3.1996 Subscription in arrears Subscription received in advance 400 Furniture 1,800 Land Depreciation shall be charged at 10% p.a. under the diminishing value method. Legacies received shall be capitalized. Investments were made in Securities, the rate of interest being 12% p.a. the date of investment was 1.6.1994 and the amount of investments was. Due date of interest 31 st March every year. Stock of sport materials on 31.3.1996 were useless and value at Nil price. Answer: Income and Expenditure Account For the year ended 31 st March, 1996 Expenditure Income To Salary to Secretary To Salaries to Staff 1 2 By Subscription By Sale of Old Newspapers 17,100 2,

To Charities To Printing & Stationery To Postage Expenses To Rates and Taxes To Upkeep of Land To Sports Material Written Off To Telephone Expenses To Depreciation on Furniture 600 120 1, 3,480 By Interest on Securities Add. Amount due 400 By Proceeds of Sport and Concert By Advertisement in year book By Deficit: Excess of Expenditure over Income 2,400 24,880 35,900 55,900 Balance Sheet of Excellent Recreation Club as on 31 st March, 1991 Liabilities Assets Capital Fund: Opening Balance Less: Excess of Expenditure over Income Add: Legacies Endowment Fund Subscription Received in Advance Land 36,680 Furniture Less: Depreciation 1,800 24,880 11,800 Sports Materials Less: Written off 4,000 15,800 400 Investments in Securities Subscriptions Receivable Interest due Cash in hand and at Bank 400 36, 36, Working Notes: (1) Balance Sheet as on 31 st March, 1995 Liabilities Assets Capital Fund (balancing figure) Subscription Received in Advance 36,680 Land Furniture Arrears of subscription Investments in Securities Cash in hand and at Bank 3,180 37,180 37,180 (2) Subscription pertaining to the period ended 31 st March, 1996 Subscription received during the year 18,000 Add: Outstanding Subscription on 31.3.96 19,000 Add: Received in advance as on 31.3.95 19, Less: Outstanding Subscription as on 31.3.95 17, Less: Received in advance as on 31.3.96 400 17,100 Question 5: - Following is the Receipt and Payment Account of Himalaya Homeopathic Aushdhalaya as on 30 th June, 6. Receipts Payments Balance Subscription Fees from Non members Municipal Grant Donation for Building Fund Interest 6,030 3,345 810 4,680 114 Salary of Nurses Boarding, Lodging and Washing Exp. Rent, Rates & Taxes Car Expenses Car Purchased Drugs & Incidental Expenses 1,968 1,140 600 2,520 6,000 2,010

Balance c/d 3,741 17,979 17,979 received for building fund was added to subscription by mistake. There was an outstanding bill for 384. From the above particulars, prepare Income and Expenditure Account of Aushdhalaya for the year ended 30.6.6. Question 6: - From the following Receipts and Payments Account of Excellent Recreation Club for the year ended 31.3.6 and additional information given, prepare an Income and Expenditure Account for the year ended 31. 3. 6 and Balance Sheet as on 31. 3. 6: - Receipts Payments Opening Balance: Cash in hand and at Bank Subscription Sale of Old Newspapers Legacies Interest on Investments Endowment Fund Receipts Proceeds of Sport and Concerts Advertisement in the Year Book 3,180 18,000 2, 4,000 4,020 Secretary s Salary Salaries to Staff Charities Printing and Stationery Postage Expenses Rates and Taxes Upkeep of the Land Purchase of Sports Materials Telephone Expenses Closing Balance: Cash in hand and at Bank 1 2 600 120 1, 3,480 58,700 58,700 Assets and Liabilities as on 31.3.5 and 31.3.6 were as follows: 31.3.5 31.3.6 Subscription in arrears Subscription received in advance 400 Furniture 1,800 Land Depreciation shall be charged at 10% p.a. under the diminishing value method. Legacies received shall be capitalized. Investments were made in Securities, the rate of interest being 12% p.a., the date of investment was 1.6.4 and the amount of investments was. Due date of interest 31 st March every year. Stock of sports materials on 31.3.6 were useless and valued at NIL price. Question 7: - Mahaveer Sports Club gives the following Receipts & Payments Account for the year ended March 31, 3: Receipts and Payments Account Receipts Payments To Opening Cash & Bank Balance 5, By Salaries 1 To Subscription 34,800 By Rent & Taxes 5,400 To Donations By Electricity Charges 600 To Interest on Investments 1, By Sports Goods To Sundry Receipts By Library Books By Newspapers & Periodicals 1,080 By Misc. Expenses 5,400 Bank Balances 51, 51, Liabilities As on 31.3.2 As on 31.3.3 Outstanding Expenses: Salaries Newspapers & Periodicals 400

Rent & Taxes 600 600 Electricity Charges 800 Assets As on 31.3.2 As on 31.3.3 Library Books Sports Goods 8,000 Furniture and Fixtures Subscriptions Receivable 1 Investment Govt. Securities 50,000 Accrued Interest 600 600 Provide Depreciation on: Furniture & Fixtures @ 10% p.a. Sports Goods @ 20% p.a. Library Books @ 10% p.a. You are required to prepare Club s opening Balance Sheet as on 01.04.2, Income and Expenditure Account for the year ended on 31.3.3 and the Balance Sheet as on that date. Question 8: - The following is the Receipts and Payments Account of Star Club for the year ended 31 st March, 2: Receipts: To Cash in hand (1-4 -1) 1 To Subscriptions: 0-01 1-02 1,6 2-03 1, 1,66, To Income from entertainments 2,900 To Entrance fees 6,700 To Interest on securities 4,800 To Sale proceeds of old chairs (book value Nil) 1, 1,97,100 Payments: By Bank overdraft (1.4.1) 3 By Investment in securities 30,000 By Furniture purchased on 1.4.1 14, By Salaries 6 By Stationery and printing 8,900 By Miscellaneous expenses 14, By Balances on 31.3.2: - Cash in hand 5, - Cash at bank 3 1,97,100 Prepare Income and Expenditure Account of the Star Club for the year ended 31 st March, 2 and a balance sheet as at that date having due regard to the following additional information: (i) The Club has 1,800 members, each paying an annual subscription of 100. Subscriptions amounting to 900 are in arrears in respect of the year 0-01. (ii) Stock of stationery on 31 st March, 1 was 1,250 and on 31 st March, 2 was 870. (iii) Entrance fees are to be capitalized. (iv) Salary of 5, for March, 2 is outstanding. Miscellaneous expenses outstanding on 31 st March, 1 amounted to 1,320. The Star Club paid 5, in the year 0-01 towards telephone charges of which 1,250 relate to the year 1-02. (v) As on 31 st March, 1, premises stodd in the books at 2,4, furniture at and Investments at 6. Depreciate premises and furniture @ 5% per annum.

Question 9: - The Accountant of Diana Club furnishes you the following Receipts and Payments account for the year ending 30 th September, 3: Receipts Amount Payments Amount Opening Balance: Honoraria to Secretary 9,600 Cash and Bank 16,760 Misc. Expenses 3,060 Subscriptions 21,420 Rates and taxes 2,520 Sale of old newspapers 4,800 Groundman s wages 1,680 Entertainment fees 8,540 Printing and Stationery 940 Bank Interest 460 Telephone expenses 4,780 Bar Receipts 14,900 Payment for Bar purchases 11,540 Repairs 640 New Car (Less sale proceeds Of old car 6,000) 25, Closing Balance: Cash and Bank 6,920 66,880 66,880 Additional Informations: 01.10.1 30.09.3 (i) Subscription due (not received) 2,400 1,960 (ii) Cheques issued, but not presented for Payment of printing 180 60 (iii) Club premises at cost 58,000 --- (iv) Depreciation on club premises provided so far 37,600 --- (v) Car at cost 24,380 --- (vi) Depreciation on car 20,580 --- (vii) Value of Bar stock 1,420 1,740 (viii) Amount unpaid for bar purchases 1,180 860 (ix) Depreciation is to be provided @ 5% p.a. on the written down value of the club premises and @ 15% p.a. on car for the whole year. You are required to prepare an Income and Expenditure account of Diana Club for the year ending 30 th September, 3 and Balance Sheet as on that date. Question 10: - The following Informations were obtained from the books of Delhi Club as on 31.3.3, at the end of the first year of the Club. You are required to prepare Receipts and Payments Account, Income and Expenditure Account for the year ended 31.3.3 and a Balance Sheet as at 31.3.3 on mercantile basis: (i) Donations received for Building and Library Room 2,00,000. (ii) Other revenue income and actual receipts: Revenue Income Actual Receipts Entrance Fees 17,000 17,000 Subscription 19,000 Locker Rents 600 600 Sundry Income 1,600 1,060 Refreshment Account ------ 16,000 (iii) Other revenue expenditure and actual payments: Revenue Expenditure Actual Payments Land (cost ) ----

Furniture (cost 1,46,000) ---- 1,30,000 Salaries 4,800 Maintenance of Playgrounds Rent 8,000 8,000 Refreshment Account ---- 8,000 Donations to the extent of 2 were utilized for the purchase of Library Books, balance was still unutilized. In order to keep it safe, 9% Govt. Bonds of 1,60,000 were purchased on 31.3.3. Remaining amount was put in the Bank on 31.3.3 under the term deposit. Depreciation at 10% p.a. was to be provided for the whole year on Furniture and Library Books. Question 11: - Summary of Receipt and Payments of Bombay Medical Aid Society for the year ended 31.`12.0 are as follows: Opening Cash balance in hand 8,000, Subscription 50,000, Donation 1, Interest on Investment @ 9% p.a. 9,000. Payments for medicine supply 30,000, Honorarium to Doctors, Salaries 28,000, Sundry Expenses, Equipment Purchase 1, Charity show expenses 1,, Charity show collection 12,. Additional Informations: 1.1.0 31.12.0 Subscription due 1, 2, Subscription received in advance 1, 700 Stock of medicine 1 Amount due for medicine supply 9,000 1 Value of equipment 2 30,000 Value of building 50,000 48,000 You are required to prepare Receipts and Payments Account and Income and Expenditure Account for the year ended 31.12.0 and Balance Sheet as on 31.12.0. Question 12: - The Association of Veterinary Physicians had the following Balance Sheet as at Dec., 31,0. Balance Sheet as at 31 st Dec. 0 Liabilities Assets Sundry Creditors (for purchase of stationery) Salary Outstanding Capital Fund 700 600 18,900 Cash on Hand Bank Balance Fixed Deposit with Bank Miscellaneous Advertisements Interest receivable on fixed deposits Subscription receivable 100 9, 250 20, 20, The Association consists of members and the annual subscription is 100 per member. All payments are through cheques except petty cash payments. The following is the summary of the Petty Cash Book for the year 1. Petty Cash Summary To Balance (1-1- 1) To Receipts from Bank 100 6,000 By Miscellaneous exp. By Balance (31.12.1) 5,900 6,100 6,100 Analysis of the bank statement for 1 shows the following payments: Sundry Creditors (for purchase of stationery) 1,800 Salaries 7,100 Subscriptions to periodicals 1, Withdrawals for Petty Cash 6,000 Miscellaneous Expenses 600 Towards additional fixed deposit (1.7.1) Salaries of 0 600 250 400

With reference to the above, you are required to prepare (a) Receipts and Payments Account for the year ending 31.12.1 (b) Income and Expenditure Account for the year ending 31.12.1 (c) Balance Sheet as at December 31, 1 after taking into account the following additional information: (i) Fixed Deposits are for long terms and carry interest at 10% per annum. During the year Interest received totaled. (ii) On 31 st Dec. 1 the following were outstanding: salaries 700; for purchases of stationery. (iii) Subscription receivable as at 31.12.1. Question 13: - Following is the Income and Expenditure Account of Victoria Club for the year ending 31 st March, 6: Expenditure Amount Income Amount To Salaries & Wages 19,000 By Subscription 30,000 To Misc. Expenses By Entrance fees received (including Insurance) By Annual Sports Income To Audit fees Receipts 6,000 To Chief Executives Less Expense Honorarium 4,000 To Printing and Stationary 1,800 To Annual day Celebration Exp. 6,000 Less Donation 4,000 To Interest on Bank Loan 600 To Depreciation on Sports Equipment 1, To Excess of Income over Expenditure 2,400 34,000 34,000 Additional Information: 31.03.05 31.03.06 (i) Subscription outstanding 2,400 (ii) Subscription received in advance 1,800 1,080 (iii) Salaries outstanding 1,600 1,800 (iv) Sports equipment (after deducting deprecation) 10,400 10,800 (v) Prepaid Insurance ---- 240 (vi) Cash in hand? 6,400 (vii) The Club owned a Sports ground of 40,000 (viii) The Club took a loan of 8,000 from a bank during the year 4-05, which was not paid in 5-06. (ix) Audit fee of 5-06 was outstanding but Audit fees of 800 for 4 05 was paid in 5 06. Prepare Receipts and Payments Account for the year ending 31 st March, 6 ad a Balance sheet on that date. Question 14: - The Bombay Sports Club has prepared the undermentioned accounts: (i) Income and Expenditure Account for 0: To Salaries To Printing and Stationery To Advertising To Audit Fees To Fire Insurance To Depreciation on Sports Equipment To Surplus 1, 2, 1,600 9,000 6,400 By Subscriptions By Rent By Profit on Sale of Old Sports Equipment (book value 1,100) By Tournament Receipts 1 Less: Expenses 13,100 Rs 15,600 4,000 700 1,900

22, 22, (ii) Receipts and Payments Accounts for 0: To Balance b/d 4, To Life Memberships 10, To Tournament Receipts 14,600 To Subscriptions: 1999 600 0 1 1 400 16,000 To Rent Received To Sale of Old equipment 1,800 By Salaries By Sports Equipment By Printing and Stationery By Advertising By Fire Insurance By Tournament expenses By Investments (made on 31.12.) By Balance c/d 11,100 2,600 1,600 1, 10, 2, 50,100 50,100 The club owned on Jan. 0 a pavilion valued at 2,. Sports equipments valued at and furniture valued at. Prepare the Balance Sheet as at 31 st December, 0 Question 15: - Punya Trust runs a charitable hospital and a dispensary and for the year ended 31 st March 1, the following balance were extracted from its books: Dr. Cr. Capital fund 18,00,000 Donations received in the year 12,00,000 Fees received from patients 6,00,000 Recovery for amenities rent etc. 5,50,000 Recovery for food supplies 2,80,000 Surgical equipments 9, Buildings, theatres etc. 6,40,000 Consumption of: Medicines 2,40,000 Foodstuffs 1,80,000 Chemicals etc. 60,000 4,80,000 Closing Stock of: Medicines etc. 40,000 Foodstuffs 8,000 Chemicals etc. 50,000 Sales of medicines (dispensary) 6, Opening stock of medicines (dispensary) 1, Purchases of medicines (dispensary) 6,00,000 Salaries: Administrative staff 60,000 Doctors, Nurses, orderlies etc. 3,00,000 Assistants at dispensary 30,000 3,90,000 Electricity and power charges: Hospital 2, Dispensary 4,000 2,14,000 Furniture, fittings and equipments 1,60,000 Ambulance 60,000 Postage, telephone charges etc. less recovery 5 Subscription to medical journals 4 Ambulance maintenance charges less recoveries 1,600 Consumption of linen, bed sheets etc. 1,80,000

Fixed Deposits (made on 10-8 -1999 for three Years at interest of 11% p.a.) 10,00,000 Cash at Hand 12,100 Cash in Bank 70, Sundry debtors (dispensary ) 1,2 Sundry creditors (dispensary) 8 Remuneration to trustees, trust office expenses etc. 4 Additional information: (i) The dispensary supplies medicines to hospital on requisitions and delivery notes; for which no adjustment has been made in the books. Cost of such supplies in the year was 1,; (ii) Stock of medicines at close at dispensary was 80,000; (iii) Stock of medicines on 31 st March, 1 at the hospital included 8,000 worth of medicines belonging to patients; this has not been considered in arriving at the figure of consumption of medicines; (iv) Donations were received towards the corpus of the trust; (v) One of the well wisher donated surgery equipment whose market value was 80,000, on 15 th August, 0; (vi) The hospital is to receive a grant of 25% of the amount spent on treatment of poor patients, from the local branch of the Red Cross Society. Such expenditure in the year was 1 lakh; (vii) Out of the fees recovered from the patients, 10% is to be given to specialists as retained; (viii) Depreciation on assets, on closing balances, is to be provided on: Surgical equipments 20% Buildings 5% Furniture and fittings 10% Ambulance 30% Prepare the income and expenditure statements of the dispensary, trust and the hospital for the year ended 31 st March, 1 and statement of affairs of the trust as at that date. Question 16: - The analysis of the Cash Book of National Library for the year 5 showed the following: Receipts Payments Subscription 4 5 6 Interest on Investments Sale of Old Furniture Hall Rent Sale of Old Newspaper Special Fund Receipts Operation (50% to be capitalized) Admission Fees (40% capitalized) Telephone Receipts 3 4,000 2, 6,000 1 7,000 Salaries Printing and Stationery Rent and Rates Electric Charges Advertisement Telephone Charges Insurance Premium Meeting Expenses Purchase of Library Books Special Fund Expenses Purchase of Furniture Misc. Expenses 17,000 3, 700 250 1, 650 600 1 3,400 4, 1,800 Additional Information: (a) The Assets of the Library on 1.1.5 were: Cash in Hand 3,700; Cash at Bank 8,000; Library Books 18,000; 8% G.P. Notes 4; Furniture 7,700. (b) Outstanding Liabilities on 31.12.5 were audit Fees 900; Rent and Tax 1,600. (c) Salaries include Re. 3,900 for 4 and 2,800 for 6. (d) Special Fund Balance (Cr.)on 1.1.5 was 3,800. (e) Outstanding assets on 31.12.5 were; Subscription 2,800; Bank Interest 400. (f) Depreciate Library Books @ 10% and Furniture @ 5%. (g) On 31.12.5, Cash in Hand was 5, and the balancing figure of the Cash Book represents Cash at Bank as on 31.12.5. Prepare an Income and Expenditure Account for the year ended 31.12.5 and a Balance Sheet as on that date assuming that additions were made at the middle of the year and Furniture was sold at the commencement of the year.

Question 14: - Gwalior Trust School give the following information: Donation Salaries & Wages Stationery General Fund (1-1-0) Library Books (1-1-0) Laboratory Equipments (1-1-0) Journal Subscription Annual Function Electricity Sports Material Prizes Lab Material Building (1-1-0) Furniture (1-1-0) Auditorium (1-1-0) Books Purchased Repairs & Maintenance Hire Charge of Auditorium Hire Charge of Sorts Complex 86,000 1,28,480 1,920 3,90,120 17,600 26,000 16,480 3, 1,880 1,440 3,400 80,000 21,920 18,000 36,000 24,480 24,600 Sports Complex (1-1-0) Swimming Pool (1-1-0) Bank Account: Fixed deposit (14% p.a.) Current A/c Foodstuff purchased Sale of foodstuff Foodstuff supplied (for annual function) Interest Sundry Creditors for Foodstuff Closing Stock of Foodstuff Charities Equipment purchased Hire Charge of Class Rooms 35,600 26,000 1,09,000? 15,516 23,408 3,400 15,260 3,516 492 6,000 24,480 25,280 32,400 Charge depreciation @ 2 ½ % on building auditorium and sports complex, @ 10% on furniture and @ 15% on lab equipments. Depreciation on new purchases may be ignored. You are required to prepare: (i) Receipts and Payments A/c of the trust for the year ended 31 st Dec. 0 (ii) Income and Expenditure Account of the Trust for the year ended 31 st Dec. 0 (iii) Balance Sheet of the Trust as on 31.12.0. Receipt and Payment Accounts Q.1. From the following Trial Balance of Brahma Samaj Education Society as at 31 st December 1996, prepare an Income and Expenditure Account and a Balance Sheet: Dr. (Rs) Cr. (Rs) Furniture and Fittings Additions Library Books Additions Buildings General Investment 12, 3, 17, 4, 2,7 1,50,000 Investment Reserve Fund Sundry Debtors and Creditors Entrance Fees Examination Fees Subscription Received Certificate Fees Hire of Society s Hall Interest on Investment Sundry Receipts Staff Salaries Printing & Stationery Taxes Examination Expenses Subscriptions of Periodicals Prize Trust Fund Prize Trust Investments 10, 800 650 1, 1 14, 15, 2,400 6, 5, 600 16,000

Prize Trust Income Prize Awarded Prize Fund, Bank Balance Donation received (to be capitalized) General Expenses Capital Fund Cash at Bank Cash in hand The following further information is supplied to enable you to make the necessary adjustments: Subscriptions to be received 4, Subscription received in advance Interest on General Investments accrued 450 Staff Salaries Outstanding 1,800 Taxes paid in advance 150 Provide depreciation at the following rates on: Library Books 15% p.a. Furniture & Fittings 5% p.a. Buildings 1% p.a. 15,800 650 400 275 18,000 375 3,89,150 5, 5,04,000 5,04,000 The market value of General Investments on 31 st Dec. 1996 was 1,3. But you are not required to bring down the book value to this level. Solution: In the books of Brahma Samaj Education Society Income and Expenditure Account For the year ended 31 st December 1996 Expenditure Incomes Rs Rs To Staff Salaries Add: Outstanding To Printing & Stationery To Taxes Less: Prepaid To Examination fees To Subscriptions & Periodicals To General Expenses To Depreciation on: To Library Books 15% To Furniture & Fittings 5% Buildings 1% To Surplus-Excess of income over expenditure 10, 1,800 800 150 2,948 705 2,750 1 650 650 1, 375 6,403 By Subscriptions Add: Outstanding Less: Received in Advance By Entrance Fees By Examination Fees By Certificate Fees By Hire of Society Hall By Interest Add: Accrued By Sundry Receipts 4, 24, 5, 450 24,000 15, 2,400 6, 32,872 55,150 55,150 Balance Sheet As at 31 st March 1996 Liabilities Rs Rs Assets Rs Rs Capital Fund: Building 2,7 Balance 3,89,150 Less: Depreciation 2,750 Donations 18,000 2,72,250 Add: Surplus 32,872 Prize Trust Fund Investment Reserve Fund Outstanding Salaries Subscription Received in Advance Sundry Creditors 4,40,022 16,250 1 1,800 14, Furniture Less: Depreciation Books Less: Depreciation Prize Trust Investment 15,700 705 21,800 2,948 5,950 600 14,995 18,852 15,800

General Investment Sundry Debtors Accrued Interest Outstanding Subscriptions Prepaid Taxes Prize Trust Bank Balance Cash at Bank Cash in hand 1,50,000 450 4, 150 275 5, 4,88,072 4,88,072 Note- Depreciation on additions to Library Books and Furniture has been calculated for 6 months. Q.2. From the following Trial Balance of a club taken out on the 31 st March 1999, prepare an Income and Expenditure Account for the year and a Balance Sheet as on that date: Rent for the year Rates, Taxes and Insurance for the year 4,360 Loan @ 5% Sundry Creditors 10,220 Entrance Fees 3, Cash at Bank Cash in hand 20 Secretary s Remuneration 1, Sundry Debtors 1,180 Subscription Received in Advance 1,600 Furniture & Fixture 1 Steward s and Servant s Wages 6,000 Club House Improvement to Club House 6,840 Printing, Stationery & Newspapers 1,450 Law Charges 180 Annual Subscription 21,730 Card and Billiards Room Receipts 1,230 Washing of Liveries and Sundries 1,070 Wines, Cards and Cigars sold 4,330 Repairs to House and Furniture 4,090 Conversation Expenses 950 Wines, Cards and Cigars purchased 3,410 Stock of Cigars (1 st April 1998) 150 Interest on Loan 60 Excess of Income over Expenditure brought forward from last account 12,950 58,560 58,560 1, are to be written-off the Furniture and Fixtures and off the Club House. There was no stock at the end of the year. Solution: In the books of. Income and Expenditure Account For the year ended 31 st March, 1999 Expenditure Incomes To Rent To Rates, Taxes & Insurance To Secretary s Remuneration To Stewards and Servants Wages To Printing, Stationery and Newspapers To Law Charges To Washing of Liveries and Sundries To Repairs to House and Furniture To Conversation Expenses To Win, Cards and Cigars: To Opening Stock 150 4,360 1, 6,000 1,450 180 1,070 4,090 950 By Entrance Fees By Annual Subscription By Card and Billiards Room Receipts By Sale of Wine, Cards and Cigars 3, 21,730 1,230 4,330

Add: Purchases To Interest on Loan To Depreciation On Furniture On Club-House To Surplus-Excess of Income over Expenditure 3,410 1, 3,560 60 2, 370 30,790 30,790 Balance Sheet As at 31 st March 1999 Liabilities Assets Rs Rs Subscription Received in Advance Sundry Creditors Loan @ 5% Income & Expenditure Account Balance b/d Add: Excess of Income over Expenditure Q 3. 12,950 370 1,600 10,220 Cash in hand Cash at Bank Sundry Debtors Furniture & Fixtures Less: Depreciation 1 1, 20 1,180 10,800 Club House 13,320 Add: Improvements 6,840 16,840 Less: Depreciation 15,840 28,140 28,140 Subscription Income for 1992-93 as per Income & Expenditure Account Advance Subscription received in 1991-92 Subscriptions outstanding at the end of 1992-93 (including for 91-92) Advance Subscription received for 1993-94 Subscription written-off during 1992-93 Subscription receivable on 1.4.92 Subscription collected (1992-93) by the Secretary but not deposited Prepare a statement showing subscription received in 1992-93 as per Receipts & Payments Account. Solution: Subscription Income for 1992-93 as per Income and Expenditure Account Less: Advance Subscription received in 1991-92 Less: Outstanding Subscription (1992-93) (9,-) Add: Outstanding Subscription collected ( minus outstanding at the end of 1992-93) ( /- minus /- written-off) Add: Advance subscription received for 1993-94 4,000 8, 3, 8 4,000 9, 8 12, 69, 5, 7 Less: Subscription collected but not deposited Subscription received as per Receipts & Payments account in 1992-93 74,000 Q 4. Calculate what amount will be posted to Income and Expenditure Account for the year ending 31 st December 1994: (a) Amount paid for stationery during the year 1994 Stock of stationery in hand on 31 st December 1994 (b) Stock of Stationery in hand on 1.1.1994 Payment made for stationery during the year 1994 Stock of stationery in hand on 31.12.1994 1,080 50 1,080 50

(c) Stock of stationery on 1.1.1994 Creditors for stationery outstanding on 1.1.1994 Amount paid for stationery during the year Stock of stationery on 31.12.1994 (d) Stock of stationery on 1.1.1994 Creditors for stationery outstanding on 1.1.1994 Amount paid for stationery during the year Stock of stationery on 31.12.1994 Creditor for stationery outstanding on 31.12.1994 (e) Creditor for stationery on 31 st Jan. 1.1.1994 Amount paid for stationery during the year 1994 Creditors for stationery on 31.12.1994 (f) Stock of stationery on 1.1.1994 Creditors for stationery on 1.1.1994 Advances paid for stationery carried forward from 1993 Amount paid for stationery during the year 1994 Stock of stationery on 31.12.1994 Creditors for stationery on 31.12.1994 Advance paid for stationery on 31.12.1994 Solution: The following amount will appear on the debit side of Income and Expenditure Account: (a) Amount paid for stationery Less: Stock of stationery (closing) Stationery used (b) Stock of stationery (opening) Add: Purchases Less: Stock of stationery (closing) Stationery used (c) Stock of stationery (opening) Add: Payments made Less: Payment made for creditors of last year Less: Stock of stationery (closing) Stationery used (d) Stock of stationery (opening) Add: Payment made Less: Payment made for creditors of last year Add: Creditors for stationery (closing) Less: Stock of stationery (closing) Stationery used (e) Payments made Less: Paid for last year (opening) Add: Creditors for stationery (closing) Stationery used (f) Stock of stationery (opening) Add: Payments made Less: Payment for last year Add: Payment made last year but stationery received this year Add: Creditors for stationery (closing) 1,080 1,080 880 130 1,080 880 20 900 130 1,030 30 1,080 50 1,080 50 130 1,080 130 20 1,080 50 130 30 1,080 50 1,030 1,080 1,380 50 1,330 880 1,180 50 1,130 1,010 1,310 50 1,260 1,080 880 130 1,010