Question

From the following Receipts and Payments Account of Sonic Club and from the given additional information, prepare the expenditure on account of salaries for the year ending 31st March, 2015 and show the salaries item in the Income and Expenditure Account and the Balance Sheet as at 31st March, 2014 and 31st March, 2015.

An Extract of Receipts and Payments Account for the year ending 31st March, 2015
Dr. Cr.
$\begin{array}{cccc}\text{Expenditure}& \text{Rs}& \text{Income}& \text{Rs}\\ & & \text{By Salaries :}& \\ & & \text{2013-14}& 20,000\\ & & \text{2014-15}& 2,80,000\\ & & \text{2015-16}& 18,000\end{array}$

Additional Information Rs

(i) Salaries outstanding on 31st March, 2014 25,000

(ii) Salaries outstanding on 31st March, 2015 45,000

(iii) Salaries paid in advance on 31st March, 2014
10,000

Answer 1

Balance Sheet
as at 31st March, 2014
$\begin{array}{cccc}\text{Liabilities}& \text{Rs}& \text{Assets}& \text{Rs}\\ \text{Outstanding Salaries}& 25,000& \text{Prepaid Salaries}& 10,000\end{array}$

Income and Expenditure Account
for the year ending 31st March, 2015 Dr. Cr.
$\begin{array}{ccccc}\text{Expenditure}& & \text{Rs}& \text{Income}& \text{Rs}\\ \text{Salaries}& 2,80,000& & & \\ \text{Add : Salaries paid in}& & & & \\ \text{Advance on}& & & & \\ \text{31.3.2014}& \underset{–}{10,000}& & & \\ & 2,90,000& & & \\ \text{Add : Outstanding for}& & & & \\ \text{2014-15}& \underset{–}{40,000}& 3,30,000& & \end{array}$

Balance Sheet
as at 31st March, 2015
$\begin{array}{ccccc}\text{Liabilities}& & \text{Rs}& \text{Assets}& \text{Rs}\\ \text{Outstanding Salaries}& & & \text{Prepaid Salaries (for 2015-16)}& 18,000\\ \text{for 2013-14}& & & & \\ \text{25,000 - 20,000}& 5,000& & & \\ \text{for 2014-15}& & & & \\ \text{(45,000 - 5,000)}& \underset{–}{40,000}& 45,000& & \end{array}$