Question

The following is the Receipts and Payments Account of 'Vikas Club' for the year ended on 31st March, 2017 :

$\begin{array}{cccc}\text{Receipts}& \text{Rs}& \text{Payments}& \text{Rs}\\ \text{Balance b/d}& 4,400& \text{Salaries}& 44,000\\ \text{Subscription :}& & \text{Furniture (Purchased on}& \\ \text{2015-2016}& 1,500& \text{1st Jan 2017)}& 10,000\\ \text{2016-2017}& 96,000& \text{Sports Expenses}& 11,000\\ \text{2017-2018}& 500& \text{Drama Expenses}& 18,400\\ \text{Entrance Fees}& 8,000& \text{Newspapers}& 2,500\\ \text{Sports Fund}& 15,000& \text{Municipal Taxes}& 3,600\\ \text{Sale of drama tickets}& 24,000& \text{Refreshments}& 32,200\\ \text{Sale of waste paper}& 150& \text{Lighting and Heating}& 6,000\\ \text{Interest on Investments}& 1,350& \text{Medicines Purchased}& 4,000\\ & & \text{Balance c/d}& 19,200\\ & \underset{–}{\overline{1,50,900}}& & \underset{–}{\overline{1,50,900}}\end{array}$

Prepare Income and Expenditure A/c for the year ended 31st March, 2017 and the Balance Sheet as at that date, after taking the following information into account :

(i) The club has 200 members each paying an annual subscription of Rs 500 and the subscription of two members is still in arrear for 2015 - 2016.

(ii) Stock of medicines on 31st March, 2017 was Rs 1,000.

(iii) Salaries are paid @ Rs 4,000 per month.

(iv) The other assets on 1st April, 2016 were : Furniture Rs 40,000 and $9\%$ Investments Rs 18,000 (Face value Rs 20,000).

(v) Depreciate furniture at $10\%$ p.a. and provide upto date interest on investments.

Answer 1

Balance Sheet
as at 1st April, 2016
$\begin{array}{cccc}\text{Liabilities}& \text{Rs}& \text{Assets}& \text{Rs}\\ \text{Capital Fund (Balancing Figure)}& 64,900& \text{Cash in hand}& 4,400\\ & & \text{Outstanding Subscription}& \\ & & \text{(Rs 1,500 + 1,000)}& 2,500\\ & & \text{Furniture}& 40,000\\ & & 9\%\text{Investments}& \\ & & \text{(Face value Rs 20,000)}& 18,000\\ & \underset{–}{\overline{64,900}}& & \underset{–}{\overline{64,900}}\end{array}$

Income and Expenditure Account for the year ending 31st March, 2017
Dr. Cr.
$\begin{array}{cccccc}\text{Expenditure}& & \text{Rs}& \text{Income}& & \text{Rs}\\ \text{Salaries}& 44,000& & \text{Subscriptions}& 96,000& \\ \text{Add : Outstanding}& \underset{–}{4,000}& 48,000& \text{Add : Outstanding for the}& & \\ \text{Drama Expenses}& & 18,400& {\text{year 2016-2017}}^{\left(1\right)}& \underset{–}{4,000}& 1,00,000\\ \text{Newspapers}& & 2,500& \text{Entrance Fees}& & 8,000\\ \text{Municipal Taxes}& & 3,600& \text{Sale of Drama Tickets}& & 24,000\\ \text{Refreshments}& & 32,200& \text{Sale of Waste Paper}& & 150\\ \text{Lighting and Heating}& & 6,000& \text{Interest on Investments}& 1,350& \\ \text{Medicines Consumed :}& & & \text{Add : Accrued Interest}& \underset{–}{450}& 1,800\\ \text{Purchases during the}& & & \text{(See Note 3)}& & \\ \text{year}& 4,000& & & & \\ \text{Less : Closing Stock}& \underset{–}{1,000}& 3,000& & & \\ \text{Depreciation on Furniture :}& & & & & \\ \text{On Rs 40,000 for}& & & & & \\ \text{one year}& 4,000& & & & \\ \text{On Rs 10,000 for}& & & & & \\ \text{3 months}& \underset{–}{250}& 4,250& & & \\ \text{Excess of Income over}& & & & & \\ \text{Expenditure}& & 16,000& & & \\ & & \underset{–}{\overline{1,33,950}}& & & \underset{–}{\overline{1,33,950}}\end{array}$

Balance Sheet
as at 31st March, 2017
$\begin{array}{cccccc}\text{Liabilities}& & \text{Rs}& \text{Assets}& & \text{Rs}\\ \text{Outstanding Salary}& & 4,000& \text{Cash in Hand}& & 19,200\\ \text{Subscription received in advance}& & 500& \text{Outstanding Subscriptions}& & \\ \text{Sports Fund}& 15,000& & {\text{(Rs 4,000 + Rs 1,000)}}^{\left(2\right)}& & 5,000\\ \text{Less : Sports Expenses}& \underset{–}{11,000}& 4,000& \text{Accrued Interest}& & 450\\ & & & \text{Stock of Medicines}& & 1,000\\ \text{Capital Fund}& 64,900& & \text{Investments}& & \\ \text{Add : Excess of Income}& & & \text{(Face value Rs 20,000)}& & 18,000\\ \text{Over Expenditure}& \underset{–}{16,000}& 80,900& \text{Furniture}& 50,000& \\ & & & \text{Less : Depreciation}& \underset{–}{4,250}& 45,750\\ & & \underset{–}{\overline{89,400}}& & & \underset{–}{\overline{89,400}}\end{array}$

Note :

(1) Total members are 200, each paying an annual subscription of Rs 500.

$\begin{array}{ccc}& & \text{Rs}\\ \text{Hence, total subscriptions receivable during the year 2016-2017 :}& & \\ =200\times 500& & =1,00,000\\ \text{Less : Amount received during the year 2016 -17}& & =\underset{–}{96,000}\\ \text{Outstanding Subscription for the year 2016 -17}& & =\underset{–}{4,000}\end{array}$

(2) The outstanding subscription for 2015 - 2016 Rs 1,000 is still in arrear at the end of 2016 - 2017 also. Hence, it will be shown on the assets side of both year's Balance Sheets.

(3) Interest is always calculated on the face value of Investments. Hence, interest @ $9\%$ on Rs 20,000 = Rs 1,800. Out of this amount Rs 1,350 has been received and the remaining Rs 450 is accrued.