Question

The following particulars relate to Madura Club for the year 31st March, 2016 :

Receipts and Payments Account
$\begin{array}{ccccc}\text{Receipts}& & \text{Rs}& \text{Payments}& \text{Rs}\\ \text{Balance b/d}& & 60,000& \text{Salaries}& 1,24,500\\ \text{Subscriptions :}& & & \text{Stationery}& 24,000\\ \text{Arrear}& 2,400& & \text{Rates}\&\text{Taxes}& 36,000\\ \text{Current}& 1,26,600& & \text{Telephone Expenses}& 6,000\\ \text{Advance}& \underset{–}{4,800}& 1,33,800& \text{Investments}& 75,000\\ \text{Profit from Canteen}& & 90,000& \text{Advertisement}& 10,500\\ \text{Miscellaneous}& & 4,500& \text{Postages}& 10,000\\ \text{Sale of Old Newspapers}& & 11,200& \text{Sundry Expenses}& 50,000\\ \text{Dividends}& & 48,500& \text{Balance c/d}& 1,72,000\\ \text{Donation}& & 1,00,000& & \\ \text{Entrance Fee}& & 60,000& & \\ & & \underset{–}{\overline{5,08,000}}& & \underset{–}{\overline{5,08,000}}\end{array}$

You are required to prepare an Income and Expenditure Account and a Balance Sheet after making the following adjustments :

(i) There are 450 members each paying an annual subscription of Rs 300; Rs 2,700 being in arrears for 2014-15 at the beginning of this year.

(ii) A donation of Rs 20,000 was wrongly included in subscriptions of the current year.

(iii) Entire donation and $\frac{3}{4}$ of entrance fees are to be capitalised.

(iv) Stock of Stationery on 31st March, 2015 was Rs 3,000; and on 31st March, 2016 was Rs 5,400.

(v) Cost of Building is Rs 6,00,000. Depreciate it at $5\%$ p.a.

Answer 1

Balance Sheet
as at 31st April, 2015
$\begin{array}{cccc}\text{Liabilities}& \text{Rs}& \text{Assets}& \text{Rs}\\ \text{Capital Fund (Balancing Figure)}& 6,65,700& \text{Cash balance}& 60,000\\ & & \text{Outstanding Subscriptions}& 2,700\\ & & \text{Stock of Stationery}& 3,000\\ & & \text{Building}& 6,00,000\\ & \underset{–}{\overline{6,65,700}}& & \underset{–}{\overline{6,65,700}}\end{array}$

Income and Expenditure Account for the year ending 31st March, 2016 Dr. Cr.
$\begin{array}{cccccc}\text{Expenditure}& & \text{Rs}& \text{Income}& & \text{Rs}\\ & & & \text{Subscriptions}& & \\ \text{Sales}& & 1,24,500& \text{(1,26,600 - 20,000)}& 1,06,600& \\ \text{Stationery}& 24,000& & \text{Add : Outstanding for}& & \\ \text{Add : Opening Stock}& \underset{–}{3,000}& & {\text{Current Year}}^{\left(1\right)}& \underset{–}{28,400}& 1,35,000\\ & 27,000& & \text{Profit from Canteen}& & 90,000\\ \text{Less : Closing Stock}& \underset{–}{5,400}& 21,600& \text{Miscellaneous}& & 4,500\\ \text{Rates}\&\text{Taxes}& & 36,000& \text{Sale of Old Newspapers}& & 11,200\\ \text{Telephone Expenses}& & 6,000& \text{Dividends}& & 48,500\\ \text{Advertisement}& & 10,500& \text{Entrance Fee (1/4 of 60,000)}& & 15,000\\ \text{Postages}& & 10,000& & & \\ \text{Sundry Expenses}& & 50,000& & & \\ \text{Depreciation on Building}& & 30,000& & & \\ \text{Excess of Income over}& & & & & \\ \text{Expenditure}& & 15,600& & & \\ & & \underset{–}{\overline{3,04,200}}& & & \underset{–}{\overline{3,04,200}}\end{array}$

Balance Sheet
as at 31st March, 2016
$\begin{array}{cccccc}\text{Liabilities}& & \text{Rs}& \text{Assets}& & \text{Rs}\\ \text{Subscriptions received in}& & & \text{Cash Balance}& & 1,72,000\\ \text{Advance}& & 4,800& \text{Outstanding Subscriptions}& & \\ \text{Capital Fund (1-4-2015)}& 6,65,700& & \text{(Rs 300 + Rs 28,400)}& & 28,700\\ \text{Add : Donation}& 1,20,000& & \text{Stock of Stationery}& & 5,400\\ \text{Add : Entrance Fee}& 45,000& & \text{Building}& 6,00,000& \\ \text{Add : Excess of income}& & & \text{Less : Depreciation}& \underset{–}{30,000}& 5,70,000\\ \text{over Expenditure}& \underset{–}{15,600}& 8,46,300& \text{Investments}& & 75,000\\ & & \underset{–}{\overline{8,51,100}}& & & \underset{–}{\overline{8,51,100}}\end{array}$

Notes :

(1) Total members are 450 and each member pays an annual subscription of Rs 300.

$\begin{array}{ccc}& & \text{Rs}\\ \text{Therefore, total subscriptions receivable for the year 2015-16}& & \\ =450\times 300& & =1,35,000\\ \text{Less : Amount received during the year 2015-16}& & =\underset{–}{1,06,600}\\ \text{Outstanding Subscription for the year 2015-16}& & =\underset{–}{28,400}\end{array}$

(2) Outstanding Subscription for the preceding year was Rs 2,700, out of which Rs 2,400 has been received during the current year. As such, Rs 300 are still in arrears which will be shown on the assets side of the Balance Sheet as at 31st March, 2016.