From the following Balance Sheet and Receipts and Payments A/c of Vidya mandir High School, Alibag. Prepare Income and Expenditure Account for the year ended 31st March, 2008 and Balance Sheet as on that date.

Balance Sheet as on 1st April, 2007
Liabilities
Amount
Assets
Amount
Entrance Fees
6000
Furniture
16800
Capital Fund
103800
Laboratory
20000


Library
25000


Investment
40000


Cash in hand
1000


Cash at bank
3000


Outstanding Tuition Fees
4000

109800

109800

Receipts and Payments Account for the year ended 31st March, 2008
Receipts
Amount
Payments
Amount
To Balance b/d

By Furniture Purchased
5400
Cash in hand
1000
By Salaries
60000
Cash at bank
3000
By Rent
28000
To Tuition Fees
80000
By Sundry Expenses
15200
To Term Fees
26200
By Annual gathering expenses
11300
To Government grant
16000
By Insurance
4000
To Donation of library
30000
By closing Balance

To Interest on Investment
2000
Cash at bank
34300

158200
158200

Adjustments:
1. Tuition fees still receivable are Rs. 10,000.
2. Salaries still payable are Rs. 30,000
3. Insurance premium is paid for one year ending 30.9.2008.
4. Rent paid in advance Rs. 4000.
5. Depreciate furniture and library at 10%.
Depreciation to be charged on the closing balances of the assets.

Solution:
In the Books of Vidya Mandir High School, Alibag
Income & Expenditure A.c for the Year Ended 31st March, 2008
Particulars
Amount
Amount
Particulars
Amount
Amount
To Salaried
60000

By Tuition Fees
80000

(+) Outstanding
30000
90000
(-) Last Year Amount
-4000

To Rent
28000


76000

(-) Prepaid
-4000
24000
(+) Outstanding of Current Year
10000
86000
To Sundry Expenses

15200
By Tern Fees

26200
To Annual gathering Expenses

11300
By Government grant

16000
To Insurance
4000

By Interest on Investment

2000
Less: Prepaid
2000
2000



To Depreciation





On Furniture
2220




On Library
2500
4720
By Excess of Expenditure over Income [Deficit]

17020


147220


147220

Balance Sheet as on 31st March, 2008
Liabilities
Amount
Amount
Assets
Amount
Amount
Capital Fund
103800

Furniture
16800

Less: Deficit
17020
86780
Add: Purchase new furniture
5400

Entrance Fees

6000

22200

Library Fund

30000
Less: Depreciation @ 10%
2220
19980
Outstanding Salaries

30000
Laboratory

20000



Library
25000




Less: Depreciation @ 10%
2500
22500



Investment

40000



Cash at Bank

34300



Tuition Fees receivable

10000



Prepaid Insurance

2000



Prepaid Rent

4000


152780


152780
Working Notes:
1. Last year’s outstanding tuition fees of Rs. 4000 are deducted from tuition fees of Rs. 80000 and there will be no second effect. At the same time Outstanding tuition fees of Rs. 10000 for the current year is added to tuition on the credit side of Income and Expenditure A/c and then shown the same on the Asset side of the Balance Sheet.
2. Outstanding Salaries of Rs. 30,000 is first added to salaries on the debit side of Income and Expenditure A/c and then shown the same on the liability side of the balance sheet.
3. Insurance for 6 months i.e. from 1.4.2008 to 3.09.2009 is paid in advance it means 6 months prepaid. Insurance prepaid = (6/12) × 4000 = RS. 2000.
5. Calculation of Depreciation:
On Furniture = 10% of (16800 + 5400) = 10% × 22200 = 2220
On Library = 10% × 25000 = 2500
6. Entrance Fees of Rs. 6000 given in the opening balance sheet is carried forward and shown on the liabilities side of new balance sheet.