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.

Accounting Problem: Vidya Mandir High School

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 6,000 Furniture 16,800
Capital Fund 1,03,800 Laboratory 20,000
Library 25,000
Investment 40,000
Cash in hand 1,000
Cash at bank 3,000
Outstanding Tuition Fees 4,000
Total 1,09,800 Total 1,09,800

Receipts and Payments A/c for the year ended 31st March, 2008

Receipts Amount (₹) Payments Amount (₹)
To Balance b/d: By Furniture Purchased 5,400
Cash in hand 1,000 By Salaries 60,000
Cash at bank 3,000 By Rent 28,000
To Tuition Fees 80,000 By Sundry Expenses 15,200
To Term Fees 26,200 By Annual Gathering Expenses 11,300
To Government Grant 16,000 By Insurance 4,000
To Donation for Library 30,000 By Closing Balance:
To Interest on Investment 2,000 Cash at Bank 34,300
Total 1,58,200 Total 1,58,200

Adjustments

  1. Tuition fees still receivable are ₹ 10,000.
  2. Salaries still payable are ₹ 30,000.
  3. Insurance premium is paid for one year ending 30.09.2008.
  4. Rent paid in advance ₹ 4,000.
  5. Depreciate furniture and library at 10% 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

Expenditure (Dr.) Amount (₹) Income (Cr.) Amount (₹)
To Salaries Add: Outstanding 60,000
30,000
90,000		 By Tuition Fees Less: O/s Last YearAdd: O/s Current Year 80,000
(4,000)
10,000
86,000
To Rent Less: Prepaid 28,000
(4,000)
24,000		 By Term Fees 26,200
To Sundry Expenses 15,200 By Government Grant 16,000
To Annual Gathering Expenses 11,300 By Interest on Investment 2,000
To Insurance Less: Prepaid (6 months) 4,000
(2,000)
2,000		 By Deficit
To Depreciation On FurnitureOn Library
2,220
2,500
4,720		 (Excess of Expenditure over Income transferred to Capital Fund) 17,020
Total 1,47,220 Total 1,47,220

Balance Sheet as on 31st March, 2008

Liabilities Amount (₹) Assets Amount (₹)
Capital Fund Less: Deficit 1,03,800
(17,020)
86,780		 Furniture Add: New PurchaseLess: Depreciation @ 10% 16,800
5,400
(2,220)
19,980
Entrance Fees 6,000 Laboratory 20,000
Library Fund (Donation) 30,000 Library Less: Depreciation @ 10% 25,000
(2,500)
22,500
Outstanding Salaries 30,000 Investment 40,000
Cash at Bank 34,300
Outstanding Tuition Fees 10,000
Prepaid Insurance 2,000
Prepaid Rent 4,000
Total 1,52,780 Total 1,52,780

Notes for Students

This section explains the accounting treatments and the technical improvements made to this page.

Accounting Working Notes
  1. Tuition Fees: Last year’s outstanding fees (₹4,000) received this year are removed from the current year's income. The current year's outstanding fees (₹10,000) are added to income and shown as an asset.
  2. Salaries: Outstanding salaries (₹30,000) are an expense for this year, so they are added to the salaries paid and also shown as a liability on the Balance Sheet.
  3. Prepaid Insurance: The policy ends on 30.09.2008, which is 6 months into the next financial year. Therefore, 6 months of the premium is prepaid. Calculation: (₹4,000 / 12 months) * 6 months = ₹2,000. This is deducted from the expense and shown as an asset.
  4. Prepaid Rent: The amount paid in advance (₹4,000) is deducted from the rent expense for the current year and listed as an asset.
  5. Depreciation: Calculated at 10% on the closing balance of the assets. Furniture: 10% of (₹16,800 Opening + ₹5,400 New) = 10% of ₹22,200 = ₹2,220. Library: 10% of ₹25,000 = ₹2,500.
  6. Entrance Fees: Since this was in the opening Balance Sheet, it is treated as capitalized and is carried forward to the closing Balance Sheet's liability side.
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