Following is the Receipts Payments Account of “Dhananjay Library, Mumbai” for the year ending 31.03.2020

Practical Problems | Q 12 | Page 122


Following is the Receipts Payments Account of “Dhananjay Library, Mumbai” for the year ending 31.03.2020


Receipts and Payments Account for the year ending 31.03.2020.


Receipts

Amount

Payments

Amount

To Balance b/d

5,000

By Salaries

9,000

To Admission Fees

4,500

By Rent

7,500

To Subscriptions

20,000

By Investments

6,000

To Lecture Hall Hire Charges

4,200

By Stationery

1,350

To Miscellaneous Income

250

By Electricity Charges

850

To Interest on Investment

900

By Books

5,000



By Outstanding Expenses (2018 - 19)

500



By Balance c/d

4,650


34850


34850


You are required to prepare an Income and Expenditure Account for the year ended 31.03.2020 and Balance Sheet as on that day.


The following information is also made available to you.


1) On 31.03.2019, the Library had the following Assets also; Books at  50,000, Furniture  6,500, and Machinery of  30,000


2) Subscription received in advance amounted to  500


3) Outstanding Salaries  1300 and for Rent  950


4) 50% of the Admission Fees should be capitalized.


5) Furniture to be depreciated at 10% p.a.


6) Library Books were purchased on 1st April 2019 charge Depreciation at 10% p. a.


7) The Investments were purchased on 01.04.2019 and they carry interest at 20*% p.a


Solution: 


In the books of Dhananjay Library, Mumbai


Income and Expenditure Account for the year ended 31st March 2020


Expenditure

Amount ₹

Amount

Income

Amount

Amount

To Salaries

9,000


By Subscription

20,000


Add: Outstanding Salary

1,300

10,300

Less: Subscription Received in Advance

500

19,500

To Rent

7,500


By Admission Fees

4,500


Add: Outstanding Rent

950

8,450

Less: 50% Capitalised

2,250

2,250

To Stationery


1,350

By Lecture Hall Hire Charges


4,200

To Electricity Charges


850

By Miscellaneous Income


250

To Depreciation



By Interest on Investments

900


Furniture

650


Add: Outstanding Interest

300

1,200

Library Books

(5000 + 500)

5,500

6,150




To Surplus

(Excess of Income over expenditure)


300






27400



27400


Balance Sheet as on 31st March 2020


Liabilities

Amount

Amount

Assets

Amount

Amount

Capital Fund

91,000


Machinery


30,000

Add : 50 % Admission

2,250


Books

50,000


Add: Surplus

300

93,550

Add: Purchases

5,000


Outstanding Salaries


1,300


55,000


Outstanding Rent


950

Less: Depreciation (5000 + 500)

5,500

49,500

Subscription Received in Advance


500

Furniture

6,500





Less: Depreciation

650

5,850




Investments

6,000





Add: Outstanding Interest

300

6,300




Cash in Hand


4,650



96300



96300

Working Notes :


(1) Opening Balance Sheet is prepared to find out opening capital fund :


Balance Sheet as on 31st March 2019


Liabilities

Amount

Assets

Amount

Outstanding Expenses

500

Books

50,000

Capital Fund

(Balancing figure)

91,000

Furniture

6,500



Machinery

30,000



Cash in Hand

(Opening balance of Receipt – Payment A/c)

5,000


91500


91500

(2) Outstanding expenses of the previous year, paid in the current year so no entry for outstanding expenses (2018 – 19)

(3)

Interest on Investment @ 20 % on ₹ 6,000

₹ 1200

Interest on Investment received

₹ 900

Outstanding interest on investment

₹ 300

 

(4) 

Depreciation on library books at 10 % p.a. on opening balance of ₹ 50,000 (for whole year)

₹ 5000

On purchases on 01 – 04 – 2019 (for whole year)

₹ 1500

Total Depreciation

₹ 5500

(5) Subscriptions received in advance  500 is deducted from subscription received on credit side of Income and Expenditure A/c and then subscription received in advance is shown separately on the Liabilities side of the Balance Sheet.


(6) Outstanding salaries and outstanding rent are added to the respective head of Account on the debit side of the Income & Expenditure Account and both the outstanding items are recorded on the Liabilities side of the Balance Sheet.


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