### 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

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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