# Practical Problem 07

Practical Problems | Q 7 | Page 118

From the following transactions of Receipts and Payments Account of “Pavan – Putra Hanuma Vyayamshala” Parbhani, and the adjustments given, you are required to prepare Income and Expenditure Account and Balance Sheet as on 31st March 2019.

 Receipts and Payments Account for the year ending 31.03.2019. Receipts Amt ₹ Payments Amt ₹ To Balance b/d By Salaries 6,000 Cash in Hand 5,000 By Entertainment Expenses 2,480 To Subscriptions By Sundry Expenses 1,300 2018 – 19                                        18000 By Electricity Charges 1,200 2019 – 20                                            410 18,410 By Rent 700 To Donations 6,000 By Investment 15,000 To Receipts from Entertainment 5,400 By Printing and Stationery 800 To Interest 400 By Postage 3,200 To Entrance fees 6,200 By Fixed Deposit 3,900 By Balance c/d Cash in Hand                                 830 Cash at Bank                               6,000 6,830 41,410 41,410

1) There are 500 members paying an annual Subscription of 50 each
2) Outstanding Salary was 1,200
3) The Assets on 01.04.2018 were as follows: Building 50,000, Furniture  15,000
4) Provide depreciation on Building and Furniture at 5% and 10% respectively.
5) 50% Entrance Fee is to be capitalized.
6) Interest on Investment at 5% p. a. has accrued for 6 months.
7) Capital Fund 70,000 on 01.04.2018

#### SOLUTION:

In the books of Pavan-putra Hanuman Vyayamshala, Parbhani

 Income and Expenditure Account for the year ended on 31st March, 2019 Expenditure Amt ₹ Amt ₹ Income Amt ₹ Amt ₹ To Salaries 6,000 By Subscription 18,000 Add: Outstanding 1,200 7,200 Add: Outstanding Subscription for Current Year 7000 25000 To Entertainment Expenses 2,480 By Donations 6,000 To Sundry Expenses 1,300 By receipts from Entertainment 5,400 To Electricity Charges 1,200 By Interest 400 To Rent 700 By Outstanding Interest on Investments (6 Months) 375 To Printing and Stationery 800 By Entrance Fees 6,200 To Postage 3,200 Less: 50 % capitalised 3,100 3,100 To Depreciation Building 2,500 Furniture 1,500 4,000 To Surplus (Excess of income over expenditure) 19,395 40,275 40,275
 Balance Sheet as on 31st March, 2019 Liabilities Amt ₹ Amt ₹ Assets Amt ₹ Amt ₹ Capital Fund 70,000 Building 50,000 Add: Surplus 19,395 Less: Depreciation 2,500 47,500 Add: 50 % Entrance Fees 3,100 92,495 Furniture 15,000 Outstanding Salary 1,200 Less: Depreciation 1,500 13,500 Subscription received in Adv. 410 Investments 15,000 O/s Interest on Investments 375 Fixed Deposit 3,900 Cash in Hand 830 Cash at Bank 6,000 O/s Subscription of C.Y 7,000 94,105 94,105

Working Notes :

(1) Interest on investment is receivable for 6 months

I = PNR/100 = 15000 × (5  ÷ 100) × (6  ÷ 12) =  ₹ 375 (outstanding interest on investment)

(2) 50% of entrance fees (i.e. 6200  ÷ 2 =  ₹ 3100) is to be capitalised means add it to the capital fund.

(3) Total subscription of current year = 500 members × ₹ 50 = ₹ 25,000

But actual subscription received = ₹ 18,000

means difference (25,000 – 18,000) of ₹ 7,000 is outstanding subscription.