BLOCK 1

UNIT 4

FINAL ACCOUNTS

Definition

The financial statements of an organization made up at the end of an

accounting period, usually the fiscal year.

For a manufacturer, the final accounts consist of (1) manufacturing account,

(2) trading account, (3) profit and loss account, and (4) profit and loss
appropriation account. A commercial company's final accounts will include
all of the above except the manufacturing account. Together, these accounts
show the gross profit, net income, and distribution of net income figures of
the company.

Need of Final Accounts:

It is quite natural that the businessman is interested in knowing whether his

business is running on Profit or Loss and also the true financial position of
his business. The main aim of Bookkeeping is to inform the Proprietor,
about the business progress and the financial position at the right time and in
the right way. Preparation of Final accounts is highly possible only after the
preparation of Trial Balance.
Financial Statements in Final Accounts:

FINAL ACCOUNTS

Trading & Profit and Loss A/c Balance sheet

1. Trading and Profit and Loss A/c is prepared to find out Profit or Loss.
2. Balance Sheet is prepared to find out financial position a if concern.

Trading and P&L A/c and Balance sheet are prepared at the end of the year
or at end of the part. So it is called Final Account.
Revenue account of trading concern is divided into two-part i.e.
1. Trading Account and
2. Profit and Loss Account.

TRADING
Trading refers buying and selling of goods. Trading A/c shows the result of
buying and selling of goods. This account is prepared to find out the
difference between the Selling prices and Cost price. If the selling price
exceeds the cost price, it will bring Gross Profit.
For Example, if the cost price of Rs. 50,000 worth of goods are sold for Rs.
60,000 that will bring in Gross Profit of Rs. 10,000.
If the cost price exceeds the selling price, the result will be Gross Loss. For
example, if the cost price Rs. 60,000 worth of goods are sold for Rs. 50,000
that will result in Gross Loss of Rs.10,000.
Thus the Gross Profit or Gross Loss is indicated in Trading Account.

Items appearing in the Debit side of Trading Account.

1. Opening Stock: Stock on hand at the commencement of the year or period
is termed as the Opening Stock.

2. Purchases: It indicates total purchases both cash and credit made during
the year.
3. Purchases Returns or Returns out words: Purchases Returns must be
subtracted from the total purchases to get the net purchases. Net purchases
will be shown in the trading account.

4. Direct Expenses on Purchases: Some of the Direct Expenses are.

i. Wages: It is also known as Productive wages or Manufacturing wages.
ii. Carriage or Carriage Inwards:
iii. Octroi Duty: Duty paid on goods for bringing them within municipal
limits.
iv. Customs duty, dock dues, Clearing charges, Import duty etc.
v. Fuel, Power, Lighting charges related to production.
vi. Oil, Grease and Waste.
vii. Packing charges: Such expenses are incurred with a view to put the
goods in the Saleable Condition.

Items appearing on the credit side of Trading Account

1. Sales: Total Sales (Including both cash and credit) made during the year.

2. Sales Returns or Return Inwards: Sales Returns must be subtracted from

the Total Sales to get Net sales. Net Sales will be shown.

3. Closing stock: Generally, Closing stock does not appear in the Trial
Balance. It appears outside the Trial balance. It represents the value of goods
at the end of the trading period.
Specimen Form of a trading A/c

BALANCING OF TRADING ACCOUNT:

The difference between the two sides of the Trading Account indicates either
Gross Profit or Gross Loss. If the total on the credit side is more, the
difference represents Gross Profit. On the other hand, if the total of the debit
side is high, the difference represents Gross Loss. The Gross Profit or Gross
Loss is transferred to Profit and Loss A/c.

Closing Entries of Trading A/c

Trading A/c is a ledger account. Hence, no direct entries should be made in
the trading account. Several items such as Purchases, Sales are first recorded
in the journal and then posted. to the ledger. The Same accounts are closed
by the transferring them to the trading account. Hence it is called as closing
entries.

Advantages of Trading Account

1. The result of Purchases and Sales can be clearly ascertained
2. Gross Profit ratio to Sales could also be easily ascertained. It helps to
determine Price.
3. Gross Profit ratio to direct Expenses could also be easily ascertained. And
so, unnecessary expenses could be eliminated.
4. Comparison of trading account details with previous years details help to
draw better administrative policies.

PROFIT AND LOSS ACCOUNT

Trading account reveals Gross Profit or Gross Loss. Gross Profit is
transferred to credit side of Profit and Loss A/c. Gross Loss is transferred to
debit side of the Profit Loss Account.
Thus Profit and Loss A/c is commenced. This Profit & Loss A/c reveals Net
Profit or Net loss at a given time of accounting year.

Items appearing on Debit side of the Profit & Loss A/c

The Expenses incurred in a business is divided in too parts. i.e. one is Direct
expenses are recorded in trading A/c., and another one is Indirect expenses,
which are recorded on the debit side of Profit & Loss A/c. Indirect Expenses
are grouped under four heads:
1. Selling Expenses: All expenses relating to sales such as Carriage
outwards, Travelling Expenses, Advertising etc.,
2. Office Expenses: Expenses incurred on running an office such as Office
Salaries, Rent, Tax,Postage, Stationery etc.,
3. Maintenance Expenses: Maintenance expenses of assets. It includes
Repairs and Renewals,Depreciation etc.
4. Financial Expenses: Interest Paid on loan, Discount allowed etc., are few
examples for Financial Expenses.

Item appearing on Credit side of Profit and Loss A/c.

Gross Profit is appeared on the credit side of P & L A/c. Also other gains
and incomes of the business are shown on the credit side. Typical of such
gains are items such as Interest received, Rent received, Discounts earned,
Commission earned.

Specimen Form
BALANCE SHEET
Trading A/c and Profit & Loss A/c reveals G.P. or G.L and N.P or N.L
respectively,
Besides the Proprietor wants
i. To know the total Assets invested in business
ii. To know the Position of owner’s equity
iii. To know the liabilities of business.

DEFINITION
The Word ‘Balance Sheet’ is defined as “a Statement which sets out the
Assets and
Liabilities of a business firm and which serves to ascertain the financial
position of the same on any particular date.”
On the left hand side of this statement, the liabilities and capital are shown.
On the right hand side, all the assets are shown. Therefore the two sides of
the Balance sheet must always be equal. Capital arrives Assets exceeds the
liabilities.

OBJECTIVES OF BALANCE SHEET:

1. It shows accurate financial position of a firm.

2. It is a gist of various transactions at a given period.

3. It clearly indicates, whether the firm has sufficient assents to repay its
liabilities.

4. The accuracy of final accounts is verified by this statement

5. It shows the profit or Loss arrived through Profit & Loss A/c.
Specimen:

The Balance sheet contains two parts i.e.

1. Left hand side i.e. the Liabilities
2. Right hand side i.e. the Assets

ASSETS:
Assets represent everything which a business owns and has money value.
Assets are always shown as debit balance in the ledger. Assets are classified
as follows.
1. Tangible Assets:
Assets which can be seen and felt by touch are called Tangible Assets.
Tangible Assets are classified into two:
a. Fixed Assets: Assets which are durable in nature and used in business
over and again are known as Fixed Assets. e.g. land and Building,
Machinery, Trucks, etc.
b. Floating Assets or Current Assets: Current Assets are i. Meant to be
converted into cash, ii. Meant for resale, iii. Likely to undergo change e.g.
Cash, Balance, stock, Sundry Debtors.
2. Intangible Assets: Assets which cannot be seen and has no fixed shape.
E.g., goodwill, Patent.
3. Fictitious assets: Assets which have no real value and will appear on the
Assets side of B/S. are known as Fictitious assets: E.g. Preliminary
expenses, Discount or creditors.

LIABILITIES:
All that the business owes to others are called Liabilities. It also includes
Proprietor’s Capital. They are known as credit balances in ledger.

Classification of Liabilities:
1. Long Term Liabilities: Liabilities will be redeemed after a long period of
time 10 to 15 years E.g. Capital, Long Term Loans.
2. Current Liabilities: Liabilities, which are redeemed within a year, are
called Current Liabilities or short-term liabilities E.g. Trade creditors, B/P,
Bank Loan.
3. Contingent Liabilities: Liabilities, which have the following features, are
called contingent liabilities. They are:
a. Not actual liability at present
b. Might become a liability in future on condition that the contemplated
event occurs.
E.g. Liability in respect of pending suit.

Equation of Balance Sheet:

Assets = Liabilities + Capital.

DIFFERENCE BETWEEN A TRIAL BALANCE AND A BALANCE

SHEET

S.No Trial Balance Balance Sheet

.
1. It shows the balances of all ledger It shows the balances of
accounts. personal and real accounts
only.
2. It is prepared after the completion of It is prepared after the
the ledger accounts or arrival of the completion of Trading and
balances. P& L A/c.
3. Its object is to check the arithmetical Its object is to reveal the
accuracy. financial position of the
business.
4. Items shown in the Trial balance are But in the B S, the items
not in order shown must be in order.
5. It shows the opening stock It shows the closing stock.
6. It has the headings, debit and credit. It has the heading of Assets
and Liabilities.

FINAL ACCOUNTS PROBLEMS:

Problem 1. From the following trial balance, prepare a Trading and Profit
and Loss Account and Balance Sheet for the year ending 31st March, 2009
Debit Balances Rs. Rs.
Sundry Debtors 1500 Rent, Rates, and Taxes 800
St
Stock 1 April, 5,000 Salaries 2,000
2008
Land & Building 10,000 Drawings 2,000
Cash in Hand 1,600 Purchases 10,000
Cash at Bank 4,000 Office Expenses 2,500
Wages 3,000 Plant and Machinery 5,700
Bills Receivable 2,000 Credit Balances
Interest 200 Capital 25,000
Bad Debts 500 Interest 600
Repairs 300 Sundry Creditors 7,000
Furniture 1500 Sales 17,000
Depreciation 1,000 Bills Payable 4,000
On 31st March, 2009 the stock was valued at Rs. 10,000

Problem 2: From the following Trial Balance of Ram, prepare the Trading,
Profit and loss account and balance sheet at the year ending 31 st March,
2009:
Trial Balance
As at 31st march, 2009
PARTICULARS DR. (RS.) CR (RS.)
Ram’s capital 2,90,000
Rams’s drawings 7,600
Purchase & Sales 89,000 1,50,000
S/R P/R 2,800 4,500
st
Stock (1 April, 2008) 12,000
Wages 8,000
Building 2,20,000
Freight & Carriage 20,000
Trade Expenses 2,000
Advertising 2,400
Interest 3,500
Taxes & Insurance 1,300
Debtors & Creditors 65,000 12,000
B/R & B/P 15,000 7,000
Cash at Bank 12,000
Cash in Hand 1,900
Salaries 8,000
Total 4,67,000 4,67,000
Adjustments:
i. Stock on 31st March,2009 was valued at Rs. 15,000
ii. Insurance was prepaid to the extent of Rs. 400.
iii. Outstanding liabilities were: Salaries Rs. 2,000 and Taxes Rs. 1,300.
iv. Depreciate Building at 2% p.a.
Problem 3: The following Trial Balance is extracted from the books of
Sumit as on 31st March, 2009:
Debit Balance Rs. Credit Balance Rs.
Stock (1.4.2008) 50,000 Capital 3,20,000
Furniture 16,000 Creditors 80,000
Building 1,60,000 Purchases Return 2,000
Debtor 60,000 Commission 1,000
Drawings 20,000 Sales 4,55,000
Plant & Machinery 1,20,000 Bad Debts Recovered 1,400
Additions to
P&M(1.10.2008) 20,000
Wages 24,000
Salaries 40,000
Bad Debts 2,000
Purchase 2,40,000
Electric Charges 2,400
Telephone Charges 4,800
General Expenses 6,000
Postage 3,600
Sales Return 1,800
Insurance Premium 3,000
Cash in hand 6,400
Cash at Bank 80,000

8,60,000

8,60,000

Prepare trading profit and loss account for the year ending 31 st March, 2008
and the balance sheet as on that date after taking into account the following
adjustments:
1. Stock on 31st March, 2009 Rs. 14,000
2. Outstanding liabilities for wages Rs. 1,200 and salaries Rs. 2,800
3. Depreciation @ 5% p.a. is to be provided on all fixed assets.
 4. Write-off Bad Debts Rs. 1,500.
5. Insurance premium paid in advance Rs. 400.
6. Accrued commission Rs. 500.

Problem 4: From the books of ABC Traders the following Trial Balance has
been prepared on 31st March, 2009:
Debit Balance Rs. Credit Balance Rs.
Purchase 1,93,500 Sales 3,00,000
(Adjusted by 23,250 Sales Tax
Stock A/c) collected 24,500
Wages 18,000 Interest on
Carriage on Investment 700
purchases 625 Provision for
Prepaid insurance 600 doubtful debts 2,500
(1.4.2008) Cash Discount 4,500
Bad Debts 7,750 Capital 71,175
Rent & Insurance 13,500 Creditors 18,750
Salary 37,500 Outstanding
Debtors wages 900
Stock 20,500 (31.3.2009)
(31.3.2009) 10,000
Investment 14,500
Cash
Accrued Interest 800
(31.3.2009) 10,500
Furniture 50,000
Plant 22,000
Income Tax
4,23,025
4,23,025

Prepare the Trading Profit and Loss Account for the year ended 31 st March,
2009, and the balance sheet as on that date, taking into consideration the
following adjustments:
 1. On 1st October, 2008 plant worth Rs. 10,000 was purchased on credit
but no entry has been passed.
2. Outstanding Expenses: Rent Rs. 500, Salary Rs. 600
3. Prepaid Expenses: Insurance Rs. 250, wages Rs. 400
4. Goods worth Rs. 2,750 were taken for personal use by the owner but
no entry has been made.
5. Write off depreciation on plant and furniture @ 10% p.a.
6. Write off Rs. 500 from debtors as bad debts and create provision for
doubtful debts @ 5% and 2% provision for discount on debtors.

FINAL ACCOUNTS OF NPO:

Not for Profit Organisations – An Introduction

Not for Profit organisations which are not engaged in business activities.
Their objective is not to make profits but to serve. Examples of such
organisations are: schools, hospitals, charitable institutions, welfare
societies, clubs, public libraries, resident welfare association, sports club etc.
These organisations provide services to their members and to the public in
general.
Their main source of income is membership fees, subscription, donation,
grant-in-aid, etc.

Characteristics of Not-for-profit organisations (NPOs)

Following are the main characteristics or the salient features of Not for
Profit organisations (NPOs) :
1. The objective of such organisations is not to make profit but to provide
service to its members and to the society in general.
2. The main source of income of these organizations is not the profit earned
from purchase and sale of goods and services but is admissions fees,
subscriptions, donations, grant-in-aid, etc.
3. These organisations are managed by a group of persons elected by the
members from among themselves. This group is called managing
committee.
4. They also prepare their accounts following the same accounting principles
and systems that are followed by business for profit organisations that are
run with an objective to earn profits

The type of financial statements that are generally prepared by Not-for-

Profit Organisations (NPOs) are :
1. Receipts and Payments Account: The receipts and payments account is
the summary of cash and bank transactions which helps in the preparation of
Income and expenditure Account and the Balance Sheet.
2. Income and Expenditure Account: Income and Expenditure A/c is
similar to Profit and Loss Account. NPOs usually prepare the Income and
Expenditure Account and balance Sheet with the help of Receipts and
Payments Account.
3. Balance Sheet

The main features of Receipts and Payments Account :

1. It is prepared at the end of the year taking items from the cash book.
2. It is the summary of all cash transactions of a year put under various
heads.
3. It records all cash transactions which occurred during the year concerned
irrespective of the period they relate to i.e. previous/current/next year.
4. It records cash transactions both of revenue nature and capital nature.
5. Like any other account it begins with opening balance and ends with
closing balance.

Format of Receipts and Payments Account

Receipts and Payments Account
 For the year ended on ................ closing balance.
Dr.
Cr.
Particulars Amt. Particulars Amt.
(Rs.) (Rs.)
Balance b/d : Purchase of Assets
Cash Printing and stationery
Bank Repairs and Renewal
Donations Newspapers/Magazines
Legacies Rent and taxes
Membership fees Postage
Entrance fees Investments
Subscriptions Conveyance
Donations Honorarium Charity
Lockers Rent Upkeep of Ground
Sale of fixed assets Insurance Telephone Charges
Premium
Interest on investments Balance c/d :
Miscellaneous Receipts Cash
Sale of old periodicals Bank

SPECIFIC ITEMS OF RECEIPTS AND PAYMENTS ACCOUNT

1. Subscription:
It is a regular payment made by the members to the organisation. It is
generally contributed annually. It appears on the debit side i.e. Receipts side
of the Receipts and Payments Account.
2. Entrance fees or Admission fees:
Whenever a person is admitted as a member of the organisation certain
amount is charged from him/her to give him/her admission. This is called
entrance fee or admission fee. It is an item of income and is shown on the
debit side of the Receipts and Payments Account.

3. Life membership fees

Membership, if granted to a person for the whole life, special fee is charged
from him/her, this is called life membership fees. It is charged once in the
life time of a member. It is a capital receipt for the organisation
4. Endowment fund
It is a fund which provides permanent means of support for the organisation.
Any contribution towards this fund is an item of capital receipt.
5. Donation
Donation is the amount received from some person, firm, company or any
other body by way of gift. It is also an important item of receipt. It can be of
two types :
(a) Specific donation : It is a donation received for a specific purpose.
Examples of such donations are : donation for library, donation for building,
etc.
(b) General donation : It is a donation which is received not for some
specific purpose. It can be of two types :
(i) General donation of big amount
(ii) General donation of small amount

6. Legacy
It is the amount which is received by organisations as per the will of a
deceased person. It is treated as a capital receipt.
7. Sale of old newspapers/periodicals and sports material
Old newspapers used/condemned sport material is sold and fetches some
money. It is a source of revenue. It is taken to the debit of Receipts and
Payments account.
8. Purchase of fixed assets
Assets such as building, machinery, furniture, books etc. are purchased for
the organisation. These are items of capital expenditure. These are shown on
the credit side i.e. the payment side of Receipts and Payments Account.
9. Payment of honorarium
This is another item of payment. This is an amount paid to persons who are
not the employees of the organisation but take part in the management of the
organisation. Remuneration paid to them is called honorarium. For example,
payment made to the secretary of the club as honorarium. This is a payment
of revenue nature.
Difference between Receipts and Payments Account and Cash Book
Receipts and Payment Account Cash Book
1.It is prepared at the end the It is prepared on day to day basis.
accounting year.
2.Every item appears only once. Items appear number of times on
different dates depending upon their
occurrence.
3. It serves the purpose of Trial It is a means of maintaining record of
Balance to prepare the financial cash transactions.
statements.
4. It reflects the activities of the It is only a systematic record of day
organization. to day cash transactions.
5. It is prepared only by Not-for- It is also prepared by business
Profit Organisations (NPOs). organisations meant to earn profit.

It is the summary of income and expenditure for the accounting year. It is

just like a profit and loss account prepared on accrual basis in case of the
business organizations. It includes only revenue items and the balance at the
end represents surplus or deficit. The Income and Expenditure Account
serves the same purpose as the profit and loss account of a business
organization does. All the revenue items relating to the current period are
shown in this account, the expenses and losses on the expenditure side and
incomes and gains on the income side of the account.
Features of Income & Expenditure Account.
 It is the account of revenue income and revenue expenditure of
an accounting year.
 It is not confined to cash transactions only, i.e. non-cash
transactions are also included in it.
 The whole amount of the income or expenditure- whether
received or paid in cash or not- is received in it.
 All expenditures are recorded on Debit side and all incomes on
Credit side.
 Only revenue transactions are recorded here.
  Its balance may be either debit or credit.
 Its balance is transferred to Capital Fund.
 It has no opening balance.
 Its closing balance either surplus or deficit. Credit balance
indicates surplus while debit balance indicates deficit.
 Transactions relating to the current year only are recorded in it.
 It is prepared on Accrual basis.
 It is, infect, similar to Profit & Loss Account of a profit-seeking
business concern.
 It is within the Double Entry System.
 It is accompanied by Balance Sheet.
 It is compulsory. It must be prepared in order to ascertain the
true result of a concern

Difference b/w Income & Payments A/c and Receipt & Payments A/c

1. Nature
Receipts and payments account is a summary of cash transactions for a
period and it is a real account. Income and expenditure account is a
summary of expenditure and income like trading and profit and loss account
and it is a nominal account.

2. Objective
Receipts and payments account is prepared to show cash and bank receipts
and payments during the period to derive closing balance of cash and bank.
Income and expenditure account is prepared to show the net result of the
operation during the period to derive surplus or deficit.

3. Recording
All cash and cheque receipts are recorded on debit side of receipts and
payments account where as all cash and bank payments are recorded on
credit side. In income and expenditure account all expenditure of revenue
nature are recorded on debit side and all incomes of revenue nature are
recorded on credit side.
4. Capital And Revenue Items
There is no distinction between capital and revenue receipts and payments in
receipts and payments account. All expenses and incomes of revenue nature
are recorded on accrual basis in income and expenditure account.

5. Contents
Receipts and payments account contains only cash and bank transactions.
Income and expenditure account contains both cash and non-cash expenses
and incomes of revenue nature.

6. Balance Sheet Requirement

Receipts and payments account is not required to prepare balance sheet.
Income and expenditure account is required to prepare balance sheet.

7. Adjustments
No adjustments are required in receipts and payments account. In income
and expenditure account adjustments are made because it is prepared on
accrual basis.

Problem 1: From the following particulars prepare a Receipts and Payments

account and an Income and Expenditure Account for the year ending 31 st
December 2008:
BALANCE SHEET
As on December 31, 2008
Liabilities Amount Assets Amount
(Rs.) (Rs.)
Outstanding Creditors Cash at Bank 3,000
Capital Fund 425 Government Securities
15,575 Accrued Interest 10,000
Outstanding Subscription 125
Books
Furniture 400
1,000
 1,475

16,000 16,000

Transactions during 2008: Subscription received Rs. 2500; Receipts from

entertainment Rs. 1000; Interest received on securities Rs. 475; Entrance Fee
received Rs. 500; Sale of old furniture Rs. 75.
Expenses: Rent Rs. 600, Printing Rs. 150; Advertising Rs. 200; Petty
expenses Rs. 55; Purchase of Government Securities Rs. 2500; Payment to
creditors Rs. 425; for furniture Rs. 400; Library books Rs. 300 and cost of
entertainment Rs. 750.
Liabilities and Outstanding on 31 st December, 2008: For printing Rs. 75;
Rent Rs. 100; Subscription Rs. 325; and interest on securities Rs. 150.

Problem 2: From the following Receipts and Payments Account of Fun

Club, prepare an Income and Expenditure Account for the year ending
March 31, 2009:

Receipts Amount Payments Amount

(Rs.) (Rs.)

Cash in Hand (opening) 4,500 Salaries 49,500

Cash at Bank (opening) 1,26,000 Paper, ink, etc 1,950
Subscriptions 1,52,400 Repairing Expenses 7,020
Donations 72,000 Billiard Table 58,050
Interest on Investments 1,800 Purchase of 61,980
Entrance Fees 18,000 investment 6,600
Interest Received from 6,300 Misc. Expenses 1,23,000
Bank 900 Purchase of Furniture 2,700
Sale of old newspaper Insurance Premium 4,200
Cash in Hand 66,900
(Closing)
Cash at Bank
3,81,900 (Closing) 3,81,900
 i) Subscriptions in Arrear for the year ended March 31, 2009 Rs.
13,500 and subscriptions in Advance for the year ended March 31,
2010 Rs. 3,900.
ii) Insurance Premium prepaid Rs. 300
iii) Misc. Expenses outstanding Rs. 900
iv) 50% of Donation is to be capitalised.
v) Entrance Fees are to be treated as Revenue Income.

Problem 3: From the following Receipts and Payments Account of Defence

Club, prepare an Income and Expenditure Account for the year ended
December 31, 2008 and the Balance Sheets as at January 1, 2008 and
December 31, 2008.

Receipts & Payments Accounts

For the year ended December 31, 2008
Receipts Amount Payments Amount
(Rs.) (Rs.)
To Balance as on January By Salaries 1,400
1, 2008 350 By General 300
To Subscriptions: Expenses
2007 250 By Electricity 200
2008 1,000 Charges 500
2009 200 1,450 By Books 400
To Rent Received from the By Newspapers
use of Hall 700 By Balance (as on 200
To Profit from 400 December 31, 2008)
Entertainment 100
To Sale of old newspapers
3,000 3,000
i) The club has 50 members each paying an annual subscription of
Rs. 25. Subscriptions Outstanding on 31st December, 2007 were to
the value of Rs. 300.
ii) On the 31st December, 2008 Salaries Outstanding amounted to
Rs. 100. Salaries paid in 2008 included Rs. 300 for the year 2007.

Problem 4: The following is the Receipts and

Payments Accounts of the Mumbai Club for the year ending December
31, 2007:

Receipts Amount Payments Amount (Rs.)

(Rs.)
To Balance b/d 3,000 By Rent 52,000
To Entrance Fees 5,500 By Stationery, Expenses,
To Subscriptions: etc. 30,680
2006 2,000 By Wages 53,300
2007 1,69,000 By Billiards Table 39,000
2008 3000 1,74,000 By Repairs and
To Locker Rents 5,000 Renewals 8,060
To Special Subscriptions By Interest 15,000
for Governor’s party 34,500 By Balance c/d 23,960

2,22,000 2,22,000

Locker Rents, Rs. 600, were for 2006 and Rs. 900 is still owing; Rent Rs.
13,000, pertained to 2006 and Rs. 13,000 is still owing; Stationery
Expenses etc. Rs. 3,120 related to 2006, still owing Rs. 3,640;
Subscriptions unpaid for 2007 Rs. 8,680; Special subscriptions for
Governor’s party outstanding Rs. 5,500.

The Club owned Sports Materials of the value Rs. 1, 60,000 on 1 st

January, 2007. This was valued at Rs. 1, 35,000 on 31 st December, 2007.
The Club took a loan of Rs. 2, 00,000 in 2006.
 Prepare the Income and Expenditure Account and Balance Sheet as at
December 31, 2007.

Problem 5: The following is the Receipts and Payments Account of Star

Club for the year ended 31st December, 2004:

Receipts Amount Payments Amount (Rs.)

(Rs.)
Cash in Hand (1st Bank Overdraft (1st
January,2004) 15,000 January,2004) 31,000
Subscriptions: Investment in Securities 30,000
2003 3,000 Furniture 14,500
2004 1,62,000 Salaries 62,000
2005 1,500 1,66,500 Stationery and Printing 8,900
Income from Misc. Expenses 14,200
Entertainments 2,900 Balance on 31st December,
Entrance Fees 6,700 2004:
Interest on Securities 4,800 Cash in Hand 5,500 36,500
Sale proceeds of old chairs 1,200 Cash at
Bank 31,000

1,97,100 1,97,100

Prepare Income and Expenditure Account of the Club for the year ended
31st December, 2004 and a Balance Sheet as at that date having due
regard to the following additional information:

a) The Club had 1,800 members; each paying an annual subscription

of Rs. 100, Subscriptions amounting to Rs. 900 are in arrears in
respect of the year 2003.
b) Stock of the Stationery on 31st December, 2003, was Rs. 1,250 and
at 31st December, 2004 Rs. 870
c) Entrance Fees are to be capitalised.
d) Salaries of Rs. 5,500 for December 2004 is outstanding. Expenses
occurring at 31st December, 2003 amounted to Rs. 1,320. The Club
 has paid Rs. Rs. 5,500 in the year 2003 towards telephone charges
of which Rs. 1,250 relate to 2004.
e) As on 31st December, 2003 Premises stand in the books at Rs. 2,
45,000 and Investments at Rs. 65,000. Depreciate Premises and
Furniture by 5%.