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Question 48 Chapter 1 of +2-A
48. Following Receipts and Payments Account was prepared from the Cash Book of Delhi Charitable Trust for the year ending 31st March 2019:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March 2019
| Receipts | Rs. | Payments | Rs. |
| To Balance b/d: | By Charity | 1,15,000 | |
| Cash in Hand | 1,15,000 | By Rent and Taxes | 32,000 |
| Cash at Bank | 1,26,000 | By Salary | 60,000 |
| To Donations | 90,000 | By Printing | 6,000 |
| To Subscriptions | 4,28,000 | By Postage | 3,000 |
| To Legacies Donations | 1,80,000 | By Advertisements | 45,000 |
| To Interest on Investment | 45,000 | By Insurance | 20,000 |
| To Sale of old Newspaper | 2,000 | By Furniture | 2,16,000 |
| By Investment | 2,30,000 | ||
| By Balance c/d: | |||
| Cash in Hand | 99,000 | ||
| Cash at Bank | 1,60,000 | ||
| 9,86,000 | 9,86,000 |
Prepare Income and Expenditure Account for the year ended 31st March 2019, and Balance Sheet as on that date after the following adjustments:
(i) Insurance premium was paid for insurance taken w.e.f. 1st July 2018.
(ii) Interest on investment ₹ 11,000 accrued was not received.
(iii) Rent ₹ 6,000; Salary ₹ 9,000 and advertisement expenses ₹ 10,000 outstanding as on 31st March 2019.
(iv) Legacy Donation is towards the construction of Library Block.
Income and Expenditure Account (for the year ended 31st March 2019)
| Expenditure |
Amount | Income |
Amount | |||
|---|---|---|---|---|---|---|
| To Charity | 1,15,000 | By Subscriptions | 4,28,000 | |||
| To Rent and Taxes | 32,000 | By Donations | 90,000 | |||
| Less: Prepaid Expenses | 6,000 | 38,000 | By Interest on Investments | 45,000 | ||
| To Salary | 60,000 | Add: Accrued Interest | 11,000 | 56,000 | ||
| Add: Outstanding | 9,000 | 69,000 | By Sale of Old Newspapers | 2,000 | ||
| To Advertisement | 45,000 | |||||
| Add: Outstanding | 10,000 | 55,000 | ||||
| To Insurance | 20,000 | |||||
| Less: Prepaid Insurance *1 | 5,000 | 15,000 | ||||
| To Printing | 6,000 | |||||
| To Postage | 3,000 | |||||
| To Surplus(Bal Fig.) | 2,75,000 | |||||
| 5,76,000 | 5,76,000 | |||||
* Means: - see the working note for calculation
Balance Sheet (for the year ended 31st March 2018)
| Liabilities |
Amount | Assets |
Amount | |
|---|---|---|---|---|
| Cash in Hand | 1,15,000 | |||
| Cash and Bank | 1,26,000 | |||
| Capital Fund (Balancing Figure) | 2,41,000 |
|||
| 2,41,000 | 2,41,000 | |||
Balance Sheet (for the year ended 31st March 2018)
| Liabilities |
Amount | Assets | Amount | |||
|---|---|---|---|---|---|---|
| Capital Fund | 2,41,000 | Furniture | 2,16,000 | |||
| Add: - Surplus | 2,75,000 | Investments | 2,30,000 | |||
| Add: - Legacy | 1,80,000 | 6,96,000 | ||||
| Outstanding Rent | 6,000 | Prepaid Insurance | 5,000 | |||
| Outstanding Salary | 9,000 | Accrued Interest on Investments | 11,000 | |||
| Outstanding Advertisement Exp. | 10,000 | Cash in Hand | 99,000 | |||
| Cash at Bank | 1,60,000 | |||||
| 5,30,400 | 5,30,400 | |||||
Working Note: -
*1: - Calculation of Prepaid Insurance
Insurance premium was paid for insurance taken w.e.f. 1st July 2018 So, it will be valid for a minimum of 1 year (up to 30th June 2019) But our Financial Year ended on 31st March 2019. that’s why from 1st April 2019 to 30th June 2019 for 3 months the premium was paid extra.
This is Related to the next year not the expense for this year so we have to subtract it from the total amount.
= 20,000 X 3/12
Prepaid Insurance Premium = 5,000/-
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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