Question

Following is the Balance Sheet on 1st April 2019 and Receipts and Payments Accounts of M.J.Liabrary. You are required to prepare Income and Expenditure Account for the year ended 31st March, 2020 and Balance Sheet as of that date.

Balance Sheet as on 1st April, 2019
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital Fund	15,00,000	Furniture	1,00,000
Subscription Received in Advance	6,000	Books	13,01,000
Outstanding Expenses	4,000	Stock of Postage Stamps	1,000
		Investment in Shares	14,000
		Cash in Hand	94,000
	15,10,000		15,10,000

 

Dr.	Receipts and Payments Account for the year ended 31st March, 2020		Cr.
Receipts	Amount (₹)	Payments	Amount (₹)
To Balance b/d - Cash	94,000	By Salaries	48,000
To Members Subscription	3,60,000	By Purchase of postage Stamps	3,000
To Entrance fees	60,000	By Books (Purchased on 1-10-19)	2,00,000
To Hire of Lecture Hall	24,000	By Outstanding Expenses Paid	4,000
To Interest on Shares	10,000	By Investments in Fixed Deposits	1,00,000
To Life Members Fee	20,000	By Furniture (Purchases on 1-7-2019)	60,000
		By Printing and Stationery	12,000
		By Rent	36,000
		By Balance c/d - Cash	1,05,000
	5,68,000		5,68,000

Adjustments:

(1) Depreciation on Books at 10% p.a.

(2) Depreciation on Furniture at 10% p.a.

(3) 50% Entrance fees and whole amount of Life Membership Fees should be capitalised.

(4) Library had 2,000 members paying Subscription ₹ 200 each.

(5) The value of unused Postage Stamps was ₹ 400.

Answer 1

Dr.	In the Book of M. J. Library Income and Expenditure Account for the year ended 31st March, 2020				Cr.
Expenditure	Amount (₹)	Amount (₹)	Income	Amount (₹)	Amount (₹)
To Salaries		48,000	By Members Subscription	3,60,000	4,00,000
To Postage Stamps			Add: Subscription received in advance	6,000
Opening Stock	1,000	3,600	Add: O/s Subscription	34,000
Add: Purchases	3,000		By Entrance Fees	60,000	30,000
	4,000		Less: 50% Capitalised	30,000
Less: Closing Stock	400		By Hire of Lecture Hall		24,000
To Printing and Stationery		12,000	By Interest on Shares		10,000
To Rent		36,000
To Depreciation on:
Books	1,40,100	1,52,425
Furniture	12,325
To Surplus (Excess of income over expenditure)		2,11,975
		4,64,000			4,64,000

 

Balance Sheet as on 31st March, 2020
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital fund	15,00,000	17,61,975	Cash in Hand		1,05,000
Add: 50% Entrance fees	30,000		Furniture	1,00,000	1,47,675
Life Membership Fees	20,000		Add: Purchase	60,000
Surplus	2,11,975			1,60,000
			Less: 8.5% Depreciation	12,325
			Books	13,01,000	13,60,900
			Add: Purchases	2,00,000
				15,01,000
			Less: Depreciation	1,40,100
			Stock of Postage Stamps		400
			Investment in Shares		14,000
			Investment in Fixed Deposits		1,00,000
			O/s Subscription		34,000
		17,61,975			17,61,975

Working Note:

(1) Depreciation on books:

Opening balance `-> 13,01,000 xx 10/100 = "Rs." 1,30,100`

Add: Books purchased on 1-10-2019

(for 6 months) `2,00,000 xx 10/100 xx 6/12` = ₹ 10,000

Total Depreciation = ₹ 1,40,100

(2) Depreciation on Furniture:

Opening balance `-> 1,00,000 xx 8.5/100 = "Rs." 8,500`

Add: Furniture purchased on 1-7-2019

(for 9 monthns) `60,000 xx 9/12 xx 8.5/100` = ₹ 3,825

∴ Total Depreciation = ₹ 12,325

(3) There are 2000 members of library paying ₹ 200 each means total subscription should be ₹ 4,00,000

Subscription received during the year	₹ 3,60,000
Subscription received in advance in previous year	₹ 6,000
Outstanding subscription of the current year	₹ 34,000
(4,00,000 - 3,60,000 - 6000 = ₹ 34,000)	₹ 4,00,000

(4) Outstanding expenses shown in the opening balance sheet and amount is paid during the year, so no entry in the closing balance sheet for o/s expenses.