Question

Jaipur Club has a prize fund of ₹ 6,00,000. It incurs expenses on prizes amounting to ₹ 5,20,000. The expenses should be: 

Options

• debited to income and expenditure account.

• presented on the asset side of the balance sheet.

• debited to income and expenditure account and presented on the asset side of the balance sheet.

• deducted from the prize fund on the liability side of the balance sheet.

Answer 1

Deducted from the prize fund on the liability side of the balance sheet.

Explanation:

Since the balance of the Prize Fund exceeds the expenses incurred so they shall be directly deducted from the Prize Fund on the liability side of the balance sheet. Hence, the correct answer is deducted from the prize fund on the liability side of the balance sheet.