Question

(Outstanding Expenses and Prepaid Expenses)

From the following information supplied to you, prepare Income and Expenditure Account for the year ending on 31.03.2020 and Balance Sheet as on that date for “Morya Sports Club” Thane.

Balance Sheet as on 01.04.2019.
Liabilities	Amount ₹	Assets	Amount ₹
Capital Fund	64,500	Machinery	69,000
Bank overdraft	38,000	Outstanding Subscriptions	8,000
Outstanding Salary	4,000	Prepaid Insurance Premium	2,000
		Furniture	15,000
		Cash in Hand	12,000
		Outstanding Locker’s Rent	500
	1,06,500		1,06,500

 

Dr.	Receipts and Payments Account for the year ended 31.03.2020				Cr.
Receipts		Amount ₹	Payments	Amount ₹
To Balance b/d		12,000	By Balance b/d (Bank Overdraft)	38,000
To Subscription		1,05,000	By Salary	17,500
To Entrance Fees (Capitalised)		9,300	By Insurance Premium	11,000
To Locker Rent		1,500	By Interest	1,400
To Donations (Capitalised)		800	By Refreshment Expenses	4,200
			By Furniture	30,000
			By Balance c/d
			Cash in Hand	6,500
			Cash at Bank	20,000
		1,28,600		1,28,600

Adjustments :

1) Subscription received includes ₹ 3,000 for 2018 - 19 and Outstanding Subscription for 2019 - 20 was ₹ 14,000.

2) On 31.03.2020, Prepaid Insurance Premium was ₹ 2,500.

3) Depreciate Furniture by ₹ 3,000.

4) Locker Rent Outstanding for 2019 - 20 is ₹ 400

Answer 1

Dr.	In the books of ‘Morya Sports Club’ Thane Income and Expenditure Account for the year ended 31st March, 2020						Cr.
Expenditure		Amount ₹	Amount ₹	Income	Amount ₹	Amount ₹
To Salary		17,500	13,500	By Subscription	1,05,000	1,16,000
Less: Outstanding salary of 2018-19		4,000		Add: Outstanding Subscription for Current Year	14,000
To Insurance Premium		11,000	10,500		1,19,000
Less: Prepared Insurance Premium		2,500		Less: Subscription Received of 2018-19	3,000
		8,500		By Locker Rent	1,500	1,400
Add: Prepaid Insurance premium of current year Paid in previous year		2,000		Add: Outstanding Locker Rent	400
To Depreciation					1,900
Furniture			3,000	Less: Outstanding Locker Rent of Previous Year	500
To Interest			1,400
To Refreshment Expenses			4,200
To Surplus (Excess of income over Expenditure)			84,800
			1,17,400			1,17,400

 

Balance Sheet as on 31st March, 2020
Liabilities		Amount ₹	Amount ₹	Assets	Amount ₹	Amount ₹
Capital Fund		64,500	1,59,400	Machinery		69,000
Add: Surplus		84,800		Outstanding Subscription (2018 – 19) (8,000 – 3,000)		5,000
Add: Entrance fees (Capitalised)		9,300		Outstanding Subscription (2019–20)		14,000
Add: Donations (Capitalised)		800		Prepaid Insurance Premium		2,500
				Furniture	15,000	42,000
				Add: Purchases	30,000
					45,000
				Less: Depreciation	3,000
				Outstanding Locker Rent (2019-20)		400
				Cash in Hand		6,500
				Cash at Bank		20,000
			1,59,400			1,59,400

Working Notes :

(1) Outstanding subscription (2018–19) ₹ 8,000 given in b/s against that ₹ 3,000 received in 2019–20.

Means still receivable subscription = ₹ 5,000 (8,000 – 3,000).

(2) Prepaid insurance premium (2018 – 19) ₹ 2,000 is for the current year. Therefore, in current year’s insurance premium, ₹ 2,000 is to be added and then subtract current year’s prepaid insurance premium.

(3) Outstanding salary of (2018 – 19), ₹ 4,000 of the previous year is to be subtracted from the current year’s salary.

(4) The total amount of donations and entrance fees are to be capitalised so add the entire amount of both the items to the Capital fund.

(5) Outstanding locker’s rent (2018 – 19) ₹ 500 is given in Balance Sheet. It is to be subtracted from current year’s locker’s rent and then add current year’s outstanding locker rent.