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Date:-12/28/2011

GLOBAL
EDUCATION POINT

NOT FOR PROFIT ORGANISATION

SUBITITLE:-NON PROFIT ORGANISATION [AUTHOR:-MAHESH SOLANKI] MOBILE NO:-9166579934

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

ACCOUNTING FOR NOT FOR PROFIT ORGANISATION


Meaning of non-trading concerns: - Non-trading concerns are such organisations, which are formed with non-profit motive. They are set up with an aim of promoting and encouraging literacy, social religious and physical activities. These organisations are called non-commercial institutions. Such type of institutions do not trade in commodities like other business persons and organisations rather, they are engaged in public service activities. A. Example: -Educational institutions, Dharmshalas, Orphanages, Hospitals, Libraries, Temples, Clubs, Sports association are non-trading concerns.

Example of non trading condern

1.Educational institutions

2.Libraries

3.Hospitals

4.Orphanages

5.Dharmshalas

6.Clubs

7.Temples

8.Sports association

Meaning of professional persons:-Those people who are not engaged in the purchases and sales of commodities and earn money with their knowledge and expertise are called professionals. These people conduct their business or profession either individually or jointly by forming firm or a company. A. Example: - Doctors, Advocates, Engineers and Chartered Accountants are professional persons.

Example of professionals person

1.Doctors

2.Advocates

3.Chartered accountants

4.Engineers

Meaning of Receipts: - Actual amount received from capital or revenue nature items are called receipts. It may be related to current year, last year and next year. A. Example:-Subscription due during the year Rs.60000 but actual amount received during the year Rs.50000 (including Rs.5000 last year and Rs.10000 next year), so actual receipts is Rs.50000.

Meaning of Payments:-Actual amount paid for capital or revenue items are called payments. It may be related to current year, last year and next year. A. Example:-Expenses due during the year Rs.50000 and actual amount paid during the year Rs.40000 (including Rs.5000 last year and Rs.6000 for next year), so actual payment is Rs.40000.

Meaning of Incomes:-Current year revenue nature incomes which is received or receivable is called incomes. A. Example:-Subscription received during the year Rs.50000 and Accrued subscription (Outstanding subscription) during the year Rs.10000 and Unearned subscription for last year Rs.5000, then current year subscription is Rs.65000 (50000+10000+5000).

Meaning of Expenditure:-Current year revenue nature expenses which is paid or payable is called expenditures. A. Example:-Salary paid during the year Rs.60000 and outstanding salary during the current year Rs.5000 and prepaid salary in last year Rs.6000, and then current year revenue nature expenditure is Rs.71000 (60000+5000+6000).

Methods of maintaining accounts and the books maintained:A. Objectives of Commercial and non-commercial organisations:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 2

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Types of organisations

1.Commerical organisations

2.Non commerical organisations

B.

Commercial organisations:-The aim or an objective of these organisations is to earn profit. a. Accounting systems maintained by commercial organisations:1. Final accounts prepared by manufacturing concerns:-

Final account prepared by manufacturing concern

A.Manufacturing account

B.Trading account

C.Profit and loss account

D.Balance sheet

To find out cost of production

To find out gross profit or gross loss

To find out net profit or net loss

To find out financial position of the entity

2.

Final accounts prepared by trading concerns:-

Final account prepared by trading concern

A.Trading account

B.Profit and loss account

C.Balance sheet

To find out gross profit or gross loss

To find out net profit or net loss

To find out financial position of the entity

C.

Non-commercial organisations:-The aim or an objective of these organisations is to promoting and encouraging literacy, social religious and physical activities. a. Accounting systems maintained by non-trading concerns:1. Final accounts prepared by non-trading concerns: Receipts and Payments account:-To find out Cash or Bank balance (Debit bank balance or bank overdraft balance). Income and Expenditure account:-To find out Surplus (Excess of Incomes over Expenditures) or Deficit (Excess of Expenditures over Incomes). Balance sheet:-To find out financial position (Assets and liabilities situation) of the entity. BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 3

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Final account prepared by non trading concern

A.Receipts and Payments account

B.Income and Expenditure account

C.Balance sheet

To find out cash or bank balance

To find out Surplus or Deficit

To find out financial position of the entity

Books are kept by non-trading concerns:Books are kept by non-trading concerns

1.Cash book

2.Stock register

3.Membership register

4.Memorandum

All types of cash receipts and cash payment are shown in cash book which may be capital or revenue nature.

All types of assets records maintained in stock register.

All types information related to members are recorded in membership register.

All types credit transactions are recorded in memorandum book to remember credit transactions.

A.

Cash Book:-All types of cash transactions (Capital and Revenue nature) are recorded in cashbook according to date of transaction occurred. This book is based on method of cash basis of accounting. Column Cashbook is prepared by nontrading concerns. It is prepared on the basis of daily transactions. a. Performa of column cash book:Performa of column cashbook

Dr. side Date Particular Total Amount Rs. Total b. Fees Rs. Total Subscription Rs. Total Donation Rs. Total Date Total Amount Rs. Total Salary and wages Rs. Total Stationary Rs. Total

Cr.side Postage and telegram Rs. Total

Opening balance of cash and bank account-Opening balance of cash and bank account (Debit bank balance or bank overdraft balance) are recorded in this book. All types of capital and revenue transactions:-All types of capital and revenue transactions are recorded in this book. All types cash Receipts are recorded in:-Debit side of column cashbook. All types cash Payments are recorded in:-Credit side of column cashbook. Closing balance of column cashbook may be:1. 2. 3. Debit balance of cash account or Debit balance of bank account or Credit balance of bank account (Bank overdraft balance).

c. d. e. f.

B.

Stock Register:-The stock register is maintained by non-trading concerns for keeping all the particulars of assets. When something is purchased, an entry is made in the stock register. a. When an asset is in greater volume:-If an asset is in greater volume, a separate register can be kept for the same.

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 4

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) b. Example:-In case of a collage, separate register can be maintained for furniture, sports goods etc., so that physical verification of the items can be made with the help of the register.

C.

Members Register:-There are some regular members in such institutions. They also give donation to the institution. Secondly, entrance fee and membership fee are collected from new members. All these receipts are accounted in the members register. Memorandum Book:-Generally, there are no credit transactions in non-trading concerns. Even if there are, it is very rare. To keep such transactions in memory, the same are written in a separate book, which is called memorandum book. Whenever cash is received concerning these transactions, or whenever payment is made, the same is entered in the cashbook.

D.

Adjustment entries related to Outstanding expenses, Accrued incomes, Unearned income and Prepaid expenses:Current year adjustment entries Related expenses a/c Dr. To related outstanding expenses a/c (Being outstanding expenses related to current year) Related accrued income a/c To related income a/c (Being accrued income related to current year) Dr. Previous year adjustment entries Related outstanding expenses a/c Dr. To related expenses a/c (Being outstanding expenses related to previous year) Related income a/c Dr. To related accrued income a/c (Being accrued income related to previous year) Related unearned income a/c Dr. To related income a/c (Being unearned income related to previous year) Related expenses a/c Dr. To related prepaid expenses a/c (Being prepaid expenses related to previous year)

Particulars 1.Outstanding expenses

2.Accurd incomes

3.Uneraned incomes

Related income a/c Dr. To related unearned income a/c (Being unearned income related to current year) Related prepaid expenses a/c Dr. To related expenses a/c (Being prepaid expenses related to current year)

4.Prepaid expenses

Adjustment format:A. Related to Income:a. In account format form:Related income account

Dr. Particulars To related accrued income (P.Y accrued income) To related unearned income (C.Y unearned income) To Income and Expenditure account (C.Y revenue nature income) Amount (Rs.) ------------Total b. In statement form:Calculation of amount shown in related income account Particulars Related income received during the year (Receipt and Payment account) Add:-Accrued income related to current year Add:-Unearned income related to previous year Less:-Accrued income related to previous year Less:-Unearned income related to current year Amount shown in Income and Expenditure account B. Related to Expenses:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 5 ---------------------------------Detailed amount (Rs.) Net amount (Rs.) ----Particulars By Cash a/c(Amount shown in Receipts and Payments account) By related accrued income (C.Y accrued income) By related unearned income (P.Y unearned income)

Cr. Amount (Rs.) ------------Total

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

a.

In account format form:Related expenses account

Dr. Particulars To opening stock (Shown in opening balance sheet) To Cash a/c(Amount shown in Receipts and Payments account) To related outstanding expenses (C.Y outstanding expenses) By related prepaid expenses (P.Y prepaid expenses) Amount (Rs.) --(IF)-------------Total b. In statement form:Calculation of amount shown in related expenses account Particulars Related expense paid during the year (Receipt and Payment account) Add:-Opening stock Add:- Outstanding expenses related to current year Add:-Prepaid expenses related to previous year Less:-Closing stock Less:-Prepaid expenses related to current year Less:-Outstanding expenses related to previous year Amount shown in Income and Expenditure account Adjustment format:-----------------------------------------Detailed amount (Rs.) Net amount (Rs.) ----Particulars By closing stock (Shown in closing balance sheet) By related outstanding expenses (P.Y outstanding expenses) By related Prepaid expenses (C.Y prepaid expenses) By Income and Expenditure account (C.Y revenue nature expenses)

Cr. Amount (Rs.) --(IF)-------------Total

Current year SHORT NAME OF CURRENT YEAR AND PREVIOUS YEAR Previous year

P.Y

C.Y

+
C.Y

P.Y Expenses related adjustment Income related adjustment

+
C.Y

P.Y

Outstanding Expenses

Accrued Income

Liabilities side Income related adjustment Expenses related adjustment

Assets side

Unearned Income C.Y P.Y

Prepaid Expenses C.Y P.Y

Some special heads relating to non-trading concerns:A. Entrance fees:-These institutions collect entrance fee from members when they enroll themselves as member. Entrance fee is also collected from the students in the academic institutions.

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 6

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Particular When information is not given about entrance fees then presentation When entrance fees treated as capital nature then presentation When some portion of entrance fees treated as capital nature then presentation

Treatment Entrance fees treated as revenue nature Entrance fees treated as capital nature Some portion treated as capital nature

Receipts and Payments account Actual received amount in receipts side Actual received amount in receipts side Actual received amount in receipts side

Income and Expenditure account Current year related revenue income in income side Not shown in Incomes and Expenditures account Current year related revenue income in income side

Balance sheet Not shown

Shown in liabilities side and add back in capital fund Capital nature portion add back in liabilities side in capital fund

a.

When information about entrance fees is not given in question then treatment and presentation in final accounts:Then whole amount of entrance fees is treated as revenue nature. Treatment of revenue nature entrance fees:1. Receipts and payment account:-Actual receipts entrance fees have shown in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account: - A Revenue nature entrance fee, which is related to current year, is shown in Income side (Credit side) of Income and expenditure account. Which may be received or receivable. Balance sheet:-Not shown in Balance sheet.

b.

2.

3. c.

Presentation of revenue nature entrance fees:1. Receipts and payment account:Receipts and Payments account for the year ending -----------

Dr. Date Receipts To entrance fees Amount Rs. ---Total 2. Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total 3. Balance sheet:Balance Sheet as on -------Liabilities Amount Rs. Total d. Assets Amount Rs. Total Incomes By Entrance fees Amount Rs. ---Total Date Payments

Cr. Amount Rs. Total

Cr.

When question say that whole amount of entrance fees is treated as capital nature then treatment and presentation in final accounts:-Then whole amount of entrance fees is treated as capital nature. Treatment of capital nature entrance fees:1. Receipts and payment account:-Actual receipts entrance fees have shown in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account:-Not shown in Income and Expenditure account.

e.

2.

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 7

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) 3. f. Balance sheet: - A Capital nature entrance fee is added back in capital fund in liabilities side of balance sheet.

Presentation of capital nature entrance fees:1. Receipts and payment account:Receipts and Payments account for the year ending -----------

Dr. Date Receipts To entrance fees Amount Rs. ---Total Date Payments

Cr. Amount Rs. Total

2.

Income and expenditure account:Income and Expenditure account for the year ending------------

Dr. Expenditure Amount Rs. Total 3. Balance sheet:Balance Sheet as on --------Liabilities Capital fund Add:-Capital nature entrance fees ------Amount Rs. ---Total g. Assets Incomes

Cr. Amount Rs. ---Total

Amount Rs.

Total

When information about entrance fees in given and say entrance fees, some portion is treated as capital nature then:-Then some portion is treated as capital nature and balance portion is treated as revenue nature. Treatment of capital and revenue nature entrance fees:1. Receipts and payment account:-Actual receipts entrance fees showed in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account-A Revenue nature entrance fee is shown in Income side (Credit side) of Income and Expenditure account. This may be received and receivable. Balance sheet:-A Capital nature entrance fee is added back in capital fund in liabilities side of balance sheet.

h.

2.

3. i.

Presentation of capital and revenue nature entrance fees:1. Receipts and payment account:Receipts and Payments account for the year ending ---------

Dr. Date Receipts To entrance fees Amount Rs. --Total 2. Income and expenditure account:Income and Expenditure account for the year ending--------Dr. Expenditure Amount Rs. Total BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Incomes By Revenue nature Entrance fees Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. ---Total

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

3.

Balance sheet:Balance Sheet as on --------Liabilities Amount Rs. ----------Total Total Assets Amount Rs.

Capital fund Add:- Capital nature entrance fees

B.

Life membership:-There is a provision in the byelaws of non-trading organisations that a person can become life member by depositing life membership fee. In such a situation, there is no need for that member to pay membership fee every year. The life membership fee received by an institution is not only for the current year rather this amount covers or is related to the whole life of an institution. Treatment Receipts and Payments account Actual received amount in receipts side Actual received amount in receipts side Actual received amount in receipts side Income and Expenditure account Not shown Balance sheet

Particular

When information is not given about life membership fees then presentation When life membership fees treated as revenue nature then presentation When some portion of life membership fees treated as revenue nature then presentation a.

Life membership fees treated as capital nature Life membership fees treated as revenue nature Life membership some portion is treated as revenue nature and balance portion is treated as capital nature

Shown in balance sheet liabilities and add back in capital fund Not shown

Current year related revenue incomes in income side Current year related revenue income in income side

Shown in balance sheet liabilities side and add back capital portion of entrance in capital fund

When information about life membership fees is not given in question then treatment and presentation in final accounts:-Then whole amount of life membership fees is treated as capital nature. 1. Treatment of capital nature life membership fees: Receipts and payment account:-Actual receipts life membership fees have shown in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account: - Not shown in Income and Expenditure account. Balance sheet:-Life membership fees whole capital nature amount will be add back in capital fund in liabilities side of balance sheet.

2.

Presentation of capital nature life membership fees: Receipts and payment account:Receipts and Payments account for the year ending -----------

Dr. Date Receipts To life membership fees Amount Rs. ---Total Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total Balance sheet:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Incomes Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. Total

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Balance Sheet as on -------Liabilities Capital fund Add:-Capital nature life membership fees ------Amount Rs. ---Total b. Total Assets Amount Rs.

When question say that whole amount of life membership fees is treated as revenue nature then treatment and presentation in final accounts:-Then whole amount of life membership fees is treated as revenue nature. 1. Treatment of revenue nature life membership fees: 2. Receipts and payment account:-Actual receipts life membership fees have shown in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account- A Revenue nature life membership fees is shown in Income side (Credit side) Income and Expenditure account. This may be received and receivable. Balance sheet: - Not shown in balance sheet.

Presentation of revenue nature entrance fees: Receipts and payment account:Receipts and Payments account for the year ending -----------

Dr. Date Receipts To life membership fees Amount Rs. ---Total Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total Balance sheet:Balance Sheet as on --------------------------Liabilities Amount Rs. Total c. Assets Incomes By Revenue nature life membership fees related to current year Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. ---Total

Amount Rs. Total

When information about life membership fees is given and says life membership fees some portion is treated as revenue nature then:-Then some portion is treated as revenue nature and balance portion is treated as capital nature. 1. Treatment of capital and revenue nature life membership fees: Receipts and payment account:-Actual receipts life membership fees showed in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account-A Revenue nature life membership fee is shown in Income side (Credit side) of Income and Expenditure account which may be received and receivable.

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 10

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Balance sheet:-A Capital nature life membership fee is added back in capital fund in liabilities side of balance sheet.

2.

Presentation of capital and revenue nature entrance fees: Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To life membership fees Amount Rs. --Total Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total Balance sheet:Balance Sheet as on ---------Liabilities Capital fund Add:- Capital nature entrance fees --------Amount Rs. ---Total C. Assets Incomes By Revenue nature life membership fees Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. ---Total

Amount Rs.

Total

Subscription:-It an important source of income for non-trading concern and it is used for management and functioning of non-trading concern. When information about subscription treatment is not given then it treated as revenue nature income. Treatment Treated as revenue nature Receipts and Payments account Actual receipts of subscription amount shown in receipts side Income and Expenditure account Current year related revenue income in Income side Balance sheet Not shown

Particular When subscription related information is not given then a.

Treatment of subscription:1. Receipts and payment account:-Actual receipts of subscription showed in Receipts side (Debit side) of Receipts and payment account, which may be related to current year, previous year and next year. Income and expenditure account-Revenue nature subscription is shown in Income side (Credit side) of Income and Expenditure account which may be received or receivable. Balance sheet:-Not shown in balance sheet.

2.

3. b.

Presentation of subscription:1. Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To subscription received Amount Rs. --Total Date Payments

Cr. Amount Rs. Total

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 11

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) 2. Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total 3. Balance sheet:Balance Sheet as on ---------Liabilities Amount Rs. Total D. Assets Amount Rs. Total Incomes By Revenue nature current year subscription Cr. Amount Rs. ---Total

Donation:-Donation has an important place in the functioning of non-trading concern. Donations are two types. Treatment Treated as revenue nature general donation Treated as capital nature specific donation Receipts and Payments account Actual received amount of general donation in receipts side Actual receipts amount of specific donation in receipts side Income and Expenditure account Revenue nature current year general donation in shown in Income side Not shown Balance sheet Not shown Liabilities side

Particular When information about general donation is given then When information about specific donation is given then a.

General donation:-When an amount received as donation is not meant for specific purpose, such donation is called general donation. 1. Treatment of general donation:-When general donation amount is lower than treatment: Receipts and payment account:-Actual receipts of general donation showed in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account-Revenue nature general donation is shown in Income side (Credit side) of Income and Expenditure account. When general donation amount is higher than it is not shown in Income and expenditure. Balance sheet:-Not shown in balance sheet.

2.

Presentation of general donation: Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To general donation Amount Rs. ---Total Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Incomes By Revenue nature general donation Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. ---Total

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GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Balance sheet:Balance Sheet as on ----------

Liabilities

Amount Rs. Total

Assets

Amount Rs. Total

b.

Special donation:-When an amount received as donation is meant for specific purpose, such donation is called specific donation. In addition, if general donation amount in higher than treatment of general donation same as special donation and that types of donation is treated as capital nature. 1. Treatment of special donation: 2. Receipts and payment account:-Actual receipts of special donation showed in Receipts side (Debit side) of Receipts and payment account Income and expenditure account-Special donation or General donation amount is very high then not shown in Income side (Credit side) of Income and Expenditure account. Balance sheet:-Specific donation is shown in liabilities side of balance sheet.

Presentation of special donation: Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To specific donation or Higher amount general donation Amount Rs. --Total Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total Balance sheet:Balance Sheet as on --------Liabilities Specific donation or Higher amount general donation Amount Rs. ---Total E. Legacy:-It is capital nature income for non-trading concern. Treatment Legacy amount treated as capital nature Receipts and Payments account Actual received amount in receipts side Income and Expenditure account Not shown Assets Incomes Date Payments

Cr. Amount Rs.

Total

Cr. Amount Rs. ---Total

Amount Rs. Total

Particular When information is not given about legacy then a.

Balance sheet Shown in liabilities side of balance sheet.

Treatment of legacy:1. Receipts and payment account:-Actual receipts of legacy showed in Receipts side (Debit side) of Receipts and payment account. BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 13

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

2. 3. b.

Income and expenditure account-Not shown in Income and Expenditure account. Balance sheet:-Shown in liabilities side of balance sheet as heading of legacy.

Presentation of legacy:1. Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To legacy received Amount Rs. --Total 2. Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total 3. Balance sheet:Balance Sheet as on ---------Liabilities Legacy Amount Rs. ---Total F. Assets Incomes Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. Total

Amount Rs. Total

Sale of sports material:-It is revenue nature income for non-trading concern. Sale of sports materials (used materials like old balls, bats, nets, etc.) is the regular feature with any Sports Club. It is usually shown as an income in the Income and Expenditure Account. Particular Treatment Sale of sports material treated as revenue nature Receipts and Payments account Actual received amount in receipts side Income and Expenditure account Current year related revenue income in income side Balance sheet Not shown

When information is not given about sale of sports materials then presentation a.

Treatment of sale of sports material:1. Receipts and payment account:-Actual receipts of sale of sports material showed in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account:-Revenue nature sale of sports material amount shown in Income side (Credit side) of Income and Expenditure account. Balance sheet:-Not shown in balance sheet.

2.

3. b.

Presentation of sale of sports material:1. Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To sale of sports material Amount Rs. --Total BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Date Payments

Cr. Amount Rs. Total

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GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) 2. Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total 3. Balance sheet:Balance Sheet as on ---------Liabilities Amount Rs. Total G. Assets Amount Rs. Total Incomes By sale of sports materials Cr. Amount Rs. ---Total

Sale of old newspapers, magazines and periodicals:-It is recurring nature revenue income for non-trading concern. Particular Treatment Treated as revenue nature Receipts and Payments account Actual received amount in receipts side Income and Expenditure account Current year related revenue income in income side Balance sheet Not shown

When information is not given about sale of old newspapers and magazines then presentation a.

Treatment of sale of old newspapers, magazines and periodicals:1. Receipts and payment account:-Actual receipts of sale of newspaper and magazines showed in Receipts and payment account Receipts side (Debit side). Income and expenditure account-Revenue nature sale of newspaper and magazines is shown in Income and Expenditure account Income side (Credit side).Which may be received or receivable. Balance sheet:-Not shown in balance sheet.

2.

3. b.

Presentation of sale of newspaper and magazines:1. Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To sale of old newspapers, magazines and periodicals Amount Rs. --Total 2. Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total 3. Balance sheet:Balance Sheet as on ---------Liabilities Amount Rs. Total BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Assets Incomes By sale of old newspapers, magazines and periodicals Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. ---Total

Amount Rs. Total

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GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

H.

Aid from government and other institutions:-It is revenue nature income for non-trading concern. Particular Treatment Aid from government is treated revenue nature Receipts and Payments account Actual received amount in receipts side Income and Expenditure account Current year related revenue income in income side Balance sheet Not shown

When information is not given about aid from govt. and other institution then presentation a.

Treatment of aid from government and other institutions:1. Receipts and payment account:-Actual receipts of aid from government and other institutions showed Receipts side (Debit side) of in Receipts and payment account. Income and expenditure account-Revenue nature aid from government and other institution is shown in Income side (Credit side) of Income and Expenditure account. This may be received or receivable. Balance sheet:-Not shown in balance sheet.

2.

3. b.

Presentation of aid from government and other institutions:1. Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To aid from government and other institutions Amount Rs. --Total 2. Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total 3. Balance sheet:Balance Sheet as on ---------Liabilities Amount Rs. Total I. Sale of old assets:a. Calculation of profit or loss on sale of fixed assets:-:Profit on sale of fixed assets:Profit on sale of fixed assets =Selling price of fixed assets - Cost of fixed assets -:Loss on sale of fixed assets:Loss on sale of fixed assets = Cost price of fixed assets - Selling price of fixed assets Assets Incomes By aid from government and other institutions Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. ---Total

Amount Rs. Total

b.

Treatment of sale of old assets:-

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 16

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Particular When loss on sale of old assets then presentation When profit on sale of old assets then presentation 1.

Receipts and Payments account Actual amount received from sale of fixed assets shown in Receipts side Actual amount received from sale of fixed assets shown in Receipts side

Income and Expenditure account Loss on sale of fixed assets is shown in Expenditure side Profit on sale of fixed assets is shown in Income side

Balance sheet Less from old assets in balance sheet assets side from related assets Less from old assets in balance sheet assets side from related assets

Receipts and payment account:-Actual receipts from sale of old assets showed in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account-Profit on sale of fixed assets is shown in Income side of Income and Expenditure account or Loss on sale of fixed assets is shown in Expenditure side (Debit side) of Income and Expenditure account. Balance sheet:-Sale of old assets related adjustment made in assets side of balance sheet.

2.

3. c.

Presentation of sale of old assets:1. Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To sale of old assets Amount Rs. --Total 2. Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure To loss on sale of old assets Amount Rs. --(IF)-Total 3. Balance sheet:Balance Sheet as on ---------Liabilities Amount Rs. Assets Old assets Add:-Purchase of new assets Less:- Sale of old assets Less:- Depreciation Total J. Fund based accounting:a. Incomes By profit on sale of old assets Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. --(IF)-Total

Amount Rs. ----------

---Total

Special funds:-The Not-for-Profit Organizations offices create special funds for special purposes/ activities. Special funds are utilized for special activities. 1. Example:-Prize fund, Match fund, Sports fund and Tournament fund etc.

Example of special funds

1.Prize fund

2.Match fund

3.Sports fund

4.Tournment fund

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 17

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) b. Special fund related income:-When such funds are invested in securities and the income earned on such investments is added to the respective fund, not credited to Income and Expenditure Account. Special fund related expenses:-The expenses incurred on such specific purposes are also deducted from the special fund. For Example:-A club may maintain a special fund for sports activities. In such a situation, the interest income on sports fund investments is added to the sports fund and all expenses on sports deducted there from. 1. When Special fund amount and income from special fund more than expenses or special fund positive balance then presentation:-The special funds are shown in liabilities side of balance sheet. When special fund amount and income from special fund less than expenses or special fund negative balance then presentation:-It is shown in Expenditure side (Debit side) of Income and Expenditure account.

c.

d.

2.

e.

Treatment of special fund:1. When Special fund amount and income from special fund more than expenses or special fund positive balance then presentation:-The special funds are shown in liabilities side of balance sheet. Treatment When special fund positive balance then presentation 2. Receipts and Payments account Actual receipts amount shown in receipts side Income and Expenditure account Not shown Balance sheet Shown in liabilities side of balance sheet

Particular Special fund

Receipts and payment account:-Actual receipts of special fund shown in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account-Not shown in Income and Expenditure account. Balance sheet:-Specific fund positive balance is shown in liabilities side of balance sheet.

When special fund amount and income from special fund less than expenses or special fund negative balance then presentation:-It is shown in Expenditure side (Debit side) of Income and Expenditure account. Treatment Receipts and Payments account Actual receipts amount shown in receipts side Income and Expenditure account Negative balance shown in Expenditure side Balance sheet Not shown

Particular Special fund

When special fund negative balance then presentation f.

Receipts and payment account:-Actual receipts of special fund showed in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account-Negative balance of special fund shown in expenditure side of Income and Expenditure account. Balance sheet:-Not shown in balance sheet.

Presentation of special fund:1. When Special fund amount and income from special fund more than expenses or special fund positive balance then presentation: Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To specific fund received Amount Rs. --Total Income and expenditure account:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Date Payments

Cr. Amount Rs.

Total

18

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total Balance sheet:Balance Sheet as on ---------Liabilities Specific fund Add:-Income related to special fund Less:-Expenses related to special fund ---------Amount Rs. Assets Amount Rs. Incomes Cr. Amount Rs. Total

---Total Total

2.

When special fund amount and income from special fund less than expenses or special fund negative balance then presentation: Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To specific fund received Amount Rs. --Total Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Excess expenditure related to special fund Amount Rs. ---Total Balance sheet:Balance Sheet as on ---------Liabilities Amount Rs. Total K. Assets Incomes Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. Total

Amount Rs. Total

Payments of Honorarium fees: - It is the amount paid to the person who is not the regular employee of the institution. a. Example:-Payment to an artist for giving performance at the club is an example of honorarium. This payment of honorarium is shown on the expenditure side of the Income and Expenditure Account. 1. Treatment of honorarium fees: Receipts and payment account:-Actual amount paid for honorarium shown in Payment side of Receipts and Payment account. Income and expenditure account-Current year related revenue nature honorarium expenditure shown in Expenditure side of Income and Expenditure account.

2. i

Presentation of honorarium fees:Receipts and payment account:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 19

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) Receipts and Payments account for the year ending ----------------Dr. Date Receipts Amount Rs. Total ii Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure To current year revenue nature honorarium fees Amount Rs. ---Total L. Total Incomes Cr. Amount Rs. Date Payments By honorarium fees Cr. Amount Rs. ---Total

Endowment Fund: - It is a fund arising from a bequest or gift, the income of which is devoted for a specific purpose. Hence, it is a capital receipt and shown on the Liabilities side of the Balance Sheet as an item of a specific purpose fund. a. Treatment of endowment fund:Treatment Treated as capital nature Receipts and Payments account Actual receipts amount shown in receipts side Income and Expenditure account Not shown Balance sheet Shown in liabilities side of balance sheet

Particular Endowment fund

1.

Receipts and payment account:-Actual receipts of endowment fund showed in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account-Not shown in Income and Expenditure account. Balance sheet:-Endowment fund is shown in liabilities side of balance sheet.

2. 3. b.

Presentation of endowment fund:1. Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To endowment fund received Amount Rs. --Total 2. Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total 3. Balance sheet:Balance Sheet as on ---------Liabilities Endowment fund Total BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Amount Rs. Assets Incomes Date Payments

Cr. Amount Rs. Total

Cr. Amount Rs. Total

Amount Rs.

Total

20

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

M.

Government Grant: - Schools, colleges, public hospitals, etc. depend upon government grant for their activities. a. Types of Government grant:-

Revenue nature government grant

The recurring grants in the form of maintenance grant is treated as revenue received and credited to Income and Expenditure account. Cash subsidy received from government is also treated as revenue nature income for the year in which it is received.

Types of Government grant

However, grants such as building grant are treated as capital receipt and transferred to the building fund account.

Capital nature government

b. Particular

Treatment of government grant fund:Treatment Treated as capital nature Treated as revenue nature Receipts and Payments account Actual amount received from government grant in receipts side Actual amount received from government grant in receipts side Income and Expenditure account Not shown Balance sheet Shown in liabilities side of balance sheet Not shown

When capital nature government grant fund then presentation When revenue nature government grant fund then presentation 1.

Revenue nature government grant shown in Income side

When capital nature government grant fund then presentation: Receipts and payment account:-Actual receipts of government grant fund showed in Receipts side of (Debit side) Receipts and payment account. Income and expenditure account-Not shown in Income and Expenditure account. Balance sheet:-Government grand fund is shown in liabilities side of balance sheet.

2.

When revenue nature government grant fund then presentation: Receipts and payment account:-Actual receipts of government grant fund showed in Receipts side (Debit side) of Receipts and payment account. Income and expenditure account-Revenue nature government grant shown in Income side (Credit side) of Income and Expenditure account. Balance sheet:-Not shown in balance sheet.

c.

Presentation of government grant fund:1. When capital nature government grant fund then presentation: Receipts and payment account:Receipts and Payments account for the year ending -----------------

Dr. Date Receipts To government grant fund received Amount Rs. --Total Income and expenditure account:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Date Payments

Cr. Amount Rs. Total

21

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total Balance sheet:Balance Sheet as on ---------Liabilities Government grant fund Amount Rs. ---Total 2. When revenue nature government grant fund then presentation: Receipts and payment account:Receipts and Payments account for the year ending ----------------Dr. Date Receipts To government grant fund Amount Rs. --Total Income and expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure Amount Rs. Total Balance sheet:Balance Sheet as on ---------Liabilities Amount Rs. Total Assets Amount Rs. Total Incomes By revenue nature government grant fund Cr. Amount Rs. ---Total Total Date Payments Cr. Amount Rs. Total Assets Amount Rs. Incomes Cr. Amount Rs. ---Total

Receipts and Payments account: -It is prepared at the end of the accounting year on the basis of cash receipts and cash payments recorded in the cash book. It simply is a summary of cash and bank transactions under various heads. A. Characteristics or silent features of Receipts and Payments account:a. Summary of every receipt:-It is summary of cashbook so subscriptions received from the members on different dates which appear on the debit side of the cashbook, shall be shown on the receipts side of the Receipt and Payment Account as one item with its total amount. Summary of every payment:- Salary, rent, electricity charges paid from time to time as recorded on the credit side of the cash book but the total salary paid, total rent paid, total electricity charges paid during the year appear on the payment side of the Receipt and Payment Account. All types Receipts or payments are recorded in Receipts and Payments account-Receipt and Payment Account gives summarised picture of various receipts and payments, irrespective of whether they pertain to the current year, previous year or next year or whether they are of capital or revenue nature. BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 22

b.

c.

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

All types of cash Receipts or payments which may be related to

1.Previous year

2.Next year

3.Current year

d.

Non-cash items are not included in Receipts and Payments account:-It may be noted that these account do not show in Receipts and Payments accounts.

Example of non cash items 2.Outstanding expenses 3.Profit on sale of fixed assets 4.Reserve created 5.Other non cash items 6.Accured income 7.Loss on sale of fixed assets

1.Depreciation

e.

Opening balance of Receipts and Payments account:- The opening balance in Receipt and Payment Account represents cash in hand / cash at bank which is shown on its receipts side. Opening balance of Receipts and Payments account

1.Bank overdraft balance

2.Debit balance of cash account

3.Debit balance of bank account

f.

Closing balance of Receipts and Payments account:- The closing balance at the end of the year, which appear on the credit side of the Receipt and Closing balance of this account represents cash in hand and bank balance as at Payment Account. If it is bank overdraft at the end, it shall be shown on its debit side as the last item.

Closing balance of Receipts and Payments account

1.Bank overdraft balance

2.Debit balance of cash account

3.Debit balance of bank account

B.

Objectives of preparation of Receipts and Payments account:a. b. c. Having control on cash and cash related transactions cashbook. Getting information about receipts and payments under different heads during the year. Facilitating preparation of Income and Expenditure account and the balance sheet.

C.

Steps in the preparation of Receipt and Payment Account:a. Opening balance of cash or Bank:- Opening debit balance of cash and bank account shown in Receipts side of Receipts and Payments account Show the total amounts of all receipts on its debit side irrespective of their nature (whether capital or revenue) and whether they pertain to past, current and future periods.

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 23

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Particular When Receipts and Payments account Debit balance When Receipts and Payments account Debit balance When Receipts and Payments account Credit balance b.

Treatment Opening Cash account Debit balance Opening Bank account Debit balance Opening Bank account Credit (Overdraft) balance

Receipts and Payments account Shown in Debit side (Receipts side) Shown in Debit side (Receipts side) Shown in Credit side (Payments side)

All types of payment are shown: - Show the total amounts of all payments on its credit side irrespective of their nature (whether capital or revenue) and whether they pertain to past, current and future periods. Non-cash items is not included in Receipts and Payments account:- None of the receivable income and payable expense is to be entered in this account, as they do not involve inflow or outflow of cash. Closing balance of cash or Bank:-Find out the difference between the total of Receipts side (Debit side) and the total of payments side (Credit side) of the account and enter the same on the credit side as the closing balance of cash/bank. In case, however, the total of the credit side is more than that of the total of the debit side, show the difference on the debit as bank overdraft and close the account. Treatment Closing Cash account Debit balance Closing Bank account Debit balance Closing Bank account Credit (Overdraft) balance Receipts and Payments account Shown in Credit side (Payments side) Shown in Credit side (Payments side) Shown in Debit side (Receipts side)

c.

d.

Particular When Receipts and Payments account Debit balance When Receipts and Payments account Debit balance When Receipts and Payments account Credit balance e.

Performa of Receipts and Payment account:Receipt and Payment Account for the year ending-------------

Dr. Date Receipts To Balance b/d (Opening balance) Cash in Hand ------Cash at Bank --(IF)-To Subscriptions To General Donation/ Donation To Sale of newspaper TO Sale of old sports materials To Interest on fixed deposits To Interest/Dividend on general fund To Sale of scraps To Proceeds from charity show To Miscellaneous receipts To Grant-in-aid (Working note 2) To Legacies To Specific Donations To Sale of Investments To Sale of Fixed Assets To Life membership fees To Investment sold To legacy received To endowment fund received To Entrance fees To specific purpose funds To Interest on specific funds' Amount (Rs.) Date Payments

Cr. Amount (Rs.) ---(IF)------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------

By Balance b/d (Opening balance) (Bank overdraft) (working note 1) By Wages and Salaries By Rent By Rates and Taxes By Insurance/ Insurance premium By Printing and Stationery By periodicals/waste paper By Postage and courier By Advertisement By Sundry expenses By Telephone charges By Investments purchased By Entertainment expenses By Locker Rent By Audit fees By Honorarium fees paid By sports material purchased By fixed deposit By audit fees paid By repair and renewals By Repair and Renewals By Upkeep of ground/ delivery van

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 24

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

To other types capital receipts To other types revenue receipts To Balance b/d (Bank Overdraft) (Working note 3)

----------------

By Conveyance expenses By Newspapers and Periodicals By Purchases of fixed Assets By Purchase of Investments By other types capital payments By other types revenue payments By Balance c/d Cash in hand C ash at Bank* (Working note 4 ) -------(IF)

-------------------------------

-----Total

Total f. Working note:1.

Working note 1:-When opening Bank overdraft balance (Credit bank balance) then it is shown in payments side of Receipts and Payments account. Working note 2:-All types receipts (Capital or Revenue) are shown in Receipts side of Receipts and Payments account, which may be related to current year, last year and next year. Working note 3:-When closing balance of bank account is Credit (Bank overdraft) then it is shown in Receipts side of Receipts and Payments account. Working note 4:-When closing balance of bank account is Debit bank balance then it is shown in Payments side of Receipts and Payments account.

2.

3.

4.

Income and Expenditure Account:-Receipts and Payments account gives information about only cash receipts and payments. Unpaid expenses, prepaid expenses, Accrued income, unearned income, Depreciation, Profit or loss on sale of fixed assets and non-cash items are not accounted in Receipts and Payments account. So find out Surplus or Deficit position Income and Expenditure account prepared. A. Characteristics of Income and Expenditure account:a. b. c. d. B. Only current year related revenue items are shown in it. It is same as profit and loss account nature. It is nominal nature account. It presented surplus or deficit during the year.

Preparation of Income and Expenditure account:a. Summary of Income and Expenditure account:-It is the summary of income and expenditure for the accounting year. It is just like Profit and loss account:-It is just like a profit and loss account prepared on accrual basis in case of the business organizations. Revenue transactions are recorded:-Only revenue nature transactions, which are related to current year, are recorded in it. Balance of Income and Expenditure account:-The balance at the end represents surplus or deficit. It is same as Profit and loss account:-The Income and Expenditure Account serve the same purpose as the profit and loss account of a business organization does. Expenses are recorded in:-The expenses and losses are recorded in Expenditure side of Income and Expenditure account. Incomes are recorded in:-The incomes and gains are recorded in Income side of Income and Expenditure account. Balance of Income and Expenditure account Transferred in:-It shows the net operating result in the form of Surplus (Excess of income over expenditure) or Deficit (Excess of expenditure over income), which is transferred to the Capital fund shown in liabilities side of balance sheet. BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 25

b.

c.

d. e.

f.

g. h.

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) i. Income and Expenditure account prepared on the basis of:- The Income and Expenditure Account is prepared on accrual basis with the help of Receipts and Payments Account and additional information relating to Outstanding expenses, Prepaid expenses, Accrued income, Unearned income and Depreciation, etc. Hence, many items appearing in the Receipts and Payments need to be adjusted.

C.

Method of preparing of Income and Expenditure account:a. Revenue nature expenses shown:-Revenue nature expenditures are shown in Expenditure side of Income and Expenditure account. Revenue nature Income shown:-Revenue nature incomes are shown in Income side of Income and Expenditure account. Surplus:-When Income side more than Expenditure side then it present Surplus (Excess of Income over Expenditure). Surplus = Income side total - Expenditure side total

b.

c.

d.

Deficit:-When Expenditure side more than Income side then it present Deficit (Excess of Expenditure over Income). Deficit = Expenditure side total - Income side total

D.

Steps in the Preparation of Income and Expenditure Account from Receipts and Payments account:a. These items are not included in Income and Expenditure account:-These items are not shown in Income and Expenditure account, so these are shown in balance sheet.

Items not shown in Incomes and Expenditue account

1.Opening cash and Bank balance

2.Capital payments

2.Capital receipts

b.

Current year revenue nature Incomes are recorded in it:-Only the revenue receipts to be shown on the income side of Income and Expenditure Account. Some of these needs to be adjusted by excluding the amounts relating to the preceding and the succeeding periods and including the amounts relating to the current year not yet received. Current year revenue nature Expenses are recorded in it:-Only the revenue expenses to the expenditure side of the Income and Expenditure Account with due adjustments as per the additional information provided relating to the amounts received in advance and these not yet received. These items are not appearing in Receipts and Payments account but recorded in Income and Expenditure account to find out Surplus or Deficit:-

c.

d.

Items shown in Income and Expenditure account

1.Deprecaiton on fixed assets

2.Profit on sale of fixed assets

3.Provision for doubtful debts

4.Loss on sale of fixed assets

E.

Performa of Income and Expenditure account:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 26

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Income and Expenditure account for the year ending-----------Dr. Expenditure To all revenue nature expenses after adjustment (If adjustment given) To depreciation of fixed assets To reserve created To loss on sale of fixed assets To provision for bad and doubtful debts To Surplus ( Excess of Income over expenditure) Amount (Rs.) -----------------(IF)-Total Distinction between Income and Expenditure Account and Receipt and Payment Account:1.On the basis of Nature 5.On the basis of Credit side 9.On the basis of adjustment

Cr. Income By all revenue nature incomes after adjustment (If adjustment given) By profit on sale of fixed assets By Deficit (Excess of Expenditure over Income) Amount (Rs.) --------(IF)--

Total

2.On the basis of Nature of Items

6.On the basis of Depreciation

10.On the basis of Institutions

3.On the basis of Period

7.On the basis of Opening Balance

11.On the basis of accounting method

4.On the basis of Debit side

8.On the basis of Closing Balance

A.

On the basis of Nature:a. b. Income and Expenditure:-It is like as profit and loss account. Receipt and Payment Account:-It is the summary of the cashbook.

B.

On the basis of Nature of Items:a. b. Income and Expenditure:-It records income and expenditure of revenue nature only. Receipt and Payment Account:-It records receipts and payments of revenue as well as capital nature.

C.

On the basis of Period:a. b. Income and Expenditure:-Income and expenditure items relate only to the current period. Receipt and Payment Account:-Receipts and payments may also relate to preceding and succeeding periods.

D.

On the basis of Debit side:a. b. Income and Expenditure:-Debit side of this account records expenses and losses. Receipt and Payment Account:-Debit side of this account records the receipts.

E.

On the basis of Credit side:a. b. Income and Expenditure: - Credit side of this account records income and gains. Receipt and Payment Account:-Credit side of this account records the payments.

F.

On the basis of Depreciation:a. b. Income and Expenditure: - Includes depreciation. Receipt and Payment Account:-Does not include depreciation.

G.

On the basis of Opening Balance:a. Income and Expenditure:-There is no opening balance. BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 27

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

b.

Receipt and Payment Account:-Balance in the beginning represents cash in hand /cash at bank or overdraft at the beginning.

H.

On the basis of Closing Balance:a. b. Income and Expenditure:-Balance of Income and Expenditure account represent Surplus or Deficit. Receipt and Payment Account:-Balance at the end represents cash in hand at the end and Bank balance (Debit bank balance or Bank overdraft balance).

I.

On the basis of adjustment:a. b. Income and Expenditure:-Adjustment concerning Income and Expenses are made in it. Receipt and Payment Account:-No adjustment is made concerning Income and Expenses.

J.

On the basis of Institutions:a. Income and Expenditure:-This is maintained by non-trading organizations which do not have profit motive objective. Receipt and Payment Account:-It is prepared by professional persons like doctors, advocates, chartered accountant etc.

b.

K.

On the basis of accounting method:a. b. Income and Expenditure:-It is a necessary part of double accounting system. Receipt and Payment Account:-It is an independent account and is not part of double entry system.

Difference between Income & Expenditure account and Profit and loss account:Difference between Income & Expenditure account and Profit and loss account

1.On the basis of Prepared by

2.On the basis of Why it is prepared

3.On the basis of Preparation

4.On the basis of sides

A.

On the basis of Prepared by:a. b. Income and Expenditure account:-It is prepared by not for profit organizations. Profit and Loss account:-It is prepared by trading concern.

B.

On the basis of Why it is prepared:a. b. Income and Expenditure account:-It is prepared to find out Surplus or Deficit on a certain date. Profit and Loss account:-It is prepared to find out Profit or loss on a certain date.

C.

On the basis of Preparation:a. Income and Expenditure account:-It is prepared on the basis of Receipts and Payments account and other information given in question. Profit and Loss account:-It is prepared on the basis of Trial balance and other information given in question.

b. D.

On the basis of sides:a. b. Income and Expenditure account:-In it, Incomes are shown in Credit side and Expenses are shown in Debit side. Profit and Loss account:-In it, Incomes are shown in credit side and Expenses are shown in Debit side.

Balance Sheet:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 28

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN) A. B. Objective of preparation of balance sheet:-For ascertaining the financial position of the entity. Balance sheet shows:-It shows assets and liabilities as at the end of the year. Assets are shown on the right hand side and the liabilities on the left hand side. Capital fund or General fund in place of the capital:-However, there will be a Capital Fund or General Fund in place of the Capital and the surplus or deficit as per Income and Expenditure Account shall be added to/deducted to this fund. It is also a common practice to add some of the capitalized items like legacies, entrance fees and life membership fees directly in the capital fund. Specific fund:-Besides the Capital or General Fund, there may be other funds created for specific purposes or to meet the requirements of the contributors/donors such as building fund, sports fund, etc. Such funds are shown separately in the liabilities side of the balance sheet. Balance sheet prepared at the beginning of the year to find out:-Sometimes it becomes necessary to prepare Balance Sheet as at the beginning of the year in order to find out the opening balance of the capital/general fund.

C.

D.

E.

Preparation of Balance Sheet:A. Capital fund closing balance shown in closing balance sheet liabilities side:-Take the Capital/General Fund as per the opening balance sheet and add surplus from the Income and Expenditure Account. Further, add entrance fees, legacies, life membership fees, etc. received during the year. Capital fund account Cr. Particulars Amount (Rs.) ---Particulars By balance b/d ( Opening capital fund balance) By Capitalized entrance fees By capitalized life membership fees By surplus (If) Total B. Amount (Rs.) ------------Total

Dr.

To deficit (If) To balance c/d (Closing capital fund balance) ----

Dr.

Fixed assets closing balance shown in closing balance sheet assets side:-Take all the fixed assets (not sold/discarded/or destroyed during the year) with additions (from the Receipts and Payments account) after charging depreciation (as per Income and Expenditure account) and show them on the assets side. Fixed assets account Cr. Particulars Amount (Rs.) ---------By loss on sale of fixed assets By balance c/d ( Closing balance of fixed assets) Total ------Total Particulars By Cash (If sale of old fixed assets during the year) By depreciation on fixed assets Amount (Rs.) -------

To balance b/d (Opening balance of fixed assets) To cash ( If purchase of fixed assets during the year) To profit on sale of fixed assets

C.

Liabilities account closing balance shown in liabilities side of balance sheet:-If some portion of liabilities paid during the year then balance of liabilities account shown in balance sheet and if new liabilities rise during the year then new liabilities had shown in balance sheet liabilities side. Liabilities account Dr. Cr. Particulars Amount (Rs.) ---Total Particulars By balance b/d ( Opening balance) Amount (Rs.) ------Total

To balance c/d (Closing balance) To cash (If liabilities paid during the year)

D.

Accrued incomes, unearned incomes related adjustment shown in:BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 29

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

a.

Opening balance sheet:-If capital fund is not given in question then it is prepared to find out capital fund. In case of new non trading concern there is no capital fund, hence opening balance sheet is not prepared. Balance sheet as on ------Liabilities Amount (Rs.) (B.F) --(If)----------------------Fixed assets Investments:Short term investments Long term investments Current assets:Stock Cash Bank Prepaid expenses Accrued income Debtors Bills receivable Assets Amount (Rs.) -------

Capital fund Long term liabilities:Mortgage loan Loan from financial institutions Current liabilities:Bank overdraft balance Unearned income Outstanding expenses Creditors Bills payable

----------------------

Reserve and surplus:Special fund Building fund General fund

---------Total Total

b.

Closing balance sheet:-It is prepared to find out financial position of the non-trading concern. Balance sheet as on -------Liabilities Amount (Rs.) ------------------------Fixed assets Investments:Short term investments Long term investments Current assets:Stock Cash Bank Prepaid expenses Accrued income Debtors Bills receivable Assets Amount (Rs.) -------

Capital fund (Closing balance) Long term liabilities:Mortgage loan Loan from financial institutions Current liabilities:Bank overdraft balance Unearned income Outstanding expenses Creditors Bills payable

----------------------

Reserve and surplus:Special fund Building fund General fund

---------Total Total

Accounting Performa:A. Fixed assets account:Fixed assets account Cr. Particulars Amount (Rs.) ---------By loss on sale of fixed assets By balance c/d ( Closing balance of fixed assets) Total BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 30 ------Total Particulars By Cash (If sale of old fixed assets during the year) By depreciation on fixed assets Amount (Rs.) -------

Dr.

To balance b/d (Opening balance of fixed assets) To cash ( If purchase of fixed assets during the year) To profit on sale of fixed assets

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

B.

Liabilities account:Liabilities account

Dr. Particulars To balance c/d (Closing balance) To cash (If liabilities paid during the year) Total C. Income account:Related income account Dr. Particulars To related accrued income (Previous year accrued income) To related unearned income (Current year unearned income) To Income and Expenditure account (Current year revenue nature income) Amount (Rs.) ------------Total D. Dr. Particulars To opening stock (Shown in opening balance sheet) --(IF)-To Cash a/c(Amount shown in Receipts and Payments account) To related outstanding expenses (Current outstanding expenses) year --------Total E. Receipts and Payments account:Receipt and Payment Account for the year ending------------Dr. Date Receipts To Balance b/d (Opening balance) Cash in Hand ------Cash at Bank --(IF)-To Subscriptions To General Donation/ Donation To Sale of newspaper TO Sale of old sports materials To Interest on fixed deposits To Interest/Dividend on general fund To Sale of scraps To Proceeds from charity show Amount (Rs.) Date Payments Cr. ----Amount (Rs.) Particulars By closing stock (Shown in closing balance sheet) By related outstanding expenses (Previous year outstanding expenses By related Prepaid expenses (Current year prepaid expenses) By Income and Expenditure account (Current year revenue nature expenses) Expenses account:Related expenses account Particulars By Cash a/c(Amount shown in Receipts and Payments account) By related accrued income (Current year accrued income) By related unearned income (Previous year unearned income) Cr. Amount (Rs.) ---Particulars By balance b/d ( Opening balance)

Cr. Amount (Rs.) ------Total

Amount (Rs.) ------------Total

Cr. Amount (Rs.) --(IF)-------------Total

By related prepaid expenses (Previous year prepaid expenses)

Amount (Rs.) ---(IF)-------------------------------------------

----------------------------------------------

By Balance b/d (Opening balance) (Bank overdraft) (working note 1) By Wages and Salaries By Rent By Rates and Taxes By Insurance/ Insurance premium By Printing and Stationery By periodicals/waste paper By Postage and courier By Advertisement

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 31

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

To Miscellaneous receipts To Grant-in-aid (Working note 2) To Legacies To Specific Donations To Sale of Investments To Sale of Fixed Assets To Life membership fees To Investment sold To legacy received To endowment fund received To Entrance fees To specific purpose funds To Interest on specific funds' To other types capital receipts To other types revenue receipts To Balance b/d (Bank Overdraft) (Working note 3)

---------------------------------------------------------------------------------

By Sundry expenses By Telephone charges By Investments purchased By Entertainment expenses By Locker Rent By Audit fees By Honorarium fees paid By sports material purchased By fixed deposit By audit fees paid By repair and renewals By Repair and Renewals By Upkeep of ground/ delivery van By Conveyance expenses By Newspapers and Periodicals By Purchases of fixed Assets By Purchase of Investments By other types capital payments By other types revenue payments By Balance c/d Cash in hand C ash at Bank* (Working note 4 ) -------(IF)

-----------------------------------------------------------------------------------------------------

Total F. Income and Expenditure account:Income and Expenditure account for the year ending-----------Dr. Expenditure To all revenue nature expenses after adjustment (If adjustment given) To depreciation of fixed assets To reserve created To loss on sale of fixed assets To provision for bad and doubtful debts To Surplus ( Excess of Income over expenditure) Amount (Rs.) -----------------(If)-Total G. Balance sheet:a. Income

Total

Cr. Amount (Rs.) --------(If)--

By all revenue nature incomes after adjustment (If adjustment given) By profit on sale of fixed assets By Deficit (Excess of Expenditure over Income)

Total

Opening balance sheet:-If capital fund is not given in question then it is prepared to find out capital fund. In case of new non-trading concern there is no capital fund, hence opening balance sheet is not prepared. Balance sheet as on -------Liabilities Amount (Rs.) (B.F) --(If)-------------Fixed assets Investments:Short term investments Long term investments Current assets:Stock Cash Assets Amount (Rs.) -------

Capital fund Long term liabilities:Mortgage loan Loan from financial institutions Current liabilities:Bank overdraft balance Unearned income

-------

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 32

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Outstanding expenses Creditors Bills payable

----------

Bank Prepaid expenses Accrued income Debtors Bills receivable

----------------

Reserve and surplus:Special fund Building fund General fund

---------Total Total

b.

Closing balance sheet:-It is prepared to find out financial position of the non-trading concern. Balance sheet as on -------Liabilities Amount (Rs.) ------------------------Fixed assets Investments:Short term investments Long term investments Current assets:Stock Cash Bank Prepaid expenses Accrued income Debtors Bills receivable Assets Amount (Rs.) -------

Capital fund (Closing balance) Long term liabilities:Mortgage loan Loan from financial institutions Current liabilities:Bank overdraft balance Unearned income Outstanding expenses Creditors Bills payable

----------------------

Reserve and surplus:Special fund Building fund General fund

---------Total Total

H.

Performa of column cashbook:Performa of column cashbook

Dr. side
Date Particular Total Amount Rs. Fees Subscription Donation Date Total Amount Rs. Salary and wages Rs. Stationary

Cr.side
Postage and telegram Rs.

Rs.

Rs.

Rs.

Rs.

Total

Total

Total

Total

Total

Total

Total

Total

A.

Calculation of amount shown in related expenses account:Statement showing Expenses shown in Income and Expenditure account Particulars Detailed amount (Rs.) -----------------------------------Net amount (Rs.) -----

Related expense paid during the year (Receipt and Payment account) Add:-Opening stock Add:- Outstanding expenses related to current year Add:-Prepaid expenses related to previous year Less:-Closing stock Less:-Prepaid expenses related to current year Less:-Outstanding expenses related to previous year

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 33

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Amount shown in Income and Expenditure account B. Calculation of amount shown in related income account:Statement showing Income shown in Income and Expenditure account Particulars Related income received during the year (Receipt and Payment account) Add:-Accurd income related to current year Add:-Unearned income related to previous year Less:-Accrued income related to previous year Less:-Unearned income related to current year Amount shown in Income and Expenditure account C. Adjustment Related rules:----------------Detailed amount (Rs.)

-------

Net amount (Rs.) ----------------------

+
C.Y

P.Y Expenses related adjustment Adjustment Income related adjustment

+
C.Y Accrued Income

P.Y

Outstanding Expenses

Liabilities side Income related adjustment Expenses related adjustment

Assets side

Unearned Income C.Y P.Y

Prepaid Expenses C.Y P.Y

D.

Short name of Previous year and Current year:-

Current year SHORT NAME OF CURRENT YEAR AND PREVIOUS YEAR Previous year

P.Y

C.Y

Debit and Credit rules for account:-

Balance of accounts

1.Assets have Debit balance A. . Dr.

2.Capital have credit balance

3.Income have credit balance

4.Liabilities have credit balance

5.Expenses have Debit balance

Assets account:-When an asset is increase, then it is debited and when an asset is decrease then it is credited due to Assets account has Debit balance always. Related Assets account Cr. Particulars Amount (Rs.) Particulars When Decrease in assets BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 34 Amount (Rs.)

When Increase in assets

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

Total B.

Total

Liabilities account:-When a liability is increase then it is credited and when an assets is decrease then it is debited due to liabilities account has Credit balance always. Related liabilities account Cr. Particulars Amount (Rs.) Total Particulars When Increase in liabilities Total Amount (Rs.)

. Dr.

When Decrease in liabilities

C.

Capital account:-When a capital is increase then it is credited and when capital is decrease then it is debited due to capital account has Credit balance always. Related capital account Cr. Particulars Amount (Rs.) Total Particulars When Increase in capital Total Amount (Rs.)

. Dr.

When Decrease in capital

D.

Income account:-When income is increase then it is credited and when income is decrease then it is debited due to income account has credit balance always. Related income account Cr. When Increase in income Total Total

. Dr. When Decrease in income

E.

Expenses account:-When expenses is increase then it is debited and when expenses is decrease then it is credited due to expenses account has debit balance always. Related expenses account

Dr. Particulars When Increase in expenses Total Step to be followed for practical question to be solved:-Step to be followed for question solved:A. B. C. D. E. F. G. H. I. Read question carefully. Determine Current year, Previous year and Next year. What would be question asked to prepare. Find out adjustment given or not related to any item. Find out capitalized items given or not. Find out capital fund given or not. Find out special fund given or not. Find out liabilities balance. Find out assets balance. BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 Amount (Rs.) Particulars When Decrease in expenses

Cr. Amount (Rs.) Total

35

GLOBAL EDUCATION POINT GURON KA TALAB SANT DHAM ROAD KAMLA NEHRU NAGAR JODHPUR (RAJASTHAN)

J. K. L. M. N.

Find out Accrued income, Unearned income, Prepaid expenses, Outstanding income related adjustment given or not. Find out Profit or loss on sale of fixed assets. Find out Accrued interest during current year. Find out Outstanding expenses during current year. Working note should be part of answer.

Step to be followed for theory types question to be solved:A. Theory question is always based on practice problem and when practical problem to be solved then theory types question easily to be solved. Always be positive for every question.

B.

BEST OF LUCK BY MAHESH SOLANKI MOBILE NO:-9166579934 OR 8233832117 36