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Unity Club – Receipt & Payment Account | Complete Problem with Solution
📝 Question
From the following Balance Sheet and Receipt & Payment Account of Unity Club, prepare:
- Income and Expenditure Account for the year ended 31 March 2019
- Balance Sheet as on 31 March 2019
Opening Balance Sheet as on 31 March 2018
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Outstanding Rent | 100 | Cash in Hand | 2,200 |
| Capital Fund | 27,600 | Building | 20,000 |
| Outstanding Subscription | 500 | ||
| Furniture | 3,000 | ||
| Books | 2,000 | ||
| Total | 27,700 | Total | 27,700 |
Receipt and Payment Account for the year ended 31 March 2019
| Receipts | ₹ | Payments | ₹ |
|---|---|---|---|
| Balance b/d | 2,200 | Rent | 6,600 |
| Subscriptions | 32,500 | Lecturer's Fee | 3,900 |
| Life Membership Fee | 3,250 | Printing & Stationery | 2,500 |
| Donation | 2,500 | Books | 8,400 |
| Profit from Entertainment | 7,250 | Furniture | 9,900 |
| Interest | 1,100 | Balance c/d | 17,500 |
| Total | 48,800 | Total | 48,800 |
Additional Information
- Subscription outstanding on 31 March 2019 was ₹750.
- Rent outstanding on 31 March 2019 was ₹500.
- Donation is to be capitalised.
- Depreciation on furniture is to be charged at 10% p.a., including furniture purchased during the year.
- Depreciation on books is to be charged at 10% p.a.
1️⃣ Receipt & Payment Account — Solution
The Receipt & Payment Account is already given in the question.
The important point is that it records actual cash receipts and cash payments.
Therefore, adjustments such as:
- Outstanding subscription
- Outstanding rent
- Depreciation
are not entered directly in the Receipt & Payment Account.
They are considered while preparing the Income & Expenditure Account and Balance Sheet.
2️⃣ Income & Expenditure Account — Solution
Income & Expenditure Account for the year ended 31 March 2019
| Expenditure | ₹ | Income | ₹ |
|---|---|---|---|
| To Rent | 7,000 | By Subscriptions | 32,750 |
| To Lecturer's Fee | 3,900 | By Profit from Entertainment | 7,250 |
| To Printing & Stationery | 2,500 | By Interest | 1,100 |
| To Depreciation on Furniture | 795 | ||
| To Depreciation on Books | 200 | ||
| To Surplus | 26,705 | ||
| Total | 41,100 | Total | 41,100 |
⭐ Surplus
Surplus = Total Income − Total Expenditure
= ₹41,100 − ₹14,395
= ₹26,705
3️⃣ 🔍 Explanation of Adjustments
अब हम प्रत्येक adjustment को समझते हैं।
Adjustment 1 — Subscription
Subscription received during the year = ₹32,500
Opening outstanding subscription = ₹500
Closing outstanding subscription = ₹750
Therefore:
Subscription Income
= ₹32,500 + ₹750 − ₹500
= ₹32,750
Why?
The ₹750 outstanding at the end belongs to the current year, so it is added.
The ₹500 outstanding at the beginning belonged to the previous year, so it is deducted.
Exam Rule
Current year's income = Cash received + Closing outstanding − Opening outstanding
Adjustment 2 — Rent
Rent paid = ₹6,600
Opening outstanding rent = ₹100
Closing outstanding rent = ₹500
Therefore:
Rent Expense
= ₹6,600 + ₹500 − ₹100
= ₹7,000
Why?
The closing outstanding rent relates to the current year and therefore is added.
The opening outstanding rent related to the previous year and is therefore deducted.
Adjustment 3 — Life Membership Fee
Life Membership Fee received = ₹3,250.
This amount is not treated as ordinary revenue income in this problem.
It is added to the Capital Fund because it is a capital receipt.
Therefore:
Life Membership Fee → Capital Fund
Adjustment 4 — Donation
Donation received = ₹2,500.
The question specifically states that the donation is to be capitalised.
Therefore:
Donation → Capital Fund
It is not shown as income in the Income & Expenditure Account.
Adjustment 5 — Depreciation on Furniture
Opening furniture = ₹3,000
Furniture purchased on 1 October 2018 = ₹9,900
Depreciation on opening furniture
₹3,000 × 10%
= ₹300
Depreciation on furniture purchased during the year
Furniture was purchased on 1 October 2018.
Therefore it was used for 6 months during the year.
₹9,900 × 10% × 6/12
= ₹495
Total depreciation on furniture
₹300 + ₹495
= ₹795
Adjustment 6 — Depreciation on Books
Opening books = ₹2,000
Depreciation = 10%
₹2,000 × 10%
= ₹200
The books purchased for ₹8,400 were purchased on 31 March 2019. Therefore, no depreciation is charged on these books for the year.
Total depreciation on books = ₹200
4️⃣ Balance Sheet — Solution
Balance Sheet as on 31 March 2019
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital Fund: | Building | 20,000 | |
| Opening Capital Fund | 27,600 | Furniture | 12,105 |
| Add: Life Membership Fee | 3,250 | Books | 10,200 |
| Add: Donation | 2,500 | Outstanding Subscription | 750 |
| Add: Surplus | 26,705 | Cash in Hand | 17,500 |
| Closing Capital Fund | 60,055 | ||
| Outstanding Rent | 500 | ||
| Total | 60,555 | Total | 60,555 |
✅ Balance Sheet Tally
Total Liabilities = ₹60,555
Total Assets = ₹60,555
Therefore:
Balance Sheet TALLIES ✅
5️⃣ 🔍 Explanation of Balance Sheet Items
Furniture
Opening furniture = ₹3,000
Add: Furniture purchased = ₹9,900
Less: Depreciation = ₹795
Therefore:
₹3,000 + ₹9,900 − ₹795 = ₹12,105
Books
Opening books = ₹2,000
Add: Books purchased = ₹8,400
Less: Depreciation = ₹200
Therefore:
₹2,000 + ₹8,400 − ₹200 = ₹10,200
Outstanding Subscription
Closing outstanding subscription = ₹750
It is an asset because the club has the right to receive this amount.
Therefore it appears on the Assets side of the Balance Sheet.
Outstanding Rent
Closing outstanding rent = ₹500
It is a liability because the club still has to pay this amount.
Therefore it appears on the Liabilities side of the Balance Sheet.
Closing Capital Fund
Opening Capital Fund = ₹27,600
Add: Life Membership Fee = ₹3,250
Add: Capitalised Donation = ₹2,500
Add: Surplus = ₹26,705
Therefore:
₹27,600 + ₹3,250 + ₹2,500 + ₹26,705
= ₹60,055
Add Outstanding Rent ₹500:
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