Question

Following Receipts and Payments Account was prepared from the Cash Book of Delhi Charitable Trust for the year ending 31st March, 2019:

Prepare Income and Expenditure Account for the year ended 31st March, 2019 and Balance Sheet as on that date after the following adjustments:

(i) Insurance premium was paid for insurance taken w.e.f. 1st July 2018.

(ii) Interest on investment ₹ 11,000 accrued was not received.

(iii) Rent ₹ 6,000; Salary ₹ 9,000 and advertisement expenses ₹ 10,000 outstanding as on 31st March 2019.

(iv) Legacy Donation is towards the construction of Library Block.

Answer 1

Income and Expenditure Account
for the year ending March 31, 2019

Dr.			Cr.
Expenditure		Amount (₹)	Income	Amount (₹)
Charity		1,15,000	Donation	90,000
Rent	32,000		Subscription	4,28,000
Add: Outstanding	6,000	38,000	Interest on Investments (45,000 + 11,000)	56,000
Salary	60,000		Sale of Old Newspapers	2,000
Add: Outstanding	9,000	69,000
Advertisement	45,000
Add: Outstanding	10,000	55,000
Insurance	20,000
Less: Prepaid	5,000	15,000
Printing		6,000
Postage		3,000
Surplus		2,75,000
		5,76,000		5,76,000

Balance Sheet
as on March 31, 2019

Liabilities		Amount (₹)	Assets		Amount (₹)
Capital Fund			Cash		99,000
Opening Balance	2,41,000		Bank		1,60,000
Add: Legacy	1,80,000		Prepaid Insurance		5,000
Add: Surplus	2,75,000	6,96,000	Furniture		2,16,000
Rent Outstanding		6,000	Investment	2,30,000
Salary Outstanding		9,000	Add: Accrued Interest	11,000	2,41,000
Adv. Exp. Outstanding		10,000
		7,21,000			7,21,000

Working Note:

Ascertainment of Capital Fund

Balance Sheet
as on March 31, 2018

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital Fund	2,41,000	Cash	1,15,000
		Banks	1,26,000
	2,41,000		2,41,000

Answer 2

Income and Expenditure Account (for the year ended 31st March 2019)

Balance Sheet (for the year ended 31st March 2018)

Balance Sheet (for the year ended 31st March 2018)

Working Note: – 

Insurance premium was paid for insurance taken w.e.f. 1st July 2018 So, it will be valid for the minimum of 1 year (up to 30th June 2019) But our Financial Year ended on 31st March 2019. that’s why from 1st April 2019 to 30th June 2019 for 3 months the premium was paid extra. 

This is Related to the next year not the expense for this year so we have to subtract it from the total amount. = 20,000 x 3/12 

Prepaid Insurance Premium = 5,000/-

Comments

Why did u added 5000 to insr. Premium??

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Insurance premium was paid for insurance taken w.e.f. 1st July 2018 So, it will be valid for the minimum of 1 year (up to 30th June 2019) But our Financial Year ended on 31st March 2019. that’s why from 1st April 2019 to 30th June 2019 for 3 months the premium was paid extra.
This is Related to the next year not the expense for this year so we have to subtract it from the total amount. = 20,000 x 3/12  
Prepaid Insurance Premium = 5,000/-