From the following Receipts and Payments Account of Excellent Recreati...
Income and Expenditure Account for the year ended 31.3.1996
Income
Membership fees 60,000
Entrance fees 15,000
Rent of club house 25,000
Sale of old furniture 10,000
Interest on investments 5,000
Total Income 1,15,000
Expenditure
Salaries and wages 45,000
Electricity charges 8,000
Printing and stationery 3,000
Rent of club house 12,000
Repairs and maintenance 9,000
Purchase of new furniture 20,000
Interest on loan 2,000
Insurance premium 1,000
Total Expenditure 1,00,000
Surplus of Income over Expenditure 15,000
Balance Sheet as on 31.3.1996
Liabilities
Capital Fund 1,20,000
Add: Surplus of Income over Expenditure 15,000
Total 1,35,000
Assets
Furniture 30,000
Investments 5,000
Cash at Bank 1,00,000
Total 1,35,000
Explanation:
Receipts and Payments Account is a summary of all the transactions that have taken place during the year, both cash and non-cash. It gives an idea about the cash inflow and outflow during the year. However, it does not provide information about the income earned and expenditure incurred during the year. To know about the income and expenditure, we need to prepare an Income and Expenditure Account.
Income and Expenditure Account is prepared to find out the profit or loss of the organization during the year. It shows all the incomes earned and expenses incurred during the year. In this case, the total income earned during the year is Rs. 1,15,000, and the total expenditure incurred is Rs. 1,00,000. Hence, the surplus of income over expenditure is Rs. 15,000.
Balance Sheet is a statement of assets and liabilities of the organization as on a particular date, usually the end of the financial year. It gives an idea about the financial position of the organization. In this case, the total assets of the organization are Rs. 1,35,000, which includes furniture, investments, and cash at bank. The total liabilities of the organization are Rs. 1,20,000, which is the capital fund of the organization. The surplus of income over expenditure of Rs. 15,000 is added to the capital fund to arrive at the total liabilities.