From the following Balance Sheet and Receipts and Payments A/c of Vidya mandir High School, Alibag. Prepare Income and Expenditure Account for the year ended 31st March, 2008 and Balance Sheet as on that date.

Balance Sheet as on 1^st April, 2007

Liabilities	Amount	Assets	Amount
Entrance Fees	6000	Furniture	16800
Capital Fund	103800	Laboratory	20000
		Library	25000
		Investment	40000
		Cash in hand	1000
		Cash at bank	3000
		Outstanding Tuition Fees	4000
	109800		109800

Receipts and Payments Account for the year ended 31^st March, 2008

Receipts	Amount	Payments	Amount
To Balance b/d		By Furniture Purchased	5400
Cash in hand	1000	By Salaries	60000
Cash at bank	3000	By Rent	28000
To Tuition Fees	80000	By Sundry Expenses	15200
To Term Fees	26200	By Annual gathering expenses	11300
To Government grant	16000	By Insurance	4000
To Donation of library	30000	By closing Balance
To Interest on Investment	2000	Cash at bank	34300
	158200	158200

Adjustments:

1. Tuition fees still receivable are Rs. 10,000.

2. Salaries still payable are Rs. 30,000

3. Insurance premium is paid for one year ending 30.9.2008.

4. Rent paid in advance Rs. 4000.

5. Depreciate furniture and library at 10%.

Depreciation to be charged on the closing balances of the assets.

Solution:

In the Books of Vidya Mandir High School, Alibag

Income & Expenditure A.c for the Year Ended 31^st March, 2008

Particulars	Amount	Amount	Particulars	Amount	Amount
To Salaried	60000		By Tuition Fees	80000
(+) Outstanding	30000	90000	(-) Last Year Amount	-4000
To Rent	28000			76000
(-) Prepaid	-4000	24000	(+) Outstanding of Current Year	10000	86000
To Sundry Expenses		15200	By Tern Fees		26200
To Annual gathering Expenses		11300	By Government grant		16000
To Insurance	4000		By Interest on Investment		2000
Less: Prepaid	2000	2000
To Depreciation
On Furniture	2220
On Library	2500	4720	By Excess of Expenditure over Income [Deficit]		17020
		147220			147220

Balance Sheet as on 31^st March, 2008

Liabilities	Amount	Amount	Assets	Amount	Amount
Capital Fund	103800		Furniture	16800
Less: Deficit	17020	86780	Add: Purchase new furniture	5400
Entrance Fees		6000		22200
Library Fund		30000	Less: Depreciation @ 10%	2220	19980
Outstanding Salaries		30000	Laboratory		20000
			Library	25000
			Less: Depreciation @ 10%	2500	22500
			Investment		40000
			Cash at Bank		34300
			Tuition Fees receivable		10000
			Prepaid Insurance		2000
			Prepaid Rent		4000
		152780			152780

Working Notes:

1. Last year’s outstanding tuition fees of Rs. 4000 are deducted from tuition fees of Rs. 80000 and there will be no second effect. At the same time Outstanding tuition fees of Rs. 10000 for the current year is added to tuition on the credit side of Income and Expenditure A/c and then shown the same on the Asset side of the Balance Sheet.

2. Outstanding Salaries of Rs. 30,000 is first added to salaries on the debit side of Income and Expenditure A/c and then shown the same on the liability side of the balance sheet.

3. Insurance for 6 months i.e. from 1.4.2008 to 3.09.2009 is paid in advance it means 6 months prepaid. Insurance prepaid = (6/12) × 4000 = RS. 2000.

5. Calculation of Depreciation:

On Furniture = 10% of (16800 + 5400) = 10% × 22200 = 2220

On Library = 10% × 25000 = 2500

6. Entrance Fees of Rs. 6000 given in the opening balance sheet is carried forward and shown on the liabilities side of new balance sheet.