From the following 'Receipts and Payments Account' of Space Club, prepare an Income and Expenditure Account for the year ended 31st March, 2021. Receipts and Payments Account of Space Club for the year ended 31st March, 2021

| Receipts | Amount (₹) | Payments | Amount (₹) |
| --

Question

From the following 'Receipts and Payments Account' of Space Club, prepare an Income and Expenditure Account for the year ended 31st March, 2021. Receipts and Payments Account of Space Club for the year ended 31st March, 2021

| Receipts | Amount (₹) | Payments | Amount (₹) |
| --- | --- | --- | --- |
| To Balance b/d | 5,000 | By Salaries | 31,000 |
| To Subscriptions | 73,000 | By Machinery (1.7.2020) | 40,000 |
| To Sale of old furniture (Book value ₹ 2,000) | 800 | By 8% Investments | 30,000 |
| To Donations | 41,800 | By Balance c/d | 19,600 |
|  | 1,20,600 |  | 1,20,600 |

Additional Information : (i) Subscriptions in arrears on 31.03.2021 were ₹ 2,000. (ii) On 31st March, 2021, outstanding salaries were ₹ 4,000. (iii) 8% Investments were purchased on 31st March, 2021. (iv) The club owned Machinery of ₹ 1,00,000 on 1st April 2020. Depreciate Machinery @ 6% p.a.

Accepted Answer

> [!TLDR]
> Adjusting cash Subscriptions and Salaries for outstanding amounts, charging depreciation on Machinery, and recognising the loss on sale of old furniture gives Space Club a surplus of ₹72,800 for the year ended 31st March 2021.

**Working Notes**

1. **Subscriptions:** Received ₹73,000 + Outstanding at year end ₹2,000 = **₹75,000**
2. **Salaries:** Paid ₹31,000 + Outstanding at year end ₹4,000 = **₹35,000**
3. **Depreciation on Machinery:**
   - On Machinery held since 1.4.2020 (₹1,00,000) @ 6% for the full year = ₹6,000
   - On Machinery purchased 1.7.2020 (₹40,000) @ 6% for 9 months (Jul'20–Mar'21) = ₹40,000 × 6% × 9/12 = ₹1,800
   - Total Depreciation = ₹6,000 + ₹1,800 = **₹7,800**
4. **Loss on Sale of Old Furniture:** Book value ₹2,000 − Sale proceeds ₹800 = **₹1,200**
5. Donations (₹41,800) carry no indication of being for a specific purpose, so they are treated as a revenue receipt. The 8% Investments (₹30,000, purchased 31.3.2021) and Machinery (₹40,000) are capital items, not shown in the Income and Expenditure Account.

**Income and Expenditure Account of Space Club for the year ended 31st March, 2021**

| Expenditure | Amount (₹) | Income | Amount (₹) |
| --- | --- | --- | --- | …

Receipts	Amount (₹)	Payments	Amount (₹)
To Balance b/d	5,000	By Salaries	31,000
To Subscriptions	73,000	By Machinery (1.7.2020)	40,000
To Sale of old furniture (Book value ₹ 2,000)	800	By 8% Investments	30,000
To Donations	41,800	By Balance c/d	19,600
	1,20,600		1,20,600

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