Q. 6. Divya Library, Buldhana showed the following position of their accounting. Consider the adjustments given and prepare Income and Expenditure Account for the year ending 31st March, 2016 and Balance Sheet as on that date: Balance Sheet as on 31st March, 2015 | Liabilities | Amount (₹) | Assets | Amount (₹) | | --- | --- | --- | --- | | Capital fund | 3,45,000 | Furniture | 36,250 | | Expenses due | 3,500 | Books | 2,75,500 | | | | Investment in securities | 25,000 | | | | Cash in hand | 4,250 | | | | Cash at bank | 7,500 | | | 3,48,500 | | 3,48,500 | Receipts and Payments Account for the year ending 31st March, 2016 | Receipts | Amount (₹) | Payments | Amount (₹) | | --- | --- | --- | --- | | To Balance b/d: | | By Electricity charges | 3,490 | | Cash in hand | 4,250 | By Postage | 3,050 | | Cash at bank | 7,500 | By Books purchased | 40,000 | | To Membership subscriptions | 90,000 | By Payment for expenses due | 3,500 | | To Entrance fees | 12,500 | By Sundry expenses | 5,250 | | To Sale of scrap | 750 | By Investment in securities | 50,000 | | To Hire of lecture hall | 9,000 | By Furniture | 14,000 | | To Interest on securities | 2,000 | By Balance c/d: | | | | | Cash in hand | 3,210 | | | | Cash at bank | 3,500 | | | 1,26,000 | | 1,26,000 | Adjustments: (1) During the current year, furniture was purchased on 1st October, 2015. Depreciate furniture @ 10% p.a. (2) Depreciate books by ₹ 50,000. (3) Membership subscription received during the year includes ₹ 7,500 for the year 2016-2017 and ₹ 3,750 are outstanding for the current year. (4) Capitalise 1/2 of the entrance fees.

> > [!TLDR] > Income ₹ 1,04,250 less expenditure ₹ 66,115 gives a Surplus of ₹ 38,135. The closing Balance Sheet (Capital fund 3,89,385 + advance subscription 7,500) ties at ₹ 3,96,885. This mirrors the NCERT/CBSE-aligned treatment of Not for Profit accounts. > > Working notes: > - Subscription income = 90,000 - 7,500 (received in advance for 2016-17) + 3,750 (outstanding for current year) = ₹ 86,250. > - Entrance fees ₹ 12,500: half capitalised ₹ 6,250 (added to Capital fund), half ₹ 6,250 treated as income. > - Depreciation on furniture: opening 36,250 x 10% = 3,625 + addition 14,000 x 10% x 6/12 (purchased 1 Oct 2015) = 700; total ₹ 4,325. > - Payment for expenses due ₹ 3,500 relates to last year's outstanding expenses (paid off), so it is not a current-year expense. > > Income and Expenditure Account for the year ended 31st March, 2016: > > | Expenditure | Amount (₹) | Income | Amount (₹) | > | --- | --- | --- | --- | > | To Electricity charges | 3,490 | By Membership subscription (90,000 - 7,500 + 3,750) | 86,250 | > | To Postage | 3,050 | By Entrance fees (1/2 of 12,500) | 6,250 | > | To Sundry expenses | 5,250 | By Sale of scrap | 750 | > | To Depreciation on Books | 50,000 | By Hire of lecture hall | 9,000 | > | To Depreciation on Furniture (3,625 + 700) | 4,325 | By Interest on securities | 2,000 | > | To Surplus (excess of income over expenditure) | 38,135 | | | > | | 1,04,250 | | 1,04,250 | > > Balance Sheet as on 31st March, 2016: > …

Q. 6. Divya Library, Buldhana showed the following position of their accounting. Consider the adjustments give

Question 38 of 38

Q. 6. Divya Library, Buldhana showed the following position of their accounting. Consider the adjustments given and prepare Income and Expenditure Account for the year ending 31st March, 2016 and Balance Sheet as on that date:

Balance Sheet as on 31st March, 2015

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital fund	3,45,000	Furniture	36,250
Expenses due	3,500	Books	2,75,500
		Investment in securities	25,000
		Cash in hand	4,250
		Cash at bank	7,500
	3,48,500		3,48,500

Receipts and Payments Account for the year ending 31st March, 2016

Receipts	Amount (₹)	Payments	Amount (₹)
To Balance b/d:		By Electricity charges	3,490
Cash in hand	4,250	By Postage	3,050
Cash at bank	7,500	By Books purchased	40,000
To Membership subscriptions	90,000	By Payment for expenses due	3,500
To Entrance fees	12,500	By Sundry expenses	5,250
To Sale of scrap	750	By Investment in securities	50,000
To Hire of lecture hall	9,000	By Furniture	14,000
To Interest on securities	2,000	By Balance c/d:
		Cash in hand	3,210
		Cash at bank	3,500
	1,26,000		1,26,000

Adjustments:

(1) During the current year, furniture was purchased on 1st October, 2015. Depreciate furniture @ 10% p.a.

(2) Depreciate books by ₹ 50,000.

(3) Membership subscription received during the year includes ₹ 7,500 for the year 2016-2017 and ₹ 3,750 are outstanding for the current year.

(4) Capitalise 1/2 of the entrance fees.

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Concept understanding — Income and Expenditure Account

An Income and Expenditure Account is the not-for-profit organisation's equivalent of a Profit & Loss Account: a nominal account prepared on the accrual basis that records only revenue incomes and expenses of the current period, and whose balance is a surplus (excess of income over expenditure) or deficit rather than profit or loss.

Convert the cash-based Receipts & Payments Account into the accrual-based Income & Expenditure Account by removing all capital items and all items of other periods, then adjusting current-period incomes/expenses for outstanding and prepaid amounts.

How it differs from Receipts & Payments

Receipts & Payments A/c = a summarised cash book: all cash received/paid, capital or revenue, current year or not.
Income & Expenditure A/c = only revenue items of the current year on accrual basis; capital receipts (donations for building, legacies, sale of assets) and capital payments (buying assets) are excluded and go to the Balance Sheet.

Preparing it (the adjustments)

Start from receipts/payments and apply accrual adjustments:

Adjustment	Treatment
Subscriptions received	+ outstanding for this year, − received in advance, − last year's arrears now received
Expenses paid	+ outstanding, − prepaid
Depreciation on assets	Debit (non-cash expense)
Bad debts / provisions	Debit

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Income ₹ 1,04,250 less expenditure ₹ 66,115 gives a Surplus of ₹ 38,135. The closing Balance Sheet (Capital fund 3,89,385 + advance subscription 7,500) ties at ₹ 3,96,885. This mirrors the NCERT/CBSE-aligned treatment of Not for Profit accounts.

Working notes:

Subscription income = 90,000 - 7,500 (received in advance for 2016-17) + 3,750 (outstanding for current year) = ₹ 86,250.
Entrance fees ₹ 12,500: half capitalised ₹ 6,250 (added to Capital fund), half ₹ 6,250 treated as income.
Depreciation on furniture: opening 36,250 x 10% = 3,625 + addition 14,000 x 10% x 6/12 (purchased 1 Oct 2015) = 700; total ₹ 4,325.
Payment for expenses due ₹ 3,500 relates to last year's outstanding expenses (paid off), so it is not a current-year expense.

Income and Expenditure Account for the year ended 31st March, 2016:

Expenditure	Amount (₹)	Income	Amount (₹)
To Electricity charges	3,490	By Membership subscription (90,000 - 7,500 + 3,750)	86,250
To Postage	3,050	By Entrance fees (1/2 of 12,500)	6,250
To Sundry expenses	5,250	By Sale of scrap	750
To Depreciation on Books	50,000	By Hire of lecture hall	9,000
To Depreciation on Furniture (3,625 + 700)	4,325	By Interest on securities	2,000
To Surplus (excess of income over expenditure)	38,135
	1,04,250		1,04,250

Balance Sheet as on 31st March, 2016:

…

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

Showing the 12 most recent of 13 on this concept.

CBSE 2026Set ANNUAL1 mark
$Q. Complete the table: Income Expenditure Deficit 25,000 .......... 2,000$
›Reveal solutionSolution

Expenditure = ₹27,000. A deficit is the excess of expenditure over income, so Expenditure = Income + Deficit.

Method

The Income and Expenditure Account of a not-for-profit concern shows a deficit when total expenditure exceeds total income. Therefore:

Deficit = Expenditure − Income

Re-arranging: Expenditure = Income + Deficit

| Item | Amount (₹) | …

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CBSE 2026Set ANNUAL1 mark
$Q. Write the word/phrase/term, which can substitute the following sentence. An account which records only revenue items in the case of a not-for-profit concern.$
›Reveal solutionSolution
The account that records only revenue items of a not-for-profit concern is the Income and Expenditure Account.

A not-for-profit concern (club, school, hospital, trust) does not prepare a Profit and Loss Account. Instead it prepares an Income and Expenditure Account, which is a nominal account resembling a Profit and Loss Account:

It is prepared on the accrual basis and includes only revenue (recurring, current-period) incomes and expenses. …
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CBSE 2025Set ANNUAL1 markMCQ
$Q. Excess of income over expenditure in ‘Not for Profit Concern’ is termed as ______.$
(a) Deficit
(b) Profit
(c) Surplus
(d) Loss
›Reveal solutionSolution

The answer is Surplus.

A Not for Profit Concern (club, school, hospital, trust) does not trade to earn profit, so it prepares an Income and Expenditure Account rather than a Profit and Loss Account. The balancing figure of this account is described in special terms:

Situation Term used
Income greater than Expenditure Surplus
Expenditure greater than Income Deficit
…

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CBSE 2025Set ANNUAL1 mark
$Q. Income and Expenditure Account is a ______ account.$
›Reveal solutionSolution

The answer is Nominal.

Accounts are classified as Personal, Real or Nominal. Nominal accounts deal with incomes, gains, expenses and losses. The Income and Expenditure Account of a Not for Profit concern records:

Debit side Credit side
Revenue expenses & losses Revenue incomes & gains
…

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CBSE 2025Set MARCH1 markMCQ
$Q. Income and Expenditure account is a :$
(a) Representative Personal A/c
(b) Real A/c
(c) Personal A/c
(d) Nominal A/c
›Reveal solutionSolution

The Income and Expenditure Account is a Nominal Account.

The Income and Expenditure Account is prepared by not-for-profit organisations (TN HSC Commerce) to record all revenue incomes and revenue expenses relating to the current period, ending in a surplus or deficit. Because it deals only with items of income and expense — not with persons or property — it falls under the class …

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CBSE 2024Set ANNUAL1 markMCQ
$Q. Find the odd one:$
(a) Audit Fees
(b) Insurance
(c) Medical Expenses
(d) Sundry Receipts
›Reveal solutionSolution

Three items are expenses; one is an income/receipt. The income item is the odd one.

In the Income and Expenditure Account of a not-for-profit concern the items fall on opposite sides:

Item Nature Side of I&E A/c
Audit Fees Expense Debit (Expenditure)
Insurance Expense Debit (Expenditure)
Medical Expenses Expense Debit (Expenditure)
Sundry Receipts Income Credit (Income)
…

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CBSE 2024Set ANNUAL1 markMCQ
$Q. Income and Expenditure Account is a ________ Account.$
(a) Capital account
(b) Real account
(c) Personal account
(d) Nominal account
›Reveal solutionSolution
The Income and Expenditure Account of a not-for-profit concern is a Nominal Account — it is the equivalent of a Profit and Loss Account and records only revenue items.

A not-for-profit concern prepares an Income and Expenditure Account to find its surplus (excess of income over expenditure) or deficit. Because it deals only with revenue incomes and revenue expenses of the current year, it follows the golden rule of nominal accounts:

Debit all expenses and losses.

Credit all incomes and gains. …
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CBSE 2024Set ANNUAL1 mark
$Q. Write the word/phrase/term which can substitute of the following statement: The debit balance of Income and Expenditure Account.$
›Reveal solutionSolution
The debit balance of the Income and Expenditure Account represents the Deficit — the excess of expenditure over income.

At the year-end the Income and Expenditure Account is balanced:

If income exceeds expenditure, the credit balance is a Surplus. …
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CBSE 2024Set MARCH1 markMCQ
$Q. Income and Expenditure Account is prepared to find out :$
(a) Surplus or deficit
(b) Profit or loss
(c) Financial position
(d) Cash and Bank balance
›Reveal solutionSolution
The Income and Expenditure Account is prepared to find the surplus or deficit of a not-for-profit organisation — option (a).

Not-for-profit organisations (clubs, societies, hospitals, schools) do not trade to earn profit, so they do not prepare a Profit and Loss Account. Instead they prepare an Income and Expenditure Account, which is a nominal account maintained on the accrual basis:

All revenue incomes of the year (whether received or not) are credited.

All revenue expenses of the year (whether paid or not) are debited.

The balancing figure is a surplus (income exceeds expenditure) or a deficit (expenditure exceeds income). …
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CBSE 2023Set ANNUAL1 markMCQ
$Q. Income and Expenditure Account is a ________ Account.$
(a) Capital
(b) Real
(c) Personal
(d) Nominal
›Reveal solutionSolution
The correct option is Nominal. The Income and Expenditure Account is prepared by a not-for-profit concern on the same lines as a Profit & Loss Account; it is a Nominal account that records all revenue incomes and expenses of the year and reveals the surplus (excess of income over expenditure) or deficit.

Explanation

Nominal accounts are accounts of incomes, gains, expenses and losses. …
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CBSE 2022Set ANNUAL1 mark
$Q. Aurangabad University prepares _______ Account instead of Profit and Loss Account.$
›Reveal solutionSolution

The blank is Income and Expenditure Account.

A university, like a club or a charitable trust, is a not-for-profit organisation whose objective is service, not profit. Such concerns do not prepare a Profit and Loss Account; instead they prepare an Income and Expenditure Account, which records all revenue incomes and revenue expenditures of the period on an accrual basis. Its balancing figure is a surplus (excess …

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CBSE 2022Set MARCH1 markMCQ
$Q. Income and Expenditure Account is prepared to find out :$
(a) surplus or deficit
(b) profit or loss
(c) financial position
(d) cash and bank balance
›Reveal solutionSolution
The Income and Expenditure Account reveals the surplus or deficit of a not-for-profit organisation.

In the Tamil Nadu HSC Class-12 Accountancy syllabus, not-for-profit organisations (clubs, societies, hospitals) do not aim to earn profit, so they prepare an Income and Expenditure Account instead of a Profit and Loss Account. It records only revenue incomes and revenue expenditures of the current period on an accrual basis.

Excess of income over expenditure = surplus.

Excess of expenditure over income = deficit. …
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Income	Expenditure	Deficit
25,000	..........	2,000

Situation	Term used
Income greater than Expenditure	Surplus
Expenditure greater than Income	Deficit
…

Debit side	Credit side
Revenue expenses & losses	Revenue incomes & gains
…

Item	Nature	Side of I&E A/c
Audit Fees	Expense	Debit (Expenditure)
Insurance	Expense	Debit (Expenditure)
Medical Expenses	Expense	Debit (Expenditure)
Sundry Receipts	Income	Credit (Income)
…

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