This problem combines a subscription adjustment, an outstanding-salary adjustment, and depreciation on two different assets, then carries every figure through to a fully balancing closing Balance Sheet. …

Step 1 — Find the opening Capital Fund.

Total Assets (1.4.2023) = 18,000 + 60,000 + 15,000 + 2,000 = ₹95,000

Total Liabilities (1.4.2023) = ₹1,000 (Outstanding Salary)

Opening Capital Fund = 95,000 − 1,000 = ₹94,000

Step 2 — Adjust Subscription. 70,000 − 2,000 (opening outstanding) + 3,500 (closing outstanding) = ₹71,500.

Step 3 — Adjust Salary. 25,000 − 1,000 (opening outstanding) + 1,500 (closing outstanding) = ₹25,500.

Step 4 — Depreciation on Books. Closing balance before depreciation = Opening ₹60,000 + Purchased ₹15,000 = ₹75,000. Depreciation @10% = ₹7,500. Closing Books = 75,000 − 7,500 = ₹67,500.

Step 5 — Depreciation on Furniture. 10% of the opening (and unchanged) balance of ₹15,000 = ₹1,500. Closing Furniture = 15,000 − 1,500 = ₹13,500.

Step 6 — Income and Expenditure Account for the year ended 31.3.2024

Check: Income = 71,500 + 1,500 = 73,000. Expenditure (excl. Surplus) = 25,500 + 12,000 + 7,500 + 1,500 = 46,500. Surplus = 73,000 − 46,500 = 26,500. …

As a cross-check, verify the closing Capital Fund from the Balance Sheet itself: Total Assets (37,500 + 67,500 + 13,500 + 3,500 = 1,22,000) minus Outstanding Salary (1,500) = 1,20,500, which agrees …

A common error is depreciating the Books only on the opening ₹60,000, ignoring the instruction to charge depreciation on the closing balance after adding the current year's ₹15,000 purchase. Another frequent slip is forgetting to carry the closing Outstanding Subscription (₹3,500) into the Balance Sheet as an asset, and t …