This is a comprehensive problem bringing together subscription adjustment, outstanding rent, depreciation on two assets, accrued interest, and the capitalisation of a specific donation and life membership fees — the full range of NPO adjustments in one problem.

Step 1 — Find the opening Capital Fund (Statement of Affairs as on 1.4.2023).

Total Assets = 4,000 + 36,000 + 3,00,000 + 40,000 + 1,00,000 + 5,000 = ₹4,85,000

Total Liabilities = 2,000 + 3,000 = ₹5,000

Opening Capital Fund = 4,85,000 − 5,000 = ₹4,80,000

Step 2 — Adjust Subscription.

2,10,000 − 5,000 (opening outstanding) + 9,000 (closing outstanding) − 4,000 (closing advance) + 3,000 (opening advance) = ₹2,13,000

Step 3 — Adjust Rent.

22,000 − 2,000 (opening outstanding) + 3,000 (closing outstanding) = ₹23,000

Step 4 — Depreciation on Furniture.

On opening ₹40,000 @10% (full year) = ₹4,000. On new ₹20,000 (purchased 1.10.2023, so 6 months) @10% = ₹1,000. Total depreciation = ₹5,000. Closing Furniture = 40,000 + 20,000 − 5,000 = ₹55,000.

Step 5 — Depreciation on Building.

2.5% of ₹3,00,000 = ₹7,500. Closing Building = 3,00,000 − 7,500 = ₹2,92,500.

Step 6 — Interest on Investments (accrual basis).

Full year's interest on opening ₹1,00,000 @10% = ₹10,000, but only ₹9,000 was received in cash, so ₹1,000 is accrued (outstanding) interest receivable. Interest for the Income and Expenditure Account = 9,000 + 1,000 = ₹10,000. (No interest is accrued on the ₹40,000 Investments purchased during the year, per the given information.) Closing Investments = 1,00,000 + 40,000 = ₹1,40,000.

Step 7 — Exclude capital items. Donation for Building (₹50,000, capitalised to a separate Building Fund) and Life Membership Fees (₹15,000, capitalised to the Capital Fund) are excluded from the Income and Expenditure Account. Furniture and Investments purchased are capital expenditure, excluded except for their depreciation impact already applied above.

Step 8 — Income and Expenditure Account for the year ended 31.3.2024

Check: Income = 2,13,000 + 10,000 = 2,23,000. Expenditure (excl. Surplus) = 60,000 + 23,000 + 8,000 + 5,000 + 7,500 = 1,03,500. Surplus = 2,23,000 − 1,03,500 = 1,19,500.

Step 9 — Closing Capital Fund.

Opening Capital Fund ₹4,80,000 + Surplus ₹1,19,500 + Life Membership Fees ₹15,000 = ₹6,14,500

Step 10 — Balance Sheet as on 31.3.2024

Cross-check the closing Capital Fund independently by treating the Balance Sheet as a Statement of Affairs: Total Assets (1,74,000 + 2,92,500 + 55,000 + 1,40,000 + 9,000 + 1,000 = 6,71,500) minus Total Liabilities excluding Capital Fund (50,000 + 3,000 + 4,000 = 57,000) = 6,14,500, which matches the Capital Fund built up in Step 9 exactly.

The most common error in a problem like this is crediting the Donation for Building or the Life Membership Fees to the Income and Expenditure Account as income — both are capital receipts and must bypass the Income and Expenditure Account entirely. Another frequent slip is charging a full year's depreciation on the furniture purchased mid-year instead of a proportionate half-year's depreciation, and forgetting that interest income must be accounted for on the accrual basis (including the accrued portion), not merely the cash actually received.