Distinguish between Receipts & Payments A/c and Income & Expenditure Account.
Or
From the given Receipts & Payments Account of Kolkata Golf Club and other information, prepare an Income & Expenditure Account for the year ended 31st December, 2018:
RECEIPTS & PAYMENTS ACCOUNT (Dr. ... Cr.) for the year ended 31st December, 2018
| Receipts | Rs. | Payments | Rs. |
|---|---|---|---|
| To Balance b/d | 3,800 | By Sports Equipments (Purchased on 1st June, 2018) | 12,000 |
| To Subscriptions: 2017 — 2,000; 2018 — 20,500; 2019 — 900 | 23,400 | By Tournament Expenses | 3,000 |
| To Donations | 4,800 | By Electricity | 2,500 |
| To Interest on Investments | 1,500 | By Printing | 1,300 |
| By Salaries | 3,400 | ||
| By Expenses for Exhibition | 4,100 | ||
| By Balance c/d | 7,200 | ||
| Total | 33,500 | Total | 33,500 |
Additional Information:
- Subscriptions outstanding for 2018 was Rs. 5,000 and subscription received in 2017 for the year 2018 amounted to Rs. 2,000.
- 50% of donations is to be capitalised.
- Depreciation is to be charged on Sports Equipment @ 5% p.a.
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Start your 14-day free trial to unlock the full solution →The Receipts & Payments Account is a cash summary (all items, all years); the Income & Expenditure Account is an accrual account of current-year revenue items giving surplus/deficit. For Kolkata Golf Club the surplus for 2018 is Rs. 16,750.
Distinction between Receipts & Payments A/c and Income & Expenditure A/c:
| Basis | Receipts & Payments A/c | Income & Expenditure A/c |
|---|---|---|
| Nature | Summary of the Cash Book (a real account) | Like a Profit & Loss A/c (a nominal account) |
| Basis | Cash basis | Accrual (mercantile) basis |
| Items included | All receipts & payments — capital and revenue, of past, current and future years | Only revenue incomes & expenses of the current year |
| Opening/closing balance | Begins and ends with cash/bank balance | No cash balance; result is surplus or deficit |
| Result shown | Closing cash/bank balance | Surplus (excess income) or deficit (excess expenditure) |
Or — Income & Expenditure Account of Kolkata Golf Club for the year ended 31st December, 2018:
Working 1 — Subscription income for 2018: received for 2018 Rs. 20,500 + outstanding for 2018 Rs. 5,000 + amount received in 2017 for 2018 Rs. 2,000 = Rs. 27,500. (Subscriptions of 2017 Rs. 2,000 and of 2019 Rs. 900 received now are not 2018 income.)
Working 2 — Donations: 50% of Rs. 4,800 is capitalised (Rs. 2,400 → not income); the remaining 50% = Rs. 2,400 is revenue income.
Working 3 — Depreciation on Sports Equipment: purchased 1 June 2018 for Rs. 12,000; @ 5% p.a. for 7 months = 12,000 x 5% x 7/12 = Rs. 350.
| Expenditure | Rs. | Income | Rs. |
|---|---|---|---|
| To Tournament Expenses | 3,000 | By Subscriptions (W1) | 27,500 |
| To Electricity | 2,500 | By Donations (50% of 4,800) (W2) | 2,400 |
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