Page 254 - ISCDEBK-XI

23.2 Double Entry Book Keeping—ISC XI

• These organisations prepare the Receipts & Payments Account, Income & Expenditure Account and the
Balance Sheet.
• Receipts & Payments Account is a summary of transactions appearing in the Cash Book showing receipts
and payments under appropriate heads along with cash and bank balances in the beginning and at the
end of the accounting period.
• Income & Expenditure Account is an account drawn at the end of an accounting period to show the results
of the activities of such organisations. It shows either surplus, i.e., excess of income over expenditure, or
deficit, i.e., excess of expenditure over income. Being a nominal account, it is drawn on the same lines as
the Profit & Loss Account.
• Balance Sheet of a non-trading organisation is prepared in the same manner as we do in the case of a
trading concern. It is prepared to show the financial position of a non-trading organisation on the last day
of the accounting year.
Treatment of Special Items
• Entrance Fee/Admission Fee. It is capitalised and added to Capital Fund.
• Life Membership Fee. These receipts are of non-recurring nature and should be added to Capital Fund in
the Balance Sheet. In other words, it is capitalised.
• Special Receipt. It is not credited to Income & Expenditure Account but is shown on the liabilities side of
the Balance Sheet. Example: Contributions towards Annual Dinner.
• Donation. General donations, not meant for specific purpose, are credited to Income & Expenditure Account.
Specific donations are shown in the Balance Sheet.
• Sale of Assets. Gain (Profit) on sale of asset is credited to Income & Expenditure Account and loss on sale
of asset is debited to Income & Expenditure Account.
• Sale of Old Newspapers, Magazines and Periodicals. It is credited to Income & Expenditure Account.
• Subscriptions. It is treated as income. Current year’s subscriptions are calculated as follows: `
Subscriptions Received during the year ...
Add: Subscriptions outstanding for the year ...
Subscriptions received in advance in the beginning of the year ... ...
...
Less: Subscriptions outstanding in the beginning of the year ...
Subscriptions received in advance at the end of the year ... ...
Subscriptions to be shown in the Income & Expenditure Account ...
• Cost of Consumable items (Stationery used/Medicine Consumed):
Opening Stock of Stationery/Medicines ...
Add: Purchases of stationery/medicines during the year ...
...
Less: Closing stock of stationery/medicines ...
Cost of stationery used/medicines consumed during the year ...
• Calculation of Expenses for the Current Year:
Cash paid during the year ...
Add: Outstanding expenses for the current year ...
Prepaid expenses in the beginning of the year ... ...
...
Less: Expenses outstanding for the last year ...
Prepaid at the end of the year ... ...
Expenses for the current year ...

• Treatment of Items of Expenses and Income Relating to a Specific Fund: If an organisation has established
a fund for a specific purpose, the expenses relating to it and also incomes from it are debited and credited
respectively to that particular Fund. Balance of the fund is shown on the liabilities side of the Balance Sheet.
• Endowment Fund. It is a fund that arises from a gift and its income is devoted for a specific purpose. It
is considered as a capital receipt and is shown on the liabilities side of the Balance Sheet.