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Example 1. A simple Income and Expenditure account


Following is a receipts and payments account of XYZ Golf club for the year ended on 31 December, 2012


X.Y.Z Golf Club
Receipts and payments Account
For the year ended on 31 Dec, 2012

RECEIPTS AMOUNT PAYMENTS AMOUNT
Balance b/d (or Balance at 1.1.2012)

Donations received

Profit on investment

Subscription received

Entrance fee
$5

$2

$2

$5

$3
Salaries paid

Groundsman wage

Rent and rates expenses

Stationery and postage expenses

Utility expenses paid

Balance c/d (Balance at 31.12.2012)

$2

$2

$2

$3

$1

$7
TOTAL $17 TOTAL $17

Assumption: Incomes received and expenses paid during the year 2012 were earned and incurred in that accounting period


Required: Prepare an income and expenses account for the year ended on 31 December, 2012


Solution:

X.Y.Z Golf Club
Income and Expenditure Account
For the year ended on 31 Dec, 2012

EXPENDITURES AMOUNT INCOMES AMOUNT
Salaries expenses

Groundsman wage

Rent and rates expenses

Stationery and postage expenses

Utility expenses paid

Surplus (Note 1)

$2

$2

$2

$3

$1

$2
Donations

Profit on investment

Subscriptions

Entrance fee


$2

$2

$5

$3
TOTAL $12 TOTAL $12


Note 1

Surplus = Total incomes - Total expenditures

Surplus = (Donations + Profit on investment + Subscriptions+ Entrance fee) - (Salaries expenses + Groundsman wage + Rent and rates expenses + Stationery and postage expenses + Utility expenses paid)

Surplus = ($2 + $2+ $5 + $3) - ($2+$2+$2+$3+$1)

Surplus = ($12) - ($10)

Surplus = $12 - $10

Surplus = $2



Example 2. Income and Expenditure account with Adjustments


Following is a receipts and payments account of X.Y.Z Golf club for the year ended on 31 December, 2012


X.Y.Z Golf Club
Receipts and payments Account
For the year ended on 31 Dec, 2012

RECEIPTS AMOUNT PAYMENTS AMOUNT
Balance b/d (or Balance at 1.1.2012)

Donations received

Profit on investment

Subscription received

Entrance fee
$5

$2

$2

$7

$3
Salaries paid

Groundsman wage

Rent and rates expenses

Stationery and postage expenses

Utility expenses paid

Balance c/d (Balance at 31.12.2012)

$2

$2

$2

$3

$1

$9
TOTAL $19 TOTAL $19

Additional information: Total Subscription received was $7, out of which 1$ related to the previous year and $2 were received in advance for the next year or 2013


Required: Prepare an income and expenses account for the year ended on 31 December, 2012


Solution:

X.Y.Z Golf Club
Income and Expenditure Account
For the year ended on 31 Dec, 2012

EXPENDITURES AMOUNT INCOMES AMOUNT
Salaries expenses

Groundsman wage

Rent and rates expenses

Stationery and postage expenses

Utility expenses paid

Surplus (Note 1)

$2

$2

$2

$3

$1

$1
Donations

Profit on investment

Subscriptions (Note 1)

Entrance fee


$2

$2

$4

$3
TOTAL $11 TOTAL $11


Note 1
Only the portion of total subscriptions that is earned during the current year or 2012 will be recorded in the Income and Expenditure Account

Total subscription received during the current year = $7

Subscription related to the previous year = $1
Subscription related to the next year = $2

Therefore, subscription amounting to $4 is related to the current year or 2012



Example 3. Income and expenditure account and Balance sheet


Following is a receipts and payments account of X.Y.Z Golf club for the year ended on 31 December, 2012


X.Y.Z Golf Club
Receipts and payments Account
For the year ended on 31 Dec, 2012

RECEIPTS AMOUNT PAYMENTS AMOUNT
Balance b/d (or Balance at 1.1.2012)

Donations received

Profit on investment

Subscription received

Entrance fee

Bank loan
$5

$2

$2

$7

$3

$10
Salaries paid

Groundsman wage

Rent and rates expenses

Stationery and postage expenses

Utility expenses paid

Payments to creditors

Balance c/d (Balance at 31.12.2012)

$2

$2

$2

$3

$1

$3

$16
TOTAL $29 TOTAL $29

Additional information: Total Subscription received was $7, out of which 1$ related to the previous year and $2 were received in advance for the next year or 2013

Assets, liabilities and accumulated fund of X.Y.Z Golf club at 1st January, 2012  were as follows:

  • Building (at cost) = $10
  • Land = $2
  • Investment = $3
  • Cash at Bank = $5
  • Creditors = $9
  • Subscription receivable = $1
  • Accumulation fund = $10

Depreciation on building is chargeable at the rate of 10% per year. Note that accumulated depreciation on building was $1 at 1st January, 2012


Required: Prepare an income and expenses account and a balance sheet as on 31 December, 2012


Solution:

X.Y.Z Golf Club
Income and Expenditure Account
For the year ended on 31 Dec, 2012

EXPENDITURES AMOUNT INCOMES AMOUNT
Salaries expenses

Groundsman wage

Rent and rates expenses

Stationery and postage expenses

Utility expenses paid

Surplus (1)

$2

$2

$2

$3

$1

$1
Donations

Profit on investment

Subscriptions

Entrance fee


$2

$2

$4

$3
TOTAL $11 TOTAL $11




XYZ Friends Club
Balance sheet
As on 31 Dec, 2012

ASSETS  AMOUNT ACC. FUND + LIABILITIES AMOUNT
Current Assets
Cash at bank-N6
Fixed Assets
Land
Building-N7
Less: Acc. depreciation
Long term investments
Investments





$10
$2    







$16

$2

$8

$3





Accumulated fund
Opening accumulated fund
Add: Surplus for the year -N1
Closing accumulated fund-N2
Short term liabilities
Subscriptions in advance-N3
Creditors-N4
Long term liabilities
Bank loan- N5

$10
$1     





$11

$2
$6

$10

TOTAL $29 TOTAL $29



N1 (Note 1)
Only the part of total subscriptions that is earned during the current year or 2012 will be recorded in the Income and Expenditure Account

Total subscription received during the current year = $7

Subscription related to the previous year = $1
Subscription related to the next year = $2

Therefore, only $4 subscription is related to the current year or 2012

N2

Opening accumulated fund Plus Surplus (as shown in the income and expenditure account) = Closing Accumulated fund

$10+$1=$11

N3
Total subscription received was $7 (as per receipts and payments account), $2 out of $7 were received as an advance subscription for the next year or 2013. Since $2 subscription was received but not yet earned, it is considered a liability of X.Y.Z Golf Club

N4
Creditors at January 1st, 2012 = $9 (as per additional information provided in the example) 

$3 were paid to creditors (as per receipts and payments account). It means creditors amounting to $6 remain to be paid ($9-$3=$6). Therefore, $6 is the closing balance of creditors that should be reported in the balance sheet

N5
Looking at the receipts and payments account, you can clearly see that X.Y.Z Golf club has obtained $10 in terms of bank loan

N6
The Balance c/d or balance at 31 December, 2012 or closing balance of receipts and payments account

N7
As mentioned in "Additional information" the Cost of building is $10, accumulated depreciation on January 1st, 2012 was $1 and rate of depreciation is 10% per year

Step 1, calculation of current year depreciation:

Depreciation expenses on building = Building cost X Rate of depreciation
Depreciation expenses on building = $10 X 10%
Depreciation expenses on building = $1

Hence, depreciation on building for the current year is = $1

Step 2, calculation of Accumulated depreciation at 31 December

Accumulated depreciation at 31 December, 2012 should be:

Accumulated depreciation at 31 December, 2012 = Current year depreciation + Accumulated depreciation at January 1st, 2012

Accumulated depreciation at 31 December, 2012 = $1 + $1

Accumulated depreciation at 31 December, 2012 = $2