ZeePedia buy college essays online


Advanced Financial Accounting

<<< Previous PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT ORGANIZATIONS FROM INCOMPLETE RECORDS Next >>>
 
img
Advance Financial Accounting (FIN-611)
VU
LESSON # 8
PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT
ORGANIZATIONS FROM INCOMPLETE RECORDS
Questions often require candidates to prepare an Income & Expenditure Account and
Balance Sheet from incomplete records. Generally, a summary of bank and cash
transactions is provided along with information relating to opening and closing assets
and liabilities.
To solve these types of problems, the following steps are followed:
1. Prepare a receipt and payment account (if not given in the question).
2. Prepare statement of affairs as on opening date.
3. Post the balances of assets and liabilities from the statement of affairs into the
relevant ledger a/c as opening balance b/f or put these in the working for
further calculation of closing balance.
4. Pick up the revenue receipts and payment and pass these from the filter of
accruals to calculate incomes and expenses for the year.
5. Prepare such ledger accounts as are deemed necessary (like subscription a/c).
6. Work out depreciation charge for the fixed assets and treat them accordingly.
7. Prepare trading account for supporting trading activities undertaken by the
non-trading organization.
8. Draft the income and expenditure account and balance sheet.
Solved Problem 1
Karachi Golf Club prepared the following Receipts and Payments Account for the year
ended December 31, 2007
Receipts
Amount
Payments
Amount
Rupees
Rupees
Opening balance b/f
3,800 Sports Equipments
10,000
Subscription
(purchased on 1.9.2007)
2,000 Tournament expenses
4,000
2006
18,500 Electricity
500
2007
900 Printing
300
2008
3,400
Entrance fees
Salaries and wages
800 Expenses for exhibition
2,100
(capital receipts)
1500 Closing Balance c/f
7,200
Interest on Investment
27,500
27,500
Additional information:
1. Non-current assets of the club on January 1, 2007 include the following:
Rupees
Club Ground
50,000
Sports Equipment
15,500
Furniture
2,000
Investment
12,000
37
img
Advance Financial Accounting (FIN-611)
VU
2. Subscription for 2007 collected in 2006 Rs. 500
3. Unpaid subscriptions for 2007 Rs. 300
4. Depreciation to be provided
@ 5% p.a. on furniture and
@ 20% p.a. on sports equipment.
Required:
prepare Income statement and balance sheet for the year 2007.
Statement of Affairs
As on January 1, 2007
Assets
Rs
Club ground
50,000
Sports equipment
15,500
Furniture
2,000
Investments
12,000
Subscription due
2,000
Cash balance
3,800
85,300
Less Liabilities
Subscription received in advance
500
Capital fund
84,800
Sports Equipment Account
Date  Particulars
Amount  Date  Particulars
Amount
Rupees
Rupees
1 Jan  Opening balance
15,500 31 Dec Depreciation
3,767
2007
2007
1 Sep Addition
10,000 31 Dec Balance
21,733
2007  During the year
2007
25,500
25,500
Sports Equipment
Rupees
Opening balance
15,500
Add Addition 1.9.2007
10,000
25,500
Less Depreciation
15,500 x 20%
3,100
3,767
10,000 x 20% x 4/12  667
Net book value
21,733
Furniture
Opening balance
2,000
Add Addition
1.9.2007
0
2,000
Less Depreciation
2,000 x 5%
100
38
img
Advance Financial Accounting (FIN-611)
VU
Net book value
1,900
Subscription Income
Subscriptions received during the year
21,400
Less Opening due
2,000
Add Closing due
300
Add Opening advance
500
Less Closing advance
900
19,300
Income & Expenditure Account
For the year ended December 31, 2007
Rupees
Incomes
Rupees
Subscription
19,300
20,800
Interest on Investment
1,500
Expenses
Tournament expenses
4,000
Electricity
500
Printing
300
Salaries and wages
3,400
Exhibition expenses
2,100
Depreciation
furniture
100
Sports equipment
3,767
14,167
6,633
Owner's Equity
Opening capital
xxx
Add Net profit
xxx
Add Fresh capital
xxx
Less Drawings
xxx
Closing capital
xxx
Capital Fund
Opening capital fund
xxx
Add Surplus
xxx
Add Capital receipts during the year
xxx
Closing capital fund
xxx
Capital fund as on December 31, 2007
Rupees
Opening capital
84,800
Add Surplus
6,633
Add Capital receipts
800
Closing capital fund
92,233
39
img
Advance Financial Accounting (FIN-611)
VU
Balance Sheet
As on December 31, 2007
Amount Capital fund &
Amount
Assets
Rupees  Liabilities
Rupees
Club building
50,000 Capital fund
92,233
Sports equipment
21,733 Subscription received in
Furniture
1,900 advance
900
Investments
12,000
Subscription due
300
Cash
7,200
93,133
93,133
Some of the non-profit organizations believe on self sufficiency. These types of
organizations run a trading activity within the organization. These may include a
canteen, a juice shop, a book shop, a tuck shop etc. Following is a solved problem that
covers working for such trading activity.
Solved Problem 2
The following summary of the Cash Book has been prepared by the Treasure of a club.
Receipts
Amount
Payment
Amount
Rupees
Rupees
Cash in hand & at bank
Wages-Outdoor staff
13,380
on April 1, 2007
4,740
Restaurant purchases
50,400
Member's subscription
29,720
Rent-18 months June 30,
7,500
Entrance fee
3,200
2008
Restaurant fee
56,800
Rates
2,200
Games competition receipts
Secretary salary
3,120
13,640
Lighting, Cleaning &
Dues to secretary
7,700
80
for petty expenses
Sanitary service
Competition prizes
4,000
Printing, postage &
6,000
Sundries
Fixed deposit in bank
8,000
Balance
5,880
108,180
108,180
On April 1, 2007, the club assets were: Furniture and Equipment Rs. 48,000; Restaurant
stocks Rs. 2,600; Stock of prizes Rs. 800, and Rs 5,200 owed for supplies to the
restaurant.
40
img
Advance Financial Accounting (FIN-611)
VU
On March 31, 2008 the restaurant Stocks were Rs. 3,000 and prizes on hand were Rs.
500 while the club owed Rs. 5,600 for restaurant supplies.
It was also found that member's subscription unpaid on March 31, 2008, amounted to
Rs. 1,000 and that the amount of Rs. 29,720 shown in cash book included Rs. 700 in
respect of previous year and Rs. 400 paid in advance for the following year.
Working for trading activity
Rupees
Supplies
Cash paid
50,400
Less Opening due
5,200
Add Closing due
5,600
Supplies purchase expenses
50,800
Cost of goods sold
Purchases of supplies
50,800
Add opening stock
2,600
Less closing stock
3,000
Cost of goods sold
50,400
Trading Account
Sales
56,800
Less Cost of Goods Sold
50,400
6,400
CLUB
Income and Expenditure Account
For the year ended 31.03.2008
Expenditure
Rs.
Income
Rs.
To Wages ­ Outdoor staff
13,380 By Members' subscriptions
29,620
To Rent
5,000 By Games competition receipts
13,640
6,400
To Rates
2,200 By Restaurant profit
To Secretary's Salary
3,120
To Lighting, cleaning and
sanitary services
7,700
To Competition prizes
4,300
To Printing, postage and
sundries
6,000
To depreciation on Furniture &
Equipment ­ 10%
4,800
To Excess of Income over
Expenditure
3,160
49,660
49,660
41
img
Advance Financial Accounting (FIN-611)
VU
CLUB
Balance Sheet
As at 31.03.2008
Liabilities
Rs.
Assets
Rs.
Capital Fund:
Furniture & Equipment
48,000
Opening Balance
50,390
Less: 10% Depreciation
4,800
43,200
Add: Entrance Fees
3,200
Restaurant Stock
3,000
Add: Excess of Income
Prizes in hand
500
56,750 Fixed deposit with bank
8,000
over Expenditure
3,160
Subscriptions received in advance
Cash in hand at bank
5,880
Creditor for restaurant supply
400 Prepaid Rent (April to June 2008)
1,250
Due to secretary
5,600 Subscriptions outstanding
1,000
80
62,830
62,830
42
Table of Contents:
  1. ACCOUNTING FOR INCOMPLETE RECORDS
  2. PRACTICING ACCOUNTING FOR INCOMPLETE RECORDS
  3. CONVERSION OF SINGLE ENTRY IN DOUBLE ENTRY ACCOUNTING SYSTEM
  4. SINGLE ENTRY CALCULATION OF MISSING INFORMATION
  5. SINGLE ENTRY CALCULATION OF MARKUP AND MARGIN
  6. ACCOUNTING SYSTEM IN NON-PROFIT ORGANIZATIONS
  7. NON-PROFIT ORGANIZATIONS
  8. PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT ORGANIZATIONS FROM INCOMPLETE RECORDS
  9. DEPARTMENTAL ACCOUNTS 1
  10. DEPARTMENTAL ACCOUNTS 2
  11. BRANCH ACCOUNTING SYSTEMS
  12. BRANCH ACCOUNTING
  13. BRANCH ACCOUNTING - STOCK AND DEBTOR SYSTEM
  14. STOCK AND DEBTORS SYSTEM
  15. INDEPENDENT BRANCH
  16. BRANCH ACCOUNTING 1
  17. BRANCH ACCOUNTING 2
  18. ESSENTIALS OF PARTNERSHIP
  19. Partnership Accounts Changes in partnership firm
  20. COMPANY ACCOUNTS 1
  21. COMPANY ACCOUNTS 2
  22. Problems Solving
  23. COMPANY ACCOUNTS
  24. RETURNS ON FINANCIAL SOURCES
  25. IASBíS FRAMEWORK
  26. ELEMENTS OF FINANCIAL STATEMENTS
  27. EVENTS AFTER THE BALANCE SHEET DATE
  28. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
  29. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 1
  30. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 2
  31. BORROWING COST
  32. EXCESS OF THE CARRYING AMOUNT OF THE QUALIFYING ASSET OVER RECOVERABLE AMOUNT
  33. EARNINGS PER SHARE
  34. Earnings per Share
  35. DILUTED EARNINGS PER SHARE
  36. GROUP ACCOUNTS
  37. Pre-acquisition Reserves
  38. GROUP ACCOUNTS: Minority Interest
  39. GROUP ACCOUNTS: Inter Company Trading (P to S)
  40. GROUP ACCOUNTS: Fair Value Adjustments
  41. GROUP ACCOUNTS: Pre-acquistion Profits, Dividends
  42. GROUP ACCOUNTS: Profit & Loss
  43. GROUP ACCOUNTS: Minority Interest, Inter Co.
  44. GROUP ACCOUNTS: Inter Co. Trading (when there is unrealized profit)
  45. Comprehensive Workings in Group Accounts Consolidated Balance Sheet