DEPARTMENT OF TECHNICAL

EDUCATION :: AP
Name : N. USHA RANI
Designation : Lecturer
Branch : Commercial & Computer Practice
(CCP)
Institute : GPW/Guntur
Year/Sem : III Sem
Sub-Code : CCP-302
Subject : ACCOUNTANCY-II
Topic : Non-Trading Concerns
Duration : 50 minutes
Sub Topic : Preparation of I & E A/c from
R & P a/c Problems - I
Teaching Aids : PPT ANIMATIONS
CCP302.66 1
 Objectives

On completion of this period you would be able to

 Prepare the Income and Expenditure account from
Receipts and Payments accounts.

CCP302.66 2
 Known to unknown

 List the features of income and expenditure

Account
 How is it prepared ?

CCP302.66 3
Recap of Income and Expenditure account:
 It is similar to Profit and Loss account. It covers all
revenue expenses (paid as well as payable) and all
revenue incomes (received as well as receivable) during a
current year

 Any income or expenditure of previous or future period are

Included. Capital income and expenditure also avoided
 Profit is termed as Excess of Income over expenditure.
Loss is termed termed as Excess of Expenditure over
income

CCP302.66 4
Preparation of Income and Expenditure a/c
from Receipts and Payments a/c:

 A scrutiny of receipts side items of revenue nature of

Receipts and Payments account relating to current year
will be done.
 These items appear on the credit side of Income
and Expenditure account
 outstanding amounts if any must be added
 The outstanding amount will appear in the
Balance Sheet also

CCP302.66 5
Example (1):

Receipts and Payments a/c shows subscription collected

Rs.25,300 including Rs.1,450 for the next year. But

subscription for the current year not yet received Rs.1,000. Find
out the Subscriptions for the current year.

CCP302.66 6
 Working Notes
Subscriptions Received 25,300
Less: Sub. Received in advance 1,450
23,850
Add: Outstanding Sub. 1,000
Subscriptions for the current year 24,850

 The subscriptions received in advance will appear in Balance sheet on

Liabilities side.
 The subscriptions outstanding will appear in Balance Sheet on
Assets side.
 Next year these two accounts will be transferred to
Subscription a/c.
CCP302.66 7
Preparation of Income and Expenditure account
from Receipts and Payments account :-

 A scrutiny of a/c Payments side items of revenue nature of

Receipts and Payments relating to present year will be
done
 These will appear on the debit side of Income and
Expenditure a/c
 outstanding expenses if any should be added
 Expenses paid in advance if any should be deducted
 Both outstanding and prepaid amounts appear in Balance
Sheet

CCP302.66 8
Example2:

Salaries paid for 2007 Rs.9,600

and includes Rs.700 for 2006 and at the end of 2007

Rs.900 is unpaid.The Salaries of the current year will
appear as follows:

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Working Notes:
Salaries paid in 2007 9,600
Less Salaries of 2006 700
8,900
Add: Unpaid salaries 900
Salaries of the current year 9,800

1. Unpaid salaries of Rs.900 to be shown on the Liabilities side

of the Balance Sheet.

2. Salaries of the current year Rs.9,800 to be shown on the

Debit side of the Income and Expenditure Account.

CCP302.66 10
Example 3:
From the following Receipts and Payments a/c of the Union club for
the year ending 31st Dec, 2000 ,Prepare Income and Expenditure a/c Receipts
and Payments a/c for the year ending 31-12-2000

Rs. Rs.
To balance b/d (1-1-2000) 400 By upkeep of grounds (A) 4000
To subscriptions 7,200 By wages of Grounds
To entrance fees 460 men 4,500

To interest on investment 1,200 By ground rent 150

By printing (B) 650

To proceeds from lectures 2,000
By Postage 60
By balance c/d
(31-12-2000) 1,900
11,260
11,260
CCP302.66 11
Problem…(Contd)

Additional Information:
(A) This item includes Rs.500 applicable to previous year

(B) This item includes Rs.150 applicable to previous year

Entrance fees are to be capitalized. The outstanding items
as on 31st December, are:

(i) Printing Rs.300; wages to grounds men Rs.500;

subscriptions outstanding Rs.300 and subscriptions received
in respect of previous year are Rs.500

CCP302.66 12
 Solutions & Notes:

Since Entrance fees are capitalized, they are not recorded

in the Income and Expenditure a/c.

CCP302.66 13
 Income and Expenditure Account For the year ending 31st December, 2000

Expenditure Rs. Income Rs.

To upkeep of grounds 4,000 By subscriptions 7,200
Less:expenses of Add:O.S. (+)300
previous year (-)500 3,500 7,500
To wages of grounds Less:subscriptions of previous
Men 4,500 year (-)500 7,000
Add:outstanding wages 500 5,000
150 BY interest on investments 1,200
To ground rent 2,000
To printing 650 BY proceeds from lecturers
Add:outstanding (+) 300
950 800
Less:expenses of previous 150
To postage 60
To Excess income over expenditure 690
10200
10200

CCP302.66 14
 Assignment
1)The following is R/P a/c of Lucky Club for the year ended 31/12/2000
Receipts and Payments a/c for the year ended 31-12-1977

Rs. Rs.
To Balance(1-1-77) 745 By Upkeep of Grounds (b) 4,750
To Subscriptions (a) … 6,800 By Wages of Grounds
To Entrance Fees … men 4,680
To Interest … … 260 By Ground Rent
To Proceeds from 420 By printing & Stationery 105
Lecturers, Concerts 2,590 © 465
By postage
By Balance (31-12-77) 95
720
10,815 10,815

CCP302.66 15
Problem Contd.

Additional Information
• This item includes Rs.100 applicable to the previous
year
(b) This item includes Rs.250 applicable to the previous year.
(C) This item includes Rs.100 applicable to the next year.
Entrance Fees are to be capitalised. The outstanding items
as on 31-12-1977 are:
Printing & Stationery Rs.80. The Social Literary Association
owed Rs.105 for the use of Club’s Hall.

From the above prepare an Income & Expenditure Account

For the year ended 31st Dec,1977.
Ans. Excess of Expenditure Rs.10
CCP302.66 16
2).From the following Receipts & Payments a/c of the Karnataka Club
,prepare an Income& Expenditure a/c for year ended 31-12-1979:
Receipts and Payments Account for the year ended 31-12-1979
Rs. Rs.
To Balance (1-1-79) 220 By Investment 10,000
To Entrance Fees 100 By Furniture 1,200
To Donations 14,000 By Salaries 1,600
To Subscriptions 3,200 By Rent 1,100
To Sports Fees 4,500 By Sports Exp. 6,500
To Sale of Old 80 By Advance for
Furniture purchase of 1,500
To Interest on 250 Buildings
Investment. By Sundry Exp. 200
To Sundry Income 50
By Balance 300
(31-12-79)
22,400 22,400

CCP302.66 17
Problem Contd
Additional Information
It was decided to treat one-half of Entrance Fee and Donations as
income. Outstanding Salary and Rent were Rs.200 and Rs.100
respectively. Subscriptions outstanding for the year 1979 amounted
to Rs.300.
Hints: 1. Sale of old furniture is not a revenue income and
should not be taken in Income & Expenditure a/c.
2. The items Investment, Furniture and Advance for
purchase of Building are Capital items and should not be taken in
I/E A/c
Ans. Excess of Income Rs.5,650/-
CCP302.66 18
3. The following is the Receipts and Payments Account of the India Club for
the year ending 31-12-1979:
Receipts and Payments Account for the year ended 31-12-79

Rs. Rs.
To Balance 1-1-1979 500 By up-keep of Grounds 4,800
To Subscriptions 6,800 (a)
To Entrance Fees 260 By Wages of 4,600
Groundsmen
To Interest for 400
Investments By Ground Rent
100
To Proceeds from By Printing (b)
2,500 500
Lectures By Postage
160
By Balance c/d
300
10,460 10,460

CCP302.66 19
Problem Contd.
Additional Information
(c) This item includes Rs.300 applicable to previous year.
(d) This item includes Rs.100 applicable to the previous year.
Entrance fees to be capitalised. The outstanding items as on 31-12-
1979 are: Printing Rs.200 and Wages of Groundsmen Rs.100.

From the above, prepare an Income and Expenditure Account for

the year ending 31-12-1979.
Ans. Excess of Expenditure Rs.360/-

CCP302.66 20
4) From the following Receipts and Payments account of Alagappa Social Club
& further information supplied, prepare an Income and Expenditure account for
the year ended Dec.31, 1973.
Receipts and Payments Account
1973 Rs. Rs.
Jan.1 To Opening Balance By Buildings 15,000
Cash at Bank 1,000 By Rent 700
Cash in hand 100 1,100 By Furniture 1,500
Dec.31 To Donations 20,000 By Salaries 600
To Life Members fees 4,000 By Cricket 200
To Subscriptions 1,800 By Tennis 500
To Interest on Investments 50 By Gardening 100
To Cricket 150 By Printing 50
To Tennis 400 By Telephone 175
To Playing Cards 300 By Advertisement 100
To Sundries 100 By Playing Cards 200
To Sale of Old newspapers 125 By Investments 8,000
By Balance
900

28,025 28,025
CCP302.66 21
 Problem Contd.
Outstanding amounts were:

Subscriptions Rs.400; interest on investments Rs.150; Outstanding

liabilities were: Salaries Rs.200, Rent Rs.200, Subscriptions received
in Advance for the year 1974 were Rs.100

Ans. Excess of Income over expenditure Rs.350/-

CCP302.66 22
 5) From the following prepare an Income and Expenditure
Account for the year ended 31st March, 1972.

1971 April 1972 March,31 Rs.

Rs.
To Balance: By Salaries 3,600
Cash at Bank 455 By Rent 600
510
Cash in Hand 55 By Printing & Stationery 145
1972 March,31 By Postage & Telegrams 25
To Subscription (including By Purchase of bicycles 95
3,000
By Purchase of 680
Rs.200 for 1972-73) 1,500
Govt.Bonds
To Interest on Investment 10
By Balance:
To Bank interest 250 Cash in Office
To Sale proceeds of car 12 125
Cash in bank
113
5,270 5,270
CCP302.66 23
Summary

Features of income and expenditure account

 It is a nominal account
 Incomes are shown on the credit side
 Expenses are shown on the debit side
 There is no opening balance
 It deals only revenue items revenue
receipts and expenditure

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Summary contd.
 Income and expenditure of the current year is taken into
consideration
 Income and expenditure relating to the preceding or
succeeding periods are excluded
 All adjustments relating to prepaid or outstanding expenses
and incomes, provision for depreciation or doubtful debts
will be made
 The closing balance is either surplus (i.e. excess income or
expenditure) or deficit (i.e. excess of expenditure over
income)

CCP302.66 25
 Quiz

(1) Income and Expenditure is similar to Profit and Loss

account of trading concerns

(a) True

(b) False

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 Quiz
(1) All incomes will appear on the credit side and all
expenditure on the debit side of Income and
Expenditure account.

(a) True

(b) False

CCP302.66 27
Assignment

1. Solve problems from old question papers and

prescribed text books

CCP302.66 28