Balance Sheet

Balance Sheet

A Balance sheet is a statement showing the financial position of an organisation. The preparation of balance sheet of a not–for–profit organisation is more or less similar to that of a trading concern. Assets and liabilities, as on the last date of the accounting period are taken to the balance sheet (liabilities are taken on the left side and assets on the right side of the balance sheet).

Important points in the preparation of a balance sheet of a not–for–profit organisation

(a) Capital fund also called as general fund or accumulated fund is taken to the liabilities side. Surplus in the income and expenditure account is added to the capital fund and deficit is subtracted from the capital fund in the balance sheet.

Tutorial Note

If capital fund of the organisation is not given in the problem, the opening balance sheet should be prepared to ascertain the opening capital fund. The difference between the total of assets and the total of liabilities as at the beginning of the year is the opening capital fund.

Opening capital fund = Assets at the beginning– Liabilities at the beginning

Illustration 16

Compute capital fund of Karur Social Club as on 31.03.2018.

Solution

(b) While preparing the balance sheet as at the end of the accounting year, the closing balances of cash and bank should be taken to the assets side of the balance sheet. If there is bank overdraft, that should be taken to the liabilities side of the balance sheet.

(c) Assets appearing in the previous year’s balance sheet, that is, in the opening balance sheet, should be taken on the assets side of the current year balance sheet and adjustments must be made for any change taking place during the year. While taking such assets, additional assets purchased should be added and assets sold should be subtracted. Depreciation on such assets should also be adjusted.

Tutorial note: New assets purchased or assets sold are to be found out by referring to the receipts and payments account.

(d) Prepaid expenses and accrued incomes as at the end of the current year should be taken to the assets side of the balance sheet.

(e) Outstanding expenses at the end of the current year and any income received in advance during the current year should be taken to the liabilities side of the balance sheet.

(f) If there are any specific funds such as tournament fund, prize fund, etc., these funds should be shown on the liabilities side of the balance sheet separately. Any income to the fund should be added to the fund account and expenses relating to the fund should be subtracted from the fund account in the balance sheet.

(g) If there is any specific fund investment, that should be taken to the assets side of the balance sheet.

Comprehensive problems

Illustration 17

From the following Receipts and Payments Account of Friends Football club, for the year ending 31st March, 2017, prepare Income and Expenditure Account for the year ending 31st March, 2017 and the Balance sheet as on that date.

Additional information:

(i) The club had furniture of ₹ 12,000 on 1st April 2016. Ignore depreciation on furniture.

(ii) Subscription outstanding for 2016-2017 ₹ 600.

(iii) Stock of sports materials on 31.03.2017 ₹ 100.

(iv) Capital fund as on 1st April 2016 was ₹ 23,000.

Solution

Illustration 18

Following is the Receipts and Payments Account of Salem Recreation Club for the year ended 31st March, 2019.

Additional information:

i.            There are 450 members each paying annual subscription of ₹ 30.

ii.            Stock of stationery on 31st March, 2018 ₹ 300 and on March 31, 2019 ₹ 500.

iii.            Capital fund as on 1st April 2018 was ₹ 9,300.

Prepare income and expenditure account for the year ended 31st March, 2019 and the balance sheet as on that date.

Solution

Calculation of subscription to be received for the year 2018-19:

Illustration 19

From the following Receipts and Payments account of Coimbatore Cricket Club for the year ending 31st March 2016, prepare income and expenditure account for the year ending 31st March, 2016 and a balance sheet as on that date.

Additional information:

On 1st April, 2015 the club had stock of balls and bats ₹ 3,000 and an advance subscription of 500. Surplus on account of tournament should be kept in reserve for permanent pavilion. Subscription due on 31.03.2016 was ₹ 2,000. Stock of bats and balls on 31.3.2016 was ₹ 1,000

Solution

Tutorial note

To find the opening capital fund, opening balance sheet should be prepared.

Illustration 20

The following is the summary of cash transactions of Delhi Literary Club for the year ending 31st March, 2019.

Additional information

a)     At the beginning of the year the club possessed books worth ₹ 20,000 and furniture worth ₹ 40,000.

b)    Subscription received in advance during the current year amounted to ₹ 1,000.

Prepare Income and Expenditure account of the club for the year ending 31st March, 2019 and the Balance sheet as on that date.

Solution

Tutorial note

To find the opening capital fund, opening balance sheet should be prepared.

Illustration 21

The following is the Receipts and Payments account of Madurai City Club for the year ending 31st March, 2018.

Additional information:

On 1st April, 2017, the club had investment of ₹ 40,000. The club also had a credit balance of ₹ 30,000 in Match fund account. On 31st March, 2017 subscriptions in arrears were ₹ 4,000 and the subscriptions in arrears on 31st March, 2018 were ₹ 4,500. Prepare the final accounts.

Solution

Tutorial note

To find the opening capital fund, opening balance sheet should be prepared.