Unit- 2

Accounting of Non Trading Organization and Single Entry System

Non-Trading Organisations

2.1 Non-Trading Organisations

Non-Trading Organisations, also known as Not for Profit Organisations (NPO) are such entities that do not have Profit motive. Such organisations work for the benefits of its members or for common public.These concerns focus on providing best possible services to the mankind. They collect very less charges for their services, sometimes they work for free.

NPOs collect funds from Government or their agencies. They receive income in form of Government Subsidies, Concessions and Donations. Sometimes, they also collect the amounts from the members in form of Subscriptions, Entrance Fees, Admission Fees, etc.NPOs are formed to promote art, education, religion, health, etc.

NPOs prepare Receipts and Payments A/c to enter the Cash Transactions. This A/c is debited when the NPO receives Cash and it is credited when it pays a sum of money. An Income and Expenditure A/c is prepared to find its surplus or deficit (profit or loss). Balance Sheet is prepared in a usual way. The only difference is the way in which Capital Fund is created. In a business form of organisation, Capital is created out of owner’s funds + Reserves and Surplus; whereas in an NPO, Capital Fund is created out of Entrance Fees or Legacies or Surplus or Donation received for the purpose of creating Capital Fund.

2.2 Single Entry System

Many small business entities don’t find time to prepare a full set of accounting system under Double Entry System of Book Keeping. They record partial books of accounts to find out the financial position of the business.

It is a system of book keeping in which only Cash A/c and various Personal A/c are prepared is known as Single Entry System of Book Keeping.

In this system, Real Accounts and Nominal Accounts are not prepared. Only Cash A/c and accounts of Debtors and Creditors are prepared.

A Statement of Profit or Loss is prepared to find the amount of Net Profit or Net Loss. To find the Opening Capital and Closing Capital of the business, Opening Statement of Affairs and Closing Statement of Affairs are prepared, respectively. These statements are just in the form of Balance Sheet, having Liabilities and Assets columns.

Q.1. Following is the Receipts and Payments A/c of Senior Citizens Pune, for the year ended March 31,2018.

Receipts and Payments Account for the year ended 31st March 2018

Receipts	Amount	Amount	Payments	Amount	Amount
To Balance b/d Cash Bank   To Subscription 2016-17 2017-18 2018-19   To Donations   To Entrance Fees   To Sale proceeds Of Furniture (Book Value 7,800)   To Interest on Fixed Deposits   To Picnic Receipts	9,100 16,400   6,000 90,000 7,500	25,500   1,03,500   20,000   10,000   6,500   4,500   15,000	By Salary 2015-16 2016-17 2017-18   By Fixed Deposit   By Printing and Stationery   By General Expenses   By Travelling Expenses   By Audit Fees   By Medical Check-up Fees   By Picnic Expenses   By Refreshment Expenses   By Office Rent   By Balance c/d Cash Bank	500 8,000 58,000   2,365 15,000	66,500   50,000   13,850   1,500   12,300   1,350   4,050   11,500   1,585   5,000   17,365
		1,85,000			1,85,000

You are given the following additional information:

1) Office Rent includes 500 paid for 2016-17 and 1000 for 2018-19. Outstanding Office Rent for current year 2,500.

2) 50% of Entrance Fees are to be capitalised.

3) Outstanding Subscription 10,000.

4) The bill for paper and periodicals 7,150 is outstanding.

2.3 Income and Expenditure Account

Prepare Income and Expenditure A/c for the year ended on 31.3.2018.

Income and Expenditure Account for the year ended 31st March, 2018

Expenditures	Amount	Amount	Incomes	Amount	Amount
To Salaries To Printing and Stationery   To General Expenses   To Travelling Expenses   To Audit Fees   To Medical Check-up Fees   To Loss on Sale Of Furniture   To Refreshment Expenses   To Office Rent (-) Paid for 2016-17 (-) Paid for 2018-19   (+) Outstanding   To Outstanding Bills for paper And periodicals   To Surplus	5,000 500   1000   3,500 2,500	58,000   13,850   1,500   12,300   1,350   4,050   1,300   1,585   6,000   7,150   25,915	By Subscription (+) Outstanding   By Donations   By Entrance Fees (-) 50% Capitalised   By Interest on Fixed Deposits   By Picnic Receipts (-) Picnic Expenses	90,000 10,000   10,000   5,000   15,000   11,500	1,00,000   20,000   5,000   4,500   3,500   25,915

Q.2. Lalit Kala Kendra gives you the following information for the year ended March 31, 2013 and you are required to prepare:

Income and Expenditure A/c for the year ended 31.03.2013 and

Balance Sheet as on 31.03.2013

Receipts and Payments Account for the year ended 31st March 2018

You are given the following additional information:

1) Capital Fund as on 1.4.2012 was 10,800.

2) Legacies are to be capitalized.

3) Outstanding Salary 300.

4) 50% of Entrance Fees are to be capitalized.

Solution:Income and Expenditures Account for the year ended 31st March 2018

EXPENDITURES	AMOUNT	AMOUNT	INCOMES		AMOUNT
To Stationery To Postage And Telegram To Magazines And Newspapers To Salaries (+) Outstanding   To Excess of Income over Expenditure (Surplus)	2,200 300	500   250   400   2,500   3,250	By Locker Rent   By Entrance Fees (-) 50% Capitalized   By Sale of Old Newspapers   By Receipts From Drama (-) Expenses   By Miscellaneous Receipts	1,900   950   7,850   3,350	500   950   150   4,500   800
TOTAL		6,900	TOTAL		6,900

Balance Sheet as on 31st March, 2013

LIABILITIES	AMOUNT	AMOUNT	ASSETS	AMOUNT	AMOUNT
Capital Fund (+) Legacies (+) Entrance Fees (+) Surplus   Outstanding Salary	10,800 11,000 950 3,250	26,000   300	Furniture Investments Cash in Hand Cash at Bank		5,000 10,000 300 11,000
TOTAL		26,300	TOTAL		26,300

2.4 Single Entry System Preparation of Account for incomplete – Records

Part II – SINGLE ENTRY SYSTEM

PROFORMA:

PARTICULARS	AMOUNT	AMOUNT
Capital at the end of the year ADD: Drawings during the year                  In Cash                  In Kind LESS: Additional Capital introduced during the year   ADJUSTED CLOSING CAPITAL   LESS: Capital at the beginning of the year   PROFIT OR LOSS BEFORE ADJUSTMENTS ADD: Income and Gains during the year           Interest on Drawings           Prepaid Expenses           Undervaluation of Assets           Overvaluation of Liabilities   LESS: Expenses and Losses during the year           Interest on Capital           Outstanding Expenses           Overvaluation of Assets           Undervaluation of Liabilities           Interest paid on Loan taken           Depreciation on Assets           Bad Debts           Reserve for Bad and Doubtful Debts           Income paid in Advance           Salary to Partners   NET PROFIT OR LOSS FOR THE YEAR	Xx Xx   Xx Xx Xx Xx   Xx Xx Xx Xx Xx Xx Xx Xx Xx xx	XXXX   Xx Xx   Xxx   Xx   Xxx   Xxx   Xxx   XXXX

IMPORTANT NOTE FOR STUDENTS:If in the question, Opening and Closing Capital are not given in the question directly, then its calculation can be done by preparing a Statement of Affairs (Balance Sheet). The total of the Liabilities column will be less than that of the Assets side. This balancing amount represents the amount of the Capital. (Refer Solved Questions)

Q1) Mrs.Ankita keeps her book under Single Entry System and gives the following information:

Mrs. Ankita withdrew 4,000 for her personal use. She received 15,000 from her father as gift, which she brought into the business.Additional furniture was purchased on 1st October 2011. Depreciate furniture by 10% p.a.Write off 1,000 as bad debts and provide 5% R.D.D. On debtors.

Find the profit or loss of her business for the year ended 31st March, 2012.

Solution: Opening and Closing Statement of Affairs for the year ended …

Statement of Profit or Loss for the year ended on 31.03.2012

PARTICULARS	AMOUNT	AMOUNT
Capital at the end of the year ADD: Drawings during the year                  In Cash                  In Kind   LESS: Additional Capital introduced during the year   ADJUSTED CLOSING CAPITAL   LESS: Capital at the beginning of the year   PROFIT OR LOSS BEFORE ADJUSTMENTS   ADD: Income and Gains during the year   LESS: Expenses and Losses during the year           Depreciation on Assets           Bad Debts           Reserve for Bad and Doubtful Debts   NET PROFIT OR LOSS FOR THE YEAR	4,000 NIL       1,400 1,000 2,450	78,500   4,000 82,500 15,000   67,500   45,500   22,000   NIL   4,850   17,150

Q2) Miss Kavita commenced her business with a capital of 1,30,000 on 1st April 2010. Her financial position was as follows as on 31st March 2011: Cash 9,120; Stock 10,250; Bills Payable 12,880; Creditors 17,180; Debtors 31,550; Bills Receivable 29,120; Premises 85,750; Vehicles 40,250.

Additional information:

1        She brought additional capital 20,000 on 30th Sept.2010. Interest on capital is to be provided at 5% p.a.

2        She withdrew 10,000 for personal use on which interest is to be charged at 6% p.a.

3        R.D.D. Is to be provided at 2.5% p.a. After providing Bad Debts 1,000.

4        Depreciate Vehicles at 2% and Premises at 4%.

Solution: Closing Statement of Affairs as on 31st March, 2011 

Statement of Profit or Loss for the year ended on 31.03.2011

PARTICULARS	AMOUNT	AMOUNT
Capital at the end of the year ADD: Drawings during the year                  In Cash                  In Kind LESS: Additional Capital introduced during the year   ADJUSTED CLOSING CAPITAL   LESS: Capital at the beginning of the year   PROFIT OR LOSS BEFORE ADJUSTMENTS   ADD: Income and Gains during the year           Interest on Drawings   LESS: Expenses and Losses during the year           Interest on Capital           Depreciation on Assets           Bad Debts           Reserve for Bad and Doubtful Debts   NET PROFIT OR LOSS FOR THE YEAR	10,000 NIL           300   7,000 4,235 1,000 764	1,75,980   1,85,980 20,000   1,65,980   1,30,000   35,980   300 36,280   12,999   23,281

Q3) Mr.Govind keeps his books on Single Entry System and disclosed the following information of his business.

Additional information:

1        Mr.Govind transferred 300 per month during first half year and 200 each month for the remaining period from his business to his personal account. He also took goods of 700 for private use.

2        Mr.Govind sold his personal asset for 7,000 and brought the proceeds into his business.

3        Furniture to be depreciated by 10%.

4        Provide R.D.D. 5% on Debtors.

Prepare: Opening and Closing Statement of Affairs and Statement of Profit or Loss for the year ended 31st March 2011.

Solution: Opening & Closing Statement of Affairs as on ………

Statement of Profit or Loss for the year ended on 31.03.2011

PARTICULARS	AMOUNT	AMOUNT
Capital at the end of the year ADD: Drawings during the year                  In Cash                  In Kind   LESS: Additional Capital introduced during the year   ADJUSTED CLOSING CAPITAL   LESS: Capital at the beginning of the year   PROFIT OR LOSS BEFORE ADJUSTMENTS ADD: Income and Gains during the year   LESS: Expenses and Losses during the year Depreciation RDD   NET PROFIT OR LOSS FOR THE YEAR	3,000 700           1,500 4,500	1,39,500   3,700 1,43,200 7,000   1,36,200   88,500   47,700 NIL   s6,000   41,700

2.5 Conversion of Single Entry into Double Entry System

Q4) Asha and Usha were partners sharing and losses in the ratio 2:1. Prepare their Statement of Profit or Loss for the year ended 31st March 2012 from the following Statement of Affairs as on 31st March 2011.

Liabilities	Amount	Assets	Amount
Creditors Bills Payable Capital: Asha Usha	33,000 9,000   62,000 32,000   1,36,000	Cash at Bank Cash in Hand Building Machinery Furniture Stock Debtors Bills Receivable	6,000 2,000 41,000 21,000 10,000 18,000 25,000 13,000
			1,36,000

The assets and liabilities as on 31st March 2012 were:

Sundry creditors 35,000, Bills Receivable 18,000, Bills Payable 15,000, Cash in Hand 3,000, Stock 32,000, Cash at Bank 6,000, Debtors 38,000. There were no changes in Fixed Assets. Additional Information are as follows:

1        Asha and Usha had drawn 10,000 and 8,000 respectively for personal use.

2        They also brought additional capital of 6,000 and 4,000 respectively.

3        Building to be depreciated by 5% and machinery and furniture at 10%.

4        Charge interest at 10% p.a. On opening capitals and interest on drawings of Asha and Usha were 700 and 500 respectively.

Solution: Statement of Affairs as on 31st March, 2011

Liabilities	Amount	Assets	Amount
Creditors Bills Payable Capital: Asha Usha	35,000 15,000   79,333 39,667   1,69,000	Cash at Bank Cash in Hand Building Machinery Furniture Stock Debtors Bills Receivable	6,000 3,000 41,000 21,000 10,000 32,000 38,000 18,000
			1,69,000

Statement of Profit or Loss for the year ended on 31.03.2012

PARTICULARS	AMOUNT	AMOUNT
Capital at the end of the year ADD: Drawings during the year                  In Cash Asha Usha                  In Kind   LESS: Additional Capital introduced during the year Asha Usha   ADJUSTED CLOSING CAPITAL   LESS: Capital at the beginning of the year   PROFIT OR LOSS BEFORE ADJUSTMENTS ADD: Income and Gains during the year           Interest on Drawings Asha Usha     LESS: Expenses and Losses during the year           Interest on Capital Asha Usha           Depreciation on Assets   NET PROFIT OR LOSS FOR THE YEAR	10,000 8,000     6,000 4,000       700 500   6,200 3,200	1,19,000   18,000   1,37,000   10,000     1,27,000   94,000   33,000   1,200   34,200   9,400 5,150   19,650

Q5) Mrs.Riddhi keeps her books on Single Entry System and following information were disclosed from it:

Mrs.Riddhi withdraws 250 each month during the half of the year and 200 each month during the second half of the year from her business for personal use.

She also took away 500 worth of goods for personal use.

Furniture to be depreciated by 5% and provide R.D.D. Of 3% on debtors.

She sold her personal asset for 35,000 and sale proceeds were introduced in business. Interest on investment receivable amounted 3,000 and Interest on loan payable amounted to 250.

Prepare Opening and Closing Statement of Affairs and also prepare Statement of Profit and Loss for the year ended on 31st March 2013.

Solution: Opening & Closing Statement of Affairs as on …

Statement of Profit or Loss for the year ended on 31.03.2013

PARTICULARS	AMOUNT	AMOUNT
Capital at the end of the year ADD: Drawings during the year                  In Cash                  In Kind   LESS: Additional Capital introduced during the year   ADJUSTED CLOSING CAPITAL   LESS: Capital at the beginning of the year   PROFIT OR LOSS BEFORE ADJUSTMENTS   ADD: Income and Gains during the year           Interest Receivable   LESS: Expenses and Losses during the year:           Interest paid on Loan taken           Depreciation on Assets           Reserve for Bad and Doubtful Debts   NET PROFIT OR LOSS FOR THE YEAR	2,700 500           3,000   250 750 1,350	1,27,000   3,200 1,30,200 35,000   95,200   84,750   10,450   3,000 13,450   2,350   11,100

Reference-

• S. M. Shukla : Financial Accounting.
• Singh and Singh : Financial Accounting.
• Bhrigu Nath Ojha & Others. : Company Accounting.
• M. C. Shukla : Advanced Accounts.
• R. D. Gupta : Advanced Accounts.
• T. S. Grewal : Financial Accounts.
• Paul and Paul : Financial Accounting