Accounting Model Paper

with a bank or invested in Government Papers or in gilt-edged securities. Income derived from such investment is credited to concerned Fund Account and all relative expenses are debited to the Fund Account. Such incomes-expenses will not be taken to Income & Expenditure Account. Fund is a liability -it will be shown on-Liabilities side of Balance Sheet. But investment of fund money is an asset and hence it a shown on Assets side of Balance Sheet. 7. ADMISSION FEE / ENTRANCE FEE:
At the time of admission every new member is to pay admission fee in addition to subscription. It is ist like the admission fee that you pay in addition to monthly tuition fee at the time of your admission into i school or college. There is a difference of opinion among the Accountants as to whether the income on account of admission fee is to be treated as capital income or revenue income. Generally, admission fee is regarded as revenue income and credited to Income & Expenditure Account. If, however, there is any stipulation in the bye—laws of the institution, it must be observed, if it is stipulated that admission fee will be regarded as capita! income, it cannot be included in Income & Expenditure Account - it will be credited to Capital Fund Account and shown on Liabilities side of Balance Sheet as an addition to that fund. Again, ;: may be so stipulated that admission fee is to be regarded partly as capital and partly revenue. The reatment will be clear from the following illustration.
ILLUSTRATION NO. 4
Admission fee received during 2005, Rs. 800. The bye-laws of the club provided that 40 % of admission fee is to capitalized.
Show how the above items will be treated in the Final Accounts of the club for the year-ended 31.12.2005.
Solution;
INCOME & EXPENDITURE ACCOUNT For the year ended 31st Dec. 2005
Cr.
Expenditure
Rs.
Income'
Rs.
Admission Fee [60% of 800]
480
BALANCE SHEET AS AT 31ST DEC. 2005
Assets
Rs.
Liabilities
Rs.
Capital Fund xxx Add Admission Fee 320 [40%of800J