Accounting problem

In examination problems depreciation is usually mentioned at certain percent per annum (% p.a.) on Ac cost of asset. If an asset is purchased in the current year, depreciation is to.be charged for the period from the date of purchase up to the end of the year. If the almirah is purchased on 1.10.2005, depreciation 3 to be charged for 3 months (Oct. to Dec.) on'31.12.2005. So the amount of depreciation will be Rs. 25 10 3
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. If the date of purchase is not mentioned, depreciation should be charged for 6 months,
^n the assumption that the asset has been purchased in the middle of the year. A note to that effect must be added.
2. SALE OF ASSETS:
Sale proceeds of assets will not be included in Income and Expenditure Account, since it is not a revenue item. But in the event of profit or loss on sale, loss will be debited to Income and Expenditure Account, but profit will not be taken to the credit of Income and Expenditure Account - it being capital mcome, will be credited to Capital Fund Account. If, however, the amount of profit is small, it may be credited to Income and Expenditure Account, since it will not affect the annual result in any significant onnner.
3. PURCHASE AND SALE OF NEWSPAPER:
Purchase of newspaper does not result in acquisition of any asset - so it is revenue expenditure. "Vhen purchased, it is debited to Income and Expenditure Account, When old newspapers are sold, the reatment is just the reverse.
4. PURCHASE AND SALE OF SPORTS MATERIALS:
Sports materials, viz. bat, ball etc. are spoiled in a very short time - so they are treated as revenue expenditure. Their sale or purchase will be dealt with in the same manner as "Purchase and Sale of Newspaper". However, if depreciation charged on sports material, then depreciation on sports material will be debited to income and expenditure account and the balance is shown in balance sheet on asset side.
5. SUBSCRIPTION:
The monthly or annual subscription paid by members is revenue income and hence credited to Income & Expenditure Account. The amount of subscription received hi this year may include subscription for last year or next year, which are to be excluded. Again, current year's subscription may be accrued or it might have been received last year in advance. Since these two items of subscription relate to current year, they are to be included. Thus we see that the following four adjustments are necessary for subscription:
With the amount of
subscription received
Last year's subscription received this year Next year's subscription received this year Current year's subscription received last year Current year's subscription not yet received
1. 2. 3. 4. HINTS:
this year
Deduct
Deduct
Add
Add
If the item relates to current year, add to subscription received this year; if the item does not relate to current year, deduct.