1
If Rs. 3,000 was outstanding at the beginning of the year towards subscription, and Rs. 20,000 is received during the year, with Rs. 5,000 still outstanding at the end of the year, the amount to be taken to Income and Expenditure Account will be:
Answer & Solution
Answer: Option
A
Solution:
This question is about how to calculate the Subscription Income for a Non-Profit Organization (NPO) that needs to be shown in its Income and Expenditure Account.
The Income and Expenditure Account is like a Profit & Loss Account for NPOs. It only includes income and expenses that belong to the current year, regardless of whether the money has actually been received or paid. This is called the Accrual Basis of Accounting.
Let's break down the calculation for Subscriptions:
1. Start with the amount of subscription received during the year:
You received Rs. 20,000 in total during the year.
2. Adjust for Outstanding Subscriptions at the beginning of the year:
The question states Rs. 3,000 was outstanding at the beginning of the year. This means this Rs. 3,000 was income for the previous year(s), not the current year. If this amount was received *this year* (and it's usually assumed to be included in the 'received during the year' figure unless stated otherwise), we need to subtract it from the total received because it does not belong to the current year's income.
So, Rs. 20,000 (Received) - Rs. 3,000 (Outstanding at beginning, related to previous year) = Rs. 17,000
3. Adjust for Outstanding Subscriptions at the end of the year:
The question states Rs. 5,000 is still outstanding at the end of the year. This means this Rs. 5,000 is income that *belongs to the current year* but has not yet been received. According to the Accrual Basis, we must include it as income for the current year.
So, Rs. 17,000 (Adjusted received amount) + Rs. 5,000 (Outstanding at end, for current year) = Rs. 22,000
Therefore, the amount of subscription to be taken to the Income and Expenditure Account for the current year is Rs. 22,000.
This matches Option A: Rs. 22,000.
The Income and Expenditure Account is like a Profit & Loss Account for NPOs. It only includes income and expenses that belong to the current year, regardless of whether the money has actually been received or paid. This is called the Accrual Basis of Accounting.
Let's break down the calculation for Subscriptions:
1. Start with the amount of subscription received during the year:
You received Rs. 20,000 in total during the year.
2. Adjust for Outstanding Subscriptions at the beginning of the year:
The question states Rs. 3,000 was outstanding at the beginning of the year. This means this Rs. 3,000 was income for the previous year(s), not the current year. If this amount was received *this year* (and it's usually assumed to be included in the 'received during the year' figure unless stated otherwise), we need to subtract it from the total received because it does not belong to the current year's income.
So, Rs. 20,000 (Received) - Rs. 3,000 (Outstanding at beginning, related to previous year) = Rs. 17,000
3. Adjust for Outstanding Subscriptions at the end of the year:
The question states Rs. 5,000 is still outstanding at the end of the year. This means this Rs. 5,000 is income that *belongs to the current year* but has not yet been received. According to the Accrual Basis, we must include it as income for the current year.
So, Rs. 17,000 (Adjusted received amount) + Rs. 5,000 (Outstanding at end, for current year) = Rs. 22,000
Therefore, the amount of subscription to be taken to the Income and Expenditure Account for the current year is Rs. 22,000.
This matches Option A: Rs. 22,000.