Accounts of Private Individuals – tryspring

By | December 25, 2018

Accounts of Private Individuals

Most of the private individuals never keep their accounts to
record earned income or expenditure incurred by them. It is
advisable for everyone to maintain an account to know what he has
earned during a particular period, what he spent, and what was
his saving out of that income. It is helpful to track the record
of income and expenditure. It also helps to increase the income
(as need arises) and control on the expenditure.

Maintenance of Accounts by Private Individuals

Private individual should keep his books on cash basis system,
ignoring accrued system in different heads like insurance premium
paid, medical insurance, school fees, taxes, household expenses,
medical expenses, clothing, salary received, bank interest,
income from mutual fund, rent received, and other income
received.

For all these, one should keep a cash book, which can be
summarized on monthly basis as per the abstract of cash Book
given below −

Abstract Cash Book

Particulars (of Income) Amount Particulars (of Expenditure) Amount

To Balance b/d

To Salary

To Rent received

To Saving Bank Interest

To Interest on FDR

To Income from Investment

To Income from profession or Business

Total

xx

xx

xx

xx

xx

xx

xx

xxxx

By Kitchen Expenses

By Electricity Expenses

By School/College fees

By Clothing

By Insurance Premium

(Life insurance, medi-claim, accidental insurance, other
Insurance like fire, theft etc.)

Total

xx

xx

xx

xx

xx

xxxx

In case of professional individual, one more column can be added
in the cash book to show professional transaction and personal
transaction separately. In addition to above, an individual may
keep a register to maintain the record for his assets including
car, building, investments, etc.

Maintenance of Accounts by Professionals

A cash basis of accounting is the most suitable system for any
professional including doctor, accountant, or solicitor instead
of a mercantile system to fulfill the following purposes −

  • To ascertain the professional income earned by him correctly
    for a specific accounting period, and also to calculate the
    net professional income after deducting the related expenses
    from the professional income.

  • To correctly record all items of income and expenditure.

Following records should be maintained by a professional −

Cash Book

All receipts and payments should be recorded in a cash book, and
a memorandum book should be maintained to keep record of credit
transactions. The credit transactions will be scored off at the
time of actually cash receipt or at the time of payment made and
should be entered in the cash book.

A cash book can be summarized under various heads on monthly,
quarterly, half yearly, or annual basis as per the suitability
and requirements.

Stock Register

Two separate stock registers should be maintained, one for resale
items and other to keep record of the items of personal use.
Resale items may be medicine, surgical items, the stationery
items, electrical items, computers, and any other items or asset.

Receipt and Expenditure Account

A receipt and expenditure account is similar to a profit and loss
account; therefore, it is prepared by the professionals to know
the professional income and expenditure for a specific period.
Outstanding incomes are ignored to prepare it, but outstanding
expenses are included in it. Therefore, it is known as Receipt
& Expenditure account instead of Receipt & Payment
account. It means, incomes are recorded on a cash basis and
expenditure on an accrual basis.

Maintenance of Accounts by Doctors

Doctors usually maintain a register that may also be known as
diary or note book in which all the particulars of the patients
including charges, fees, physical conditions of patient, etc. are
recorded. After grouping, the extracted entries of diary are
recorded in the cash book under different heads of income.
Similarly, expenses are also recorded under various heads.

In case, where the number of doctors is two or more than two and
they run their clinic in the partnership, income may be recorded
in the cash book under various heads (Doctor Wise), similar to a
petty cash book pattern. Similarly, the expenses relating to each
doctor may be recorded under various heads of the expenses.

Thus, cash book, stock register, memorandum book, Receipt and
expenditure account, and Balance sheet are prepared by the
doctors.

Illustration

Dr. Ortho starts his medical practice on 1st January 2013 and
introduced a capital of Rs. 300,000/. Receipt and payment account
as on 31-12-2013.

Receipt Amount (Rs.) Payment Amount (Rs.)

To Consultation Charges

To Capital Introduced

2,500,000

300,000

By Clinic Rent

By Salary to Staff

By Books & Periodicals

By Medical Equipment

By Other expenses

By Balance c/d

Cash in hand

Cash at Bank

240,000

300,000

15,000

450,000

38,000

57,000

1,700,000

Total 28,00,000 Total 28,00,000
  • Outstanding salary Rs. 50,000
  • Medical equipment was purchased on 01-04-2013
  • Depreciation on Equipment is Rs. 15%

Solution

Receipt & Expenditure Account of Dr. Ortho

For the year ended 31-12-2013

Expenditure Amount Receipt Amount

To Clinical Rent

To Salary to Staff300,000

Add: Outstanding

Salary50,000

————

To Books & Periodicals

To Other Expenses

To Depreciation on Equipment

To Surplus – Excess of Receipt over Expenditure

2,40,000

350,000

15,000

38,000

50,625

1806,375

By Consultation Charges

25,00,000

Total 25,00,000 Total 25,00,000

Dr. Ortho

Balance Sheet

As on 31-12-2013

Expenditure Amount Receipt Amount

Capital Introduced300,000

Add: Surplus1,806,375

_________

Outstanding Salary

2,106,375

50,000

Cash in hand

Cash at Bank

Medical Equipment450,000

Less: Depreciation50,625

_______

57,000

1,700,000

399,375

Total 2,156,375 Total 2,156,375

Maintenance of Accounts of Educational Institutions

Most of the educational institutions are registered under Indian
Society Registration Act, 1860. The core purpose of formation of
the educational institutions is to educate people at large and
not to earn profit.

Generally, following financial transactions are being incurred by
the educational institutions −

Main Sources of Collection Types of Expenses/Payments
  • Admission fees, tuition fees, Examination fees, fines
    etc.

  • Security deposit by students

  • Donations from public

  • Grants from Government for building, prizes,
    maintenance, etc.

  • Salary, allowances, and provident fund contribution to
    teaching and nonteaching staffs.

  • Examination expenses

  • Stationery & printing expenses

  • Distribution of scholarships and stipends

  • Purchase and repair of furniture & fixture.

  • Prizes

  • Expenses on sports and games

  • Festival and function expenses

  • Library books, newspaper, magazines, etc.

  • Medical expenses- medicine and examination

  • Audit fees and audit expenses

  • Electricity expenses

  • Telephone expenses

  • Laboratory running & maintenance

  • Laboratory equipment

  • Building Repair & maintenance

Separate collection register should be maintained to record these
collections from the above mention sources. Separate ledger for
students should also be maintained for each student to record the
fees — due, received, and outstanding if any.

Normally, all accounting records are maintained on the basis of
financial year i.e. from 1st April to 31st
March in most of the educational institutions. Educational
institutions maintain income and expenditure account to keep the
records of surplus or deficiency and also to prepare a Balance
sheet to know the financial position of the institution.

Consolidation of Accounts of various Educational Institutions

Consolidation of accounts is done step by step, where various
institutions are run under one society.

The given example is an illustration of the simplified procedures

Consolidation of Fees

Institute wise consolidation will be done as hereunder −

Opening Balance of Fees Due

Add: Fees due during the current financial year

Less: Fees collected during the current Financial Year

Outstanding Fees at the end of the year

XXX

XXX

XXXXX

XXX

XXX

Illustration

Trial Balance of the Brilliant education society as on 31st
March, 2013 is given as here under, please prepare an Income and
Expenditure Account and a Balance sheet on that date −

Particulars Amount (Debit) Amount (Credit)
Cash in Hand 68,000
Cash at Bank 802,000
Scholarship Fund Investment 800,000
Miscellaneous Expenses 420,000
Interest received on Scholarship Fund 80,000
Interest Received on Investment 55,000
Investment 550,000
Sundry Creditors 236,000
Building 1,700,000
Furniture & Fixture 200,000
Addition to Furniture & Fixture 25000
Vehicles 280,000
Sundry Debtors 260,000
Capital Fund 2,400,000
Donation for Capital Fund 500,000
Entrance Fees 40,000
Course Fees 1,600,000
Examination Fees 70,000
Auditorium Rent Received 850,000
Salary 1,100,000
Printing & Stationery 50,000
Scholarship Awarded 36,000
Scholarship Fund Reserve 360,000
Government Grant Received 100,000
Total 6,291,000 6,291,000

Additional Information

  • Salary for one month is outstanding.

  • Outstanding Auditorium is Rs, 50,000/- and Rs. 25,000
    received in advance.

  • Depreciation is to be provided at 5% on building, 10% on
    Furniture & Fixture, and 15% on vehicles.

Solution

In the Books of Brilliant Education Society

Income & Expenditure Account

For the Year ended 31st March, 2013

Expenditure Amount Income Amount

To Printing & Stationery

To Salary1,100,000

(+) Outstanding

Salary100,000

————–

To Miscellaneous Expenses

To Scholarship awarded

To Depreciation:

Building @ 5%85,000

Furniture & Fixture22,500

Vehicles @ 15%42,000

————–

To Surplus of Income over
Expenditure

50,000

1,200,000

420,000

36,000

149,500

964,500

By Entrance Fees

By Examination Fees

By Course Fees

By Auditorium Rent850,000

(+) Outstanding

Rent50,000

————–

900,000

(-) Advance Rent

Received25,000

————–

By Government Grants

By Interest received on scholarship
fund

40,000

70,000

1,600,000

875,000

100,000

80,000

55,000

Total 2,820,000 Total 2,820,000

Balance Sheet

As on 31-03-2013

Liabilities Amount Assets Amount

Capital Fund2,400,000

Add: Donation500,000

—————

2,900,000

Add: Surplus964,500

—————

Scholarship Fund

Sundry Creditors

Salary outstanding

Rent received in advance

3,864,500

360,000

236,000

100,000

25,000

Building1,700,000

(-) Depreciation@ 5%85,000

————–

Furniture & Fixture200,000

(+) Addition25,000

————–

225,000

(-) Depreciation @10%22,500

————–

Vehicles280,000

(-) Depreciation @15%42,000

————–

Investments

Scholarship Fund Investment

Sundry Debtors

Rent receivable

Cash in hand

Cash at Bank

1,615,000

202,500

238,000

550,000

800,000

260,000

50,000

68,000

802,000

Total 4,585,500 Total 4,585,500

Maintenance of Accounts of Student Hostels

Hostels are run by most of the educational institutions to
provide boarding facility to the students, coming from remote
places, for their education. Hostels are usually run on no profit
basis. Government also grants some fund to these hostels to
provide cheaper living space to the students.

Like any other non-profit organization, hostels also have
accountants who record and maintain their financial transactions
as −

  • Receipt & Payment Account
  • Income & Expenditure Account
  • Balance Sheet

Following are the common lists of incomes and expenditures
incurred by Hostels −

Main Source of Collection Types of Expenses/Payments
  • Admission fees

  • Security (refundable at the time of entering into the
    hostel)

  • Room rent

  • Electricity, water, fans, coolers, heaters &
    geysers charges etc.

  • Government grants

  • Fees for reading room & common room.

  • Mess charges

  • Medical Fee.

  • Electricity expenses

  • Water charges

  • Building repair & maintenance

  • Grocery & provisions for mess

  • Rent for hostel Accommodation (In case or rented
    premises)

  • Salary (Warden, watchman, sweeper etc.)

  • Telephone expenses

  • Newspaper and magazines

Illustration

From the given information and Trial Balance, please prepare an
Income & Expenditure account and Balance sheet of Divya Jyoti
hostels (for the girls) for the year ending 31-03-2014 −

Particulars Amount (Debit) Amount (Credit)

Opening Stock

  • Food

  • Fuel

  • Drinks

  • Sundries

31,500

4,500

3,000

6,000

Purchases

  • Food

  • Fuel

  • Drinks

  • Sundries

1,065,000

90,000

135,000

15,000

Wages

  • Mess

  • Others

337,500

97,500

Annual Day Collection 10,500
Building 6,300,000
Capital Fund 7,050,000
Cash at Bank 466,500
Common Room Expenses 24,000
Electricity and Water Charges 28,500
Electricity and Water Charges 42,000
Fans 75,000
Furniture & Fixture 225,000
General Fund 450,000
Grants-Youth welfare Departments 300,000
Heaters 7,500
Income From Investments 82,500
Indoor Games Material 22,500
Investments 750,000
Land 750,000
Medical Expenses 19,500
Mess Charges (for guests) 30,000
Mess Fees 1,770,000
Rent for fan Heater etc. 16,500
Repair & Maintenance 33,000
Room Rent 352,500
Room Service Charges 9,000
Security Deposits 400,500
Total 10,500,000 10,500,000

Additional Information

  • Depreciation to be provided @ 5% on Building, Furniture,
    & Fixture; and 15% on heater and Fans.

  • Closing stock: Food Rs. 22,500, Fuel Rs. 7,500, Drinks Rs.
    4,500, and sundries Rs. 3,000.

Solution

In the Books of Divya Jyoti Hostels

Income & Expenditure Account

For the Year ended 31st March, 2014

Expenditure Amount Income Amount

To Mess Expenses

Food: Opening Stock31,500

Add: Purchases1,065,000

————–

1,096,500

Less: Closing Stock22,500

————–

Fuel: Opening Stock4,500

Add: Purchases90,000

————–

94,500

Less: Closing Stock7,500

————–

Drinks: Opening Stock3,000

Add: Purchases135,000

————–

138,000

Less: Closing Stock4,500

————–

Sundries: Opening Stock6,000

Add: Purchases15,000

————–

21,000

Less: Closing Stock3,000

————–

To Wages : Mess337,500

Others97,500

————–

To Electricity & Water Charges

To Repair & Maintenance

To Indoor Games Material

To Common Room Expenses

To Medical Expenses

To Depreciation:

Building5%315,000

Furniture10%22,500

Heaters15%1,125

Fans15%11,250

————–

To Excess of Income Over

Expenditure

1,074,000

87,000

133,500

18,000

435,000

42,000

33,000

22,500

24,000

19,500

3,49,875

3,61,125

By Room Rent

By Rent for Heater, Fans, etc.

By Grants-Youth Welfare

By Income From Investments

By Annual Day Collection

By Mess Fees

By Mess Charges for Grants

By Room Service Charges

By Electricity & Water Charges

352,500

16,500

300,000

82,500

10,500

1,770,000

30,000

9,000

28,500

Total 2,599,500 Total 2,599,500

Balance Sheet

As on 31-03-2014

Liabilities Amount Assets Amount

Capital Fund

General Fund450,000

Add: Surplus361,125

————

Security Deposits

7,050,000

811,125

400,500

Land

Building6,300,000

(-) Depreciation@ 5%315,000

————

Furniture & Fixture225,000

(-) Depreciation @10%22,500

————

Heaters7,500

(-) Depreciation @15%1,125

————

Fans75,000

(-) Depreciation @15%11,250

————

Investments

Closing Stocks:

Food22,500

Fuel7,500

Drinks4,500

Sundries3,000

————

Cash at Bank

750,000

5,985,000

202,500

6,375

63,750

750,000

37,500

466,500

Total 8,261,625 Total 8,261,625

Maintenance of Accounts of Hospitals

Being a non-profit organization, hospitals also maintain Receipt
& Payment accounts, Income & Expenditure account, and
Balance Sheet.

An illustration of the income and expenditure of a hospital is
shown below −

Main Items of Income Types of Expenses/Payments
  • Room Rent

  • Medical Care

  • Dentistry Charges

  • Delivery Room Charges

  • Anesthesia Charges

  • Laboratory Charges

  • Grants for operating needs of Hospital

  • Grants for fixed Assets

  • Donations

  • Miscellaneous Income

  • Interest on Investments

  • Fees from Nursing & Training School

  • Bed Charges

  • Operating Room Charges

  • X-ray Charges

  • Pharmacy Charges

  • Physiotherapy Charges

  • Electricity & Water Charges

  • Pharmacy Charges

  • Salaries and Wages

  • Pharmacy Expenses

  • Building repair & Maintenance

  • Laundry Charges

  • Rent for Nursing Hostel Accommodation (In case or
    rented premises)

  • Telephone Expenses

  • Laboratory Expenses

  • Surgery Expenses

  • Operation Tools and Equipment Expenses

  • Depreciation

Illustration

A charitable hospital and pharmacy are run by Rehmat Ali trust;
following are the balances as extracted from its books for the
year ended 31-03-2014 −

Particulars Amount (Debit) Amount (Credit)

Consumption of

  • Medicines

  • Foodstuff

  • Drugs and Chemicals

Closing Stock of

  • Medicines

  • Foodstuff

  • Drugs and Chemicals

360,000

270,000

90,000

60,000

12,000

3,000

Salary 540,000
Electricity 315,000

Pharmacy

  • Opening Stock

  • Purchase

  • Sale

  • Salary

  • Electricity

165,000

900,000

45,000

6,000

930,000

Furniture & Fixture 240,000
Ambulance 90,000
Telephone Expenses 78,000
Subscription 63,000
Ambulance Charges 2,400
Consumption of Housekeeping Items 2,70,000
Bank Deposits @ 15% 1,500,000
Cash in hand 105,000
Cash at Bank 720,000
Sundry Debtors 181,500
Sundry Creditors 824,100
Remuneration to Trustees 63,000
Capital Fund 2,700,000
Donation 1,800,000
Fees 900,000
Rent 825,000
Food Supply 420,000
Building 960,000
Equipment 1,365,000
Total 8,401,500 8,401,500

Additional Information

  • Depreciation to be provided @ 5% on Building; 10% on
    Furniture; 15% on Equipment; and 30% on Ambulance.

  • Closing stock of medicine at pharmacy Rs. 120,000

  • 15% of the fees received from patients to be paid to
    specialist doctors.

  • Supply of medicines from pharmacy to the hospital Rs. 180,000
    for which no adjustment has been made in the books of
    accounts.

Solution

In the Books of Rehmat Ali Trust

Income & Expenditure Account of the Pharmacy

For the Year ended 31st March, 2014

Expenditure Amount Income Amount

To Opening Stock (Medicines)

To Purchase of Medicine

To Salaries

To Electricity Expenses

To Surplus of Income over
Expenditure

165,000

900,000

45,000

6,000

114,00

By Sale (Medicines)

By Medicine to Hospital

By Closing Stock

930,000

180,000

120,000

Total 1,230,000 Total 1,230,000

Income & Expenditure Account of the Hospital

For the Year ended 31st March, 2014

Expenditure Amount Income Amount

To Consumption of

Medicines360,000

Add:

Medicine from

Pharmacy180,000

————

To Consumption of Food Stuff

To Consumption of Drugs &
Chemicals

To Consumption of House Keeping

To Salaries

To Electricity Expenses

To Subscription

To Fees to specialist 15% of fees

To Telephone Expenses

To Depreciation:

Building5%48,000

Furniture10%24,000

Equipment 15%204,750

Ambulance 30%27,000

————

540,000

270,000

90,000

270,000

540,000

315,000

63,000

135,000

78,000

303,750

By Fees

By Rent

By Recovery of Food supply

By Ambulance Charges

By Deficit (Excess of expenditure Over
Income)

900,000

825,000

420,000

2,400

457,350

Total 2,391,750 Total 2,391,750

Income & Expenditure Account of Trust

For the Year ended 31st March, 2014

Expenditure Amount Income Amount

To Deficit (Hospital A/c)

To Remuneration to Trustee

457,350

63,000

By Surplus (Pharmacy)

By Interest due on fixed deposit

By Net Deficit

114,000

225,000

181,350

Total 520,350 Total 520,350

Statement of Affairs of Rehmat Ali Trust

As on 31-03-2014

Liabilities Amount Assets Amount

Capital Fund2,700,000

Add: Donation1,800,000

—————-

4,500,000

Less: Net Deficit (-)181,350

—————-

Sundry Creditors

Fees Payable to specialist

4,318,650

824,100

135,000

Building960,000

(-) Depreciation@ 5%48,000

—————

Furniture & Fixture240,000

(-) Depreciation @10%24,000

————-

Equipment1,365,000

(-) Depreciation @15%204,750

————-

Ambulance90,000

(-) Depreciation @30%27,000

————-

Bank Deposits1,500,000

Add: Interest Due225,000

————-

Closing Stocks:

Medicine60,000

Foodstuff12,000

Drugs & Medicine3,000

Pharmacy120,000

————-

Sundry Debtors

Cash in hand

Cash at Bank

912,000

216,000

1,160,250

63,000

1,725,000

195,000

181,500

105,000

720,000

Total 5,277,750 Total 5,277,750

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