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CS Professional · CSR and Social Governance · Financial and Non-financial Reporting of Different Non-Corporate Entities

Bharat Gramin Vikas Trust earned a surplus of ₹6,00,000 and an auditor reviews its Income and Expenditure Account. Subscriptions of ₹40,000 relating to the next year were received this year, and ₹25,000 of salaries for the year remain unpaid. Both were recorded purely on a cash basis. What surplus results after correcting to the accrual basis?

The corrected surplus is ₹5,35,000. Subscriptions received in advance of ₹40,000 relate to the next year and are removed from income, and outstanding salaries of ₹25,000 are added as an expense. So 6,00,000 less 40,000 less 25,000 equals 5,35,000.

  1. A₹5,35,000Correct
  2. B₹6,15,000
  3. C₹5,65,000
  4. D₹6,65,000

Explanation

Advance subscriptions of ₹40,000 belong to next year, so reduce income: 6,00,000 − 40,000 = 5,60,000. Outstanding salaries of ₹25,000 are an expense of this year: 5,60,000 − 25,000 = 5,35,000. Option C ignores the salary; option B adds the items instead.

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