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CSEET · Fundamentals of Accounting · Accounting for Non-Profit Organizations

Greenfield Club's Income and Expenditure Account for the year showed total income of Rs 5,60,000 and total expenditure of Rs 5,95,000. How should this result be treated?

There is a deficit of Rs 35,000 because expenditure of Rs 5,95,000 exceeds income of Rs 5,60,000. A deficit is deducted from the capital or general fund in the Balance Sheet, not treated as income or a liability.

  1. ASurplus of Rs 35,000 added to the capital fund
  2. BDeficit of Rs 35,000 deducted from the capital fundCorrect
  3. CDeficit of Rs 35,000 shown as income
  4. DSurplus of Rs 35,000 shown as a current liability

Explanation

Expenditure exceeds income by 5,95,000 - 5,60,000 = 35,000, so there is a deficit. The excess of expenditure over income is deducted from the capital fund in the Balance Sheet. Calling it a surplus reverses the comparison.

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