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CA Foundation · Accounting · Financial Statements of Not-for-Profit Organisations

Himalaya Welfare Society paid ₹90,000 as insurance premium during 2024-25. The premium covered 1 October 2024 to 30 September 2025. How will this payment appear in the Receipts and Payments Account and in the Income and Expenditure Account for the year ended 31 March 2025?

The full ₹90,000 appears on the payments side of the Receipts and Payments Account, while only ₹45,000 is charged in the Income and Expenditure Account as six months of the premium relate to the year. The remaining ₹45,000 is a prepaid expense in the Balance Sheet.

  1. A₹90,000 on the payments side; ₹45,000 as expense in Income and Expenditure AccountCorrect
  2. B₹45,000 on the payments side; ₹45,000 as expense in Income and Expenditure Account
  3. C₹90,000 on the payments side; ₹90,000 as expense in Income and Expenditure Account
  4. D₹90,000 on the payments side; ₹1,35,000 as expense

Explanation

The Receipts and Payments Account records the full cash paid, ₹90,000. For the Income and Expenditure Account, only 6 months (October to March) relate to the year: 90,000 × 6/12 = 45,000. The remaining ₹45,000 is a prepaid expense shown as an asset. Charging the full 90,000 ignores the accrual adjustment.

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