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

Total payments in the Receipts and Payments Account of Kalyan Welfare Association for the year include ₹90,000 for a 3-year insurance premium paid on 1 October 2024, covering 1 October 2024 to 30 September 2027. When preparing the Income and Expenditure Account for the year ended 31 March 2025, what amount should be charged for this premium?

The amount charged is ₹15,000. The premium of ₹90,000 covers 36 months, which is ₹2,500 per month, and only six months from October 2024 to March 2025 fall in the current year. The rest is a prepaid expense carried forward.

  1. A₹90,000
  2. B₹15,000Correct
  3. C₹30,000
  4. D₹45,000

Explanation

The premium is ₹90,000 for 36 months, which is ₹2,500 per month. The year ended 31 March 2025 covers 6 months from October, giving 6 × 2,500 = ₹15,000. Charging ₹90,000 would ignore the prepaid portion, and ₹30,000 treats it as a one-year premium covering the full year.

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