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)AmountParticulars (of Expenditure)Amount
To Balance b/dTo SalaryTo Rent receivedTo Saving Bank InterestTo Interest on FDRTo Income from InvestmentTo Income from profession or BusinessTotalxxxxxxxxxxxxxxxxxxBy Kitchen ExpensesBy Electricity ExpensesBy School/College feesBy ClothingBy Insurance Premium(Life insurance, medi-claim, accidental insurance, other Insurance like fire, theft etc.)Totalxxxxxxxxxxxxxx

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.


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.

ReceiptAmount (Rs.)PaymentAmount (Rs.)
To Consultation ChargesTo Capital Introduced2,500,000300,000By Clinic RentBy Salary to StaffBy Books & PeriodicalsBy Medical EquipmentBy Other expensesBy Balance c/dCash in handCash at Bank240,000300,00015,000450,00038,00057,0001,700,000
  • 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

To Clinical RentTo Salary to Staff300,000Add: OutstandingSalary50,000————To Books & PeriodicalsTo Other ExpensesTo Depreciation on EquipmentTo Surplus – Excess of Receipt over Expenditure2,40,000350,00015,00038,00050,6251806,375By Consultation Charges25,00,000

Dr. Ortho

Balance Sheet

As on 31-12-2013

Capital Introduced300,000Add: Surplus1,806,375_________Outstanding Salary2,106,37550,000Cash in handCash at BankMedical Equipment450,000Less: Depreciation50,625_______57,0001,700,000399,375

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 CollectionTypes 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 DueAdd: Fees due during the current financial yearLess: Fees collected during the current Financial YearOutstanding Fees at the end of the year


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 −

ParticularsAmount (Debit)Amount (Credit)
Cash in Hand68,000
Cash at Bank802,000
Scholarship Fund Investment800,000
Miscellaneous Expenses420,000
Interest received on Scholarship Fund80,000
Interest Received on Investment55,000
Sundry Creditors236,000
Furniture & Fixture200,000
Addition to Furniture & Fixture25000
Sundry Debtors260,000
Capital Fund2,400,000
Donation for Capital Fund500,000
Entrance Fees40,000
Course Fees1,600,000
Examination Fees70,000
Auditorium Rent Received850,000
Printing & Stationery50,000
Scholarship Awarded36,000
Scholarship Fund Reserve360,000
Government Grant Received100,000

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.


In the Books of Brilliant Education Society

Income & Expenditure Account

For the Year ended 31st March, 2013

To Printing & StationeryTo Salary1,100,000(+) OutstandingSalary100,000————–To Miscellaneous ExpensesTo Scholarship awardedTo Depreciation:Building @ 5%85,000Furniture & Fixture22,500Vehicles @ 15%42,000————–To Surplus of Income over Expenditure50,0001,200,000420,00036,000149,500964,500By Entrance FeesBy Examination FeesBy Course FeesBy Auditorium Rent850,000(+) OutstandingRent50,000————–900,000(-) Advance RentReceived25,000————–By Government GrantsBy Interest received on scholarship fund40,00070,0001,600,000875,000100,00080,00055,000

Balance Sheet

As on 31-03-2013

Capital Fund2,400,000Add: Donation500,000—————2,900,000Add: Surplus964,500—————Scholarship FundSundry CreditorsSalary outstandingRent received in advance3,864,500360,000236,000100,00025,000Building1,700,000(-) Depreciation@ 5%85,000————–Furniture & Fixture200,000(+) Addition25,000————–225,000(-) Depreciation @10%22,500————–Vehicles280,000(-) Depreciation @15%42,000————–InvestmentsScholarship Fund InvestmentSundry DebtorsRent receivableCash in handCash at Bank1,615,000202,500238,000550,000800,000260,00050,00068,000802,000

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 CollectionTypes 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


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 −

ParticularsAmount (Debit)Amount (Credit)
Opening Stock −·        Food·        Fuel·        Drinks·        Sundries31,5004,5003,0006,000
Purchases −·        Food·        Fuel·        Drinks·        Sundries1,065,00090,000135,00015,000
Wages −·        Mess·        Others337,50097,500
Annual Day Collection10,500
Capital Fund7,050,000
Cash at Bank466,500
Common Room Expenses24,000
Electricity and Water Charges28,500
Electricity and Water Charges42,000
Furniture & Fixture225,000
General Fund450,000
Grants-Youth welfare Departments300,000
Income From Investments82,500
Indoor Games Material22,500
Medical Expenses19,500
Mess Charges (for guests)30,000
Mess Fees1,770,000
Rent for fan Heater etc.16,500
Repair & Maintenance33,000
Room Rent352,500
Room Service Charges9,000
Security Deposits400,500

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

To Mess ExpensesFood: Opening Stock31,500Add: Purchases1,065,000————–1,096,500Less: Closing Stock22,500————–Fuel: Opening Stock4,500Add: Purchases90,000————–94,500Less: Closing Stock7,500————–Drinks: Opening Stock3,000Add: Purchases135,000————–138,000Less: Closing Stock4,500————–Sundries: Opening Stock6,000Add: Purchases15,000————–21,000Less: Closing Stock3,000————–To Wages : Mess337,500Others97,500————–To Electricity & Water ChargesTo Repair & MaintenanceTo Indoor Games MaterialTo Common Room ExpensesTo Medical ExpensesTo Depreciation:Building5%315,000Furniture10%22,500Heaters15%1,125Fans15%11,250————–To Excess of Income OverExpenditure1,074,00087,000133,50018,000435,00042,00033,00022,50024,00019,5003,49,8753,61,125By Room RentBy Rent for Heater, Fans, etc.By Grants-Youth WelfareBy Income From InvestmentsBy Annual Day CollectionBy Mess FeesBy Mess Charges for GrantsBy Room Service ChargesBy Electricity & Water Charges352,50016,500300,00082,50010,5001,770,00030,0009,00028,500

Balance Sheet

As on 31-03-2014

Capital FundGeneral Fund450,000Add: Surplus361,125————Security Deposits7,050,000811,125400,500LandBuilding6,300,000(-) Depreciation@ 5%315,000————Furniture & Fixture225,000(-) Depreciation @10%22,500————Heaters7,500(-) Depreciation @15%1,125————Fans75,000(-) Depreciation @15%11,250————InvestmentsClosing Stocks:Food22,500Fuel7,500Drinks4,500Sundries3,000————Cash at Bank750,0005,985,000202,5006,37563,750750,00037,500466,500

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 IncomeTypes 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


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 −

ParticularsAmount (Debit)Amount (Credit)
Consumption of·        Medicines·        Foodstuff·        Drugs and ChemicalsClosing Stock of·        Medicines·        Foodstuff·        Drugs and Chemicals360,000270,00090,00060,00012,0003,000
Pharmacy −·        Opening Stock·        Purchase·        Sale·        Salary·        Electricity165,000900,00045,0006,000930,000
Furniture & Fixture240,000
Telephone Expenses78,000
Ambulance Charges2,400
Consumption of Housekeeping Items2,70,000
Bank Deposits @ 15%1,500,000
Cash in hand105,000
Cash at Bank720,000
Sundry Debtors181,500
Sundry Creditors824,100
Remuneration to Trustees63,000
Capital Fund2,700,000
Food Supply420,000

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

To Opening Stock (Medicines)To Purchase of MedicineTo SalariesTo Electricity ExpensesTo Surplus of Income over Expenditure165,000900,00045,0006,000114,00By Sale (Medicines)By Medicine to HospitalBy Closing Stock930,000180,000120,000

Income & Expenditure Account of the Hospital

For the Year ended 31st March, 2014

To Consumption ofMedicines360,000Add:Medicine fromPharmacy180,000————To Consumption of Food StuffTo Consumption of Drugs & ChemicalsTo Consumption of House KeepingTo SalariesTo Electricity ExpensesTo SubscriptionTo Fees to specialist 15% of feesTo Telephone ExpensesTo Depreciation:Building5%48,000Furniture10%24,000Equipment 15%204,750Ambulance 30%27,000————540,000270,00090,000270,000540,000315,00063,000135,00078,000303,750By FeesBy RentBy Recovery of Food supplyBy Ambulance ChargesBy Deficit (Excess of expenditure Over Income)900,000825,000420,0002,400457,350

Income & Expenditure Account of Trust

For the Year ended 31st March, 2014

To Deficit (Hospital A/c)To Remuneration to Trustee457,35063,000By Surplus (Pharmacy)By Interest due on fixed depositBy Net Deficit114,000225,000181,350

Statement of Affairs of Rehmat Ali Trust

As on 31-03-2014

Capital Fund2,700,000Add: Donation1,800,000—————-4,500,000Less: Net Deficit (-)181,350—————-Sundry CreditorsFees Payable to specialist4,318,650824,100135,000Building960,000(-) 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 Deposits1,500,000Add: Interest Due225,000————-Closing Stocks:Medicine60,000Foodstuff12,000Drugs & Medicine3,000Pharmacy120,000————-Sundry DebtorsCash in handCash at Bank912,000216,0001,160,25063,0001,725,000195,000181,500105,000720,000

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