Accounts-ipcc

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amulya (Querist)
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26 August 2011 if RS.38000 of depreciation is given in income and expenditure account.....and opening and closing balance of equipment is 10000 and 15000 repectively{AT WDV} .......
then what will be the amout credite to receipts and payment account of NPO????

please answer my query...m confused ??????

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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28 August 2011 Information not complete

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Aashok Kumar Sharma online

Aashok Kumar Sharma online

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14 July 2024 In the context of an Income and Expenditure Account (which is typically used by Non-Profit Organizations or NPOs), depreciation is treated as an expense. Let's break down the scenario and determine the amount credited to the Receipts and Payments Account of the NPO.

### Given Information:
- Depreciation in Income and Expenditure Account: ₹38,000
- Opening balance of equipment (WDV method): ₹10,000
- Closing balance of equipment (WDV method): ₹15,000

### Calculation Steps:

1. **Understand Depreciation in Income and Expenditure Account:**
- Depreciation of ₹38,000 means this amount has been accounted for as an expense in the period.

2. **Impact on Equipment (WDV Method):**
- The equipment account under the Written Down Value (WDV) method reflects the carrying amount of the equipment after accounting for depreciation.
- Opening balance of equipment: ₹10,000
- Closing balance of equipment: ₹15,000

3. **Determine the Net Change in Equipment's Carrying Amount:**
- The net increase in the carrying amount of equipment during the year is calculated as:
```
Closing Balance of Equipment - Opening Balance of Equipment = ₹5,000
```
- This ₹5,000 represents the amount by which the equipment's carrying amount increased during the year, taking into account the depreciation charged.

4. **Amount Credited to Receipts and Payments Account:**
- In the Receipts and Payments Account of an NPO, the amount credited typically reflects the net cash flow position, which includes items like subscriptions received, donations received, etc.
- Depreciation expense is a non-cash item and does not affect the cash flow directly. Hence, it does not appear in the Receipts and Payments Account.
- The change in equipment's carrying amount (₹5,000) is also not a cash flow item and is not directly recorded in the Receipts and Payments Account.

### Conclusion:

- **Depreciation Impact:** ₹38,000 is recorded as an expense in the Income and Expenditure Account.
- **Equipment's Carrying Amount:** Increased by ₹5,000 during the year.
- **Receipts and Payments Account:** The amount credited to this account does not include depreciation or changes in the carrying amount of equipment. It focuses on actual cash receipts and payments.

Therefore, the amount credited to the Receipts and Payments Account of the NPO, based on the information provided, does not directly include the depreciation expense or the change in equipment's carrying amount. It primarily reflects the cash movements in and out of the organization during the accounting period.

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