Case Study Information:Pragya Madan, an ex-Indian hockey player, decided to start a hockey academy named "Bright Hockey Academy" on 1st April 2022 to train young girls.Her neighbor, Ishwar, died and willed his land to start the academy.Her father, Ramkumar, spent ₹20,00,000 for the construction of a pavilion.100 young girls joined the academy and paid an annual subscription of ₹1,000 each.10 members paid a single amount of ₹25,000 each to obtain life membership.Hockey sticks and balls purchased during the year amounted to ₹27,000. Closing stock of these items is nil.Question: The Life Membership fees received from the 10 members is:
- ARecorded on the income side of the Income and Expenditure A/c
- BShown on the assets side of the Balance sheet
- CShown on the expenditure side of the Income and Expenditure account
- DAdded to the capital fund
Solution & Step-by-step Explanation
Life membership fees are non-recurring capital receipts because a member pays them only once to enjoy benefits over their lifetime. Therefore, it is a capital receipt and must be capitalized by adding it directly to the Capital Fund on the liabilities side of the Balance Sheet.