Receipts Payment Account

Step 1: Prepare the Cash Book (Option E)

The cash book is the starting point, where all cash transactions (receipts and payments) are recorded chronologically. This provides the raw data for further accounts.

Step 2: Prepare Receipts and Payments Account (Option C)

Using the cash book, the Receipts and Payments Account is prepared. This account summarizes all cash inflows (receipts) and outflows (payments) during the period, regardless of whether they relate to the current period or not.

Step 3: Prepare Income and Expenditure Account (Option B)

The Income and Expenditure Account is derived from the Receipts and Payments Account. It adjusts for non-cash items (like depreciation) and accruals to determine the surplus or deficit for the period, similar to a profit and loss statement.

Step 4: Adjust Outstanding/Prepaid Items and Determine Surplus/Deficit (Option D)

Adjustments for outstanding or prepaid expenses/income are made to ensure the Income and Expenditure Account reflects the correct financial result. The surplus or deficit is then calculated.

Step 5: Prepare the Balance Sheet (Option A)

Finally, the Balance Sheet is prepared to show the NPO’s financial position at the end of the period, incorporating the surplus/deficit and any other adjustments.

Correct Sequence

The logical sequence of steps is: E → C → B → D → A.

Final Answer

The correct option is Option 1: E, C, B, D, A.

Determining the cost of medicines consumed requires accounting for:

• Opening balances (stock, creditors, and advances)
• Purchases/Payments during the period
• Closing balances (stock, creditors, and advances)

Step 1: Calculate Purchases

Purchases will be calculated by adjusting payments to creditors with opening and closing balances of creditors and advance to suppliers.

Amount paid to creditors during the year: Rs 3,70,000

Add: Opening balance of creditors (1.04.2020): Rs 25,000

Less: Closing balance of creditors (31.03.2021): Rs (17,000)

Less: Opening balance of advance to creditors (1.04.2020): Rs (11,000)

Add: Closing balance of advance to creditors (31.03.2021): Rs 18,000

Value of medicine purchased: Rs 3,85,000

Step 2: Calculate the Cost of Medicine Consumed

The cost of medicine will be calculated by adjusting purchases with opening and closing balance of stock of medicine.

Opening Stock as on 1.04.2020: Rs 62,000

Purchases during the year: Rs 3,85,000

Less: Closing Stock as on 31.03.2021: Rs (54,000)andnbsp;

Cost of medicine consumed: Rs 3,93,000

Therefore, the cost of medicine consumed during the period is approximately Rs 3,63,000

Begin the Receipt and Payment Account with the opening balance of cash in hand and at bank. This is the starting point for the account and is entered on the debit side.
Then, record all cash receipts during the accounting period on the debit side.
Next, record all cash payments made during the period on the credit side.
Finally, calculate the difference between the total of the debit and credit sides to determine the closing balance.

Thus, the correct sequence is: (C), (B), (D), (A).