Pragya Madan, an Ex Indian hockey woman player decided to start a hockey academy to train young enthusiastic girls of her village with the support of her family, She started Bright Hockey Academy. On 1st April 2022. Her neighbor Ishwar died and he willed his land to start the academy. Her father 'Ramkumar' spent Rs.20,00,000 for construction of pavilion. 100 young girls joined the academy and they paid yearly of Rs.1,000 each. 10 members paid a single amount Rs.25,000 to get life membership. Hockey and balls purchased during the year amounted to Rs.27,000 Closing stock of these item is nil. Based on the above information you are required to answer the questions.
Treatment of construction of pavilion is
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Added to general or capital fund and also shown on assets side of Balance sheet.
Ramkumar spent Rs. 20,00,000 on constructing a pavilion for the academy: it is a donation made for a specific purpose and received in the form of an asset. A donation for a specific purpose is capitalised, not taken as income, so it is added to the fund (capital) side, and the pavilion itself is a fixed asset of the academy, shown on the assets side of the Balance Sheet.
Option (2) shown only on assets side of Balance sheet — Incorrect. The academy did not pay for the pavilion, so the asset must be matched by a fund on the liabilities side; showing only the asset would leave the Balance Sheet unbalanced.
Option (3) Added to only capital fund — Incorrect. The pavilion is an asset the academy now owns and uses, so it must also appear on the assets side.
Option (4) debited to Income and expenditure account — Incorrect. Construction of a pavilion is capital expenditure that gives a lasting asset; it is not a revenue expense of the year.
Note: This question is from the pre-rationalised NCERT book. The topic is not there in the latest NCERT book (2026-27), but it is still in the CUET 2026 syllabus, so do not skip it.
NCERT (Pre-rationalised edition): |