NCERT Solutions for Class 11 Accountancy Chapter 10 - Incomplete Records

NCERT Solutions for Class 11 Accountancy Chapter 10 Free PDF Download

Please Click on Free PDF Download link to Download the NCERT Solutions for Class 11 Accountancy Chapter 10 Incomplete Records

Short Answer Type Question

1. State the meaning of incomplete records ?

Ans. Accounts that are not recorded under the double entry system are known as incomplete records. According to Kohler (Dictionary of Accountants) Single Entry System is defined as, “A system of accounting in which only cash and personal accounts are kept as a rule, it is always imperfect double entry, varying according to circumstances.” Many small businesses maintain incomplete records of their transactions. They do not keep proper books of accounts and at the end of the year mainly prepare books like, Cash Book, personal accounts (of debtors and creditors) invoices and Balance Sheet. They maintain as per their needs. This system is also known as dual-nutrient system. The preparation of financial statments is neither as easier nor as effective, as it is under double entry system. Therefore, it is not possible to guarantee exact profit or loss.

2. What are the possible reasons for keeping incomplete records ?

Ans. The possible reasons for keeping incomplete records are:

(i) Simple method : Proprietors, who do not have the proper knowledge of accounting principles, find it much convenient and easier to maintain their business records under this system.

(ii) Less time consuming : Maintaining books according to the single entry system is less time consuming as only few books are to be maintained. Further, the books are not as comprehensive as they are under double entry system.

(iii) Less expensive : It is an economical mode of maintaining records, as there is no need to appoint specialised accountant.

(iv) Flexible : Owner may record transactions as per his/her own needs. It can be easily adjusted or changed whenever needed.

3. Distinguish between Statement of Affairs and Balance Sheet.

Ans.

Difference between Statement of Affairs and Balance Sheet

Basis of Difference	Statement of Affairs	Balance Sheet
(i) Objective	It is prepared to determine the amount of capital at a particular date.	It is prepared to ascertaining the financial position of the business.
(ii) Reliability	It is treated as less reliable because it is based on incomplete records and estimates.	A Balance Sheet is treated as more reliable because it is based on double entry principles.
(iii) Accounting Method	It is prepared from incomplete records of business transactions under single entry system.	It is prepared when accounts are maintained under double entry system.
(iv) Omission	Omission of assets and liabilities cannot be easily identified.	Omission of assets and liabilities can be easily identified, as omission will lead to mismatch of either sides of the balance sheet.

4. What practical difficulties are encountered by a trader due to incompleteness of accounting records ?

Ans. The following are the difficulties that are encountered by a trader due to incompleteness of accounting records

(i) Accuracy of accounts: Arithmetical accuracy of accounts can not be ascertained, since proper records of accounts are not maintained. Consequently, Trial Balance cannot be prepared.

(ii) Encourages fraud: As the arithmetical accuracy cannot be determined; so, this encourages fraud and provides sufficient scope for bluffing and carelessness.

(iii) Difficult to analyse the true financial position: As profit or loss cannot be ascertained easily so the the Balance Sheet cannot be easily prepared. Hence, with the absence of Balance Sheet, the business
will not reflect the true financial position.

(iv) Difficulty in comparison: Due to the incomplete records and the unavailability of previous years data, comparison is not possible.

(v) Unacceptable to tax authorities: It does not reflect the true and acceptable presentation of expenses and revenues. Hence, these are not acceptable by the tax authorities.

(vi) Raising funds: Since analysis of solvency, profitability and liquidity of business cannot be done, it is difficult to raise fund from outside.

Long Answer Type Questions

5. What is meant by a Statement of Affairs? How can the profit or loss of a trader be ascertained with the help of a statement of affairs?

Ans. A Statement of Affairs resembles Balance Sheet; however, it is not called a Balance Sheet. The statement of affairs is a Statement of Assets and Liabilities. The main difference between a Statement of Affairs and a Balance Sheet is that while the former is prepared on the basis of physical calculations faulty original documents, the latter is prepared purely on the basis of ledger accounts. Thus, the authentication
and relevance of the latter are ensured. The excess of assets over liabilities (i.e. the balancing figure) is designated as the company’s capital. The perform of the statement of affairs is presented below.

Statement of Affairs as on……

Liabilities	Amount (₹)	Assets	Amount (₹)
Bills Payable	—	Land and Building	—
Creditors	—	Plant and Machinery	—
Outstanding Expense		Furniture
Capital (Balance Figure)*		Stock	—
		Debtors	—
		Cash and Bank	—
		Prepaid Expenses
		Capital:
		Deficiency (Balancing Figure, if any)

* When liabilities are more than assets, then the balancing figure is denoted by Capital-Deficiency in the assets side of the statement of affairs. When the assets balance exceeds liabilities balance, the balancing figure is denoted by Capital in the liabilities side of the statement of affairs. For ascertaining profit or loss, if capital in the beginning is not given, then opening statement of affairs is prepared in order to calculate the capital in the beginning. Once the opening capital and closing capital is calculated, a Statement of Profit or Loss is prepared to determine the amount of profit earned or loss incurred during the accounting period.

Statement of Profit or Loss for the year
ending………

Particulars	Amount (₹)
Closing capital at the end of the year	—
Add:Drawings made during the year	—
Less:Additional capital introduced during the year	—
Adjusted capital at the end of the year	—
Less: Capital in the beginning of the year	—
Profit (Loss) for the year	—
(Balancing figure)

6. Is it possible to prepare the profit and loss account and the balance sheet from the incomplete book of accounts kept by a trader’? Do you agree? Explain.

Ans. The Profit and Loss Account and the Balance Sheet can be prepared from the incomplete book of accounts through Conversion Method. This method converts, incomplete records into duplicate or double entry records. In case of incomplete records, details of some transactions are easily available like cash sales, cash purchases, creditors, debtors; however, there are number of transactions, the details of which may not be available directly. Yet, these details can be found out indirectly or logically. Some of the important items that are vital for preparing Balance Sheet are given below.

(i) Opening Capital	(vi) Cash Sales
(ii) Closing Capital	(vii) Payment from Debtors
(iii) Credit Purchases	(viii) Payment to Creditors
(iv) Cash Purchases	(ix) Opening Stock
(v) Credit Sales	(x) Closing Stock.

Below given are the steps included in the conversion method in a chronological order.

(i) If opening capital is not given then the first step is to prepare opening Statement of Affairs that gives the Opening Capital.

(ii) The second step is to prepare Cash Book that gives the opening or the closing cash and bank balance.

(iii) The next step is to prepare Total Debtors Account. It is prepared in order to find out one of the missing figures, such as credit sales, opening debtors, closing debtors and cash received from debtors.

(iv) The subsequent step is to prepare Total Creditors Account to ascertain one of the missing figures, such as credit sales, opening creditors, closing creditors and cash paid to the creditors.

(v) The last step is to prepare final accounts. On the basis of the missing figures ascertained in each of the above steps, alongwith other mentioned information, Trading and Profit and Loss Account and Balance Sheet can be prepared.

7. Explain how the following may be ascertained from incomplete records:

(a) Opening capital and closing capital

(b) Credit sales and credit purchases

(c) Payments to creditors and collection from debtors

(d) Closing balance of cash.

Ans. (a) Opening capital and closing capital: Opening capital can be ascertained by preparing opening statement of affairs at the beginning of the accounting period and closing capital can be ascertained by preparing closing Statement of Affairs at the end of the accounting period.

Statement of Affairs as on….

Liabilities	Amount (₹)	Assets	Amount (₹)
Bills Payable	—	Land and Building	—
Creditors	—	Machinery	—
Outstanding Expense	—	Furniture	—
Capital (Balancing Figure)*	—	Stock	—
		Debtors	—
		Cash and Bank	—
		Prepaid Expenses
		Capital:
		Deficiency (Balancing Figure)*

* When liabilities are more than assets, capital appears in assets side, as it is balancing figure.

When the assets balance exceeds liabilities balance, the balancing figure is denoted by capital in the Liabilities side of the Statement of Affairs.

(b) Credit Sales and Credit Purchases: Credit sales are ascertained as the balancing figure of the Total Debtors Account and Credit Purchases are ascertained as the balancing figure of the Total Creditors Account.

Dr.	Total Debtors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	—	By Cash A/c	—
To Bills Receivable A/c	—	By Bank A/c	—
(Bills Dishonoured)		By Discount Allowed A/c	—
To Bank (Cheque Dishonoured)		By Bad Debts A/c	—
To Credit Sales (Balancing Figure)	—	By Sales Returns A/c	—
		By Bills Receivable A/c	—
		(Bill Drawn)
		By Balance c/d	—

Dr.	Total Creditors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Cash A/c	—	By Balance b/d	—
To Bank A/c	—	By Bank A/c	—
To Bills Payable A/c	—	By (Cheque Dishonoured)	—
To Discount Received A/c	—	By Bills Payable (Bills Dishonoured)	—
To Purchases Returns A/c	—	By Credit Purchases A/c	—
To Balance c/d	—	By (Balancing Figure)	—

(c) Payment to creditors and collection from debtors: Payment to the creditors are ascertained from the Total Creditors Account as a balancing figure and collection from debtors are ascertained from the Total Debtors Account as a balancing figure.

(d) Closing balance of cash: Closing balance of cash is ascertained from the Cash Book, which shows all receipts in the debit side and all payments in the credit side during an accounting year and the balancing figure of the cash book is the closing balance of cash.

Numerical Questions

8. Following information is given below prepare the statement of profit of loss:

Particulars	Amount (₹)
Capital at the end of the year	5,00,000
Capital in the beginning of the year	7,50,000
Drawings made during the period	3,75,000
Additional Capital introduced	50,000

Ans.

Statement of Profit and Loss

Particulars	Amount (₹)
Capital at the end of the year	5,00,000
Add: Drawings made during the year	3,75,000
Less: Capital in the beginning of the year	(7,50,000)
Less: Additional Capital introduced	(50,000)
Profit made during the year	(75,000)

9. Manveer started his business on April 01, 2016 with a capital of ₹4,50,000. On March 31, 2017 his position was as under:

Particulars	Amount (₹)
Cash	99,000
Bills Receivable	75,000
Plant	48,000
Land and Building	1,80,000
Furniture	50,000

He owned ₹45,000 from his friend Susheel on that date. He withdrew ₹8,000 per month for his household purposes. Ascertain his profit or loss for this year ended March 31, 2017.

Ans.

Books of Manveer
Statement of Affairs

as at 31^st March, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Loan from Susheel	45,000	Cash	99,000
Closing Capital	4,07,000	Bills Receivable	75,000
(Balancing Figure)		Plant	48,000
		Land and Building	1,80,000
		Furniture	50,000
	4,52,000		4,52,000

Statement of Profit and Loss
for the year ending March 31, 2017

Particulars	Amount (₹)
Capital as on March 31, 2017	4,07,000
Add: Drawings made during the year (₹8,000 × 12)	96,000
Less: Capital as on April 01, 2016	4,50,000
Profit during the year 2017	53,000

10. From the information given below ascertain the profit for the year :

Particulars	Amount (₹)
Capital at the beginning of the year	70,000
Additional capital introduced during the year	17,500
Stock	59,500
Sundry Debtors	25,900
Business Premises	8,600
Machinery	2,100
Sundry Creditors	33,400
Drawings made during the year	26,400

Ans.

Statement of Affairs
(as at …………)

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	33,400	Stock	59,500
Capital (Balancing figure)	62,700	Sundry Debtors	25,900
		Business Premises	8,600
		Machinery	2,100
	96,100		96,100

Statement of Profit and Loss

Particulars	Amount (₹)
Capital at the end of the year	62,700
Add: Drawings made during the year	26,400
Less: Capital at the beginning of the year	70,000
Less: Additional capital introduced during the year	17,500
Profit during the year	1,600

11. From the following information, calculate capital at the beginning :

Particulars	Amount (₹)
Capital at the end of the year	4,00,000
Add: Drawings made during the year	60,000
Fresh capital introduce during the year	1,00,000
Profit of the current year	80,000

Ans. Capital in the beginning = Capital at the end + Drawings – (Fresh Capital Introduced + Profit)

= [4,00,000 + 60,000 – (1,00,000 + 80,000)] = ₹2,80,000

Note: As per the solution, the profit should be of ₹2,80,000; but, the answer given in the book is ₹2,60,000.

12. Following information is given below calculate the closing capital:

Liabilities	April 2016 (₹)	March 2017 (₹)
Creditors	5,000	30,000
Bills Payable	10,000
Loan		50,000
Bills Receivable	30,000	50,000
Stock	5,000	30,000
Cash	2,000	20,000

Calculation of profit or loss and ascertainment of statement of affairs at the end of the year (Opening Balance is given)

Ans.

Statement of Affairs
as at April 2016

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	5,000	Bills Receivable	30,000
Bills Payable	10,000	Stock	5,000
Capital (Balancing figure)	22,000	Cash	2,000
	37,000		37,000

Statement of Affairs
as at March 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	30,000	Bills Receivable	50,000
Loan	50,000	Stock	30,000
Capital (Balancing figure)	20,000	Cash	20,000
	1,00,000		1,00,000

Capital on March 31, 2017(Closing) = ₹20,000

Statement of Profit and Loss

for the year ending 31^st March, 2017

Particulars	Amount (₹)
Capital as on March 31, 2017	20,000
Less: Capital on April 01, 2016	22,000
Loss during the year 2017	2,000

13. Mrs. Anu started firm with a capital of ₹4,00,000 on 1^st October 2016. She borrowed from her friends a sum of ₹1,00,000 @ 10% per annum (interest paid) for business and brought a further amount to capital ₹75,000 on March 31, 2017, her position was :

Particulars	Amount (₹)
Cash	30,000
Stock	4,70,000
Debtors	3,50,000
Creditors	3,00,000

He withdrew ₹8,000 per month for the year. Calculate profit or loss for the year and show your working clearly.

Books of Mrs. Anu
Statement of Affairs
as at March, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	3,00,000	Cash	30,000
10% Loan from Friends	1,00,000	Stock	4,70,000
Capital (Balancing figure)	4,50,000	Debtors	3,50,000
	8,50,000		8,50,000

Statement of Profit and Loss
for the year ending March 31, 2017

Particulars	Amount (₹)
Capital as on March, 2017	4,50,000
Add: Drawings during the year (8,000 × 6 months)	48,000
Less: Capital as on October 01, 2016	4,00,000
Less:Additional capital introduced	75,000
Mrs. Anu, during the year 2017	23,000

14. Mr. Arnav does not keep proper records of his business he provided following information, you are required to prepare a statement showing the profit or loss for the year.

Particulars	Amount (₹)
Capital at the beginning of the year	15,00,000
Bills Receivable	60,000
Cash in hand	80,000
Furniture	9,00,000
Building	10,00,000
Creditors	6,00,000
Stock in trade	2,00,000
Further capital introduced	3,20,000
Drawing made during the period	80,000

Ascertainment of statement of affairs at the beginning and at the end of the year and calculation of profit or loss.

Ans.

Books of Mr. Arnav
Statement of Affairs
at the end of year…

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	6,00,000	Bills Receivable	60,000
Capital (Balancing figure)	16,40,000	Cash in Hand	80,000
		Furniture	9,00,000
		Building	10,00,000
		Stock in Trade	2,00,000
	22,40,000		22,40,000

Statement of Profit and Loss
for the year ended………

Particulars	Amount (₹)
Capital at the end of the year	16,40,000
Add: Drawings during the year	80,000
Less: Capital at the beginning of the year	15,00,000
Less: Further capital introduced	3,20,000
Loss during the year	1,00,000

15. Mr. Akshat keeps his books on incomplete records following information is given below:

Liabilities	April 2016 (₹)	April 2017 (₹)
Cash in hand	1,000	1,500
Cash at Bank	15,000	10,000
Stock	1,00,000	95,000
Debtors	42,500	70,000
Business Premises	75,000	1,35,000
Furniture	9,000	7,500
Creditors	66,000	87,000
Bills Payable	44,000	58,000

During the year he withdrew ₹45,000 and introduced ₹25,000 as further capital in the business compute the profit or loss of the business.

Ans.

Books of Mr. Akshat
Statement of Affairs

as at 1^st April, 2016

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	66,000	Cash in Hand	1,000
Bills Payable	44,000	Cash at Bank	15,000
Capital (Balancing figure)	1,32,500	Stock	1,00,000
		Debtors	42,500
		Business Premises	75,000
		Furniture	9,000
	2,42,500		2,42,500

Statement of Affairs

as at 31^st March, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	87,000	Cash in Hand	1,500
Bills Payable	58,000	Cash at Bank	10,000
Capital (Balancing figure)	1,74,000	Stock	95,000
		Debtors	70,000
		Business Premises	1,35,000
		Furniture	7,500
	3,19,000		3,19,000

Statement of Profit and Loss
for the year ending 31^st March, 2017

Particulars	Amount (₹)
Capital as on March, 2017	1,74,000
Add: Drawings during the year	45,000
Less: Capital as on April 01, 2016	(1,32,500)
Less: Additional capital introduced	(25,000)
Profit earned by Mr. Akshat during the year 2016-2017	61,500

16. Gopal does not keep proper books of account. Following information is given below :

Liabilities	April 01, 2016 (₹)	March 31, 2017 (₹)
Cash in hand	18,000	12,000
Cash at Bank	1,500	2,000
Stock in trade	80,000	90,000
Sundry Debtors	36,000	60,000
Sundry Creditors	60,000	40,000
Loan	10,000	8,000
Office Equipments	25,000	30,000
Land and Building	30,000	20,000
Furniture	10,000	10,000

During the year he introduced ₹20,000 and withdrew ₹12,000 from the business. Prepare the statement of profit or loss on the basis of given information.

Books of Gopal
Statement of Affairs
as at April 01, 2016

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	60,000	Cash in Hand	18,000
Loan	10,000	Cash at Bank	1,500
Capital (Balancing figure)	1,30,500	Stock in trade	80,000
		Sundry Debtors	36,000
		Office Equipments	25,000
		Land and Buildings	30,000
		Furniture	10,000
	2,00,500		2,00,500

Statement of Affairs

as at 31^st March, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	40,000	Cash in Hand	12,000
Loan	8,000	Cash at Bank	2,000
Capital (Balancing figure)	1,76,000	Stock in Trade	90,000
		Sundry Debtors	60,000
		Office Equipments	30,000
		Land and Buildings	20,000
		Furniture	10,000
	2,24,000		2,24,000

Statement of Profit and Loss
for the year ending March, 2017

Particulars	Amount (₹)
Capital as on March 31, 2017	1,76,000
Add: Drawings made during, 2017	12,000
Less: Capital as on April 01, 2016	(1,30,500)
Less:Additional capital introduced	(20,000)
Profit during the year	37,500

Note: As per the solution, the profit during the year should be ₹37,500; whereas, the profit given in the book is ₹53,500.

17. Mr. Muneesh maintains his books of accounts from incomplete records. His books provide the information:

	April 2016 (₹)	April 2017 (₹)
Cash	1,200	1,600
Bills Receivable	—	2,400
Debtors	16,800	27,200
Stock	22,400	24,400
Investments	—	8,000
Furniture	7,500	8,000
Creditors	14,000	15,200

He withdrew ₹300 per month for personal expenses. He sold his investment of ₹16,000 at 2% premium and introduced that amount into business.

Ans.

Statement of Affairs

as at 01^st April, 2016

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	14,000	Cash	1,200
Capital (Balancing figure)	33,900	Debtors	16,800
		Stock	22,400
		Furniture	7,500
	47,900		47,900

Statement of Profit and Loss
for the year ending 31^st March, 2017

Particulars	Amount (₹)
Capital as on March 31, 2017	56,400
Add: Drawings made during the year 2017 (300 × 12)	3,600
Less: Capital as on April 01, 2016	(33,900)
Less: Additional capital introduced (16,000 + 2% of 16,000)	(16,320)
Profit during the year	9,780

Statement of Affairs
as at 31^st March, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	15,200	Cash	1,600
Capital (Balancing figure)	56,400	Bills Receivable	2,400
		Debtors	27,200
		Stock	24,400
		Investment	8,000
		Furniture	8,000
	71,600		71,600

18. Mr. Girdhari Lal does not keep full double entry records. His balance as on January 01, 2016 is as.

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	35,000	Cash in hand	5,000
Bills Payable	15,000	Cash at bank	20,000
Capital	40,000	Sundry Debtors	18,000
		Stock	22,000
		Furniture	8,000
		Plant	17,000
	90,000		90,000

His position at the end of the year is:

Particulars	Amount (₹)
Cash in hand	7,000
Stock	8,600
Debtors	23,800
Furniture	15,000
Plant	20,350
Bills Payable	20,200
Creditors	15,000

He withdrew ₹500 per month, out of which he spent ₹1,500 for business purpose. Prepare the statement of profit or loss.

Ans.

Books of Mr. Girdhari Lal
Statement of Affairs
as at 31^st March, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Bills Payable	20,200	Cash in Hand	7,000
Creditors	15,000	Stock	8,600
Capital (Balancing figure)	39,550	Debtors	23,800
		Furniture	15,000
		Plant	20,350
	74,750		74,750

Statement of Profit and Loss
for the year ending 31^st March, 2017

	Amount (₹)
Capital at the end of the year	39,550
Add: Drawings (₹500 × 12 months)	6,000
Less: Capital at the beginning of the year 2016	(40,000)
Less: Additional capital introduced	(1,500)
Profit earned during the year 2017	4,050

19. Mr. Ashok does not keep his books properly. Following information is available from his books.

Liabilities	April 2016 (₹)	March 2017 (₹)
Sundry Creditors	45,000	93,000
Loan from Wife	66,000	57,000
Sundry Debtors	22,500	—
Land and Building	89,600	90,000
Cash in hand	7,500	8,700
Bank Overdraft	25,000	—
Furniture	1,300	1,300
Stock	34,000	25,000

During the year Mr. Ashok sold his private car for ₹50,000 and invested this amount into the business. He withdrew from the business ₹1,500 per month upto October 31, 2016 and thereafter ₹4,500 per month as drawings. You are required to prepare the statement of profit or loss and statement of affair as on March 31, 2017.

Ans.

Books of Mr. Ashok
Statement of Affairs

as at 01^st April, 2016

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	45,000	Sundry Debtors	22,500
Loan from Wife	66,000	Land and Building	89,600
Bank Overdraft	25,000	Cash in Hand	7,500
Capital (Balancing figure)	18,900	Furniture	1,300
		Stock	34,000
	1,54,900		1,54,900

Statement of Affairs as at March, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Sundry Creditors	93,000	Land and Building	90,000
Loan from Wife	57,000	Cash in Hand	8,700
		Furniture	1,300
		Stock	25,000
		Capital (Balancing figure)	25,000
	1,50,000		1,50,000

Statement of Profit and Loss

for the year ending 31^st March, 2017

Particulars	Amount (₹)
Capital as on March 31, 2017	25,000
Add: Drawings (₹1,500 × 7 months) + (₹4,500 × 5 months)	33,000
Less: Capital as on April 01, 2016	(18,900)
Less: Additional capital introduced (sale of car)	(50,000)
Loss during the year 2017	(60,900)

Note: As per the solution, the loss incurred during the year 2011 is ₹60,900; while the answer given in the book shows ₹57,900.

20. Krishna Kulkarni has not kept proper books of accounts, prepare the statement of profit or loss for the year ending March 31, 2016 from the following information:

	April 01, 2016 (₹)	March 31, 2017 (₹)
Cash in hand	10,000	36,000
Debtors	20,000	80,000
Creditors	10,000	46,000
Bills Receivable	20,000	24,000
Bills Payable	4,000	42,000
Car	—	80,000
Stock	40,000	30,000
Furniture	8,000	48,000
Investment	40,000	50,000
Bank balance	1,00,000	90,000

The following adjustments were made:

(a) Krishna withdrew cash ₹5,000 per month for private use.

(b) Depreciation @ 5% on car and furniture @10%.

(d) Fresh Capital introduced during the year ₹30,000.

Ans.

Books of Krishna Kulkarni
Statement of Affair’s

as at 01^st April, 2016

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	10,000	Cash in Hand	10,000
Bills Payable	4,000	Debtors	20,000
Capital (Balancing figure)	2,24,000	Bills Receivable	20,000
		Stock	40,000
		Furniture	8,000
		Investment	40,000
		Cash at Bank	1,00,000
	2,38,000		2,38,000

Statement of Affair’s

as at 31^st March, 2017

Liabilities	Amount (₹)	Assets		Amount (₹)
Creditors	46,000	Cash in Hand		36,000
Bills Payable	42,000	Debtors		80,000
Outstanding Expenses	6,000	Bills Receivable		24,000
Capital (Balancing figure)	3,35,200	Car	80,000
		Less: Depreciation 5%	(4,000)	76,000
		Stock		30,000
		Furniture	48,000
		Less: Depreciation 10%	(4,800)	43,200
		Investment		50,000
		Cash at Bank		90,000
	4,29,200			4,29,200

Statement of Profit and Loss

for the year ending 31^st March, 2017

Particulars	Amount (₹)
Capital as on March 31, 2017	3,35,200
Add: Drawings made during the year (₹5,000 × 12 months)	60,000
Less: Capital as on April 01, 2016	(2,24,000)
Less: Fresh capital introduced during the year 2017	(30,000)
Profit earned during the year 2017	1,41,200

21. M/s Saniya Sports Equipment does not keep proper records. From the following information find out profit or loss and also prepare balance sheet for the year ended 31^st March, 2017.

	March 31, 2016 (₹)	March 31, 2017 (₹)
Cash in hand	6,000	24,000
Bank Overdraft	30,000	—
Stock	50,000	80,000
Sundry Creditors	26,000	40,000
Bills Payable	6,000	12,000
Furniture	40,000	60,000
Bills Receivable	8,000	28,000
Machinery	50,000	1,00,000
Investment	30,000	80,000

Drawings ₹10,000 p.m. for personal use, fresh capital introduce during the year ₹2,00,000. A bad debts of ₹2,000 and a provision of 5% is to be made on debtors outstanding, salary ₹2,400, prepaid insurance ₹700, depreciation charged on furniture and machine @ 10% p.a.

Ans.

Statement of Affair’s

as at 31^st March, 2016

Liabilities	Amount (₹)	Assets	Amount (₹)
Bank Overdraft	30,000	Cash in Hand	6,000
Sundry Creditors	26,000	Stock	50,000
Bills Payable	6,000	Sundry Debtors	60,000
Capital (Balancing figure)	1,82,000	Furniture	40,000
		Bills Receivable	8,000
		Machinery	50,000
		Investment	30,000
	2,44,000		2,44,000

Statement of Affairs

as at 31^st March, 2017

Liabilities	Amount (₹)	Assets		Amount (₹)
Sundry Creditors	40,000	Cash in Hand		24,000
Bills Payable	12,000	Stock		80,000
Outstanding Salary	2,400	Sundry Debtors	1,40,000
Capital (Balancing figure)	4,33,400	Less: Bad debts	(2,000)
			1,38,000
		Less: 5% Provision	(6,900)	1,31,100
		Furniture	60,000
		Less: Depreciation	(6,000)	54,000
		Bills Receivable		28,000
		Machinery	1,00,000
		Less: Depreciation	(10,000)	90,000
		Investment		80,000
		Prepaid Insurance		700
	4,87,800			4,87,800

Statement of Profit and Loss

for the year ending 31^st March, 2017

Particulars	Amount (₹)
Capital as on March 31, 2017	4,33,400
Add: Drawings made during the year (₹10,000 × 12)	1,20,000
Less: Capital as on March 31, 2016	(1,82,000)
Less: Fresh capital introduced during the year 2017	(2,00,000)
Profit earned during the year 2017	1,71,400

Note: As per the solution, the profit earned during the year is ₹1,71,400 while, according to the book, the answer is ₹1,71,300.

In order to match our answer with NCERT, the treatment of provision will be made as,

Particulars	Amount (₹)
Debtors	1,40,000
Less: Bad Debts	(7,000)
	1,33,000
Less: Bad-debts	(2,000)
Debtors	1,31,100

However, as per the rule, the treatment of provision will be calculated as,

Particulars	Amount (₹)
Debtors	1,40,000
Less: 5% Provision	(2,000)
	1,38,000
Less: 5% Provision	(6,900)
Debtors	1,31,000

22. From the following information calculate the amount to be paid to creditors:

Particulars	Amount (₹)
Sundry creditors as on 31^st March, 2017	1,80,425
Discount received	26,000
Discount allowed	24,000
Return outwards	37,200
Return inward	32,200
Bills accepted	1,99,000
Bills endorsed to creditors	26,000
Creditors as on 01^stApril, 2016	2,09,050
Total purchases	8,97,000
Cash purchases	1,40,000

Ans.

Dr.	Creditors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Discount Received	26,000	By Balance b/d	2,09,050
To Return Outwards	37,200	By Purchases (credit)
To Bills accepted	1,99,000	(8,97,000 – 1,40,000)	7,57,000
To B/R (endorsed to creditors)	26,000
To Balance c/d	1,80,425
To Cash Bank (Balancing figure)	4,97,425
	9,66,050		9,66,050

Note: As per the solution, the balancing figure is ₹4,97,425, while, according to the book, the answer is ₹4,40,175. The difference is because of opening and closing balance, which is considered wrong as per the answer.

23. Find out the credit purchases from the following :

Particulars	Amount (₹)
Balance of creditors 01^st April, 2016	45,000
Balance of creditors 01^st April, 2017	36,000
Cash paid to creditors	1,80,000
Cheque issued to creditors	60,000
Cash purchases	75,000
Discount received from creditors	5,400
Discount allowed	5,000
Bills payable given to creditors	12,750
Return outwards	7,500
Bills payable dishonoured	3,000
Bills receivable endorsed to creditors	4,500
Bills receivable endorsed to creditors dishonoured	1,800
Return inwards	3,700

Ans.

Dr.	Creditors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Cash	1,80,000	By Balance b/d	45,000
To Bank	60,000	By B/P (dishonoured)	3,000
To Discount Received	5,400	By B/R (dishonoured)	1,800
To B/P (accepted)	12,750	By Purchases-credit
To Return outwards	7,500	(Balancing figure)	2,56,350
To B/R (endorsed to creditors)	4,500
To Balance c/d	36,000
	3,06,150		3,06,150

Credit Purchases = ₹2,56,350

24. From the following information calculate total purchases.

Particulars	Amount (₹)
Creditors April 01, 2016	30,000
Creditors March 31, 2017	20,000
Opening balance of Bills payable	25,000
Closing balance of Bills payable	35,000
Cash paid to creditors	1,51,000
Bills discharged	44,500
Cash purchases	1,29,000
Return outwards	6,000

Ans.

Dr.	Creditors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Cash	1,51,000	By Balance b/d	30,000
To Return Outwards	6,000	By Purchases-credit	2,01,500
To Bills Payable (working notes)	54,500	(Balancing figure)
To Balance c/d	20,000
	2,31,500		2,31,500

Working Note:

Dr.	Bills Payable Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Cash (Bills Discharged)	44,500	By Balance b/d	25,000
To Balance c/d	35,000	By Creditors—(Bills Payable Accepted)	54,500
		(Balancing figure)
	79,500		79,500

Total Purchase = Cash Purchases + Credit Purchases (as per Creditors Account)

= 1,29,000 + 2,01,500 = ₹3,30,500

25. The following information is given:

Particulars	Amount (₹)
Opening creditors	60,000
Cash paid to creditors	30,000
Closing creditors	36,000
Returns Inward	13,000
Bills matured	27,000
Bills dishonoured	8,000
Purchases return	12,000
Discount allowed	5,000

Calculate credit purchases during the year.

Ans.

Dr.	Creditors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Cash	30,000	By Balance b/d	60,000
To Purchases Return	12,000	By B/P (dishonoured)	8,000
To B/P (Accepted) (see note)	27,000	By Purchases-credit	37,000
To Balance c/d	36,000	(Balancing figure)
	1,05,000		1,05,000

Note: In order to match the answer with NCERT book, in the solution bills payable matured has been assumed as bills payable accepted.

26. From the following, calculate the amount of bills accepted during the year.

	(₹)
Bills payable as on April 01, 2016	1,80,000
Bills payable as on March 31, 2017	2,20,000
Bills payable dishonoured during the year	28,000
Bills payable honoured during the year	50,000

Ans.

Dr.	Bills Payable Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Creditors (dishonoured)	28,000	By Balance b/d	1,80,000
To Cash / Bank	50,000	By Creditors (acceptance)	1,18,000
To Balance c/d	2,20,000	(Balancing figure)
	2,98,000		2,98,000

27. Find out the amount of bills matured during the year on the basis of information given below :

Particulars	Amount (₹)
Bills payable dishonoured	37,000
Closing balance of Bills payable	85,000
Opening balance of Bills payable	70,000
Bills payable accepted	90,000
Cheque dishonoured	23,000

Ans.

Dr.	Bills Payable Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Creditors (Bill dishonoured)	37,000	By Balance b/d	70,000
To Cash / Bank (Balancing figure)	38,000	By Creditors (acceptance)	90,000
To Balance c/d	85,000	(Balancing figure)
	1,60,000		1,60,000

Bills Payable matured during the year is ₹38,000.

28. Prepare the bills payable account from the following and find out missing figure if any :

Particulars	Amount (₹)
Bills accepted	1,05,000
Discount received	17,000
Sales returns	9,000
Return inwards	12,000
Cash paid to accounts payable	50,000
Bills receivable endorsed to creditors	45,000
Bills dishonoured	17,000
Bad debts	14,000
Balance of accounts payable (closing)	85,000
Credit purchases	2,15,000

Ans.

Dr.	Bills Payable Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Creditors (Dishonoured)	17,000	By Creditors (acceptance)	1,05,000
To Cash / Bank (Balancing figure)	88,000	(Balancing figure)

	1,05,000		1,05,000

Dr.	Accounts Payable Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Discount Received	17,000	By Purchases-Credit	2,15,000
To Purchases Return	9,000	By B/P (dishonoured)	17,000
To Cash	50,000	By Balance b/d	79,000
To B/R (endorsed)	45,000	(Balancing figure)
To B/P (acceptance)	1,05,000
To Balance c/d	85,000
	3,11,000		3,11,000

Bills payable discharged is ₹88,000 and the opening balance of creditors is ₹79,000.

29. Calculate the amount of bills receivable during the year.

Particulars	Amount (₹)
Opening balance of bills receivable	75,000
Bills dishonoured	25,000
Bills collected (honoured)	1,30,000
Bills receivable endorsed to creditors	15,000
Closing balance of bills receivable	65,000
Bills receivable received	1,50,000

Ans.

Dr.	Bills Receivable Account		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	75,000	By Bills dishonoured	25,000
To Debtors	1,60,000	By Bills collected (honoured)	1,30,000
(Balancing figure)		By Bills receivable endorsed to creditors)	15,000
		By Balance c/d	65,000
	2,55,000		2,55,000

30. Calculate the amount of bills receivable dishonoured from the following information:

	₹
Opening balance of bills receivable	1,20,000
Bills collected (honoured)	1,85,000
Bills receivable endorsed	22,800
Closing balance of bills receivable	50,700
Bills receivable received	1,50,000

Ans.

Dr.	Bills Receivable Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	1,20,000	By Bills collected (Cash/Bank)	1,85,000
To Debtors	1,50,000	(honoured)
(B/R received)		By Bills receivable endorsed (creditors)	22,800
		By Balance c/d	50,700
		By Debtors (dishonoured)	11,500
		(Balaning figure)
	2,70,000		2,70,000

Therefore, the Bills Receivable dishonoured is ₹11,500.

31. From the details given below, find out the credit sales and total sales:

	(₹)
Opening debtors	45,000
Closing debtors	56,000
Discount allowed	2,500
Sales returns	8,500
Irrecoverable amount	4,000
Bills receivable received	12,000
Bills receivable dishonoured	3,000
Cheque dishonoured	7,700
Cash sales	80,000
Cash received from debtors	2,30,000
Cheque received from debtors	25,000

Ans.

Dr.	Debtors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	45,000	By Discount allowed	2,500
To B/R (dishonoured)	3,000	By Sales Return	8,500
To Bank A/c (cheque dishonoured)	7,700	By Bad debts (irrecoverable amount)	4,000
To Sales-credit	2,82,300	By B/R (received)	12,000
(Balancing figure)		By Cash A/c	2,30,000
		By Bank A/c	25,000
		By Balance c/d	50,000
	3,38,000		3,38,000

Credit sales is ₹2,82,300

Total sales = Cash sales + Credit sales

= 80,000 + 2,82,300 = ₹3,62,300

32. From the following information, prepare the bills receivable account and total debtors account for the year ended March, 31, 2017.

	₹
Opening balance of debtors	1,80,000
Opening balance of bills receivable	55,000
Cash sales made during the year	95,000
Credit sales made during the year	14,50,000
Return inwards	78,000
Cash received from debtors	10,25,000
Discount allowed to debtors	55,000
Bills receivable endorsed to creditors	60,000
Cash received (bills matured)	80,500
Irrecoverable amount	10,000
Closing balance of bills receivable on March 31, 2017	75,500

Ans.

Dr.	Debtors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	1,80,000	By Return Inwards	78,000
To Sales credit	14,50,000	By Discount allowed	55,000
		By Cash A/c	10,25,000
		By Bad Debt (irrecoverable amount)	10,000
		By B/R (received)	1,61,000
		By Balance c/d	3,01,000
		(Balancing figure)
	16,30,000		16,30,000

Dr.	Bills Receivable Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	55,000	By Cash (Bills matured)	80,500
To Debtors (received)	1,61,000	By Creditors (endorsed)	60,000
(Balancing figure)		By Balance c/d	75,500
	2,16,000		2,16,000

The missing figure in the bills receivable account B/R received from debtors is ₹1,61,000 and the missing figure in the debtor account -Closing balance is ₹3,01,000.

33. Prepare the suitable accounts and find out the missing figure of any

	₹
Opening balance of debtors	14,00,000
Opening balance of bills receivable	7,00,000
Closing balance of bills receivable	3,50,000
Cheque dishonoured	27,000
Cash received from debtors	10,75,000
Cheque received and deposited in the bank	8,25,000
Discount allowed	37,500
Irrecoverable amount	17,500
Returns inwards	28,000
Bills receivable received from customers	1,05,000
Bills receivable matured	2,80,000
Bills discounted	65,000
Bills endorsed to creditors	70,000

Ans.

Dr.	Debtors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	14,00,000	By Cash	10,75,000
To Bank (Cheque Dishonoured)	27,000	By Bank	8,25,000
To B/R (Dishonoured)	40,000	By Discount allowed	37,500
To Sales credit (Balancing Figure)	6,21,000	By Bad debt (Irrecoverable Amount)	17,500
		By Return Inwards	28,000
		By B/R (Received)	1,05,000
	20,88,000		20,88,000

Dr.	Bills Receivable Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	7,00,000	By Cash (B/R matured)	4,80,000
To Debtors (B/R received)	1,05,000	By Bank (Bill endorsed)	65,000
		By Creditor (endorsed)	70,000
		By Balance c/d	3,50,000
		By Debtors (dishonoured)	40,000
		(Balancing figure)

	8,05,000		8,05,000

Note: As per the solution, the balancing figure is ₹6,21,000, while according to the book, the answer is ₹5,16,000.

34. From the following information ascertain the opening balance of sundry debtors and closing balance of sundry creditors :

Particulars	(₹)
Opening stock	30,000
Closing stock	25,000
Opening creditors	50,000
Closing debtors	75,000
Discount allowed by creditors	1,500
Discount allowed to customers	2,500
Cash paid to creditors	1,35,000
Bills payable accepted during the period	30,000
Bills receivable received during the period	75,000
Cash received from customers	2,20,000
Bills receivable dishonoured	3,500
Purchases	2,95,000

The rate of gross profit is 25% on selling price and out of the total sales ₹85,000 was for cash sales.

Ans.

Dr.	Sundry Debtors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d (Balancing figure)	54,000	By Discount allowed	2,500
To B/R (dishonoured)	3,500	By B/R (received)	75,000
To Sales Credit	3,15,000	By Cash A/c	2,20,000
		By Balance c/d	75,000
	3,72,000		3,72,000

Dr.	Sundry Creditors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Discount received	1,500	By Balance b/d	50,000
To Cash	1,35,000	By Purchase credit	2,95,000
To B/P (accepted)	30,000
To Balance c/d (Balancing figure)	1,78,000
	3,45,500		3,45,500

Working Notes:

Total sales = Cash Sales + Credit Sales

= Cost of goods sold + Gross profit

Cost of goods sold = Opening stock + Purchases – Closing stock

= 80,000 + 2,95,000 – 25,000 = ₹3,00,000

Let us assume the sales to be 100%

Sales = Cost of goods sold + Gross profit

Then 100% = Cost of goods sold + 25%

Cost of goods sold = 100 – 25% = 75%

$$\text{Gross Profit =}\frac{\text{Cost of good sold}}{\%\space \text{of Cost of goods sold}}\\×\space\%\space\text{of gross profit}\\=\frac{3,00,000}{75}×25 \\= ₹1,00,000$$

Sales = Cost of goods sold + Gross Profit

= 3,00,000 + 1,00,000 = ₹4,00,000

Total Sales = Cash Sales + Credit Sales

Or 4,00,000 = 85,000 + Credit Sales

Or Credit Sales = ₹3,15,000

Note: It is assumed that all purchaces are made in credit.

35. Mrs. Bhavana keeps his books by Single Entry System. You are required to prepare final accounts of her business for the year ended March 31, 2017. Her records relating to cash receipts and cash payments for the above period showed the following particulars:

Dr.	Summary of Cash	Cr.

Receives	Amount (₹)	Payments	Amount (₹)
Opening balance of cash	12,000	Paid to creditors	53,000
Further capital	20,000	Business expenses	12,000
Received from debtors	1,20,000	Wage paid	30,000
		Bhavana’s drawings	15,000
		Balance at Bank on March 31, 2017	35,000
		Cash in hand	7,000
	1,52,000		1,52,000

The following information is also available:

	April 01, 2016 (₹)	March 31, 2017 (₹)
Debtors	55,000	85,000
Creditors	22,000	29,000
Stock	35,000	70,000
Plant	10,00,000	1,00,000
Machinery	50,000	50,000
Land and Building	2,50,000	2,50,000
Investment	20,000	20,000

All her sales and purchases were on credit. Provide depreciation on plant and building by 10% and machinery by 5%, make a provision for bad debts by 5%.

Ans.

Books of Mrs. Bhavana

Dr.	Debtors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	55,000	By Cash	1,20,000
To Sales-credit	1,50,000	By Balance c/d	85,000
	2,05,000		2,05,000

Dr.	Creditors Account	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Cash	53,000	By Balance b/d	22,000
To Balance c/d	29,000	By Purchases-credit	60,000
	82,000		82,000

Statement of Affairs

as on 01^st April, 2016

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	22,000	Debtors	55,000
Capital	5,00,000	Stock	35,000
Opening		Plant	1,00,000
(Balancing figure)		Machinery	50,000
		Land & Building	2,50,000
		Investment	20,000
		Cash	12,000
	5,22,000		5,22,000

Plant of ₹1,00,000 has been taken into the statment of affairs on 01st April, 2016, instead of ₹10,00,000.

Trading Account

Dr.	for the year ended 31^st March, 2017	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Opening stock	35,000	By Sales	1,50,000
To Purchases	60,000	By Closing stock	70,000
To Wages	30,000
To Gross profit c/d (Balancing figure)	95,000
	2,20,000		2,20,000

Profit and Loss Account

Dr.	for the year ended 31^st March, 2017	Cr.

Particulars		Amount (₹)	Particulars	Amount (₹)
To Business Expenses		12,000	By Trading (Gross profit b/d)	95,000
To Depreciation
On Plant	10,000
On Machines	2,500
On Building	25,000	37,500
To Provision for doubtful debt		4,250
To Net profit c/d (Balancing figure)		41,250

		95,000		95,000

Balance Sheet

as on 31^st March, 2017

Liabilities		Amount (₹)	Assets		Amount (₹)
Creditors		29,000	Debtors	85,000
Capital Opening	5,00,000		Less: 5% provision for Bad debt	(4,250)	80,750
Add: Net Profit	41,250		Stock		70,000
Add:Further Capital	20,000		Plant	1,00,000
	5,61,250		Less: 10% Depreciation	(10,000)	90,000
Less: Drawings	(15,000)	5,46,250	Machinery	50,000
			Less: 10% Depreciation	(2,500)	47,500
			Land & Building	2,50,000
			Less: 10% Depreciation	(25,000)	2,25,000
			Investment		20,000
			Cash in Hand		7,000
			Cash at Bank		35,000
		5,75,250			5,75,250