NCERT Solutions for Class 11 Accountancy Chapter 8 - Financial Statement (Without Adjustment)

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Short Answer Type Questions

1. What are the objectives of preparing financial statements?

Ans. Financial statements are prepared with the following objective:

(i) Determine the financial position of a business.

(ii) Ascertain the financial performance of the business.

(iii) To measure the changes in the financial position of a business.

(iv) To compare the financial performance of business both intra and inter-firm wise.

2. What is the purpose of preparing trading and profit and loss accounts?

Ans. Financial statements are prepared with the following objective:

(i) Determine the financial position of a business.

(ii) Ascertain the financial performance of the business.

(iii) To measure the changes in the financial position of a business.

The profit and loss account is prepared for the following purpose:

(i) Ascertaining net profit or net loss.

(ii) Analysing indirect expenses.

(iii) It provides a basis for profitability ratios.

3. Explain the concept of the cost of goods sold.

Ans. Costs incurred in producing goods that a company sells are known as Cost of Goods Sold or Cost of Goods Sold.

(i) If all the goods are sold out. Then, it can be computed as:

Cost of Goods Sold = Purchases + Direct Expenses

(ii) If there is some stock left at the end of the financial year. Then, it can be computed as:

Cost Goods Sold = Purchases + Direct Expenses – Closing Stock

(iii) A stock which is carried forward at the beginning of the financial year from the previous financial year is called opening stock and is computed as:

Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses – Closing Stock

4. What is a Balance Sheet? What are its characteristics?

Ans. A statement prepared to determine the values of assets and liabilities of a business on a specific date is called a Balance Sheet. Debit signifies the assets, while credits represent the liabilities.

It has the following features:

(i) It depends on other statements, i.e., trading and Profit and loss accounts.

(ii) It reflects the financial position of a company.

(iii) It is generally prepared at the end of an accounting period.

(iv) The balance of both sides should match.

5. Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure:

(a) Expenditure incurred on repairs and whitewashing at purchasing an old building to make it usable.

(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.

(d) Expenditure incurred in maintaining of a tea garden which will produce tea after four years.

(e) Depreciation charged on a plant.

(f) The expenditure incurred in erecting a platform on which a machine will be fixed.

(g) Advertising expenditure, the benefits of which will last for four years.

Ans.

Basis of Difference	Capital Expenditure	Revenue Expenditure
Meaning	Expenditure is borne for acquiring or improving an asset.	Expenses borne for running daily business activities.
Place of adjustment	It is shown in the Balance Sheet and Income Statement.	It is shown in the Income statement.
Nature	Non-recurring	Recurring
Benefits	Benefits can be attained across many financial years.	Benefits can be achieved only in the present year.

(a) Capital expenditure	(e) Revenue expenditure
(b) Revenue expenditure	(f) Capital expenditure
(c) Capital expenditure	(g) Deferred revenue expenditure
(d) Capital expenditure

6. What is an operating profit?

Ans. Operating profit is a profit of a company generated from its core operations. In other words, it is the profit a business earns from its normal business activities. It is often used as a measure of a company’s profitability and efficiency in managing its operations.

The following equation can be used to represent:

Operating Profit = Net Profit + Non-Operating Expenses – Non-Operating Incomes

Long Answer Type Questions

7. What are financial statements? What information do they provide ?

Ans. Statements that contain financial information about a company’s financial performance or position that can satisfy the information required by the internal and external users are called financial statements.

(i) It acts as a source of financial information that caters to the varied information requirements of users.

(ii) It is made to represent a fair and true value of the business.

(iii) The financial statements are trading and profit and loss account and balance sheet, which depicts gross profit or gross loss and net profit or not loss, liabilities and assets.

(iv) It enables a business to compare itself from the other businesses and to compare its performance with performance of previous years.

The various users of information are :

(i) Prospective Owner: These are the external users who want to know the previous year's profits and financial position of the company and also the company's future performance

(ii) Government: It is an external user who wants to know a company's financial position to safeguard stakeholders' rights, to calculated correct tax liabilities etc.

(iii) Current Owners: These are internal users who want to know the profits earned by the company in the current financial year and the current position of the liabilities and assets.

8. What are closing entries? Give four examples of closing entries.

Ans. A journal entry made at the end of a financial year that carries balances from a temporary account to a permanent account is called a closing entry. Some examples of closing entry are:

(i) The purchase returns are closed by transferring the balance to the purchase account.

Following entries are made:

Purchases return A/c	Dr
To Purchases A/c

(ii) The sales return account is closed by the balance transfer to the sales account. Entries will be:

Sales A/c	Dr
To Sales Return A/c

(iii) Purchases account closed by transferring to the debit side of trading and Porit and Loss Account

Trading A/c	Dr
To Purchases A/c

(iv) Sales account closed by transferring the balance to the credit side of trading and Profit and Loss account.

Sales A/c	Dr
To Trading A/c

9. Discuss the need for preparing a balance sheet.

Ans. The balance sheet needs to be prepared due to following reasons :

(i) To highlight value assets and liabilities a company is having.

(ii) To indicate the liquidity and financial position of a company.

(iii) It aids the management in planning and controlling company operations.

(iv) It acts as an information source for external and internal users.

(v) It serves as a reference for balances that need to be carried forward.

10. What is meant by Grouping and Marshalling of assets and liabilities? Explain the ways in which a balance sheet may be marshalled.

Ans. Grouping refers to including liabilities and assets of similar nature under a common heading. For instance, different kinds of creditors can be placed under one heading. Likewise, raw materials, work in progress, and finished goods can be placed under one heading named inventories.

Marshalling refers to arranging liabilities and assets in order of permanence and liquidity.

In order of permanence: In this method, the most permanent liability or an asset gets the top position on the balance sheet, and the remaining assets are arranged to reduce the level of permanence. For example,

(i) Debtors	(ii) Bank	(iii) Cash

Likewise, liabilities in order of permanence are as follows:

(i) Capital	(ii) Long-term loan	(iii) Creditors

In order of Liquidity: It indicates how easily an asset can be transformed into cash or liability can be paid off. The asset examples are arranged as follows:

(i) Cash	(ii) Bank	(iii) Debtors

Numerical Questions

11. From the following balances taken from the books of Simmi and Vimmi Ltd.

For the year ending March 31, 2017, calculate the gross profit.

	(₹)
Closing stock	2,50,000
Net sales during the year	40,00,000
Net purchases during the year	15,00,000
Opening stock	15,00,000
Direct expenses	80,000

Ans.

Trading Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Opening Stock	15,00,000	By Net Sales	40,00,000
To Net Purchases	15,00,000	By Closing Stock	2,50,000
To Direct Expenses	80,000
To Gross Profit	11,70,000
	42,50,000		42,50,000

12. From the following balances extracted from the books of M/s Ahuja and Nanda. Calculate the amount of:

(a) Cost of goods available for sale

(b) Cost of goods sold during the year

(c) Gross Profit

	(₹)
Opening stock	25,000
Credit purchases	7,50,000
Cash purchases	3,00,000
Credit sales	12,00,000
Cash purchases	3,00,000
Credit sales	12,00,000
Cash sales	4,00,000
Wages	1,00,000
Salaries	1,40,000
Closing stock	30,000
Sales return	50,000
Purchases return	10,000

Ans. (a) Cost of Goods Sold available for Sales or Cost of Goods Manufactured = Opening Stock + Net Purchases + Wages

= 25,000 + 10,40,000 + 1,00,000

= ₹11,65,000

(b) Cost of Goods Sold = Opening Stock + Net Purchases + Wages – Closing Stock

= 25,000 + 10,40,000 + 1,00,000 – 30,000

= ₹11,35,000

(c)

Dr.	Trading Account	Cr.

Particulars		Amount (₹)	Particulars		Amount (₹)
To Opening Stock		25,000	By Sales
To Purchases			Add: Credit Sales	12,00,000
Add: Credit Purchases	7,50,000		Add: Cash Sales	4,00,000
Add: Cash Purchases	3,00,000		Less: Sales Return	(50,000)	15,50,000
Less: Purchases Return	(10,000)	10,40,000	By Closing Stock		30,000
To Wages	1,00,000
To Gross Profit	4,15,000
	15,80,000				15,80,000

13. Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv and Sons for the year ended 31^st March, 2017.

	(₹)
Opening stock	50,000
Net sales	11,00,000
Net purchases	6,00,000
Direct expenses	60,000
Administration expenses	45,000
Selling and distribution expenses	65,000
Loss due to fire	20,000
Closing stock	70,000

Ans.

Trading Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Opening Stock	50,000	By Sales	11,00,000
To Purchases	6,00,000	By Closing Stock	70,000
To Direct Expenses	60,000
To Gross Profit	4,60,000
	11,70,000		11,70,000

Operating Profit = Sales – (Opening Stock + Net Purchases + Direct Expenses + Administration
Expenses + Selling and Distribution Expenses) + Closing Stock

= 11,00,000 – (50,000 + 6,00,000 + 60,000 + 45,000 + 65,000) + 70,000 = ₹3,50,000

14. Operating profit earned by M/s Arora and Sachdeva in 2016-17 was ₹17,00,000. Its non-operating incomes were ₹1,50,000 and non-operating expenses were ₹3,75,000. Calculate the amount of net profit earned by the firm.

Ans. Net Profit = Operating Profit + Non-operating Income – Non-operating Expenses

= 17,00,000 + 1,50,000 – 3,75,000 = ₹14,75,000

Net profit earned by M/s Arora and Sachdeva in 2016–17 is ₹14,75,000

15. The following are the extracts from the trial balance of M/s Bhola and Sons as on March 31, 2017:

Account Title	Debit (₹)	Credit (₹)
Opening Stock	2,00,000
Purchases	8,10,000
Sales		10,10,000
	10,10,000	10,10,000

(Only relevant items)

Closing Stock as on date was valued at ₹3,00,000.

You are required to record the necessary journal entries and show how the above items will appear in the trading and profit and loss account and balance sheet of M/s Bhola and Sons.

Ans.

In the Books of M/s Bhola and Sons

Journal

Date	Particulars		L.F.	Amount (Dr.) (₹)	Amount (Cr.) (₹)
2017
Mar. 31	Trading A/c	Dr.		10,10,000
	To Opening Stock A/c				2,00,000
	To Purchases A/c				8,10,000
	(Being balance from purchases account and stock accounttransferred to trading account)
Mar. 31	Sales A/c	Dr.		10,10,000
	Closing Stock A/c	Dr.		3,00,000
	To Trading A/c				13,10,000
	(Being balance from sales and closing stock transferred to trading account)
Mar. 31	Trading A/c	Dr.		3,00,000
	To Profit and Loss A/c (Gross Profit)				3,00,000
	(Being balance of trading account (gross profit) transferred to Profit and Loss A/c)

Trading Account

Dr.	for the year ending 31st March, 2017	Cr.

Particulars	Amount (₹)	Particulars	Amount (₹)
To Opening Stock	2,00,000	By Sales	10,10,000
To Purchases	8,10,000	By Closing Stock	3,00,000
To Gross Profit	3,00,000
	13,10,000		13,10,000

Balance Sheet

as at 31^st March, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
		Closing Stock	3,00,000
			3,00,000

16. Prepare trading and profit and loss account and balance sheet, as on March 31, 2017:

Account Title	Amount (₹)	Account Title	Amount (₹)
Machinery	27,000	Capital	60,000
Sundry debtors	21,600	Bills payable	2,800
Drawings	2,700	Sundry creditors	1,400
Purchases	58,500	Sales	73,500
Wages	15,000
Sundry expenses	600
Rent and taxes	1,350
Carriage inwards	450
Bank	4,500
Opening stock	6,000

Closing stock as on March 31, 2017 ₹22,400

Ans. Trading and profit and loss account and balance sheet are prepared as follows:

Trading Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Opening Stock	6,000	By Sales	73,500
To Purchases	58,500	By Closing Stock	22,400
To Wages	15,000
To Carriage Inwards	450
To Gross Profit
(Transferred to Profit and Loss A/c)	15,950
	95,900		95,900

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Sundry Expenses	600	By Gross Profit	15,950
To Rent and Texes	1,350
To Net Profit	14,000
	(Tranferred to Capital A/c)
	15,950		15,950

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets		Amount (₹)
Capital	60,000		Fixed Assets:
Add: Net Profit	14,000		Machinery		27,000
Less: Drawings	(2,700)	71,300	Current Assets:
Sundry Creditors		1,400	Bank	4,500
Bills Payable		2,800	Closing Stock	22,400
			Sundry Debtors	21,600	48,500
		75,500			75,500

17. The following trial balance is extracted from the books of M/s Ram on March 31, 2017. You are required to prepare trading and profit and loss account and the balance sheet as on date:

Account Title	Amount (₹)	Account Title	Amount (₹)
Debtors	12,000	Apprenticeship premium	5,000
Purchases	50,000	Loan	10,000
Coal, gas and water	6,000	Bank overdraft	1,000
Factory wages	11,000	Sales	80,000
Salaries	9,000	Creditors	13,000
Rent	4,000	Capital	20,000
Discount	3,000
Advertisement	500
Drawings	1,000
Loan	6,000
Petty cash	500
Sales return	1,000
Machinery	5,000
Land and Building	10,000
Income tax	100
Furniture	9,900

Ans. Trading and profit and loss account and balance sheet are prepared as follows:

Trading Account

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

Particulars	Amount (₹)	Particulars	Particulars	Amount (₹)
To Purchases	50,000	By Sales	80,000
To Coal, Gas and Water	6,000	Less: Sales Return	(1,000)	79,000
To Factory Wages	11,000
To Gross Profit
(Transferred to Profit and Loss A/c)	12,000
	79,000			79,000

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars		Amount (₹)
To Purchases	50,000	By Sales	80,000
To Coal, Gas and Water	6,000	Less: Sales Return	(1,000)	79,000
To Factory Wages	11,000
To Gross Profit
(Transferred to Profit and Loss A/c)	12,000
	79,000			79,000

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Salaries	9,000	By Gross Profit	12,000
To Rent	4,000	By Apprenticeship Premium	5,000
To Discount	3,000
To Advertisement	500
To Net Profit	500
(Transferred to capital A/c)
	17,000		17,000

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital	20,000		Machinery	5,000
Add: Profit & Loss (Net Profit)	500		Land and Building	10,000
Less: Drawings	(1,000)		Furniture	9,900
Less: Income Tax	(100)	19,400	Loan (Advance)	6,000
Loan (Taken)		10,000	Debtors	12,000
Creditors		13,000	Petty Cash	500
Bank Overdraft	1,000
	43,400			43,400

18. The following is the trial balance of Manju Chawla on March 31, 2017. You are required to prepare trading and profit and loss account and a balance sheet as on date:

Account Title	Debit (₹)	Credit (₹)
Opening Stock	10,000
Purchases and sales	40,000	80,000
Returns	200	600
Productive wages	6,000
Dock and Clearing charges	4,000
Donation and charity	600
Delivery van expenses	6,000
Lighting	500
Sales tax collected		1,000
Bad debts	600
Misc. incomes		6,000
Rent from tenants		2,000
Royalty	4,000
Capital		40,000
Drawings	2,000
Debtors and Creditors	6,700	7,000
Cash	3,000
Investment	6,000
Patents	4,000
Land and Machinery	43,000

Closing stock ₹2,000.

Ans. Trading and profit and loss account and balance sheet are prepared as follows:

Trading Account

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

Particulars		Amount (₹)	Particulars		Amount (₹)
To Opening Stock		10,000	By Sales	80,000
To Purchases	40,000		Less: Sales Return	(200)	79,800
Less: Purchases Returen	(600)	39,400	By Closing Stock		2,000
To Productive Wages	6,000
To Dock and Clearing Charges	4,000
To Royalty	4,000
Gross Profit	18,400
(Tranferred to profit and loss A/c)
	81,800				81,800

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Donation and Charity	600	By Gross Profit	18,400
To Delivery Van Expenses	6,000	By Misc. Incomes	6,000
To Lighting	500	By Rent from Tenants	2,000
To Bad Debts	600
To Net Profit	18,700
(Transferred to Capital A/c)
	26,400		26,400

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital	40,000		Patents	4,000
Add: Profit & Loss (Net Profit)	18,700		Land and Machinery	43,000
Less: Drawings	(2,000)	56,700	Investment	6,000
Sales Tax Collected		1,000	Debtors	6,700
Creditors		7,000	Cash	3,000
			Closing Stock	2,000
	64,700			64,700

19. The following is the Trial Balance of Mr. Deepak as on March 31, 2017. You are required to prepare trading account, profit and loss account and a balance sheet as on date:

Account Title	Amount (₹)	Account Title	Amount (₹)
Drawings	36,000	Capital	2,50,000
Insurance	3,000	Bills payable	3,600
General expenses	29,000	Creditors	50,000
Rent and taxes	14,400	Discount received	10,400
Lighting (factory)	2,800	Purchases return	8,000
Travelling expenses	7,400	Sales	4,40,000
Cash in hand	12,600
Bills receivable	5,000
Sundry debtors	1,04,000
Furniture	16,000
Plant and Machinery	1,80,000
Opening stock	40,000
Purchases	1,60,000
Sales return	6,000
Carriage inwards	7,200
Carriage outwards	1,600
Wages	84,000
Salaries	53,000

Closing stock ₹35,000.

Ans. The trading account, profit and loss account and a balance sheet are prepared below :

Trading Account

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

Particulars		Amount (₹)	Particulars		Amount (₹)
To Opening Stock		40,000	By Sales	4,40,000
To Purchases	1,60,000		Less: Sales Return	(6,000)	4,34,000
Less: Purchases Returen	(8,000)	1,52,000	By Closing Stock		35,000
To Lighting (factory)	2,800
To Carriage Inwards	7,200
To Wages	84,000
To Gross Profit	1,83,000
(Transferred to Profit and Loss A/c)
	4,69,000				4,69,000

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Insurance	3,000	By Gross Profit	1,83,000
To General Expenses	29,000	By Discount Received	10,400
To Rent and Taxes	14,400
To Travelling Expenses	7,400
To Carriage Outwards	1,600
To Salaries	53,000
To Net Profit	85,000
(Transferred to Capital A/c)
	1,93,400		1,93,400

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital	2,50,000		Plant and Machinery	1,80,000
Add: Net Profit	85,000		Furniture	16,000
Less: Drawings	(36,000)	2,99,000	Sundry Debtors	1,04,000
Creditors		50,000	Closing Stock	35,000
Bills payable		3,600	Bills Receivable	5,000
			Cash in Hand	12,600
		3,52,600		3,52,600

20. Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2017.

Account Title	Debit (₹)	Credit (₹)
Purchases and sales	3,52,000	5,60,000
Returns inwards and Return outwards	9,600	12,000
Carriage inwards	7,000
Carriage outwards	3,360
Fuel and power	24,800
Opening stock	57,600
Bad debts	9,950
Debtors and Creditors	1,31,200	48,000
Capital		3,48,000
Investment	32,000
Interest on investment		3,200
Loan		16,000
Repairs	2,400
General expenses	17,000
Wages and salaries	28,800
Land and buildings	2,88,000
Cash in hand	32,000
Miscellaneous receipts		160
Sales tax collected		8,350

Closing stock ₹30,000.

Ans. Trading and profit and loss account and balance sheet for the question are posted below:

Trading Account

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

Particulars		Amount (₹)	Particulars		Amount (₹)
To Opening Stock		57,600	By Sales	5,60,000
To Purchases	3,52,000		Less: Return Inwards	(9,600)	5,50,400
Less: Returen outwards	(12,000)	3,40,000	By Closing Stock		30,000
To Carriage Inwards	7,000
To Fuel and Power	24,800
To Wages and Salaries	28,800
To Gross Profit	1,22,200
(Transferred to Profit and Loss A/c)
	5,80,400				5,80,400

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Carriage Outwards	3,360	By Gross Profit	1,22,200
To Bad Debts	9,950	By Interest on Investment	3,200
To Repairs	2,400	By Miscellaneous Receipts	160
To General Expenses	17,000
To Net Profit	92,850
(Transferred to Capital A/c)
	1,25,560		1,25,560

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital	3,48,000		Land and Building	2,88,000
Add: Net Profit	92,850	4,40,850	Investment	32,000
Loan		16,000	Debtors	1,31,200
Creditors		48,000	Closing Stock	30,000
Sales Tax Collected		8,350	Cash in Hand	32,000
		5,13,200		5,13,200

21. From the following trial balance of Mr. A. Lal, prepare trading, profit and loss account and balance sheet as on March 31, 2017.

Account Title	Debit (₹)	Credit (₹)
Stock as on April 01, 2016	16,000
Purchases and Sales	67,600	1,12,000
Returns inwards and outwards	4,600	3,200
Carriage inwards	1,400
General expenses	2,400
Bad debts	600
Discount received		1,400
Bank overdraft		10,000
Interest on bank overdraft	600
Commission received		1,800
Insurance and taxes	4,000
Scooter expenses	200
Salaries	8,800
Cash in hand	4,000
Scooter	8,000
Furniture	52,000
Building	65,000
Debtors and Creditors	6,000	16,000
Capital		50,000

Closing stock ₹15,000.

Ans. Trading and profit and loss account and balance sheet for the question are posted below :

Trading Account

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

Particulars		Amount (₹)	Particulars		Amount (₹)
To Opening Stock		16,000	By Sales	1,12,000
To Purchases	67,600		Less: Return inwards	(4,600)	1,07,400
Less: Return outwards	(3,200)	64,400	By Closing Stock		15,000
To Carriage Inwards		1,400
To Gross Profit		40,600
(Transferred to Profit and Loss A/c)
		1,22,400			1,22,400

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To General Expenses	2,400	By Gross Profit	40,600
To Bad Debts	600	By Discount Received	1,400
To Interest on Bank Overdraft	600	By Commission Received	1,800
To Insurance and Taxes	4,000
To Scooter Expenses	200
To Salaries	8,800
To Net Profit	27,200
(Transferred to Capital A/c)
	43,800		43,800

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital		50,000	Building	65,000
Add: Net Profit	27,200	77,200	Furniture	5,200
Creditors		16,000	Scooter	8,000
Sales Tax Collected		10,000	Debtors	6,000
			Closing Stock	15,000
			Cash in Hand	4,000
		1,03,200		1,03,200

22. Prepare trading and profit and loss account and balance sheet of M/s Royal Traders from the following balances as on March 31, 2017.

Account Title	Amount (₹)	Account Title	Amount (₹)
Stock	20,000	Sales	2,45,000
Cash	5,000	Creditors	10,000
Bank	10,000	Bills payable	4,000
Carriage on purchases	1,500	Capital	2,00,000
Purchases	1,90,000
Drawings	9,000
Wages	55,000
Machinery	1,00,000
Debtors	27,000
Postage	300
Sundry expenses	1,700
Rent	4,500
Furniture	35,000

Closing stock ₹8,000.

Ans. Trading and profit and loss account and balance sheet are prepared below :

Trading Account

Particulars	Amount (₹)	Particulars	Amount (₹)
To Opening Stock	20,000	By Sales	2,45,000
To Purchases	1,90,000	By Closing Stock	8,000
To Carriage Inwards	1,500	By Gross Loss	13,500
To Wages	55,000	(Transferred to Profit and Loss A/c)
	2,66,500		2,66,500

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

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Gross Loss	13,500	To Net Loss	20,000
To Postage	300	(Transferred to Capital A/c)
To Sundry Expenses	1,700
To Rent	4,500
	20,000		20,000

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital	2,00,000		Machinery	1,00,000
Less: Net Loss	(20,000)		Furniture	35,000
Less: Drawings	(9,000)	1,71,000	Debtors	27,000
Creditors		10,000	Closing Stock	8,000
Bills Payable		4,000	Bank	10,000
			Cash	5,000
		1,85,000		1,85,000

23. Prepare trading and profit and loss account from the following particulars of M/s Neema Traders as on March 31, 2017.

Account Title	Amount (₹)	Account Title	Amount (₹)
Buildings	23,000	Sales	1,80,000
Plant	16,930	Loan	8,000
Carriage inwards	1,000	Bills payable	2,520
Wages	3,300	Bank overdraft	4,720
Purchases	1,64,000	Creditors	8,000
Sales return	1,820	Capital	2,36,000
Opening Stock	9,000	Purchases return	1,910
Machinery	2,10,940
Insurance	1,610
Interest	1,100
Bad debts	250
Postage	300
Discount	1,000
Salaries	3,000
Debtors	3,900

Stock on March 31, 2017 ₹16,000.

Ans. Trading and profit and loss account and balance sheet are prepared below:

Trading Account

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

Particulars		Amount (₹)	Particulars		Amount (₹)
To Opening Stock		9,000	By Sales	1,80,000
To Purchases	1,64,000		Less: Sales Return	(1,820)	1,78,180
Less: Purchases Return	(1,910)	1,62,090	By Closing Stock		16,000
To Carriage Inwards		1,000
To Wages		3,300
To Gross Profit		18,790
(Transferred to Profit and Loss A/c)
	1,94,180				1,94,180

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Insurance	1,610	By Gross Profit	18,790
To Interest	1,100
To Bad Debts	250
To Postage	300
To Discount	1,000
To Salaries	3,000
To Net Profit	11,530
(Transferred to Capital A/c)
	18,790		18,790

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital	2,36,000		Building	23,000
Less: Net Profit	11,530	2,47,530	Plant	16,930
Loan		8,000	Machinery	2,10,940
Creditors		8,000	Debtors	3,900
Bills Payable		2,520	Closing Stock	16,000
Bank Overdraft		4,720
		2,70,770		2,70,770

24. From the following balances of M/s Nilu Sarees as on March 31, 2017. Prepare trading and profit and loss account and balance sheet as on date.

Account Title	Amount (₹)	Account Title	Amount (₹)
Opening stock	10,000	Sales	2,28,000
Purchases	78,000	Capital	70,000
Carriage inwards	2,500	Interest	7,000
Salaries	30,000	Commission	8,000
Commission	10,000	Creditors	28,000
Wages	11,000	Bills payable	2,370
Rent and taxes	2,800
Repairs	5,000
Telephone expenses	1,400
Legal charges	1,500
Sundry expenses	2,500
Cash in hand	12,000
Debtors	30,000
Machinery	60,000
Investments	90,000
Drawings	18,000

Closing stock, as on March 31, 2017 ₹22,000.

Ans.

Trading Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Opening Stock	10,000	By Sales	2,28,000
To Purchases	78,000	By Closing Stock	22,000
To Carriage Inwards	2,500
To Wages	11,000
To Gross Profit	1,48,500
(Transferred to Profit and Loss A/c)
	2,50,000		2,50,000

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Salaries	30,000	By Gross Profit	1,48,500
To Commission	10,000	By Interest	7,000
To Rent and Taxes	2,800	By Commission	8,000
To Repairs	5,000
To Telephone Expenses	1,400
To Legal Charges	1,500
To Sundry Expenses	2,500
To Net Profit	1,10,300
(Transferred to capital A/c)
	1,63,500		1,63,500

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital	70,000		Machinery	60,000
Add: Net Profit	1,10,300		Investments	90,000
Less: Drawings	(18,000)	1,62,300	Debtors	30,000
Creditors		28,000	Closing Stock	22,000
Bills Payable		2,370	Cash in Hand	12,000
Suspense		21,330
		2,14,000		2,14,000

25. Prepare trading and profit and loss account of M/s Sports Equipment for the year ended March 31, 2017 and balance sheet as on that date:

Account Title	Debit (₹)	Credit (₹)
Opening stock	50,000
Purchases and Sales	3,50,000	4,21,000
Sales returns	5,000
Capital		3,00,000
Commission		4,000
Creditors		1,00,000
Bank overdraft		28,000
Cash in hand	32,000
Furniture	1,28,000
Debtors	1,40,000
Plants	60,000
Carriage on purchases	12,000
Wages	8,000
Rent	15,000
Bad debts	7,000
Drawings	24,000
Stationery	6,000
Travelling expenses	2,000
Insurance	7,000
Discount	5,000
Office expenses	2,000

Closing stock as on March 31, 2017 ₹2,500

Ans. Trading and profit and loss account and balance sheet are prepared below :

Trading Account

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

Particulars	Amount (₹)	Particulars		Amount (₹)
To Opening Stock	50,000	By Sales	4,21,000
To Purchases	3,50,000	Less: Sales Return	(5,000)	4,16,000
To Carriage on Purchases	12,000	By Closing Stock		2,500
To Wages	8,000	By Gross loss		1,500
		(Transferred to Profit and Loss A/c)
	4,20,000			4,20,000

Profit and Loss Account

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

Particulars	Amount (₹)	Particulars	Amount (₹)
To Gross Loss	1,500	By Commission	4,000
To Rent	15,000	By Net Loss	41,500
To Bad Debts	7,000	(Transferred to capital A/c)
To Stationery	6,000
To Travelling Expenses	2,000
To Insurance	7,000
To Discount	5,000
To Office Expenses	2,000
	45,500		45,500

Balance Sheet

as at 31^st March, 2017

Liabilities		Amount (₹)	Assets	Amount (₹)
Capital	3,00,000		Plants	60,000
Less: Net Loss	(41,500)		Furniture	1,28,000
Less: Net Loss	(24,000)	2,34,500	Debtors	1,40,000
Less: Drawings	(24,000)	2,34,500	Debtors	1,40,000
Creditors		1,00,000	Closing Stock	2,500
Bank Overdraft		28,000	Cash in Hand	32,000
		3,62,500		3,62,500