NCERT Solutions for Class 11 Accountancy Chapter 9 - Financial Statement (With Adjustment)

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    Short Answer Type Questions

    1. Why is it necessary to record the adjusting entries in the preparation of final accounts ?

    Ans. (i) It ensures that accounts comply with the accrual concept of accounting.

    (ii) It aids in assessing whether the final accounts reflect true loss or profit. It also signifies the true financial position of a company.

    (iii) It gives the scope for introducing various provisions which can be made at the end of the year, only after evaluating the whole year's performance.

    2. What is meant by closing stock? Show its treatment in final accounts?

    Ans. The cost of goods that remain unsold at the end of the financial year is called the closing stock. The closing stock value is defined by comparing cost and realisable prices. The lesser among the two values is the value of the closing stock. In final accounts, the closing stock is:

    (i) Credit the closing stock to the Trading and P&L account.

    (ii) Add it to the asset side of the balance sheet.

    Adjustment entry will be:

    Closing Stock A/c Dr.
    To Trading A/c

    3. State the meaning of :

    (a) Outstanding expenses

    (b) Prepaid expenses

    (c) Income received in advance

    (d) Accrued income

    Ans. (a) Outstanding Expenses : These are the expenses that need to be paid in the current financial year but cannot be paid. As expense is generated during the financial year, it makes perfect sense to charge it against revenue earned to arrive at a true loss or profit. Hence, these are liabilities and need to be paid.

    (b) Prepaid Expenses : Those expenses in which the associated benefit has not been materialised but the payment is already made in advance are prepaid expenses.

    (c) Income received in advance : The income is received in the current financial year, but the benefits will be realised in the upcoming financial year. Such income is known as income received in advance.

    (d) Accrued Income : Income earned in the financial year but not received by the end of the financial year is called accrued income. It is due to be received in future financial years. It is shown on the balance sheet's asset side.

    4. Give the proforma of the income statement and balance in vertical form.

    Ans. Income statement for the period ended….

    Particulars Amount
    (₹)    		 Amount
    (₹)
    Sales (Gross)
    Less: Returns
    Net Sales
    Cost of Goods Sold
    Opening Stock
    Purchase
    Less: Returns
    Carriage inwards
    Wages
    Cost of Goods Available for Sale
    Less: Closing stock
    Gross Profit
    Operating Expenses
    (a) Selling Expenses
    Advertising
    Discount
    Allowances
    Bad Debts and Provisions
    Carriage Outwards
    Total Selling Expenses
    (b) General and Administration Expenses
    Salaries
    Rent and Rates
    Insurance
    Depreciation
    Postage
    Repair
    General Expenses
    Total Operating Expenses
    Net income from operations (Operating Profit)
    Other Income (Non-operating Gains)
    Interest Earned
    Commission Earned
    Profit on Sale of Fixed Assets
    Less: Deductions (Non-operating Expenses)
    Interest Paid
    Loss by Fire
    Net Non-operating Gains
    Net income (Net Profit)

    Balance sheet

    as at……

    Particulars Amount
    (₹)    		 Amount
    (₹)
    Current Assets
    Cash in Hand
    Cash at Bank
    Bills Receivable
    Accrued income
    Debtors
    Stock
    Prepaid Expenses
    Total Current Assets
    Current Liabilities
    Bank Overdraft
    Outstanding Expenses
    Bills Payable
    Trade creditors
    Income Received in Advance
    Total Current Liabilities
    Net Working Capital
    (Current Assets and Current Liabilities)
    Fixed Assets
    Furniture and Fixtures
    Patents
    Plants and Machinery
    Building
    Land
    Goodwill
    Total Fixed Assets
    Total Assets (After Paying Current Liabilities)
    Capital Employed
    Long term Liabilities
    Loan
    Mortgage
    Total Long Term Liabilities
    Net Assets (being the difference between total)
    (Assets and long term liabilities)
    Particulars Amount
    (₹)    		 Amount
    (₹)
    Capital (Proprietor)
    Capital in the Beginning
    Add: Capital introduced During the Current Year
    Interest on Capital, Salary etc.
    Profit for the Current Year
    Less: Drawing During the Current Year
    Interest on Drawings
    Loss for the Current Year
    Total Capital of the Proprietor at the End of the year

     5. Why is it necessary to create a provision for doubtful debts at the time of preparation of final accounts ?

    Ans. In an ideal situation, it is anticipated that debtors will pay all the money they owe to the company, but in reality, it doesn't happen. Some debtors may default on their payments. It is not certain how much that debt will become bad debt. Hence, a company has to estimate reasonably for such an event. This estimate is known as a provision for bad debts. It is shown on the debit side of the Profit and Loss account.

    Profit and Loss A/c Dr
    To Provision for Doubtful Debts A/c

    6. What adjusting entries would you record for the following ?

    (a) Depreciation

    (b) Discount on debtors

    (c) Interest on capital

    (d) Manager's commission

    Ans. The following adjusting entries would be there

    For Recording the Depreciation

    Particulars L.
    F.    		 Amount
    (Dr.)
    (₹)    		 Amount
    (Cr.)
    (₹)
    Depreciation A/c Dr.
    To Sundry Assets A/c

    For Recording the Discount on debtors

    Particulars L.
    F.    		 Amount
    (Dr.)
    (₹)    		 Amount
    (Cr.)
    (₹)
    Profit and Loss A/c Dr.
    To Provision for Discount on Debtors A/c

     For Recording the Interest on capital

    Particulars L.
    F.    		 Amount
    (Dr.)
    (₹)    		 Amount
    (Cr.)
    (₹)
    Interest on Capital A/c Dr.
    To Capital A/c

     For Recording the Manager's commission

    Particulars L.
    F.    		 Amount
    (Dr.)
    (₹)    		 Amount
    (Cr.)
    (₹)
    Profit and Loss A/c Dr.
    To Manager’s Commission A/c

    7. What is meant by provision for discount on debtors ? 

    Ans. A company allows discounts to debtors to motivate them to clear their debts. This is only made for those debtors who pay their money on time. The discount that a debtor will get is projected and assessed by making a provision for a discount on debtors. The journal entry will be:

    Profit and Loss A/c Dr.
    To Provision for Discount on Debtors A/c

     It is shown on the expense side of the P&L account and subtracted from the balance sheet's assets side.

     8. Give the journal entries for the following adjustments:

    (a) Outstanding salary at ₹3,500.

    (b) Rent unpaid for one month at ₹6,000 per annum.

    (c) Insurance prepaid for a quarter at ₹16,000 per annum.

    (d) Purchase of furniture costing ₹7,000 entered in the purchases book.

    Ans.

    S. No. Particulars L.
    F.    		 Debit
    (₹)    		 Credit
    (₹)
    (a) Salaries A/c Dr. 3,500
    To Outstanding Salaries A/c 3,500
    (Salaries outstanding for ₹3,500)
    (b) Rent A/c Dr. 500
    To Outstanding Rent A/c 500
    (Outstanding adjusted)
    (c) Prepaid Insurance A/c Dr. 4,000
    To Insurance A/c 4,000
    (Insurance premium paid in advance for 3 months, i.e., ₹4,000)
    (d) Furniture A/c Dr. 7,000
    To Purchases A/c 7,000
    (Correction entry for the Wrong debit of Furniture to Purchases Account) (Rent unpaid for one month = 6,000/12 = ₹500)

    Long Answer Type Questions

    9. What are adjusting entries? Why are they necessary for preparing the final accounts ?

    Ans. In the accrual base of accounting, profit and loss for a year are not dependent only on expenses paid in cash or revenues in cash during the year. Some of the expenses and receipts in a year may belong to the future/previous financial year. There can be some expenses yet to be brought to the books of account.

    Adjusting entries will give a true and fair value to the company.

    Recording adjusting entries are necessary because:

    (i) It ensures that accounts comply with the accrual concept of accounting.

    (ii) It aids in assessing whether the final accounts reflect true loss or profit. It also signifies the true financial position of a company.

    (iii) It gives the scope for introducing various provisions which can be made at the end of the year, only after evaluating the whole year's performance.

    10. What is meant by provision for doubtful-debts? How are the relevant accounts prepared, and what journal entries are recorded in the final accounts? How is the amount for provision for doubtful debts calculated ?

    Ans. In an ideal situation, it is anticipated that debtors will be paying all the money owed by them to the company, but in reality, it doesn't happen. Some debtors may default on their payments. It is not certain how much that debt will become bad debt. Hence, a company has to estimate reasonably for such an event. This estimate is known as a provision for bad debts. It is shown on the debit side of the P&L account.

    Profit and Loss A/c Dr
    To Provision for Doubtful Debts A/c

    Provision for doubtful debts is shown as a reduction from debtors on the balance sheet's asset side. Therefore, it shows the fair and true value of the company. Provision for doubtful debts created at the end of the financial year is carried forward to the next financial year.

    Adjustment entries for the provision for doubtful debts:

    Profit and Loss Account
    for the year ended………

    Expenses/Losses Amount
    (₹)    		 Revenues/Gains Amount
    (₹)
    Provision for doubtful debts xx
    Bad debts xx
    Further bad debts xx
    New provision xx
    Less: Old Provision xx
    		 xx

    Balance Sheet

    as at…………

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Sundry Debtors xx
    Less: Further Bad debts xx
    Less:Provision for Doubtful debts xx
    		 xx

    11. Show the treatment of prepaid expenses, depreciation, and closing stock at the time of preparation of final accounts when :

    (a) When given inside the Trial Balance?

    (b) When given outside the Trial Balance?

    Ans. (i) Prepaid expenses

    (a) When given inside the Trial Balance: It will only be added to the asset side of the Balance Sheet.

    Balance Sheet

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    By Prepaid Expenses

     (b) When given outside the Trial Balance: It will be posted in the P&L account as well as the Balance Sheet.

    Profit and Loss Account

    Dr.
    for the year ended………
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Concerned Expenses By Prepaid Expenses
    Less: Prepaid Expenses

    Balance Sheet
    as at………

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Prepaid Expenses

    (ii) Depreciation: Balance depreciation is shown in the Profit and Loss account as an expense in the trial balance. When it is shown in the trial balance, it means a reduction from the concerned asset; when depreciation is displayed outside the trial balance, it is recorded both in the Profit and Loss account and the balance sheet.

    (1) Inside Trial Balance

    Profit and Loss Account

    Dr.
    for the year ended………
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Depreciation

    (ii) Outside Trial Balance

    Profit and Loss Account

    Dr.
    for the year ended………
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Depreciation on Concerned Assets

    Balance Sheet
    as at…………

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Concerned Assets
    Less: Depreciation

    Closing stock

    (a) Closing stock is valued based on the least among cost price or realisable value. If present in Trial Balance posted only on Assets side of Balance Sheet.

    Balance Sheet

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Closing Stock

    (b) When closing stock is given outside trial balance, it gets posted in two places, i.e., Trading account and Balance Sheet.

    Trading A/c

    Dr.
    for the year ended………
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    By Closing Stock

    Balance Sheet
    as at………

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Closing Stock

    Numerical Questions

    12. Prepare a trading and profit and loss account for the year ending 31st March, 2017 from the balances extracted of M/s Rahul Sons. Also prepare a balance sheet at the end of the year.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Stock 50,000 Sales 1,80,000
    Wages 3,000 Purchases Return 2,000
    Salary 8,000 Discount received 500
    Purchases 1,75,000 Provision for Doubtful Debtsx 2,500
    Sales Return 3,000 Capital 3,00,000
    Sundry Debtors 82,000 Bills Payable 22,000
    Discount allowed 1,000 Commission received 4,000
    Insurance 3,200 Rent 6,000
    Rent, Rates and Taxes 4,300 Loan 34,800
    Fixtures and Fittings 20,000
    Trade Expenses 1,500
    Bad Debts 2,000
    Drawings 32,000
    Repair and Renewals 1,600
    Travelling Expenses 4,200
    Postage 300
    Telegram Expenses 200
    Legal Fees 500
    Bills Receivable 50,000
    Building 1,10,000
    5,51,800 5,51,800

    Adjustments:

    1. Commission received in advance ₹1,000.
    2. Rent receivable ₹2,000.
    3. Salary outstanding ₹1,000 and insurance prepaid ₹800.
    4. Further bad debts ₹1,000 and provision for doubtful debts @ 5% on debtors and discount on debtors @ 2%.
    5. Closing stock ₹32,000.
    6. Depreciation on building @ 6% p.a.

    Ans.

    In the Books of M/s. Rahul Sons

    Trading Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 50,000 By Sales 1,80,000
    To Purchases 1,75,000 Less: Sales Returns (3,000)
    		 1,77,000
    Less: Purchase Returns (2,000)
    		 1,73,000 By Closing Stock 32,000
    To Wages 3,000 By Gross Loss 17,000
    2,26,000 2,26,000

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Gross Loss 17,000 By Discount Received 500
    To Salary 8,000 By Commission Received 4,000
    Add: Outstanding Salary 1,000 9,000 Less: Advance Commission (1,000) 3,000
    To Discount Allowed 1,000 By Rent 6,000
    To Insurance 3,200 Add: Rent Receivable 2,000
    		 8,000
    Less: Insurance Prepaid (800)
    		 2,400 By Net Loss 43,189
    To Rent, Rates and Taxes 4,300
    To Trade Expenses 1,500
    To Bad-Debts 2,000
    Add: Further Bad-Debts 1,000
    Add: New Provision 4,050
    Less: Old Provision (2,500) 4,550
    To Discount on Debtors 1,539
    To Postage 300
    To Telegram Expenses 200
    To Depreciation on Building 6,600
    To Repairs and Renewals 1,600
    To Travelling Expenses 4,200
    To Legal Fees 500
    54,689 54,689

    Balance Sheet

    as at 31st December, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 3,00,000 Amount
    (₹)    		 82,000
    Less: Net Loss (43,189) Less: Further Bad-Debts (1,000)
    Less: Drawings (32,000)
    		 2,24,811 Less:New Provision (4,050)
    Bills Payable 22,000 Less: Discount on Debtors
    Loan 34,800 (on ₹76,950) (1,539)
    		 75,411
    Bills Receivables 50,000
    Advance Commission 1,000 Buildings 1,10,000
    Outstanding Salary 1,000 Less: 6% Depreciation (6,600)
    		 1,03,400
    Rent Receivable 2,000
    Prepaid Insurance 800
    Closing Stock 32,000
    Furniture and Fittings 20,000
    2,83,611 2,83,611

    13. Prepare a trading and profit and loss account of M/s Green Club Ltd. for the year ending 31st March, 2017 from the following figures taken from his Trial Balance:

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Opening Stock 35,000 Sales 2,50,000
    Purchases 1,25,000 Purchase Return 6,000
    Return Inwards 25,000 Creditors 10,000
    Postage and Telegram 600 Bills payable 20,000
    Salary 12,300 Discount 1,000
    Wages 3,000 Provision for Bad Debts 4,500
    Rent and Rates 1,000 Interest Received 5,400
    Packing and Transport 500 Capital 75,000
    General Expense 400
    Insurance 4,000
    Debtors 50,000
    Cash in hand 20,000
    Cash at bank 40,000
    Machinery 20,000
    Lighting and Heating 5,000
    Discount 3,500
    Bad Debts 3,500
    Investment 23,100
    3,71,900 3,71,900

    Adjustments :

    1. Depreciation charged on machinery @ 5% p.a.
    2. Further bad debts ₹1,500, discount on debtors @ 5% and make a provision on debtors @ 6%.
    3. Wages prepaid ₹1,000.
    4. Interest on investment @ 5% p.a.
    5. Closing stock ₹10,000.

    Ans.

    Trading Account

    for the year ending 31st March, 2017

    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    Opening Stock 35,000 Sales 2,50,000
    Purchases 1,25,000 Less: Sales Returns (25,000)
    		 2,25,000
    Less: Purchase Returns (6,000)
    		 1,19,000 Closing Stock 10,000
    Wages 3,000
    Less: Prepaid Wages (1,000)
    		 2,000
    Gross Profit 79,000
    2,35,000 2,35,000

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Bad Debts 3,500 By Gross Profit 79,000
    Add: Further Bad-debts 1,500 By Interest in Accrued Investment 1,155
    Add:New Provision 2,910 By Discount 1,000
    Less: Old Provision (4,500) 3,410 By Interest Received 5,400
    To Discount on Debtors 2,280
    To Postage and Telegram 600
    To Salary 12,300
    To Rent and Rates 1,000
    To Packing and Transport 500
    To General Expenses 400
    To Insurance 4,000
    To Discount 3,500
    To Depreciation on Machinery 1,000
    To Lighting and Heating 5,000
    To Net Profit 52,565
    86,555 86,555

    Balance Sheet
    as on 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Creditors 10,000 Cash in Hand 20,000
    Bills Payable 20,000 Cash at Bank 40,000
    Capital 75,000 Debtors 50,000
    Add: Net Profit 52,565
    		 1,27,565 Less: Further Bad-Debts (1,500)
    Less:New Provision (2,910)
    Less:Discount on Debtors (2,280) 43,310
    Investment 23,100
    Add: Interest on Investment 1,155
    		 24,255
    Machinery 20,000
    Less: Depreciation (1,000)
    		 19,000
    Prepaid Wages 1,000
    Closing Stock 10,000
    1,57,565 1,57,565

    14. The following balances has been extracted from the trial of M/s Runway Shine Ltd. Prepare a trading and profit and loss account and a balance sheet as on 31st March, 2017.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Purchases 1,50,000 Sales 2,50,000
    Opening Stock 50,000 Return Outwards 4,500
    Return Inwards 2,000 Interest Received 3,500
    Carriage Inwards 4,500 Discount Received 400
    Cash in hand 77,800 Creditors 1,25,000
    Cash at bank 60,800 Bills payable 6,040
    Wages 2,400 Capital 1,00,000
    Printing and Stationery 4,500
    Discount 400
    Bad debts 1,500
    Insurance 2,500
    Investment 32,000
    Debtors 53,000
    Bills Receivable 20,000
    Postage and Telegraph 400
    Commission 200
    Interest 1,000
    Repair 440
    Lighting Charges 500
    Telephone Charges 100
    Carriage Outward 400
    Motor Car 25,000
    4,89,440 4,89,440

    Adjustments:

    1. Further bad debts ₹1,000. Discount on debtors ₹500 and make a provision on debtors @ 5%.
    2. Interest received on investment @ 5%.
    3. Wages and interest outstanding ₹100 and ₹200 respectively.
    4. Depreciation charged on motor car @ 5% p.a.
    5. Closing Stock ₹32,500.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 50,000 By Sales 2,50,000
    To Purchases 1,50,000 Less: Return Inwards (2,000)
    		 2,48,000
    Less: Return Outwards (4,500)
    		 1,45,500 By Closing Stock 32,500
    To Carriage Inwards 4,500
    To Wages 2,400
    Add: Outstanding Wages 100
    		 2,500
    To Gross Profit 78,000
    2,80,500 2,80,500

    Ans.

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Carriage Outward 400 By Gross Profit 78,000
    To Printing and Stationery 4,500 By Interest Received 3,500
    To Discount 400 By Discount Received 400
    To Bad Debts 1,500 By Interest Received on Investment 1,600
    Add: Further Bad Debts 1,000
    Add: New Provision 2,600
    		 5,100
    To Discount on Debtors 500
    To Insurance 2,500
    To Postage and Telegraph 400
    To Commission 200
    To Interest 1,000
    Add: Outstanding Interest 200 1,200
    To Repair 440
    To Lighting Charges 500
    To Telephone Charges 100
    To Depreciation on Motor Car 1,250
    To Net Profit 66,010
    83,500 83,500

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Creditors 1,25,000 Cash in Hand 77,800
    Bills Payable 6,040 Add: Interest Received 1,600 79,400
    Capital 1,00,000 Cash at Bank 60,800
    Add: Net Profit 66,010 1,66,010 Investment 32,000
    Outstanding Interest 100 Debtors 53,000
    Outstanding Wages 200 Less: Further Bad Debts (1,000)
    Less: New Provision (2,600)
    Less: Discount on Debtors (500) 48,900
    Motor Car 25,000
    Less: Depreciation (1,250) 23,750
    Bills Receivable 20,000
    Closing Stock 32,500
    2,97,350 2,97,350

    15. From the following Trial Balance you are required to prepare trading and profit and loss account for the year ending 31st March, 2017 and Balance sheet on that date.

    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    Opening Stock 25,000 Sales 7,00,000
    Furniture 16,000 Creditors 72,500
    Purchases 5,55,300 Bank Overdraft 50,000
    Carriage Inwards 4,700 Provision for bad and doubtful debts 2,100
    Bad Debts 1,800 Discount 500
    Wages 52,000 Capital 2,00,000
    Debtors 80,000 Purchases Return 20,000
    Sales Return 15,000
    Rent 24,000
    Miscellaneous Expenses 3,400
    Salaries 68,000
    Cash 8,900
    Drawings 14,000
    Buildings 1,60,000
    Advertising 10,000
    Interest on Bank Overdraft 7,000
    10,45,100 10,45,100

    Adjustments :

    1. Closing stock valued at ₹36,000
    2. Private purchases amounting to ₹5,000 debited to purchases account.
    3. Provision for doubtful debts @ 5% on debtors.
    4. Sign board costing ₹4,000 includes in advertising.
    5. Depreciate furniture by 10%.

    Ans.

    Trading A/c

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 25,000 By Sales 7,00,000
    To Purchases 5,55,300 Less: Sales Return (15,000)
    		 6,85,000
    Less: Private (5,000) By Closing Stock 36,000
    Less: Purchases Return (20,000)
    		 5,30,300
    Carriage Inwards 4,700
    To Wages 52,000
    To Gross Profit 1,09,000
    7,21,000 7,21,000

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Bad debts 1,800 By Gross Profit 1,09,000
    To Provision for Doubtful debts 4,000 By Discount Received 500
    Less: Old Provision (2,100) 3,700 By Net Loss to be transferred 4,600
    To Rent 24,000
    To Miscellaneous Expenses 3,400
    To Salaries 68,000
    To Advertising 10,000
    Less: Sign Board (4,000) 6,000
    To Interest on Bank Overdraft 7,000
    To Depreciation on Furniture 2,000
    1,14,100 1,14,100

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 2,00,000 Furniture 16,000
    Less: Drawings (19,000) Add: Sign Board 4,000
    Less: Net Loss (4,600)
    		 1,76,800 Less: Depreciation (2,000) 18,000
    Creditors 72,500 Building 1,60,000
    Bank Overdraft 50,000 Debtors 80,000
    Less: Provision (New) (4,000)
    		 76,000
    Closing Stock 36,000
    Cash 8,900
    2,98,900 2,98,900

    16. From the following information prepare trading and profit and loss account of M/s Indian Sports house for the year ending 31st March, 2017.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Drawings 20,000 Capital 2,00,000
    Sundry Debtors 80,000 Return Outwards 2,000
    Bad Debts 1,000 Bank Overdraft 12,000
    Trade Expenses 2,400 Provision for Bad Debts 4,000
    Printing and Stationery 2,000 Sundry Creditors 60,000
    Rent, Rates and Taxes 5,000 Bills Payable 15,400
    Freight 4,000 Sales 2,76,000
    Return Inwards 7,000
    Opening Stock 25,000
    Purchases 1,80,000
    Furniture and Fixture 20,000
    Plant and Machinery 1,00,000
    Bills Receivable 14,000
    Wages 10,000
    Cash in hand 6,000
    Discount allowed 2,000
    Investments 40,000
    Motor car 51,000
    5,69,400 5,69,400

    Adjustments:

    1. Closing stock was ₹45,000.
    2. Provision for doubtful debts is to be maintained @ 2% on debtors.
    3. Depreciation charged on: Furniture and Fixture @ 5%, Plant and Machinery @ 6% and Motor Car @10%.
    4. A Machine of ₹30,000 was purchased on 1st October, 2016.
    5. The manager is entitled to a commission of @ 10% of the net profit after charging such commission.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 25,000 By Sales 2,76,000
    To Purchases 1,80,000 Less: Return Inwards (7,000)
    		 2,69,000
    Less: Return Outwards (2,000)
    		 1,78,000 By Closing Stock 45,000
    To Wages 10,000
    To Freight 4,000
    To Gross Profit 97,000
    3,14,000 3,14,000
    Dr.
    Profit and Loss Account
    		 Cr.

    for the year ending 31st March, 2017

    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Trade Expenses 2,400 By Gross Profit 97,000
    To Printing and Stationery 2,000 By Old Provision for Bad Debts 4,000
    To Rent, Rates and Taxes 5,000 Less: Bad Debts (1,000)
    To Discount Allowed 2,000 Less: New Provision (1,600)
    		 1,400
    To Depreciation on Motor Car 5,100
    To Depreciation on Furniture and Fixtures 1,000
    To *Depreciation on P & M of ₹70,000 4,200
    To **Depreciation on P & M of ₹30,000 900
    To Net Profit Before Manager's
    Commission    		 75,800
    98,400 98,400
    To Manager's Commission 6,891 By Balance b/d 75,800
    To Net Profit After Commission 68,909
    75,800 75,800

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 2,00,000 Cash in Hand 6,000
    Add: Net Profit 68,909 Sundry Debtors 80,000
    Less: Drawings (20,000)
    		 2,48,909 Less: New Provision (1,600)
    		 78,400
    O/S Manager's Commission 6,891 Furniture and Fixtures 20,000
    Bank Overdraft 12,000 Less: Depreciation 1,000 19,000
    Creditors 60,000 Plant and Machinery 1,00,000
    Bills Payable 15,400 Less: Depreciation 1* (4,200)
    Less: Depreciation 2** (900)
    		 94,900
    Bills Receivable 14,000
    Investments 40,000
    Motor Car 51,000
    Less: Depreciation (5,100) 45,900
    Closing Stock 45,000
    3,43,200 3,43,200

    Working Notes:

    1. Manager's Commission =

    $$\text{Net Profit before commission}×\frac{10}{100+10}\\= ₹75,800×\frac{10}{110} = ₹ 6,891$$

    1. Out of the machinery of ₹1, 00,000, ₹30,000 worth of machinery was purchased on 01/October/2016.

    Therefore, the depreciation on this machinery will be for 6 months at 6% p.a.

    *Depreciation on machinery =

    $$30,000×\frac{6}{12}×\frac{6}{100} = ₹900$$

    **The rest of the machinery of `70,000 will bear depreciation at 6% p.a.

    Depreciation on machinery =

    $$70,000×\frac{6}{12} = ₹900$$

    17. Prepare the trading and profit and loss account and a balance sheet ofM/s Shine Ltd.from the following particulars.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Sundry Debtors 1,00,000 Bills Payable 85,550
    Bad Debts 3,000 Sundry Creditors 25,000
    Trade Expenses 2,500 Provision for Bad Debts 1,500
    Printing and Stationary 5,000 Return Outwards 4,500
    Rent, Rates and Taxes 3,450 Capital 2,50,000
    Freight 2,250 Discount received 3,500
    Sales Return 6,000 Interest received 11,260
    Motor Car 25,000 Sales 1,00,000
    Opening Stock 75,550
    Furniture and Fixture 15,500
    Purchases 75,000
    Drawings 13,560
    Investments 65,500
    Cash in hand 36,000
    Cash in bank 53,000
    4,81,310 4,81,310

    Adjustments:

    1. Closing stock was valued ₹35,000.
    2. Depreciation charged on furniture and fixture @ 5%.
    3. Further bad debts ₹1,000. Make a provision for bad debts @ 5% on sundry debtors.
    4. Depreciation charged on motor car @ 10%.
    5. Interest on drawings @ 6%.
    6. Rent, rates and taxes was outstanding ₹200.
    7. Discount on debtors 2%.

    Ans.

    Dr.
    Trading Account
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 75,550 By Sales 1,00,000
    To Purchases 75,000 Less: Sales Inwards (6,000)
    		 94,000
    Less: Return Outwards (4,500)
    		 70,500 By Closing Stock 35,000
    By Gross Loss 17,050
    1,46,050 1,46,050
    Dr.
    Profit and Loss Account
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Gross Loss 17,050 By Discount 3,500
    To Bad Debts 3,000 By Interest Received 11,260
    Add: Further Bad-Debts 1,000 By Interest on Drawings 814
    Add:New Provision 4,950 By Net Loss 27,482
    Less: Old Provision (1,500)
    		 7,450
    To Discount on Debtors 1,881
    To freight 2,250
    To Trade Expenses 2,500
    To Printing and Stationery 5,000
    To Rent, Rates and Taxes 3,450
    Add: O/S Rent, Rates and Taxes 200M
    		 3,650
    To Depreciation on Furniture 775
    To Depreciation on Motor Car 2,500
    43,056 43,056

    Balance Sheet

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Bills Payable 85,550 Sundry Debtors 100,000
    Sundry Creditors 25,000 Less: Further Debts (1,000)
    Capital 2,50,000 Less: New Provision (4,950)
    Less: Net Loss (27,482) Less: Discount on Debtors (1,881)
    		 92,169
    Less : Drawings (13,560) Motor Car 25,000
    Less: Interest on Drawings (814) 2,08,144 Less: Depreciation (2,500)
    		 22,500
    Outstanding Rent, Rates and Taxes 200 Furniture and Fixtures 15,500
    Less: Depreciation (775)
    		 14,725
    Investments 65,500
    Cash in Hand 36,000
    Cash at Bank 53,000
    Closing Stock 35,000
    3,18,894 3,18,894

    18. Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss account and a balance sheet as on 31st March, 2017.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Opening Stock 2,26,000 Sales 6,80,000
    Purchases 4,40,000 Return Outwards 15,000
    Drawings 75,000 Creditors 50,000
    Buildings 1,00,000 Bills Payable 63,700
    Motor Van 30,000 Interest Received 20,000
    Freight Inwards 3,400 Capital 3,50,000
    Sales Return 10,000
    Trade Expense 3,300
    Heat and Power 8,000
    Salary and Wages 5,000
    Legal Expense 3,000
    Postage and Telegram 1,000
    Bad Debts 6,500
    Cash in hand 79,000
    Cash at bank 98,000
    Sundry Debtors 25,000
    Investments 40,000
    Insurance 3,500
    Machinery 22,000
    11,78,700 11,78,700

    The following additional information is available:

    1. Stock on 31st December, 2017 was ₹30,000.
    2. Depreciation is to be charged on building at 5% and motor van at 10%.
    3. Provision for doubtful debts is to be maintained at 5% on Sundry Debtors.
    4. Unexpired insurance was ₹600.
    5. The Manager is entitled to a commission @ 5% on net profit after charging such commission.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 2,26,000 By Sales 6,80,000
    To Purchases 4,40,000 Less: Sales Return (10,000)
    		 6,70,000
    Less: Returns Outwards (15,000) 4,25,000 By Closing Stock 30,000
    To Freight Inwards 3,400
    To Heat and Power 8,000
    To Gross Profit 37,600
    7,00,000 7,00,000

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Trade Expenses 3,300 By Gross Profit 37,600
    To Salary and Wages 5,000 By Interest Received 20,000
    To Legal Expenses 3,000
    To Postage and Telegram 1,000
    To Bad Debts 6,500
    Add: New Provision 1,250 7,750
    To Depreciation on Building 5,000
    To Depreciation on Motor Van 3,000
    To Insurance 3,500
    Less: Unexpired Insurance (600)
    		 2,900
    To Net Profit 26,650
    57,600 57,600
    To Manager's Commission Payable 1,269 By Balance b/d 26,650
    To Net Profit after Commission 25,381
    26,650 26,650

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 35,000 Cash in Hand 79,000
    Add: Net Profit 25,381 Cash at Bank 98,000
    Less: Drawings (75,000)
    		 3,00,381 Buildings 1,00,000
    Creditors 50,000 Less: Depreciation (5,000)
    		 95,000
    Bills Payable 63,700 Motor Van 30,000
    Manager's Commission Payable 1,269 Less: Depreciation (3,000) 27,000
    Sundry Debtors 25,000
    Less: New Provision (1,250)
    		 23,750
    Investments 40,000
    Machinery 22,000
    Unexpired Insurance 600
    Closing Stock 30,000
    4,15,350 4,15,350

    19. From the following balances extracted from the books of Raga Ltd. Prepare a trading and profit and loss account for the year ended 31st March, 2017 and a balance sheet as on that date.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Drawings 20,000 Sales 2,20,000
    Land and Buildings 12,000 Capital 1,01,110
    Plant and Machinery 40,000 Discount 1,260
    Carriage Inwards 100 Apprentice Premium 5,230
    Wages 500 Bills Payable 1,28,870
    Salary 2,000 Purchases return 10,000
    Sales Return 200
    Bank Charges 200
    Coal, Gas and Water 1,200
    Purchases 1,50,000
    Trade Expenses 3,800
    Stock (Opening) 76,800
    Cash at bank 50,000
    Rates and Taxes 870
    Bills Receivable 24,500
    Sundry Debtors 54,300
    Cash in hand 30,000
    4,66,470 4,66,470

    The additional information is as under :

    1. Closing stock was valued at the end of the year ₹20,000.
    2. Depreciation on plant and machinery charged at 5% and land and building at 10%.
    3. Discount on debtors at 3%.
    4. Make a provision at 5% on debtors for doubtful debts.
    5. alary outstanding was ₹100 and Wages prepaid was ₹40.
    6. The manager is entitled a commission of 5% on net profit after charging such commission.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 76,800 By Sales 2,20,000
    To Purchases 1,50,000 Less: Sales Return (200)
    		 2,19,800
    Less: Purchases Return (10,000)
    		 1,40,000 By Closing Stock 20,000
    To Carriage Inwards 100
    To Wages 500
    Less: Prepaid (40)
    		 460
    To Coal, Gas and Water 1,200
    To Gross Profit 21,240
    2,39,800 2,39,800

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Salary 2,000 By Gross Profit 21,240
    Add: Outstanding Salary 100
    		 2,100 By Discount 1,260
    To Bank Charges 200 By Apprentice Premium 5,230
    To Trade Expenses 3,800
    To Rates and Taxes 870
    To Depreciationon Plant and Machinery 2,000
    To Depreciation on Land and Building 1,200
    To Provision for Doubtful Debts 2,715
    To Discount on Debtors 1,548
    To Net Profit 13,297
    27,730 27,730
    To Manager's Commission 633 By Balance b/d 13,297
    To Net Profit after Commission 12,664
    13,297 13,297

    Balance Sheet
    for the year ending 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 1,01,110 Cash at Bank 50,000
    Add: Net Profit 12,664 Land and Building 12,000
    Less: Drawings (20,000)
    		 93,774 Less: Depreciation (1,200)
    		 10,800
    Bills Payable 1,28,870 Plant and Machinery 40,000 10,800
    Outstanding Salary 100 Less: Depreciation (2,000)
    		 38,000
    Outstanding Manager's Commission 633 Bills Receivable 24,500
    Sundry Debtors 54,300
    Less: New Provision (2,715)
    Less:Discount on Debtors (1,548)
    		 50,037
    Cash in Hand 30,000
    Closing Stock 20,000
    Prepaid Wages 40
    2,23,377 2,23,377

    20. From the following balances of M/s Jyoti Exports, prepare trading and profit and loss account for the year ended 31st March, 2017 and balance sheet as on this date.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Sundry Debtors 9,600 Sundry Creditors 2,500
    Opening Stock 22,800 Sales 72,670
    Purchases 34,800 Purchases Returns 2,430
    Carriage Inwards 450 Bills Payable 15,600
    Wages 1,770 Capital 42,000
    Office Rent 820
    Insurance 1,440
    Factory Rent 390
    Cleaning Charges 940
    Salary 1,590
    Building 24,000
    Plant and Machinery 3,600
    Cash in hand 2,160
    Gas and Water 240
    Octroi 60
    Furniture 20,540
    Patents 10,000
    1,35,200 1,35,200

    Closing stock ₹10,000.

    1. To provision for doubtful debts is to be maintained at 5 per cent on sundry debtors.
    2. Wages amounting to ₹500 and salary amounting to ₹350 are outstanding
    3. Factory rent prepaid ₹100.
    4. Depreciation charged on Plant and Machinery @ 5% and Building @ 10%.
    5. Outstanding insurance ₹100.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 22,800 By Sales 72,670
    To Purchases 34,800 By Closing Stock
    Less: Purchases Return (2,430)
    		 32,370
    To Carriage Inwards 450
    To Wages 1,770
    Add: Outstanding Wages 500 2,270
    To Factory Rent 390
    Less: Prepaid Rent (100)
    		 290
    To Gas and Water 240
    To Octroi 60
    To Cleaning Charges 940
    To Gross Profit 23,250
    82,670 82,670

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Office Rent 820 By Gross Profit 23,250
    To Insurance 1,440
    Add: Outstanding Insurance 100
    		 1,540
    To Depreciation on Plant and Machinery 180
    To Salary 1,590
    Add: Outstanding Salary 350
    		 1,940
    To Provision for Doubtful Debts 480
    To Depreciation on Building 2,400
    To Net Profit 15,890
    23,250 23,250

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 42,000 Sundry Debtors 9,600
    Add: Net Profit 15,890 57,890 Less: New Provision (480)
    		 9,120
    Sundry Creditors 2,500 Building 24,000
    Bills Payable 15,600 Less: Depreciation (2,400)
    		 21,600
    Outstanding Salary 350 Plant and Machinery 3,600
    Outstanding Wages 500 Less: Depreciation (180)
    		 3,420
    Outstanding Insurance 100 Cash in Hand 2,160
    Furniture 20,540
    Patents 10,000
    Closing Stock 10,000
    Prepaid Factory Rent 100
    76,940 76,940

    21. The following balances have been extracted from the books of M/s Green House for the year ended 31st March, 2017, prepare trading and profit and loss account and balance sheet as on this date.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Purchases 80,000 Capital 2,10,000
    Bank Balance 11,000 Bills payable 6,500
    Wages 34,000 Sales 2,00,000
    Debtors 70,300 Creditors 50,000
    Cash in hand 1,200 Return Outwards 4,000
    Legal Expenses 4,000
    Building 60,000
    Machinery 120,000
    Bills Receivable 7,000
    Office Expenses 3,000
    Opening Stock 45,000
    Gas and Fuel 2,700
    Freight and Carriage 3,500
    Factory Lighting 5,000
    Office Furniture 5,000
    Patent right 18,800
    4,70,500 4,70,500

    Adjustments:

    (a) Machinery is depreciated at 10% and buildings depreciated at 6%.

    (b) Interest on capital @ 4%.

    (c) Outstanding wages ₹50.

    (d) Closing stock ₹50,000.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 45,000 By Sales 2,00,000
    To Purchases 80,000 By Closing Stock 50,000
    Less: Return Outwards (4,000)
    		 76,000
    To Wages 34,000
    Add: Wages Outstanding 50 34,050
    To Gas and Fuel 2,700
    To Freight and Carriage 3,500
    To Factory Lighting 5,000
    To Gross Profit 83,750
    2,50,000 2,50,000

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Legal Expenses 4,000 By Gross Profit 83,750
    To Office Expenses 3,000
    To Depreciation on Machine 12,000
    To Depreciation on Building 3,600
    To Interest on Capital 8,400
    To Net Profit 52,750
    83,750 83,750

    Balance Sheet
    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 2,10,000 Bank Balance 11,000
    Add:Interest on Capital 8,400 Debtors 70,300
    Add: Net Profit 52,750
    		 2,71,150 Cash in Hand 1,200
    Bills Payable 6,500 Building 60,000
    Creditors 50,000 Less: Depreciation (3,600)
    		 56,400
    Outstanding Wages 50 Machinery 1,20,000
    Less: Depreciation (12,000)
    		1,08,000
    Bills Receivable 7,000
    Patent Right 18,800
    Office Furniture 5,000
    Closing Stock 50,000
    3,27,700 3,27,700

    22. From the following balances extracted from the book of M/s Manju Chawla on 31st March, 2017. You are requested to prepare the trading and profit and loss account and a balance sheet as on this date.

    Account Title Amount
    (₹)    		 Amount
    (₹)
    Opening Stock 10,000
    Purchases and Sales 40,000 80,000
    Returns 200 600
    Wages 6,000 …
    Dock and cleaning charges 4,000 …
    Lighting 500 …
    Misc. Income … 6,000
    Rent … 2,000
    Capital … 40,000
    Drawings 2,000
    Debtors and Creditors 6,000 7,000
    Cash 3,000 …
    Investment 6,000 …
    Patent 4,000 …
    Land and Machinery 43,000 …
    Donations and Charity 600 …
    Sales tax collected … 1,000
    Furniture 11,300 …
    1,36,600 1,36,600

    Closing stock was ₹2,000.

    (a) Interest on drawings @ 7% and interest on capital @ 5%.

    (b) Land and Machinery is depreciated at 5%

    (c) Interest on investment @ 6%.

    (d) Unexpired rent ₹100.

    (e) Charge 5% depreciation on furniture.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st 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 Return (600)
    		 39,400 By Closing Stock 2,000
    To Wages 6,000
    To Dock and Cleaning Charges 4,000
    To Gross Profit 22,400
    81,800 81,800

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Lighting 500 By Gross Profit 22,400
    To Donations and Charity 600 By Miscellaneous Income 6,000
    To Interest on Capital 2,000 By Rent 2,000
    To Depreciation on Furniture 565 Less: Unearned Rent 100 1,900
    To Depreciationon Land and Machinery 2,150 By Interest on Drawings 140
    To Net Profit 24,985 By Interest on Investment 360
    30,800 30,800

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 40,000 Debtors 6,000
    Add: Interest on Capital 2,000 Cash 3,000
    Add: Net Profit 24,985 Investment 6,000
    Less: Drawings (2,000) Add: Interest on Investment 360
    		 6,360
    Less: Interest on Drawings (140)
    		 64,845 Patent 4,000
    Creditors 7,000 Land and Machinery 43,000
    Sales Tax Collected 1,000 Less: Depreciation (2,150)
    		 40,850
    Unearned Rent 100 Furniture 11,300
    Less: Depreciation (565)
    		 10,735
    Closing Stock 2,000
    72,945 72,945

    23. The following balances were extracted from the books of M/s Panchsheel Garments on 31st March, 2017.

    Account Title Amount
    (₹)    		 Account Title Amount
    (₹)
    Opening Stock 16,000 Sales 1,12,000
    Purchases 67,600 Return Outwards 3,200
    Return Inwards 4,600 Discount 1,400
    Carriage Inwards 1,400 Bank Overdraft 10,000
    General Expenses 2,400 Commission 1,800
    Insurance 4,000 Creditors 16,000
    Scooter Expenses 200 Capital 50,000
    Salary 8,800
    Cash in hand 4,000
    Scooter 8,000
    Furniture 5,200
    Buildings 65,000
    Debtors 6,000
    Wages 1,200
    1,94,400 1,94,400

    Prepare the trading and profit and loss account for the year ended 31st March, 2017 and a balance sheet as on that date.

    (a) Unexpired insurance ₹1,000.

    (b) Salary due but not paid ₹1,800.

    (c) Wages outstanding ₹200.

    (d) Interest on capital 5%.

    (e) Scooter is depreciated @ 5%.

    (f) Furniture is depreciated ₹@ 10%.

    (g) Closing stock was ₹15,000.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st 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 Wages 1,200
    Add: Outstanding Wages 200
    		 1,400
    To Gross Profit 39,200
    1,22,400 1,22,400

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To General Expenses 2,400 By Gross Profit 39,200
    To Insurance 4,000 By Discount 1,400
    Less: Unexpired Insurance (1,000)
    		 3,000 By Commission 1,800
    To Scooter Expenses 200
    To Salary 8,800
    Add: Outstanding Salary 1,800 10,600
    To Interest on Capital 2,500
    To Depreciation on Scooter 400
    To Depreciation on Furniture 520
    To Net Profit 22,780
    42,400 42,400

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 50,000 Cash in Hand 4,000
    Add: Interest on Capital 2,500 Scooter 8,000
    Add: Net Profit 22,780
    		 75,280 Less: Depreciation (400)
    		 7,600
    Bank Overdraft 10,000 Furniture 5,200
    Creditors 16,000 Less: Depreciation (520) 4,680
    Outstanding Salary 1,800 Buildings 65,000
    Outstanding Wages 200 Debtors 6,000
    Unexpired Insurance 1,000
    Closing Stock 15,000
    1,03,280 1,03,280

    24. Prepare the trading and profit and loss account and balance sheet of M/s Control Device India on 31st March, 2017 from the following balance as on that date.

    Account Title Amount
    (₹)    		 Amount
    (₹)
    Drawings and Capital 19,530 67,500
    Purchase and Sales 45,000 1,12,500
    Salary and Commission 25,470 1,575
    Carriage 2,700
    Plant and Machinery 27,000
    Furniture 6,750
    Opening stock 42,300
    Insurance premium 2,700
    Interest 7,425
    Bank overdraft 24,660
    Rent and Taxes 2,160
    Wages 11,215
    Returns 2,385 1,440
    Carriage outwards 1,485
    Debtors and Creditors 36,000 58,500
    General expenses 6,975
    Octroi 530
    Investment 41,400
    2,73,600 2,73,600

    Closing stock was valued ₹20,000.

    (a) Interest on capital @ 10%.

    (b) Interest on drawings @ 5%.

    (c) Wages outstanding ₹50.

    (d) Outstanding salary ₹20.

    (e) Provide a depreciation @ 5% on plant and machinery.

    (f) Make a 5% provision on debtors.

    Ans.

    Trading Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Opening Stock 42,300 By Sales 1,12,500
    To Purchases 45,000 Less: Sales Return (2,385)
    		 1,10,115
    Less: Purchases Return (1,440)
    		 43,560 By Closing Stock 20,000
    To Carriage 2,700
    To Wages 11,215
    Add: Outstanding Wages 50
    		 11,265
    To Octroi 530
    To Gross Profit 29,760
    1,30,115 1,30,115

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Salary 25,470 By Gross Profit 29,760
    Add: Outstanding Salary 20 25,490 By Commission 1,575
    To Insurance Premium 2,700 By Interest 7,425
    To Rent & Taxes 2,160 By Interest on drawings 977
    To Carriage Outwards 1,485 By Net loss 8,975
    To General Expenses 6,975
    To Interest on Capital 6,750
    To Depreciation on P & M 1,350
    To Provision for debtors 1,800
    48,710 48,710

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Capital 67,500 Plant and Machinery 27,000
    Add: Interest on Capital 6,750 Less: Depreciation (1,350)
    		 25,650
    Less: Net Loss (8,973) Furniture 6,750
    Less: Drawings (19,530) Debtors 36,000
    Less: Interest on Drawings (977) 44,770 Less: New Provision (1,800)
    		 34,200
    Bank Overdraft 24,660 Investment 41,400
    Creditors 58,500 Closing Stock 20,000
    Outstanding Wages 50
    Salary Outstanding 20
    1,28,000 1,28,000

     25. The following balances appeared in the trial balance of M/s Kapil Traders as on 31st March, 2017:

    Amount
    (₹)
    Sundry debtors 30,500
    Bad debts 500
    Provision for doubtful debts 2,000

     The partners of the firm agreed to records the following adjustments in the books of the Firm. Further bad debts ₹300. Maintain provision for bad debts 10%. Show the following adjustments in the bad debts account, provision account, debtors account, profit and loss account and balance sheet.

    Ans.

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    To Bad Debts 500
    Add:Further Bad Debts 300
    Add: New Provision 3,020
    Less: Old Provision 2,000 1,820

    Balance Sheet

    as at 31st March, 2017

    Liabilities Amount
    (₹)    		 Assets Amount
    (₹)
    Debtors 30,500
    Less: Further Bad Debts (300)
    Less: New Provision (3,020)
    		 27,180
    Dr.
    Debtors Account
    		 Cr.
    Date Particulars Amount
    (₹)    		 Date Particulars Amount
    (₹)
    2017 2017
    Mar. 31 To Balance b/d 30,500 Mar. 31 By Further Bad Debts A/c 300
    Mar. 31 By Provision for Doubtful Debts A/c 3,020
    Mar. 31 By Balance c/d 27,180
    30,500 30,500
    Dr.
    Bad Debts Account
    		 Cr.
    Date Particulars Amount
    (₹)    		 Date Particulars Amount
    (₹)
    2017 2017
    Mar. 31 To Balance b/d 500 Mar. 31 By Provision for Doubtful Debts A/c 800
    (As per the Trial Balance)
    Mar. 31 To Sundry Debtors A/c 300
    800 800
    Dr.
    Provision for Doubtful Debts Account
    		 Cr.
    Date Particulars Amount
    (₹)    		 Date Particulars Amount
    (₹)
    2017 2016
    Mar. 31 To Bad Debt A/c 800 April 1 By Balance b/d 2,000
    (Old provision)
    Mar. 31 To Balance b/d 3,020 April. 1 By Profit and Loss A/c 1,820
    (New Provision) (Balance Figure)
    3,820 3,820

    26. Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on 31st March, 2017.

    Amount
    (₹)
    Debtors 80,000
    Bad debts 2,000
    Provision for doubtful debts 5,000

    Adjustments:

    Bad Debts ₹500 Provision on Debtors @ 3%.

    Ans.

    Profit and Loss Account

    Dr.
    for the year ending 31st March, 2017
    		 Cr.
    Particulars Amount
    (₹)    		 Particulars Amount
    (₹)
    By old Provision for doubtful debts A/c  5,000
    Less: Bad debts   (2,000)
    Less: Further bad debts   (500)
    Less:New pension for doubtful debts   (2,385) 115
    115

    Balance Sheet
    as at 31st March, 2017

    Liabilities Amount
    (₹)
    Assets
    		 Amount
    (₹)
    Debtors 80,000
    Less: Further Bad Debts (500)
    Less:New Provision on Debtors (2,385)
    		 77,115
    77,115
    Dr.
    Bad Debts Account
    		 Cr.
    Date Particulars Amount
    (₹)    		 Date Particulars Amount
    (₹)
    2017 2017
    Dec. 31 To Balance b/d 2,000 Dec. 31 By Provision for Doubtful 2,500
    (As per the Trial Balance) Debts A/c
    Dec.31 To Sundry Debtors A/c 500
    2,500 2,500
    Dr.
    Provision for Doubtful Debts Account
    		 Cr.
    Date Particulars Amount
    (₹)    		 Date Particulars Amount
    (₹)
    2017 2017
    Dec. 31 To Bad Debts A/c 2,500 Jan. 1 By Balance b/d 5,000
    Dec. 31 To Balance b/d 2,385 (Old Provision)
    (New Provision)
    Dec.31 To Profit and Loss A/c 115
    5,000 5,000
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