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

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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