1st Puc Accountancy Chapter 10 Financial Statement – II Notes Question Answer Mcq Pdf Download Class 11Accounts Chapter 10 Practical Problems Solutions 2023 Class 11 Accountancy Chapter 10 Notes Financial Statements With Adjustments Class 11 Solutions Financial Statements 2 Class 11 Solutions ಪ್ರಥಮ ಪಿಯುಸಿ ಲೆಕ್ಕಶಾಸ್ತ್ರ ಅಧ್ಯಾಯ - 10 ನೋಟ್ಸ್,
1st Puc Accountancy Chapter 10 Notes
Six Marks Question
Q1. Why is it necessary to create a provision for doubtful-debts at the time of preparation of final accounts?
In an ideal scenario, it is expected that debtors will be paying all the amount owed by them to the business, in reality, it doesn’t happen as some debtors might default on paying. It can be the full amount or a part of the sum borrowed. It is uncertain as to how much will that debt actually becomes bad debt. A business has to make a reasonable estimate for such an event. This estimate is called as provision for bad debts. It is created by debiting P & L account.
Profit and Loss A/c Dr
To Provision for doubtful debts A/c
Q2. State the meaning of:
(a) Outstanding expenses
(b) Prepaid expenses
(c) Income received in advance
(d) Accrued income
(a) Outstanding Expenses: Such expenses are incurred in the present accounting period but are not paid. As expense is generated during accounting period it makes perfect sense to charge it against revenue earned to arrive at true profit or loss. These are liabilities and need to be paid.
(b) Prepaid Expenses: Those type of expenses in which the associated benefit has not been materialized, but the payment is already done in advance are known as prepaid expenses.
(c) Income received in advance: The income is received in the present accounting period and the benefits will be realised in the upcoming accounting period, such income is called income received in advance.
(d) Accrued Income: Income that is earned in the accounting period, but yet to be received by end of accounting period is known as accrued income. It is due to be received in the future accounting periods. It is shown on asset side of balance sheet.
Q3. What is meant by closing stock? Show its treatment in final accounts.
Cost of goods that remains unsold in the inventory after completion of the accounting period is referred to as the closing stock. The closing stock value is determined by comparing the realisable value and cost price. The lesser among two values is considered as the value of closing stock.
In final accounts the closing stock is adjusted by:
1) Crediting the closing stock to trading and profit and loss account.
2) Placing it on the asset part of the balance sheet.
Following entries need to be passed for adjustment
Closing Stock A/c Dr.
To Trading A/c
Q4. Why is it necessary to record the adjusting entries in the preparation of final accounts?
Recording adjusting entries in preparing final accounts is necessary because of the following reasons:
- It helps in assessing whether the final accounts reflect true profit or loss, it also shows true financial position of a business.
- It ensures accounts comply with the accrual basis of accounting.
- It makes sure that all financial transaction belong to current fiscal year. No transaction of past or future are taken into account.
- It provides the scope for introducing different provisions which can be made at year end, only after assessing the whole year’s performance.
Q5. Give the proforma of income statement and balance in vertical form.
Income statement for the period ended ….
| Particulars | Amount₹ | Amount₹ |
| Sales | ||
| Less: Sales returns (Return inwards) | ||
| Net sales | ||
| Cost of goods | ||
| Opening stock | ||
| Purchases | ||
| Less: Purchase returns (Return outwards) | ||
| Carriage on purchases | ||
| Wages | ||
| Add: Outstanding wages | ||
| Less: Prepaid wages | ||
| Fuel and power | ||
| Factory rent | ||
| Installation or erection of machines | ||
| Octroi | ||
| Less: Closing stock | ||
| Gross Profit/Gross Loss (whichever is applicable) | ||
| Operating Expenses/Losses | ||
| Selling Expenses/Losses | ||
| Total Selling expenses | ||
| General & Administrative expenses/losses | ||
| Total General & Administrative Expenses | ||
| Total Operating Expenses/Losses |
Balance sheet as on…….
| Particulars | Amount₹ | Amount₹ |
| Current Assets | ||
| Prepaid expenses | ||
| Total current assets | ||
| Current Liabilities | ||
| Total Current Liabilities | ||
| Non-Current Assets | ||
| Total non-current assets | ||
| Non-Current Liabilities | ||
| Total non-current Liabilities |
Q6. 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.
| S. No. | Particulars | L.F. | Debit₹ | Credit₹ |
| a) | Salaries A/c Dr. To Outstanding Salaries A/c (Salaries outstanding for Rs 3,500) | 3,500 | 3,500 | |
| b) | Rent A/c Dr. To Outstanding Rent A/c | 500 | 500 | |
| c) | Prepaid Insurance A/c Dr. To Insurance A/c (Insurance premium paid in advance for 3 months i.e. ₹ 4000) | 4,000 | 4,000 | |
| d) | Furniture A/c Dr. To Purchases A/c (Correction entry for Wrong debit of Furniture to Purchases Account) | 7,000 | 7,000 | |
| (Rent unpaid for one month = 6000/12 = ₹ 500) |
Q7. What adjusting entries would you record for the following?
(a) Depreciation
(b) Discount on debtors
(c) Interest on capital
(d) Manager’s commission
(a) Depreciation
Dr. Cr.
| Particulars | Amount | Particulars | Amount | Liabilities | Amount | Assets | Amount | |
| Depreciation | Assets Less: Depreciation | |||||||
(b) Discount on debtors
Dr. Cr.
| Particulars | Amount | Particulars | Amount | Liabilities | Amount | Assets | Amount | |
| Discount on Debtors | Debtors Less: Discount on Debtors | |||||||
(c) Interest on capital
Dr. Cr.
| Particulars | Amount | Particulars | Amount | Liabilities | Amount | Assets | Amount | |
| Interest on Capital | Capital Add: Interest on Capital | |||||||
(d) Manager’s commission
Two types of manager commission can be seen.
Case 1: When the commission is applied on the profit before commission being charged.
Dr. Cr.
| Particulars | Amount | Particulars | Amount | Liabilities | Amount | Assets | Amount | |
| Manager’s Commission | Outstanding Manager’s | |||||||
| Commission | ||||||||
Case 2: When the commission is applied on the profit after charging the commission.
Dr. Cr.
| Particulars | Amount | Particulars | Amount | Liabilities | Amount | Assets | Amount | |
| Outstanding Manager’s | ||||||||
| Commission | ||||||||
| Manager’s Commission |
Karnataka 1st PUC Accountancy Chapter 10 Financial Statements With Adjustments
Twelve Marks Qs
Q1. 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?
In an ideal scenario, it is expected that debtors will be paying all the amount owed by them to the business, in reality it doesn’t happen as some debtors might default on paying. It can be the full amount or a part of the sum borrowed. It is uncertain as to how much will that debt actually becomes bad debt. A business has to make a reasonable estimate for such an event. This estimate is called as provision for bad debts. It is created by debiting P & L account.
Profit and Loss A/c Dr
To Provision for doubtful debts A/c
Provision for doubtful debts is shown as deduction from debtors on asset side of balance sheet. It presents a true and fair view of business. Provision for doubtful debts created at the end of the accounting period is carried forward to the next accounting period.
Adjustment entries for the provision for doubtful debts
Profit and Loss Account
| Expenses/Losses | Amount₹ | Revenues/Gains | Amount₹ |
| Provision for doubtful debts | |||
| Bad debts | |||
| Further bad debts | |||
| New provision | |||
| Less: Old Provision |
Balance Sheet
| Liabilities | Amount₹ | Assets | Amount₹ |
| Sundry debtors | |||
| Less: Further bad debts | |||
| Less: Provision for doubtful debts |
Q2. 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?
(i) Prepaid expenses
(a) When given inside the Trial Balance: It will be added in the asset side of the Balance Sheet only.
Balance Sheet
| Assets | Amount | |
| Prepaid Expenses |
(b) When given outside the Trial Balance: It will be posted in the P & L account as well as Balance Sheet
Dr. Cr.
| Particulars | Amount | Particulars | Amount | Liabilities | Amount | Assets | Amount | |
| Concerned Expenses Less: Prepaid Expenses | Prepaid Expenses | |||||||
Balance Sheet
| Assets | Amount | |
| Prepaid Expenses |
(ii) Depreciation
In trial balance depreciation is shown in P & L account as it is an expense. When present in trial balance it means deduction has taken from concerned asset, when depreciation is shown outside trial balance, then it needs to be recorded both in P & L account as well as balance sheet.
1) Inside Trial Balance
Profit and Loss Account
Dr. Cr.
| Particulars | Amount | Particulars | Amount |
| Depreciation |
2) Outside Trial Balance
Dr. Cr.
| Particulars | Amount | Particulars | Amount | Liabilities | Amount | Assets | Amount | |
| Depreciation on Concerned Assets | Concerned Assets Less: Depreciation | |||||||
(iii) Closing stock
(a) Closing stock is valued based on the least among cost price or realisble value. If present in Trial Balance, posted only in 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. P & L account and Balance Sheet
Dr. Cr.
| Particulars | Amount | Gains/Revenue | Amount | Liabilities | Amount | Assets | Amount | |
| Closing Stock | ||||||||
| Closing Stock |
1st Puc Accountancy Chapter 10 Notes
Q3. Prepare a trading and profit and loss account for the year ending December 31, 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 debts | 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.
The solution is given below:
Books of M/s. Rahul Sons.Trading Account for the year ending December 31, 2017
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Opening Stock | 50,000 | Sales 1,80,000 Less: Sales Returns 3,000 | 1,77,000 |
| Purchases 1,75,000 Less: Purchase Returns 2,000 | 1,73,000 | Closing Stock | 32,000 |
| Gross Loss | 17,000 | ||
| Wages | 3,000 | ||
| 2,26,000 | 2,26,000 |
Profit and Loss Account for the year ending December 31, 2017
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Gross Loss | 17,000 | Discount Received | 500 |
| Salary8,000 Add: Outstanding Salary 1,000 | 9,000 | Commission Received 4,000 Less: Advance Commission 1,000 | 3,000 |
| Discount Allowed | 1,000 | Rent 6,000 Add: Rent Receivable 2,000 | 8,000 |
| Insurance3,200 Less: Insurance Prepaid 800 | 2,400 | ||
| Rent Rates and Taxes | 4,300 | Net Loss | 43,189 |
| Trade Expenses | 4,300 | ||
| Bad-Debts 2,000 Add: Further Bad-Debts 1,000 Add: New Provision 4,050 Less: Old Provision 2,500 | 4,550 | ||
| Discount on Debtors | 1,539 | ||
| Postage | 300 | ||
| Telegram Expenses | 200 | ||
| Depreciation on Building | 6,600 | ||
| Repair and Renewals | 1,600 | ||
| Travelling Expenses | 4,200 | ||
| Legal Fees | 500 | ||
| 54,689 | 54,689 |
Balance Sheet for the year ending December 31, 2017
| Liabilities | Amount₹ | Assets | Amount₹ |
| Capital 3,00,000 Less: Net Loss 43,189 Less: Drawings 32,000 | 2,24,811 | Debtors 82,000 Less: Further Bad-Debts 1,000 Less: New Provision 4,050 Less: Discount on Debtors (on ₹ 76,950) 1,539 | 75,411 |
| Bills Payable | 22,000 | B/R | 50,000 |
| Loan | 34,800 | Buildings 1,10,000 Less: 6% Depreciation 6,600 | 1,03,400 |
| Advance Commission | 1,000 | Buildings | |
| Outstanding Salary | 1,000 | Rent Receivabl | 2,000 |
| Prepaid Insurance | 800 | ||
| Closing Stock | 32,000 | ||
| Furniture and Fittings | 20,000 | ||
| 2,83,611 | 2,83,611 |
Q4. Prepare a trading and profit and loss account of M/s Green Club Ltd. for the year ending March 31, 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.
The solution is given below:
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Opening Stock | 35,000 | Sales 2,50,000 Less: Sales Returns (25,000) | 2,25,000 |
| Purchases 1,25,000 Less: Purchase Returns (6,000) | 1,19,000 | ||
| Wages 3,000 Less: Prepaid Wages (1,000) | 2,000 | Closing Stock | 10,000 |
| Gross Profit | 79,000 | ||
| 2,35,000 | 2,35,000 |
Profit and Loss Account for the year ending March 31, 2017
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Bad Debts 3,500 Add: Further Bad-debts 1,500 Add: New Provision 2,910 Less: Old Provision 4,500 | 3,410 | Gross Profit | 79,000 |
| Interest on Accrued Investment | 1,155 | ||
| Discount | 1,000 | ||
| Interest Received | 5,400 | ||
| Discount on Debtors | 2,280 | ||
| Postage and Telegram | 600 | ||
| Salary | 12,300 | ||
| Rent and Rates | 1,000 | ||
| Packing and Transport | 500 | ||
| General Expenses | 400 | ||
| Insurance | 4,000 | ||
| Discount | 3,500 | ||
| Depreciation on Machinery | 1,000 | ||
| Lighting and Heating | 5,000 | ||
| Net Profit | 52,565 | ||
| 86,555 | 86,555 |
Balance Sheets on March 31, 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 Add: Net Profit 52,565 | 1,27,565 | Debtors 50,000 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 | ||
| Closing Stock | 10,000 | ||
| 1,57,565 | 1,57,565 |
Q5. Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on March 31, 2017
| ₹ | |
| Debtors | 80,000 |
| Bad debts | 2,000 |
| Provision for doubtful debts | 5,000 |
Adjustments:
Bad Debts ₹ 500 Provision on Debtors @ 3%.
The solution is given below:
Profit and Loss Account
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Bad Debts 2,000 Add: Further Bad Debts 500 Add: New Provision for Bad Debts 2,385 | 4,885 | Old Provision for Doubtful Debts | 5,000 |
| Balancing figure | 115 | ||
| 5,000 | 5,000 |
Balance Sheet
| Liabilities | Amount₹ | Assets | Amount₹ |
| Debtors 80,000 Less: Further Bad Debts 500 Less: New Provision on Debtors 2,385 | 77,115 | ||
| 77,115 |
Bad Debts Account
Dr. Cr.
| Date | Particulars | Amount₹ | Date | Particulars | Amount₹ |
| 2017 | 2017 | ||||
| Dec.31 | Balance b/d | 2,000 | Dec.31 | Provision for Doubtful Debts | 2,500 |
| (as per the Trial Balance) | |||||
| Dec.31 | Sundry Debtors | 500 | |||
| 2,500 | 2,500 |
Provision for Doubtful Debts Account
Dr. Cr.
| Date | Particulars | Amount₹ | Date | Particulars | Amount₹ |
| 2017 | 2017 | ||||
| Dec.31 | Bad Debts | 2,500 | Jan.01 | Balance b/d (Old Provision) | 5,000 |
| Dec.31 | Balance b/d | 2,385 | |||
| (New Provision) | |||||
| Dec.31 | Profit and Loss | 115 | |||
| (Balancing Figure) | |||||
| 5,000 | 5,000 |
Q6. The following balances appeared in the trial balance of M/s Kapil Traders as on March 31, 2017
| ₹ | |
| 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.
The solution is given below:
Profit and Loss Account
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Bad Debts 500 | |||
| Add: Further Bad Debts 300 | |||
| Add: New Provision 3,020 | |||
| Less: Old Provision 2,000 | 1,820 |
Balance Sheet
| Liabilities | Amount₹ | Assets | Amount₹ |
| Debtors 30,500 | |||
| Less: Further Bad Debts 300 | 27,180 | ||
| Less: New Provision 3,020 | 27,180 |
Debtors Account
Dr. Cr.
| Date | Particulars | Amount₹ | Date | Particulars | Amount₹ |
| 2017 | 2017 | ||||
| March 31 | Balance b/d | 30,500 | March 31 | Further Bad Debts | 300 |
| March 31 | Provision for Doubtful Debts | 3,020 | |||
| March 31 | Balance c/d | 27,180 | |||
| 30,500 | 30,500 |
Bad Debts Account
Dr. Cr.
| Date | Particulars | Amount₹ | Date | Particulars | Amount₹ |
| 2017 | 2017 | ||||
| March 31 | Balance b/d | 500 | March 31 | Provision for Doubtful Debts | 800 |
| (As per the Trial Balance) | |||||
| March 31 | Sundry Debtors | 300 | |||
| 800 | 800 |
Provision for Doubtful Debts Account
Dr. Cr.
| Date | Particulars | Amount₹ | Date | Particulars | Amount₹ |
| 2017 | 2016 | ||||
| March 31 | Bad Debt | 800 | April 01 | Balance b/d (Old Provision) | 2,000 |
| April 01 | Profit and Loss | 1,820 | |||
| (Balancing figure) | |||||
| March 31 | Balance b/d | 3,020 | |||
| (New Provision) | |||||
| 3,820 | 3,820 |
Q7. Prepare the trading and profit and loss account and balance sheet of M/s Control Device India on March 31, 2017 from the following balance as on that date.
| Account Title | DebitAmount₹ | CreditAmount₹ |
| 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.
The solution is given below:
Trading Account
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Opening Stock | 42,300 | Sales 1,12,500 Less: Sales Return 2,385 | 1,10,115 |
| Purchases 45,000 Less: Purchases Return 1,440 | 43,560 | Closing Stock | 20,000 |
| 1,440 | 43,560 | ||
| Carriage | 2,700 | 2,700 | |
| Wages 11,215 Add: Outstanding Wages 50 | 11,265 | ||
| Octroi | 530 | ||
| Gross Profit | 29,760 | ||
| 1,30,115 | 1,30,115 |
Q8. The following balances were extracted from the books of M/s Panchsheel Garments on March 31, 2017.
| Account Title | DebitAmount₹ | Account Title | CreditAmount₹ |
| 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 March 31, 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%.
Trading Account
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Opening Stock | 16,000 | Sales 1,12,000 Less: Return Inwards 4,600 | 1,07,400 |
| Purchases 67,600 Less: Return Outwards 3,200 | 64,400 | Closing Stock | 15,000 |
| Carriage Inwards | 1,400 | ||
| Wages 1,200 Add: Outstanding Wages 200 | 1,400 | ||
| Gross Profit | 39,200 | ||
| 1,22,400 | 1,22,400 |
Balance Sheet
| Liabilities | Amount₹ | Assets | Amount₹ |
| Capital 50,000 Add: Interest on Capital 2,500 Add: Net Profit 22,780 | 75,280 | Cash in Hand | 4,000 |
| Scooter 8,000 Less: Depreciation 400 | 7,600 | ||
| Furniture 5,200 Less: Depreciation 520 | 4,680 | ||
| Bank Overdraft | 10,000 | Buildings | 65,000 |
| Creditors | 16,000 | Debtors | 6,000 |
| Outstanding Salary | 1,800 | Unexpired Insurance | 1,000 |
| Outstanding Wages | 200 | Closing Stock | 15,000 |
| 1,03,280 | 1,03,280 |
Q9. The following balances have been extracted from the books of M/s Green House for the year ended March 31, 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.
The solution is given below:
Trading Account
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Opening Stock | 45,000 | Sales | 2,00,000 |
| Purchases 80,000 Less: Return Outwards 4,000 | 76,000 | Closing Stock | 50,000 |
| Wages 34,000 Add: Wages Outstanding 50 | 34,050 | ||
| Gas and Fuel | 2,700 | ||
| Freight and Carriage | 3,500 | ||
| Factory Lighting | 5,000 | ||
| Gross Profit | 83,750 | ||
| 2,50,000 | 2,50,000 | ||
Profit and Loss Account
Dr. 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 | |||
| Liabilities | Amount₹ | Assets | Amount₹ |
| Capital 2,10,000 Add: Interest on Capital 8,400 Add: Net profit 52,750 | 2,71,150 | Bank Balance | 11,000 |
| Debtors | 70,300 | ||
| Cash in Hand | 1,200 | ||
| Building 60,000 Less: Depreciation 3,600 | 56,400 | ||
| Bills Payable | 6,500 | Machinery 1,20,000 Less: Depreciation 12,000 | 1,08,000 |
| Creditors | 50,000 | Bills Receivable | 7,000 |
| Outstanding Wages | 50 | Patent Right | 18,800 |
| Office Furniture | 5,000 | ||
| Closing Stock | 50,000 | ||
| 3,27,700 | 3,27,700 |
Q10. From the following balances of M/s Jyoti Exports, prepare trading and profit and loss account for the year ended March 31, 2017 and balance sheet as on this date.
| Account Title | DebitAmount₹ | Account Title | CreditAmount₹ |
| 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.
The solution is given below:
Trading Account
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Opening Stock | 22,800 | Sales | 72,670 |
| Purchases 34,800 Less: Purchases Return 2,430 | 32,370 | Closing Stock | 10,000 |
| Carriage Inwards | 450 | ||
| Wages1,770 Add: Outstanding Wages 500 | 2,270 | ||
| Factory Rent 390 Less: Prepaid Rent100 | 290 | ||
| Gas and Water | 240 | 240 | |
| Octroi | 60 | 60 | |
| Cleaning Charges | 940 | 940 | |
| Gross Profit | 23,250 | 23,250 | |
| 82,670 | 82,670 |
Profit and Loss Account
Dr. Cr.
| Particulars | Amount₹ | Particulars | Amount₹ |
| Office Rent | 820 | Gross Profit | 23,250 |
| Insurance 1,440 Add: Outstanding Insurance 100 | 1,540 | ||
| Depreciation on Plant and Machinery | 180 | ||
| Salary 1,590 Add: Outstanding Salary 350 | 1,940 | ||
| Provision for Doubtful Debts | 480 | ||
| Depreciation on Building | 2,400 | ||
| Net Profit | 15,890 | ||
| 23,250 | 23,250 |
Balance Sheet
| Liabilities | Amount₹ | Assets | Amount₹ |
| Capital 42,000 Add: Net Profit 15,890 | 57,890 | Sundry Debtors9,600 Less: New Provision 480 | 9,120 |
| Sundry Creditors | 2,500 | Building24,000 Less: Depreciation2,400 | 21,600 |
| Bills Payable | 15,600 | 15,600 | |
| Outstanding Salary | 350 | Plant and Machinery 3,600 Less: Depreciation180 | 3,42 |
| Outstanding Wages | 500 | Cash in Hand | 2,160 |
| Outstanding Insurance | 100 | Furniture | 20,540 |
| Patents | 10,000 | ||
| Closing Stock | 10,000 | ||
| Prepaid Factory Rent | 100 | ||
| 76,940 | 76,940 |
FAQ:
Income statement
Capital
Rent expenses
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