Adjustments to Financial Statements

Tutorial No: 13

Question 01
Baby Land Traders Trial Balance as at 31 st December 2020 was as
follows.

Baby Land Traders Trial Balance at 31 st December 2020

Rs. Rs.

Advertising 18,500

Bad debts 4,200

Bank overdraft 14,800

Loan Interest Paid 5,800

Capital 700,000

Cash in hand 20,000

Creditors 24,500

Debtors 26,500

Delivery Expenses 4,200

Land and Buildings - Cost 350,000

Furniture – Cost 200,000

Machinery – Cost 250,000

Motor Car – Cost 340,000

 Accumulated Depreciation as at 1st January
2020

Land and Buildings 65,000

Furniture 22,000

Machineries 52,000

Motor car 45,000

Drawings 6,400

Electricity 14,200

Insurance 2,800

Long Term Loan 10% 80,000

Provision for Doubtful debts 1st January 2020 2,000

Purchases 478,000

Rent Income 5,900

Sales 861,100

Inventory as at 1st January 2020 87,300

Sundry expenses 11,200

Telephone 11,200

Wages & Salaries 12,000

Long term Investments 30,000

1,872,300 1,872,300
Additional Information
1. Inventory as at 31 December 2020 was valued at 84,000. To sell
the inventory an additional cost of Rs. 4,000 is to be incurred. The
cost of the inventory was 90,000.
2. Drawings of the owner by goods 2,500 and by cash 3,000 from the
business.
3. Accrued expenses as at 31.12.2020
Electricity - Rs.1200
4. Prepayments as at 31.12.2020
Advertising - Rs.500
5. Provision for doubtful debts should be adjusted as 10% from the
debtors.
6. Provision for Depreciation should be adjusted as follows.
Building - Straight line basis 5%
Furniture - Straight line basis 10%
Machinery - Reducing Balance basis 10%
Motor Vehicle - Reducing Balance basis 25%
Required.
1. Profit & Loss Account for the year ended 31st December 2020
2. Balance Sheet as at 31st December 2020.
Question 02

Given below is the Trial Balance of Lassana Traders for the year ended
31st December 2019.

Lassana Traders Trial Balance as at 31.12.2019

Account Debit Credit
Opening inventory at 01.01.2019 100,000
Cash in hand 25,000
Cash at bank/ Bank Overdraft
45,000
Purchases 900,000
Return inwards 15,000
Salaries and wages 675,000
Electricity 160,000
Carriage outwards 45,000
Carriage inwards 54,000
Building (at cost) 2,500,000
Land (at cost) 4,000,000
Machinery (at cost) 4,000,000
10% Bank Loan (obtained on
1/1/2019) 1,000,000
Advertising Expenses 155,000
Drawings 25,000
Insurance 16,000
Trade Debtors 900,000
Postal Charges 5,000
Sales commission 15,00
0
Provision for Depreciation-Buildings 325,000
(1/1/2019)
Provision for Depreciation-Machinery 350,000
(1/1/2019)
Provision for Doubtful debts 75,000
( 1/1/2019)
Sales 2,500,000
Return Outwards 150,000
Capital 9,000,000
Trade payables 60,000
Rent received 55,000
13,575,000 13,575,000

The following additional information is available.

1. The closing inventory as at 31.12.2019 is Rs. 250,000. This stock

can be sold for Rs. 160,000 after incurring selling expense of Rs.
40,000.
2. The company policy is to depreciate Buildings at 5% Straight Line

basis and Machinery at 10% reducing balance method.

3. It has been decided to write off a debtor worth Rs. 25,000. The

company policy is to provide 10% of the debtor balance as

provision for doubtful debt.
4. The owner has taken inventory worth Rs. 15,000 homes but no

records have been made in respect of this.

5. Insurance expense of Rs. 4,000 is due at the end of the year.

6. It was revealed that the postal charge of Rs. 2000 has been

incorrectly recorded to the Advertising expense account. 

7. The business has paid the electricity expense of Rs. 1000 for the

month of January 2020 on 31st December 2019.

 8. The company has received Rs. 4,000 as an advance for January

month’s rent during the month of December 2019.

You are required to prepare;

1. The Income Statement for the year ended 31 st December
2019.
2. The Balance Sheet as at 31st December 2019.