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MBA Chp-10 Final Accounts WITH Adjustment
MBA Chp-10 Final Accounts WITH Adjustment
10.1 INTRODUCTION
In the previous Chapter 9, we have studied the manner in which the final accounts are
prepared. The two components of final accounts reveal the financial performance
(through Income Statement) and the financial position (through Balance Sheet). These are
prepared on the basis of information available in Trial balance.
At the end of the accounting period, there are many transactions and events that remain
unaccounted like outstanding expenses, prepaid expenses, accrued income, etc. These
transactions and events need to be adjusted so that the final accounts give true and fair
view of results as well as the financial position. The journal entries, passed to incorporate
these adjustments, are called as Adjustment Entries. When these are given outside the
Trial Balance, usually two accounts are affected:
(a) Trading and Profit and Loss A/c
(b) Balance sheet
These adjustments have been discussed in the current chapter. The comprehensive
problems are also given, after discussion of these adjustments.
The purchase and sale of goods are entered in the books through “Purchases A/c” and
“Sales A/c” respectively. Similarly, returns are incorporated through “Returns Inwards”
and “Returns Outwards” A/c. Therefore, as such, there is no account which automatically
discloses the value of stock, at the end of the year. The valuation and incorporation of
closing stock is required due to two reasons:
(i) The Trading A/c is debited with Opening Stock and Purchases. The sales are credited.
Now, in order to find out the gross profit, there is a need to compare the sales with
Cost of Goods sold (COGS). When the amount of closing stock is credited, the Trading
A/c finally gets COGS to the debit side.
(ii) The closing stock is an item of Current asset. It is disclosed in the Balance Sheet so
that the positional statement may reveal information about all the assets.
Balance Sheet
As on ……………..
ASSETS AMOUNT LIABILITIES AMOUNT
Current Assets
Closing Stock XXX
Illustration 10.1
The following information is given in the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Opening stock 30,000
Purchases 2,95,000
Closing Stock 15,000
Show the relevant disclosure in Trading A/c and Balance Sheet.
Solution:
Trading Account
Particulars Amount Particulars Amount
To Opening Stock 30,000
To Purchases 2,95,000
Balance Sheet
Liabilities Amount Assets Amount
Closing Stock 15,000
(ii) Closing stock is shown on the asset side of the Balance Sheet under current assets.
Trading account
For the year ended ………..
Particulars Amount Particulars Amount
To Adjusted Purchases XXX
Balance Sheet
As on ……………..
ASSETS AMOUNT LIABILITIES AMOUNT
Current Assets
Closing Stock XXX
Illustration 10.2
The following information is given in the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
To Purchases 7,45,000
Balance Sheet
Liabilities Amount Assets Amount
Closing Stock 12,000
Illustration 10.3
Consider the following information:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Opening Stock 2,00,000
Purchases 18,00,000
Direct Expenses 1,20,000
Indirect expenses 90,000
Sales 21,10,000
If the closing stock is Rs. 4,20,000, prepare Trading A/c.
Solution:
Trading Account
Particulars Amount Particulars Amount
To Opening Stock 2,00,000 By Sales 21,10,000
To Purchases 18,00,000 By closing Stock 4,20,000
To Direct Expenses 1,20,000
To Gross Profit 4,10,000
25,30,000 25,30,000
Tutorial Note:
1. Indirect expenses will be debited to Profit and Loss a/c.
2. Closing Stock Rs. 4,20,000 will be shown in Balance sheet also.
These are the expenses incurred in the current accounting period but remain
unpaid up to the end of the period. It may be outstanding wages, outstanding rent,
outstanding salary, etc. The following adjustment entry is passed for outstanding
expense given as an adjustment.
Expenses A/c Dr. XXX
To Outstanding Expenses A/c XXX
(Being unpaid expenses provided)
Illustration 10.4
The following information is given in the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Rent 50,000
Salaries 90,000
Outstanding salary (o/s) 10,000
In addition, Outstanding Rent (Rs. 5,000) is also given outside the Trial Balance. You are
required to answer the following:
(1) What is the amount paidtowards Rent in the current year?
(2) What is the Rent Expense to be debited to Profit and Loss Account of the Current
Year?
(3) What is the amount paid towards salary in current year?
(4) Show the extracts in Final Accounts.
Solution:
(1) Rent Paid = Rs. 50,000
(2) Rent Expenses = Paid (Rs. 50,000) + Outstanding (Rs. 5,000) = Rs. 55,000
(3) Salary Paid = Rs. 80,000
(4) Extracts in Final Accounts:
Profit and Loss Account
Particulars Amount Particulars Amount
To Rent 50,000
+ Outstanding 5,000 55,000
To Salaries 90,000
(including o/s Rs. 10,000)
Balance Sheet
Liabilities Amount Assets Amount
Current Liability
Outstanding Rent 5,000
Outstanding Salary 10,000
The expenses are charged to Profit and Loss A/c of the period to which they are related.
Therefore, if in the current period, some expenses have been paid in advance, then such
portion is treated as an asset in the closing balance sheet of the current year. The
adjustment entry is:
Note: When prepaid expenses are given in the trial balance, then prepaid expenses are
shown in the balance sheet only as a current asset.
Profit and Loss Account
Particulars Amount Particulars Amount
To Expenses XXXXX
- Prepaid (XXX) XXXXX
Balance Sheet
Liabilities Amount Assets Amount
Current Asset
Prepaid expenses XXX
Illustration 10.5
Trial Balance
Particulars Dr. Cr.
Amount Amount
Insurance 36,000
The insurance premium is prepaid to the extent of Rs. 6,000.
Show the extracts in Final Accounts.
Solution:
Profit and Loss Account
Particulars Amount Particulars Amount
To Insurance 36,000
- Prepaid (6,000) 30,000
Balance Sheet
Liabilities Amount Assets Amount
Current Asset
Prepaid Insurance 6,000
These incomes are related with the current period but not yet been received. The
following is the adjustment entry in this regard:
Balance Sheet
Liabilities Amount Assets Amount
Current Asset
Outstanding Income XXX
It is that portion of income which has been received in current period but is
actually related with next period. Such income received in advance is treated as a
liability. The following is the adjustment entry:
Note: If any outstanding or prepaid item is given in Trial balance itself, then they
are taken to balance sheet only.
Illustration 10.6
The following information is given in the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Salaries 1,40,000
Outstanding salary 14,000
Rent 70,000
Insurance 20,000
Commission 24,000
In addition, following items are given outside the Trial Balance:
(a) Outstanding Rent Rs. 30,000
(b) Prepaid Insurance Rs. 4,000
(c) Commission received in advance Rs. 5,000
Show the extracts in Final Accounts.
Solution:
Profit and Loss Account (extracts)
Particulars Amount Particulars Amount
To salary 1,40,000 By Gross Profit ??
To Rent 70,000 By Commission 24,000
+ Outstanding 30,000 1,00,000 - Advance (5,000) 19,000
To Insurance 20,000
-Prepaid (4,000) 16,000
Balance Sheet(extracts)
Liabilities Amount Assets Amount
Current Liability Current Asset
Outstanding Rent 30,000 Prepaid Insurance 4,000
Outstanding Salary 14,000
10.7 Depreciation
The depreciation is the expired utility of a fixed asset. It is charged to Profit and
Loss A/c. The entry depends upon the fact whether provision for depreciation a/c
is maintained or not.
(a) When depreciation is directly credited to Asset A/c:
Depreciation A/c Dr. XXX
To Asset A/c XXX
(Being depreciation provided)
Profit and Loss A/c Dr. XXX
To Depreciation A/c XXX
(Being the transfer of Depreciation)
(b) When Provision for Depreciation A/c is maintained:
Depreciation A/c Dr. XXX
To Provision for Depreciation A/c XXX
(Being depreciation provided)
Profit and Loss A/c Dr. XXX
To Depreciation A/c XXX
(Being the transfer of Depreciation)
Note: When depreciation is given in the Trial Balance, it means the firm has
already deducted the amount from corresponding Fixed Assets. So, in that
case, this depreciation will be debited to profit and Loss A//c only. (Refer
Chapter 11).
Bad Debts are that amount that could not be realized from the debtors. The
following is the accounting treatment:
(1) If bad debts are given in Trial Balance, then it is simply taken to Profit and
Loss A/c only. No adjustment is required in the Balance sheet as it has already
been deducted from debtors.
Illustration 10.7
The following information is given in the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Debtors 2,70,000
Bad Debts 5,000
Show the extracts in Final Accounts.
Solution:
Profit and Loss Account (extracts)
Particulars Amount Particulars Amount
To Bad Debts 5,000
(2) If bad debts are given as an adjustment (i.e. further bad debts given outside
the trial balance): The following adjustment entry is passed:
(a) On the debit side of Profit and Loss A/c, these further bad debts are
shown as addition to bad debts already written off.
(b) On the asset side of the balance sheet, these are deducted from sundry
debtors.
Illustration 10.8
The following information is given in the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Debtors 2,15,000
Bad Debts 3,000
In addition, further bad debts Rs. 4,000 are given outside the Trial Balance.
Show the extracts in Final Accounts.
Solution:
Profit and Loss Account (extracts)
Particulars Amount Particulars Amount
To Bad Debts 3,000
+ Further Bad Debts 4,000 7,000
On account of prudence concept, the expected losses are provided whereas the
expected profits are not anticipated in the books. It is followed at the time of
preparing the final accounts. As regards debtors at the end of the current year, the
realization will be made in the next year. Any bad debts will be reported in that
next period only. Therefore, as a matter of prudence, provision is required for such
expected bad debts. So that, if these may be charged to such provision account in
place of P & L a/c. The following adjustment entry is passed:
Illustration 10.9
The following information is given in the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Debtors 5,00,000
The provision @ 4% will be maintained for doubtful debts.
Show the accounting treatment.
Solution:
P & L A/c Dr. 20,000
To Provision for doubtful debts A/c 20,000
(Being amount provided for expected bad debts)
Illustration 10.10 [When Provision for Doubtful Debts is NOT given in Trial Balance]
The following information is the extract from the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Debtors 4,00,000
Additional Information: Create a Provision for Doubtful Debts @ 4% on sundry
debtors. Pass necessary journal entry and show these items in the Profit and Loss A/c
and Balance Sheet.
Solution: Adjustment Entry:
P & L A/c Dr. 16,000
To Provision for doubtful debts A/c 16,000
(Being provision made for doubtful debts)
Illustration 10.11 [When Provision for Doubtful Debts is GIVEN in Trial Balance]
The following information is the extract from the Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Debtors 4,00,000
Provision for Doubtful Debts 16,000
Additional Information: Maintain a Provision for Doubtful Debts @ 5% on sundry
debtors. Pass necessary journal entry and show these items in the Profit and Loss A/c
and Balance Sheet.
Solution:
Adjustment Entry:
P & L A/c Dr. 9,000
To Provision for doubtful debts A/c 9,000
(Being provision made for doubtful debts)
Illustration 10.12 [When Provision for Doubtful Debts is GIVEN in Trial Balance]
Consider the following Trial Balance:
Trial Balance
Particulars Dr. Cr.
Amount Amount
Debtors 2,00,000
Bad debts 19,500
Provision for Doubtful Debts 14,000
Additional Information: Maintain a Provision for Doubtful Debts @ 5% on sundry
debtors. Pass necessary journal entry and show these items in the Profit and Loss A/c
and Balance Sheet.
Solution:
Usually debtors are allowed cash discount for prompt payment by them before the
due date. This discount allowed is an expense. If the payment is received from
debtors in next year and discount is allowed at that time, the expense will be
booked in next year, instead of current year. Therefore, provision for discount is
also maintained for discount on debtors.
Important to note: The expected discount to be allowed is charged as expense in
current year and credited to Provision for Discount on Debtors A/c. In next year, the
actual discount allowed is debited to this Provision for Discount A/c and not to
Profit and Loss A/c. Since discount is allowed on debts making payment, it is not
calculated on bad debts. Therefore, Provision for Discount is calculated on the
amount of debtors after deducting further bad debts and Provision for Doubtful
Debts. When Provision for Discount A/c is created, the following entry is passed:
Illustration 10.14
The Net Profit before commission is Rs. 5,88,000. Calculate the manager’s
commission if it is payable at:
(a) 8% of Net Profit before charging any commission.
(b) 5% of Net Profit after charging such commission.
Solution:
(a) 8% of Net Profit before charging any commission.
𝑹𝒂𝒕𝒆 𝒐𝒇 𝑪𝒐𝒎𝒎𝒊𝒔𝒔𝒊𝒐𝒏
Commission = Net Profit before Commission × 𝟏𝟎𝟎
8
= Rs. 5,88,000 × = Rs. 47,040
100
(b) 5% of Net Profit after charging such commission.
𝑹𝒂𝒕𝒆 𝒐𝒇 𝑪𝒐𝒎𝒎𝒊𝒔𝒔𝒊𝒐𝒏
Commission = Net Profit before Commission × 𝟏𝟎𝟎 + 𝑹𝒂𝒕𝒆 𝒐𝒇 𝑪𝒐𝒎𝒎𝒊𝒔𝒔𝒊𝒐𝒏
5
= Rs. 5,88,000 × 100+5 = Rs. 28,000
Illustration 10.15
The following is the Trial Balance of Ritu Traders as on 31st December, 2018.
Illustration 10.16
On March 31, 2019 the following Trial Balance was extracted from the books of Sharma and
company:
Particulars Dr. Amount (Rs.) Cr. Amount (Rs.)
Capital A/c — 1,00,000
Plant & Machinery 1,00,000 —
Sales — 4,07,000
Purchases 2,60,000 —
Return 6,000 5,750
Opening Stocks 40,000 —
Discounts 350 —
Bank Charges 75 —
S. Debtors 45,000 —
S. Creditors — 35,000
Salaries 26,800 —
Wages 30,000 —
Carriage 1,950
1,325
Bad Debts Provision —
Rent, Rates & Taxes 10,000 —
Advertising 2,000 —
Cash in Hand 900 —
Cash at Bank 6,000 —
Furniture & Fitting 20,000 —
5,49,075 5,49,075
You are required to prepare final accounts for the year ended 31st March, 2019 and the Balance Sheet
as on the date. The following adjustments are required :
1. Closing Stock Rs. 35,000.
2. Depreciation on Plant and machinery @ 15% p.a., and on furniture and fittings @10% p.a., to
be provided.
3. Bad Debts provision to be adjusted to Rs. 500.
4. Interest on Capital to be allowed at 10% p.a.
5. 15% of the profit remaining after charging interest on capital to be carried to General Reserve.
Solution
Trading and Profit and Loss A/c of Sharma and company
for the year ending 31st March, 2019
Particulars Amount Particulars Amount
Illustration 10.17
The following is the Trial Balance of Kamal Enterprises for the year ended 31st December,
2018. You are required to prepare a Profit & Loss Account and Balance Sheet after taking
into account the adjustments given below :
Debit Balances Amount Credit Balances Amount
(Rs.) (Rs.)
Cash in Hand 500 Sales 1,50,300
Cash at Bank 1,200 Purchase Returns 5,000
Office Furniture 6,000 Accounts Payable 12,000
Accounts Receivable 15,000 Bills Payable 8,000
Commissions 1,200 Discount Receivable 1,000
Bills Receivable 3,500 Dividend Received 2,000
Power and Fuel 6,000 Rent Receivable 3,500
Plant & Machinery 24,000 Capital 27,000
Office Expenses 2,000
Carriage Inwards 1,200
Carriage Outwards 3,500
Rent, Rates & Taxes 1,700
Leasehold Premises 25,000
Wages 30,000
Salaries 7,000
Opening Inventory 12,000
Sales Returns 2,000
Purchases 60,000
Drawings 7,000
2,08,000 2,08,000
Adjustments
(1) Closing Inventory as on 31.12.2018 Rs. 18,000.
(2) Depreciate Plant and Machinery at 10%.
(3) Salaries outstanding Rs. 1,000, Power and Fuel outstanding Rs. 2,000.
(4) Rs. 5,000 was spent on Plant and machinery but wrongly included in wages.
(5) Provide for bad and doubtful debts for Rs. 1,500.
(6) Discount earned but not received Rs. 100.
(7) Commission due but not recorded Rs. 200.
(8) Rent received includes Rs. 500 received in advance.
Solution
Kamal Enterprises
Trading and Profit and Loss Account for the year ending 31.12.2018
Particulars Amount Particulars Amount
To Opening Inventory 12,000 By Sales 1,50,300
To Purchases 60,000 Less : Returns 1,48,300
2,000
Less : Return 5,000 55,000 By Closing Inventory 18 000
To Wages 30,000
Add : Spent on Plant &
Machinery 5,000 25,000
To Fuel and Power 6,000
Add: Outstanding 2,000 8,000
To Carriage Inwards 1,200
To Gross Profit c/d 65,100
1,66,300 1,66,300
To Office Expenses 2,000 By Gross Profit b/d 65,100
To Commission 1 200 By Discounts Received 1,000
Add : Outstanding 200 1,400 Add : Discounts earned but
not Received 100 1,100
Illustration 10.18
. The following is the Trial Balance extracted from the books of Mohan as on 30 September,
2018.
Particulars Dr. Amount (Rs.) Cr. Amount (Rs.)
Capital Account — 1,00,000
Plant & Machinery 78,000 —
Furniture 2,000 —
Purchases and Sales 60,000 1,27,000
Returns 1,000 750
Opening Stock 30,000 —
Discount 425 800
Sundry Debtors/Creditors 45,000 25,000
Salaries 7,550 —
Manufacturing wages 10,000 —
Carriage outwards 1,200
525
Provision for doubtful debts —
Rent, rates, Taxes 10,000 —
Advertisements 2,000 —
Cash 6,900 —
2,54,075 2,54,075
Prepare trading and profit and loss Account for the year ended 30 September 2018 and a balance sheet
on that date after taking into account the following adjustments:
(a) Closing stock was valued at Rs. 34,220.
(b) Provision for doubtful debts is to be kept at Rs. 500.
(c) Depreciate plant and machinery @ 10% p.a.
(d) The proprietor has taken goods worth Rs. 5,000 for personal use and additionally distributed
goods worth Rs. 1,000 as samples.
(e) Purchase of furniture Rs. 920 has been passed through purchases book.
Solution
Mohan
Trading and Profit and Loss Account
For the Year ended 30 September, 2018
Dr. Cr.
Particulars Amount Particulars Amount
To Opening Stock 30,000 By Sales 1,27,000
To Purchases 60,000 Less : Returns 1,000 1,26,000
Less : Returns 750 By Stock at the end 34,220
59,250
Less : Drawings 5,000
54,250
Less : Samples 1,000
53,250
Less : Furniture purchased 920 52,330
To Manufacturing wages 10,000
To Gross Profit c/d 67,890
1,60,220 1,60,220
To Salaries 7,550 By Gross Profit b/ d 67,890
To Rent, rates and taxes 10,000 By Discount 800
To Carriage outwards 1,200 By Provision for bad debts (525-500) 25
To Advertisement 2,000
To Depreciation on Plant and
Machinery (10% of Rs. 78,000) 7,800
To Discount 425
To Advertisements (Samples) 1,000
Illustration 10.19
From the following Trial Balance of Shri Shivam as on 31st March, 2019, You are required to
prepare a Trading and profit & Loss Account for the year ended 31st march, 2019 and
Balance Sheet as on that date, after making the necessary adjustments as mentioned
hereunder:
Particulars Dr. Amount (Rs.) Cr. Amount (Rs.)
Shivam’s Capital — 1,60,000
Shivam’s Drawings 24,000 —
Furniture and Fixtures 8,000 —
Plant & Machinery 60,000 —
Patents (Ten years from 01.4.2018) 40,000 —
Stock on 1.4.2018 40,000 —
Purchases 1,70,000 —
Salaries 14,800 —
Wages 30,000 —
Sundry Debtors 20,400 —
Sales — 2,64,000
Cash in Hand 13,250 —
Land 28,350 —
Loan from Shyam (at 6% from 01.10.2018) — 20,000
Postage and Fax 3,000 —
Rent, Rates and Taxes 7,200 —
Bad Debts 800 —
Sundry Creditors — 24,000
Discount — 1,200
Carriage Inward 400 —
Interest on Loan 300 —
Insurance 1,600 —
Travelling Expenses 1,000 —
Sundry Expenses 600 —
Cash at Bank 20,500 —
Bank Overdraft — 15,000
Total 4,84,200 4,84,200
Adjustments
(i) Stock as on 31.3.2019 is valued at Rs. 30,000.
(ii) A new machine was installed on 1st April, 2018 for Rs. 3,000. No entry in this respect was
passed in the books. Wages of Rs. 1,000 paid for installing the machine were debited to
Wages Account.
(iii) Of the sundry debtors, Rs. 200 are bad and are to be written off. You are required to maintain
a provision for doubtful debts @ 5% on debtors and provision for discount on debtors @2%.
(iv) Goods costing Rs. 2,000 were given away as free samples for publicity.
(v) Depreciate Plant & Machinery at 20% per annum and Furniture and Fixtures at 10% per
annum.
(vi) On 01.4.2018, Machinery of the value of Rs. 10,000 was destroyed by fire and the insurance
claim settled at Rs. 8,000 was credited to Machinery Account.
(vii) Goods costing Rs. 1,000 were sent to a customer for Rs. 1,200 on 30th March 2019 on sale
or return basis. This was recorded as actual sales.
Solution
Trading and Profit and Loss Account for the year ended 31st March, 2019
Illustration 10.20
On 31.12.2018 the following Trial Balance was prepared from the books of Rohit :
Dr. (Rs.) Cr. (Rs.)
Sundry Debtors 50,600
Sundry Creditors — 10,000
Bills Receivable 5,000 —
Plant & Machinery 75,000 —
Purchases 90,000 —
Capital — 70,000
Freehold Premises ! 50,000 —
Salaries 11,000 —
Wages 14,400 —
Postage and Stationery 750 —
Carriage In 750 —
Carriage Out 1,000 —
Bad Debts 950
350
Bad Debts Provisions —
General Charges 1,500 —
Cash at Bank 5,300 —
Cash in Hand 800 —
Bills Payable — 5,000
Reserve — 20,000
Sales — 2,31,700
Closing Stock 30,000 —
3,37,050 3,37,050
(v) It was discovered in January 2018 that stock sheets as on 31.12.2017 were overcast by
Rs. 1,000
You are required to prepare Trading and Profit and Loss account for the year ended 31st
December, 2018 and a Balance Sheet as at that date.
Solution :
Trading and Profit and Loss A/c for the year ending 31st December, 2018
Particulars Amount Particulars Amount
To Purchases 90,000 By Sales 2,31,700
Less : Overcast Stock 1,000 89,000
To Wages 14,400
To Carriage Inward 750
To Gross Profit 1,27,550
2,31,700 2,31,700
To Salaries 11,000 By Gross Profit 1,27,550
Add : O/S 9,000 20,000
To Post & Stationery 750
To Carriage out 1,000
To Bad Debts 950
Add: New Provision 1,265
2,215
Less : Old Provision 350 1,865
To General Charges 1,500
To Interest on Capital 3,500
To Net Profit transferred 98,935
to Capital Account
1,27,550 1,27,550
Q.1 From the following Trial Balance prepare Trading, Profit & Loss Account and Balance
Sheet as on 31st December 2018.
Dr. Balances Cr. Balances
(Rs.) (Rs.)
Capital — 25,000
Loans — 5,000
Sales — 35,000
Account Payable — 4,000
Bills Payable — 5,000
Purchase Returns — 2,000
Dividends Received — 3,000
Plant & Machinery 13,000 —
Buildings 17,000 —
Receivable 9,650 —
Purchases 18,000 —
Discount Allowed 1,200 —
Wages 7,000 —
Salaries 3,000 —
Travelling Expenses 750 —
Freight 200 —
Insurance 300 —
Q.2 From the following Trial Balance prepare Trading and Profit and Loss Account for the year
ended 31st December, 2018 and Balance Sheet as on that date :
Dr. (Rs.) Cr. (Rs.)
Drawings 10,000 —
Stock on 1,1,2018 46,000
Purchases and Purchases Returns 1,50,200 600
Cash in Hand 3,400 —
Bank Balance 22,660 —
Freehold Premises 38,600 —
Trade Expenses 840 —
Printing, Stationery and Advertising 1,640 —
Professional Charges 280 —
Commission Received — 3 300
Investments as on 1st Jan. @ 10% 4,000 —
Interest on above — 200
Sundry Debtors and Creditors 36,000 29,000
Wages 25,000 —
Salaries 14,000 —
Capital — 1,14,000
Income Tax 1,600 —
Discount allowed and Received 6,300 4,600
Sales Returns and Sales 550 2,08,950
Bills Receivable / Bills Payable 3,200 10,000
Office Furniture 3,050 —
Rent, Rates and Insurance 4,000 —
Bad Debts Provision — 670
Total 3,71,320 3,71,320
Adjustments
(а) Provide for wages Rs. 5,000.
(b) Write Off 5% depreciation on freehold premises and 10% on office furniture.
(c ) Insurance to the extent of Rs. 200 relates to 2019.
(d) Stock on 31.12.2018 is l 5,20,000.
(e ) Charge interest on capital 5% and on drawings Rs. 300.
(f) Further bad debts are Rs. 1,000.
(g) Provide for doubtful debts @ 5% on sundry debtors.
(h) Make provision for discount on debtors and reserve for discount on creditors @ 2%.
[Ans. G.P: Rs. 34,800; N.P.: Rs. 4,840; Balance sheet Total: Rs. 1,57,660]
Q.3 Mr. Neel had prepared the following Trial Balance from his Ledger as on 31st March,
2019.
Particulars Dr. Amount (Rs.) Cr. Amount (Rs.)
Stock as on 1st April, 2018 5,00,000 -
Purchases and Returns 31,00,000 45,000
Sales and Returns 55,000 41,50,000
Cash in Hand 2,50,000 —
Cash at Bank 5,00,000 —
Trader’s Capital — 22,59,200
Rates and Taxes 50,000 —
Drawings 45,000 —
Salaries 95,000 —
Postage & Telegram 1,05,000 —
Insurance 90,000 —
Salesman Commission 78,000 —
Printing and Stationery 95,500 —
Advertisement 1,70,000 —
Furniture and Fittings 5,50,000 —
Motor Car 48,000 —
Discounts ' 50,000 75,000
General Expense 65,700 —
Carriage Inward 10,000 —
Carriage Outward 22,000 —
Wages 50,000 —
Sundry Debtors/Creditors 10,00,000 4,00,000
Total 69,29,200 69,29,200
You are required to prepare Trading and Profit & Loss Account for the year ended on
31st March, 2019 and Balance Sheet as on that date after making the necessary
adjustments.
You are provided with the following information :
(i) Closing Stock as on 31st March, 2019 Rs. 1,45,000.
(ii) Neel had withdrawn goods worth Rs. 50,000 during the year.
(iii) Purchases include Purchase of furniture worth Rs. 1,00,000.
(iv) Debtors include Rs. 50,000 bad debts.
(v) Sales include goods worth Rs. 1,50,000 sent out to NN & Co., on approval and
remained unsold as on 31st March, 2019. The cost of the goods was Rs. 1,00,000.
(vi) Provision for Bad Debts is to be created at 5% of Sundry Debtors.
(vii) Depreciate Furniture and Fittings by 10% and Motor Car by 20%.
(viii) The salesman is entitled to a commission of 10% on total sales.[CA 2004]
[Ans. G.P: Rs. 7,25,000; N. Loss.: Rs. 5,02,300; Balance sheet Total: Rs. 23,78,400]
Q.4 Prepare Trading and Profit & Loss Account and Balance Sheet as on 31st March 2019:
from the following balance :
Amount
(Rs.)
M. Mirza’s Capital A/c 1,19,400
M. Mirza’s Drawings A/c 10,550
Sundry Creditors 59,630
15% Loan A/c (Cr.) 20,000
Cash in Hand 3,030
Cash at Bank 18,970
Sundry Debtors (Including Badri Das for Dishonoured bill of Rs.
1,000) 62,000
Bills Receivable 9,500
Stocks in hand on March 31, 2019 was Rs. 1,28,960. Write off half of Badri Das’s
dishonoured bill. Create a provision of 5% on Sundry Debtors. Charge 10% interest on
Capital. Manufacturing Wages include Rs. 1,200 for erection of new machinery purchased
last year. Depreciate Plant and Machinery by 15% and Fixtures and Fittings by 10% per
annum. Commission earned but not received amount to Rs. 600- Interest on loan for the
last two months is not paid.
[Ans. G.P: Rs. 96,570; N. Profit.: Rs. 52,313; Balance sheet Total: Rs. 2,53,233]
Q.5 Shri Patit Bansali submitted to you the following Trial Balance, which he has not been
able to agree. Rewrite the Trial Balance and prepare Trading and Profit & Loss Account
for the year 31.12.2018 and a Balance Sheet as on that date after giving effect to the under
mentioned adjustments:
Particulars Dr. Amount (Rs.) Cr. Amount (Rs.)
Capital — 16,000
Opening Stock 17,500 —
Closing Stock — 18,790
Drawings 3,305 —
Return Inward — 550
Carriage Inward 1,240 —
Deposit with X 1,400
Return Outward 840 —
Carriage Outward — 725
Rent Paid 800 —
Rent Outstanding 150 —
Purchases 13,000 —
Sundry Debtors 5,000 —
Sundry Creditors — 4,000
Furniture — 29,000
Sales — 29,000
Wages 850 —
Cash 1,370 —
Goodwill 1,800 —
Advertisement 950 —
48,305 70465
Adjustments
(i) Write off Rs. 600 as Bad Debts and make Reserve for Bad Debts on Sundry Debtors at
5%.
(ii) Stock valued at Rs. 2,000 was destroyed by fire on 25 December, 2018 but Insurance
Company admitted a claim for Rs.1,500 only and paid the sum in January, 2019.
(iii) Depreciate Furniture by 10%.
[Ans. Correct Total of Trial Balance Rs. 49,990; G.P. Rs. 17,490; N.P. Rs. 13,545; Total
of B/S Total Rs. 30,390.]