Unit 2: Preparation of Books of Accounts and Financial Statement

1)Send submits to you the following trial balance. Prepare final accounts foe the year
ending March 31, 2018 and a balance sheet as on that date after giving effect to the
undermentioned adjustments:

Dr. Cr.

₹ ₹
Drawings 3,250 Capital 15,000
Stock(1-4-2017) 17445 Returns Inwards 554
Carriage Inwards 1240 Deposits with Das Gupta 1,375
Rent 820 Carriage Outwards 725
Returns Outwards 840 Loan to Chatterjee@5% p.a. 1,000
Rent Outstanding 130 Interest on above 25
Purchases 12970 Stocks (31-3-2018) 18,792
Debtors 4000 Creditors 3,000
Advertisement 954 Provision for Doubtful Debts 1,200
Bad Debts 400 Sales 27,914
Patents and Patterns 500 Discounts Allowed 330
Wages 754
Cash 62
Goodwill 1730

45095 69915

(i) Managers Is entitled to a commission of 10% of net profits after charging such
commission.
(ii) Increase bad debts by ₹600. Provision for doubtful debts is to be 10% and provision
for discount on debtors at 5%.
(iii)Stocks valued at ₹1500 destroyed by fire. Insurance Co., admitted claim for ₹950
only. Payment is yet to be received.
(iv) Carry forward ₹200 of advertisement to next year.
(v) Amount was loaned to Chatterjee on April 1,2017.
2) Following is the Balance of Ranbir as at 31st March, 2018:

Particular Dr Cr
Cash in Hand 2,080
Cash at Bank 4,260
Purchases 1,13,350
Returns Outward 1,000
Sales ` 2,37,560
Returns Inwards 1,360
Wages 25,960
Fuel and Power 11,460
Carriage on Sales 9,400
Carriage on Purchases 5,080
Stock on 1st April, 2017 31,520
Building 65,000
Freehold Land 25,000
Machinery 44,000
Salaries 35,000
Patents 15,000
General Expenses 6,000
Insurance 1,200
Capital 1,82,000
Drawings 10,490
Sundry Debtors 39,000
Sundry Creditors 22,600
Input CGST 7,500
Input SGST 7,500
Output IGST 15,000

4,58,160 4,58,160

You are required to prepare Trading and Profit and Loss Account for the year ending 31st March ,2018
and Balance Sheet as on that date after considering the following adjustments:
1. Stock at hand on 31st March ,2018 is Rs15000
2. Machinery is to be depreciated @ 10% and patents @ 20%
3. Salaries for the month of March, 2018 amounted to Rs3000 were unpaid.
4. Insurance included a premium of Rs170 for next year
5. Wages included a sum of Rs5000 spent on constructing a cycle shed for employees and
customers
6. A provision for Doubtful Debts is to be created to the extent of 5% on Sundry Debtors .
 3) From the following trial balance and additional information. You are required to prepare final
accounts :

Particulars Debit Credit

Capital 20000
Sundry Debtors 5400
Drawings 1800
Machinery 7000
Sundry Creditors 2800
Wages 10000
Purchases 19000
Opening Stock 4000
Bank Balance 3000
Carriage Charges 300
Salaries 400
Rent and Taxes 900
Sales 29000

51800 51800
Additional information :

(i)Closing Stock Rs1200

(ii)Outstanding rent and taxes Rs100
(iii)Charge depreciation on machinery at 10%
(iv)Wages Prepaid Rs400
4) Following is the Trial Balance of M/s Kasturi Agencies as on 31st March, 2018. Prepare
Trading and Profit & Loss account for the ended 31st March, 2018 and a Balance Sheet
on that date:
Particulars Dr. Cr.
Capital - 1,00,000
Drawings 18,000 -
Buildings 15,000 -
Furniture & Fittings 7,500 -
Motor Van 25,000 -
Loan from Hari @ 12% Interest - 15,000
Interest paid on above 900 -
Sales - 1,00,000
Purchases 75,000 -
Opening stock 25,000 -
Establishment expenses 15,000 -
Wages 2,000 -
Insurance 1,000 -
Commission received - 4,500
Sundry debtors 28,100 -
Bank balance 20,000 -
Sundry Creditors - 10,000
Interest - 3,000

2,32,500 2,32,500

Adjustments
a) The value of stock on 31st March, 2018 was ₹32,000
b) Outstanding wages ₹500
c) Prepaid Insurance ₹300
d) Commission received in advance ₹1,300
e) Allow interest on capital @10%
f) Depreciate: Building 2½ %, Furniture & Fittings 10%, Motor Van 10%
g) Charge interest on drawing ₹500
h) Accrued interest ₹500
Answer- (G.P=₹ 29,500; N. P=₹5,575; B/S= total ₹1, 24,775)
5.) The following balances were extracted from the books of M/S Vinayaka Traders as on 31-
3-2018.
Particular Debit Credit
Capital __ 19,400
Purchase and Sales 41,400 55,140
Trade Debtors and Creditors 7,250 3,860
Stock as on 1-4-2017 4,120 __
Balance at Bank 3,920 __
Drawings 4,600 __
Motor van Expenses 510 __
Motor van 6,250 __
Rent and Rates 750 __
Salaries 8,120 __
Reserve for Doubtful Debts __ 250
Bad Debts 230 __
General expenses 1,120 __
Discount Allowed and 1,050 910
Received
Insurance 240 __

79,560 79,560

The following are the adjustments to be made;

i. Salaries and rent accrued but not paid $820 and $150 respectively.
ii. Insurance paid in advance $ 40.
iii. Maintain the reserve for doubtful debts at $ 300.
iv. Depreciation on Motor van to be made at 10%.
v. The stock in trade as on 31st march 2018 was valued at $ 5,040.

You are required to prepare a trading, profit and loss account for the year ending 31st
march 2018 and the Balance Sheet as on that date.
6) Following is the schedule of balance on 31st march 2018 extracted from the books of
Dinesh:
Particular Debit ($) Credit($)
Cash in hand 1,400 __
Cash at Bank 2,600 __
Sundry Debtors 86,000 __
Stock as on 1st April, 2017 62,000 __
Furniture and Fixtures 21,400 __
Office Equipment 16,000 __
Buildings 60,000 __
Motor Car 20,000 __
Sundry Creditors __ 83,000
Loan __ 30,000
Provision for Bad Debts __ 3,000
Purchases 1,40,000 __
Purchases Return __ 2,600
Sales __ 2,30,000
Sales Return 4,200 __
Salaries 11,000 __ __
Rent for Godown 5,500 __
Interest on Loan 2,700 __
Rate and Taxes 2,100 __
Discount Allowed to 2,400 __
Debtors __ 1,600
Discount Received from
Creditors 1,200 __
Freight on Purchases 2,000 __
Carriage Outwards 12,000 __
Drawings 1,800 __
Printing and Stationery 2,200 __
Electric Charges 5,500 __
Insurance Premium 3,000 __
General Office Expenses 2,000 __
Bad Debts 1,600 __
Bank Charges 3,600 __
Motor Car Expenses __ 1,62,000
Capital account 60,000
Input CGST 60,000
Input SGST 40,000
Output CGST 40,000
Output SGST

5,92,200 5,92,200
Prepare Trading and Profit and Loss account for the year ended 31st March, 2018 and Balance
Sheet as on the date after making the following adjustment:
i. Provide depreciation on__ (a) Building @ 5%; (b)Furniture and Fixture @ 10%;
(c) Office Equipment @15%; and (d) Motor Car @ 20%.
ii. Value of stock at the close of the year was $44,000.
iii. Provision for bad debts is to be maintained at 5% of sundry debtors.
iv. Insurance premium includes $4,000 paid towards proprietor’s life insurance policy
and the balance of the insurance charges covers the period from 1st July, 2017 to 30th
June , 2018.

7) From the following balances extracted from boos of ‘x’ firm, prepare trading and profit
and loss account and balance sheet as on 31-3-2018.
Particulars D,ebit(₹) Credit(₹)
Purchase/Sales 71,280 60,000
Capital/Drawings 4,440 60,000
Computer 18,000 _
Cash at Bank 4,380 _
Cash in hand 2,836 _
Stock on 1-4-2017 3,000 _
Miscellaneous Receipts _ 200
Patents 1,540 _
Rent 10,000 _
Trade Mark 2,090 _
Discount Received _ 2,000
Reserve Fund _ 13,000
Workmen’s Compensation Fund _ 2,000
Bills Receivable/Bills Payable 6,720 10,000
Freight inward 920 _
Sundry Debtors/Creditors 22,000 18,000
IDBI Shares 6,000 _
Commission _ 720
Computer Repair Expenses 1,156 _
Office Expenses 1,200 _
Dividend - 320
Provision for Doubtful Debts _ 432
Insurance Premium 550 _
Entertainment Expenses 2,000 _
Wages 1,800 _
Salaries 16,780 _
Returns 1,000 11,000
1,77,692 1,77,692
Adjustments:

(i) The Value of closing stock ₹ 8,000.

(ii) Rent outstanding ₹ 1,000.
(iii) Advance Salary paid ₹ 1,780
 (iv) Dividend accrued but not received ₹ 180
(v) Depreciate computer at 5% p.a. Write off patents at 10% p.a.
(vi) Create provision For discount on debtors and on creditors at 1% each.
(vii) Insurance premium prepaid ₹ 300.

[ Gross profit ₹ 1,000; Net Loss ₹26,828; Balance Sheet Total ₹ 72,552]

8) From the following Trial Balance Mr. Hari and additional information prepare Trading
and profit Loss Account and a Balance Sheet as on 31-12-2018.
Particulars Cr.(₹) Cr.(₹)
Capital 1,00,000
Furniture 20,000 -
Purchases 1,50,000 -
Debtors 2,00,000 -
Interest earned - 4,000
Salaries 30,000 -
Sales - 3,21,000
Purchases Return - 5,000
Wages 20,000 -
Rent 15,000 -
Bad Debts Written off 7,000 -
Creditors - 1,20,000
Drawings 24,000
Provision for Bad Debts - 6,000
Printing and Stationary 8,000 -
Insurance 12,000 -
Opening Stock 50,000 -
Office Expenses 12,000 -
Provision for Depreciation - 2,000
Sales Returns 10,000
5,58,000 5,58,000
Additional Information:
(a) Depreciate furniture by 10% on cost.
(b) A provision for doubtful debt is to be created to the extent of 5% on debtors.
(c) Salaries for the month of March 2018 of ₹ 3,000 was unpaid which is to be
provided for, However salaries included ₹2,000 paid in the advance.
(d) Insurance prepaid ₹ 2,000.
(e) Provide for O/S expense ₹ 6,000.
(f) Stock used for private purpose ₹ 6,000.
(g) Closing stock ₹ 60,000.
Ans. [Gross profit ₹ 1,62,000; Net Profit ₹69,000; Balance Sheet Total ₹ 2,70,000]
9) Following is the trial balance of Lakshmi Co. Ltd. as at 31st March,2018:
Rs Rs
Stock, 31st March, 2017 75,000
Sales 3,50,000
Purchases 2,45,000
Wages 50,000
Discount 5,000
Furniture and Fittings 17,000
Salaries 7,500
Rent 4,950
Sundry Expenses 7,050
Surplus Account 31st March, 2017 15,030
Dividends Paid 9,000
Share Capital 1,00,000
Debtors and Creditors 37,500 17,500
Plant and Machinery 29,000
Cash and Bank 16,200
Reserve 15,500
Patents and Trade Mark 4,830

5,03,030 5,03,030

Prepare Statement of profit and Loss for the year ended 31st March, 2018 and Balance Sheet as at the
date. Take into consideration the following adjustments:
i. Stock on 31st March, 2018 was valued at Rs 82,000.
ii. Depreciation on fixed assets @ 10%.
iii. Make a provision for income-tax @ 50%.
iv. Ignore corporate dividend tax.
10) A limited company was registered with an authorized capital of ₹30,00,000 inequity
shares of ₹10 each. Following is the list of balances extracted from its books on 31-3-2018:

Particulars ₹ Particulars ₹

Purchases 9,25,000 General Expenses 84,175

Wages 4,24,325 Stock on 1-4-2017 3,75,000
Manufacturing Expenses 65,575 Goodwill 1,00,000
Salaries 70,000 Cash in Hand 28,750
Bad Debts 10,550 Cash in Bank 2,22,000
Director’s fee 33,625 Subscribed and fully paid Capital 20,00,000
Debentures Interest paid 45,000 Surplus Account
Calls in Arrear 37,500 (credit balance) 72,500
Plant and Machinery 15,00,000 6% Debentures 15,00,000
Premises 16,50,000 Sundry Creditors 2,90,000
Interim Dividend paid 1,87,500 Bills Payable 1,67,500
Furniture and Fixtures 35,000 Sales 20,75,000
Sundry Debtors 4,36,000 General Reserve 1,25,000

You are required to prepare Statement pf Profit and Loss for the year ended 31st March,
2018 and the balance sheet as at that date, after making the following adjustments:
Depreciate Plant and Machinery by 10%. Provide half year’s interest on debentures.
Make the provision for bad and doubtful debts ₹4,250 on sundry debtors. Stock on 31st March,
2018 was ₹4,55,000. Corporate dividend tax is to be ignored.
Ans: [ Net Profit ₹2,97,500; B/S Total ₹42,72,500].
11) ABC Silver Ore Co. Ltd was formed on April 1, 2017 with an authorized capital of
₹6,00,000 in shares of ₹ 10 each. Of these 52,000 shares had been issued and subscribed but
there were calls in arrears on 100 shares. From the following trail balance as on March 31,2018
prepare Profit and Loss Statement and Balance Sheet.

Particulars ₹ ₹
Cash at Bank 1,05,500 -
Share Capital - 5,19,750
Plant 40,000 -
Sale of Silver - 1,79,500
Mines 2,20,000 -
Promotion Expenses 6000 -
Interest on F.D upto Dec. 31 - 3,900
Dividend on Investment - 3,200
Royalties paid 10,000 -
Railway Track and Wages 17,000 -
Wages of Miners 74,220 -

Advertising 5,000 -
Carriage on Plant 1,800 -
Furniture and Buildings 20,900 -
Administrative Expenses 28,000 -
Repair to Factory Plant 900 -
Coal and Oil 6,500 -
Cash 530 -
Investments: Shares of Tin Mines 80,000 -
Brokerage on above 1,000 -
6% F.D in syndicate bank on 1-4-2017 89,000 -

7,06,350 7,06,350

Depreciate Plant and Railway by 10%, Furniture and Building by 5%. Write off one-third of
the promotion expenses. Value of silver on March 31,2018 was ₹ 15,000. The directors forfeited
on December 10,2017, 100 shares of which only ₹750 had been paid.
Ans: [ Net Profit ₹ 70,398; B/S Total ₹5,90,148]
 12) K Ltd. Was registered with a nominal capital of ₹5,00,000 dividend into
shares of ₹100 each. Following Trial Balance is extracted from the books
on 31st March, 2018:
₹ ₹
Buildings 2,90,000 Sales 5,20,000
Machinery 1,00,000 Salary Outstanding 2,000
Closing Stock 90,000 Provision for Bad Debt (1-4-2017) 3,000
Purchases (adjusted) 2,10,000 Share Capital 2,00,000
Salaries 60,000 General Reserve 40,000
Directors’ Fees 10,000 Surplus A/c 25,000
Rent 26,000 Creditors 92,000
Depreciation 20,000 Provision for Depreciation:
Bad Debts 6,000 on Building 50,000
Interest accrued on Investment 2,000 on Machinery
Investment: 12,000 shares of 14% Debentures 2,00,000
A Ltd. ₹10 each, ₹8 paid up 1,20,000 Interest on Debentures accrued
Debentures Interest 28,000 but not due 14,000
Loose Tools 23,000 Interest on Investments 12,000
Advance Tax 60,000 Unclaimed Dividend 5,000
Sundry Expenses 18,000
Debtors 1,25,000
Bank 30,000

12,18,000 12,18,000

Prepare Profit and Loss Statement for the year ending 31st March, 2018 and
Balance Sheet afte considering the following:
i. Closing stock is more than opening stock by ₹30,000.
ii. Provide for Bad debts @ 4% on Debtors.
iii. Make a provision for Income Tax @ 40%.
iv. Depreciation expense including depreciation of ₹8,000 on Buildings and that of ₹12,000 on
Machinery.
v. The directors recommended a dividend @ 25%.
vi. Transfer required amount to General Reserve.
 13) Following is the Trial Balance of Zee Ltd.as on 31st March, 2018:

Debit Balance Rs Credit Balances Rs

Stock on 1-4-2017 75,000 Purchases Returns 10,000
Purchases 2,45,000 Sales 3,40,000
wages 30,000 Discount Received 3,000
Carriage 950 Surplus A/C 15,000
Furniture 17,000 Share Capital 1,00,000
Salaries 7,500 Creditors 17,500
Rent 4,000 General Reserve 15,500
Sundry Trade Expenses 16,950 Bills Payable 7,000
Debtors 27,500
Plant and Machinery 29,000
Cash at Bank 45,300
Patents 4,800
Bills Receivable 5,000
5,08,000 5,08,000

Required:
Prepare Statement of Profit and Loss for the year ending 31st March, 2018 and a Balance
Sheet on thatdate after considering the following adjustments:
(a) Stock on 31-3-2018 was Rs.88,000.
(b) provide for income tax @ 35% and corporate dividend tax @ 10%.
(c) Depreciate Plant and Machinery at 15%, Furniture 10% and patents at 5%.
(d) Outstanding rent amounted to Rs.800 and outstanding salaries Rs.900.
(e) Provide Rs.510 for doubtful debts.
(f) The Board recommends payment of dividend @ 15% per annum.
(g) Transfer the minimum required amount to general reserve.
 14) Following is the trial balance of P.K. Limited as on 31st march, 2018
Debit Balance Amt Credit Balance Amt
Opening Stock 1,50,000 Equity Share Capital 5,00,000
Purchases 3,80,000 Purchase Returns 10,000
Wages 60,000 Sales 11,50,000
Carriages 2,000 Discount 6,300
Furniture 25,000 Surplus Account 1,70,000
Salaries 12,000 Sundry Creditors 33,700
Rent 15,000 General Reserve 82,000
Trade Expenses 11,000 Bills Payable 13,000
Sundry Debtors 54,000 Provision for Doubtful Debts 3,000
Plant and Machinery 12,00,000
Cash at Bank 21,500
Patents 9,000
Bills Receivables 14,000
Bad Debts 6,500
Discount Allowed 8,000
19,68,000 19,68,000

Additional Information:
(1) Stock on 31st March, 2018 Rs 2,00,000.
(2) Depreciate plant and machinery at 12%, furniture at 10% and patents at 20%.
(3) Further bad debts amounted to RS 4,000. Provide 5% on debtors for bad debts.
(4) Provide income tax @ 35% and for the corporate dividend tax @ 14%.
(5) The Board of directors recommended a dividend of 25%
Prepare Statement of Profit and Loss for the year ended 31ST March, 2018 and Balance Sheet
as on that date.
 15.
Following are the balances of ABC Limited as on 31st March,2018:

Following are the balances of ABC Limited as on 31st March,2018:

Debit Amount Credit Amount
Premise 30,72,000 Equity Share Capital 40,00,000
Plant 33,00,000 12% Debenture 30,00,000
Stock 7,50,000 Surplus Account 2,63,000
Debtors 8,70,000 Bills Payable 3,70,000
Goodwill 2,50,000 Creditors 4,00,000
Bank 4,52,000 General Reserves 2,50,000
Calls in Arrears 75,000 Sales 41,50,000
Interim Dividend Paid 6,00,000 Bad Debts Provision 35,000
Purchases 18,50,000
Wages 7,71,000
General Expenses 74,000
Salaries 2,03,000
Bad Debts 21,000
Debenture intrest Paid 1,80,000

1,24,68,000 1,24,68,000

Additional Information :
(1)Depreciation Plant by 10%.
(2) Half year’s Debenture interest due .
(3) Create 5% provision on Debtors for doubtful debts.
(4)Provide fir income Tax @35%.
(5) Stock on 31st March .2018 was ₹ 9,50,000.
(6) No final dividend is declared by the company.
(7) Ignore Corporate Dividend Tax.
(8) Transfer the minimum required amount to General Reserve.
Prepare Statement of Profit &Loss and Balance sheet as per schedule.