DK Goel Solutions Chapter 22 Financial Statements - With Adjustments

DK Goel Accountancy Class 11 Solutions Chapter 22 Financial Statements – With Adjustments which is outlined by expert Accountancy teachers from the latest version of DK Goel Class 11 Accountancy textbooks. We at BYJU’S provide DK Goel Solutions to assist students to comprehend all the theories in particular. There are numerous concepts in Accountancy, but the concepts of Trial Balance, Depreciation and Bank Reconciliation Statement (BRS) are required.

DK Goel Accountancy Class 11 Solutions – Chapter 22

Question 1

The following are the balances extracted from the books of Raghunath Ji as on 31st March, 2017. From these balances, prepare his Trading and Profit & Loss Account and Balance Sheet as at that date:

Dr.

(₹)

Cr.

(₹)

Opening Stock

12,000

Purchases

40,000

Sales

86,000

Discount

400

Sales Return

6,000

Buildings

50,000

Debtors

16,000

Salaries

2,400

Office Expenses

1,200

Wages

10,000

Purchase Return

4,000

Interest

800

Travelling Expenses

400

Fire Insurance Premium

800

Machinery

20,000

Carriage on Purchases

700

Commission

400

Cash in hand

2,300

Rent and Taxes

1,800

Capital

62,000

Creditors

10,800

1,64,000

1,64,000

Adjustment:-

1. Closing Stock was valued at ₹ 16,000.

2. Wages ₹ 2,000 and salaries ₹ 1,200 are outstanding.

3. Rent for two months at the rate of ₹ 500 per month is outstanding.

4. Depreciate Buildings by 5% and machinery by 10%.

5. Prepaid Insurance ₹ 200.

Solution:

Trading Account of Raghunath Ji

Dr.

Cr.

Particulars

Particulars

Opening Stock

12,000

Sales

86,000

Purchases

40,000

Less: Sales Return

6,000

80,000

Less: Purchases Return

4,000

36,000

Closing Stock

16,000

Carriage

700

Wages

10,000

Add: Outstanding

2,000

12,000

Gross Profit (Balancing Figure)

35,300

96,000

96,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN)

Gross Profit

35,300

Machinery

2,000

Discount

400

Building

2,500

4,500

Interest

800

Salaries

2,400

Add: Outstanding

1,200

3,600

Insurance

800

Less: Prepaid

200

600

Rent & Taxes

1,800

Add: Outstanding

1,000

2,800

Office Expenses

1,200

Travelling Expenses

400

Commission

400

Net Profit (Balancing Figure)

23,000

36,500

36,500

Balance Sheet

Liabilities

Assets

Capital

62,000

Fixed Assets

Add: Net Profit

23,000

85,000

Machinery

20,000

Less: Depreciation

2,000

18,000

Current Liabilities

Building

50,000

Creditors

10,800

Less: Depreciation

2,500

47,500

Outstanding Wages

2,000

Outstanding Salaries

1,200

Current Assets

Outstanding Rent

1,000

Closing Stock

16,000

Prepaid Insurance

200

Debtors

16,000

Cash in Hand

2,300

1,00,000

1,00,000

Working Note: Evaluating Depreciation

Depreciation on Building=50,000× \(\frac{5}{100}\) = ₹2,500

Depreciation on Machinery=20,000× \(\frac{10}{100}\) = ₹2,000

Question 2

From the following Trial Balance prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date:-

Dr. (₹)

Cr. (₹)

Stock 1st April, 2016

22,300

Purchases and Purchase Return

2,30,000

5,200

Freehold Premises

1,00,000

Incidental Trade Exp.

11,200

Insurance

1,850

Audit Fees

800

Commission Received

2,700

Interest

1,400

Debtors and Creditors

32,400

24,830

Wages

30,200

Salaries

15,200

Capital

1,50,000

Drawings

12,000

Income-Tax

3,600

Investments

8,000

Discount allowed & received

7,500

4,200

Sales Return & Sales

6,400

3,17,400

B/R

5,200

Office Furniture

9,000

Rent

2,600

Cash in hand

5,080

Bank Balance

7,600

5,08,330

5,08,330

Adjustment:-

1. Stock at 31st March 2017 is ₹ 70,000.

2. Write of 5% Depreciation on Freehold Premises and 20% on office furniture.

3. Commission earned but not received ₹ 500.

4. Interest earned ₹ 600.

5. ₹ 200 for rent have been received in advance.

6. Charge interest on Capital @ 6% and ₹ 500 on Drawings.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

22,300

Sales

3,17,400

Purchases

2,30,000

Less: Sales Return

6,400

3,11,000

Less: Purchases Return

5,200

2,24,800

Closing Stock

70,000

Wages

30,200

Gross Profit (Balancing Figure)

1,03,700

3,81,000

3,81,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

1,03,700

Freehold Premises

5,000

Interest on Drawings

500

Furniture

1,800

6,800

Commission

2,700

Interest on Capital (WN2)

9,000

Add: Accrued

500

3,200

Incidental Trade Expenses

11,200

Rent

2,600

Insurance

1,850

Less: Rent received in advance

200

2,400

Audit Fees

800

Interest

1,400

Salaries

15,200

Add: Accrued

600

2,000

Discount Allowed

7,500

Discount Received

4,200

Net Profit (Balancing Figure)

63,650

1,16,000

1,16,000

Balance Sheet

Liabilities

Assets

Capital

1,50,000

Fixed Assets

Add: Interest on Capital

9,000

Freehold Premises

1,00,000

Add: Net Profit

63,650

Less: Depreciation

5,000

95,000

Less: Drawings

12,000

Office Furniture

9,000

Less: Interest on Drawings

500

Less: Depreciation

1,800

7,200

Less: Income Tax

3,600

2,06,550

Investments

8,000

Current Liabilities

Current Assets

Creditors

24,830

Closing Stock

70,000

Rent received in advance

200

Accrued Interest

600

Accrued Commission

500

Debtors

32,400

Bills Receivable

5,200

Cash at Bank

7,600

Cash in Hand

5,080

2,31,580

2,31,580

Working Notes 1: Evaluation of Depreciation

Depreciation on Freehold Premises=1,00,000× \(\frac{5}{100}\) = 5,000

Depreciation on Office Furniture=9,000× \(\frac{2}{100}\) = 1,800

Depreciationon Freehold Premises=1,00,000×5100=5,000

Depreciation on Office Furniture=9,000×20100=1,800

Working Notes 2: Evaluating Interest on Capital

Interest On Capital=1,50,000× \(\frac{6}{100}\) = 9,000

Question 2

From the following Trial Balance prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date:-

Dr.

(₹)

Cr.

(₹)

Stock 1st April, 2016

22,300

Purchases and Purchase Return

2,30,000

5,200

Freehold Premises

1,00,000

Incidental Trade Exp.

11,200

Insurance

1,850

Audit Fees

800

Commission Received

2,700

Interest

1,400

Debtors and Creditors

32,400

24,830

Wages

30,200

Salaries

15,200

Capital

1,50,000

Drawings

12,000

Income-Tax

3,600

Investments

8,000

Discount allowed & received

7,500

4,200

Sales Return & Sales

6,400

3,17,400

B/R

5,200

Office Furniture

9,000

Rent

2,600

Cash in hand

5,080

Bank Balance

7,600

5,08,330

5,08,330

Adjustment:-

1. Stock at 31st March 2017 is ₹ 70,000.

2. Write of 5% Depreciation on Freehold Premises and 20% on office furniture.

3. Commission earned but not received ₹ 500.

4. Interest earned ₹ 600.

5. ₹ 200 for rent have been received in advance.

6. Charge interest on Capital @ 6% and ₹ 500 on Drawings.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

22,300

Sales

3,17,400

Purchases

2,30,000

Less: Sales Return

6,400

3,11,000

Less: Purchases Return

5,200

2,24,800

Closing Stock

70,000

Wages

30,200

Gross Profit (Balancing Figure)

1,03,700

3,81,000

3,81,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

1,03,700

Freehold Premises

5,000

Interest on Drawings

500

Furniture

1,800

6,800

Commission

2,700

Interest on Capital (WN2)

9,000

Add: Accrued

500

3,200

Incidental Trade Expenses

11,200

Rent

2,600

Insurance

1,850

Less: Rent received in advance

200

2,400

Audit Fees

800

Interest

1,400

Salaries

15,200

Add: Accrued

600

2,000

Discount Allowed

7,500

Discount Received

4,200

Net Profit (Balancing Figure)

63,650

1,16,000

1,16,000

Balance Sheet as on March 31, 2017

Liabilities

Assets

Capital

1,50,000

Fixed Assets

Add: Interest on Capital

9,000

Freehold Premises

1,00,000

Add: Net Profit

63,650

Less: Depreciation

5,000

95,000

Less: Drawings

12,000

Office Furniture

9,000

Less: Interest on Drawings

500

Less: Depreciation

1,800

7,200

Less: Income Tax

3,600

2,06,550

Investments

8,000

Current Liabilities

Current Assets

Creditors

24,830

Closing Stock

70,000

Rent received in advance

200

Accrued Interest

600

Accrued Commission

500

Debtors

32,400

Bills Receivable

5,200

Cash at Bank

7,600

Cash in Hand

5,080

2,31,580

2,31,580

Working Notes 1: Evaluation of Depreciation

Depreciationon Freehold Premises=1,00,000× \(\frac{5}{100}\) = 5,000

Depreciation on Office Furniture=9,000× \(\frac{20}{100}\) = 1,8000

Depreciationon Freehold Premises=1,00,000×5100=5,000

Depreciation on Office Furniture=9,000×20100=1,800

Working Notes 2: Evaluation Interest on Capital

Intereston Capital=1,50,000× \(\frac{6}{100}\) = 9,000

Question 3

On 31st March, 2017 the following Trial Balance was extracted from the books of Mohan:-

Dr.

(₹)

Cr.

(₹)

Capital

30,000

Drawings

5,000

Debtors and Creditors

20,000

10,000

Bank Loan

9,500

Interest on Loan

300

Cash

2,000

Provision for Bad-Debts

700

Stock 1-4-2016

6,800

Motor Vehicles

10,000

Bank

3,500

Land and Buildings

12,000

Bad-Debts

500

Purchases and Sales

66,000

1,10,000

Returns

8,000

1,500

Carriage Outward

2,500

Carriage Inward

3,000

Salaries

9,000

Rent and Insurance

3,000

Advertising

3,500

Discount

500

General Expenses

3,400

B/R and B/P

6,000

2,000

Rent received

300

1,64,500

1,64,500

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date after taking into account the following:-

(a) Private purchases ₹ing to ₹ 4,000 have been debited to Purchases Account.

(b) Depreciate Land and Buildings at \(2\frac{1}{2}\)% and Motor Vehicles at 20%.

(c) Salaries outstanding ₹ 200.

(d) Prepaid Insurance ₹ 200.

(e) Provision for Doubtful Debts is to be maintained at 5% on Debtors.

(f) Stock on 31st March, 2017 was valued at ₹ 7,000.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

6,800

Sales

1,10,000

Purchases

66,000

Less: Return Inwards

8,000

1,02,000

Less: Return Outwards

1,500

Closing Stock

7,000

Less: Drawings

4,000

60,500

Carriage Inward

3,000

Gross Profit (Balancing Figure)

38,700

1,09,000

1,09,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

38,700

Land & Building

300

Discount received

500

Motor Vehicle

2,000

2,300

Rent received

300

Salary

9,000

Add: Outstanding

200

9,200

Rent & Insurance

3,000

Less: Pre-paid

200

2,800

Old Bad Debts

500

Add: New Bad Debts

Add: New Provision (WN2)

1,000

Less: Old Provision

700

800

Interest on Bank Loan

300

Carriage Outward

2,500

Advertisement

3,500

General Expenses

3,400

Net Profit (Balancing Figure)

14,700

39,500

39,500

Balance Sheet

Liabilities

Assets

Capital

30,000

Fixed Assets

Add: Net Profit

14,700

Land & Buildings

12,000

Less: Drawings (5,000 + 4,000)

9,000

35,700

Less: Depreciation

300

11,700

Motor Vehicles

10,000

Current Liabilities

Less: Depreciation

2,000

8,000

Creditors

10,000

Outstanding Salaries

200

Current Assets

Bank Loan

9,500

Closing Stock

7,000

Bills Payable

2,000

Prepaid Insurance

200

Debtors

20,000

Less: Provision for Bad Debts

1,000

19,000

Bills Receivables

6,000

Cash at Bank

3,500

Cash in Hand

2,000

57,400

57,400

Working Notes 1: Evaluation of Depreciation

Depreciation on land and buildings = 12,000 X \(\frac{2.5}{100}\) = 300

Depreciation of motor vehicles = 12,000 X \(\frac{20}{100}\) = 2,000

Working Notes 2: Evaluating Provision for Doubtful Debts

Provision for doubtful Debts = 20,000 X \(\frac{5}{100}\) = 1,000

Question 4

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date from the following Trial Balance:-

Dr.

(₹)

Cr.

(₹)

Capital

10,000

Cash

1,500

Bank Overdraft

2,000

Purchases and Sales

12,000

15,000

Returns

1,000

2,000

Establishment Expenses

2,200

Taxes and Insurance

500

Bad-debts and Bad-debt Provision

500

700

Debtors and Creditors

5,000

2,000

Commission

500

Deposits

4,000

Opening Stock

3,000

Drawings

1,400

Furniture

600

B/R and B/P

3,000

2,500

34,700

34,700

Adjustments:-

1. Salaries ₹ 100 and taxes ₹ 200 are outstanding but insurance ₹ 50 is prepaid.

2. Commission ₹ 100 is received in advance for next year.

3. Interest ₹ 210 is to be received on Deposits and Interest on Bank overdraft ₹ 300 is to be paid.

4. Bad-debts provision is to be maintained at ₹ 1,000 on Debtors.

5. Depreciate furniture by 10%.

6. Stock on 31st March, 2017 was valued at ₹ 4,500.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

3,000

Sales

15,000

Purchases

12,000

Less: Return Inwards

1,000

14,000

Less: Return Outwards

2,000

10,000

Closing Stock

4,500

Gross Profit (Balancing Figure)

5,500

18,500

18,500

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation on Furniture (WN)

60

Gross Profit

5,500

Establishment Charges

2,200

Commission received

500

Outstanding Salaries

100

Less: Comm. received in advance

100

400

Taxes & Insurance

500

Accrued Interest on Deposits

210

Add: Outstanding Taxes

200

Less: Prepaid Insurance

50

650

Old Bad Debts

500

Add: New Bad Debts

Add: New Provision

1,000

Less: Old Provision

700

800

Outstanding Interest on Bank Overdraft

300

Net Profit (Balancing Figure)

2,000

6,110

6,110

Balance Sheet

as on March 31, 2017

Liabilities

Assets

Capital

10,000

Fixed Assets

Add: Net Profit

2,000

Furniture

600

Less: Drawings

1,400

10,600

Less: Depreciation

60

540

Current Liabilities

Current Assets

Creditors

2,000

Closing Stock

4,500

Outstanding Salaries

100

Prepaid Insurance

50

Outstanding Taxes

200

Debtors

5,000

Bills Payable

2,500

Less: Provision for Bad Debts

1,000

4,000

Bank Overdraft

2,000

Bills Receivables

3,000

Commission received in advance

100

Deposits

4,000

Outstanding Interest on Bank Overdraft

300

Add: Accrued Interest

210

4,210

Cash in Hand

1,500

17,800

17,800

Working Note: Evaluating Depreciation

Depreciationon Furniture=600× \(\frac{10}{100}\) = 60

Question 5

The following are the balances of Messrs Gupta & Co. as at 31st March, 2009:-

Particulars

(₹)

Particulars

(₹)

Cash in Hand

540

Patents

7,500

Cash at Bank

2,630

Salaries

25,000

Purchases

40,675

General Expenses

22,790

Returns Inwards

680

Insurance

600

Wages

8,480

Drawings

5,245

Fuel & Power

4,730

Sundry Debtors

14,500

Bad-debts

210

Sales

98,440

Bad-debts Provision

340

Returns Outwards

500

Carriage on Sales

3,200

Capital

92,000

Carriage on Purchases

2,040

S. Creditors

6,300

Stock (1.4.2008)

5,760

Rent Cr.

9,000

Building

32,000

Freehold Land

10,000

Machinery

20,000

Prepare Trading and Profit & Loss A/c and a Balance Sheet as at 31st March, 2009 after taking into account the following adjustments:-

(i) Stock on hand as on 31st March, 2009 is ₹ 6,800.

(ii) Machinery is to be depreciated at 10% and Patents at 20%.

(iii) Salaries for the month of March, 2009 ₹ing to ₹ 1,500 were unpaid.

(iv) Insurance includes a premium of ₹ 170 on a policy expiring on 30th September, 2009.

(v) Write off ₹ 500 as Bad-debts and create a provision for Doubtful Debts at 5% on Sundry Debtors.

(vi) Rent Receivable ₹ 1,000.

Solution:

Trading Account of Messrs Gupta & Co.

Dr.

Cr.

Particulars

Particulars

Opening Stock

5,760

Sales

98,440

Purchases

40,675

Less: Return Inwards

680

97,760

Less: Return Outwards

500

40,175

Closing Stock

6,800

Carriage on Purchases

2,040

Wages

8,480

Fuel & Power

4,730

Gross Profit (Balancing Figure)

43,375

1,04,560

1,04,560

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

43,375

Machinery

2,000

Rent received

9,000

Patents

1,500

3,500

Add: Accrued

1,000

10,000

Salaries

25,000

Net Loss (Balancing Figure)

4,200

Add: Outstanding

1,500

26,500

Insurance

600

Less: Prepaid (WN2)

85

515

Old Bad Debts

210

Add: Further Bad Debts

500

Add: New Provision (WN3)

700

Less: Old Provision

340

1,070

Carriage on Sales

3,200

General Expenses

22,790

57,575

57,575

Balance Sheet

Liabilities

Assets

Capital

92,000

Fixed Assets

Less: Net Loss

4,200

Machinery

20,000

Less: Drawings

5,245

82,555

Less: Depreciation

2,000

18,000

Patents

7,500

Current Liabilities

Less: Depreciation

1,500

6,000

Creditors

6,300

Building

32,000

Outstanding Salaries

1,500

Freehold Land

10,000

Current Assets

Closing Stock

6,800

Prepaid Insurance

85

Sundry Debtors

14,500

Less: Further Bad Debts

500

Less: New Provision for Bad Debts

700

13,300

Accrued Rent

1,000

Cash at Bank

2,630

Cash in Hand

540

90,355

90,355

Working Notes 1: Evaluation of Depreciation

Depreciation on Machinery=20,000× \(\frac{10}{100}\) = 2,000

Depreciationon Patents=7,500× \(\frac{20}{100}\) = 1,500

Depreciation on Machinery=20,000×10100=2,000

Depreciationon Patents=7,500×20100=1,500

Winning Notes 2: Calculation of Prepaid Insurance

If a policy is expiring on 30 September 2009, it means insurance is pre-paid for the period 31 March 2009 – 30 September 2009 = 6 months

Prepaid Insurance=170× \(\frac{6}{12}\) = 85

Working Notes 3: Evaluation of Provision for Doubtful Debts

Provision for Doubtful Debts = (Sundry Debtors−Further BadDebts) ×\(\frac{Rate}{100}\)

(14,500−500)× \(\frac{5}{100}\) = 700

Question 6

From the following Trial Balance extracted from the books of A, prepare Trading and Profit & Loss Account for the year ending 31st March, 2008 and a Balance Sheet as at that date:-

Dr.

(₹)

Cr.

(₹)

Furniture

640

Loose Tools

6,250

Buildings

7,500

Capital Account

12,500

Bad-debts

125

Provision for Bad-debts

200

Sundry Debtors and Creditors

3,800

2,500

Stock on 1st April, 2007

3,460

Purchases and Sales

5,475

15,450

Bank Overdraft

2,850

Sales Return and Purchases Return

200

125

Stationery

450

Interest Account

118

Commission

375

Cash in hand

650

Taxes and Insurance

1,250

General Expenses

782

Salaries

3,300

34,000

34,000

The following adjustments are to be made:

(i) Stock in hand on 31st March, 2008 was ₹ 3,250.

(ii) Depreciate Building at 5% and Furniture at 10%. Loss Tools are revalued at ₹ 5,000 at the end of the year.

(iii) Salaries ₹ 300 and taxes ₹ 120 are outstanding.

(iv) Insurance ₹ing to ₹ 100 is prepaid.

(v) Write off a further ₹ 100 as Bad-Debts and Provision for Doubtful Debts is to be made equal to 5% on Sundry Debtors.

(vi) Half of the stationery was used by the proprietor for his personal purposes.

Solution:

Trading Account for the year ended March 31, 2008

Dr.

Cr.

Particulars

Particulars

Opening Stock

3,460

Sales

15,450

Purchases

5,475

Less: Sales Return

200

15,250

Less: Purchases Return

125

5,350

Closing Stock

3,250

Gross Profit (Balancing Figure)

9,690

18,500

18,500

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

9,690

Building

375

Commission Received

375

Furniture

64

Loose Tools

1,250

1,689

Salaries

3,300

Add: Outstanding

300

3,600

Taxes & Insurance

1,250

Add: Outstanding Taxes

120

Less: Prepaid Insurance

100

1,270

Old Bad Debts

125

Add: Further Bad Debts

100

Add: New Provision (WN2)

185

Less: Old Provision

200

210

Stationery

450

Less: Drawings (1/2)

225

225

Interest

118

General Expenses

782

Net Profit (Balancing Figure)

2,171

10,065

10,065

Balance Sheet

Liabilities

Assets

Capital

12,500

Fixed Assets

Add: Net Profit

2,171

Building

7,500

Less: Drawings (1/2 of Stationery)

225

14,446

Less: Depreciation

375

7,125

Furniture

640

Current Liabilities

Less: Depreciation

64

576

Creditors

2,500

Loose tools

6,250

Outstanding Salaries

300

Less: Depreciation

1,250

5,000

Outstanding Taxes

120

Bank Overdraft

2,850

Current Assets

Closing Stock

3,250

Prepaid Insurance

100

Debtors

3,800

Less: Further Bad Debts

100

Less: Provision for Bad Debts

185

3,515

Cash in Hand

650

20,216

20,216

Working Notes 1: Evaluation of Depreciation

Depreciationon Buildings=7,500× \(\frac{5}{100}\) = 375

Depreciationon Furniture=640× \(\frac{10}{100}\) = 64

Depreciationon Patents=6,250−5,000=1,250

Depreciationon Buildings=7,500×5100=375

Depreciationon Furniture=640×10100=64Depreciationon Patents=6,250−5,000=1,250

Working Note 2: Evaluating Provision for Doubtful Debts

Provision for Doubtful Debts = (Sundry Debtors−Further Bad Debts) ×\(\frac{Rate}{100}\)

(3,800−100)× \(\frac{5}{100}\) = 185

Provi

Question 7

From the following figures prepare the Trading and Profit and Loss Account for the year ended 31st March, 2012 and the Balance Sheet as at that date:-

Particulars

(₹)

Particulars

(₹)

Stock (1st April, 2011)

75,000

Sundry Debtors

82,000

Purchases

8,00,000

Loan from X

10,000

Sales

12,00,000

Interest on X Loan

1,500

Motor Car

1,50,000

Furniture

20,000

Car Expenses

42,000

Land and Building

2,00,000

Rent

5,500

Capital

2,50,000

Salaries

35,200

Sundry Creditors

91,300

Bad Debts

1,500

Returns Inward

7,500

Provision for bad debts

8,100

Returns Outward

6,000

Commission (Cr.)

4,600

Cash in hand

16,400

Wages

1,25,000

Insurance

8,400

Adjustments:-

(i) Commission include ₹ 1,600 being commission received in advance.

(ii) Write off ₹ 2,000 as further Bad-debts and maintain Bad-debts provision at 5% on debtors.

(iii) Expenses paid in advance are: Wages ₹ 5,000 and Insurance ₹ 1,200.

(iv) Rent and Salaries have been paid for 11 months.

(v) Loan from X has been taken at 18% p.a. interest.

(vi) Depreciate furniture by 15% p.a. and Motor Car by 20% p.a.

(vii) Closing Stock was valued at ₹ 60,000.

Solution:

Dr.

Cr.

Particulars

Particulars

Opening Stock

75,000

Sales

12,00,000

Purchases

8,00,000

Less: Return Inwards

7,500

11,92,500

Less: Return Outwards

6,000

7,94,000

Closing Stock

60,000

Wages

1,25,000

Less: Prepaid

5,000

1,20,000

Gross Profit (Balancing Figure)

2,63,500

12,52,500

12,52,500

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

2,63,500

Furniture

3,000

Commission

4,600

Motor Car

30,000

33,000

Less: Comm. received in advance

1,600

3,000

Salaries

35,200

Old Provision for Doubtful Debts

8,100

Add: Outstanding (WN2)

3,200

38,400

Less: New Provision (WN3)

4,000

4,100

Rent

5,500

Add: Outstanding Taxes (WN2)

500

6,000

Insurance

8,400

Less: Prepaid

1,200

7,200

Interest on Loan

1,500

Add: Outstanding (WN2)

300

1,800

Old Bad Debts

1,500

Add: Further Bad Debts

2,000

3,500

Car Expenses

42,000

Net Profit (Balancing Figure)

1,38,700

2,70,600

2,70,600

Balance Sheet

Liabilities

Assets

Capital

2,50,000

Fixed Assets

Add : Net Profit

1,38,700

3,88,700

Land & Building

2,00,000

Loan from X

10,000

Furniture

20,000

Add: Outstanding Interest on Loan

300

10,300

Less: Depreciation

3,000

17,000

Motor Car

1,50,000

Current Liabilities

Less: Depreciation

30,000

1,20,000

Creditors

91,300

Outstanding Salaries

3,200

Current Assets

Outstanding Rent

500

Closing Stock

60,000

Commission received in advance

1,600

Prepaid Insurance

1,200

Prepaid Wages

5,000

Debtors

82,000

Less: Further Bad Debts

2,000

Less: Provision for Bad Debts

4,000

76,000

Cash in Hand

16,400

4,95,600

4,95,600

Working Notes 1: Evaluation of Depreciation

Depreciationon Furniture=20,000× \(\frac{15}{100}\) = 3,000

Depreciationon Motor Car=1,50,000× \(\frac{20}{100}\) = 30,000

Depreciationon Furniture=20,000×15100=3,000

Depreciationon Motor Car=1,50,000×20100=30,000

Working Notes 2: Evaluation of Outstanding Expenses

1. Salaries for 11 months=35,200

Salary for 1 month= \(\frac{35,200}{11}\) X 1 = 3,200 = Salary Outstanding

2.Rent for 11 months=5,500

Rent for 1 month= \(\frac{5,500}{11}\) X 1 = 500 = Rent OUtstanding

3.Interest on Loan=10,000 × \(\frac{18}{100}\) = 1,800

Interest paid=1,500

∴ Interest Outstanding=300(1,800−1,500)

Working Notes 3: Calculation of Provision for Doubtful Debts

Provision for Doubtful Debts = (Sundry Debtors−Further Bad Debts)× \(\frac{Rate}{100}\)

= (82,000−2,000)× \(\frac{5}{100}\) = 4,000

Question 8

Extract of a Trial Balance as at March 31, 2017 is as follows:

Sundry Debtors

₹ 1,02,000

Bad Debts

₹ 1,400

Provision for doubtful debts

₹ 3,400

Additional information:

A debtor of ₹ 2,000 could not be recovered. It is decided to maintain Provision for Doubtful Debtors @ 5% on Debtors and Provision for Discount at @ 2%.

How these adjustments will be shown in Financial Statements?

Solution:

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Old Bad Debts

1,400

Add: Further Bad Debts

2,000

Add: New Provision

5,000

Less: Old Provision

3,400

5,000

Provision for Discount on Debtors

1,900

Balance Sheet

Liabilities

Assets

Current Assets

Debtors

1,02,000

Less: Further Bad Debts

2,000

Less: Provision for Doubtful Debts

5,000

Less: Provision for Discount on Debtors

1,900

93,100

Working Notes 1: Evaluation of Provision for Doubtful Debts

Provision for doubtful debts = (Debtors-Further Bad Debts) X \(\frac{Rate}{100}\)

= (1,02,000 – 2,000) X \(\frac{5}{100}\) = 5,000

Working Notes 2: Evaluation of Provision for Discount on Debtors

Provision for discount on debtors = (DEbtors – Further bad debts – Provision for doubtful debts) X \(\frac{Rate}{100}\)

= (1,02,000 – 2,000 – 5,000) X \(\frac{2}{100}\) = 1,900

Question 9

Prepare a Trading and Profit & Loss account for the year ending March 31, 2018, from the balances extracted of M/s Rahul Sons. Also prepare a balance sheet as at that date.

Debit Balances

Credit Balances

Stock

50,000

Sales

1,80,000

Wages

3,000

Purchase return

2,000

Salary

8,000

Discount received

500

Purchases

1,75,000

Provision for bad debts

2,500

Sales Return

3,000

Capital

2,90,000

S. 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

Output CGST

15,000

Trade Expenses

1,500

Output SGST

15,000

Bad debts

2,000

Drawings

32,000

Repair and renewals

1,600

Travelling expenses

4,200

Postage

500

Legal fees

500

Bills Receivable

50,000

Building

1,10,000

Input CGST

10,000

Input SGST

10,000

5,71,800

5,71,800

Adjustments :-

(i) Commission received in advance ₹ 1,000.

(ii) Rent receivable ₹ 2,000, subject to levy of CGST and SGST @ 9% each.

(iii) Salary outstanding ₹ 1,000 and insurance prepaid ₹ 800.

(iv) Further Bad-debts ₹ 1,000 and provision for Bad-debts @ 5% on debtors and provision for discount on debtors @ 2%.

(v) Closing Stock ₹ 32,000.

(vi) Depreciation on Building @ 6% p.a.

Solution:

Financial Statement of M/s Rahul Sons

Trading Account

for the year ended March 31, 2018

Dr.

Cr.

Particulars

Particulars

Opening Stock

50,000

Sales

1,80,000

Purchases

1,75,000

Less: Sales Return

3,000

1,77,000

Less: Purchases Return

2,000

1,73,000

Closing Stock

32,000

Wages

3,000

Gross Loss (Balancing Figure)

17,000

2,26,000

2,36,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Gross Loss

17,000

Commission

4,000

Depreciation on Building (WN1)

6,600

Less: Unearned

1,000

3,000

Salaries

8,000

Rent received

6,000

Add: Outstanding

1,000

9,000

Add: Accrued

2,000

8,000

Insurance

3,200

Discount Received

500

Less: Prepaid

800

2,400

Net Loss (Balancing Figure)

43,189

Old Bad Debts

2,000

Add: New Bad Debts

1,000

Add: New Provision (WN2)

4,050

Less: Old Provision

2,500

4,550

Provision for Discount on Debtors

1,539

Discount Allowed

1,000

Rent, Rates and Taxes

4,300

Trade Expenses

1,500

Repairs & Renewable

1,600

Travelling Expenses

4,200

Postage

300

Telegram Expenses

200

Legal Fees

500

54,689

54,689

Balance Sheet

Liabilities

Assets

Capital

2,90,000

Fixed Assets

Less: Net Loss

43,189

Building

1,10,000

Less: Drawings

32,000

2,14,811

Less: Depreciation

6,600

1,03,400

Loan

34,800

Fixture and Fittings

20,000

Current Liabilities

Current Assets

Bills Payable

22,000

Closing Stock

32,000

Outstanding Salaries

1,000

Prepaid Insurance

800

Commission received in advance

1,000

Bills Receivable

50,000

Output CGST 15,180

Debtors

82,000

(15,000+180*)

5,180

Less: Bad Debts

1,000

Less: Input CGST 10,000

Less: Provision for Bad Debts

4,050

Output CGST 15,180

(15,000+180*)

Less: Provision for Discount on Debtors

1,539

75,41

Less: Input CGST 10,000

5,180

Accrued Rent*

2,360

2,83,971

2,83,971

Working Notes 1: Evaluation of Depreciation

Depreciationon Building=1,10,000× \(\frac{6}{100}\) = 6,600

Depreciationon Building=1,10,000×6100=6,600

Working Notes 2: Evaluation of Provision for Doubtful Debts

Provision for Doubtful Debts = (Debtors−Further Bad Debts)× \(\frac{Rate}{100}\)

(82,000−1,000) ×\(\frac{5}{100}\) = 4,050

Working Notes 3: Evaluation of Provision for Discount on Debtors

Provision for Doubtful Debts = (Debtors−Further Bad Debts)× \(\frac{Rate}{100}\)

(82,000−1,000-4,050) ×\(\frac{2}{100}\) = 1,539

Working Notes 4: Adjustment entry for Accrued Rent

Journal

Date

Particulars

L.F.

Debit ₹

Credit ₹

2018

March 31

Accrued Rent A/c

Dr.

2,360

To Rent A/c

2,000

To Output CGST A/c

180

To Output SGST A/c

180

(Rent receivable plus @ 9% SGST& CGST for the period)

Question 10

From the following balances, prepare Final Accounts of Mr. Bal Gopal :-

Particulars

Particulars

Life Insurance Premium (self)

500

Capital

40,000

Stock (1-4-2017)

7,500

Plant and Machinery

12,500

Returns Inward

1,000

Purchases

36,000

Furniture

4,600

Sundry Debtors

10,500

Freehold Property

10,000

Coal, Gas and Water

1,000

Carriage Inwards

400

Carriage outwards

100

Advertising

200

Sales

60,000

Sundry Creditors

4,850

Discount (Dr.)

400

Returns outwards

500

Rent for Premises Sublet

500

Commission (Cr.)

600

Trade Expenses

8,650

Lighting

250

Stationery

2,000

Loan from bank

5,000

Interest Charged by Bank

450

Wages & Salaries

7,500

Cash

2,900

Input IGST

5,000

Adjustments :-

(i) Stock on 31st March, 2018 was ₹ 10,000 and stationery unused at the end was ₹ 400.

(ii) Rent of Premises Sublet received in advance ₹ 100.

(iii) Provision for Doubtful Debts is to be created @ 10% on Debtors.

(iv) Provision for discount on Debtors is to be created @ 2%.

(v) Stock of the Value of ₹ 4,000 was destroyed by fire on 25th March, 2018. Stock was purchased paying IGST @ 12%. A Claim of ₹ 3,000 has been admitted by Insurance Co.

(vi) Bank Loan has been taken at 12% p.a. Interest.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

7,500

Sales

60,000

Purchases

36,000

Less: Return Inwards

1,000

59,000

Less: Return Outwards

500

Closing Stock

10,000

Less: Goods Destroyed by Fire

4,000

31,500

Carriage Inward

400

Wages & Salaries

7,500

Coal, Gas and Water

1,000

Gross Profit (Balancing Figure)

21,100

69,000

69,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Discount Allowed

400

Gross Profit

21,100

Stationery

2,000

Rent for premises

500

Less: Closing Stock

400

1,600

Less: Rent received in advance

100

400

Interest

450

Commission received

600

Add: Outstanding Interest (WN1)

150

600

Provision for Doubtful Debts (WN2)

1,050

Provision for Discount on Debtors (WN3)

189

Loss by Fire* (WN4)

4,480

Less: Ins. Claim admitted

3,000

1,480

Advertisement

200

Trade Expenses

8,650

Carriage Outwards

100

Lighting

250

Net Profit (Balancing Figure)

7,581

22,100

22,100

Balance Sheet

Liabilities

Assets

Capital

40,000

Fixed Assets

Add: Net Profit

7,581

Furniture

4,600

Less: Drawings (LIC)

500

47,081

Freehold Property

10,000

Plant and Machinery

12,500

Current Liabilities

Current Assets

Creditors

4,850

Closing Stock

10,000

Bank Loan

5,000

Insurance Company

3,000

Rent received in advance

100

Stock of Stationery

400

Outstanding Interest on Bank

Input IGST(5,000-480*)

4,520

Loan

150

Debtors

10,500

Less: Provision for Bad Debts

1,050

Less: Provision for Discount

189

9,261

Cash in Hand

2,900

57,181

57,181

Working Notes 1: Evaluation of outstanding interest on bank loan

Interest on Bank Loan=5,000× \(\frac{12}{100}\) = 600

Interest charged by Bank=450

∴Outstanding Interest=Rs150 (600−450)

Working Note 2: Evaluation of Provision for Doubtful Debts

Provision for Doubtful Debts = Sundry Debtors X \(\frac{Rate}{100}\)

10,500 X \(\frac{10}{100}\) = ₹1,050

Working Note 3: Evaluation of Provision for Discount on Debtors

Provision for a discount on debtors = (Sundry Debtors−Provision for Bad Debts)× \(\frac{Rate}{100}\)

(10,500−1,050)× \(\frac{2}{100}\) = ₹189

Provi Working Note 4: Adjustment Entry for goods destroyed by fire

Journal

Date

Particulars

L.F.

Debit ₹

Credit ₹

2018

March 25

Loss by fire A/c

Dr.

4,480

To Purchases A/c

4,000

To Input IGST A/c

480

(Goods lost in fire and effect of 12% IGST reversed)

Question 11(A)

From the following balances, prepare Trading, Profit and Loss A/c and a Balance Sheet as at 31st March 2018:-

Particulars

Particulars

Stock (1st April 2017)

20,000

Goodwill

16,000

Purchases

2,92,000

Furniture and Fittings

58,000

Fuel and Power

34,000

Repair Charges

2,900

Capital

1,60,000

Bank

18,000

Sales

5,90,000

Salaries

1,10,000

Rent

10,000

General Expenses

18,000

Returns Inwards

16,000

Debtors

2,30,000

Cash Discount allowed

15,000

Creditors

1,35,000

Cash Discount received

19,000

Output CGST

5,000

Drawings

58,100

Output SGST

5,000

Input CGST

8,000

Input SGST

8,000

Take the following adjustments into account:

(a) General expenses include ₹ 5,000 chargeable to Furniture purchased on 1st October 2017.

(b) Create a provision of 5% on debtors for Bad and Doubtful Debts after treating ₹ 30,000 as a Bad-debt.

(c) Depreciation on furniture and fittings for the year is to be at the rate of 10% per annum.

(d) Closing Stock was ₹ 40,000, but there was a loss by fire on 20th March to the extent of ₹ 8,000. Insurance Company admitted the claim in full.

(e) (I) Goods costing ₹ 2,500 were used by the proprietor.

(II) Goods costing ₹ 1,500 were distributed as free samples.

Goods were purchased paying CGST and SGST @ 6% each.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

20,000

Sales

5,90,000

Purchases

2,92,000

Less: Return Inwards

16,000

5,74,000

Less: Goods Destroyed by Fire

8,000

Closing Stock

40,000

Less: Drawings

2,500

Less: Advertisement

1,500

2,80,000

Fuel and Power

34,000

Gross Profit (Balancing Figure)

2,80,000

6,14,000

6,14,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation on Furniture (WN1)

6,050

Gross Profit

2,80,000

General Expenses

18,000

Discount Received

19,000

Less: Furniture

5,000

13,000

Rent

10,000

Further Bad Debts

30,000

Add: New Provision (WN3)

10,000

40,000

Discount Allowed

15,000

Repair Charges

2,900

Advertisement (Free Samples)

1,680

Salaries

1,10,000

Net Profit (Balancing Figure)

1,00,370

2,99,000

2,99,000

Balance Sheet

Liabilities

Assets

Capital

1,60,000

Fixed Assets

Add : Net Profit

1,00,370

Furniture & Fittings

58,000

Less: Drawings (58,100 +2,800*)

60,900

1,99,470

Add: Additions

5,000

Less: Depreciation

6,050

56,950

Goodwill

16,000

Current Liabilities

Current Assets

Creditors

1,35,000

Closing Stock

40,000

Insurance company( 8,000+12% GST)

8,960

Input CGST(8,000-240-480) 7,280

Less: Output CGST 5,000

2,280

Input CGST(8,000-240-480) 7,280

Less: Output CGST 5,000

2,280

Cash at Bank

18,000

Debtors

2,30,000

Less: Bad Debts

30,000

Less: Provision for Bad Debts

10,000

1,90,000

3,34,470

3,34,470

Working Notes 1: Evaluation of Depreciation

Furniture of Rs 5,000 was purchased on Oct 01, 2013

Depreciation on furniture = 58,000 \(\frac{10}{100}\) + 5,000 X \(\frac{10}{100}\) X \(\frac{6}{100}\)

= 58,000 +250 = ₹6,050

Working Notes 2= Evaluation of Outstanding Rent

₹ of Rent Outstanding=10,000× \(\frac{2}{100}\) = ₹2,000

Working Notes 3: Evaluation of Provision for Doubtful Debts

Provision for Doubtful Debts = (Sundry Debtors−Further Bad Debts)× \(\frac{Rate}{100}\)

= (2,30,000−30,000)× \(\frac{5}{100}\) = ₹10,000

Question 11 (B)

From the following particulars taken out from the books of Subhash General Store, prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at the date:-

Particulars

Particulars

Plant & Machinery on 1-4-2016

80,000

Rent

12,000

Plant & Machinery Purchased on 1-7-2016

20,000

Insurance Premium paid from 1-1-2017 to 31-12-2017

1,200

Sundry Debtors

1,20,000

Cash at Bank

5,400

Creditors

32,000

Wages

20,400

Furniture

5,000

Advertising

4,800

Motor Car

70,000

Carriage Inwards

10,200

Purchases

1,60,000

Carriage Outwards

2,000

Sales

2,80,000

Fuel and Power

15,700

Sales Returns

15,000

Manoj’s Capital

3,50,000

Salaries

36,000

Manoj’s Drawings

12,000

Opening Stock

60,000

Brokerage

700

Motor Car Expenses

6,000

Donation

5,100

Stationery

500

The following information is relevant:-

1. Closing Stock ₹ 55,000. Stock valued at ₹ 10,000 was destroyed by fire on 18th March, 2017 but the Insurance Company admitted a claim of ₹ 6,800 only which was received in April, 2017.

2. Stationery for ₹ 150 was consumed by the Proprietor.

3. Goods costing ₹ 1,200 were given away as charity.

4. A new Signboard costing ₹ 1,500 is included in Advertising.

5. Rent is to be allocated 2/3rd to Factory and 1/3rd to Office.

6. Depreciate machinery by 10% and Motor Car by 20%.

Solution:

Trading Account of Subhash General Store

Dr.

Cr.

Particulars

Particulars

Opening Stock

60,000

Sales

2,80,000

Purchases

1,60,000

Less: Sales Return

15,000

2,65,000

Less: Goods Destroyed by Fire

10,000

Closing Stock

55,000

Less: Charity

1,200

1,48,800

Carriage Inwards

10,200

Rent (2/3rd)

8,000

Wages

20,400

Fuel & Power

15,700

Gross Profit (Balancing Figure)

56,900

3,20,000

3,20,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Charity

1,200

Gross Profit

56,900

Stationery

500

Net Loss (Balancing Figure)

28,750

Less: Drawings

150

350

Advertisement

4,800

Less: Sign Board

1,500

3,300

Depreciation: (WN1)

Machinery

9,500

Motor Car

14,000

23,500

Salaries

36,000

Loss by Fire

10,000

Less: Ins. Claim admitted

6,800

3,200

Rent (1/3rd)

4,000

Insurance

1,200

Less: Prepaid (WN2)

900

300

Motor Car Expenses

6,000

Brokerage

700

Carriage Outwards

2,000

Donation

5,100

85,650

85,650

Balance Sheet

Liabilities

Assets

Capital

3,50,000

Fixed Assets

Less: Net Loss

28,750

Furniture

5,000

Less: Drawings (12,000 + 150)

12,150

3,09,100

Machinery

80,000

Add: Addition

20,000

Current Liabilities

Less: Depreciation

9,500

90,500

Creditors

32,000

Motor Car

70,000

Less: Depreciation

14,000

56,000

Current Assets

Closing Stock

55,000

Insurance company

6,800

Prepaid Insurance

900

Debtors

1,20,000

Sign Board

1,500

Cash at Bank

5,400

3,41,100

3,41,100

Working Notes 1: Evaluation of Depreciation

Depreciation on Plant and Machinery = 80,000 X \(\frac{10}{100}\) + 20,000 X \(\frac{10}{100}\) X \(\frac{9}{100}\) = ₹ 9,500

Depreciationon Motor Car=70,000× \(\frac{20}{100}\) = ₹ 14,000

Working Notes 2: Evaluation of Prepaid Insurance

Prepaid Insurance=1,200× \(\frac{9}{12}\) = ₹ 900

Question 12

Give journal entries for the following adjustments in final accounts:

(i) Salaries ₹ 5,000 are outstanding.

(ii) Insurance ₹ing to ₹ 2,000 is paid in advance.

(iii) ₹ 4,000 for rent have been received in advance.

(iv) Commission earned but not received ₹ 1,000.

(v) Interest on capital ₹ 1,500.

(vi) Interest on Drawings ₹ 300.

(vii) Write off ₹ 2,000 as further bad-debts.

(viii) Closing Stock ₹ 3,000.

Solution:

Journal

Date

Particulars

L.F.

1.

Salary A/c

Dr.

5,000

To Outstanding Salary A/c

5,000

(Adjusted outstanding salary)

2.

Prepaid Insurance A/c

Dr.

2,000

To Insurance A/c

2,000

(Adjusted insurance prepaid)

3.

Rent A/c

Dr.

4,000

To Rent Received in Advance A/c

4,000

(Adjusted advance rent received)

4.

Accrued Commission A/c

Dr.

1,000

To Commission A/c

1,000

(Adjusted commission receivable)

5.

Interest on Capital A/c

Dr.

500

To Capital A/c

500

(Allowed capital interest)

6.

Drawings A/c

Dr.

300

To Interest on Drawings A/c

300

(Charged drawing interest)

7.

Bad Debts A/c

Dr.

2,000

To Debtors A/c

2,000

(Bad debts written off)

8.

Closing Stock A/c

Dr.

3,000

To Trading A/c

3,000

(Closing Stock transferred to Trading Account)

Question 13

Give journal entries for the following adjustments in final accounts assuming CGST and SGST @ 9% each:

(i) Closing Stock ₹ 80,000.

(ii) Outstanding salaries ₹ 21,000.

(iii) Insurance premium amounting to ₹ 15,000 is paid in advance.

(iv) ₹ 9,000 received for rent related to the next accounting period.

(v) Commission accrued but not received during the accounting year ₹ 1,500.

(vi) Write off ₹ 500 as further bad debts.

(vii) Goods costing ₹ 8,000 destroyed by fire and insurance company admitted a claim for ₹ 5,000 only.

(viii) Goods costing ₹ 10,000 (Market value ₹ 11,000) were taken by proprietor for personal use.

Solution:

Journal

Date

Particulars

L.F.

Debit ₹

Credit ₹

(i)

Closing Stock A/c

Dr.

80,000

To Trading A/c

80,000

(Transfer of Closing Stock to Trading A/c)

(ii)

Salary A/c

Dr.

21,000

To Outstanding Salary A/c

(Outstanding salaries)

21,000

(iii)

Prepaid Insurance A/c

Dr.

15,000

To Insurance A/c

15,000

(Insurance premium paid in advance)

(iv)

Rent A/c

Dr.

9,000

To Rent Received in Advance A/c

9,000

(Rent received in advance)

(v)

Accrued Commission A/c

Dr.

1,770

To Commission A/c

1,500

To Output CGST A/c

135

To Output SGST A/c

135

(Commission accrued but not received)

(vi)

Bad Debts A/c

Dr.

500

To Debtors A/c

500

(Write off further bad debts)

(vii)

Loss by Fire A/c

Dr.

9,440

To Purchases A/c

8,000

To Input CGST A/c

720

To Input SGST A/c

720

(Loss of goods by fire)

Insurance Company A/c

Dr.

5,000

Profit & Loss A/c

4,440

To Loss by Fire A/c

9,440

(Insurance company admitted claim)

(viii)

Drawings A/c

Dr.

11,800

To Purchases A/c

10,000

To Input CGST A/c

900

To Input SGST A/c

900

(Goods withdrawn by proprietor for personal use)

Question 14

Following is the Trial Balance of Mr. Gautam as at 31st March, 2017:

Dr. Balances

(₹)

Cr. Balances

(₹)

Goodwill

30,000

Purchase Returns

2,650

Land & Buildings

60,000

Capital A/c

2,03,000

Plant & Machinery

40,000

Bills Payable

13,800

Loose Tools

3,000

Sundry Creditors

30,000

Bills Receivable

2,000

Sales

1,15,000

Stock 1st April, 2016

40,000

Purchases

51,000

Wages

20,000

Carriage Inwards

1,200

Coal & Gas

5,600

Salaries

4,000

Rent

2,700

Discount allowed

1,500

Cash at Bank

25,000

Cash in hand

1,400

Sundry Debtors

45,000

Repairs

1,800

Printing & Stationery

600

Bad-debts

1,200

Advertisements

3,500

Furniture and Fixtures

1,200

General Expenses

250

Investments

5,000

Drawings

15,000

Carriage Outwards

1,500

Sales Returns

2,000

3,64,450

3,64,450

You are required to prepare Final Accounts after taking into account the following adjustments:

(a) Closing Stock on 31st March, 2017 was ₹ 60,000.

(b) Depreciate Plant and Machinery at 5%, Loose Tools at 15% and Furniture and fixtures at 5%.

(c) Provide \(2\frac{1}{2}\)% for discount on Sundry Debtors and also provide 5% for Bad and Doubtful Debts on Sundry Debtors.

(d) Only three quarter’s rent has been paid, the last quarter’s rent being outstanding.

(e) Interest earned but not received ₹ 600.

(f) Write off \(\frac{1}{4}\)th of Advertisement expenses.

Solution:

Trading Account of Mr. Gautam

Dr.

Cr.

Particulars

Particulars

Opening Stock

40,000

Sales

1,15,000

Purchases

51,000

Less: Sales Return

2,000

1,13,000

Less: Purchases Return

2,650

48,350

Closing Stock

60,000

Wages

20,000

Carriage Inwards

1,200

Coal and Gas

5,600

Gross Profit (Balancing Figure)

57,850

1,73,000

1,73,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

57,850

Plant & Machinery

2,000

Accrued Interest

600

Loose Tools

450

Furniture

60

2,510

Rent

2,700

Add: Outstanding Rent (WN2)

900

3,600

Bad Debts

1,200

Add: New Provision (WN3)

2,250

3,450

Discount Allowed

1,500

Provision for Discount on Debtors (WN4)

1,069

Advertisement Expenses written-off

875

Salaries

4,000

Repairs

1,800

Printing & Stationery

600

General Expenses

250

Carriage Outwards

1,500

Net Profit (Balancing Figure)

37,296

58,450

58,450

Balance Sheet

Liabilities

Assets

Capital

2,03,000

Fixed Assets

Add : Net Profit

37,296

Plant & Machinery

40,000

Less: Drawings

15,000

2,25,296

Less: Depreciation

2,000

38,000

Loose Tools

3,000

Current Liabilities

Less: Depreciation

450

2,550

Creditors

30,000

Furniture & Fixtures

1,200

Bills Payable

13,800

Less: Depreciation

60

1,140

Outstanding Rent

900

Investments

5,000

Land & Building

60,000

Goodwill

30,000

Current Assets

Closing Stock

60,000

Accrued Interest

600

Advertisement Expenditure

2,625

Bills Receivable

2,000

Cash at Bank

25,000

Debtors

45,000

Less: Provision for Bad Debts

2,250

Less: Provision for Discount

1,069

41,681

Cash in Hand

1,400

2,69,996

2,69,996

Working Notes 1: Depreciation Evaluation

Depreciation of Plant & Machinery=40,000× \(\frac{5}{100}\) = ₹2,000

Depreciation of Furniture & Fixtures=1,200× \(\frac{5}{100}\) = ₹60

Depreciation of Loose Tools=3,000× \(\frac{15}{100}\) = ₹450

Working Notes 2: Outstanding Rent Evaluation

Rent paid for 3 quarters=2,700

Rent per quarter= \(\frac{2,700}{3}\) = ₹900 = Outstanding Rent

Working Notes 3: Provision for doubtful debts Evaluation

Provision for doubtful debts = Sundry Debtors X \(\frac{Rate}{100}\)

= 45,000× \(\frac{5}{100}\) =Rs 2,250

Working Notes 4: Provision for Discount on Debtors Evaluation

Provision for Discount on Debtors = (Sundry Debtors−Provision for Bad Debts) X \(\frac{Rate}{100}\)

= (45,000−2,250)× \(\frac{2.5}{100}\) = ₹ 1,069

Question 15

From the following Trial Balance, extracted from the books of Raga Ltd., prepare a Profit and Loss Account for the year ended 31st March, 2014 and a Balance Sheet as at that date:

Debit Balances

Credit Balances

Drawings Account

20,000

Sales

2,20,000

Land & Building

12,000

Capital

1,01,110

Plant and Machinery

40,000

Discount

1,260

Carriage Inward

100

Commission

5,230

Wages

500

Bills Payable

1,28,870

Salary

2,000

Purchase 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

30,00

4,66,470

4,66,470

The additional informations are as under:

(i) Closing stock was valued at the end of the year at ₹ 20,000.

(ii) Depreciation on Plant and Machinery charged at 5% and on Land and Building at 10%.

(iii) Make a provision for discount on debtors at 3%.

(iv) Make a provision at 5% on debtors for Bad-debts.

(v) Salary outstanding was ₹ 100 and Wages prepaid were ₹ 40.

(vi) The manager is entitled to a Commission of 5% on Net Profit after charging such Commission.

Solution:

Trading Account of Raga Ltd.

Dr.

Cr.

Particulars

Particulars

Opening Stock

76,800

Sales

2,20,000

Purchases

1,50,000

Less: Sales Return

200

2,19,800

Less: Purchases Return

10,000

1,40,000

Closing Stock

20,000

Wages

500

Less: Prepaid

40

460

Carriage Inward

100

Coal, Gas and Water

1,200

Gross Profit (Balancing Figure)

21,240

2,39,800

2,39,800

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

21,240

Plant & Machinery

2,000

Discount Received

1,260

Land & Building

1,200

3,200

Apprentice Premium

5,230

Salaries

2,000

Add: Outstanding

100

2,100

Provision for Doubtful Debts (WN2)

2,715

Provision for Discount on Debtors (WN3)

1,548

Bank Charges

200

Trade Expenses

3,800

Rates & Taxes

870

Outstanding Manager’s Commission (WN4)

633

Net Profit (Balancing Figure)

12,644

27,730

27,730

Balance Sheet

Liabilities

Assets

Capital

1,01,110

Fixed Assets

Add: Net Profit

12,664

Plant & Machinery

40,000

Less: Drawings

20,000

93,774

Less: Depreciation

2,000

38,000

Land & Building

12,000

Current Liabilities

Less: Depreciation

1,200

10,800

Outstanding Manager’s Commission

633

Bills Payable

1,28,870

Current Assets

Outstanding Salaries

100

Closing Stock

20,000

Prepaid Wages

40

Bills Receivable

24,500

Cash at Bank

50,000

Debtors

54,300

Less: Provision for Bad Debts

2,715

Less: Provision for Discount

1,548

50,037

Cash in Hand

30,000

2,23,377

2,23,377

Working Notes 1: Depreciation Evaluation

Depreciation of Plant and Machinery = 40,000 X \(\frac{5}{100}\) = 2,000

Depreciation on Building = 12,000 X \(\frac{10}{100}\) = ₹1,200

Working Notes 2: Doubtful Debts Evaluation

Provision for doubtful debts = Sundry Debtors X \(\frac{Rate}{100}\)

= 54,300 X \(\frac{5}{100}\)= ₹2,715

Working Notes 3: Discount on debtors Evaluation

Provision for discount on debtors = (Sundry Debtors – provision for bad debts)X \(\frac{Rate}{100}\)

= (54,300 – 2,715)X \(\frac{3}{100}\)= ₹1,548

Working Notes 4: Manager’s commission Evaluation

Profit before manager’s commission = ₹13,297 (27,730-14,433) X \(\frac{5}{105}\) = 633

Question 16

The following balances were extracted from the books of Shri Krishan Kumar as at 31st March, 2017:

Dr. ₹

Cr.₹

Capital

24,500

Drawings

2,000

General Expenses

2,500

Buildings

11,000

Machinery

9,340

Stock (1-4-2016)

16,200

Power

2,240

Taxes and Insurance

1,315

Wages

7,200

Sundry Debtors

6,280

Sundry Creditors

2,500

Charity

105

Bad-debts

550

Bank Overdraft

11,180

Sales

65,360

Purchases

47,000

Scooter

2,000

Scooter Expenses

500

Bad-debts Provision

900

Commission

1,320

Trade Expenses

1,280

Bills Payable

3,850

Cash

100

1,09,610

1,09,610

Adjustments:-

(i) Stock on 31st March, 2017 was valued at ₹ 23,500.

(ii) 15th

of general expenses and taxes & insurance to be charged to the factory and the balance to the office.

(iii) Write off a further Bad-debts of ₹ 160 and maintain the provision for Bad-debts at 5% on Debtors.

(iv) Depreciate Machinery at 10% and Scooter by ₹ 240.

(v) Provide ₹ 700 for outstanding interest on Bank Overdraft.

(vi) Prepaid Insurance is to the extent of ₹ 50.

(vii) Provide for Manager’s Commission at 10% on the Net Profit after charging such Commission.

Prepare final accounts for the year ended 31st March, 2017 after giving effect to the above adjustments.

Solution:

Trading Account of Shri Krishan Kumar

Dr.

Cr.

Particulars

Particulars

Opening Stock

16,200

Sales

65,360

Purchases

47,000

Closing Stock

23,500

Wages

7,200

General Expenses (1/5th)

500

Taxes and Insurance (1/5th)

253

Power

2,240

Gross Profit (Balancing Figure)

15,467

88,860

88,860

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

15,467

Machinery

934

Commission Received

1,320

Scooter

240

1,174

Old Bad Debts

550

Add: Further Bad Debts

160

Add: New Provision (WN2)

306

Less: Old Provision

900

116

Outstanding Interest on Bank Overdraft

700

Taxes & Insurance

1,315

Less: Pre-paid

50

Less: T/f to Trading A/c

253

1,012

General Expenses

2,500

Less: T/f to Trading A/c

500

2,000

Charity

105

Scooter Expenses

500

Trade Expenses

1,280

Outstanding Manager’s Commission (WN3)

900

Net Profit (Balancing Figure)

9,000

16,787

16,787

Balance Sheet

Liabilities

Assets

Capital

24,500

Fixed Assets

Add: Net Profit

9,000

Machinery

9,340

Less: Drawings

2,000

31,500

Less: Depreciation

934

8,406

Scooter

2,000

Current Liabilities

Less: Depreciation

240

1,760

Creditors

2,500

Building

11,000

Outstanding Manager’s Commission

900

Bills Payable

3,850

Current Assets

Outstanding Interest on Bank Overdraft

700

Closing Stock

23,500

Bank Overdraft

11,180

Prepaid Insurance

50

Debtors

6,280

Less: Bad Debts

160

Less: Provision for Bad Debts

306

5,814

Cash in Hand

100

50,630

50,630

Working Notes 1: Depreciation Evaluation

Machinery Depreciation = 9,340× \(\frac{10}{100}\) = ₹934

Working Notes 2 : Provision for doubtful debts Evaluation

Provision for doubtful debts = (Sundry Debtors−Further Bad debts) X \(\frac{Rate}{100}\)

= (6,280−160)× \(\frac{5}{100}\) = ₹ 306

Working Notes 3: Manager’s Commission Evaluation

Profit before Manager’s Commission= ₹ 9,900 (16,787−6,887)

Manager’s Commission=9,900× \(\frac{10}{110}\) = ₹ 900

Question 17(A)

On 31st March, 2017 the following Trial Balance was extracted from the books of Sh. Ghanshyam Das:-

Dr. ₹

Cr. ₹

Capital Account

2,00,000

Debtors and Creditors

40,000

25,000

Loan on Mortgage

30,000

Interest on Loan

2,250

Discount

1,800

Stock on 1st April, 2016

20,000

Motor Vehicle

50,000

Cash at Bank

4,450

Investments

16,000

Wages

18,000

Land and Building

2,80,000

Bad-Debts

1,500

Purchases and Sales

2,50,000

4,80,000

Purchases and Sales Returns

12,000

10,000

Carriage Outward

8,000

Carriage Inward

6,500

Salaries

7,200

Outstanding Salaries

600

Rates, Taxes and Insurance

15,000

Advertising

5,000

General Expenses

6,400

Bills Receivable and Payable

7,500

5,400

Prepaid Insurance

3,000

7,52,800

7,52,800

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date, after making adjustments for the following matters:

1. Depreciate Land and Building at 2.5% and Motor Vehicles at 20%.

2. Interest on Loan at 15% p.a. is unpaid for six months.

3. Ghanshyam Das withdrew ₹ 2,000 for his private use. This amount was included in general expenses.

4. Interest on Investments is receivable for full year @ 10%.

5. Provide for Manager’s Commission at 10% on Net Profit after charging such commission.

6. Stock in hand on 31st March, 2017 was valued at ₹ 25,000 (Realisable value ₹ 22,000).

Solution:

Trading Account of Sh. Ghanshyam Das

Dr.

Cr.

Particulars

Particulars

Opening Stock

20,000

Sales

4,80,000

Purchases

2,50,000

Less: Sales Return

12,000

4,68,000

Less: Purchases Return

10,000

2,40,000

Closing Stock

22,000

Wages

18,000

Carriage Inwards

6,500

Gross Profit (Balancing Figure)

2,05,500

4,90,000

4,90,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

2,05,500

Land & Building

7,000

Accrued Interest on Investment

1,600

Motor Vehicle

10,000

17,000

Discount Received

1,800

Interest on Loan

2,250

Add: Outstanding (WN2)

2,250

4,500

General Expenses

6,400

Less: Drawings

2,000

4,400

Bad Debts

1,500

Carriage Outwards

8,000

Salaries

7,200

Rates, Taxes and Insurance

15,000

Advertisement

5,000

Outstanding Manager’s Commission (WN3)

13,300

Net Profit (Balancing Figure)

1,33,000

2,08,900

2,08,900

Balance Sheet

Liabilities

Assets

Capital

2,00,000

Fixed Assets

Add: Net Profit

1,33,000

Land & Building

2,80,000

Less: Drawings

2,000

3,31,000

Less: Depreciation

7,000

2,73,000

Motor Vehicle

50,000

Current Liabilities

Less: Depreciation

10,000

40,000

Creditors

25,000

Investments

16,000

Outstanding Manager’s Commission

13,300

Current Assets

Outstanding Salaries

600

Closing Stock

22,000

Bills Payable

5,400

Bills Receivable

7,500

Loan on Mortgage

30,000

Debtors

40,000

Outstanding Interest on Loan

2,250

32,250

Prepaid Insurance

3,000

Accrued Interest on Investment

1,600

Cash at Bank

4,450

4,07,550

4,07,550

Working Notes 1: Depreciation Evaluation

Land & Building Depreciation = 2,80,000 X \(\frac{2.5}{100}\) = ₹7,000

Motor Vehicle Depreciation =50,000 X \(\frac{20}{100}\) = ₹10,000

Working Notes 2: Outstanding Interest on Loan Evaluation

Outstanding Interest=30,000× \(\frac{15}{100}\) x \(\frac{6}{12}\) = ₹ 2,250

Working Notes 3: Manager’s Commission Evaluation

Profit before Manager’s Commission=Rs 1,46,300 (2,08,900−62,600)

Manager’s Commission=1,46,300 X \(\frac{10}{110}\) = ₹13,300

Question 17(B)

Prepare Trading and Profit and Loss Account and Balance Sheet as at 31st March, 2017 from the following Balances of Mr. Sardari Lal :

Particulars

(₹)

Particulars

(₹)

Capital Account

41,000

Drawings

5,000

Creditors – Trade

30,000

Purchases

1,71,000

Creditors – Expenses

6,800

Carriage inwards

1,500

Rent Received

600

Wages

23,000

Purchases Returns

4,000

Power

9,000

Sales

2,89,600

Rent and Insurance

19,900

Bad-Debts Provision on 1st April, 2016

600

Salaries

34,400

Advertising Development

8,000

Discount Received

1,800

Goodwill

5,000

General Charges

8,600

Plant and Machinery

20,000

Sales Returns

600

Traveller’s Samples

2,700

Traveller’s Commission

2,890

Stock on 1-4-2016

32,000

Traveller’s Salaries

9,100

Debtors

14,600

Discount Allowed

5,000

Cash at Bank

2,000

Cash in hand

110

Adjustments:- The Closing stock was ₹ 23,000 but there has been a loss by fire on 20th March, 2017, to the extent of ₹ 20,000, not covered by insurance. Depreciate Plant and Machinery by 10% and Traveller’s Samples by \(33\frac{1}{2}\)%. Increase the Bad-debts Provision to ₹ 2,000. Write 20% off Advertising Development Account. Annual premium on insurance expiring 1st June, 2017 was ₹ 1,200. Provide for Manager’s commission @ 5% on Net Profits after charging such Commission.

Solution:

Trading Account of Mr. Sardari Lal

Dr.

Cr.

Particulars

Particulars

Opening Stock

32,000

Sales

2,89,600

Purchases

1,71,000

Less: Sales Return

600

2,89,000

Less: Purchases Return

4,000

Closing Stock

23,000

Less: Goods Destroyed by Fire

20,000

1,47,000

Power

9,000

Carriage Inwards

1,500

Wages

23,000

Gross Profit (Balancing Figure)

99,500

3,12,000

3,12,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

99,500

Traveler’s Sample

900

Rent Received

600

Plant & Machinery

2,000

2,900

Discount Received

1,800

Rent & Insurance

19,900

Net Loss (Balancing Figure)

3,690

Less: Prepaid (WN2)

200

19,700

New Provision

2,000

Less: Old Provision

600

1,400

Traveler’s Commission

2,890

Traveler’s Salaries

9,100

Salaries

34,400

Discount Allowed

5,000

Loss by Fire

20,000

Advertisement Development Expenditure written-off (WN3)

1,600

General Charges

8,600

1,05,590

1,05,590

Balance Sheet

Liabilities

Assets

Capital

41,000

Fixed Assets

Less: Net Loss

3,690

Plant & Machinery

20,000

Less: Drawings

5,000

32,310

Less: Depreciation

2,000

18,000

Traveler’s Samples

2,700

Current Liabilities

Less: Depreciation

900

1,800

Creditors- Expenses

6,800

Goodwill

5,000

Creditors- Trade

30,000

Current Assets

Closing Stock

23,000

Advertisement Development

6,400

Prepaid Insurance

200

Cash in Hand

110

Debtors

14,600

Less: Provision for Doubtful Debts

2,000

12,600

Cash at Bank

2,000

69,110

69,110

Working Notes 1: Depreciation Evaluation

Plant and Machinery = 20,000 X \(\frac{10}{100}\) = ₹ 2,000

Traveller’s Samples = 2,700 X \(\frac{100}{3×100}\) = ₹ 900

Working Notes 2: Prepaid Insurance Evaluation

Prepaid Insurance= 1,200 X \(\frac{2}{12}\) = ₹ 200

Working Notes 3: Advertisement Expenditure Written-off Evaluation

Advertisement Expenditure Written-off = 8,000 X \(\frac{20}{100}\) = ₹ 1,600

Working Notes 4: Manager’s Commission Evaluation

Since, there is a net loss, therefore, there will be no commission for the manager.

Question 18

State with reasons whether the following are capital or revenue expenditures:

(i) A new machine is purchased for ₹ 60,000, ₹ 800 were spent on its carriage and ₹ 1,500 were paid as wages for its installation.

(ii) A sum of ₹ 40,000 was spent on painting the new factory.

(iii) ₹ 6,000 were paid for annual insurance premium.

(iv) ₹ 20,000 were spent on repairs before using a second hand generator purchased recently.

(v) ₹ 5,000 were spent on the repair of a machinery.

(vi) ₹ 50,000 were spent for airconditioning of the office of the manager.

Solution:

1.The purchase of machine, carriage, and installation is considered as a capital expenditure as it is an asset and will contribute in future revenue.

2. Painting a new factory falls into capital expenditure as it will increase the revenue capacity of a firm

3. Annual insurance premium is a standard and regular business activity, therefore, it is a revenue expenditure.

4. Repair of a second hand generator is an every year expenditure which will increase the revenue of a business, so it will be considered as capital expenditure.

5. Repair of a second hand machine is a regular expense which will contribute to the revenue generation of a company. So, it is a revenue expenditure.

6.Money spent on manager’s air conditioning will strengthen the asset value and thus, it is a capital expenditure.

Question 19

From the following Trial Balance of Mr. Alok, prepare Trading and Profit & Loss Account for the year ending 31st March, 2014, and a Balance Sheet as at that date:-

Dr. Balances

(₹)

Cr. Balances

(₹)

Drawings

5,275

Capital

59,700

Bills Receivable

4,750

Loan at 8% p.a. (on.1.4.2013)

10,000

Machinery

14,400

Commission Received

2,820

Debtors

(including X for dishonoured Bill of ₹ 1,000)

30,000

Creditors

29,815

Wages

20,485

Sales

1,78,215

Returns Inward

2,390

Purchases

1,28,295

Rent

2,810

Stock (1.4.2013)

44,840

Salaries

5,500

Travelling Expenses

945

Insurance

200

Cash

9,750

Repairs

1,685

Interest on Loan

500

Discount Allowed

2,435

Bad-Debts

1,810

Furniture

4,480

2,80,550

2,80,550

The following adjustments are to be made:

(i) Stock in the shop on 31st March, 2014 was ₹ 64,480.

(ii) Half the amount of X‘s Bill is irrecoverable.

(iii) Create a provision of 5% on other debtors.

(iv) Wages include ₹ 600 for erection of new Machinery.

(v) Depreciate Machinery by 5% and Furniture by 10%.

(vi) Commission includes ₹ 300 being Commission received in advance.

Solution:

Trading Account of Mr. Alok

Dr.

Cr.

Particulars

Particulars

Opening Stock

44,840

Sales

1,78,215

Purchases

1,28,295

Less: Return Inwards

2,390

1,75,825

Wages

20,485

Closing Stock

64,480

Less: Erection Charges of

New Machinery

600

19,885

Gross Profit (Balancing Figure)

47,285

2,40,305

2,40,305

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

47,285

Machinery

750

Commission

2,820

Furniture

448

1,198

Less: Comm. Received in advance

300

2,520

Old Bad Debts

1,810

Add: Further Bad Debts

500

Add: New Provision (WN2)

1,450

3,760

Rent

2,810

Interest on Loan

500

Add: Outstanding (WN3)

300

800

Salaries

5,500

Travelling Expenses

945

Insurance

200

Repairs

1,685

Discount Allowed

2,435

Net Profit (Balancing Figure)

30,472

49,805

49,805

Balance Sheet

Liabilities

Assets

Capital

59,700

Fixed Assets

Add: Net Profit

30,472

Machinery

14,400

Less: Drawings

5,275

84,897

Add: Erection charges

600

8% Loan

10,000

Less: Depreciation

750

14,250

Furniture

4,480

Current Liabilities

Less: Depreciation

448

4,032

Creditors

29,815

Outstanding Interest

300

Current Assets

Commission received in advance

300

Closing Stock

64,480

Bills Receivables

4,750

Debtors

30,000

Less: Bad Debts

500

Less: Provision for Doubtful Debts

1,450

28,050

Cash in Hand

9,750

1,25,312

1,25,312

Working Notes 1: Depreciation Evaluation

Machinery Depreciation = (14,400+600) X \(\frac{5}{100}\) = ₹ 750

Furniture Depreciation =4,480 X \(\frac{10}{100}\) = ₹ 448

Working Notes 2: Provision of doubtful debts Evaluation

Provision of doubtful debts = (Sundry Debtors−Further Bad Debts−Amount recoverable from X) X \(\frac{Rate}{100}\)

= (30,000−500−500)× \(\frac{5}{100}\) = ₹ 1.450

*Provisions to be maintained on Debtors other than X

Working Notes 2: Outstanding interest on loan Evaluation

Interest on Loan=10,000 × \(\frac{8}{100}\) = ₹ 800

Interest on Loan already Paid = 300

Therefore, Outstanding Interest on Loan = Rs 300

Question 20

Extracts of Trial Balance as at 31st March, 2017:

Dr. ₹

Cr. ₹

Sundry Debtors (including Dewan for dishonoured bill of ₹ 20,000)

4,80,000

Provision for Doubtful Debts

24,000

Bad Debts

10,000

Adjustments:

(i) \(2\frac{3}{4}\)% of Dewan’s bill is irrecoverable.

(ii) Create a provision of 6% on Sundry Debtors.

Show the effect on the Profit and Loss Account and Balance Sheet.

Solution:

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Old Bad Debts

10,000

Add: Further Bad Debts

15,000

Add: New Provision

27,600

Less: Old Provision

24,000

28,600

Balance Sheet

Liabilities

Assets

Current Assets

Debtors

4,80,000

Less: Bad Debts

15,000

Less: Provision for Doubtful Debts

27,600

4,37,400

Working Note 1: Provision for Doubtful Debts Evaluation

Provision for Doubtful Debts = (Sundry Debtors−Further Bad Debts−Amount recoverable from Dewan*) X \(\frac{Rate}{100}\)

= (4,80,000−15,000−5,000) X \(\frac{6}{100}\) = ₹ 27,600

*Apart from Dewan the provision will be maintained by Debtors

Question 21

From the following Trial Balance extracted from the books of S. Sujan Singh, prepare a Trading and Profit & Loss Account for the year ended 31st March, 2016 and a Balance Sheet as at that date:

Dr.

Cr.

Capital Account

90,000

Drawings Account

6,480

Land and Buildings

25,000

Plant & Machinery

14,270

Furniture & Fixtures

1,250

Carriage (Inwards)

4,370

Wages

21,470

Salaries

4,670

Bad-Debts Provision (as on 1st April, 2015)

2,470

Sales

91,230

Sales Returns

1,760

Bank Charges

140

Coal, Gas and Water

720

Rates & Taxes

840

Discount Account (Balance)

120

Purchases

42,160

Purchases Returns

8,460

Bills Receivable

1,270

Trade Expenses

1,990

Sundry Debtors

37,800

Sundry Creditors

12,170

Stock (1st April, 2015)

26,420

Miscellaneous Receipt

500

Fire Insurance

490

Cash at Bank

13,000

Cash in Hand

850

2,04,950

2,04,950

Adjustments:-

1. Carry forward the following unexpired amounts:-

(i) Fire Insurance

₹ 125

(ii) Rates and Taxes

₹ 240

2. Transfer to Building Account ₹ 3,000 from purchases and ₹ 2,000 from wages, representing cost of material and labour spent on additions to Building made during the year.

3. Charge Depreciation on Land and Buildings at 2.5% and on Plant & Machinery at 10%.

4. Make a Provision of 5% on Sundry Debtors for Bad-debts.

5. Charge 5% Interest on Capital but not on Drawings.

6. The value of Stock as on 31st March, 2016 was ₹ 29,390.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

26,420

Sales

91,230

Purchases

42,160

Less: Sales Return

1,760

89,470

Less: Purchases Return

8,460

Closing Stock

29,390

Less: t/f to Building

3,000

30,700

Wages

21,470

Less: t/f to Building

2,000

19,470

Carriage

4,370

Coal, Gas and Water

720

Gross Profit (Balancing Figure)

37,180

1,18,860

1,18,860

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

37,180

Plant & Machinery

1,427

Miscellaneous Receipts

500

Land & Building

750

2,177

Discount

120

Fire Insurance

490

Old Provision

2,470

Less: Unexpired

125

365

Less: New Provision (WN2)

1,890

580

Interest on Capital

4,500

Rates & Taxes

840

Less: Unexpired

240

600

Salaries

4,670

Trade Expenses

1,990

Bank Charges

140

Net Profit (Balancing Figure)

23,938

38,380

37,980

Balance Sheet

Liabilities

Assets

Capital

90,000

Fixed Assets

Add: Interest on Capital

4,500

Land & Building (25,000 + 3,000 + 2,000)

30,000

Add: Net Profit

23,938

Less: Depreciation

750

29,250

Less: Drawings

6,480

1,11,958

Plant & Machinery

14,270

Less: Depreciation

1,427

12,843

*Current Liabilities

Furniture & Fixtures

1,250

Creditors

12,170

*Current Assets

Closing Stock

29,390

Unexpired Fire Insurance

125

Unexpired Rates & Taxes

240

Bills Receivables

1,270

Cash at Bank

13,000

Debtors

37,800

Less: Provision for Doubtful Debts

1,890

35,910

Cash in Hand

850

1,24,128

1,24,128

Working Notes 1: Depreciation Evaluation

Land and Building Depreciation = 30,000 x \(\frac{2.5}{100}\) = ₹ 750

Machinery and Plant Depreciation =14,270× \(\frac{10}{100}\) = ₹1,427

Working Notes 2: Provision for Doubtful Debts Evaluation

Provision for Doubtful Debts = (Sundry Debtors−Further Bad Debts)× \(\frac{Rate}{100}\)

= (37,800−0) X \(\frac{5}{100}\) = ₹1,890

Question 22

From the following Trial Balance extracted from the books of Sh. Pawan Kumar, prepare a Trading Account, Profit & Loss Account for the year ended 31st March, 2014 and a Balance Sheet as at that date.

Dr. Balances

Cr. Balances

Drawings

1,20,000

Capital

16,00,000

Plant and Machinery

12,00,000

Creditors

2,60,000

Horses and Carts

2,60,000

Sales

8,20,000

Debtors

3,40,000

Bills Payable

2,21,200

Purchases

2,00,000

Interest on Ram’s Loan

1,800

Wages

80,000

Rent Received

12,000

Cash at Bank

2,60,000

Salaries

80,000

Repairs

5,000

Stock (1-4-2013)

7,000

Stock (31-3-2014)

92,000

Rent

45,000

Manufacturing expenses

15,000

Bad-Debts

50,000

Carriage

15,000

Income Tax

20,000

Life Insurance Premium

30,000

Loan to Ram at 12% p.a.

20,000

Insurance

12,000

Insurance Prepaid

1,000

29,15,000

29,15,000

Adjustments:-

1. Plant and Machinery includes a new machinery purchased on 1st October, 2013 for ₹ 2,00,000.

2. Depreciate Plant and Machinery by 10% p.a. and Horses and Carts by 20% p.a.

3. Salaries for the month of February and March 2014 are outstanding.

4. Goods worth ₹ 15,000 were sold and dispatched on 27th March but no entry was passed to this effect.

5. Make a provision for Doubtful Debts at 5% on Debtors.

Solution:

Trading Account of Sh. Pawan Kumar

Dr.

Cr.

Particulars

Particulars

Opening Stock

70,000

Sales

8,20,000

Purchases

2,00,000

Add: Unrecorded Sales

15,000

8,35,000

Carriage

15,000

Wages

80,000

Manufacturing Expenses

15,000

Gross Profit (Balancing Figure)

4,55,000

8,35,000

8,35,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

4,55,000

Plant & Machinery

1,10,000

Rent Received

12,000

Horse & Carts

52,000

1,62,000

Interest on Ram’s Loan

1,800

Old Bad Debts

50,000

Add: Accrued Interest (WN4)

600

2,400

Add: New Provision (WN2)

17,750

67,750

Insurance

12,000

Salaries

80,000

Add: Outstanding (WN3)

16,000

96,000

Repairs

5,000

Rent

45,000

Net Profit (Balancing Figure)

81,650

4,69,400

4,69,400

Balance Sheet

Liabilities

Assets

Capital

16,00,000

Fixed Assets

Add : Net Profit

81,650

Plant & Machinery

12,00,000

Less: Drawings (incl. LIP and Income Tax)

1,70,000

15,11,650

Less: Depreciation

1,10,000

10,90,000

Horses & Carts

2,60,000

Current Liabilities

Less: Depreciation

52,000

2,08,000

Creditors

2,60,000

Outstanding Salaries

16,000

Current Assets

Bills Payable

2,21,200

Closing Stock

92,000

Prepaid Insurance

1,000

Accrued Interest

600

Ram’s Loan

20,000

Cash at Bank

2,60,000

Debtors

3,40,000

Add: Unrecorded

15,000

Less: Provision for Doubtful Debts

17,750

3,37,250

20,08,850

20,08,850

Working Notes 1: Depreciation Evaluation

Depreciationon Plant & Machinery =10,00,000× \(\frac{10}{100}\) + 2,00,000 X \(\frac{10}{100}\) X \(\frac{6}{12}\)= ₹1,10,000

Horse & Carts Depreciation =2,60,000× \(\frac{20}{100}\) = ₹52,000

Plant & Machinery Depreciation =10,00,000×10100+ 2,00,000×10100×612=Rs1,10,000

Horse & Carts Depreciation =2,60,000×20100=Rs 52,000

Working Notes 2: Provision for Doubtful Debts Evaluation

Provision for Doubtful Debts = (Sundry Debtors+Unrecorded Sales)× \(\frac{Rate}{100}\)

= (3,40,000+15,000)× \(\frac{5}{100}\) = ₹ 17,750

Working Notes 3: Outstanding Expenses Evaluation

Salaries for 10 months = 80,000

Salary for 2 months= \(\frac{80,000}{100}\) X 2 = ₹ 16,000

Salaries for 10 months = 80,000Salary for 2 months=80,00010×2=Rs16,000

Working Notes 4: Accrued Interest on Ram’s Loan Expenses Evaluation

Interest on Loan=20,000× \(\frac{12}{100}\) = ₹ 2,400

Interest on already received Loan = ₹ 1,800

Therefore, Accrued Interest = (₹ 2,400 – ₹ 1,800) = ₹ 600

Question 23

The following balances were extracted from the books of Modern Traders as at 31st March, 2017:-

Particulars

Particulars

Capital Account

85,000

Printing and Stationery

800

Drawings Account

5,000

Sundry Creditors

23,000

Plant and Machinery

40,000

Sales

1,20,000

Stock on 1-4-2016

15,000

Postage

800

Purchases

82,000

Bad-Debts

400

Sundry Debtors

20,600

Provision for Doubtful Debts

800

Furniture

5,000

Discount received

400

Freight Inward

2,000

Rent Revenue

1,200

Carriage Outward

500

Insurance

700

Rent, Rates and Taxes

4,600

Salaries

20,000

Wages

1,300

Cash in Hand

6,200

Cash at Bank

25,500

Prepare Final Accounts for the year ended 31st March, 2017 after taking into account the following:

(i) Stock on 31st March, 2017 was valued at ₹ 15,000.

(ii) Goods costing ₹ 6,000 were sent to a customer on “Sale on Return basis” for ₹ 7,200 on 26th March, 2017 and had been recorded in the books as actual sales.

(iii) Provision for Doubtful Debts is to be maintained at 5% of the Debtors.

(iv) Prepaid Insurance was ₹ 100.

(v) Provide Depreciation on Plant and Machinery @ 10% and on Furniture @ 5%.

Solution:

Trading Account of Modern Traders

Dr.

Cr.

Particulars

Particulars

Opening Stock

15,000

Sales

1,20,000

Purchases

82,000

Less: Sale on Approval Basis

7,200

1,12,800

Freight Inwards

2,000

Closing Stock

15,000

Wages

1,300

Add: Sale on Approval Basis

6,000

21,000

Gross Profit (Balancing Figure)

33,500

1,33,800

1,33,800

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

33,500

Machinery and Plant

4,000

Received Discount

400

Furniture

250

4,250

Rent Revenue

1,200

Bad Debts

400

Add: New Provision (WN2)

670

Less: Old Provision

800

270

Carriage Outwards

500

Insurance

700

Less: Prepaid

100

600

Rates, Rent, & Taxes

4,600

Printing & Stationery

800

Postage & Telegram

800

Salaries

20,000

Net Profit (Balancing Figure)

3,280

35,100

35,100

Balance Sheet

as on March 31, 2017

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Capital

85,000

Fixed Assets

Add: Net Profit

3,280

Plant & Machinery

40,000

Less: Drawings

5,000

83,280

Less: Depreciation

4,000

36,000

Furniture

5,000

Current Liabilities

Less: Depreciation

250

4,750

Creditors

23,000

Current Assets

Closing Stock

15,000

Add: Sale on Approval Basis

6,000

21,000

Prepaid Insurance

100

Cash in Hand

6,200

Cash at Bank

25,500

Debtors

20,600

Less: Sale on Approval Basis

7,200

Less: Provision for Doubtful Debts

670

12,730

1,06,280

1,06,280

Working Notes 1: Depreciation Evaluation

Machinery Depreciation = 40,000 X \(\frac{5}{100}\) = ₹4,000

Depreciationon Furniture=5,000× \(\frac{5}{100}\) = ₹250

Depreciation on Machinery=40,000×10100=Rs 4,000

Depreciationon Furniture=5,000×5100=Rs 250

Working Notes 2: Provision for doubtful debts

Provision for doubtful debts = (Sundry Debtor – Sale on Approval Basis) X \(\frac{Rate}{100}\)

= (20, 600 – 7,200) X \(\frac{5}{100}\) = ₹670

Question 24

The following Trial Balance has been extracted from the books of Shri Santosh Kumar as at 31st March, 2017:-

Dr.₹

Cr. ₹

Plant and Machinery

1,00,000

Furniture

12,000

Capital Account

1,91,000

Household Expenses

16,000

Sales

4,68,000

Loose Tools

20,000

Goodwill

10,000

Opening Stock (1-4-2016)

20,000

Returns Outward

4,000

Discount

6,000

Purchases

2,12,000

Returns Inwards

8,000

Wages

1,00,000

Salaries

60,000

Outstanding Salaries

5,000

Investments at 10% p.a.

6,000

Interest on Investments

300

Sundry Creditors

24,000

Miscellaneous Receipts

2,000

Carriage Inwards

12,000

General Expenses and Insurance

39,000

Advertisement Expenses

15,000

Postage

4,000

Sundry Debtors

56,000

B. Barua

2,000

Cash Balance

14,000

Bank

3,200

Suspense Account

2,500

7,06,000

7,06,000

The following additional information is available:-

(I) Stock on 31st March, 2017 was ₹ 30,800.

(II) Depreciation is to be charged on Plant and Machinery at 5% and Furniture at 6%. Loose Tools are revalued at ₹ 16,000.

(III) Create a provision of 2% for Discount on Debtors.

(IV) Salary of ₹ 2,000 paid to Shri B. Barua, a temporary employee, stands debited to his personal account and it is to be corrected.

(V) Write off 1/5th of advertisement expenses.

You are to prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and a Balance Sheet as at that date.

Solution:

Trading Account of Shri Santosh Kumar

Dr.

Cr.

Particulars

Particulars

Opening Stock

20,000

Sales

4,68,000

Purchases

2,12,000

Less: Return Inwards

8,000

4,60,000

Less: Return Outwards

4,000

2,08,000

Closing Stock

30,800

Carriage Inwards

12,000

Wages

1,00,000

Gross Profit (Balancing Figure)

1,50,800

4,90,800

4,90,800

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

1,50,800

Plant & Machinery

5,000

Discount

6,000

Furniture

720

Miscellaneous Receipts

2,000

Loose Tools

4,000

9,720

Interest on Investment

300

Salaries

60,000

Add: Accrued (WN3)

300

600

Add: Salary to B.Barua

2,000

62,000

Advertisement Expenses written-off

3,000

Provision for Discount on Debtors (WN2)

1,120

General Expenses & Insurance

39,000

Postage & Telegram

4,000

Net Profit (Balancing Figure)

40,560

1,59,400

1,59,400

Balance Sheet

as on March 31, 2017

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Capital

1,91,000

Fixed Assets

Add: Net Profit

40,560

Plant & Machinery

1,00,000

Less: Drawings

16,000

2,15,560

Less: Depreciation

5,000

95,000

Furniture

12,000

Current Liabilities

Less: Depreciation

720

11,280

Creditors

24,000

Loose Tools

20,000

Bank Overdraft

3,200

Less: Depreciation

4,000

16,000

Outstanding Salaries

5,000

10% Investment

6,000

Suspense Account

2,500

Current Assets

Goodwill

10,000

Closing Stock

30,800

Advertisement Expenditure

12,000

Accrued Interest on Investments

300

Cash in Hand

14,000

Debtors

56,000

Less: Provision for Discount on Debtors

1,120

54,880

2,50,260

2,50,260

Working Notes 1: Depreciation Evaluation

Machinery Depreciation = 1,00,000 X \(\frac{5}{100}\) = ₹5,000

Furniture Depreciation=12,000× \(\frac{6}{100}\) = ₹720

Loose Tools Depreciation (20,000− 16,000 ) = ₹ 4,000

Working Note 2: Provision for discount on debtors Evaluation

Provision for Discounton Debtors=56,000× \(\frac{2}{100}\) = ₹ 1,120

Working Note 3: Accrued investment interest Evaluation

Interest on Investment=6,000× \(\frac{10}{100}\) = ₹600

Interest on already received loan = ₹ 300

Therefore, Accrued Interest = ₹ 300

Question 25

From the following Trial Balance of Sh. Swamy Narain, prepare Trading and Profit & Loss Account for the year ended 31st March 2018 and a Balance Sheet as at that date :

Dr. Balances

Cr. Balances

Opening Stock

50,000

Capital

20,00,000

Purchases

5,30,000

Sales

12,50,000

General Expenses

45,000

Sundry Creditors

1,36,000

Stationery

6,000

Trade Charges due but not paid

5,000

Wages

2,15,000

Outstanding Rent

4,000

Trade Charges

25,000

Bank Balance

45,000

Rent

44,000

Charity

5,000

Advertisement Expenses

30,000

Carriage on Sales

12,000

Bills Receivables

30,000

Sundry Debtors

2,20,000

Cash Discount

16,000

Cash in Hand

22,000

Furniture

1,00,000

Advance for Furniture

40,000

Plant & Machinery

6,00,000

Building

14,50,000

34,40,000

34,40,000

Adjustments:

(i) Stock on 31 March, 2018 was valued at ₹ 60,000.

(ii) A new machine was installed during the year costing ₹ 2,00,000 but it was not recorded in the books. Wages paid for its installation ₹ 10,000 have been debited to Wages Account.

(iii) An advance of ₹ 10,000 given alongwith purchase order was wrongly recorded in purchases.

(iv) General expenses include ₹ 20,000 paid for Wages.

(v) Wages include a sum of ₹ 50,000 spent on the erection of a Scooter Stand for employees.

(vi) Advance for Furniture is for furniture at proprietor’s residence.

(vii) Depreciate Furniture at 15%, Plant & Machinery at 20% and Building at 10%.

(viii) Carry forward 2/3 of Advertisement Expenses as unexpired.

(ix) A B/R of ₹ 20,000 was discounted with bank on 15 Nov. 2017, but not yet matured.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

50,000

Sales

12,50,000

Purchases

5,30,000

Closing Stock

60,000

Less: Advance received against Order

(10,000)

5,20,000

Wages

2,15,000

Add: Included in General Expenses

20,000

Less: Shed Construction

(50,000)

Less: Machinery Wages

(10,000)

1,75,000

Gross Profit

5,65,000

13,10,000

13,10,000

Profit & Loss Account

Dr.

Cr.

Particulars

Particulars

Cash Discount

16,000

Gross Profit

5,65,000

General Expenses

45,000

Less: Wages

(20,000)

25,000

Stationery

6,000

Trade Charges

25,000

Rent

44,000

Charity

5,000

Advertisement Expenses

10,000

Carriage on Sales

12,000

Depreciation on:

Furniture

15,000

Building

1,50,000

Plant & Machinery

1,62,000

3,27,000

Net Profit

95,000

5,65,000

5,65,000

Dr.

Balance Sheet

Cr.

Liabilities

Assets

Creditors

1,36,000

Furniture

1,00,000

Outstanding Trade Charges

5,000

Less: Depreciation

15,000

85,000

Outstanding Rent

4,000

Plant & Machinery

6,00,000

Bank Overdraft

45,000

Add: Additions

2,10,000

Capital

20,00,000

Less: Depreciation

1,62,000

6,48,000

Less: Drawings

40,000

Unexpired Advertisement Expenses

20,000

Add: Net Profit

95,000

20,55,000

Building

14,50,000

Creditors for Machinery

2,00,000

Add: Additions

50,000

Less: Depreciation

1,50,000

13,50,000

Cash in Hand

22,000

Closing Stock

60,000

Debtors

2,20,000

Advance against Purchases

10,000

Bills Receivable

30,000

24,45,000

24,45,000

Question 26

Following is the Trial Balance as on 31st March 2016. Prepare Trading and Profit and Loss Account and Balance Sheet :-

Particulars

Debit

(₹)

Credit

(₹)

Stock (1st April 2015)

8,000

Sales

2,20,000

Purchases

1,26,000

Productive Wages

56,500

Salaries

16,000

Stores Consumed

6,050

Carriage

3,050

Rent and Rates

5,200

Insurance

1,320

Machinery

52,000

Building

67,000

Capital less Drawings

1,45,600

Sundry Debtors

44,000

Sundry Creditors

20,000

Secured Loan

15,000

Furniture

3,350

General Expenses

2,600

Cash in hand

1,930

Bad Debts

1,020

Bank

6,580

Total

4,00,600

4,00,600

Additional Information :

(a) Stock on 31st March 2016 is ₹ 20,600.

(b) Depreciate machinery @ 10% p.a.

(c) Make a Provision @ 5% for Doubtful Debts.

(d) Provide \(2\frac{1}{2}\)% for discount on sundry debtors.

(e) Rent and Rates include security deposit of ₹ 400.

(f) Insurance prepaid ₹ 120.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

8,000

Sales

2,20,000

Purchases

1,26,000

Closing Stock

20,600

Stores Consumed

6,050

Productive Wages

56,500

Carriage

3,050

Gross Profit

41,000

2,40,600

2,40,600

Profit & Loss Account

Dr.

Cr.

Particulars

Particulars

Salaries

16,000

Gross Profit

41,000

Rent & Rates

5,200

Less: Security Deposit

(400)

4,800

Insurance

1,320

Less: Prepaid

120

1,200

General Expenses

2,600

Bad Debts

1,020

Add: Provision for Doubtful Debts

2,200

3,220

Provision for Discount on Debtors

1,045

Machinery Depreciation

5,200

Net Profit

6,935

41,000

41,000

Balance Sheet

Dr.

Cr.

Liabilities

Assets

Creditors

20,000

Machinery

52,000

Capital

1,45,600

Less: Depreciation

5,200

46,800

Add: Net Profit

6,935

1,52,535

Building

67,000

Secured Loan

15,000

Cash in Hand

1,930

Closing Stock

20,600

Debtors

44,000

Less: Provision for Doubtful Debts

2,200

Less: Provision for Discount

1,045

40,755

Furniture

3,350

Prepaid Insurance

120

Security Deposit

400

Bank

6,580

1,87,535

1,87,535

Question 27

From the following Trial Balance and other information prepare Trading and Profit and Loss Account for the year ended 31st March 2016 and Balance Sheet as at that date.

Heads of Accounts

Debit

(₹)

Credit

(₹)

Sundry Debtors

32,000

Stock (1st April 2015)

22,000

Cash in hand

35

Cash at bank

1,545

Plant and Machinery

17,500

Sundry Creditors

10,650

Trade Expenses

1,075

Sales

1,34,500

Salaries

2,225

Carriage Outwards

400

Rent

900

Bills Payable

7,500

Purchases

1,18,870

Discounts

1,100

Premises

34,500

Capital (1st April 2015)

79,500

Total

2,32,150

2,32,150

Additional Information:

Stock on 31st March 2016 was ₹ 12,450. Rent was unpaid to the extent of ₹ 85 and ₹ 150 were outstanding for Trade Expenses. ₹ 400 are to be written off as bad debts out of the above debtors, and 5% is to be provided for doubtful debts. Depreciate plant and machinery 10% and premises by 2%. Manager is entitled a commission of 5% on net profit after charging his commission.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

22,000

Sales

1,34,500

Purchases

1,18,870

Closing Stock

12,450

Gross Profit

6,080

1,46,950

1,46,950

Profit & Loss Account

Dr.

Cr.

Particulars

Particulars

Salaries

2,225

Gross Profit

6,080

Trade Expenses

1,075

Net Loss

4,275

Add: Outstanding

150

1,225

Rent

900

Add: Outstanding

85

985

Carriage Outwards

400

Bad Debts

400

Add: Provision for doubtful debts

1,580

1,980

Discount

1,100

Depreciation on Machinery

1,750

Depreciation on Premises

690

10,355

10,355

Balance Sheet

Dr.

Cr.

Liabilities

Assets

Sundry Creditors

10,650

Plant & Machinery

17,500

Capital

79,500

Less: Depreciation

1,750

15,750

Less: Net Loss

4,275

75,225

Cash in Hand

35

Bills Payable

7,500

Closing Stock

12,450

Rent Outstanding

85

Premises

34,500

Outstanding Trade Expenses

150

Less: Depreciation

690

33,810

Debtors

32,000

Less: Further Bad Debts

400

Less: Provision for doubtful debts

1,580

30,020

Cash at Bank

1,545

93,610

93,610

Note: Since there is a net loss, therefore, the manager will not be entitled to any commission.

Question 28

The following is the Trial Balance of Pankaj as on 31st March, 2015:

Name of Account

Wages

10,000

Capital

43,000

Machinery

50,000

Vehicles

10,000

Sales return/Purchase return

2,000

1,000

Stock

10,000

Purchase & Sale

36,000

70,000

Repair

2,000

Rent

1,000

Provision for doubtful debts

700

Bad debts

2,400

Loan from Bank

15,000

Interest on Loan

800

Cash in Hand

16,000

Debtors & Creditors

12,000

15,300

Commission received

7,200

1,52,200

1,52,200

Adjustment:-

(i) Closing stock was valued at ₹ 12,000.

(ii) Wages have been paid for 10 months.

(iii) Write off ₹ 500 as further bad debts and provide 5% provision for doubtful debts.

(iv) Outstanding interest on loan ₹ 700.

(v) Depreciate machinery @ 5%

(b) Does question depict any value?

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

10,000

Sales

70,000

Purchases

36,000

Less: Return Inwards

2,000

68,000

Less: Return Outwards

1,000

35,000

Closing Stock

12,000

Wages

10,000

Add: Outstanding Wages

2,000

12,000

Gross Profit (Balancing Figure)

23,000

80,000

80,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Interest on Loan

800

Gross Profit

23,000

Add: Outstanding

700

1,500

Commission Received

7,200

Machine Depreciation

2,500

Old Bad Debt

2,400

Add: New Bad Debts

500

Add: Provision for Bad Debts (New)

575

Less: Provision for Bad Debts (Old)

700

2,775

Repair

2,000

Rent

1,000

Net Profit (Balancing Figure)

20,425

30,200

30,200

Balance Sheet

Liabilities

Assets

Capital

43,000

Fixed Assets

Add: Net Profit

20,425

63,425

Machinery

50,000

Loan from Bank

15,000

Less: Depreciation

2,500

47,500

Current Liabilities

Vehicles

10,000

Creditors

15,300

Current Assets

Outstanding Wages

2,000

Closing Stock

12,000

Outstanding Interest on Loan

700

Debtors

12,000

Less: Bad Debts (New)

500

Less: Provision for Bad Debts (New)

575

10,925

Cash in Hand

16,000

96,425

96,425

Question 29

Following are balances from the trial balance of Ritesh Traders as at 31st March 2008:

Particulars

Particulars

Opening Stock

5,620

Interest on Securities

6,400

Purchases

1,54,200

Land and Building

10,00,000

Sales

3,74,800

Securities

6,00,000

Wages

1,26,000

Cash in Hand

25,600

Carriage Inward

900

Bank Overdraft

3,40,000

Freight on Purchase

4,900

Discount Allowed

1,500

Salaries

8,000

Discount Received

420

Insurance

2,800

Bill Payable

4,000

Repair to Machinery

1,400

Loan (Cr.)

11,000

Drawings

5,600

Bills Receivable

7,000

Customer’s A/c

15,800

Capital Account

13,47,600

Postage

500

Suppliers A/c

40,000

Trade Expenses

1,000

X’s Loan (Cr.)

18,600

Plant and Machinery

1,82,000

Prepare Trading and Profit & Loss Account for the year ended 31st March 2008 and Balance Sheet as at that date after taking into account the following adjustments :

(i) Closing Stock was valued at ₹ 19,000.

(ii) Depreciation to be provided on Land and Building @ 5% p.a. and on Plant & Machinery @ 10% p.a.

(iii) Write off ₹ 2,000 as Bad debt.

(iv) Insurance was prepaid ₹ 700.

(v) Create provision for doubtful debts @ 5% on debtors.

(vi) Wages include ₹ 4,800 for installation of a new machinery.

Solution:

Trading Account of Ritesh Traders

Dr.

Cr.

Particulars

Particulars

Opening Stock

5,620

Sales

3,74,800

Purchases

1,54,200

Closing Stock

19,000

Wages

1,26,000

Less: Wrong inclusion

4,800

1,21,200

Carriage Inward

900

Freight on Purchase

4,900

Gross Profit (Balancing Figure)

1,06,980

3,93,800

3,93,800

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation:

Gross Profit

1,06,980

Land & Building

50,000

Interest on Securities

6,400

Plant & Machinery

18,680

68,680

Discount Received

420

Insurance

2,800

Less: Prepaid

700

2,100

Old Bad Debts

Add: New Bad Debts

2,000

Add: New Provision

690

Less: Old Provision

2,690

Postage

500

Trade Expenses

1,000

Salaries

8,000

Repairs to Machinery

1,400

Discount Allowed

1,500

Net Profit (Balancing Figure)

27,930

1,13,800

1,13,800

Balance Sheet

Liabilities

Assets

Capital

13,47,600

Fixed Assets

Add : Net Profit

27,930

Plant & Machinery

1,82,000

Less: Drawings

5,600

13,69,930

Add: Wages

4,800

Less: Depreciation

18,680

1,68,120

Land & Building

10,00,000

Less: Depreciation

50,000

9,50,000

Current Liabilities

Current Assets

Creditors

40,000

Closing Stock

19,000

Bills Payable

4,000

Securities

6,00,000

X’s Loan

18,600

Prepaid Insurance

700

Bank Overdraft

3,40,000

Bills Receivable

7,000

Loan

11,000

Debtors

15,800

Less: Bad debts

2,000

Less: Provision

690

13,110

Cash in Hand

25,600

17,83,530

17,83,530

Working Note 1: Depreciation Evaluation

Machinery Depreciation=1,86,800× \(\frac{10}{100}\) = ₹18,680

Building Depreciation =10,00,000× \(\frac{5}{100}\) = ₹50,000

Working Notes 2: Provision for doubtful debts Evaluation

Provision for Doubtful Debts = (Sundry Debtors−Further Bad Debts) X \(\frac{Rate}{100}\)

(15,800−2,000)× \(\frac{5}{100}\) = ₹ 690

Question 30

Prepare Trading and Profit and Loss Account and Balance Sheet from the following Trial Balance and information as on 31st March, 2013.

Name of Account

Debit

(₹)

Credit

(₹)

Drawings and Capital

15,000

3,25,000

Plant and Machinery

2,00,000

Motor Vehicle

1,50,000

Return Inward and Outward

25,000

37,000

Stock on 1st April, 2012

82,000

Purchases and Sales

4,40,000

6,75,000

Carriage Inward

6,000

Trade Expenses

2,500

Bad Debts

4,250

Provision for Doubtful Debts

6,000

Commission

4,000

Rent, Rates & Taxes

12,000

Salaries and Wages

24,000

Debtors and Creditors

70,000

55,000

Fuel and Water

4,750

Cash in Hand

16,500

Cash at Bank

50,000

Total

11,02,000

11,02,000

Adjustments:-

(i) Closing Stock was valued at ₹ 1,12,500.

(ii) Commission include ₹ 1,200 being commission received in advance.

(iii) Salaries and wages is outstanding for the month of Feb. & March, 2013.

(iv) Depreciate Plant & Machinery by 15% and Motor Vehicle by 20%.

(v) Write off ₹ 500 as further Bad Debts and maintain a provision for doubtful debts at 1% on debtors.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

82,000

Sales

6,75,000

Purchases

4,40,000

Less: Return Inwards

25,000

6,50,000

Less: Return Outwards

37,000

4,03,000

Closing Stock

1,12,500

Carriage Inward

6,000

Fuel and Water

4,750

Gross Profit (Balancing Figure)

2,66,750

7,62,500

7,62,500

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation:

Gross Profit

2,66,750

Plant & Machinery

30,000

Commission

4,000

Motor Vehicle

30,000

60,000

Less: Unearned

1,200

2,800

Salaries & Wages

24,000

Provision for Doubtful Debts

Add: Outstanding

4,800

28,800

(Old & New Provision)

5,305

Bad Debts (Old)

4,250

Add: Bad Debts

500

4,750

Trade Expenses

2,500

Rent, Rates, and Taxes

12,000

Net Profit (Balancing Figure)

1,66,805

2,74,855

2,74,855

Balance Sheet

Liabilities

Assets

Capital

3,25,000

Fixed Assets

Add : Net Profit

1,66,805

Plant & Machinery

2,00,000

Less: Drawings

15,000

4,76,805

Less: Dep.

30,000

1,70,000

Motor Vehicle

1,50,000

Less: Dep.

30,000

1,20,000

Current Liabilities

Current Assets

Creditors

55,000

Closing Stock

1,12,500

Outstanding Salaries and Wages

4,800

Debtors

70,000

Unearned Commission

1,200

Less: Bad Debts

500

Less: Provision for Bad Debts

695

68,805

Cash in Hand

16,500

Cash at Bank

50,000

5,37,805

5,37,805

Working Note 1: Depreciation Evaluation

Machine Depreciation = 2,00,000 X \(\frac{15}{100}\) = ₹30,000

Working Notes 2 : Provision for doubtful debts Evaluation

Provision for doubtful debts = (Sundry Debtors −Further Bad Debts) X \(\frac{Rate}{100}\)

(70,000−500)× \(\frac{1}{100}\) – ₹ 695

Working Notes 3 : Wages and Salaries Evaluation

Paid 10 months Wages and Salaries = ₹ 24,000

Outstanding Salaries and Wages for 2 months =24,000 × \(\frac{2}{100}\) =₹ 4,800

Question 31

The following balances were taken from the books of Shri R. Lal as at 31st March, 2017.

Particulars

(₹)

Particulars

(₹)

Capital

1,00,000

Rent (Cr.)

2,100

Drawing

17,600

Railway Freight on sales

16,940

Purchases

80,000

Carriage Inwards

2,310

Sales

1,40,370

Office Expenses

1,340

Purchase Returns

2,820

Printing & Stationery

660

Stock on 1.4.2016

11,460

Postage

820

Bad Debts

1,400

Sundry Debtors

62,070

Bad Debts Provision on 1.4.2016

3,240

Sundry Creditors

18,920

Rates & Insurance

1,300

Cash at Bank

12,400

Discount (Cr.)

190

Cash in Hand

2,210

Bills Receivable

1,240

Office Furniture

3,500

Sales Returns

4,240

Salaries & Commission

9,870

Wages

6,280

Addition to Building

7,000

Building

25,000

Prepare Trading and Profit & Loss A/c and Balance Sheet as at 31st March, 2017, after keeping in view the following adjustments:

(i) Depreciate old Building at 2 1/2% and addition to Building at 2% and Office Furniture at 5%.

(ii) Write off further Bad-debts ₹ 570.

(iii) Increase the Bad-debts Provision to 6% of Debtors.

(iv) On 31st March, 2017 ₹ 570 are outstanding for salary.

(v) Rent receivable ₹ 200 on 31st March, 2017.

(vi) Interest on capital at 5% to be charged.

(vii) Unexpired Insurance ₹ 240.

(viii) Stock was valued at ₹ 14,290 on 31st March, 2017.

Solution:

Trading Account of Shri R. Lal

Dr.

Cr.

Particulars

Particulars

Opening Stock

11,460

Sales

1,40,370

Purchases

80,000

Less: Return Inwards

4,240

1,36,130

Less: Return Outwards

2,820

77,180

Closing Stock

14,290

Carriage Inwards

2,310

Wages

6,280

Gross Profit (Balancing Figure)

53,190

1,50,420

1,50,420

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

53,190

Building

625

Rent

2,100

Furniture

175

Add: Accrued

200

2,300

Additions to Building

140

940

Discount

190

Salary & Commission

9,870

Add: Outstanding Salaries

570

10,440

Bad Debts

1,400

Add: Further Bad Debts

570

Add: New Provision (WN2)

3,690

Less: Old Provision

3,240

2,420

Interest on Capital

5,000

Rates & Insurance

1,300

Less: Unexpired

240

1,060

Railway Freight on Sales

16,940

Office Expenses

1,340

Printing & Stationery

660

Postage & Telegram

820

Net Profit (Balancing Figure)

16,060

55,680

55,680

Balance Sheet

Liabilities

Assets

Capital

1,00,000

Fixed Assets

Add: Interest on Capital

5,000

Building

25,000

Add: Net Profit

16,060

Less: Depreciation

625

24,375

Less: Drawings

17,600

1,03,460

Additions to Building

7,000

Less: Depreciation

140

6,860

Current Liabilities

Office Furniture

3,500

Sundry Creditors

18,920

Less: Depreciation

175

3,325

Outstanding Salaries

570

Current Assets

Closing Stock

14,290

Bills Receivable

1,240

Accrued Rent

200

Unexpired Insurance

240

Cash in Hand

2,210

Sundry Debtors

62,070

Less: Further Bad Debts

570

Less: Provision for Discount on Debtors

3,690

57,810

Cash at Bank

12,400

1,22,950

1,22,950

Working Notes1: Depreciation Evaluation

Building Depreciation = 25,000 X \(\frac{2.5}{100}\) = ₹625

Addition to building Depreciation = 7,000 X \(\frac{2}{100}\) = ₹140

Office Furniture Depreciation = 3,500 X \(\frac{5}{100}\) = ₹175

Working Notes 2 : Provision for doubtful debts

Provision for doubtful debts = (Sundry Debtors – Further bad debts) X \(\frac{Rate}{100}\)

(62,070 – 570) X \(\frac{6}{100}\) – ₹3,690

Question 32

From the following balances extracted from the books of Karan and the additional information, prepare the trading and profit and loss account for the year ended 31st March, 2010 and also show the balance sheet as at that date:

Debit ₹

Credit

Stock on 1st April, 2009

625

Purchases and Sales

903

1,372

Returns

22

13

Capital Account

300

Drawings

45

Land and Buildings

300

Furniture and Fittings

80

Trade Debtors and Trade Creditors

250

450

Cash in hand

35

Investments

100

Interest

5

Commission

30

Direct Expenses

75

Postage, Stationery and Telephone

25

Fire Insurance Premium

20

Salaries

90

Bank Overdraft

400

2,570

2,570

Additional Information:

(i) Closing stock on 31st March, 2010 is valued at ₹ 6,50,000. Goods worth ₹ 5,000 are reported to have been taken away by the proprietor for his personal use at home during the year.

(ii) Interest on investments ₹ 5,000 is yet to be received while ₹ 10,000 of the commission received is yet to be earned.

(iii) ₹ 5,000 of the fire insurance premium paid is in respect of the quarter ending 30th June, 2010.

(iv) Salaries ₹ 10,000 for March, 2010 and bank overdraft interest estimated at ₹ 20,000 are yet to be recorded as outstanding charges.

(v) Depreciation is to be provided on land and buildings @ 5% per annum and on furniture and fittings @ 10% per annum.

(vi) Make a provision for doubtful debts @ 5% of trade debtors.

Solution:

Trading Account of Karan

Dr.

Cr.

Particulars

Particulars

Opening Stock

6,25,000

Sales

13,72,000

Purchases

9,03,000

Less: Return Inwards

22,000

13,50,000

Less: Return Outwards

13,000

Closing Stock

6,50,000

Less: Goods taken for personal use

5,000

8,85,000

Direct Expenses

75,000

Gross Profit (Balancing Figure)

4,15,000

20,00,000

20,00,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

4,15,000

Building

15,000

Interest on Invest.

5,000

Furniture

8,000

23,000

Add: Accrued

5,000

10,000

Fire Insurance Premium

20,000

Commission

30,000

Less: Prepaid

5,000

15,000

Less: Unearned

10,000

20,000

Provision for Doubtful Debts (WN2)

12,500

Outstanding Interest on Bank Overdraft

20,000

Salaries

90,000

Add: Outstanding

10,000

1,00,000

Postage, Stationery & Telephone

25,000

Net Profit (Balancing Figure)

2,49,500

4,45,000

4,45,000

Balance Sheet

Liabilities

Assets

Capital

3,00,000

Fixed Assets

Add: Net Profit

2,49,500

Land & Building

3,00,000

Less: Drawings (45,000 + 5,000)

50,000

4,99,500

Less: Depreciation

15,000

2,85,000

Furniture

80,000

Current Liabilities

Less: Depreciation

8,000

72,000

Trade Creditors

4,50,000

Investment

1,00,000

Salaries Outstanding

10,000

Outstanding Interest on overdraft bank

20,000

Current Assets

Bank Overdraft

4,00,000

Closing Stock

6,50,000

Unearned Commission

10,000

Accrued Interest

5,000

Prepaid Insurance

5,000

Cash in Hand

35,000

Trade Debtors

2,50,000

Less: Provision for Discount on Debtors

12,500

2,37,500

13,89,500

13,89,500

Working Notes 1: Depreciation Evaluation

Building Depreciation = 3,00,000× 5100= ₹ 15,000

Furniture Depreciation =80,000× 8100= ₹ 8,000

Working Notes 2: Provision for Doubtful Debts Evaluation

Provision for doubtful Debts = (Sundry Debtors−Further Bad Debts)× X \(\frac{Rate}{100}\)

=(2,50,000−0) X \(\frac{5}{100}\)= ₹ 12,500

Question 33

The following is the trial balance of Mr. Amar Chand as at 31st March, 2016:-

Dr.

(₹)

Cr.

(₹)

Stock on 1st April, 2015

62,000

Purchases and Sales

3,15,000

4,48,000

Returns

3,700

2,500

Sundry Debtors and Creditors

80,000

43,000

Bills Receivable and Payable

12,100

4,300

Drawings and Capital

30,000

2,00,000

Cash in Hand

24,800

Balance with Bank of Tokyo

32,800

Discount

2,600

3,800

Carriage on Purchases

7,500

Carriage on Sales

1,200

Bad-Debts

2,400

Bad-Debts Provision

3,000

Furniture on 1st April, 2015

10,000

New Furniture purchased on 1st January, 2016

6,000

Rent

10,000

Salaries

25,000

Commission

2,400

Repairs

2,300

Insurance (Annual Premium paid on 1st Jan., 2016)

3,600

Salaries Outstanding

5,000

Sales Van

75,000

Sales Van Expenses

6,000

7,12,000

7,12,000

Taking into account the following adjustments, prepare Trading and Profit & Loss Account and the Balance Sheet as at 31st March, 2016:-

1. Stock on 31st March, 2016 was valued at ₹ 46,000.

2. Depreciate Furniture at 15% p.a. and Sales Van at 20% p.a.

3. A sum of ₹ 200 is due for repairs.

4. Write off ₹ 2,000 as further bad-debts and create a provision for doubtful debts @ 5% on Debtors. Also provide 2% for discount on Debtors.

5. Rent is paid at the rate of ₹ 1,000 per month.

6. Allow 8% interest on Capital and charge ₹ 1,500 as interest on Drawings.

Solution:

Trading Account of Mr. Amar Chand

Dr.

Cr.

Particulars

Particulars

Opening Stock

62,000

Sales

4,48,000

Purchases

3,15,000

Less: Return Inwards

3,700

4,44,300

Less: Return Outwards

2,500

3,12,500

Closing Stock

46,000

Carriage on Purchases

7,500

Gross Profit (Balancing Figure)

1,08,300

4,90,300

4,90,300

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

1,08,300

Furniture

1,725

Received Commission

2,400

Sales Van

15,000

16,725

Drawing Interest

1,500

Repairs

2,300

Discount Received

3,800

Add: Outstanding

200

2,500

Bad Debts (Old)

2,400

Add: Further Bad Debts

2,000

Add: New Provision (WN2)

3,900

Less: Old Provision

3,000

5,300

Discount Allowed

2,600

Provision for Discount on Debtors (WN3)

1,482

Rent

10,000

Add: Outstanding (WN4)

2,000

12,000

Insurance

3,600

Less: Prepaid (WN5)

2,700

900

Interest on Capital

16,000

Carriage on Sales

1,200

Salaries

25,000

Sales Van Expenses

6,000

Net Profit (Balancing Figure)

26,293

1,16,000

1,16,000

Balance Sheet

Liabilities

Assets

Capital

2,00,000

Fixed Assets

Add: Interest on Capital

16,000

Furniture

10,000

Add: Net Profit

26,293

Add: Additions

6,000

Less: Drawings

30,000

Less: Depreciation

1,725

14,275

Less: Interest on Drawings

1,500

2,10,793

Sales Van

75,000

Less: Depreciation

15,000

60,000

Current Liabilities

Current Assets

Sundry Creditors

43,000

Closing Stock

46,000

Outstanding Salaries

5,000

Bills Receivable

12,100

Outstanding Repairs

200

Bank of Tokyo

32,800

Outstanding Rent

2,000

Prepaid Insurance

2,700

Bills Payable

4,300

Cash in Hand

24,800

Sundry Debtors

80,000

Less: Bad debts

2,000

Less: Provision for Doubtful Debts

3,900

Less: Provision for Discount on Debtors

1,482

72,618

2,65,293

2,65,293

Working Notes 1: Depreciation Evaluation

Furniture Depreciation = 10,000 X \(\frac{15}{100}\) + 6,000 X \(\frac{15}{100}\) X \(\frac{3}{100}\) = ₹1,752

Salesman Depreciation = 75,000 X \(\frac{20}{100}\) = ₹15,000

Working Note 2: Provision for Bad Debts Evaluation

Provision of bad debts = (Sundry DEbtors – Further Bad DEbts) X \(\frac{Rate}{100}\)

(80,000 – 2,000) X \(\frac{5}{100}\) = ₹3,900

Working Note 3: Provision for Discount on Debtors Evaluation

Provision for discount on debtors = (Sundry Debtors – Further Bad Debts – Provision for bad debts) X \(\frac{Rate}{100}\)

(80,000 – 2,000 -3,900) X \(\frac{2}{100}\) = ₹ 1,482

Working Note 4: Outstanding Rent Evaluation

Per month rent = ₹ 1,000

Per Year Rent = 1,000 × 12 = ₹ 12,000

Rent Already Paid = ₹ 10,000

Thus, Outstanding Rent = ₹ 2,000 (12,000- 10,000)

Working Note 5: Prepaid Insurance Evaluation

Prepaid Insurance for nine months = 3,600 X \(\frac{9}{12}\) = ₹ 2,700

Question 34

From the following balances extracted from the books of Sharma, prepare the Trading and Profit & Loss Account for the year ended 31st March 2011 and Balance Sheet as at that date after taking into consideration the adjustments given below:

Particulars

Dr. ₹

Cr.₹

Drawing and Capital

7,500

50,000

Purchases and Sales

72,100

95,000

Returns

1,300

2,700

Sundry Debtors and Creditors

18,200

35,750

Stock (1.04.2010)

19,800

Bad Debts

3,000

Bill Receivable and Payable

12,000

23,000

Cash in Hand

300

Office Expenses

6,210

Sales Van

15,000

SalesVan Expenses

1,400

Discount

2,910

Rent and Taxes

10,700

Telephone Charges

1,050

Postage

950

Furniture

5,000

Printing and Stationery

2,750

Commission

8,400

Carriage Inwards

3,200

Salaries and Wages

20,500

2,09,360

2,09,360

Adjustments:

(i) Closing Stock was valued at ₹ 61,700.

(ii) Depreciate Furniture and Machinery @10% p.a. and Sale Van @20% p.a.

(iii) Outstanding Rent amounted to ₹ 900.

(iv) Bad Debts ₹ 200.

(v) Make a provision for Doubtful Debts @5% on Debtors.

(vi) Charge one-fourth of salaries and wages to the Trading Account.

(vii) A new machinery was purchased on credit and installed on 31st December 2010 costing ₹ 15,000. No entry for the same has yet been passed in the books.

Solution:

Trading Account of Sharma

Dr.

Cr.

Particulars

Particulars

Opening Stock

19,800

Sales

95,000

Purchases

72,100

Less: Return Inwards

1,300

93,700

Less: Return Outwards

2,700

69,400

Closing Stock

61,700

Salaries & Wages (1/4th)

5,125

Carriage Inwards

3,200

Gross Profit (Balancing Figure)

57,875

1,55,400

1,55,400

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

57,875

Machinery

375

Received Discount

2,910

Furniture

500

Sales Van

3,000

3,875

Bad Debts

3,000

Add: Further Bad Debts

200

Add: New Provision (WN2)

900

4,100

Office Expenses

6,210

Telephone Charges

1,050

Rent and Taxes

10,700

Add: Outstanding

900

11,600

Postage & Telegram

950

Printing & Stationery

2,750

Salaries & Wages (3/4th)

15,375

Commission

8,400

Sales Van Expenses

1,400

Net Profit (Balancing Figure)

5,075

60,785

60,785

Balance Sheet

Liabilities

Assets

Capital

50,000

Fixed Assets

Add: Net Profit

5,075

Furniture

5,000

Less: Drawings

7,500

47,575

Less: Depreciation

500

4,500

Machinery

15,000

Current Liabilities

Less: Depreciation

375

14,625

Creditors for Machinery

15,000

Sales Van

15,000

Sundry Creditors

35,750

Less: Depreciation

3,000

12,000

Outstanding Rent

900

Bills Payable

23,000

Current Assets

Closing Stock

61,700

Bills Receivable

12,000

Cash in Hand

300

Sundry Debtors

18,200

Less: Further Bad Debts

200

Less: Provision for Doubtful Debts

900

17,100

1,22,225

1,22,225

Working Notes 1: Depreciation Evaluation

Furniture Depreciation = 5,000 X \(\frac{10}{100}\) = ₹ 500

Sales Van Depreciation =15,000 X \(\frac{20}{100}\) = ₹ 3,000

Machinery Depreciation=15,000 X \(\frac{10}{100}\) X \(\frac{3}{12}\) = ₹ 375

Working Notes 2: Provision for doubtful Debts Evaluation

Provision for doubtful Debts = (Sundry Debtors−Further Bad Debts) x \(\frac{Rate}{100}\)

(18,200−200) X \(\frac{5}{100}\) = ₹ 900

Question 35

Prepare a trading and profit & loss account of M/s Green Club Ltd. for the year and a Balance Sheet as at that date from the following figures taken from their trial balance:

Debit Balances

(₹)

Credit Balances

(₹)

Opening Stock

1,25,000

Sales

2,50,000

Purchases

35,000

Purchase Return

6,000

Return inward

25,000

Creditors

55,000

Postage

600

Capital

50,000

Salary

12,300

Discount received

1,000

Wages

3,000

Provision for bad debts

4,500

Rent and rates

1,000

Commission received

5,400

Packing and transport

500

General expenses

400

Insurance

4,000

Debtors

50,000

Cash in hand

20,000

Closing Stock

40,000

Machinery

20,000

Lighting

5,000

Discount

3,500

Bad debts

3,500

Investments

23,100

3,71,900

3,71,900

Adjustments:-

(i) Depreciation charged on Machinery @ 5% p.a.

(ii) Further Bad-debts ₹ 1,500, provision for discount on debtors @ 5% and provision for Doubtful Debts on debtors @ 6%.

(iii) Wages prepaid ₹ 1,000.

(iv) Interest on investments @ 5% p.a.

Solution:

Trading Account of M/s Green Club Ltd.

Dr.

Cr.

Particulars

Particulars

Opening Stock

1,25,000

Sales

2,50,000

Purchases

35,000

Less: Return Inwards

25,000

2,25,000

Less: Return Outwards

6,000

29,000

Wages

3,000

Less: Prepaid

1,000

2,000

Gross Profit (Balancing Figure)

69,000

2,25,000

2,25,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation on Machinery (WN1)

1,000

Gross Profit

69,000

Discount Allowed

3,500

Commission Received

5,400

Provision for Discount on Debtors (WN3)

2,280

Discount Received

1,000

Old Bad Debts

3,500

Accrued Interest on Investment (WN4)

1,155

Add: Further Bad Debts

1,500

Add: New Provision (WN2)

2,910

Less: Old Provision

4,500

3,410

Salaries

12,300

Lighting

5,000

Postage and Telegram

600

Rent and Rates

1,000

Packing and Transport

500

General Expenses

400

Insurance

4,000

Net Profit (Balancing Figure)

42,565

76,555

76,555

Balance Sheet

Liabilities

Assets

Capital

50,000

Fixed Assets

Add: Net Profit

42,565

Machinery

20,000

Less: Drawings

92,565

Less: Depreciation

1,000

19,000

Investments

23,100

Current Liabilities

Creditors

55,000

Current Assets

Closing Stock

40,000

Prepaid Wages

1,000

Accrued Interest on Investment

1,155

Debtors

50,000

Less: Further Bad Debts

1,500

Less: New Provision for Bad Debts

2,910

Less: Provision for Discount on Debtors

2,280

43,310

Cash in Hand

20,000

1,47,565

1,47,565

Working Notes 1: Depreciation Evaluation

Machinery Depreciation = 20,000 X \(\frac{5}{100}\) = ₹1,000

Working Notes 2: Provision for Doubtful Debts

Provision for doubtful Debts = (Sundry Debtors – Further bad Debts) X \(\frac{Rate}{100}\)

(50,000 – 1,500) X \(\frac{6}{100}\) = ₹ 2,910

Working Notes 3: Provision for Discount on Debtors

Provision for discount on Debtors = ( Sunder Debtors – Further Bad Debts – Provision for bad debts) X \(\frac{Rate}{100}\)

(50,000 – 1,500 – 2,910) X \(\frac{5}{100}\) = ₹ 2,280

Working Notes 4: Interest Investment Evaluation

Interest Accrued = 23,100 X \(\frac{5}{100}\) = ₹1,155

Question 36

Below is given the Trial Balance of Mr. Ram as at 31st December, 2015. You are required to prepare Trading and Profit & Loss Account and Balance Sheet as at that date.

Dr. Balances

(₹)

Cr. Balances

(₹)

Opening Stock

42,000

Sales

4,10,000

Purchases

2,00,000

Sundry Creditors

20,000

Plant

60,000

Purchases Return

8,000

Salary

33,000

Commission

7,500

Wages

44,000

Bank

24,000

Discount

2,000

Capital

1,50,000

Rent

27,500

Interest on Investments

700

Furniture (Including Furniture of

₹ 5,000 purchased on 1st July, 2015)

20,000

Special Rebate

800

Carriage in

5,800

Carriage out

3,200

Sundry Debtors

1,00,000

Office Expenses

6,600

Cash in hand

5,400

Investments at 14% p.a.

10,000

Insurance (Paid to 30th April, 2016)

1,500

Stock on 31st December, 2015

60,000

6,21,000

6,21,000

Adjustments:-

1. Create a provision for Doubtful Debts @ 5% on Debtors and 2% for discount on Debtors.

2. Provide up-to-date interest on Investments.

3. Expenses for rent, wages, salaries and office expenses are uniform throughout the year and those for December, 2015 have not been paid.

4. Depreciate Plant by 10% p.a. and Furniture by 20% p.a.

5. Unearned Commission ₹ 1,500.

Solution:

Trading Account of Mr. Ram

Dr.

Cr.

Particulars

Particulars

Opening Stock

42,000

Sales

4,10,000

Purchases

2,00,000

Less: Purchases Return

8,000

1,92,000

Carriage Inwards

5,800

Wages

44,000

Add: Outstanding (WN6)

4,000

48,000

Gross Profit (Balancing Figure)

1,22,200

4,10,000

4,10,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

1,22,200

Plant

6,000

Commission

7,500

Furniture

3,500

9,500

Less: Unearned

1,500

6,000

Rent

27,500

Interest on Investment

700

Add: Outstanding (WN6)

2,500

30,000

Add: Accrued (WN4)

700

1,400

Provision for Doubtful Debts (WN2)

5,000

Special Rebate

800

Provision for Discount on Debtors (WN3)

1,900

Carriage Outwards

3,200

Insurance

1,500

Less: Prepaid (WN5)

500

1,000

Salaries

33,000

Add: Outstanding (WN6)

3,000

36,000

Office Expenses

6,600

Add: Outstanding (WN6)

600

7,200

Discount

2,000

Net Profit (Balancing Figure)

34,600

1,30,400

1,30,400

Balance Sheet

Liabilities

Assets

Capital

1,50,000

Fixed Assets

Add: Net Profit

34,600

1,84,600

Plant

60,000

Less: Depreciation

6,000

54,000

Current Liabilities

Furniture

20,000

Sundry Creditors

20,000

Less: Depreciation

3,500

16,500

Outstanding Wages

4,000

14% Investments

10,000

Outstanding Rent

2,500

Outstanding Salaries

3,000

Current Assets

Outstanding Office Expenses

600

Closing Stock

60,000

Unearned Commission

1,500

Accrued Interest on Investments

700

Bank Overdraft

24,000

Prepaid Insurance

500

Cash in Hand

5,400

Sundry Debtors

1,00,000

Less: Provision for Doubtful Debts

5,000

Less: Provision for Discount on Debtors

1,900

93,100

2,40,200

2,40,200

Working Notes 1:Depreciation Evaluation

Plant Depreciation = 60,000 X \(\frac{10}{100}\) = ₹6,000

Furniture Depreciation = 15,000 X \(\frac{20}{100}\) + \(\frac{5}{100}\) + 5,000 X \(\frac{20}{100}\) X \(\frac{6}{12}\) = ₹3,500

Working Notes 2: Provision for Doubtful Debts

Provision for doubtful Debts = (Sundry Debtors – Further bad Debts) X \(\frac{Rate}{100}\)

(1,00,000−0) X \(\frac{5}{100}\) = ₹5,000

Working Notes 3: Provision for Discount on Debtors

Provision for Discounton Debtors = (Sundry Debtors−Further Bad Debts−Provision for Bad Debts) X \(\frac{Rate}{100}\)

(1,00,000−0−5,000) X \(\frac{Rate}{100}\) = ₹1,900

Working Note 4: Accrued Interest on Investments Evaluation

Interest on Investments=14,000 X \(\frac{10}{100}\) = ₹ 1,400

Interest Already Received= ₹ 700

Therefore, Accrued Interest on Investments= ₹ 700

Working Notes 5: Insurance prepaid Evaluation

Prepaid Insurance=1,500 X \(\frac{4}{100}\) = ₹ 500

Prepaid Insurance=1,500 X 412= ₹ 500

Working Notes 6: Outstanding Expenses Evaluation

Rent, Wages, Salaries, and Office Expenses have been paid for 11 months.

Outstanding Expenses will be:

Rent Outstanding = 27,500 X \(\frac{1}{11}\) = ₹2,500

Wages Outstanding = 44,000 X \(\frac{1}{11}\) = ₹ 4,000

Salary Outstanding = 33,000 X \(\frac{1}{11}\) = ₹ 3,000

Office Expenses Outstanding = 6,600 X \(\frac{1}{11}\) = ₹ 600

Question 37

On 31st March, 2017 the following Trial Balance of Sh. Ajay Oswal was taken out. Prepare Trading and Profit & Loss Account for the year and Balance Sheet at that date after making the following adjustments:-

(i) Stock on 31st March, 2017 was valued ₹ 26,000.

(ii) General Manager is entitled to a Commission of 5% on Net Profits after charging such Commission.

(iii) ₹ 2,000 paid for Salary & Wages have been included in Sundry Debtors.

(iv) Increase Bad-debts by ₹ 800 and create provision for Doubtful Debts at 10%.

(v) General Expenses include insurance premium paid up to 30th June, 2017 @ ₹ 3,000 per annum.

(vi) ₹ 600 out of the Advertisement Expenses are to be carried forward to the next year.

(vii) Charge one-fourth of ‘Salaries and Wages’ to Trading A/c.

(viii) Accrued Income ₹ 2,500.

Dr.

(₹)

Cr.

(₹)

Capital

3,00,000

Income Tax

8,000

Stock on 1-4-2016

16,000

Return Inwards

5,600

Carriage Inwards

8,200

Deposit with PNB

15,000

Return Outwards

4,100

Carriage Outwards

3,700

Loan to Mr. Malik @ 18% p.a. given on 1-7-2016

10,000

Interest on the above

900

Rent

13,000

Outstanding Rent

1,000

Purchases

1,48,000

Debtors

75,800

Goodwill

25,000

Land and Buildings

2,00,000

Furniture

15,000

Salaries & Wages

38,000

Creditors

26,200

Advertisement Expenses

3,000

Provision for Doubtful Debts

3,500

Bad-Debts

2,000

Patents and Patterns

6,000

Cash in hand

8,900

Sales

2,70,000

General Expenses

4,500

6,05,700

6,05,700

Solution:

Trading Account of Sh. Ajay Oswal

Dr.

Cr.

Particulars

Particulars

Opening Stock

16,000

Sales

2,70,000

Purchases

1,48,000

Less: Return Inwards

5,600

2,64,400

Less: Return Outwards

4,100

1,43,900

Closing Stock

26,000

Salaries & Wages (1/4th of 40,000)

10,000

Carriage Inwards

8,200

Gross Profit (Balancing Figure)

1,12,300

2,90,400

2,90,400

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Salaries & Wages

38,000

Gross Profit

1,12,300

Add: Omitted

2,000

Accrued Income

2,500

Less: T/f to Trading

10,000

30,000

Interest

900

Bad Debts

2,000

Add: Accrued (WN2)

450

1,350

Add: Further Bad Debts

800

Add: New Provision (WN1)

7,300

Less: Old Provision

3,500

6,600

Carriage Outwards

3,700

Advertisement

3,000

Less: Prepaid

600

2,400

General Expenses

4,500

Less: Prepaid Insurance (WN3)

750

3,750

Rent

13,000

Outstanding Manager’s Commission (WN4)

2,700

Net Profit (Balancing Figure)

54,000

1,16,150

1,16,150

Balance Sheet

as on March 31, 2017

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Capital

3,00,000

Fixed Assets

Add: Net Profit

54,000

Goodwill

25,000

Less: Drawings (Income Tax)

8,000

3,46,000

Land & Building

2,00,000

Furniture

15,000

Current Liabilities

Patents & Patterns

6,000

Creditors

26,200

Loan to Mr. Malik

10,000

Outstanding Manager’s Commission

2,700

Outstanding Rent

1,000

Current Assets

Closing Stock

26,000

Prepaid Insurance

750

Prepaid Advertisement

600

Accrued Income

2,500

Accrued Interest

450

Deposit with PNB

15,000

Debtors

75,800

Less: Wrongly Included

2,000

Less: Bad Debts

800

Less: Provision for Bad Debts

7,300

65,700

Cash in Hand

8,900

3,75,900

3,75,900

Working Notes 1: Provision for Doubtful Debts Evaluation

Provision for Doubtful Debts = (Sundry Debtors−Further Bad Debts) X \(\frac{Rate}{100}\)

(73,800−800)× \(\frac{10}{100}\) = ₹7,300

Working Notes 2 : Evaluation of Accrued loan Interest to Malik

Interest = 10,000 X \(\frac{18}{100}\) X \(\frac{9}{12}\) = ₹1,350

Received Interest = ₹ 900

Therefore, Accrued Interest= ₹ 450

Working Notes 3: Prepaid Insurance Evaluation

Per year Insurance Premium= ₹ 3,000

Insurance Premium for 1st April 2012 to 30th June 2012 = 3,000 X \(\frac{3}{12}\) = ₹750

Working Notes 4: Manager’s Commission Evaluation

Profit before Manager’s Commission = ₹ 56,700 (1,16,150−59,450)

Therefore, Manager’s Commission= ₹ 56,700× \(\frac{5}{100}\) = ₹2,700

Question 38

Prepare Trading and Profit & Loss Account and Balance Sheet as at 31st March, 2017, from the following balances.

Particulars

(₹)

Particulars

(₹)

Capital A/c

5,00,000

Stock on 1.4.2016

67,000

Drawings A/c

36,000

Salaries & Wages

24,000

Bills Receivable

5,800

Outstanding Salaries and Wages

2,000

Plant & Machinery

3,80,000

Insurance (including premium of ₹ 1,000 per annum paid upto 30-9-2017)

2,600

Sundry Debtors

58,000

Cash

46,600

Loan A/c (Cr.) at 12% p.a.

20,000

Bank Overdraft

15,000

Manufacturing Wages

40,000

Repairs & Renewals

1,600

Returns Inwards

3,000

Interest & Discount (Dr.)

4,400

Purchases

1,20,000

Bad-Debts

4,000

Sales

2,60,000

Sundry Creditors

30,000

Rent

28,000

Fixtures & fittings

12,000

Commission Received

6,000

Adjustments:-

1. Stock on hand on 31st March, 2017 was ₹ 80,000.

2. Further Bad-debts written off ₹ 2,000 and Create a provision of 5% of Sundry Debtors.

3. Rent has been paid up to 31st May, 2017.

4. Manufacturing wages include ₹ 10,000 of a new Machinery purchased on 1st October, 2016.

5. Depreciate Plant and Machinery by 10% p.a. and Fixtures and Fittings by 20% p.a.

6. Commission earned but not received ₹ 1,000.

7. Interest on Loan for the last two months is not paid.

8. Goods worth ₹ 4,000 were distributed as free samples.

Solution:

Trading Account

Dr.

Cr.

Particulars

Particulars

Opening Stock

67,000

Sales

2,60,000

Purchases

1,20,000

Less: Return Inwards

3,000

2,57,000

Less: Advertisement

4,000

1,16,000

Closing Stock

80,000

Manufacturing Wages

40,000

Less: New Machinery

10,000

30,000

Gross Profit (Balancing Figure)

1,24,000

3,37,000

3,37,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

1,24,000

Plant & Machinery

38,500

Commission Received

6,000

Fixture & Fittings

2,400

40,900

Add: Accrued

1,000

7,000

Rent

28,000

Less: Prepaid (WN2)

4,000

24,000

Bad Debts

4,000

Add: Further Bad Debts

2,000

Add: New Provision (WN3)

2,800

8,800

Outstanding Interest on Loan (WN4)

400

Insurance

2,600

Less: Prepaid (WN5)

500

2,100

Advertisement

4,000

Salaries & Wages

24,000

Repairs & Renewals

1,600

Interest & Discount

4,400

Net Profit (Balancing Figure)

20,800

1,31,000

1,31,000

Balance Sheet

Liabilities

Assets

Capital

5,00,000

Fixed Assets

Add: Net Profit

20,800

Plant & Machinery

3,80,000

Less: Drawings

36,000

4,84,800

Add: New Machinery

10,000

12% Loan

20,000

Less: Depreciation

38,500

3,51,500

Fixture & Fittings

12,000

Current Liabilities

Less: Depreciation

2,400

9,600

Sundry Creditors

30,000

Outstanding Salaries & Wages

2,000

Current Assets

Outstanding Interest on Loan

400

Closing Stock

80,000

Bank Overdraft

15,000

Accrued Commission

1,000

Prepaid Insurance

500

Prepaid Rent

4,000

Cash in Hand

46,600

Sundry Debtors

58,000

Less: Further Bad Debts

2,000

Less: Provision for Doubtful Debts

2,800

53,200

Bills Receivable

5,800

5,52,200

5,52,200

Working Notes 1: Depreciation Evaluation

Plant and Machinery Depreciation = ₹3,80,000 X \(\frac{10}{100}\) + 10,000 X \(\frac{10}{100}\) X \(\frac{6}{12}\) = ₹38,500

Fixtures and Fittings Depreciation = ₹12,000 X \(\frac{20}{100}\) = ₹2,400

Working Notes 2: Prepaid Rent Evaluation

14 months rent paid = ₹ 28,000

Rent prepaid = ₹ 28,000 X \(\frac{2}{14}\) = ₹4,000

Working Notes 3: Provision for Doubtful Debts Evaluation

Provision for doubtful debts = (Sundry Debtors − Further Bad Debts) X \(\frac{Rate}{100}\)

(58,000 −2,000) X \(\frac{5}{100}\) = ₹2,800

Working Notes 4: Loan interest Evaluation

Outstanding Interest loan =20,000 X \(\frac{12}{100}\) X \(\frac{2}{12}\) = ₹400

Working Notes 5: Prepaid Insurance Evaluation

Prepaid Insurance =1,000 X \(\frac{6}{12}\) = ₹500

Question 39

From the following Trial Balance extracted from the books of Mr. Karuna Sagar, prepare a Trading and Profit & Loss A/c for the year ended 31st March, 2014 and a Balance Sheet as at that date:

Dr. Balances

(₹)

Cr. Balances

(₹)

Purchases

3,30,000

Sales

5,30,000

Rent Paid

7,480

Returns

8,000

Wages

33,000

Trade Creditors

37,000

Salaries

30,800

Discount

3,000

Power

5,400

Capital

2,00,000

Stock on 1-4-2013

15,000

Miscellaneous Income

3,060

Stock on 31-3-2014

36,000

Charity

500

Debtors

53,000

Furniture

8,000

Motor Car

2,00,000

Motor Car Expenses

18,000

Insurance

3,600

Unexpired Insurance

600

Drawings

5,000

Cash Balance

34,680

7,81,060

7,81,060

Informations:-

(i) Goods Costing ₹ 2,000 were taken away by the proprietor for his personal use and goods costing ₹ 1,500 were given away as charity.

(ii) Expenses for wages, rent and salaries are uniform throughout the year and those for March have not been paid.

(iii) Provide 10% depreciation on Furniture and 20% on Motor Car.

(iv) Provide for Manager’s Commission at 10% on Net Profit after charging such Commission.

Solution:

Trading Account of Mr. Karuna

Dr.

Cr.

Particulars

Particulars

Opening Stock

15,000

Sales

5,30,000

Purchases

3,30,000

Less: Drawings

2,000

Less: Charity

1,500

Less: Return Outwards

8,000

3,18,500

Wages

33,000

Add: Outstanding (WN2)

3,000

36,000

Power

5,400

Gross Profit (Balancing Figure)

1,55,100

5,30,000

5,30,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Depreciation: (WN1)

Gross Profit

1,55,100

Furniture

800

Discount

3,000

Motor Car

40,000

40,800

Miscellaneous Income

3,060

Rent

7,480

Add: Outstanding (WN2)

680

8,160

Salaries

30,800

Add: Outstanding (WN2)

2,800

33,600

Charity (1,500 + 500)

2,000

Motor Car Expenses

18,000

Insurance

3,600

Outstanding Manager’s Commission (WN3)

5,000

Net Profit (Balancing Figure)

50,000

1,61,160

1,61,160

Balance Sheet

Liabilities

Assets

Capital

2,00,000

Fixed Assets

Add: Net Profit

50,000

Furniture

8,000

Less: Drawings (5,000 + 2,000)

7,000

2,43,000

Less: Depreciation

800

7,200

Motor Car

2,00,000

Current Liabilities

Less: Depreciation

40,000

1,60,000

Trade Creditors

37,000

Outstanding Manager’s Commission

5,000

Current Assets

Outstanding Salaries

2,800

Closing Stock

36,000

Outstanding Rent

680

Debtors

53,000

Outstanding Wages

3,000

Unexpired Insurance

600

Cash in Hand

34,680

2,91,480

2,91,480

Working Notes 1: Depreciation Evaluation

Furniture Depreciation = 8,000 X \(\frac{10}{100}\) = ₹ 800

Motor Car Depreciation =2,00,000 X \(\frac{20}{100}\) = ₹40,000

Working Notes 2: Outstanding expenses

Rent Outstanding = 7,480 X \(\frac{1}{11}\) = ₹ 680

Wages Outstanding = 33,000 X \(\frac{1}{11}\) = ₹ 3,000

Salaries Outstanding = 30,800 X \(\frac{1}{11}\) = ₹ 2,800

Working Notes 3: Manager’s Commission Evaluation

Profit before Manager’s Commission= ₹ 55,000 (1,61,160 −1,06,160)

Manager’s Commission = 55,000 X \(\frac{10}{110}\) = ₹5,000

Question 40

From the following Trial Balance of Sh. Parveen Kumar, prepare Trading and Profit & Loss Account for the year ending 31st March, 2014 and a Balance Sheet as at that date:

Dr. Balances

(₹)

Cr. Balances

(₹)

Stock at Commencement

40,000

Sales

5,10,000

Purchases

3,20,000

Loan from Mr. Naresh @ 15% p.a.

40,000

Returns Inward

7,000

Returns Outwards

8,000

Sundry Debtors

80,000

Bank

24,200

Cash

9,400

Provision for Doubtful Debts

2,500

Manufacturing Expenses

44,000

Discount

1,800

Trade Expenses

7,200

Rent to Premises sublet, for the year to 30th Sep., 2014

4,000

Carriage

3,500

Capital

1,20,000

Salaries and Wages

15,800

Sundry Creditors

47,000

Postage

1,500

Stationery

800

Freight Inwards

4,300

Land and Building

2,00,000

Patents

8,000

Furniture

10,000

Insurance Premium

6,000

7,57,500

7,57,500

Informations:-

(1) Closing Stock was valued at ₹ 60,000. You are informed that goods valued ₹ 12,000 were sold and dispatched on 29th March, 2014, but no entry was passed to this effect.

2. Insurance Premium include ₹ 1,200 paid on 1st October, 2013 to run for one year from Oct. 1, 2013 to Sept. 30, 2014.

(3) Loan from Mr. Naresh was taken on 1st July, 2013. Interest has not been paid so far.

(4) Create provision for Doubtful Debts at 5% on Sundry Debtors after writing off ₹ 600 as Bad-debts during the year.

(5) A bill of ₹ 3,200 for advertisement in newspaper remained unpaid at the end of the year.

(6) Purchases include Furniture costing ₹ 5,000 purchased on 1st April, 2013.

(7) Charge 10% p.a. depreciation on Furniture and write off \(\frac{1}{5}\)th of patents.

Solution:

Trading Account of Sh. Parveen Kumar

Dr.

Cr.

Particulars

Particulars

Opening Stock

40,000

Sales

5,10,000

Purchases

3,20,000

Add: Unrecorded

12,000

Less: Return Outwards

8,000

Less: Return Inwards

7,000

5,15,000

Less: Furniture

5,000

3,07,000

Closing Stock

60,000

Manufacturing Expenses

44,000

Carriage Inward

3,500

Freight Inwards

4,300

Gross Profit (Balancing Figure)

1,76,200

5,75,000

5,75,000

Profit and Loss Account

Dr.

Cr.

Particulars

Amount ₹

Particulars

Depreciation: (WN1)

Gross Profit

1,76,200

Furniture

1,500

Rent of Premises sublet

4,000

Patents

1,600

3,100

Less: Unearned (WN5)

2,000

2,000

Insurance Premium

6,000

Discount

1,800

Less: Prepaid (WN2)

600

5,400

Further Bad Debts

600

Add: New Provision (WN3)

4,570

Less: Old Provision

2,500

2,670

Interest Outstanding on Naresh’s Loan (WN4)

4,500

Outstanding Advertisement Bill

3,200

Trade Expenses

7,200

Salaries & Wages

15,800

Postage & Telegrams

1,500

Stationery

800

Net Profit (Balancing Figure)

1,35,830

1,80,000

1,80,000

Balance Sheet

Liabilities

Assets

Capital

1,20,000

Fixed Assets

Add: Net Profit

1,35,830

2,55,830

Patents

8,000

Loan from Naresh

40,000

Less: Depreciation

1,600

6,400

Furniture (10,000 + 5,000)

15,000

Current Liabilities

Less: Depreciation

1,500

13,500

Creditors

47,000

Land & Building

2,00,000

Outstanding Advertisement Bill

3,200

Unearned Rent

2,000

Current Assets

Bank Overdraft

24,200

Closing Stock

60,000

Outstanding Interest on Loan

4,500

Prepaid Insurance Premium

600

Debtors

80,000

Add: Unrecorded

12,000

Less: Bad Debts

600

Less: Provision for Doubtful Debts

4,570

86,830

Cash in Hand

9,400

3,76,730

3,76,730

Working Notes 1: Depreciation Evaluation

Patents Depreciation = 8,000 X \(\frac{1}{5}\) = ₹1,600

Furniture Depreciation = 15,000 X \(\frac{10}{100}\) = ₹1,500

Working Notes 2: Prepaid Insurance Evaluation

Prepaid Insurance = 1,200 X \(\frac{6}{12}\) = 600

Working Notes 3: Provision for Doubtful Debts Evaluation

Provision for Doubtful Debt = (Sundry Debtors+Unrecorded Sales − Further Bad Debts)

\(\frac{Rate}{100}\)

(80,000+12,000−600) X \(\frac{5}{100}\)= ₹ 4,570

Working Notes 4: Loan interest Evaluation

Outstanding Interest =40,000 X \(\frac{15}{100}\) X \(\frac{9}{12}\) = ₹4,500

Working Notes 5: Rent Received in Advance Evaluation

Rent Received in Advance=4,000 X \(\frac{6}{12}\) = ₹2,000

Question 41

The following Trial Balance was extracted from the books of Mr. Gupta as at 31st March, 2014:

Dr. Balances

(₹)

Cr. Balances

(₹)

Stock on 1-4-2013

65,000

Capital

2,50,000

Purchases

7,10,000

Rent Received

3,900

Wages

22,000

Loan from Mr. Yadav @ 15% p.a.

20,000

Trade Expenses

5,000

Sales

9,50,000

Freight and Dock Charges

8,000

Discount

600

Travelling Expenses

3,800

Outstanding Wages

2,000

Lighting and Heating (Factory)

7,200

Trade Expenses accrued but not paid

500

Stores Consumed

2,000

Sundry Creditors

80,000

Rent Paid

16,500

Establishment Charges

18,000

Interest on Mr. Yadav’s Loan

1,500

Sundry Debtors

1,42,000

Cash

6,000

Fixed Assets

3,00,000

Adjustments:-

(i) Goods costing ₹ 20,000 were purchased and included into stock but no entry was passed to record the purchase.

(ii) Loan from Mr. Yadav was taken on 1st June, 2013.

(iii) Sundry Debtors include an amount of ₹ 2,000 due from a customer who has become insolvent and nothing is recoverable from his estate.

(iv) Create a provision of 5% for Doubtful Debts and 2% for discount on Debtors.

(v) Three months lighting and heating bill due but not paid ₹ 3,000.

(vi) Rent is paid for 11 months but is received for 13 months.

(vii) Stock amounted to ₹ 90,000 on 31st March, 2014.

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2014 and a Balance Sheet as at that date.

Solution:

Trading Account of Mr. Gupta

Dr.

Cr.

Particulars

Particulars

Opening Stock

65,000

Sales

9,50,000

Purchases

7,10,000

Closing Stock

90,000

Add: Unrecorded

20,000

7,30,000

Wages

22,000

Store Consumed

2,000

Lighting & Heating

7,200

Add: Outstanding

3,000

10,200

Freight & Dock Charges

8,000

Gross Profit (Balancing Figure)

2,02,800

10,40,000

10,40,000

Profit and Loss Account

Dr.

Cr.

Particulars

Particulars

Interest on Loan

1,500

Gross Profit

2,02,800

Add: Outstanding (WN1)

1,000

2,500

Rent Received

3,900

Further Bad Debts

2,000

Less: Rent received in Advance (WN4)

300

3,600

Add: New Provision (WN2)

7,000

9,000

Discount

600

Trade Expenses

5,000

Provision for Discount on Debtors WN3)

2,660

Rent

16,500

Add: Outstanding (WN5)

1,500

18,000

Travelling Expenses

3,800

Establishment Expenses

18,000

Net Profit (Balancing Figure)

1,48,040

2,07,000

2,07,000

Balance Sheet

Liabilities

Assets

Capital

2,50,000

Fixed Assets

Add: Net Profit

1,48,040

3,98,040

Fixed Assets

3,00,000

Loan from Mr. Yadav

20,000

Current Liabilities

Current Assets

Sundry Creditors

80,000

Closing Stock

90,000

Add: Unrecorded

20,000

1,00,000

Cash in Hand

6,000

Outstanding Wages

2,000

Sundry Debtors

Outstanding Trade Expenses

500

Less: Further Bad Debts

2,000

Outstanding Lighting & Heating

3,000

Less: Provision for Doubtful Debts

7,000

Outstanding Rent

1,500

Less: Provision for Discount on Debtors

2,660

1,30,340

Outstanding Interest on Loan

1,000

Rent received in advance

300

5,26,340

5,26,340

Working Notes 1: Loan interest Outstanding Evaluation

Interest on Loan=20,000 X \(\frac{15}{100}\) X \(\frac{10}{12}\) = ₹ 2,500

Interest paid = ₹ 1,500

Therefore, Outstanding loan interest

Working Note 2: Provision for Doubtful Debts Evaluation

Provision for doubtful debts = (Sundry Debtors−Further Bad Debts) X \(\frac{Rate}{100}\)

(1,42,000−2,000) X \(\frac{5}{100}\) = ₹ 7,000

Working Notes 3: Provision for Discount on Debtors Evaluation

Provision for discount on debtors= (Sundry Debtors−Further Bad Debts−Provision for

Bad Debts) X \(\frac{Rate}{100}\)

(1,42,000−2,000−7,000) X \(\frac{2}{100}\) = ₹2,660

Working Notes 4: Advance rent received Evaluation

Advance Rent=3,900 X \(\frac{1}{13}\) = ₹300

Advance Rent=3,900×113=Rs 300

Working Notes 5: Outstanding Rent Evaluation

Outstanding Rent = 16,500 X \(\frac{1}{11}\) = ₹ 1,500

Also Check: DK Goel Solution for Chapter 23 Accounts from Incomplete Records
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