NCERT Solutions of Class 11 Accounts Chapter 9: Financial Statements-II

NCERT Solutions of Class 11 Accounts Chapter 9: Financial Statements- II

NCERT Solutions for Class 11 Accounts Chapter 9: Financial Statements-II Chapter 9, Financial Statements-II, focuses on providing a detailed understanding of preparing and interpreting financial statements for non-profit organizations (NPOs) and other entities. The chapter elaborates on essential concepts like Receipts and Payments Accounts, Income and Expenditure Accounts, and Balance Sheets for NPOs.

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The NCERT Solutions of Class 11 Accounts Chapter 9: Financial Statements- II are tailored to help the students master the concepts that are key to success in their classrooms. The solutions given in the PDF are developed by experts and correlate with the CBSE syllabus of 2023-2024. These solutions provide thorough explanations with a step-by-step approach to solving problems. Students can easily get a hold of the subject and learn the basics with a deeper understanding. Additionally, they can practice better, be confident, and perform well in their examinations with the support of this PDF.

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Students can access the NCERT Solutions of Class 11 Accounts Chapter 9: Financial Statements- II. Curated by experts according to the CBSE syllabus for 2023–2024, these step-by-step solutions make Accountancy much easier to understand and learn for the students. These solutions can be used in practice by students to attain skills in solving problems, reinforce important learning objectives, and be well-prepared for tests.

Exercise Questions – Financial Statements- II

Question 1 :

Why is it necessary to record the adjusting entries in the preparation of final accounts?

Answer :

Recording adjusting entries in preparing final accounts is necessary because of the following reasons:

1. It helps in assessing whether the final accounts reflect true profit or loss, and it also shows the true financial position of a business.

2. It ensures accounts comply with the accrual basis of accounting.

3. It makes sure that all financial transactions belong to the current fiscal year. No transactions of past or future are taken into account.

4. It provides the scope for introducing different provisions, which can be made at year-end, only after assessing the whole year’s performance.

Question 2 :

What is meant by closing stock? Show its treatment in final accounts.

Answer :

The cost of goods that remain unsold in the inventory after the completion of the accounting period is referred to as the closing stock. The closing stock value is determined by comparing the realisable value and cost price. The lesser among the two values is considered as the value of the closing stock.

In final accounts, the closing stock is adjusted by:

1) Crediting the closing stock to trading and profit and loss account.

2) Placing it on the asset part of the balance sheet.

The following entries need to be passed for adjustment

Closing Stock A/c Dr.

To Trading A/c

Question 3 :

State the meaning of the following:

(a) Outstanding expenses

(b) Prepaid expenses

(c) Income received in advance

(d) Accrued income

Answer :

(a) Outstanding expenses: Such expenses are incurred in the present accounting period but are not paid. As expense is generated during the accounting period, it makes perfect sense to charge it against revenue earned to arrive at true profit or loss. These are liabilities and need to be paid.

(b) Prepaid expenses: Those types of expenses in which the associated benefit has not been materialised but the payment is already done in advance are known as prepaid expenses.

(c) Income received in advance: The income is received in the present accounting period, and the benefits will be realised in the upcoming accounting period, such income is called income received in advance.

(d) Accrued income: Income that is earned in the accounting period but yet to be received by the end of the accounting period is known as accrued income. It is the due to be received in future accounting periods. It is shown on the asset side of the balance sheet.

Question 4 :

Give the proforma of the income statement and balance in vertical form.

Income statement for the period ended ….
	Particulars	Amount ₹	Amount ₹
Sales
Less: Sales returns (Return inwards)

Total sales revenue

Cost of goods
Purchases
Less: Purchase returns (Return outwards)
Carriage on purchases
Wages
Add: Outstanding wages
Less: Prepaid wages
Fuel and power
Factory rent
Installation or erection of machines
Octroi
Less: Closing stock
Gross Profit/Gross Loss (whichever is applicable)
Operating Expenses/Losses
Selling Expenses/Losses
……………………
……………………	……………………
……………………	……………………
……………………	……………………
……………………	……………………
……………………	……………………
……………………	……………………
……………………	……………………
Total selling expenses
General & administrative expenses/losses
……………………
……………………	……………………
……………………	……………………
……………………	……………………
……………………
……………………	……………………
……………………	……………………
……………………	……………………
Total General & Administrative Expenses
Total Operating Expenses/Losses

Answer :

Balance sheet
	Particulars	Amount ₹	Amount ₹
Current Assets
……………………
……………………
……………………
……………………
……………………
……………………
……………………
……………………
Prepaid expenses
Total current assets
Current liabilities
……………………
……………………
……………………
……………………
……………………
……………………

……………………
Total Current Liabilities
Non-Current Assets
……………………
……………………
……………………
……………………
……………………

……………………
……………………
Total Non-current Assets
Non-Current Liabilities
……………………
……………………
……………………
……………………
……………………
……………………
……………………
……………………
Total Non-current Liabilities
Capital

Question 5 :

Why is it necessary to create a provision for doubtful debts at the time of preparation of final accounts?

Answer :

In an ideal scenario, it is expected that debtors will be paying all the amount owed by them to the business, in reality, it doesn’t happen as some debtors might default on paying. It can be the full amount or a part of the sum borrowed. It is uncertain as to how much will that debt actually becomes bad debt. A business has to make a reasonable estimate for such an event. This estimate is called the provision for bad debts. It is created by debiting the P & L account.

Profit and loss A/c Dr

To Provision for doubtful debts A/c

Question 6 :

What adjusting entries would you record for the following?

(a) Depreciation

(b) Discount on debtors

(c) Interest on capital

(d) Manager’s commission

Answer :

(a) Depreciation

Dr.			Cr.
Particulars	Amount	Particulars		Amount	Liabilities	Amount	Assets		Amount
Depreciation							Assets
								Less: Depreciation

(b) Discount on debtors

Dr.			Cr.
Particulars	Amount	Particulars		Amount	Liabilities	Amount	Assets		Amount
Discount on Debtors							Debtors


								Less: Discount on Debtors

Dr.			Cr.
Particulars	Amount	Particulars		Amount	Liabilities		Amount	Assets	Amount
Interest on Capital					Capital
						Add: Interest on Capital

(d) Manager’s commission

Two types of manager commission can be seen as follows:

Case 1: When the commission is applied to the profit before charging the commission.

Dr.			Cr.
Particulars	Amount	Particulars		Amount	Liabilities	Amount	Assets	Amount
Manager’s Commission					Outstanding Manager’s
					Commission

Case 2: When the commission is applied to the profit after charging the commission.

Dr.			Cr.
Particulars	Amount	Particulars		Amount	Liabilities	Amount	Assets	Amount
					Outstanding Manager’s
					Commission




Manager’s Commission

Question 7 :

What is meant by the provision for discounts on debtors?

Answer :

7. What is meant by the provision for discounts on debtors?

A business allows discounts to debtors to encourage them to clear their debts. The amount of discount that a debtor will receive is estimated and accounted for by creating a provision for discount on debtors. It is only for those debtors who repay on time. The journal entry for such an event can be written as follows:

Profit and Loss A/c

Dr.

To Provision for Discount on Debtors A/c

Discount to debtors is an expense, and hence it is shown in the expense side of the P & L account and deducted from the assets side in the balance sheet.

Question 8 :

Give the journal entries for the following adjustments:

(a) Outstanding salary at ₹ 3,500.

(b) Rent unpaid for one month at ₹ 6,000 per annum.

(c) Insurance prepaid for a quarter at ₹ 16,000 per annum.

(d) Purchase of furniture costing ₹ 7,000 entered in the purchases book.

Answer :

Sl. No.

Particulars

L.F.

Debit

₹

Credit

₹

Salaries A/c Dr.

3,500

To Outstanding Salaries A/c

3,500

(Salaries Outstanding for Rs. 3,500)

Rent A/c Dr.

500

To Outstanding Rent A/c

500

Prepaid Insurance A/c Dr.

4,000

To Insurance A/c

4,000

(Insurance premium paid in advance for 3 months, i.e. ₹ 4000)

Furniture A/c Dr.

7,000

To Purchases A/c

7,000

(Correction entry for the wrong debit of furniture to purchases account)

(Rent unpaid for one month = 6000/12 = ₹ 500)

Question 9 :

What are adjusting entries? Why are they necessary for preparing the final accounts?

Answer :

In the accrual base of accounting, profit and loss for a year are not dependent only on revenues in cash or expenses paid in cash during the year. Some parts of the receipts and expenses that occurred in a year might belong to previous/future accounting periods. There can be some expenses which are yet to be brought to the books of account. Adjusting these items will provide a true and fair view of the business.

Recording adjusting entries in preparing final accounts is necessary because of the following reasons:

1. It helps in assessing whether the final accounts reflect true profit or loss also, it shows the true financial position of the business.

2. It ensures accounts comply with the accrual basis of accounting.

3. It makes sure that all financial transactions belong to the current fiscal year. No transaction of past or future is taken into account.

4. It provides the scope for introducing various provisions which can be made at year-end, only after assessing the whole year’s performance.

Question 10 :

What is meant by the provision for doubtful debts? How are the relevant accounts prepared, and what journal entries are recorded in the final accounts? How is the amount for provision for doubtful debts calculated?

Answer :

Profit and loss A/c Dr

To Provision for doubtful debts A/c

Provision for doubtful debts is shown as the deduction from debtors on the asset side of the balance sheet. It presents a true and fair view of the business. Provision for doubtful debts created at the end of the accounting period is carried forward to the next accounting period.

Adjustment entries for the provision for doubtful debts

Profit and Loss Account

Expenses/Losses	Amount ₹	Revenues/Gains	Amount ₹
Provision for doubtful debts
Bad debts
Further bad debts
New provision
Less: Old provision

Balance Sheet

Liabilities	Amount ₹	Assets	Amount ₹
		Sundry debtors
		Less: Further bad debts
		Less: Provision for doubtful debts

Question 11 :

Show the treatment of prepaid expenses, depreciation and closing stock at the time of preparation of final accounts when:

(a) Given inside the trial balance?

(b) Given outside the trial balance?

(i) Prepaid expenses

Answer :

(a) When given inside the trial balance: It will be added only to the asset side of the balance sheet.

Balance Sheet
Assets		Amount
Prepaid Expenses

(b) When given outside the trial balance: It will be posted in the P & L account as well as the balance sheet

Dr.				Cr.
Particulars		Amount	Particulars		Amount	Liabilities	Amount	Assets	Amount
Concerned Expenses								Prepaid Expenses
	Less: Prepaid Expenses

Balance Sheet
Assets		Amount
Prepaid Expenses

(ii) Depreciation

In the trial balance, depreciation is shown in the P & L account, as it is an expense. When present in the trial balance, it means a deduction has been taken from the concerned asset, and when depreciation is shown outside the trial balance, it needs to be recorded both in the P & L account as well as the balance sheet.

1) Inside Trial Balance

Profit and Loss Account
Dr.			Cr.
Particulars	Amount	Particulars		Amount
Depreciation

2) Outside Trial Balance

Dr.			Cr.
Particulars	Amount	Particulars		Amount	Liabilities	Amount	Assets		Amount
Depreciation on Concerned Assets							Concerned Assets
								Less: Depreciation

(iii) Closing stock

(a) Closing stock is valued based on the least among cost price or realisable value. If present in the trial balance, it gets posted only on the assets side of the balance sheet.

Balance Sheet
Liabilities	Amount	Assets	Amount

		Closing Stock

(b) When closing stock is given outside trial balance, it gets posted in two places, i.e. P & L account and balance sheet.

Dr.			Cr.
Particulars	Amount	Gains/Revenue		Amount	Liabilities	Amount	Assets	Amount
		Closing Stock
							Closing Stock

Question 12 :

Prepare a trading and profit and loss account for the year ending December 31, 2017, from the balances extracted from M/s Rahul Sons. Also, prepare a balance sheet at the end of the year.

Account Title	Amount ₹	Account Title	Amount ₹
Stock	50,000	Sales	1,80,000
Wages	3,000	Purchases return	2,000
Salary	8,000	Discount received	500
Purchases	1,75,000	Provision for doubtful debts	2,500
Sales return	3,000	Capital	3,00,000
Sundry debtors	82,000	Bills payable	22,000
Discount allowed	1,000	Commission received	4,000
Insurance	3,200	Rent	6,000
Rent rates and taxes	4,300	Loan	34,800
Fixtures and fittings	20,000
Trade expenses	1,500
Bad debts	2,000
Drawings	32,000
Repair and renewals	1,600
Travelling expenses	4,200
Postage	300
Telegram expenses	200
Legal fees	500
Bills receivable	50,000
Building	1,10,000
	5,51,800		5,51,800

Adjustments

1. Commission received in advance ₹ 1,000.

2. Rent receivable ₹ 2,000.

3. Salary outstanding ₹ 1,000 and insurance prepaid ₹ 800.

4. Further, bad debts ₹ 1,000 and provision for doubtful debts @ 5% on debtors and discount on debtors @ 2%.

5. Closing stock ₹ 32,000.

6. Depreciation on building @ 6% p.a.

Answer :

Books of M/s. Rahul Sons Trading Account for the Year Ending December 31, 2017
Dr.								Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			50,000	Sales		1,80,000
Purchases		1,75,000			Less: Sales Returns	3,000	1,77,000
	Less: Purchase Returns	2,000	1,73,000	Closing Stock			32,000
Wages			3,000	Gross Loss			17,000

			2,26,000				2,26,000

Profit and Loss Account for the Year Ending December 31, 2017
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Gross Loss			17,000	Discount Received			500
Salary		8,000		Commission Received		4,000
	Add: Outstanding Salary	1,000	9,000		Less: Advance Commission	1,000	3,000
Discount Allowed			1,000
Insurance		3,200		Rent		6,000
	Less: Insurance Prepaid	800	2,400		Add: Rent Receivable	2,000	8,000
Rent Rates and Taxes			4,300
Trade Expenses			1,500	Net Loss			43,189
Bad Debts		2,000
	Add: Further Bad Debts	1,000
	Add: New Provision	4,050
	Less: Old Provision	2,500	4,550
Discount on Debtors			1,539
Postage			300
Telegram Expenses			200
Depreciation on Building			6,600
Repair and Renewals			1,600
Travelling Expenses			4,200
Legal Fees			500

			54,689				54,689

Balance Sheet for the Year Ending December 31, 2017
Liabilities			Amount ₹	Assets			Amount ₹
Capital		3,00,000		Debtors		82,000
	Less: Net Loss	43,189			Less: Further Bad Debts	1,000
	Less: Drawings	32,000	2,24,811		Less: New Provision	4,050
Bills Payable			22,000		Less: Discount on Debtors (on ₹ 76,950)	1,539	75,411
Loan			34,800	B/R			50,000
Advance Commission			1,000	Buildings		1,10,000
Outstanding Salary			1,000		Less: 6% Depreciation	6,600	1,03,400
				Rent Receivable			2,000
				Prepaid Insurance			800
				Closing Stock			32,000
				Furniture and Fittings			20,000

			2,83,611				2,83,611

Question 13 :

Prepare a trading and profit and loss account of M/s Green Club Ltd. for the year ending March 31, 2017, from the following figures taken from their trial balance:

Account Title	Amount ₹	Account Title	Amount ₹
Opening stock	35,000	Sales	2,50,000
Purchases	1,25,000	Purchase return	6,000
Return inwards	25,000	Creditors	10,000
Postage and telegram	600	Bills payable	20,000
Salary	12,300	Discount	1,000
Wages	3,000	Provision for bad debts	4,500
Rent and rates	1,000	Interest received	5,400
Packing and transport	500	Capital	75,000
General expense	400
Insurance	4,000
Debtors	50,000
Cash in hand	20,000
Cash at bank	40,000
Machinery	20,000
Lighting and heating	5,000
Discount	3,500
Bad debts	3,500
Investment	23,100
	3,71,900		3,71,900

Adjustments

1. Depreciation charged on machinery @ 5% p.a.

2. Further, bad debts ₹ 1,500, discount on debtors @ 5% and make a provision on debtors @ 6%.

3. Wages prepaid ₹ 1,000.

4. Interest on investment @ 5% p.a.

5. Closing stock 10,000.

Answer :


Dr.				Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			35,000	Sales		2,50,000
Purchases		1,25,000			Less: Sales Returns	(25,000)	2,25,000
	Less: Purchase Returns	(6,000)	1,19,000	Closing Stock			10,000

Wages		3,000
	Less: Prepaid Wages	(1,000)	2,000
Gross Profit			79,000
			2,35,000				2,35,000

Profit and Loss Account for the Year Ending March 31, 2017
Dr.				Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Bad Debts		3,500		Gross Profit	79,000
	Add: Further Bad Debts	1,500		Interest on Accrued Investment	1,155
	Add: New Provision	2,910		Discount	1,000
	Less: Old Provision	4,500	3,410	Interest Received	5,400
Discount on Debtors			2,280
Postage and Telegram			600
Salary			12,300
Rent and Rates			1,000
Packing and Transport			500
General Expenses			400
Insurance			4,000
Discount			3,500
Depreciation on Machinery			1,000
Lighting and Heating			5,000
Net Profit			52,565

			86,555		86,555

Balance Sheet as on March 31, 2017
Liabilities			Amount ₹	Assets			Amount ₹
Creditors			10,000	Cash in Hand			20,000
Bills Payable			20,000	Cash at Bank			40,000
Capital		75,000
	Add: Net Profit	52,565	1,27,565	Debtors		50,000
					Less: Further Bad Debts	1,500
					Less New Provision	2,910
					Less: Discount on Debtors	2,280	43,310

				Investment		23,100
					Add: Interest on Investment	1,155	24,255

				Machinery		20,000
					Less: Depreciation	1,000	19,000

				Prepaid Wages			1,000
				Closing Stock			10,000

			1,57,565				1,57,565

Question 14 :

The following balances have been extracted from the trial of M/s Runway Shine Ltd. Prepare the trading and profit and loss accounts and a balance

sheet as on March 31, 2017.

Account Title	Amount ₹	Account Title	Amount ₹
Purchases	1,50,000	Sales	2,50,000
Opening stock	50,000	Return outwards	4,500
Return inwards	2,000	Interest received	3,500
Carriage inwards	4,500	Discount received	400
Cash in hand	77,800	Creditors	1,25,000
Cash at bank	60,800	Bill payable	6,040
Wages	2,400	Capital	1,00,000
Printing and stationery	4,500
Discount	400
Bad debts	1,500
Insurance	2,500
Investment	32,000
Debtors	53,000
Bills receivable	20,000
Postage and telegraph	400
Commission	200
Interest	1,000
Repair	440
Lighting charges	500
Telephone charges	100
Carriage outward	400
Motor car	25,000
	4,89,440		4,89,440

Adjustments

1. Further, bad debts ₹ 1,000, discount on debtors ₹ 500 and make a provision on debtors @ 5%.

2. Interest received on investment @ 5%.

3. Wages and interest outstanding ₹ 100 and ₹ 200, respectively.

4. Depreciation charged on motor car @ 5% p.a.

5. Closing Stock ₹ 32,500.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			50,000	Sales		2,50,000
Purchases		1,50,000			Less: Return Inwards	2,000	2,48,000
	Less: Return Outwards	4,500	1,45,500	Closing Stock			32,500

Carriage Inwards			4,500
Wages		2,400
	Add: Outstanding Wages	100	2,500
Gross Profit			78,000

			2,80,500				2,80,500

Profit and Loss Account
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Carriage Outward			400	Gross Profit	78,000
Printing and Stationery			4,500	Interest Received	3,500
Discount			400	Discount Received	400
Bad Debts		1,500		Interest Received on Investment	1,600
	Add: Further Bad Debts	1,000
	Add: New Provision	2,600	5,100
Discount on Debtors			500
Insurance			2,500
Postage and Telegraph			400
Commission			200
Interest		1,000
	Add: Outstanding Interest	200	1,200
Repair			440
Lighting Charges			500
Telephone Charges			100
Depreciation on Motor Car			1,250
Net Profit			66,010

			83,500		83,500

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Creditors			1,25,000	Cash in Hand		77,800
					Add: Interest Received	1,600	79,400
Bills Payable			6,040	Cash at Bank			60,800
Capital		1,00,000		Investment			32,000
	Add: Net Profit	66,010	1,66,010	Debtors		53,000
					Less: Further Bad Debts	1,000
Outstanding Interest			100		Less: New Provision	2,600
Outstanding Wages			200		Less: Discount on Debtors	500	48,900

				Motor Car		25,000
					Less: Depreciation	1,250	23,750
				Bills Receivable			20,000
				Closing Stock			32,500

			2,97,350				2,97,350

Question 15 :

The following balances have been extracted from the trial of M/s Haryana Chemical Ltd. You are required to prepare the trading and profit and loss accounts and balance sheet as on March 31, 2017, from the given information.

Account Title	Amount ₹	Account Title	Amount ₹
Opening stock	50,000	Sales	3,50,000
Purchases	1,25,500	Purchases return	2,500
Sales return	2,000	Creditors	25,000
Cash in hand	21,200	Rent	5,000
Cash at bank	12,000	Interest	2,000
Carriage	100	Bills payable	1,71,700
Freehold land	3,20,000	Capital	3,00,000
Patents	1,20,000
General expenses	2,000
Sundry debtors	32,500
Building	86,000
Machinery	34,500
Insurance	12,400
Drawings	10,000
Motor vehicle	10,500
Bad debts	2,000
Light and water	1,200
Trade expenses	2,000
Power	3,900
Salary and wages	5,400
Loan a 15% (01.09.2017)	3,000
	8,56,200		8,56,200

Adjustments

1. Closing stock was valued at the end of the year at ₹ 40,000.

2. Salary amounting ₹ 500 and trade expense of ₹ 300 are due.

3. Depreciation charged on building and machinery are @ 4% and @ 5%, respectively.

4. Make a provision of 5% on sundry debtors.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			50,000	Sales		3,50,000
Purchases		1,25,500			Less: Return	2,000	3,48,000
	Less: Return Outwards	2,500	1,23,000	Closing Stock			40,000

Carriage			100
Power			3,900
Gross Profit			2,11,000

			3,88,000				3,88,000

Profit and Loss Account
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
General Expenses			2,000	Gross Profit	2,11,000
Insurance			12,400	Rent	5,000
Bad Debts		2,000		Interest	2,000
	Add: Provision for Bad Debts	1,625	3,625	Accrued Interest on Loan	150
Light and Water			1,200
Trade Expenses		2,000
	Add: Outstanding Trade Expenses	300	2,300

Salary and Wages		5,400
	Add: Outstanding Salary	500	5,900
Depreciation on Building			3,440
Depreciation on Machinery			1,725
Net Profit			1,85,560

			2,18,150		2,18,150

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		3,00,000		Cash in Hand			21,200
	Add: Net Profit	1,85,560		Cash at Bank			12,000
	Less: Drawings	10,000	4,75,560	Freehold Land			3,20,000
Creditors			25,000	Patents			1,20,000
Bills Payable			1,71,700	Sundry Debtors		32,500
Outstanding Trade Expenses			300		Less: Provision for Bad Debts	1,625	30,875
Outstanding Salary			500
				Building		86,000
					Less: Depreciation	3,440	82,560

				Machinery		34,500
					Less: Depreciation	1,725	32,775
				Motor Vehicle			10,500
				Loan		3,000
					Add: Interest on Loan	150	3,150
				Closing Stock			40,000

			6,73,060				6,73,060

Working Note

The loan given bears an interest of 15% p.a., and the interest is unpaid from 01-9-2017 to 31-12-2017. Thus, interest for the loan is outstanding for four months. It is calculated as follows:

Interest on loan =	3000 ×	15	×	4	= ₹ 150
		100		12

Question 16 :

From the following information, prepare the trading and profit and loss accounts of M/s Indian sports house for the year ending March 31, 2017.

Account Title	Amount ₹	Account Title	Amount ₹
Drawings	20,000	Capital	2,00,000
Sundry debtors	80,000	Return outwards	2,000
Bad debts	1,000	Bank overdraft	12,000
Trade expenses	2,400	Provision for bad debts	4,000
Printing and stationery	2,000	Sundry creditors	60,000
Rent Rates and taxes	5,000	Bills payable	15,400
Freight	4,000	Sales	2,76,000
Return inwards	7,000
Opening stock	25,000
Purchases	1,80,000
Furniture and fixture	20,000
Plant and machinery	1,00,000
Bills receivable	14,000
Wages	10,000
Cash in hand	6,000
Discount allowed	2,000
Investments	40,000
Motor car	51,000
	5,69,400		5,69,400

Adjustments

1. Closing stock was ₹ 45,000.

2. Provision for doubtful debts is to be maintained @ 2% on debtors.

3. Depreciation charged on: furniture and fixture @ 5%, plant and Machinery @ 6% and motor car @ 10%.

4. A Machine of ₹ 30,000 was purchased on October 01, 2016.

5. The manager is entitled to a commission of 10% of the net profit after charging such a commission.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			25,000	Sales		2,76,000
Purchases		1,80,000			Less: Return Inwards	7,000	2,69,000
	Less: Return Outwards	2,000	1,78,000	Closing Stock			45,000
Wages			10,000
Freight			4,000
Gross Profit			97,000
			3,14,000				3,14,000

Profit and Loss Account
Dr.					Cr.
Particulars	Amount ₹	Particulars			Amount ₹
Trade Expenses	2,400	Gross Profit			97,000
Printing and Stationery	2,000	Old Provision for Bad Debts		4,000
Rent Rates and Taxes	5,000		Less: Bad Debts	1,000
Discount Allowed	2,000		Less: New Provision	1,600	1,400
Depreciation on Motor Car	5,100
Depreciation on Furniture and Fixtures	1,000
*Depreciation on P & M of ₹ 70,000	4,200
**Depreciation on P & M of ₹ 30,000	900
Net Profit Before Manager’s Commission	75,800

	1,02,400				1,02,400
Manager’s Commission	6,891
Net Profit After Commission	68,909	Balance b/d			75,800
	75,800				75,800

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		2,00,000		Cash in Hand			6,000
	Add: Net Profit	68,909		Sundry Debtors		80,000
	Less: Drawings	20,000	2,48,909		Less: New Provision	1,600	78,400

O/S Manager’s Commission			6,891	Furniture and Fixtures		20,000
Bank Overdraft			12,000		Less: Depreciation	1,000	19,000
Creditors			60,000
Bills Payable			15,400	Plant and Machinery		1,00,000
					Less: Depreciation 1*	4,200
					Less: Depreciation 2**	900	94,900
				Bills Receivable			14,000
				Investments			40,000
				Motor Car		51000
					Less: Depreciation	5100	45,900
				Closing Stock			45,000

			3,43,200				3,43,200

Working Notes

1. Manager’s Commission

= Net profit before commission ×		10
		110
= 75,800 ×	10
	110
= ₹ 6,891

2. Out of the machinery of ₹ 1,00,000, ₹ 30,000 worth of machinery was purchased on 1st October 2016. Therefore, the depreciation on this machinery will be for 6 months at 6% p.a.

*Depreciation on machinery (30,000) =	30,000 ×	6	×	6	= ₹ 900
		12		100

**The rest of the machinery of ₹ 70,000 will bear depreciation at 6% p.a.

Depreciation on machinery (70,000) =	70,000 ×	6	= ₹ 900
		12

Question 17 :

Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. from the following particulars.

Account Title	Amount ₹	Account Title	Amount ₹
Sundry debtors	1,00,000	Bills payable	85,550
Bad debts	3,000	Sundry creditors	25,000
Trade expenses	2,500	Provision for bad debts	1,500
Printing and stationery	5,000	Return outwards	4,500
Rent, rates and taxes	3,450	Capital	2,50,000
Freight	2,250	Discount received	3,500
Sales return	6,000	Interest received	11,260
Motor car	25,000	Sales	1,00,000
Opening stock	75,550
Furniture and fixture	15,500
Purchases	75,000
Drawings	13,560
Investments	65,500
Cash in hand	36,000
Cash in bank	53,000
	4,81,310		4,81,310

Adjustments

1. Closing stock was valued ₹ 35,000.

2. Depreciation charged on furniture and fixture @ 5%.

3. Further bad debts ₹ 1,000. Make a provision for bad debts @ 5% on sundry debtors.

4. Depreciation charged on motor car @ 10%.

5. Interest on drawing @ 6%.

6. Rent, rates and taxes were outstanding for ₹ 200.

7. Discount on debtors 2%.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			75,550	Sales		1,00,000
Purchases		75,000			Less: Sales Inwards	6,000	94,000
	Less: Return Outwards	4,500	70,500	Closing Stock			35,000
Freight			2,250
				Gross Loss			19,300

			1,48,300				1,48,300

Profit and Loss Account
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Gross Loss			19,300	Discount	3,500
Bad Debts		3,000		Interest Received	11,260
	Add: Further Bad Debts	1,000		Interest on Drawings	814
	Add: New Provision	4,950		Net Loss	27,482
	Less: Old Provision	1,500	7,450
Discount on Debtors			1,881
Trade Expenses			2,500
Printing and Stationery			5,000
Rent, Rates and Taxes		3,450
	Add: O/S Rent, Rates and Taxes	200	3,650
Depreciation on Furniture			775
Depreciation on Motor Car			2,500

			43,056		43,056

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Bills Payable			85,550	Sundry Debtors		100,000
Sundry Creditors			25,000		Less: Further Debts	1,000
Capital		2,50,000			Less: New Provision	4,950
	Less: Net Loss	27,482			Less: Discount on Debtors	1,881	92,169
	Less: Drawings	13,560
	Less: Interest on Drawings	814		Motor Car		25,000
			2,08,144		Less: Depreciation	2,500	22,500

Outstanding Rent, Rates and Taxes			200	Furniture and Fixtures		15,500
					Less: Depreciation	775	14,725
				Investments			65,500
				Cash in Hand			36,000
				Cash in Bank			53,000
				Closing Stock			35,000

			3,18,894				3,18,894

Question 18 :

Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss accounts and a balance sheet as on March 31, 2017.

Account Title	Amount ₹	Account Title	Amount ₹
Opening stock	2,26,000	Sales	6,80,000
Purchases	4,40,000	Return outwards	15,000
Drawings	75,000	Creditors	50,000
Buildings	1,00,000	Bills payable	63,700
Motor van	30,000	Interest received	20,000
Freight inwards	3,400	Capital	3,50,000
Sales return	10,000
Trade expense	3,300
Heat and power	8,000
Salary and wages	5,000
Legal expense	3,000
Postage and telegram	1,000
Bad debts	6,500
Cash in hand	79,000
Cash at bank	98,000
Sundry debtors	25,000
Investments	40,000
Insurance	3,500
Machinery	22,000
	11,78,700		11,78,700

The following additional information is available:

1. Stock on December 31, 2017, was ₹ 30,000.

2. Depreciation is to be charged on the building at 5% and the motor van at 10%.

3. Provision for doubtful debts is to be maintained at 5% on sundry debtors.

4. Unexpired insurance was ₹ 600.

5. The manager is entitled to a commission @ 5% on net profit before charging such commission.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			2,26,000	Sales		6,80,000
Purchases		4,40,000			Less: Sales Return	10,000	6,70,000
	Less: Returns Outwards	15,000	4,25,000	Closing Stock			30,000
Freight Inwards			3,400
Heat and Power			8,000
Gross Profit			37,600


			7,00,000				7,00,000

Profit and Loss Account
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Trade Expenses			3,300	Gross Profit	37,600
Salary and Wages			5,000	Interest Received	20,000
Legal Expenses			3,000
Postage and Telegram			1,000
Bad Debts		6,500
	Add: New Provision	1,250	7,750
Depreciation on Building			5,000
Depreciation on Motor Van			3,000
Insurance		3,500
	Less: Unexpired Insurance	600	2,900
Net Profit			26,650

			57,600		57,600
Manager’s Commission Payable			1,269	Balance b/d	26,650
Net Profit after Commission			25,381
			26,650		26,650

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		3,50,000		Cash in Hand			79,000
	Add: Net Profit	25,381		Cash at Bank			98,000
	Less: Drawings	75,000	3,00,381	Buildings		1,00,000
Creditors			50,000		Less: Depreciation	5,000	95,000
Bills Payable			63,700
Manager’s Commission Payable			1,269	Motor Van		30,000
					Less: Depreciation	3,000	27,000

				Sundry Debtors		25,000
					Less: New Provision	1,250	23,750
				Investments			40,000
				Machinery			22,000
				Unexpired Insurance			600
				Closing Stock			30,000

			4,15,350				4,15,350

Question 19 :

From the following balances extracted from the books of Raga Ltd., prepare the trading and profit and loss accounts for the year ended March 31, 20117 and a balance sheet as on that date.

Account Title	Amount ₹	Account Title	Amount ₹
Drawings	20,000	Sales	2,20,000
Land and buildings	12,000	Capital	1,01,110
Plant and machinery	40,000	Discount	1,260
Carriage inwards	100	Apprentice premium	5,230
Wages	500	Bills payable	1,28,870
Salary	2,000	Purchases 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	30,000
	4,66,470		4,66,470

The additional information is as under:

1. Closing stock was valued at the end of the year ₹ 20,000.

2. Depreciation on plant and machinery charged at 5% and land and building at 10%.

3. Discount on debtors at 3%.

4. Make a provision at 5% on debtors for doubtful debts.

5. Salary outstanding was ₹ 100, and wages prepaid was ₹ 40.

6. The manager is entitled to a commission of 5% on net profit after charging such commission.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
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
Carriage Inwards			100
Wages		500
	Less: Prepaid	40	460
Coal, Gas and Water			1,200
Gross Profit			21,240
			2,39,800				2,39,800

Profit and Loss Account
Dr.				Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Salary		2,000		Gross Profit	21,240
	Add: Outstanding Salary	100	2,100	Discount	1,260
Bank Charges			200	Apprentice Premium	5,230
Trade Expenses			3,800
Rates and Taxes			870
Depreciation on Plant and Machinery			2,000
Depreciation on Land and Building			1,200
Provision for Doubtful Debts			2,715
Discount on Debtors			1,548
Net Profit			13,297

			27,730		27,730
Manager’s Commission			633	Balance b/d	13,297
Net Profit after Commission			12,664
			13,297		13,297

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		1,01,110		Cash at Bank			50,000
	Add: Net Profit	12,664		Land and Building		12,000
	Less: Drawings	20,000	93,774		Less: Depreciation	1,200	10,800
				Plant and Machinery		40,000
Bills Payable			1,28,870		Less: Depreciation	2,000	38,000
Outstanding Salary			100	Bills Receivable			24,500
Outstanding Manager’s Commission			633	Sundry Debtors		54,300
					Less: New Provision	2,715
					Less: Discount on Debtors	1,548	50,037
				Cash in Hand			30,000
				Closing Stock			20,000
				Prepaid Wages			40

			2,23,377				2,23,377

Question 20 :

From the following balances of M/s Jyoti Exports, prepare the trading and profit and loss accounts for the year ended March 31, 2017, and the balance sheet as on this date.

Account Title	Debit Amount ₹	Account Title	Credit Amount ₹
Sundry debtors	9,600	Sundry creditors	2,500
Opening stock	22,800	Sales	72,670
Purchases	34,800	Purchases returns	2,430
Carriage inwards	450	Bills payable	15,600
Wages	1,770	Capital	42,000
Office rent	820
Insurance	1,440
Factory rent	390
Cleaning charges	940
Salary	1,590
Building	24,000
Plant and machinery	3,600
Cash in hand	2,160
Gas and water	240
Octroi	60
Furniture	20,540
Patents	10,000
	1,35,200		1,35,200

Closing stock ₹ 10,000.

1. To provision for doubtful debts is to be maintained at 5 per cent on sundry debtors.

2. Wages amounting to ₹ 500 and salary amounting to ₹ 350 are outstanding.

3. Factory rent prepaid for ₹ 100.

4. Depreciation charged on Plant and Machinery @ 5% and Building @ 10%.

5. Outstanding insurance of ₹ 100.

Answer :

Trading Account
Dr.				Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Opening Stock			22,800	Sales	72,670
Purchases		34,800		Closing Stock	10,000
	Less: Purchases Return	2,430	32,370
Carriage Inwards			450
Wages		1,770
	Add: Outstanding Wages	500	2,270

Factory Rent		390
	Less: Prepaid Rent	100	290
Gas and Water			240
Octroi			60
Cleaning Charges			940
Gross Profit			23,250
			82,670		82,670

Profit and Loss Account
Dr.				Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Office Rent			820	Gross Profit	23,250
Insurance		1,440
	Add: Outstanding Insurance	100	1,540
Depreciation on Plant and Machinery			180
Salary		1,590
	Add: Outstanding Salary	350	1,940
Provision for Doubtful Debts			480
Depreciation on Building			2,400
Net Profit			15,890

			23,250		23,250

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		42,000		Sundry Debtors		9,600
	Add: Net Profit	15,890	57,890		Less: New Provision	480	9,120

Sundry Creditors			2,500	Building		24,000
Bills Payable			15,600		Less: Depreciation	2,400	21,600

Outstanding Salary			350	Plant and Machinery		3,600
Outstanding Wages			500		Less: Depreciation	180	3,420
Outstanding Insurance			100	Cash in Hand			2,160
				Furniture			20,540
				Patents			10,000
				Closing Stock			10,000
				Prepaid Factory Rent			100

			76,940				76,940

Question 21 :

The following balances have been extracted from the books of M/s Green House for the year ended March 31, 2017. Prepare the trading and profit and loss accounts and balance sheet as on this date.

Account Title	Amount ₹	Account Title	Amount ₹
Purchases	80,000	Capital	2,10,000
Bank balance	11,000	Bills payable	6,500
Wages	34,000	Sales	2,00,000
Debtors	70,300	Creditors	50,000
Cash in hand	1,200	Return outwards	4,000
Legal expenses	4,000
Building	60,000
Machinery	120,000
Bills receivable	7,000
Office expenses	3,000
Opening stock	45,000
Gas and fuel	2,700
Freight and carriage	3,500
Factory lighting	5,000
Office furniture	5,000
Patent right	18,800
	4,70,500		4,70,500

Adjustments:

(a) Machinery is depreciated at 10%, and buildings depreciated at 6%.

(b) Interest on capital @ 4%.

(c) Outstanding wages of ₹ 50.

(d) Closing stock of ₹ 50,000.

Answer :

Trading Account
Dr.				Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Opening Stock			45,000	Sales	2,00,000
Purchases		80,000		Closing Stock	50,000
	Less: Return Outwards	4,000	76,000

Wages		34,000
	Add: Wages Outstanding	50	34,050
Gas and Fuel			2,700
Freight and Carriage			3,500
Factory Lighting			5,000
Gross Profit			83,750

			2,50,000		2,50,000

Profit and Loss Account
Dr.			Cr.
Particulars	Amount ₹	Particulars	Amount ₹
To Legal Expenses	4,000	By Gross Profit	83,750
To Office Expenses	3,000
To Depreciation on Machine	12,000
To Depreciation on Building	3,600
To Interest on Capital	8,400
To Net Profit	52,750

	83,750		83,750

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		2,10,000		Bank Balance			11,000
	Add: Interest on Capital	8,400		Debtors			70,300
	Add: Net profit	52,750	2,71,150	Cash in Hand			1,200
				Building		60,000
Bills Payable			6,500		Less: Depreciation	3,600	56,400
Creditors			50,000	Machinery		1,20,000
Outstanding Wages			50		Less: Depreciation	12,000	1,08,000
				Bills Receivable			7,000
				Patent Right			18,800
				Office Furniture			5,000
				Closing Stock			50,000

			3,27,700				3,27,700

Question 22 :

From the following balances extracted from the book of M/s Manju Chawla on March 31, 2017, prepare the trading and profit and loss accounts and a balance sheet as on this date.

Account Title	Amount ₹	Amount ₹
Opening stock	10,000
Purchases and sales	40,000	80,000
Returns	200	600
Wages	6,000
Dock and cleaning charges	4,000
Lighting	500
Misc. Income		6,000
Rent		2,000
Capital		40,000
Drawings	2,000
Debtors and creditors	6,000	7,000
Cash	3,000
Investment	6,000
Patent	4,000
Land and machinery	43,000
Donations and charity	600
Sales tax collected		1,000
Furniture	11,300
	1,36,600	1,36,600

The closing stock was ₹ 2,000.

(a) Interest on drawings @ 7% and interest on capital @ 5%.

(b) Land and machinery are depreciated at 5%.

(c) Interest on investment @ 6%.

(d) Unexpired rent ₹ 100.

(e) Charge 5% depreciation on furniture.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			10,000	Sales		80,000
Purchases		40,000			Less: Sales Return	200	79,800
	Less: Purchases Return	600	39,400	Closing Stock			2,000
Wages			6,000
Dock and Cleaning Charges			4,000
Gross Profit			22,400

			81,800				81,800

Profit and Loss Account
Dr.		Cr.
Particulars	Amount ₹	Particulars			Amount ₹
Lighting	500	Gross Profit			22,400
Donations and Charity	600	Miscellaneous Income			6,000
Interest on Capital	2,000	Rent		2,000
Depreciation on Furniture	565		Less: Unearned Rent	100	1,900
Depreciation on Land and Machinery	2,150	Interest on Drawings			140
Net Profit	24,985	Interest on Investment			360

	30,800				30,800

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		40,000		Debtors			6,000
	Add: Interest on Capital	2,000		Cash			3,000
	Add: Net Profit	24,985		Investment		6,000
	Less: Drawings	2,000			Add: Interest on Investment	360	6,360
	Less: Interest on Drawings	140	64,845	Patent			4,000
Creditors			7,000	Land and Machinery		43,000
Sales Tax Collected			1,000		Less: Depreciation	2,150	40,850
Unearned Rent			100
				Furniture		11,300
					Less: Depreciation	565	10,735
				Closing Stock			2,000
			72,945				72,945

Question 23 :

The following balances were extracted from the books of M/s Panchsheel Garments on March 31, 2017.

Account Title	Debit Amount ₹	Account Title	Credit Amount ₹
Opening stock	16,000	Sales	1,12,000
Purchases	67,600	Return outwards	3,200
Return Inwards	4,600	Discount	1,400
Carriage inwards	1,400	Bank overdraft	10,000
General expenses	2,400	Commission	1,800
Insurance	4,000	Creditors	16,000
Scooter expenses	200	Capital	50,000
Salary	8,800
Cash in hand	4,000
Scooter	8,000
Furniture	5,200
Buildings	65,000
Debtors	6,000
Wages	1,200
	1,94,400		1,94,400

Prepare the trading and profit and loss account for the year ended March 31, 2017, and a balance sheet as on that date.

(a) Unexpired insurance ₹ 1,000.

(b) Salary due but not paid ₹ 1,800.

(c) Wages outstanding ₹ 200.

(d) Interest on capital 5%.

(e) Scooter is depreciated @ 5%.

(f) Furniture is depreciated @ 10%.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			16,000	Sales		1,12,000
Purchases		67,600			Less: Return Inwards	4,600	1,07,400
	Less: Return Outwards	3,200	64,400	Closing Stock			15,000
Carriage Inwards			1,400
Wages		1,200
	Add: Outstanding Wages	200	1,400
Gross Profit			39,200
			1,22,400				1,22,400

Profit and Loss Account
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
General Expenses			2,400	Gross Profit	39,200
Insurance		4,000		Discount	1,400
	Less: Unexpired Insurance	1,000	3,000	Commission	1,800
Scooter Expenses			200
Salary		8,800
	Add: Outstanding Salary	1,800	10,600
Interest on Capital			2,500
Depreciation on Scooter			400
Depreciation on Furniture			520
Net Profit			22,780
			42,400		42,400

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		50,000		Cash in Hand			4,000
	Add: Interest on Capital	2,500		Scooter		8,000
	Add: Net Profit	22,780	75,280		Less: Depreciation	400	7,600
Bank Overdraft			10,000	Furniture		5,200
Creditors			16,000		Less: Depreciation	520	4,680
Outstanding Salary			1,800	Buildings			65,000
Outstanding Wages			200	Debtors			6,000
				Unexpired Insurance			1,000
				Closing Stock			15,000


			1,03,280				1,03,280

Question 24 :

Prepare the trading and profit and loss account and balance sheet of M/s Control Device India on March 31, 2017, from the following balance as on that date.

Account Title	Debit Amount ₹	Credit Amount ₹
Drawings and capital	19,530	67,500
Purchase and sales	45,000	1,12,500
Salary and commission	25,470	1,575
Carriage	2,700
Plant and machinery	27,000
Furniture	6,750
Opening stock	42,300
Insurance premium	2,700
Interest		7,425
Bank overdraft		24,660
Rent and taxes	2,160
Wages	11,215
Returns	2,385	1,440
Carriage outwards	1,485
Debtors and creditors	36,000	58,500
General expenses	6,975
Octroi	530
Investment	41,400
	2,73,600	2,73,600

The closing stock was valued ₹ 20,000.

(a) Interest on capital @ 10%.

(b) Interest on drawings @ 5%.

(c) Wages outstanding ₹ 50.

(d) Outstanding salary ₹ 20.

(e) Provide a depreciation @ 5% on plant and machinery.

(f) Make a 5% provision on debtors.

Answer :

Trading Account
Dr.							Cr.
Particulars			Amount ₹	Particulars			Amount ₹
Opening Stock			42,300	Sales		1,12,500
Purchases		45,000			Less: Sales Return	2,385	1,10,115
	Less: Purchases Return	1,440	43,560	Closing Stock			20,000
Carriage			2,700
Wages		11,215
	Add: Outstanding Wages	50	11,265
Octroi			530
Gross Profit			29,760
			1,30,115				1,30,115

Balance Sheet
Liabilities			Amount ₹	Assets			Amount ₹
Capital		67,500		Plant and Machinery		27,000
	Add: Interest on Capital	6,750			Less: Depreciation	1,350	25,650
	Less: Net Loss	8,973		Furniture			6,750
	Less: Drawings	19,530		Debtors		36,000
	Less: Interest on Drawings	977	44,770		Less: New Provision	1,800	34,200
Bank Overdraft			24,660	Investment			41,400
Creditors			58,500	Closing Stock			20,000
Outstanding Wages			50
Salary Outstanding			20

			1,28,000				1,28,000

Question 25 :

The following balances appeared in the trial balance of M/s Kapil Traders as on March 31, 2017

	₹
Sundry debtors	30,500
Bad debts	500
Provision for doubtful debts	2,000

The partners of the firm agreed to record the following adjustments in the books of the Firm. Further, bad debts ₹300. Maintain provision for bad debts at 10%. Show the following adjustments in the bad debts account, provision account, debtors account, profit and loss account and balance sheet.

Answer :

Profit and Loss Account
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Bad Debts		500
	Add: Further Bad Debts	300
	Add: New Provision	3,020
	Less: Old Provision	2,000	1,820

Balance Sheet
Liabilities	Amount ₹	Assets			Amount ₹
		Debtors		30,500
			Less: Further Bad Debts	300
			Less: New Provision	3,020	27,180

Debtors Account
Dr.				Cr.
Date	Particulars	Amount ₹	Date		Particulars	Amount ₹
2017			2017
March 31	Balance b/d	30,500	March 31		Further Bad Debts	300
			March 31		Provision for Doubtful Debts	3,020
			March 31		Balance c/d	27,180

		30,500				30,500

Bad Debts Account
Dr.				Cr.
Date	Particulars	Amount ₹	Date		Particulars	Amount ₹
2017			2017
March 31	Balance b/d	500	March 31		Provision for Doubtful Debts	800
	(As per the Trial Balance)

March 31	Sundry Debtors	300
		800				800

Provision for Doubtful Debts Account
Dr.				Cr.
Date	Particulars	Amount ₹	Date		Particulars	Amount ₹
2017			2016
March 31	Bad Debt	800	April 01		Balance b/d (Old Provision)	2,000
			April 01		Profit and Loss	1,820
					(Balancing figure)
March 31	Balance b/d	3,020
	(New Provision)
		3,820				3,820

Question 26 :

Prepare the bad debts account, provision for the account, profit and loss account and balance sheet from the following information as on March 31, 2017

	₹
Debtors	80,000
Bad debts	2,000
Provision for doubtful debts	5,000

Adjustments:

Bad Debts ₹ 500 Provision on Debtors @ 3%.

Answer :

Profit and Loss Account
Dr.					Cr.
Particulars			Amount ₹	Particulars		Amount ₹
Bad Debts		2,000		Old Provision for Doubtful Debts		5,000
	Add: Further Bad Debts	500
	Add: New Provision for Bad Debts	2,385	4,885

Balancing figure			115

			5,000			5,000

Balance Sheet
Liabilities	Amount ₹	Assets			Amount ₹
		Debtors		80,000
			Less: Further Bad Debts	500
			Less: New Provision on Debtors	2,385	77,115

					77,115

Bad Debts Account
Dr.				Cr.
Date	Particulars	Amount ₹	Date		Particulars	Amount ₹
2017			2017
Dec.31	Balance b/d	2,000	Dec.31		Provision for Doubtful Debts	2,500
	(as per the Trial Balance)

Dec.31	Sundry Debtors	500
		2,500				2,500

Provision for Doubtful Debts Account
Dr.				Cr.
Date	Particulars	Amount ₹	Date		Particulars	Amount ₹
2017			2017
Dec.31	Bad Debts	2,500	Jan.01		Balance b/d (Old Provision)	5,000

Dec.31	Balance b/d	2,385
	(New Provision)

Dec.31	Profit and Loss	115*
	(Balancing Figure)
		5,000				5,000

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