CLASS 11 COMMERCE ACCOUNTANCY(PART – II) CHAPTER – 2 FINANCIAL STATEMENTS – 2

Financial Statements

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

Account TitleAmount₹Account TitleAmount₹
Stock50,000Sales1,80,000
Wages3,000Purchases return2,000
Salary8,000Discount received500
Purchases1,75,000Provision for doubtful debts2,500
Sales return3,000Capital3,00,000
Sundry Debtors82,000Bills payable22,000
Discount allowed1,000Commission received4,000
Insurance3,200Rent6,000
Rent Rates and Taxes4,300Loan34,800
Fixtures and fittings20,000
Trade expenses1,500
Bad debts2,000
Drawings32,000
Repair and renewals1,600
Travelling expenses4,200
Postage300
Telegram expenses200
Legal fees500
Bills receivable50,000
Building1,10,000
5,51,8005,51,800

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 :

The solution is given below:

Books of M/s. Rahul Sons.Trading Account for the year ending December 31, 2017

Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock50,000Sales1,80,000
Purchases1,75,000Less: Sales Returns3,0001,77,000
Less: Purchase Returns2,0001,73,000Closing Stock32,000
Wages3,000Gross Loss17,000
2,26,0002,26,000

Profit and Loss Account for the year ending December 31, 2017

Dr.Cr.
ParticularsAmountParticularsAmount
Gross Loss17,000Discount Received500
Salary8,000Commission Received4,000
Add: Outstanding Salary1,0009,000Less: Advance Commission1,0003,000
Discount Allowed1,000
Insurance3,200Rent6,000
Less: Insurance Prepaid8002,400Add: Rent Receivable2,0008,000
Rent Rates and Taxes4,300
Trade Expenses1,500Net Loss43,189
Bad-Debts2,000
Add: Further Bad-Debts1,000
Add: New Provision4,050
Less: Old Provision2,5004,550
Discount on Debtors1,539
Postage300
Telegram Expenses200
Depreciation on Building6,600
Repair and Renewals1,600
Travelling Expenses4,200
Legal Fees500
54,68954,689
Balance Sheet for the year ending December 31, 2017
LiabilitiesAmountAssetsAmount
Capital3,00,000Debtors82,000
Less: Net Loss43,189Less: Further Bad-Debts1,000
Less: Drawings32,0002,24,811Less: New Provision4,050
Bills Payable22,000Less: Discount on Debtors (on ₹ 76,950)1,53975,411
Loan34,800B/R50,000
Advance Commission1,000Buildings1,10,000
Outstanding Salary1,000Less: 6% Depreciation6,6001,03,400
Rent Receivable2,000
Prepaid Insurance800
Closing Stock32,000
Furniture and Fittings20,000
2,83,6112,83,611

2. 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 his trial balance:

Account TitleAmount₹Account TitleAmount₹
Opening stock35,000Sales2,50,000
Purchases1,25,000Purchase return6,000
Return inwards25,000Creditors10,000
Postage and Telegram600Bills payable20,000
Salary12,300Discount1,000
Wages3,000Provision for bad debts4,500
Rent and Rates1,000Interest received5,400
Packing and Transport500Capital75,000
General expense400
Insurance4,000
Debtors50,000
Cash in hand20,000
Cash at bank40,000
Machinery20,000
Lighting and Heating5,000
Discount3,500
Bad debts3,500
Investment23,100
3,71,9003,71,900

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.
The solution is given below:
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock35,000Sales2,50,000
Purchases1,25,000Less: Sales Returns(25,000)2,25,000
Less: Purchase Returns(6,000)1,19,000Closing Stock10,000
Wages3,000
Less: Prepaid Wages(1,000)2,000
Gross Profit79,000
2,35,0002,35,000
Profit and Loss Account for the year ending March 31, 2017
Dr.Cr.
ParticularsAmountParticularsAmount
Bad Debts3,500Gross Profit79,000
Add: Further Bad-debts1,500Interest on Accrued Investment1,155
Add: New Provision2,910Discount1,000
Less: Old Provision4,5003,410Interest Received5,400
Discount on Debtors2,280
Postage and Telegram600
Salary12,300
Rent and Rates1,000
Packing and Transport500
General Expenses400
Insurance4,000
Discount3,500
Depreciation on Machinery1,000
Lighting and Heating5,000
Net Profit52,565
86,55586,555
Balance Sheetas on March 31, 2017
LiabilitiesAmountAssetsAmount
Creditors10,000Cash in Hand20,000
Bills Payable20,000Cash at Bank40,000
Capital75,000
Add: Net Profit52,5651,27,565Debtors50,000
Less: Further Bad-Debts1,500
Less New Provision2,910
Less: Discount on Debtors2,28043,310
Investment23,100
Add: Interest on Investment1,15524,255
Machinery20,000
Less: Depreciation1,00019,000
Prepaid Wages1,000
Closing Stock10,000
1,57,5651,57,565

3. The following balances has been extracted from the trial of M/s Runway Shine Ltd. Prepare a trading and profit and loss account and a balance sheet as on March 31, 2017.

Account TitleAmount₹Account TitleAmount₹
Purchases1,50,000Sales2,50,000
Opening stock50,000Return outwards4,500
Return inwards2,000Interest received3,500
Carriage inwards4,500Discount received400
Cash in hand77,800Creditors1,25,000
Cash at bank60,800Bill payable6,040
Wages2,400Capital1,00,000
Printing and Stationery4,500
Discount400
Bad debts1,500
Insurance2,500
Investment32,000
Debtors53,000
Bills receivable20,000
Postage and Telegraph400
Commission200
Interest1,000
Repair440
Lighting Charges500
Telephone charges100
Carriage outward400
Motor car25,000
4,89,4404,89,440

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.

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock50,000Sales2,50,000
Purchases1,50,000Less: Return Inwards2,0002,48,000
Less: Return Outwards4,5001,45,500Closing Stock32,500
Carriage Inwards4,500
Wages2,400
Add: Outstanding Wages1002,500
Gross Profit78,000
2,80,5002,80,500
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Carriage Outward400Gross Profit78,000
Printing and Stationery4,500Interest Received3,500
Discount400Discount Received400
Bad Debts1,500Interest Received on Investment1,600
Add: Further Bad Debts1,000
Add: New Provision2,6005,100
Discount on Debtors500
Insurance2,500
Postage and Telegraph400
Commission200
Interest1,000
Add: Outstanding Interest2001,200
Repair440
Lighting Charges500
Telephone Charges100
Depreciation on Motor Car1,250
Net Profit66,010
83,50083,500
Balance Sheet
LiabilitiesAmountAssetsAmount
Creditors1,25,000Cash in Hand77,800
Add: Interest Received1,60079,400
Bills Payable6,040Cash at Bank60,800
Capital1,00,000Investment32,000
Add: Net Profit66,0101,66,010Debtors53,000
Less: Further Bad Debts1,000
Outstanding Interest100Less: New Provision2,600
Outstanding Wages200Less: Discount on Debtors50048,900
Motor Car25,000
Less: Depreciation1,25023,750
Bills Receivable20,000
Closing Stock32,500
2,97,3502,97,350

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

Account TitleAmountAccount TitleAmount
Opening stock50,000Sales3,50,000
Purchases1,25,500Purchases return2,500
Sales return2,000Creditors25,000
Cash in hand21,200Rent5,000
Cash at bank12,000Interest2,000
Carriage100Bills payable1,71,700
Free hold land3,20,000Capital3,00,000
Patents1,20,000
General Expenses2,000
Sundry Debtors32,500
Building86,000
Machinery34,500
Insurance12,400
Drawings10,000
Motor vehicle10,500
Bad debts2,000
Light and Water1,200
Trade expenses2,000
Power3,900
Salary and Wages5,400
Loan a 15% (01.09.2017)3,000
8,56,2008,56,200

Adjustments

  • 1. Closing stock was valued at the end of the year ₹ 40,000.
  • 2. Salary amounting ₹ 500 and trade expense ₹ 300 are due.
  • 3. Depreciation charged on building and machinery are @ 4% and @ 5% respectively.
  • 4. Make a provision of @ 5% on sundry debtors.

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock50,000Sales3,50,000
Purchases1,25,500Less: Return2,0003,48,000
Less: Return Outwards2,5001,23,000Closing Stock40,000
Carriage100
Power3,900
Gross Profit2,11,000
3,88,0003,88,000
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
General Expenses2,000Gross Profit2,11,000
Insurance12,400Rent5,000
Bad Debts2,000Interest2,000
Add: Provision for Bad Debts1,6253,625Accrued Interest on Loan150
Light and Water1,200
Trade Expenses2,000
Add: Outstanding Trade Expenses3002,300
Salary and Wages5,400
Add: Outstanding Salary5005,900
Depreciation on Building3,440
Depreciation on Machinery1,725
Net Profit1,85,560
2,18,1502,18,150
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital3,00,000Cash in Hand21,200
Add: Net Profit1,85,560Cash at Bank12,000
Less: Drawings10,0004,75,560Freehold Land3,20,000
Creditors25,000Patents1,20,000
Bills Payable1,71,700Sundry Debtors32,500
Outstanding Trade Expenses300Less: Provision for Bad Debts1,62530,875
Outstanding Salary500
Building86,000
Less: Depreciation3,44082,560
Machinery34,500
Less: Depreciation1,72532,775
Motor Vehicle10,500
Loan3,000
Add: Interest on Loan1503,150
Closing Stock40,000
6,73,0606,73,060

Working Note

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

Interest on loan =3000 ×15×4= ₹ 150
10012

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

Account TitleAmount₹Account TitleAmount₹
Drawings20,000Capital2,00,000
Sundry debtors80,000Return outwards2,000
Bad debts1,000Bank overdraft12,000
Trade Expenses2,400Provision for bad debts4,000
Printing and Stationery2,000Sundry creditors60,000
Rent Rates and Taxes5,000Bills payable15,400
Freight4,000Sales2,76,000
Return inwards7,000
Opening stock25,000
Purchases1,80,000
Furniture and Fixture20,000
Plant and Machinery1,00,000
Bills receivable14,000
Wages10,000
Cash in hand6,000
Discount allowed2,000
Investments40,000
Motor car51,000
5,69,4005,69,400

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 entitle to a commission of @ 10% of the net profit after charging such commission.

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock25,000Sales2,76,000
Purchases1,80,000Less: Return Inwards7,0002,69,000
Less: Return Outwards2,0001,78,000Closing Stock45,000
Wages10,000
Freight4,000
  Gross Profit97,000
3,14,0003,14,000
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Trade Expenses2,400Gross Profit97,000
Printing and Stationery2,000Old Provision for Bad Debts4,000
Rent Rates and Taxes5,000Less: Bad Debts1,000
Discount Allowed2,000Less: New Provision1,6001,400
Depreciation on Motor Car5,100
Depreciation on Furniture and Fixtures1,000
*Depreciation on P & M of ₹ 70,0004,200
**Depreciation on P & M of ₹ 30,000900
Net Profit Before Manager’s Commission75,800
1,02,4001,02,400
Manager’s Commission6,891
Net Profit After Commission68,909Balance b/d75,800
75,80075,800
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital2,00,000Cash in Hand6,000
Add: Net Profit68,909Sundry Debtors80,000
Less: Drawings20,0002,48,909Less: New Provision1,60078,400
O/S Manager’s Commission6,891Furniture and Fixtures20,000
Bank Overdraft12,000Less: Depreciation1,00019,000
Creditors60,000
Bills Payable15,400Plant and Machinery1,00,000
Less: Depreciation 1*4,200
Less: Depreciation 2**90094,900
Bills Receivable14,000
Investments40,000
Motor Car51000
Less: Depreciation510045,900
Closing Stock45,000
3,43,2003,43,200

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 01/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
12100
**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

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

Account TitleAmount₹Account TitleAmount₹
Sundry debtors1,00,000Bills payable85,550
Bad debts3,000Sundry creditors25,000
Trade expenses2,500Provision for bad debts1,500
Printing and Stationary5,000Return outwards4,500
Rent, Rates and Taxes3,450Capital2,50,000
Freight2,250Discount received3,500
Sales return6,000Interest received11,260
Motor car25,000Sales1,00,000
Opening stock75,550
Furniture and Fixture15,500
Purchases75,000
Drawings13,560
Investments65,500
Cash in hand36,000
Cash in bank53,000
4,81,3104,81,310

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 was outstanding ₹ 200.

7. Discount on debtors 2%.

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock75,550Sales1,00,000
Purchases75,000Less: Sales Inwards6,00094,000
Less: Return Outwards4,50070,500Closing Stock35,000
Freight     2,250
Gross Loss19,300
1,48,3001,48,300
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Gross Loss19,300Discount3,500
Bad Debts3,000Interest Received11,260
Add: Further Bad-Debts1,000Interest on Drawings814
Add: New Provision4,950Net Loss27,482
Less: Old Provision1,5007,450
Discount on Debtors1,881
Trade Expenses2,500
Printing and Stationery5,000
Rent, Rates and Taxes3,450
Add: O/S Rent, Rates and Taxes2003,650
Depreciation on Furniture775
Depreciation on Motor Car2,500
43,05643,056
Balance Sheet
LiabilitiesAmountAssetsAmount
Bills Payable85,550Sundry Debtors100,000
Sundry Creditors25,000Less: Further Debts1,000
Capital2,50,000Less: New Provision4,950
Less: Net Loss27,482Less: Discount on Debtors1,88192,169
Less: Drawings13,560
Less: Interest on Drawings814Motor Car25,000
2,08,144Less: Depreciation2,50022,500
Outstanding Rent, Rates and Taxes200Furniture and Fixtures15,500
Less: Depreciation77514,725
Investments65,500
Cash in Hand36,000
Cash in Bank53,000
Closing Stock35,000
3,18,8943,18,894

.

7. 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 account and a balance sheet as on March 31, 2017.

Account TitleAmount₹Account TitleAmount₹
Opening stock2,26,000Sales6,80,000
Purchases4,40,000Return outwards15,000
Drawings75,000Creditors50,000
Buildings1,00,000Bills payable63,700
Motor van30,000Interest received20,000
Freight inwards3,400Capital3,50,000
Sales return10,000
Trade expense3,300
Heat and Power8,000
Salary and Wages5,000
Legal expense3,000
Postage and Telegram1,000
Bad debts6,500
Cash in hand79,000
Cash at bank98,000
Sundry debtors25,000
Investments40,000
Insurance3,500
Machinery22,000
11,78,70011,78,700

The following additional information is available:

  • 1. Stock on December 31, 2017 was ₹ 30,000.
  • 2. Depreciation is to be charged on building at 5% and 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.

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock2,26,000Sales6,80,000
Purchases4,40,000Less: Sales Return10,0006,70,000
Less: Returns Outwards15,0004,25,000Closing Stock30,000
Freight Inwards3,400
Heat and Power8,000
Gross Profit37,600
7,00,0007,00,000
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Trade Expenses3,300Gross Profit37,600
Salary and Wages5,000Interest Received20,000
Legal Expenses3,000
Postage and Telegram1,000
Bad Debts6,500
Add: New Provision1,2507,750
Depreciation on Building5,000
Depreciation on Motor Van3,000
Insurance3,500
Less: Unexpired Insurance6002,900
Net Profit26,650
57,60057,600
Manager’s Commission Payable1,269Balance b/d26,650
Net Profit after Commission25,381
26,65026,650
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital3,50,000Cash in Hand79,000
Add: Net Profit25,381Cash at Bank98,000
Less: Drawings75,0003,00,381Buildings1,00,000
Creditors50,000Less: Depreciation5,00095,000
Bills Payable63,700
Manager’s Commission Payable1,269Motor Van30,000
Less: Depreciation3,00027,000
Sundry Debtors25,000
Less: New Provision1,25023,750
Investments40,000
Machinery22,000
Unexpired Insurance600
Closing Stock30,000
4,15,3504,15,350

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

Account TitleAmount₹Account TitleAmount₹
Drawings20,000Sales2,20,000
Land and Buildings12,000Capital1,01,110
Plant and Machinery40,000Discount1,260
Carriage inwards100Apprentice premium5,230
Wages500Bills payable1,28,870
Salary2,000Purchases return10,000
Sales return200
Bank charges200
Coal, Gas and Water1,200
Purchases1,50,000
Trade Expenses3,800
Stock (Opening)76,800
Cash at bank50,000
Rates and Taxes870
Bills receivable24,500
Sundry debtors54,300
Cash in hand30,000
4,66,4704,66,470

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 a commission of 5% on net profit after charging such commission.

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock76,800Sales2,20,000
Purchases1,50,000Less: Sales Return2002,19,800
Less: Purchases Return10,0001,40,000Closing Stock20,000
Carriage Inwards100
Wages500
Less: Prepaid40460
Coal, Gas and Water1,200
Gross Profit21,240
2,39,8002,39,800
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Salary2,000Gross Profit21,240
Add: Outstanding Salary1002,100Discount1,260
Bank Charges200Apprentice Premium5,230
Trade Expenses3,800
Rates and Taxes870
Depreciation on Plant and Machinery2,000
Depreciation on Land and Building1,200
Provision for Doubtful Debts2,715
Discount on Debtors1,548
Net Profit13,297
27,73027,730
Manager’s Commission633Balance b/d13,297
Net Profit after Commission12,664
13,297 13,297
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital1,01,110Cash at Bank50,000
Add: Net Profit12,664Land and Building12,000
Less: Drawings20,00093,774Less: Depreciation1,20010,800
Plant and Machinery40,000
Bills Payable1,28,870Less: Depreciation2,00038,000
Outstanding Salary100Bills Receivable24,500
Outstanding Manager’s Commission633Sundry Debtors54,300
Less: New Provision2,715
Less: Discount on Debtors1,54850,037
Cash in Hand30,000
Closing Stock20,000
Prepaid Wages40
2,23,3772,23,377

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

Account TitleDebitAmountAccount TitleCreditAmount
Sundry debtors9,600Sundry creditors2,500
Opening stock22,800Sales72,670
Purchases34,800Purchases returns2,430
Carriage inwards450Bills payable15,600
Wages1,770Capital42,000
Office rent820
Insurance1,440
Factory rent390
Cleaning charges940
Salary1,590
Building24,000
Plant and Machinery3,600
Cash in hand2,160
Gas and Water240
Octroi60
Furniture20,540
Patents10,000
1,35,2001,35,200

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 ₹ 100.
  • 4. Depreciation charged on Plant and Machinery @ 5% and Building @ 10%.
  • 5. Outstanding insurance ₹ 100.

Answer :

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock22,800Sales72,670
Purchases34,800Closing Stock10,000
Less: Purchases Return2,43032,370
Carriage Inwards450
Wages1,770
Add: Outstanding Wages5002,270
Factory Rent390
Less: Prepaid Rent100290
Gas and Water240
Octroi60
Cleaning Charges940
Gross Profit23,250
82,67082,670
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Office Rent820Gross Profit 23,250
Insurance1,440
Add: Outstanding Insurance1001,540
Depreciation on Plant and Machinery180
Salary1,590
Add: Outstanding Salary3501,940
Provision for Doubtful Debts480
Depreciation on Building2,400
Net Profit15,890
23,25023,250
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital42,000Sundry Debtors9,600
Add: Net Profit15,89057,890Less: New Provision4809,120
Sundry Creditors2,500Building24,000
Bills Payable15,600Less: Depreciation2,40021,600
Outstanding Salary350Plant and Machinery3,600
Outstanding Wages500Less: Depreciation1803,420
Outstanding Insurance100Cash in Hand2,160
Furniture20,540
Patents10,000
Closing Stock10,000
Prepaid Factory Rent100
76,94076,940

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

Account TitleAmount₹Account TitleAmount₹
Purchases80,000Capital2,10,000
Bank balance11,000Bills payable6,500
Wages34,000Sales2,00,000
Debtors70,300Creditors50,000
Cash in hand1,200Return outwards4,000
Legal expenses4,000
Building60,000
Machinery120,000
Bills receivable7,000
Office expenses3,000
Opening stock45,000
Gas and fuel2,700
Freight and Carriage3,500
Factory lighting5,000
Office furniture5,000
Patent right18,800
4,70,5004,70,500

Adjustments:

  • (a) Machinery is depreciated at 10% and buildings depreciated at 6%.
  • (b) Interest on capital @ 4%.
  • (c) Outstanding wages ₹ 50.
  • (d) Closing stock ₹ 50,000.

Answer :

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock45,000Sales2,00,000
Purchases80,000Closing Stock50,000
Less: Return Outwards4,00076,000
Wages34,000
Add: Wages Outstanding5034,050
Gas and Fuel2,700
Freight and Carriage3,500
Factory Lighting5,000
Gross Profit83,750
2,50,0002,50,000
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
To Legal Expenses4,000By Gross Profit83,750
To Office Expenses3,000
To Depreciation on Machine12,000
To Depreciation on Building3,600
To  Interest on Capital8,400
To Net Profit*52,750
83,75083,750
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital2,10,000Bank Balance11,000
Add: Interest on Capital8,400Debtors70,300
Add: Net profit52,7502,71,150Cash in Hand1,200
Building60,000
Bills Payable6,500Less: Depreciation3,60056,400
Creditors50,000Machinery1,20,000
Outstanding Wages50Less: Depreciation12,0001,08,000
Bills Receivable7,000
Patent Right18,800
Office Furniture5,000
Closing Stock50,000
3,27,7003,27,700

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

Account TitleAmountAmount
Opening stock10,000
Purchases and Sales40,00080,000
Returns200600
Wages6,000
Dock and cleaning charges4,000
Lighting500
Misc. Income6,000
Rent2,000
Capital40,000
Drawings2,000
Debtors and Creditors6,0007,000
Cash3,000
Investment6,000
Patent4,000
Land and Machinery43,000
Donations and Charity600
Sales tax collected1,000
Furniture11,300
1,36,6001,36,600

Closing stock was ₹ 2,000.

  • (a) Interest on drawings @ 7% and interest on capital @ 5%.
  • (b) Land and Machinery is depreciated at 5%.
  • (c) Interest on investment @ 6%.
  • (d) Unexpired rent ₹ 100.
  • (e) Charge 5% depreciation on furniture.

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock10,000Sales80,000
Purchases40,000Less: Sales Return20079,800
Less: Purchases Return60039,400Closing Stock2,000
Wages6,000
Dock and Cleaning Charges4,000
Gross Profit22,400
81,80081,800
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Lighting500Gross Profit22,400
Donations and Charity600Miscellaneous Income6,000
Interest on Capital2,000Rent2,000
Depreciation on Furniture565Less: Unearned Rent1001,900
Depreciation on Land and Machinery2,150Interest on Drawings140
Net Profit24,985Interest on Investment360
30,80030,800
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital40,000Debtors6,000
Add: Interest on Capital2,000Cash3,000
Add: Net Profit24,985Investment6,000
Less: Drawings2,000Add: Interest on Investment3606,360
Less: Interest on Drawings14064,845Patent4,000
Creditors7,000Land and Machinery43,000
Sales Tax Collected1,000Less: Depreciation2,15040,850
Unearned Rent100
Furniture11,300
Less: Depreciation56510,735
Closing Stock2,000
72,94572,945

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

Account TitleDebitAmountAccount TitleCreditAmount
Opening stock16,000Sales1,12,000
Purchases67,600Return outwards3,200
Return Inwards4,600Discount1,400
Carriage inwards1,400Bank overdraft10,000
General expenses2,400Commission1,800
Insurance4,000Creditors16,000
Scooter expenses200Capital50,000
Salary8,800
Cash in hand4,000
Scooter8,000
Furniture5,200
Buildings65,000
Debtors6,000
Wages1,200
1,94,4001,94,400

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%.

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock16,000Sales1,12,000
Purchases67,600Less: Return Inwards4,6001,07,400
Less: Return Outwards3,20064,400Closing Stock15,000
Carriage Inwards1,400
Wages1,200
Add: Outstanding Wages2001,400
Gross Profit39,200
1,22,4001,22,400
Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
General Expenses2,400Gross Profit39,200
Insurance4,000Discount1,400
Less: Unexpired Insurance1,0003,000Commission1,800
Scooter Expenses200
Salary8,800
Add: Outstanding Salary1,80010,600
Interest on Capital2,500
Depreciation on Scooter400
Depreciation on Furniture520
Net Profit22,780
 42,400 42,400
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital50,000Cash in Hand4,000
Add: Interest on Capital2,500Scooter8,000
Add: Net Profit22,78075,280Less: Depreciation4007,600
Bank Overdraft10,000Furniture5,200
Creditors16,000Less: Depreciation5204,680
Outstanding Salary1,800Buildings65,000
Outstanding Wages200Debtors6,000
Unexpired Insurance1,000
Closing Stock15,000
1,03,2801,03,280

13. 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 TitleDebitAmountCreditAmount
Drawings and Capital19,53067,500
Purchase and Sales45,0001,12,500
Salary and Commission25,4701,575
Carriage2,700
Plant and Machinery27,000
Furniture6,750
Opening stock42,300
Insurance premium2,700
Interest7,425
Bank overdraft24,660
Rent and Taxes2,160
Wages11,215
Returns2,3851,440
Carriage outwards1,485
Debtors and Creditors36,00058,500
General expenses6,975
Octroi530
Investment41,400
2,73,6002,73,600

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.

The solution is given below:

Trading Account
Dr.Cr.
ParticularsAmountParticularsAmount
Opening Stock42,300Sales1,12,500
Purchases45,000Less: Sales Return2,3851,10,115
Less: Purchases Return1,44043,560Closing Stock20,000
Carriage2,700
Wages11,215
Add: Outstanding Wages5011,265
Octroi530
Gross Profit29,760
1,30,1151,30,115
Balance Sheet
LiabilitiesAmountAssetsAmount
Capital67,500Plant and Machinery27,000
Add: Interest on Capital6,750Less: Depreciation1,35025,650
Less: Net Loss8,973Furniture6,750
Less: Drawings19,530Debtors36,000
Less: Interest on Drawings97744,770Less: New Provision1,80034,200
Bank Overdraft24,660Investment41,400
Creditors58,500Closing Stock20,000
Outstanding Wages50
Salary Outstanding20
1,28,0001,28,000

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

Sundry debtors30,500
Bad debts500
Provision for doubtful debts2,000

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

The solution is given below:

Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Bad Debts500
Add: Further Bad Debts300
Add: New Provision3,020
Less: Old Provision2,0001,820
Balance Sheet
LiabilitiesAmountAssetsAmount
Debtors30,500
Less: Further Bad Debts300
Less: New Provision3,02027,180
Debtors Account
Dr.Cr.
DateParticularsAmountDateParticularsAmount
20172017
March 31Balance b/d30,500March 31Further Bad Debts300
March 31Provision for Doubtful Debts3,020
March 31Balance c/d27,180
30,50030,500
Bad Debts Account
Dr.Cr.
DateParticularsAmountDateParticularsAmount
20172017
March 31Balance b/d500March 31Provision for Doubtful Debts800
(As per the Trial Balance)
March 31Sundry Debtors300
800800
Provision for Doubtful Debts Account
Dr.Cr.
DateParticularsAmountDateParticularsAmount
20172016
March 31Bad Debt800April 01Balance b/d (Old Provision)2,000
April 01Profit and Loss1,820
(Balancing figure)
March 31Balance b/d3,020
(New Provision)
3,8203,820

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

Debtors80,000
Bad debts2,000
Provision for doubtful debts5,000

 Adjustments: 

Bad Debts ₹ 500 Provision on Debtors @ 3%.

The solution is given below:

Profit and Loss Account
Dr.Cr.
ParticularsAmountParticularsAmount
Bad Debts2,000Old Provision for Doubtful Debts5,000
Add: Further Bad Debts500
Add: New Provision for Bad Debts2,3854,885
Balancing figure115
5,0005,000
Balance Sheet
LiabilitiesAmountAssetsAmount
Debtors80,000
Less: Further Bad Debts500
Less: New Provision on Debtors2,38577,115
77,115
Bad Debts Account
Dr.Cr.
DateParticularsAmountDateParticularsAmount
20172017
Dec.31Balance b/d2,000Dec.31Provision for Doubtful Debts2,500
(as per the Trial Balance)
Dec.31Sundry Debtors500
2,5002,500
Cr.
ParticularsAmountDateParticularsAmount
2017
Bad Debts2,500Jan.01Balance b/d (Old Provision)5,000
Balance b/d2,385
(New Provision)
Profit and Loss115*
(Balancing Figure)
5,0005,000