NCERT Solutions For Class 11 Financial Accounting Part II Chapter 10 Financial Statements – II

Class 11 Financial Accounting Part II Chapter 10 Financial Statements – II

NCERT Solutions For Class 11 Financial Accounting Part II Chapter 10 Financial Statements – II in this step-by-step answer guide. In some of State Boards and CBSE schools, students are taught thru NCERT books. As the chapter comes to an end, students are requested few questions in an exercising to evaluate their expertise of the chapter. Students regularly want guidance managing those NCERT Solutions.

It’s most effective natural to get stuck withinside the exercises while solving them so that you can assist students score higher marks, we’ve provided step by step NCERT answers for all exercises of Class eleven Accountancy so you can are looking for assist from them. Students should solve those exercises carefully as questions withinside the final exams are requested from those, so these exercises immediately have an impact on students’ final score. Find all NCERT Solutions for Class eleven Accountancy below and prepare in your tests easily.

NCERT Solutions For Class 11 Financial Accounting Part II Chapter 10 Financial Statements – II

Class 11 Financial Accounting Part II Chapter 10 Financial Statements – II

Page No 410:

Question 1:

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

ANSWER:

It is extremely important to record the adjusting entries in the preparation of final accounts.

1. This is done in order to assess the true net profit or net loss of the business organisation.

2. It helps us record those adjustments which were left or omitted and were not recorded in the accounts.

3. It assists us to separate all the financial transactions into a year-wise category. The financial statements include only those entries which belong to the current year. It rules out the previous and forthcoming years’ entries which are the basis for accrual basis of accounting.

4. Further, it provides us the room for making various provisions which are made at the end of the year, after assessing the entire year’s performance.

Page No 410:

Question 2:

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

ANSWER:

Closing stock implies the value of unsold goods at the end of an accounting period. The valuation of closing stock is done on the basis of its cost price or the realisable value, whichever of the two is lesser.

 

Example: If a good with the cost price of Rs 20,000 is purchased at the end of an accounting period and its realisable value is Rs 30,000, then the closing stock will be valued at Rs 20,000 not at Rs 30,000.

 

Treatment of closing stock

 

If closing stock is given in the adjustment, then there will be two postings.

 

Trading Account

 

Balance Sheet

Dr.

  

Cr.

       

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

Closing Stock

 

  

 

  

 

 

  

  

  

 

              

 

If closing stock is given in the trial balance, then it needs to be shown only in the assets side of the Balance Sheet.

 

Page No 410:

Question 3:

State the meaning of:

(a) Outstanding expenses

(b) Prepaid expenses

(c) Income received in advance

(d) Accrued income

ANSWER:

(a) Outstanding Expenses: These refer to those expenses which belong to and are incurred in the current accounting period but are left unpaid. In other words, we can say that the services in exchange of these payments have been realised but the payments are not made. For example, if Rs 1000 wages are outstanding, then this means that labour worth Rs 1,000 has been used but has not been paid for till the end of the year.

(b) Prepaid Expenses: These refer to those expenses for which the benefits have not been realised but the payments have already been made in advance. These are basically the advance payments for the next year, which are made in the current accounting period.

Example: Prepaid insurance premium of Rs 1,000 means that the payment of Rs 1,000 is made in advance for the next accounting period.

(c) Income Received in Advance: This refers to the income received whose actual realisation of benefits will occur in the next accounting period. These are also called unearned incomes.

Example: Commission of Rs 1,200 for the year 2011-12 is received in 2010-11. This commission does not belong to the current year as it is related with the work to be done in the next accounting year i.e., 2011-12.

(d) Accrued Income: This refers to those incomes which have been earned during an accounting period but have not been actually realised in the current period. These are also called earned incomes.

Page No 410:

Question 4:

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

ANSWER:

Income statement for the period ended ….

 

Particulars

Amount

Rs

Amount

Rs

Sales (Gross)

 

 

Less: Returns

 

 

 

Net Sales

 

 

Cost of goods sold

 

 

 

Opening Stock

 

 

 

Purchases

 

 

 

Less: Returns

 

 

 

Carriage Inwards

 

 

 

Wages

 

 

 

Cost of Goods Available for Sale

 

 

Less: Closing Stock

 

 

Gross Profit

 

 

Operating Expenses

 

 

(a) Selling Expenses

 

 

 

Advertising

 

 

 

Discount

 

 

 

Allowances

 

 

 

Bad-Debts and Provisions

 

 

 

Carriage Outwards

 

 

 

Total Selling Expenses

 

 

(b) General and Administration Expenses

 

 

 

Salaries

 

 

 

Rent and Rates

 

 

 

Insurance

 

 

 

Depreciation

 

 

 

Postage

 

 

 

Repairs

 

 

 

General Expenses

 

 

 

Total Operating Expenses

 

 

 

Net Income from Operations (Operating profit)

 

 

Other Income (Non-operating gains)

 

 

 

Interest Earned

 

 

 

Commission Earned

 

 

 

Profit on Sale of Fixed Assets

 

 

Less: Deductions (Non-operating expenses)

 

 

 

Interest Paid

 

 

 

Loss by Fire

 

 

 

Net Non-operating Gains

 

 

 

Net Income (Net profit)

 

 

 

 

 

 

 

Income statement for the period ended ….

 

Particulars

Amount

Rs

Amount

Rs

Current Assets

 

 

 

Cash in Hand

 

 

 

Cash at Bank

 

 

 

Bills Receivable

 

 

 

Accrued Income

 

 

 

Debtors

 

 

 

Stock

 

 

Prepaid Expenses

 

 

Total Current Assets

 

 

 Less: Current Liabilities

 

 

 

Bank Overdraft

 

 

 

Outstanding Expenses

 

 

 

Bills Payable

 

 

 

Trade Creditors

 

 

 

Income Received in Advance

 

 

 

Total Current Liabilities

 

 

 

Net Working Capital

 

 

 

(Current assets and Current liabilities)

 

 

 Fixed Assets

 

 

 

Furniture and Fixtures

 

 

 

Patents

 

 

 

Plants and Machinery

 

 

 

Building

 

 

 

Land

 

 

 

Goodwill

 

 

 

Total Fixed Assets

 

 

 

Total Assets (After paying current liabilities)

 

 

 Capital Employed

 

 

 

Long-term Liabilities

 

 

 

Loan

 

 

 

Mortgage

 

 

 

Total Long-term Liabilities

 

 

 

Net Assets (being the difference between total assets and long-term liabilities)

 

 

 Capital (Proprietor)

 

 

 

 Capital in the Beginning

 

 

 Add: Capital Introduced During the Current Year

 

 

 

 Interest on Capital, Salary, etc.

 

 

 

 Profit for the Current Year

 

 

 Less: Drawings During the Current Year

 

 

 

 Interest on Drawings

 

 

 

 Loss for the Current Year

 

 

 

 Total Capital of the Proprietor at the End of the Year

 

 

 

 

Page No 410:

Question 5:

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

ANSWER:

The provision for doubtful-debts is created with the motive of minimising the effect of actual loss caused by the bad-debts. The actual figure of the current year’s bad-debts will be known in the next year with the realisation of debtors. At that point of time, it will be known as to how many of the debtors have become bad. Thus, instead of waiting for the realisation of debtors, we create a provision for doubtful-debts in order to cover the expected future loss associated with the debtors becoming bad.

Page No 410:

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)

Dr.

 

      Cr.

 

 

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

Depreciation

  

 

 

 

 

 

 Assets

 

 

 

 

 

 

 

 

 

Less: Depreciation

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (b)

Dr.

 

      Cr.

 

 

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

Discount on Debtors

  

 

 

 

 

 

 Debtors

 

 

 

 

 

 

 

 

 

Less: New Provision

 

 

 

 

 

 

 

 

 

Less: Further Bad Debts

 

 

 

 

 

 

 

 

 

Less: Discount on Debtors

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (c)

Dr.

 

      Cr.

 

 

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

Interest on Capital

  

 

 

 

 Capital

 

 

 

 

 

 

 

 

 

Add: Interest on Capital

 

 

 

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (d) Manager’s commission

There are two cases in manager’s commission.

Case 1: Manager’s commission based on profits before charging the manager’s commission.

Dr.

 

      Cr.

 

 

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

Manager’s Commission

  

 

 

 

 Outstanding Manager’s

 

 

 

 

 

 

 

 

 Commission

 

 

 

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Case 2: Manager’s commission based on profits after charging the manager’s commission.

­

Dr.

 

      Cr.

 

 

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

Net Profit before

  

 

 

 

 Outstanding Manager’s

 

 

 

 Manager’s Commission

 

 

 

 

 Commission

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 O/S Manager’s Commission

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Profit after

 

 

 

 

 

 

 

 

 

Manager’s Commission

 

 

 

 

 

 

 

 

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page No 410:

Question 7:

What is meant by provision for discount on debtors?

ANSWER:

The discount is allowed to those debtors who are ready to pay a huge amount in one shot. It is given in order to encourage them to repay the debt. The provision for discount on debtors is created on good debtors. The amount of good debtors is calculated by deducting the amount of Bad Debts, further Bad Debts and new provision for Doubtful Debts. The required percentage of the good debtors is calculated and the provision for discount on debtors is deducted from the Debtors’ amount in the Assets side of a Balance Sheet. As it is a loss for the business, it is shown in the Debit side of the Profit and Loss Account.

Page No 410:

Question 8:

Give the journal entries for the following adjustments:

(a) Outstanding salary at Rs 3,500.

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

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

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

ANSWER:

S. No.

Particulars

L.F.

Debit

Rs

Credit

Rs

a)

Salaries A/c Dr.

 

3,500

 

 

 

To Outstanding Salaries A/c

 

 

3,500

 

(Salaries of Rs 3,500 is remaining outstanding)

 

 

 

 

 

 

 

 

 

b)

Rent A/c Dr.

 

500

 

 

 

To Outstanding Rent A/c

 

 

500

 

(Rent unpaid for one month at Rs 500 =

6000

)

 

 

 

12

 

 

 

 

 

 

c)

Prepaid Insurance A/c Dr.

 

4,000

 

 

 

To Insurance A/c

 

 

4,000

 

(Insurance paid in advance for 3 months i.e. Rs 400)

   

 

 

 

 

 

 

d)

Furniture A/c Dr.

 

7,000

 

 

 

To Purchases A/c

 

 

7,000

 

(Furniture was wrongly debited to Purchases Account,

now rectified)

 

 

 

      
        

 

 



Page No 411:

Question 1:

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

ANSWER:

Adjusting entries are the entries of those adjustments which are given outside the trial balance and which help us reflect the true financial position i.e., profit or loss of an organisation. According to the double-entry system, all the adjustments given outside the Trial Balance are posted at two places. The adjusting entries are necessary they enable us to post and take into account those items which are omitted or entered with the wrong amount and/or recorded under wrong heads.

The treatment of adjusting entries is necessary.

(i) It helps us assess the true financial position of an organisation based on accrual basis of accounting.

(ii) It helps us know the actual figure of profit or loss.

(iii) It records the omitted entries and rectifies the errors made.

(iv) It helps in providing depreciation and making different provisions, such as Bad Debts and depreciation.

Page No 411:

Question 2:

What is meant by 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:

The provision for doubtful-debts is provided after deducting the amount of bad-debts from the debtors. The provision for doubtful-debts is provided because of the rationale that the actual amount of bad-debts will only be known in the next year, when the amount of debtors will get realised. Thus, it will only then be known as to how many of the debtors have become bad. Thus, in order to bridge-up the expected future loss, we create a provision for doubtful-debts.

 

For the provision for doubtful-debts, we prepare debtors account and provision for doubtful-debts account. For recording bad-debts, the following journal entry is passed.

 

Profit and Loss A/c

Dr.

 

To Provision for Bad and Doubtful Debts A/c

   

 

Example: An extract from a Trial Balance as on December 31, 2010.

 

Debtors

10,500

Provision for Doubtful Debts as on January 01, 2010

1,000

Bad Debts Account

1,500

 

 

 

Adjustment:

(i) Further bad-debts amount to Rs 500.

(ii) Create a provision for doubtful-debts at 5% on debtors.

 

Explanation

The provision for Doubtful Debt as on January 01, 2010 was Rs 1,000 and the Bad Debts during the year were Rs 1,500. In addition to this, there was a further Bad Debt of Rs 500 which was known at the end of the year i.e., December 31, 2010. Now we need to create a provision for Doubtful Debts at 5% on debtors.

 

Profit and Loss A/c

Dr.

  

Cr.

Particulars

 

Amount

Particulars

Amount

Bad Debts

1,500

 

 

 

 

 

Add: Further Bad Debts

500

 

  

 

 

Add: New Provision for Doubtful Debts

500

 

  

 

 

Less: Old Provision (given in Trial Balance)

1,000

1,500 

  

 

 

  

 

 

 

 

 

Balance Sheet

Liabilities

Amount

Assets 

Amount

 

  

 Debtors

10,500

 

 

  

 

Less: Further Bad Debts

500

 

 

  

  

10,000

 

 

  

 

Less: New Provision for Doubtful Debts

500

9,500

 

  

   

 

 

The amount of provision for Doubtful Debts is calculated by debiting the amount of further Bad Debts from debtors and calculating the given percentage of provision on remaining debtors. This provision is added to the Bad Debts amount in the profit and loss account and deducted from debtors in the assets side of a Balance Sheet.

 

Page No 411:

Question 3:

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

(a) When given inside the Trial Balance?

(b) When given outside the Trial Balance?

ANSWER:

(i) Prepaid expenses

(a) When given inside the Trial Balance: It will be posted only in the Assets side of the Balance Sheet.

 

Balance Sheet

Assets

 

Amount

Prepaid Expenses 

 

­­

 

 

 

 

 

 

 

(b) When given outside the Trial Balance:

 

Dr.

 

      Cr.

 

 

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

 Concerned Expenses

  

 

 

 

 

 

 Prepaid Expenses

 

 

Less: Prepaid Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(ii) Depreciation

(a) If depreciation is given inside the Trial Balance, then it can be shown in the Debit side of the Profit and Loss A/c. It means that this depreciation amount has already been deducted from the concerned assets in the Balance Sheet.

 

Profit and Loss Account

Dr.

 

      Cr.

Particulars

Amount

Particulars

Amount

 Depreciation

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

 

 

 

 

 

 

 

(b) If depreciation is given outside the Trial Balance, i.e. in the adjustments, then it is shown in the debit side of the Profit and Loss Account and deducted from the concerned assets in the Assets side of Balance Sheet.

Dr.

 

      Cr.

 

 

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

 Depreciation on Concerned Assets

  

 

 

 

 

 

 Concerned Assets

 

 

 

 

 

 

 

 

 

Less: Depreciation

 

 

 

 

 

 

 

 

 

 

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(iii) Closing stock

(a) The closing stock is valued at cost price or realisable value, whichever of the two is lesser. If given inside the Trial Balance, then it will be posted only in the Assets side of the Balance Sheet.

Balance Sheet

Liabilities

Amount

Assets

Amount

 

 

 

 

 

 

Closing Stock

 

 

 

 

 

 

(b) If the closing stock is given outside the Trial Balance then, it needs to be posted at two places.

 

Dr.

 

      Cr.

 

 

Particulars

Amount

Particulars

Amount

 

Liabilities

Amount

Assets

Amount

 

  

 Closing Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing Stock

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page No 411:

Question 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 Title

Amount

Rs

Account Title

Amount

Rs

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 Rs 1,000.

2. Rent receivable Rs 2,000.

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

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

5. Closing stock Rs 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

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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 Rs 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page No 412:

Question 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 Title

Amount

Rs

Account Title

Amount

Rs

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 Rs 1,500, discount on debtors @ 5% and make a provision on debtors @ 6%.

3. Wages prepaid Rs 1,000.

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

5. Closing stock 10,000.

ANSWER:

 Trading Account for the year ending March 31, 2017

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 



Page No 413:

Question 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 Title

Amount

Rs

Account Title

Amount

Rs

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 Rs 1,000. Discount on debtors Rs 500 and make a provision on debtors @ 5%.

2. Interest received on investment @ 5%.

3. Wages and interest outstanding Rs 100 and Rs 200 respectively.

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

5. Closing Stock Rs 32,500.

ANSWER:

Trading Account

Dr.

 

 

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

 

Particulars

Amount

Rs

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

Rs

 

 

Particulars

Amount

Rs

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

Rs

 

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Page No 414:

Question 4:

From the following Trial Balance you are required to prepare trading and profit and loss account for the year ending March 31, 2017 and Balance Sheet on that date.
 

Particulars

Amount

 (₹) 

Particulars

Amount

(₹)

Opening stock

25,000

Sales

7,00,000

Furniture

16,000

Creditors

72,500

Purchases

5,55,300

Bank Overdraft

50,000

Carriage Inwards

4,700

Provision for bad and doubtful debts

2,100

Bad debts

1,800

Discount

500

Wages

52,000

Capital

2,00,000

Debtors

80,000

Purchases Return

20,000

Sales Return

15,000

 

 

Rent

24,000

 

 

Miscellaneous Expenses

3,400

 

 

Salaries

68,000

 

 

Cash

8,900

 

 

Drawings

14,000

 

 

Buildings

1,60,000

 

 

Advertising

10,000

 

 

Interest on Bank Overdraft            

7,000

 

 

 

 

 

 

 

10,45,100

 

10,45,100

 

 

 

 


Adjustments

1. Closing stock valued at ₹ 36,000.
2. Private purchases amounting to ₹ 5,000 debited to purchases account.
3. Provision for doubtful debts @ 5% on debtors.
4. Sign board costing ₹ 4,000 includes in advertising.
5. Depreciate furniture by 10%.

ANSWER:

Trading A/c

Dr.

For the year ended 31st March, 2017

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Opening Stock

25,000

Sales

7,00,000

 

Purchases

5,55,300

 

  Less: Sales Return

(15,000)

6,85,000

  Less: Private Purchases

(5,000)

 

Closing Stock

36,000

  Less: Purchases Return

(20,000)

5,30,300

 

 

Carriage Inwards

4,700

 

 

Wages

52,000

 

 

Gross Profit c/d

1,09,000

 

 

 

 

 

 

 

7,21,000

 

7,21,000

Profit and Loss A/c

Dr.

For the year ended 31st March, 2017

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

Bad debts

1,800

 

Gross Profit b/d

1,09,000

Provision for Doubtful debts

4,000

 

Discount Received

500

  Less: Old Provision

(2,100)

3,700

Net Loss to be transferred            

4,600

Rent

24,000

 

 

Miscellaneous Expenses

3,400

 

 

Salaries

68,000

 

 

Advertising

10,000

 

 

 

Less: Sign Board

(4,000)

6,000

 

 

Interest on Bank Overdraft

7,000

 

 

Depreciation on Furniture

2,000

 

 

 

 

 

 

 

1,14,100

 

1,14,100

 

Balance Sheet

Dr.

As at 31st March, 2017

Cr.

Liabilities

Amount

(₹)

Assets

Amount

(₹)

Capital

2,00,000

 

Furniture

16,000

 

 

 

 

  Add: Sign Board

4,000

 

  Less: Drawings

(19,000)

 

  Less: Depreciation

(2,000)

18,000

  Less: Net Loss

(4,600)

1,76,800

Building

1,60,000

Creditors

72,500

Debtors

80,000

 

Bank Overdraft

50,000

Less: Provision (New)

(4,000)

76,000

 

 

Closing Stock

36,000

 

 

Cash

8,900

 

 

 

 

 

2,98,900

 

2,98,900



Page No 415:

Question 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 Title

Amount

Rs

Account Title

Amount

Rs

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 Rs 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 Rs 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.

 

 

ANSWER:

Trading Account

Dr.

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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 Rs 70,000

 

4,200

 

 

 

 

**Depreciation on P & M of Rs 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

Rs

Assets

Amount

Rs

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

 

= Rs 6,891

 

 

 

 

 

 

2. Out of the machinery of Rs 1,00,000, Rs 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

= Rs 900

12

100

 

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

 

Depreciation on machinery (70,000) =

70,000 ×

6

= Rs 900

12

Note: As per our solution Gross Profit is Rs 97,000, however, as per book it is Rs 1,01,000.

 



Page No 416:

Question 6:

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

 

Account Title

Amount

Rs

Account Title

Amount

Rs

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 Stationary

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 Rs 35,000.

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

3. Further bad debts Rs 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 Rs 200.

7. Discount on debtors 2%.

 

 

ANSWER:

Trading Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

Page No 417:

Question 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 Title

Amount

Rs

Account Title

Amount

Rs

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 Rs 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 Rs 600.

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

 

ANSWER:

Trading Account

Dr.

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

In NCERT, Q-7 adjustment (5) is a misprint. The answer represents the Net Profit after the Manager’s Commission. However, in the adjustment, the Net Profit has been mentioned before the Manager’s Commission.

 

 



Page No 418:

Question 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 Title

Amount

Rs

Account Title

Amount

Rs

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 Rs, 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 Rs 100 and Wages prepaid was Rs 40.

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

ANSWER:

Trading Account

Dr.

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Page No 419:

Question 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 Title

Debit

Amount

Rs

Account Title

Credit

Amount

Rs

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 Rs 10,000.

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

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

3. Factory rent prepaid Rs 100.

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

5. Outstanding insurance Rs 100.

 

 

ANSWER:

Trading Account

Dr.

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 

Page No 420:

Question 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 Title

Amount

Rs

Account Title

Amount

Rs

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 Rs 50.

(d) Closing stock Rs 50,000.

 

 

ANSWER:

Trading Account

Dr.

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

 

Page No 421:

Question 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 Title

Amount

Rs

Amount

Rs

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

 

Closing stock was Rs 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 Rs 100.

(e) Charge 5% depreciation on furniture.

 

 

ANSWER:

Trading Account

Dr.

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: In the NCERT textbook, the answer provided for question number 11 is different from the solution. However, the answer should be

Gross profit = Rs 22,400 instead of Rs 21,900

Net profit = Rs 24,985 instead of Rs 25,185

Total of Balance Sheet = Rs 72,945 instead of Rs 71,185



Page No 422:

Question 12:

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%.
(g) Closing stock was ₹ 15,000.

ANSWER:

Trading Account

Dr.

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 



Page No 423:

Question 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 Title

Debit

Amount

Rs

Credit

Amount

Rs

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

 

Closing stock was valued Rs 20,000.

(a) Interest on capital @ 10%.

(b) Interest on drawings @ 5%.

(c) Wages outstanding Rs 50.

(d) Outstanding salary Rs 20.

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

(f) Make a 5% provision on debtors.

ANSWER:

Trading Account

Dr.

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Profit and Loss Account

Dr.

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Salary

25,470

 

Gross Profit

 

29,760

 

Add: Outstanding Salary

20

25,490

Commission

 

1,575

Insurance Premium

 

2,700

Interest

 

7,425

Rent and Taxes

 

2,160

Interest on Drawings

 

977

Carriage Outwards

 

1,485

Net Loss

 

8,973

General Expenses

 

6,975

 

 

 

 

Interest on Capital

 

6,750

 

 

 

 

Depreciation on P & M

 

1,350

 

 

 

 

Provision on Debtors

 

1,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,710

 

 

 

48,710

 

 

 

 

 

 

 

 

  

Balance Sheet

Liabilities

Amount

Rs

Assets

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

Page No 423:

Question 14:

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

 

 

Rs

Sundry debtors

30,500

Bad debts

500

Provision for doubtful debts

2,000

 

The partners of the firm agreed to records the following adjustments in the books of the Firm: Further bad debts Rs.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.

ANSWER:

Profit and Loss Account

Dr.

 

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Bad Debts

500

 

 

 

 

 

 

Add: Further Bad Debts

300

 

 

 

 

 

 

Add: New Provision

3,020

 

 

 

 

 

 

Less: Old Provision

2,000

1,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

Liabilities

Amount

Rs

Assets

Amount

Rs

 

 

 

 

Debtors 

30,500

 

 

 

 

 

 

Less: Further Bad Debts

300

 

 

 

 

 

 

Less: New Provision

3,020

27,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debtors Account

Dr.

Cr.

Date

Particulars

Amount

Rs

Date

Particulars

Amount

Rs

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

Rs

Date

Particulars

Amount

Rs

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

Rs

Date

Particulars

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Page No 424:

Question 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

 

Rs

Debtors

80,000

Bad debts

2,000

Provision for doubtful debts

5,000

 

Adjustments

Bad Debts Rs 500 Provision on Debtors @ 3%.

ANSWER:

Profit and Loss Account

Dr.

 

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

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

Rs

Assets

Amount

Rs

 

 

 

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

Rs

Date

Particulars

Amount

Rs

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

Rs

Date

Particulars

Amount

Rs

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Note: In this case, the old provision exceeds the sum total of Bad debts and the New Provision. Thus, the balancing figure is Rs 115 and is calculated as Rs 2,500 + Rs 2,385 – Rs 5,000 = Rs (115)

 

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