Chapter 2 Financial Statements II Solutions

Question - 11 : -
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 - 11 : -

(i) Prepaid expenses

(a) When given inside theTrial Balance: It will be addedin the asset side of the Balance Sheet only.

Balance Sheet
Assets		Amount
Prepaid Expenses

(b) When given outside theTrial Balance: It will beposted in the P & L account as well as Balance Sheet

Dr.

Cr.

Particulars

Amount

Particulars

Amount

Liabilities

Amount

Assets

Amount

Concerned Expenses

Prepaid Expenses

Less: Prepaid Expenses

Balance Sheet

Assets

Amount

Prepaid Expenses

(ii) Depreciation

In trial balancedepreciation is shown in P & L account as it is an expense. When present intrial balance it means deduction has taken from concerned asset, whendepreciation is shown outside trial balance, then it needs to be recorded bothin P & L account as well as balance sheet.

1)Inside Trial Balance

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

2)Outside Trial Balance

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

(iii) Closing stock

(a) Closing stock isvalued based on the least among cost price or realisble value. If present inTrial Balance, posted only in Assets side of Balance Sheet.

Balance Sheet
Liabilities	Amount	Assets	Amount

		Closing Stock

(b) When closing stockis given outside trial balance, it gets posted in two places i.e. P & Laccount and Balance Sheet

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

Question - 12 : - Prepare a trading and profit and loss account for the year ending December 31, 2017 from the balances extracted of M/s Rahul Sons. Also prepare a balance sheet at the end of the year.

Account Title

Amount

₹

Account Title

Amount

₹

Stock

50,000

Sales

1,80,000

Wages

3,000

Purchases return

2,000

Salary

8,000

Discount received

500

Purchases

1,75,000

Provision for doubtful debts

2,500

Sales return

3,000

Capital

3,00,000

Sundry Debtors

82,000

Bills payable

22,000

Discount allowed

1,000

Commission received

4,000

Insurance

3,200

Rent

6,000

Rent Rates and Taxes

4,300

Loan

34,800

Fixtures and fittings

20,000

Trade expenses

1,500

Bad debts

2,000

Drawings

32,000

Repair and renewals

1,600

Travelling expenses

4,200

Postage

300

Telegram expenses

200

Legal fees

500

Bills receivable

50,000

Building

1,10,000

5,51,800

5,51,800

Adjustments
1. Commission received in advance ₹ 1,000.
2. Rent receivable ₹ 2,000.
3. Salary outstanding ₹ 1,000 and insurance prepaid ₹ 800.
4. Further bad debts ₹ 1,000 and provision for doubtful debts @ 5% on debtors and discount on debtors @ 2%.
5. Closing stock ₹ 32,000.
6. Depreciation on building @ 6% p.a.

Answer - 12 : -

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

					2,26,000							2,26,000


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

				54,689									54,689

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

			2,83,611				2,83,611

Question - 13 : - Prepare a trading and profit and loss account of M/s Green Club Ltd. for the year ending March 31, 2017 from the following figures taken from his trial balance:

Account Title

Amount

₹

Account Title

Amount

₹

Opening stock

35,000

Sales

2,50,000

Purchases

1,25,000

Purchase return

6,000

Return inwards

25,000

Creditors

10,000

Postage and Telegram

600

Bills payable

20,000

Salary

12,300

Discount

1,000

Wages

3,000

Provision for bad debts

4,500

Rent and Rates

1,000

Interest received

5,400

Packing and Transport

500

Capital

75,000

General expense

400

Insurance

4,000

Debtors

50,000

Cash in hand

20,000

Cash at bank

40,000

Machinery

20,000

Lighting and Heating

5,000

Discount

3,500

Bad debts

3,500

Investment

23,100

3,71,900

3,71,900

Adjustments
1. Depreciation charged on machinery @ 5% p.a.
2. Further bad debts ₹ 1,500, discount on debtors @ 5% and make a provision on debtors @ 6%.
3. Wages prepaid ₹ 1,000.
4. Interest on investment @ 5% p.a.
5. Closing stock 10,000.

Answer - 13 : -


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

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

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

					86,555					86,555

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

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

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

				Prepaid Wages			1,000
				Closing Stock			10,000

			1,57,565				1,57,565

Question - 14 : - The following balances 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

₹

Account Title

Amount

₹

Purchases

1,50,000

Sales

2,50,000

Opening stock

50,000

Return outwards

4,500

Return inwards

2,000

Interest received

3,500

Carriage inwards

4,500

Discount received

400

Cash in hand

77,800

Creditors

1,25,000

Cash at bank

60,800

Bill payable

6,040

Wages

2,400

Capital

1,00,000

Printing and Stationery

4,500

Discount

400

Bad debts

1,500

Insurance

2,500

Investment

32,000

Debtors

53,000

Bills receivable

20,000

Postage and Telegraph

400

Commission

200

Interest

1,000

Repair

440

Lighting Charges

500

Telephone charges

100

Carriage outward

400

Motor car

25,000

4,89,440

4,89,440

Adjustments
1. Further bad debts ₹ 1,000. Discount on debtors ₹ 500 and make a provision on debtors @ 5%.
2. Interest received on investment @ 5%.
3. Wages and interest outstanding ₹ 100 and ₹ 200 respectively.
4. Depreciation charged on motor car @ 5% p.a.
5. Closing Stock ₹ 32,500.

Answer - 14 : -

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

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

				2,80,500						2,80,500


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

					83,500					83,500

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

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

			2,97,350				2,97,350

Question - 15 : - The following balances have been extracted from the trial of M/s Haryana Chemical Ltd. You are required to prepare a trading and profit and loss account and balance sheet as on March 31, 2017 from the given information.

Account Title

Amount

₹

Account Title

Amount

₹

Opening stock

50,000

Sales

3,50,000

Purchases

1,25,500

Purchases return

2,500

Sales return

2,000

Creditors

25,000

Cash in hand

21,200

Rent

5,000

Cash at bank

12,000

Interest

2,000

Carriage

100

Bills payable

1,71,700

Free hold land

3,20,000

Capital

3,00,000

Patents

1,20,000

General Expenses

2,000

Sundry Debtors

32,500

Building

86,000

Machinery

34,500

Insurance

12,400

Drawings

10,000

Motor vehicle

10,500

Bad debts

2,000

Light and Water

1,200

Trade expenses

2,000

Power

3,900

Salary and Wages

5,400

Loan a 15% (01.09.2017)

3,000

8,56,200

8,56,200

Answer - 15 : -

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

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

					3,88,000						3,88,000


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

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

						2,18,150					2,18,150

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

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

			6,73,060				6,73,060

WorkingNote

The loan given bearsan 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 asfollows:

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

Question - 16 : - 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

₹

Account Title

Amount

₹

Drawings

20,000

Capital

2,00,000

Sundry debtors

80,000

Return outwards

2,000

Bad debts

1,000

Bank overdraft

12,000

Trade Expenses

2,400

Provision for bad debts

4,000

Printing and Stationery

2,000

Sundry creditors

60,000

Rent Rates and Taxes

5,000

Bills payable

15,400

Freight

4,000

Sales

2,76,000

Return inwards

7,000

Opening stock

25,000

Purchases

1,80,000

Furniture and Fixture

20,000

Plant and Machinery

1,00,000

Bills receivable

14,000

Wages

10,000

Cash in hand

6,000

Discount allowed

2,000

Investments

40,000

Motor car

51,000

5,69,400

5,69,400

Adjustments
1. Closing stock was ₹ 45,000.
2. Provision for doubtful debts is to be maintained @ 2% on debtors.
3. Depreciation charged on: furniture and fixture @ 5%, plant and Machinery @ 6% and motor car @ 10%.
4. A Machine of ₹ 30,000 was purchased on October 01, 2016.
5. The manager is entitle to a commission of @ 10% of the net profit after charging such commission.

Answer - 16 : -

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

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

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

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

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

			3,43,200				3,43,200

WorkingNotes

1. Manager’sCommission

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

2. Out of themachinery of ₹ 1, 00,000, ₹ 30,000 worth of machinery was purchased on01/October/2016. Therefore, the depreciation on this machinery will be for 6months at 6% p.a.

*Depreciation on machinery (30,000) =	30,000 ×	6	×	6	= ₹ 900
		12		100
**The rest of the machinery of ₹ 70,000 will bear depreciation at 6% p.a.

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

Question - 17 : - Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. from the following particulars.

Account Title

Amount

₹

Account Title

Amount

₹

Sundry debtors

1,00,000

Bills payable

85,550

Bad debts

3,000

Sundry creditors

25,000

Trade expenses

2,500

Provision for bad debts

1,500

Printing and 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 ₹ 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%.

Answer - 17 : -

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

				1,48,300							1,48,300

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

						43,056					43,056

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

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

			3,18,894				3,18,894

Question - 18 : - Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss account and a balance sheet as on March 31, 2017.

Account Title

Amount

₹

Account Title

Amount

₹

Opening stock

2,26,000

Sales

6,80,000

Purchases

4,40,000

Return outwards

15,000

Drawings

75,000

Creditors

50,000

Buildings

1,00,000

Bills payable

63,700

Motor van

30,000

Interest received

20,000

Freight inwards

3,400

Capital

3,50,000

Sales return

10,000

Trade expense

3,300

Heat and Power

8,000

Salary and Wages

5,000

Legal expense

3,000

Postage and Telegram

1,000

Bad debts

6,500

Cash in hand

79,000

Cash at bank

98,000

Sundry debtors

25,000

Investments

40,000

Insurance

3,500

Machinery

22,000

11,78,700

11,78,700

The following additional information is available:
1. Stock on December 31, 2017 was ₹ 30,000.
2. Depreciation is to be charged on 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.

Answer - 18 : -

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


				7,00,000							7,00,000


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

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

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

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

			4,15,350				4,15,350

Question - 19 : - From the following balances extracted from the books of Raga Ltd. Prepare 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

₹

Account Title

Amount

₹

Drawings

20,000

Sales

2,20,000

Land and Buildings

12,000

Capital

1,01,110

Plant and Machinery

40,000

Discount

1,260

Carriage inwards

100

Apprentice premium

5,230

Wages

500

Bills payable

1,28,870

Salary

2,000

Purchases return

10,000

Sales return

200

Bank charges

200

Coal, Gas and Water

1,200

Purchases

1,50,000

Trade Expenses

3,800

Stock (Opening)

76,800

Cash at bank

50,000

Rates and Taxes

870

Bills receivable

24,500

Sundry debtors

54,300

Cash in hand

30,000

4,66,470

4,66,470

The additional information is as under:
1. Closing stock was valued at the end of the year ₹, 20,000.
2. Depreciation on plant and machinery charged at 5% and land and building at 10%.
3. Discount on debtors at 3%.
4. Make a provision at 5% on debtors for doubtful debts.
5. Salary outstanding was ₹ 100 and Wages prepaid was ₹ 40.
6. The manager is entitled a commission of 5% on net profit after charging such commission.

Answer - 19 : -

Trading Account
Dr.										Cr.
Particulars				Amount ₹		Particulars				Amount ₹
Opening Stock				76,800		Sales			2,20,000
Purchases		1,50,000					Less: Sales Return		200	2,19,800
	Less: Purchases Return	10,000		1,40,000		Closing Stock				20,000
Carriage Inwards				100
Wages		500
	Less: Prepaid	40		460
Coal, Gas and Water				1,200
Gross Profit				21,240
				2,39,800						2,39,800


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

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

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

			2,23,377				2,23,377

Question - 20 : - From the following balances of M/s Jyoti Exports, prepare trading and profit and loss account for the year ended March 31, 2017 and balance sheet as on this date.

Account Title

Debit

Amount

₹

Account Title

Credit

Amount

₹

Sundry debtors

9,600

Sundry creditors

2,500

Opening stock

22,800

Sales

72,670

Purchases

34,800

Purchases returns

2,430

Carriage inwards

450

Bills payable

15,600

Wages

1,770

Capital

42,000

Office rent

820

Insurance

1,440

Factory rent

390

Cleaning charges

940

Salary

1,590

Building

24,000

Plant and Machinery

3,600

Cash in hand

2,160

Gas and Water

240

Octroi

60

Furniture

20,540

Patents

10,000

1,35,200

1,35,200

Closing stock ₹ 10,000.
1. To provision for doubtful debts is to be maintained at 5 per cent on sundry debtors.
2. Wages amounting to ₹ 500 and salary amounting to ₹ 350 are outstanding.
3. Factory rent prepaid ₹ 100.
4. Depreciation charged on Plant and Machinery @ 5% and Building @ 10%.
5. Outstanding insurance ₹ 100.

Answer - 20 : -

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

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

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

								23,250			23,250

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

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

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

				76,940							76,940

Free - Previous Years Question Papers

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

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

Chapter 2 Financial Statements II Solutions

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