# Illustrations - Financial Statements: With Adjustments Notes | Study Crash Course of Accountancy - Class 11 - Commerce

## Commerce: Illustrations - Financial Statements: With Adjustments Notes | Study Crash Course of Accountancy - Class 11 - Commerce

The document Illustrations - Financial Statements: With Adjustments Notes | Study Crash Course of Accountancy - Class 11 - Commerce is a part of the Commerce Course Crash Course of Accountancy - Class 11.
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4. Interest on bank loan paid Rs.2,500
5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation
4]
6. Salaries (11 months) [Explanation 5]
7. Patent rights (5 years) [Explanation 6]
to 30th June, 2011) [Explanation 7]
9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010)
[Explanation 8]
10. Interest on Investment

2,500
10,00,000

1,10,000
1,00,000
36,000

5,40,000

1,00,000

30,000

Note: Financial Year is the Accounting Year.

Explanations:
1.  Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August,
2010 to 31st March, 2011) —
Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000.
The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet.
2.  Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to
31st March, 2011) = Rs.3,000.
The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
3.  10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss
Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance
of Rs.7,500 will be shown on the liabilities side of the Balance Sheet.
4.  1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and
this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet.
5.  One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he   added to salary on the debit side
of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
6.  1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss   Account as amortisation of
patents right and the same will be shown as deduction   from patents right on the assets side of the Balance Sheet.
7.  Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 =
Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss
Account and shown on the assets side of the Balance Sheet.
8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to   Profit and Loss Account as
income for the year. Out of this Rs.30,000 has been   received. The balance Rs.15,000 will be shown on the assets
side of the Balance   Sheet as accrued income.

Illustration 1
From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year
ending 31
st
March, 2015 and Balance Sheet as at the date.
Particulars Dr. (Rs.) Cr. (Rs.)
Capital  72,000
Drawings 8,400
Printing Charges 1,000
Machinery 20,000
Purchases 55,000
Sales  96,000
Salaries 9,300
Bills Receivable 1,900
Bills Payable  2,700
Stock (01.04.2014) 24,000
Bank Loan  7,300
Rent 3,000
Page 2

4. Interest on bank loan paid Rs.2,500
5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation
4]
6. Salaries (11 months) [Explanation 5]
7. Patent rights (5 years) [Explanation 6]
to 30th June, 2011) [Explanation 7]
9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010)
[Explanation 8]
10. Interest on Investment

2,500
10,00,000

1,10,000
1,00,000
36,000

5,40,000

1,00,000

30,000

Note: Financial Year is the Accounting Year.

Explanations:
1.  Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August,
2010 to 31st March, 2011) —
Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000.
The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet.
2.  Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to
31st March, 2011) = Rs.3,000.
The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
3.  10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss
Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance
of Rs.7,500 will be shown on the liabilities side of the Balance Sheet.
4.  1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and
this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet.
5.  One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he   added to salary on the debit side
of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
6.  1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss   Account as amortisation of
patents right and the same will be shown as deduction   from patents right on the assets side of the Balance Sheet.
7.  Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 =
Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss
Account and shown on the assets side of the Balance Sheet.
8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to   Profit and Loss Account as
income for the year. Out of this Rs.30,000 has been   received. The balance Rs.15,000 will be shown on the assets
side of the Balance   Sheet as accrued income.

Illustration 1
From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year
ending 31
st
March, 2015 and Balance Sheet as at the date.
Particulars Dr. (Rs.) Cr. (Rs.)
Capital  72,000
Drawings 8,400
Printing Charges 1,000
Machinery 20,000
Purchases 55,000
Sales  96,000
Salaries 9,300
Bills Receivable 1,900
Bills Payable  2,700
Stock (01.04.2014) 24,000
Bank Loan  7,300
Rent 3,000

Building 25,000
Wages 6,500
Sundry Debtors 30,000
Sundry Creditors  12,000
Furniture 2,000
1,90,000 J 1,90,000
(i) Value of Closing Stock 27,500 on 31
st
March, 2015.
(ii) Salaries outstanding Rs. 1,500.
(iii) Insurance Premium Prepaid Rs. 300.
(iv) Depreciate Machinery by 10% and Building by 2%.
(v) Write off further Bad Debts amounting to Rs. 1,500.
Solution:
TRADING AND PROFIT AND LOSS ACCOUNT
Particulars  Amt.(Rs.) Particulars Amt.(Rs.)
To Opening Stock  24.000 By Sales 96.000
To Purchases  55,000 By Closing Stock 27,500
To Wages  6,500
To Gross Profit transferred to Profit
and Loss A/c  38,000
1,23,500  1,23,500
To Printing Charges  1,000 By Gross Profit transferred from Trading A/c 38,000
To Salaries 9,300
To Rent  3,000
Less: Prepaid Insurance 300 1,100
To Depreciation:
Machinery :?,000
Building 500 2,500
To Net Profit Transferred to Capital A/c 15,600
38,000  38,000
BALANCE SHEET
as at 31
st
March, 2015
Liabilities  Amt.(Rs.) Assets  Amt.(Rs.)
Capital ,000  Machinery 20.000
Add: Net Profit 15,600  Less: Depreciation 2,000 18,000
Less: Drawings 8,400 79,200 Building 25,000
Bills Payable  2,700 Less: Depreciation 500 24,500
Sundry Creditors  12,000 Furniture  2,000
Bank Loan  7,300 Sundry Debtors 30,000
Outstanding Salaries  1,500 Less: Bad Debts 1,500 28,500
Stock  27,500
Prepaid Insurance  300
Bills Receivable  1,900
1,02,700   1,02,700

Illustration 2
Trial Balance of Mr. Gopal Das as on 31st March, 2014 was as follows:
Purchases/Sales
Provision for Doubtful Debts
8,12,525

12,62,000
26,000
Page 3

4. Interest on bank loan paid Rs.2,500
5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation
4]
6. Salaries (11 months) [Explanation 5]
7. Patent rights (5 years) [Explanation 6]
to 30th June, 2011) [Explanation 7]
9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010)
[Explanation 8]
10. Interest on Investment

2,500
10,00,000

1,10,000
1,00,000
36,000

5,40,000

1,00,000

30,000

Note: Financial Year is the Accounting Year.

Explanations:
1.  Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August,
2010 to 31st March, 2011) —
Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000.
The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet.
2.  Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to
31st March, 2011) = Rs.3,000.
The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
3.  10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss
Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance
of Rs.7,500 will be shown on the liabilities side of the Balance Sheet.
4.  1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and
this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet.
5.  One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he   added to salary on the debit side
of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
6.  1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss   Account as amortisation of
patents right and the same will be shown as deduction   from patents right on the assets side of the Balance Sheet.
7.  Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 =
Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss
Account and shown on the assets side of the Balance Sheet.
8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to   Profit and Loss Account as
income for the year. Out of this Rs.30,000 has been   received. The balance Rs.15,000 will be shown on the assets
side of the Balance   Sheet as accrued income.

Illustration 1
From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year
ending 31
st
March, 2015 and Balance Sheet as at the date.
Particulars Dr. (Rs.) Cr. (Rs.)
Capital  72,000
Drawings 8,400
Printing Charges 1,000
Machinery 20,000
Purchases 55,000
Sales  96,000
Salaries 9,300
Bills Receivable 1,900
Bills Payable  2,700
Stock (01.04.2014) 24,000
Bank Loan  7,300
Rent 3,000

Building 25,000
Wages 6,500
Sundry Debtors 30,000
Sundry Creditors  12,000
Furniture 2,000
1,90,000 J 1,90,000
(i) Value of Closing Stock 27,500 on 31
st
March, 2015.
(ii) Salaries outstanding Rs. 1,500.
(iii) Insurance Premium Prepaid Rs. 300.
(iv) Depreciate Machinery by 10% and Building by 2%.
(v) Write off further Bad Debts amounting to Rs. 1,500.
Solution:
TRADING AND PROFIT AND LOSS ACCOUNT
Particulars  Amt.(Rs.) Particulars Amt.(Rs.)
To Opening Stock  24.000 By Sales 96.000
To Purchases  55,000 By Closing Stock 27,500
To Wages  6,500
To Gross Profit transferred to Profit
and Loss A/c  38,000
1,23,500  1,23,500
To Printing Charges  1,000 By Gross Profit transferred from Trading A/c 38,000
To Salaries 9,300
To Rent  3,000
Less: Prepaid Insurance 300 1,100
To Depreciation:
Machinery :?,000
Building 500 2,500
To Net Profit Transferred to Capital A/c 15,600
38,000  38,000
BALANCE SHEET
as at 31
st
March, 2015
Liabilities  Amt.(Rs.) Assets  Amt.(Rs.)
Capital ,000  Machinery 20.000
Add: Net Profit 15,600  Less: Depreciation 2,000 18,000
Less: Drawings 8,400 79,200 Building 25,000
Bills Payable  2,700 Less: Depreciation 500 24,500
Sundry Creditors  12,000 Furniture  2,000
Bank Loan  7,300 Sundry Debtors 30,000
Outstanding Salaries  1,500 Less: Bad Debts 1,500 28,500
Stock  27,500
Prepaid Insurance  300
Bills Receivable  1,900
1,02,700   1,02,700

Illustration 2
Trial Balance of Mr. Gopal Das as on 31st March, 2014 was as follows:
Purchases/Sales
Provision for Doubtful Debts
8,12,525

12,62,000
26,000

Sundry Debtors/Sundry Creditors
Bills Payable
Opening Stock
Wages
Salaries
Furniture
Postage
Power and Fuel
Loan to Ram @ 10% (1.12.2013)
Cash in Hand and at Bank
Trade Expenses accrued but not paid
Drawings A/c/Capital A/o
Outstanding Wages
2,51,000

1,33,625
1,15,685
27,875
36,250
21,130
6,750
29,155
2,625
15,000
50,000

22,260
1,52,630
19,750

3,500
50,000
10,000
Total 15,23,880 15,23,880

Prepare Trading and Profit and Loss Account for the year ended 31st March, 2014 and Balance Sheet as at that date after
taking into consideration the following information:
(i)  Stock on 31st March, 2014 was Rs.62,750.
(ii)  Depreciation on Furniture is to be charged @ 10%.
(iii) Provision for Doubtful Debts is to be maintained @ 5% on Sundry Debtors.
(iv)  Sundry Debtors include an item of Rs.2,500 due from a customer who has become insolvent.
(v)  Goods of the value of Rs.7,500 have been destroyed by fire and insurance company admitted a claim for Rs.5,000.
(vi)  Received Rs.6,000 worth of goods on 27th March, 2014 but the invoice of purchases was not recorded in Purchases
Book.
Solution:
TRADING AND PROFIT AND LOSS ACCOUNT
for the year ended 31st March, 2014
Particulars Rs. Particulars Rs.
To Opening Stock
To Purchases      8,12,525
To Wages
To Power and Fuel
To Gross Profit c/d
1,33,625

8,18,525
1,15,685
6,750
2,57,665
By Sales
By Abnormal Loss by Fire
By Closing Stock
12,62,000
7,500
62,750
13,32,250  13,32,250
To Irrecoverable Loss of Stock
To Salaries
To Postage
To Depreciation on Furniture
To Net Profit trfd. to Capital A/c
2,500
27,875
21,130
29,155
3,625
1,82,330
By Gross Profit
By Provision for Doubtful
debts (Old)    26,000
Provision for Doubtful
Debts (New)    12,425
(5/100 x Rs.2,48,525)
17,550
By Interest on Loan
2,57,665

8,450
500
2,66,615  2,66,615

BALANCE SHEET
as at 31st March, 2014
Liabilities Rs. Assets Rs.
Current Liabilities
Creditors   1,52,630
Bills Payable
Outstanding Wages

1,58,630
19,750
10,000
Current Assets
Insurance Claim (Receivable)
Cash in Hand
Closing Stock
Debtors  2,51,000

5,000
50,000
62,750

Page 4

4. Interest on bank loan paid Rs.2,500
5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation
4]
6. Salaries (11 months) [Explanation 5]
7. Patent rights (5 years) [Explanation 6]
to 30th June, 2011) [Explanation 7]
9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010)
[Explanation 8]
10. Interest on Investment

2,500
10,00,000

1,10,000
1,00,000
36,000

5,40,000

1,00,000

30,000

Note: Financial Year is the Accounting Year.

Explanations:
1.  Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August,
2010 to 31st March, 2011) —
Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000.
The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet.
2.  Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to
31st March, 2011) = Rs.3,000.
The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
3.  10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss
Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance
of Rs.7,500 will be shown on the liabilities side of the Balance Sheet.
4.  1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and
this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet.
5.  One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he   added to salary on the debit side
of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
6.  1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss   Account as amortisation of
patents right and the same will be shown as deduction   from patents right on the assets side of the Balance Sheet.
7.  Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 =
Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss
Account and shown on the assets side of the Balance Sheet.
8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to   Profit and Loss Account as
income for the year. Out of this Rs.30,000 has been   received. The balance Rs.15,000 will be shown on the assets
side of the Balance   Sheet as accrued income.

Illustration 1
From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year
ending 31
st
March, 2015 and Balance Sheet as at the date.
Particulars Dr. (Rs.) Cr. (Rs.)
Capital  72,000
Drawings 8,400
Printing Charges 1,000
Machinery 20,000
Purchases 55,000
Sales  96,000
Salaries 9,300
Bills Receivable 1,900
Bills Payable  2,700
Stock (01.04.2014) 24,000
Bank Loan  7,300
Rent 3,000

Building 25,000
Wages 6,500
Sundry Debtors 30,000
Sundry Creditors  12,000
Furniture 2,000
1,90,000 J 1,90,000
(i) Value of Closing Stock 27,500 on 31
st
March, 2015.
(ii) Salaries outstanding Rs. 1,500.
(iii) Insurance Premium Prepaid Rs. 300.
(iv) Depreciate Machinery by 10% and Building by 2%.
(v) Write off further Bad Debts amounting to Rs. 1,500.
Solution:
TRADING AND PROFIT AND LOSS ACCOUNT
Particulars  Amt.(Rs.) Particulars Amt.(Rs.)
To Opening Stock  24.000 By Sales 96.000
To Purchases  55,000 By Closing Stock 27,500
To Wages  6,500
To Gross Profit transferred to Profit
and Loss A/c  38,000
1,23,500  1,23,500
To Printing Charges  1,000 By Gross Profit transferred from Trading A/c 38,000
To Salaries 9,300
To Rent  3,000
Less: Prepaid Insurance 300 1,100
To Depreciation:
Machinery :?,000
Building 500 2,500
To Net Profit Transferred to Capital A/c 15,600
38,000  38,000
BALANCE SHEET
as at 31
st
March, 2015
Liabilities  Amt.(Rs.) Assets  Amt.(Rs.)
Capital ,000  Machinery 20.000
Add: Net Profit 15,600  Less: Depreciation 2,000 18,000
Less: Drawings 8,400 79,200 Building 25,000
Bills Payable  2,700 Less: Depreciation 500 24,500
Sundry Creditors  12,000 Furniture  2,000
Bank Loan  7,300 Sundry Debtors 30,000
Outstanding Salaries  1,500 Less: Bad Debts 1,500 28,500
Stock  27,500
Prepaid Insurance  300
Bills Receivable  1,900
1,02,700   1,02,700

Illustration 2
Trial Balance of Mr. Gopal Das as on 31st March, 2014 was as follows:
Purchases/Sales
Provision for Doubtful Debts
8,12,525

12,62,000
26,000

Sundry Debtors/Sundry Creditors
Bills Payable
Opening Stock
Wages
Salaries
Furniture
Postage
Power and Fuel
Loan to Ram @ 10% (1.12.2013)
Cash in Hand and at Bank
Trade Expenses accrued but not paid
Drawings A/c/Capital A/o
Outstanding Wages
2,51,000

1,33,625
1,15,685
27,875
36,250
21,130
6,750
29,155
2,625
15,000
50,000

22,260
1,52,630
19,750

3,500
50,000
10,000
Total 15,23,880 15,23,880

Prepare Trading and Profit and Loss Account for the year ended 31st March, 2014 and Balance Sheet as at that date after
taking into consideration the following information:
(i)  Stock on 31st March, 2014 was Rs.62,750.
(ii)  Depreciation on Furniture is to be charged @ 10%.
(iii) Provision for Doubtful Debts is to be maintained @ 5% on Sundry Debtors.
(iv)  Sundry Debtors include an item of Rs.2,500 due from a customer who has become insolvent.
(v)  Goods of the value of Rs.7,500 have been destroyed by fire and insurance company admitted a claim for Rs.5,000.
(vi)  Received Rs.6,000 worth of goods on 27th March, 2014 but the invoice of purchases was not recorded in Purchases
Book.
Solution:
TRADING AND PROFIT AND LOSS ACCOUNT
for the year ended 31st March, 2014
Particulars Rs. Particulars Rs.
To Opening Stock
To Purchases      8,12,525
To Wages
To Power and Fuel
To Gross Profit c/d
1,33,625

8,18,525
1,15,685
6,750
2,57,665
By Sales
By Abnormal Loss by Fire
By Closing Stock
12,62,000
7,500
62,750
13,32,250  13,32,250
To Irrecoverable Loss of Stock
To Salaries
To Postage
To Depreciation on Furniture
To Net Profit trfd. to Capital A/c
2,500
27,875
21,130
29,155
3,625
1,82,330
By Gross Profit
By Provision for Doubtful
debts (Old)    26,000
Provision for Doubtful
Debts (New)    12,425
(5/100 x Rs.2,48,525)
17,550
By Interest on Loan
2,57,665

8,450
500
2,66,615  2,66,615

BALANCE SHEET
as at 31st March, 2014
Liabilities Rs. Assets Rs.
Current Liabilities
Creditors   1,52,630
Bills Payable
Outstanding Wages

1,58,630
19,750
10,000
Current Assets
Insurance Claim (Receivable)
Cash in Hand
Closing Stock
Debtors  2,51,000

5,000
50,000
62,750

Capital
Opening Balance    50,000
Lees: Drawings    22,260
27,740
3,500

2,10,070
2,48,500
Less: Provision   12,425
Loan to Ram    15,000
Fixed Assets
Furniture     36,250
Less: Depreciation    3,625

2,36,075

15,500

32,625
4,01,950  4,01,950

Illustration 3
On 31
st
March, 2015, the following Trial Balance was extracted from the books of M/s Bajaj Trader:
Particulars Dr. (Rs.) Cr.(Rs.)
Capital  30,000
Drawings 5,000
Debtors and Creditors 20,000 10,000
Loan  8,400
Interest on Loan 300
Cash 2,000
Provision for Doubtful Debts  1,800
Stock on (0104-2014) 6,800
Motor Vehicle 10,000
Bank 3,500
Machinery 12,000
Purchases and Sales 66,000 1,10,000
Returns 8,000 1,500
Carriage Outwards 2,500
Carriage Inwards 3,000
Salaries 9,000
Rent and Insurance 3,000
Discount  500
General Expenses 3,400
Bills Receivable and Bills Payable 6,000 2,000
1,64,500 1,64,500
Prepare Trading and Profit and Loss Account for the year ended 31
st
March, 2015 and Balance Sheet as on that date after
taking into account the following adjustments:
(i) Machinery includes a machinery purchased on 1
st
October, 2014 for Rs. 2,000. Depreciate machinery @ 2% p.a.
(ii) Depreciate motor vehicles at 20%
(iii) Salaries outstanding Rs. 200.
(iv) Insurance includes a premium of Rs. 400 on a policy expiring on 30
th
September, 2015.
(v) Provision for Doubtful Debts is to be maintained at 5% on debtors, (vi) Stock on 31
st
March, 2015 was valued at Rs.
7,000.
Solution:
Trading and Profit and loss account
Particulars Amt.(Rs.) Particulars  Amt. (Rs.)
To Opening Stock 6,800 By Sales 1,10,000
To Purchases 66,000  Less: Sales Return 8,000 1,02,000
Less: Purchases Return 1,500 64,500   7,000
To Carriage Inwards 3,000
To Gross Profit transferred to Profit
and Loss A/c 34,700
1,09,000   1,09,000
Page 5

4. Interest on bank loan paid Rs.2,500
5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation
4]
6. Salaries (11 months) [Explanation 5]
7. Patent rights (5 years) [Explanation 6]
to 30th June, 2011) [Explanation 7]
9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010)
[Explanation 8]
10. Interest on Investment

2,500
10,00,000

1,10,000
1,00,000
36,000

5,40,000

1,00,000

30,000

Note: Financial Year is the Accounting Year.

Explanations:
1.  Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August,
2010 to 31st March, 2011) —
Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000.
The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet.
2.  Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to
31st March, 2011) = Rs.3,000.
The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
3.  10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss
Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance
of Rs.7,500 will be shown on the liabilities side of the Balance Sheet.
4.  1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and
this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet.
5.  One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he   added to salary on the debit side
of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet.
6.  1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss   Account as amortisation of
patents right and the same will be shown as deduction   from patents right on the assets side of the Balance Sheet.
7.  Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 =
Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss
Account and shown on the assets side of the Balance Sheet.
8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to   Profit and Loss Account as
income for the year. Out of this Rs.30,000 has been   received. The balance Rs.15,000 will be shown on the assets
side of the Balance   Sheet as accrued income.

Illustration 1
From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year
ending 31
st
March, 2015 and Balance Sheet as at the date.
Particulars Dr. (Rs.) Cr. (Rs.)
Capital  72,000
Drawings 8,400
Printing Charges 1,000
Machinery 20,000
Purchases 55,000
Sales  96,000
Salaries 9,300
Bills Receivable 1,900
Bills Payable  2,700
Stock (01.04.2014) 24,000
Bank Loan  7,300
Rent 3,000

Building 25,000
Wages 6,500
Sundry Debtors 30,000
Sundry Creditors  12,000
Furniture 2,000
1,90,000 J 1,90,000
(i) Value of Closing Stock 27,500 on 31
st
March, 2015.
(ii) Salaries outstanding Rs. 1,500.
(iii) Insurance Premium Prepaid Rs. 300.
(iv) Depreciate Machinery by 10% and Building by 2%.
(v) Write off further Bad Debts amounting to Rs. 1,500.
Solution:
TRADING AND PROFIT AND LOSS ACCOUNT
Particulars  Amt.(Rs.) Particulars Amt.(Rs.)
To Opening Stock  24.000 By Sales 96.000
To Purchases  55,000 By Closing Stock 27,500
To Wages  6,500
To Gross Profit transferred to Profit
and Loss A/c  38,000
1,23,500  1,23,500
To Printing Charges  1,000 By Gross Profit transferred from Trading A/c 38,000
To Salaries 9,300
To Rent  3,000
Less: Prepaid Insurance 300 1,100
To Depreciation:
Machinery :?,000
Building 500 2,500
To Net Profit Transferred to Capital A/c 15,600
38,000  38,000
BALANCE SHEET
as at 31
st
March, 2015
Liabilities  Amt.(Rs.) Assets  Amt.(Rs.)
Capital ,000  Machinery 20.000
Add: Net Profit 15,600  Less: Depreciation 2,000 18,000
Less: Drawings 8,400 79,200 Building 25,000
Bills Payable  2,700 Less: Depreciation 500 24,500
Sundry Creditors  12,000 Furniture  2,000
Bank Loan  7,300 Sundry Debtors 30,000
Outstanding Salaries  1,500 Less: Bad Debts 1,500 28,500
Stock  27,500
Prepaid Insurance  300
Bills Receivable  1,900
1,02,700   1,02,700

Illustration 2
Trial Balance of Mr. Gopal Das as on 31st March, 2014 was as follows:
Purchases/Sales
Provision for Doubtful Debts
8,12,525

12,62,000
26,000

Sundry Debtors/Sundry Creditors
Bills Payable
Opening Stock
Wages
Salaries
Furniture
Postage
Power and Fuel
Loan to Ram @ 10% (1.12.2013)
Cash in Hand and at Bank
Trade Expenses accrued but not paid
Drawings A/c/Capital A/o
Outstanding Wages
2,51,000

1,33,625
1,15,685
27,875
36,250
21,130
6,750
29,155
2,625
15,000
50,000

22,260
1,52,630
19,750

3,500
50,000
10,000
Total 15,23,880 15,23,880

Prepare Trading and Profit and Loss Account for the year ended 31st March, 2014 and Balance Sheet as at that date after
taking into consideration the following information:
(i)  Stock on 31st March, 2014 was Rs.62,750.
(ii)  Depreciation on Furniture is to be charged @ 10%.
(iii) Provision for Doubtful Debts is to be maintained @ 5% on Sundry Debtors.
(iv)  Sundry Debtors include an item of Rs.2,500 due from a customer who has become insolvent.
(v)  Goods of the value of Rs.7,500 have been destroyed by fire and insurance company admitted a claim for Rs.5,000.
(vi)  Received Rs.6,000 worth of goods on 27th March, 2014 but the invoice of purchases was not recorded in Purchases
Book.
Solution:
TRADING AND PROFIT AND LOSS ACCOUNT
for the year ended 31st March, 2014
Particulars Rs. Particulars Rs.
To Opening Stock
To Purchases      8,12,525
To Wages
To Power and Fuel
To Gross Profit c/d
1,33,625

8,18,525
1,15,685
6,750
2,57,665
By Sales
By Abnormal Loss by Fire
By Closing Stock
12,62,000
7,500
62,750
13,32,250  13,32,250
To Irrecoverable Loss of Stock
To Salaries
To Postage
To Depreciation on Furniture
To Net Profit trfd. to Capital A/c
2,500
27,875
21,130
29,155
3,625
1,82,330
By Gross Profit
By Provision for Doubtful
debts (Old)    26,000
Provision for Doubtful
Debts (New)    12,425
(5/100 x Rs.2,48,525)
17,550
By Interest on Loan
2,57,665

8,450
500
2,66,615  2,66,615

BALANCE SHEET
as at 31st March, 2014
Liabilities Rs. Assets Rs.
Current Liabilities
Creditors   1,52,630
Bills Payable
Outstanding Wages

1,58,630
19,750
10,000
Current Assets
Insurance Claim (Receivable)
Cash in Hand
Closing Stock
Debtors  2,51,000

5,000
50,000
62,750

Capital
Opening Balance    50,000
Lees: Drawings    22,260
27,740
3,500

2,10,070
2,48,500
Less: Provision   12,425
Loan to Ram    15,000
Fixed Assets
Furniture     36,250
Less: Depreciation    3,625

2,36,075

15,500

32,625
4,01,950  4,01,950

Illustration 3
On 31
st
March, 2015, the following Trial Balance was extracted from the books of M/s Bajaj Trader:
Particulars Dr. (Rs.) Cr.(Rs.)
Capital  30,000
Drawings 5,000
Debtors and Creditors 20,000 10,000
Loan  8,400
Interest on Loan 300
Cash 2,000
Provision for Doubtful Debts  1,800
Stock on (0104-2014) 6,800
Motor Vehicle 10,000
Bank 3,500
Machinery 12,000
Purchases and Sales 66,000 1,10,000
Returns 8,000 1,500
Carriage Outwards 2,500
Carriage Inwards 3,000
Salaries 9,000
Rent and Insurance 3,000
Discount  500
General Expenses 3,400
Bills Receivable and Bills Payable 6,000 2,000
1,64,500 1,64,500
Prepare Trading and Profit and Loss Account for the year ended 31
st
March, 2015 and Balance Sheet as on that date after
taking into account the following adjustments:
(i) Machinery includes a machinery purchased on 1
st
October, 2014 for Rs. 2,000. Depreciate machinery @ 2% p.a.
(ii) Depreciate motor vehicles at 20%
(iii) Salaries outstanding Rs. 200.
(iv) Insurance includes a premium of Rs. 400 on a policy expiring on 30
th
September, 2015.
(v) Provision for Doubtful Debts is to be maintained at 5% on debtors, (vi) Stock on 31
st
March, 2015 was valued at Rs.
7,000.
Solution:
Trading and Profit and loss account
Particulars Amt.(Rs.) Particulars  Amt. (Rs.)
To Opening Stock 6,800 By Sales 1,10,000
To Purchases 66,000  Less: Sales Return 8,000 1,02,000
Less: Purchases Return 1,500 64,500   7,000
To Carriage Inwards 3,000
To Gross Profit transferred to Profit
and Loss A/c 34,700
1,09,000   1,09,000

To Interest on Loan  300 By Gross Profit transferred from
34,700
To Carriage Outwards  2,500 By Discount Received  500
To Salaries 9,000  By Rent  300
Add: Outstanding Salaries 200 9,200 By Provision for Doubtful
To Rent and Insurance 3,000  Debts (Old) 1,800
Less: Prepaid Insurance  200 2,800 Less: Bad Debts 500
To Advertising  3,500 Less: Provision for Doubtful
To General Expenses  3,400 Debts (New) 1,000 300
To Depreciation on:
Machinery 220
Motor Vehicles 2,000 2,220
To Net Profit Transferred to Capital A/c 11,880
35,800   35,800

Balance sheet as on 31/3/2015
Liabilities  Amt. (Rs.) Assets  Amt. (Rs.)
Capital 30,000  Machinery 12,000
Add: Net Profit 11,880  Less: Depreciation 220 11,780
41,880  Motor Vehicle 10,000
Less: Drawings 5,000 36,880 Less: Depreciation 2,000 8,000
Creditors  10,000 Debtors 20,000
Loan  8,400 Less: Provision for Doubtful Debts 1,000 19,000
Bills Payable  2,000 Closing Stock  7,000
Outstanding salaries  200 Bills Receivable  6,000
Prepaid Insurance  200
Cash  2,000
Bank  3,500
57,480   57,480

Illustration 4
The following is the Trial Balance of M/s Reliable Enterprises on 31
st
December, 2014:
Particulars Dr.(Rs.) cr.(Rs.)
Cash in Band 1,080
Cash at Bank 5,260
Purchases 81,350
Returns Outward  1,000
Sales Account  1,97,560
Returns Inward 1,360
Wages 20,960
Fuel and Power 9,460
Carriage 4,080
Stock (1.1.2014) 11,520
Building 60,000
Freehold land 20,000
Machinery 40,000
Salaries 30,000
Patents 15,000
General Expenses 6,000
Insurance 1,200
Capital  1,42,000
Drawings 10,490
Sundry Debtors 29,000
Carriage on Sales 6,400
Sundry Creditors  12,600
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## Crash Course of Accountancy - Class 11

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