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

 Page 1


          
                                                       
 
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]  
8. Insurance Premium (including an annual premium of Rs.12,000 paid up 
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  
Advertising 2,500  
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]  
8. Insurance Premium (including an annual premium of Rs.12,000 paid up 
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  
Advertising 2,500  
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 
Insurance Premium 1,400  
Furniture 2,000  
 1,90,000 J 1,90,000 
Adjustments: 
(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    
Add: Outstanding Salaries 1,500 10,800   
To Advertising  2,500   
To Rent  3,000   
To Insurance Premium 1,400    
Less: Prepaid Insurance 300 1,100   
To Depreciation:     
Machinery :?,000    
Building 500 2,500   
To Bad Debts  1,500   
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:  
Heads of Accounts Dr.(Rs.) Cr.(Rs.) 
Purchases/Sales  
Provision for Doubtful Debts  
8,12,525 
 
12,62,000 
26,000 
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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]  
8. Insurance Premium (including an annual premium of Rs.12,000 paid up 
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  
Advertising 2,500  
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 
Insurance Premium 1,400  
Furniture 2,000  
 1,90,000 J 1,90,000 
Adjustments: 
(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    
Add: Outstanding Salaries 1,500 10,800   
To Advertising  2,500   
To Rent  3,000   
To Insurance Premium 1,400    
Less: Prepaid Insurance 300 1,100   
To Depreciation:     
Machinery :?,000    
Building 500 2,500   
To Bad Debts  1,500   
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:  
Heads of Accounts Dr.(Rs.) Cr.(Rs.) 
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  
Trade Expenses  
Bad Debts  
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 
Add:Omitted Purchases 6,000 
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 Trade Expenses  
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  
Less: Bad Debts     2,625  
Further Bad Debts     2,500  
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  
Add: Omitted Purchases    6,000  
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 
 
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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]  
8. Insurance Premium (including an annual premium of Rs.12,000 paid up 
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  
Advertising 2,500  
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 
Insurance Premium 1,400  
Furniture 2,000  
 1,90,000 J 1,90,000 
Adjustments: 
(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    
Add: Outstanding Salaries 1,500 10,800   
To Advertising  2,500   
To Rent  3,000   
To Insurance Premium 1,400    
Less: Prepaid Insurance 300 1,100   
To Depreciation:     
Machinery :?,000    
Building 500 2,500   
To Bad Debts  1,500   
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:  
Heads of Accounts Dr.(Rs.) Cr.(Rs.) 
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  
Trade Expenses  
Bad Debts  
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 
Add:Omitted Purchases 6,000 
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 Trade Expenses  
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  
Less: Bad Debts     2,625  
Further Bad Debts     2,500  
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  
Add: Omitted Purchases    6,000  
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 
 
          
                                                       
 
Trade Expenses Accrued 
Capital  
Opening Balance    50,000  
Lees: Drawings    22,260  
      27,740 
Add: Net Profit  1,82,330 
3,500 
 
 
 
 
2,10,070 
Less: Bad Debts    2,500 
   2,48,500 
Less: Provision   12,425  
Loan to Ram    15,000  
Add: Interest       500  
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  
Bad Debts 500  
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  
Advertising 3,500  
Discount  500 
General Expenses 3,400  
Bills Receivable and Bills Payable 6,000 2,000 
Rent Received  300 
 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]  
8. Insurance Premium (including an annual premium of Rs.12,000 paid up 
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  
Advertising 2,500  
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 
Insurance Premium 1,400  
Furniture 2,000  
 1,90,000 J 1,90,000 
Adjustments: 
(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    
Add: Outstanding Salaries 1,500 10,800   
To Advertising  2,500   
To Rent  3,000   
To Insurance Premium 1,400    
Less: Prepaid Insurance 300 1,100   
To Depreciation:     
Machinery :?,000    
Building 500 2,500   
To Bad Debts  1,500   
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:  
Heads of Accounts Dr.(Rs.) Cr.(Rs.) 
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  
Trade Expenses  
Bad Debts  
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 
Add:Omitted Purchases 6,000 
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 Trade Expenses  
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  
Less: Bad Debts     2,625  
Further Bad Debts     2,500  
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  
Add: Omitted Purchases    6,000  
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 
 
          
                                                       
 
Trade Expenses Accrued 
Capital  
Opening Balance    50,000  
Lees: Drawings    22,260  
      27,740 
Add: Net Profit  1,82,330 
3,500 
 
 
 
 
2,10,070 
Less: Bad Debts    2,500 
   2,48,500 
Less: Provision   12,425  
Loan to Ram    15,000  
Add: Interest       500  
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  
Bad Debts 500  
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  
Advertising 3,500  
Discount  500 
General Expenses 3,400  
Bills Receivable and Bills Payable 6,000 2,000 
Rent Received  300 
 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 
Trading A/C 
 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