Adjustment Treatment Treatment

Adjustment
Entry in Trading in

and Profit Balance

and Loss Sheet
Account

Closing Closing stock Shown on Shown on

1 Dr.
stock A/c the credit the
assets
To Trading assets
side and
A/c side
profit
and loss
account
Added to Shown on
2 Outstanding Expense A/c Dr.
the the

To respective liabilities
expenses
outstanding expense side

expense on the
A/c debit side

Prepaid Deducted Shown on

3 Prepaid/ Dr.
expense A/c from the the

respective
To assets
Unexpired expense
Expenses A/c side
on
the debit
expenses
side

Income Accured Added to Shown on

4 Dr.
earned income A/c the the

but not To Income respective assets

received A/c income side

on the
credit side
Income Deducted Shown on
5 Income A/c Dr.
received from the the

To Income respective
in advance liabilities
received income

in advence on the
sides
A/c credit side

Depreciaton Shown on Deducted

6 Depreciation Dr.
A/c the debit from

To Assets the value

side
A/c of
 asset
Profit and Shown on
7 Provision for Dr. Shown as
Loss A/c the debit

To
bad and side deduction
Provision for

doubtful doubtful from

debts debts debtors
Profit and Shown on
8 Provision for Dr. Shown as
Loss A/c the debit

To
discount on side deductoin
Provision for

discount form
debtors
debtors debtors
Shown on Shown on
9 Manager’s Manager’s Dr.
the debit the
commission liabilities
commission side
A/c side

To
outstanding

commission
A/c

Interest on Shown on
10 Interest on Dr. Shown as
capital A/c the debit

To capital addition
capital side
A/c to

capital
Shown on Deducted
11 Further bad Bad debts A/c Dr.
the debit from

To Sundry
debts side debtors
Debtors A/c
Adjustments

1. Closing stock Rs. 70,000

2. Create a reserve for bad and doubtful debts @ 10% on book debts

3. Insurance prepaid Rs. 50

4. Rent outstanding Rs. 150

5. Interest on loan is due @ 6% p.a.

Trading and Profit and Loss Account

for the year ended March 31,2014

Dr. Cr.

Expenses/Losses Amount Revenues/Gains Amount

Rs. Rs.

Opening stock 60,220 Sales 2,81,500

Purchase 1,99,080 Less : Sales return (1,870) 2,79,630

Less Purchases return (1,450) 1,97,630 Closing stock 70,000

Carriage 5,170

Gross profit c/d 86,610

3,49,630 3,49,630

Discount allowed 3,960 Gross profit b/d 86,610

Bank charges 100 Discount received 2,980

Salaries 6,420
Rent and Taxes 7,680

Add Rent outstanding 150 7,830

General expenses 3,630

Insurance 750

Less Insurance prepaid (50) 700

Bad debts 1,250

Add New provision 8,274

for bad debts 9,524

Less Old provision (4,650)

for bad debts 4,874

Interest on loan outstanding 900

Net profit (transferred to 61,176

capital account)

89,590 89,590
 Balance Sheet as at March 31, 2014

Liabilities Amount Assets Amount

Rs. Rs.

Creditors 18,670 Cash at bank 13,870

Loan 15,000
Add Interest on loan 900 15,900 Book debts 82,740

Outstanding
Rent outstanding 150 Less Reserve (8,274) 74,466

for bad debts

Capital 1,50,000 Bills receivable 1,860

Add Net profit 61,176 Land and Building 42,580

2,11,176 Furniture 5,130

Less Drawings (6,300) 2,04,876 Plant and Machinery 31,640

Insurance (prepaid) 50

Closing stock 70,000

2,39,596 2,39,596

The following were the balances extracted from the books of Yogita as on March 31, 2014:

Debit Balances Amount Credit Balances Amount

Rs. Rs.

Cash in hand 540 Sales 98,780

Cash at bank 2,630 Return outwards 500

Purchases 40,675 Capital 62,000

Return inwards 680 Sundry creditors 6,300

Wages 8,480 Rent 9,000

Fuel and Power 4,730

Carriage on sales 3200

Carriage on purchases 2040

Opening stock 5,760

Building 32,000
 Freehold land 10,000

Machinery 20,000

Salaries 15,000

Patents 7,500

General expenses 3,000

Insurance 600

Drawings 5,245

Sundry debtors 14,500

Taking into account the following adjustments prepare trading and profit and loss account and
balance sheet as on March 31, 2014 :

(a) Stock in hand on March 31, 2014,was Rs. 6,800.

(b) Machinery is to be depreciated at the rate of 10% and patents @ 20%.

(c) Salaries for the month of March, 2014 amounting to Rs. 1,500 were outstanding.

(d) Insurance includes a premium of Rs. 170 on a policy expiring on September 30, 2014.

(e) Further bad debts are Rs. 725. Create a provision @ 5% on debtors.

(f) Rent receivable Rs. 1,000.

Books of Yogita

Trading and Profit and Loss Account

for the year ended March 31, 2014

Dr. Cr.

Expenses/Losses Amount Revenues/Gains Amount

Rs. Rs.

Opening stock 5,760

Purchases 40,675 Sales 98,780

Less Return outwards (500) 40,175 Less Return inwards (680) 98,100

Wages 8,480 Closing stock 6,800

Fuel and Power 4,730

Carriage on purchases 2,040

Gross profit c/d 43,715

1,04,900 1,04,900

Salaries 15,000 Gross profit b/d 43,715

 Add Outstanding salaries 1,500 16,500 Rent 9,000

Carriage 3,200 Add Accrued rent 1,000 10,000

General expenses 3,000

Insurance 600
Less Prepaid insurance (85) 515

Further bad debts 725

Add Provision for doubtful debts 689 1,414

Depreciation : machinery 2,000

Patent 1,500 3,500

Net profit 25,586

(transferred to capital account)

53,715 53,715

Balance Sheet as at March 31, 2014

Dr. Cr.

Liabilities Amount Assets Amount

Rs. Rs.

Sundry creditors 6,300 Cash in hand 540

Cash in bank 2,630

Salaries outstanding 1,500 Sundry debtors 14,500

Capital 62,000 Less Further (725)

bad debts 13,775

Less Provision (689) 13,086

for bad debts

Add Net profit 25,586 Insurance prepaid 85

87,586 Stock 6,800

Rent accrued 1,000

Less Drawings (5,245) 82,341 Freehold land 10,000

Building 32,000

Machinery 20,000
Less Depreciation (2,000) 18,000

Patents 7,500

Less Depreciation (1,500) 6,000

90,141 90,141