FINAL ACCOUNTS

QUESTION 1

Trial Balance for financial the year (FY) ended 31st March 2017 of M/s Deepakshi shows
following details:

Particulars Debit (₹) Credit (₹)

Purchase & Sales 10,00,000 12,00,000
Debtors & Creditors 5,00,000 4,00,000
Opening Stock 2,00,000

Closing Stock 3,00,000

Other Expenses & Incomes 7,00,000 9,00,000

Fixed Assets & Long Term Liabilities 25,00,000 6,00,000
Capital 21,00,000

52,00,000 52,00,000

Additional Info: Creditors balance as on 1st April 2016 is ₹ 3,00,000

You are required to calculate : Cost of goods sold and amount paid to creditors during the year.
SOLUTION
i) Calculation of Cost of Goods sold:

Particulars ₹

Opening Stock 2,00,000

Add: Purchases (Closing stock already adjusted) 10,00,000

Cost of Goods Sold 12,00,000

Since, closing stock appears in Trial Balance, it means following entry has already been passed in
books:
Closing Stock A/c Dr. 3,00,000
To Purchases A/c 3,00,000
So, we can see purchases have already been reduced by the amount of unsold stock, therefore
no more adjustment needs to be made on account of closing stock for computing Cost of
goods sold (COGS).
ii) Calculation of amount paid to creditors:

Date Particulars ₹ Date Particulars ₹

To Bank A/c (Balancing 12,00,000 1.4.16 By Balance b/d 3,00,000

 Figure)

31.3.17 To Balance c/d 4,00,000 By Purchases A/c 13,00,000

16,00,000 (Note:1) 16,00,000

Note: 1) Purchases made during the year can be computed as:

Particulars ₹

Purchases as per Trial Balance 10,00,000

Add: Closing Stock already adjusted 3,00,000
Purchases made during the year 13,00,000

QUESTION 2

1,00,000 units were produced in a factory. Per unit material cost was Rs. 10 and per unit
labour cost was Rs. 5. That apart it was agreed to pay royalty @ Rs. 3 per unit to the
Japanese collaborator who supplied technology.

Required

Calculate Manufacturing cost.

SOLUTION

In this case Manufacturing Cost comprises of-

Raw Material consumed (1,00,000 x ₹ 10) ₹ 10,00,000
Direct Wages (1,00,000 x ₹ 5) ₹ 5,00,000
Direct Expenses (1,00,000 x ₹ 3) ₹ 3,00,000
₹ 18,00,000

QUESTION 3

Opening Inventory 1,00,000

Purchases 6,72,000
Carriage Inwards 30,000
Wages 50,000
Sales 11,00,000

Returns inward 1,00,000

Returns outward 72,000

Closing Inventory 2,00,000

Required
From the above information, prepare a Trading Account of M/s. ABC Traders for the year
ended 31 st March, 2017 and Pass necessary closing entries in the journal proper of M/s. ABC
Traders
SOLUTION
In the books of M/s. ABC Traders Trading Account
for the year ended 31 st March, 2016

Particulars Amount Particulars Amount

₹ ₹
To Opening Inventory 1,00,000 By Sales 11,00,000

To Purchases 6,72,000 Less: Returns (1,00,000) 10,00,000

Inward

Less: Returns (72,000) 6,00,000 By Closing 2,00,000

outward To Carriage 30,000 Inventory
Inwards
To Wages 50,000

To Gross profit 4,20,000

12,00,000 12,00,000

Journal Proper in the Books of

M/s. ABC Traders

Date Particulars Amount Amount

2017 ₹ ₹

Mar. Returns outward A/c Dr. 72,000

31
To Purchases A/c 72,000

(Being the transfer of returns to purchases account)

 Sales A/c Dr. 1,00,000

To Returns Inward A/c 1,00,000

(Being the transfer of returns to sales account)

Sales A/c Dr. 10,00,00 10,00,000

To Trading A/c 0
(Being the transfer of balance of sales account to
trading account)

Trading A/c Dr. 7,80,000

To Opening Inventory A/c 1,00,000

To Purchases A/c 6,00,000

To Wages A/c 50,000

To Carriage Inwards A/c 30,000

(Being the transfer of balances of opening Inventory,

purchases and wages accounts)

Closing Inventory A/c To Trading A/c Dr. 2,00,000 2,00,000

(Being the incorporation of value of closing Inventory)

Trading A/c Dr. 4,20,000

To Gross Profit 4,20,000

(Being the amount of gross profit)

Gross profit Dr. 4,20,000

To Profit and Loss A/c 4,20,000

(Being the transfer of gross profit to Profit and Loss

Account)

QUESTION 4

Revenue, Expenses and Gross Profit Balances of M/s ABC Traders for the year ended on 31st
March 2016 were as follows:
Gross Profit ₹4,20,000, Salaries ₹ 1,10,000, Discount (Cr.), ₹ 18,000, Discount (Dr.) ₹
19,000, Bad Debts ₹ 17,000, Depreciation ₹65,000, Legal Charges ₹ 25,000, Consultancy Fees
₹32,000, Audit Fees ₹ 1,000, Electricity Charges ₹ 17,000, Telephone, Postage and Telegrams ₹
12,000, Stationery ₹27,000, Interest paid on Loans ₹70,000.
Required
Prepare Profit and Loss Account of M/s ABC Traders for the year ended on 31st March, 2016.
Show necessary closing entries in the Journal Proper of M/s. ABC Traders also.
SOLUTION
In the Books of M/s. ABC Traders
Profit and Loss Account
For the year ended 31 st March, 2016

Particulars Amount Particulars Amount

₹ ₹
To Salaries 1,10,000 By Gross Profit 4,20,000
To Legal Charges 25,000 By Discount received 18,000
To Consultancy Fees 32,000

To Audit Fees 1,000

To Electricity Charges 17,000

To Telephone, Postage 12,000

&Telegrams
To Stationery 27,000

To Depreciation 65,000

To Discount Allowed 19,000

To Bad Debts 17,000

To Interest 70,000

To Net Profit 43,000

4,38,000 4,38,000

Journal Proper in the

Books of M/s. ABC Traders

Date Particulars Amount Amount

2016 ₹ ₹

March 31 Profit & Loss Account Dr. 3,95,000

To Salaries A/c 1,10,000

To Legal Charges A/c 25,000

To Consultancy Fees A/c 32,000

To Audit Fees A/c 1,000

To Electricity Charges A/c 17,000

To Telephone, Postage & Telegrams A/c 12,000

To Stationery A/c 27,000

To Depreciation A/c 65,000

To Discount Allowed A/c 19,000

To Bad Debts A/c 17,000

To Interest A/c 70,000

(Being the transfer of balances of various expenses

accounts)

Discount Received A/c Dr. 18,000

To Profit & Loss A/c 18,000

(Being the transfer of discount received account

balance)

Gross Profit A/c Dr. 4,20,000

To Profit & Loss A/c 4,20,000

(Being the transfer of gross profit from Trading

Account)

Profit & Loss A/c Dr. 43,000

To Net Profit A/c 43,000

(Being the ascertainment of net profit)

Net Profit A/c To Capital A/c Dr. 43,000 43,000

(Being the transfer of net profit to Capital A/c)
QUESTION 5

Mr. Vimal runs a factory which produces soaps. Following details were available in respect of his
manufacturing activities for the year ended on 31.3.2016:
₹

Opening Work-in-Process (10,000 units) 16,000

Closing Work-in-Process (12,000 units) 20,000
Opening inventory of Raw Materials 1,70,000
Closing inventory of Raw Materials 1,90,000
Purchases 8,20,000
Hire charges of machine @ ₹ 0.60 per unit manufactured

Hire charges of factory 2,20,000

Direct wages-Contracted @ ₹ 0.80 per unit manufactured and

@ ₹ 0.40 per unit of Closing W.I.P.

Repairs and Maintenance 1,80,000

Units produced – 5,00,000 units

Required
Prepare a Manufacturing Account of Mr. Vimal for the year ended 31.3.2016.
SOLUTION
In the Books of Mr. Vimal
Manufacturing Account for the Year ended 30.6.2016

Particulars Units Amount Particulars Units Amount

₹ ₹

To Opening Work- 10,000 16,000 By Closing Work- 12,000 20,000

in- Process in- Process
To Raw Materials By Trading A/c – 5,00,000 19,00,800
Consumed: Cost of finished
Opening inventory 1,70,000 goods transferred

Add: Purchases 8,20,000

9,90,000

Inventory (1,90,000) 8,00,000

To Direct Wages
-W.N.(1) 4,04,800

To Direct expenses:

Hire charges

on Machinery

- W.N. (3) 3,00,000

To Indirect expenses:

Hire charges of

Factory Shed 2,20,000

Repairs Maintenance 1,80,000

19,20,800 19,20,800

Working Notes:
(1) Direct Wages – 5,00,000 units @ ₹ 0.80 = ₹ 4,00,000
(2)12,000 units @ ₹ 0.40 = ₹
4,800
₹ 4,04,800
(3) Hire charges on Machinery – 5,00,000 units @ ₹ 0.60 = ₹ 3,00,000

QUESTION 6

On 1st Jan. 2017 provision for Doubtful Debts existed at ₹ 40,000. Trade receivables on
31.12.2017 were ₹ 15,00,000; bad debts totalled ₹ 1,00,000. It is required to write off the
bad debts and create a provision equal to 5% of the Trade receivables' balances.
Required
Show how you would compute the amount debited to the Profit and Loss Account.

SOLUTION

PARTICULARS ₹

Opening Provision (Cr.) 40,000

Bad Debts written off (Dr.) 1,00,000
Short Provision 60,000
Provision required (Dr.) (5% of ₹ 14,00,000) 70,000
Additional amount required for debit to the Profit and Loss Account (Dr.) 1,30,000

The account will appear as follows:

Provision for Doubtful Debts Account

2017 ₹ 2017 ₹

Dec. 31 To Bad Debts Account 1,00,000 Jan. 1 By Balance b/d 40,000

To Balance c/d (required) 70,000 Dec. 31 By Profit and Loss A/c 1,30,00
(Balancing Figure) 0

1,70,000 1,70,00
0

2018

Jan 1 By Balance b/d 70,000

QUESTION 7
The following is the Trial Balance of C. Wanchoo on 31st Dec. 2017.
Trial Balance on 31st December, 2017

Particulars ₹ ₹

Capital Account 10,00,000

Inventory Account 2,00,000

Cash in hand 1,44,000

Machinery Account 7,36,000

Purchases Account 18,20,000

Wages Account 10,00,000

Salaries Account 10,00,000

Discount Allowed A/c 50,000

Discount Received A/c 30,000

Sundry Office Expenses Account 6,00,000

Sales Account 50,00,000

Sums owing by customer (Trade receivables) 8,50,000

Trade payables (sums owing to suppliers) 3,70,000

Total 64,00,000 64,00,000

Value of Closing Inventory on 31st Dec. 2017 was ₹ 2,70,000
Required
Prepare closing entries for the above items and Prepare Trading and Profit and Loss Account.
SOLUTION

Date Particulars L.F. ₹ ₹

2017

Dec. 31 Trading Account Dr. 30,20,000

To Inventory Account 2,00,000

To Purchase A/c 18,20,000

To Wages A/c 10,00,000

(Being the accounts in the Trial Balance which have to be

transferred to the Trading Account debit side)

Dec. 31 Sales Account Dr. 50,00,000

To Trading A/c 50,00,000

(Being the amount of Sales transferred to the credit of

Trading Account)

Dec. 31 Inventory (Closing) A/c To Trading A/c Dr. 2,70,000 2,70,000

(Being the value of Inventory on hand on 31 st Dec.
2016)

Dec. 31 Trading A/c Dr. 22,50,000

To Profit and Loss A/c 22,50,000

(Beina the transfer of gross profit.)

Dec. 31 Profit and Loss A/c Dr. 16,50,000

To Discount Allowed Account 50,000

To Salaries A/c 10,00,000

To Sundry Office Expenses A/c 6,00,000

(Being thjk e various expense accounts transferred to the

P & L Account)
Dec. 31 Discount Received A/c Dr. 30,000

To P & L Account 30,000

(Being the credit balance of discount received transferred

to Profit and Loss A/c)

Dec. 31 Profit and Loss A/c To Capital A/c Dr. 6,30,000 6,30,000
(Being the transfer to Net Profit to the Capital Account)

1,28,50,00 1,28,50,00
0 0

Question 8

Given below Trial Balance of M/s Dayal Bros, as on 31st March, 2017:

Particulars Debit Balances Credit Balances

₹ ₹
Capital A/c 7,00,000

Land and Building 3,00,000

14% Term Loan 4,00,000

Loan from M/s. D & Co. 4,60,000

Trade receivables 4,20,000

Cash in hand 20,000

Inventories in Trade 6,00,000

Furniture 2,00,000

Trade payables 40,000

Advances to Suppliers 1,00,000

Net Profit 1,00,000

Drawings 60,000

17,00,000 17,00,000

Required
Prepare Balance Sheet as on 31st March, 2017.
SOLUTION
In the Books of M/s Dayal Bros.
Balance Sheet
as on 31 st March, 2017

Liabilities ₹ Amount ₹ Assets Amount ₹

Capital: Balances 7,00,000 Land & Building Furniture 3,0000
Add: Net Profit 1,00,000 2,0,000

8,00,000 Inventories in Trade 6,00,000

Less: Drawings (60,000) 7,40,000 Trade receivables 4,20,000

14% Term Loan 4,00,000 Advances to Suppliers 1,00,000

Loan from M/s D & 4,60,000 Cash in Hand 20,000

Co.
Trade payables 40,000

16,40,000 16,40,000

Question 9

. Mr. Pankaj runs a factory which produces motor spares of export quality. The following details
were obtained about his manufacturing expenses for the year ended on 31.3.2016.
₹

W.I.P. - Opening 3,90,000

-Closing 5,07,000

Raw Materials - Purchases 12,10,000

- Opening 3,02,000

-Closing 3,10,000

- Returned 18,000

- Indirect material 16,000

Wages - direct 2,10,000

- indirect 48,000
Direct expenses - Royalty on production 1,30,000

- Repairs and maintenance 2,30,000

- Depreciation on factory shed 40,000

- Depreciation on plant & machinery 60,000

By-product at 20,000
selling price

You are required to prepare Manufacturing Account of Mr. Pankaj for the year ended on
31.3.2016.
SOLUTION

In the Books of Mr. Pankaj

Manufacturing Account
for the year ended on 31.3.2016

Particulars Amount Particulars Amount

₹ ₹

To Opening W.I.P. 3,90,000 By Closing W-l-P 5,07,000

To Raw Material Consumed: By – products 20,000

Opening inventory 3,02,000 By Trading A/c- 17,81,000

Purchases 12,10,000 Cost of finished

15,12,000 goods transferred

Less: Return (18,000)

14,94,000

Less: Closing inventory (3,10,000) 11,84,000

To Direct Wages 2,10,000

To Direct expenses:

Royalty 1,30,000

To Manufacturing
Overhead:
Indirect Material 16,000

Indirect Wages Repairs & 48,000

Maintenance 2,30,000
Depreciation on

Factory Shed 40,000

Depreciation on Plant &

Machinery 60,000 3,94,000

23,08,000 23,08,000

QUESTION 10

From the following prepare: (a) Manufacturing Account; (b) Trading and Profit & Loss
Account; and (c) Balance Sheet.
TRIAL BALANCE AS AT 31 ST MARCH 2018
₹ ₹

Opening Stocks: Insurance (Factory) 7,000

Raw Materials 57,100 Insurance (General) 800

Finished goods 5,60,000 Bad Debts 4,100

Work-in-Progress 10,000 General Expenses 29,420

Wages 2,00,000 Carriage Outward 94,240

Purchases 8,82,740 Other Assets 11,38,840

Carriage Inward 36,860 Drawings 10,000

Repairs 60,000 Sales 17,40,000

Salaries (Factory) 21,000 Profit and Loss Balance (Op) 1,20,000

Salaries (General) 10,000 Capital 13,10,000

Rates and Taxes 22,400 Sale of Scrap 10,000
Travelling Expenses 35,500

Closing Stocks: Raw Materials ₹ 52,720; Finished Goods ₹ 3,43,240, Work-in-Progress ₹

1,00,000.
SOLUTION:
MANUFACTURING ACCOUNT
DR. for the year ending on 31st March, 2018 CR.

Particulars ₹ Particulars ₹

To Raw Material By Sale of Scrap 10,000

consumed:

Opening Stock 57,100 By Closing WIP 1,00,000

Add: Purchases 8,82,740 By Trading A/c (Cost of

Less: Closing stock 52,720 8,87,120 Goods manufactured t/f) 11,11,980

To Opening WIP 10,000

To Wages 2,00,000

To Carriage Inward 36,860

To Repairs 60,000

To Salaries 21,000

To Insurance 7,000

12,21,980 12,21,980

TRADING AND PROFIT & LOSS ACCOUNT

DR. FOR THE YEAR ENDED 31ST MARCH 2018 CR.

Particulars ₹ Particulars ₹

To Opening Stock of Finished 5,60,000 By Sales 17,40,000

Goods By Closing Stock of Finished

To Manufacturing A/c Goods 3,43,240

(Cost of goods manufactured) 11,11,980

To Gross Profit c/d 4,11,260

20,83,240 20,83,240

To Salaries (General) 10,000 By Gross Profit b/d 4,11,260

To Rent & Taxes 22,400

To Travelling Expenses 35,500

To Insurance (General) 800

To Bad Debts 4,100

To General Expenses 29,420

To Carriage Outward 94,240

To Net Profit transferred to 2,14,800

Capital A/c

4,11,260 4,11,260

BALANCE SHEET AS AT 31 ST MARCH 2018

Liabilities ₹ Assets ₹

Capital Account: Closing Stocks:

Opening Balance 13,10,000 Raw Materials 52,720

Less: Drawings 10,000 13,00,000 Work in progress 1,00,000

Profit & Loss A/c Finished Goods 3,43,240

Opening Balance 1,20,000 Other Assets: 11,38,840

Add:
Add: Current year’s 2,14,800 3,34,800
profit

16,34,800 16,34,800

QUESTION 11

Following are the Manufacturing A/c, Creditors A/c and Trading A/c provided by Ms. Shivi related
to 2016-17. There are certain figures missing from these accounts.
Raw Material
Material A/c

Date Particulars Amount Date Particulars Amount

₹ ₹
To Opening Stock A/c 1,00,000 By Raw Material
Consumed
To Creditors A/c ………… By Closing Stock A/c …………..
 Creditors A/c

Date Particulars Amount Date Particulars Amount

₹ ₹
To Bank A/c To Balance 22,00,00 By Balance b/d 15,00,0
c/d 0 00
6,00,000

Manufacturing A/c

Particulars Amount Particulars Amount

₹ ₹
To Raw Material Consumed By Trading A/c 17,94,000

To Wages 3,50,000

To Depreciation 2,00,000

To Direct Expenses 2,44,000

Additional Information:
1) Purchase of machinery worth ₹ 10,00,000 has been omitted. Machinery are chargeable at a
depreciation rate of 10%.
2) Wages include the following
Paid to Factory Workers – ₹ 3,00,000
Paid to labour at office – ₹ 50,000
3) Direct Expenses include following:
♦ Electricity charges of ₹ 80,000 of which 30% pertained to office.
♦ Fuel Charges of ₹ 20,000
♦ Freight Inwards of ₹ 35,000
♦ Delivery charges to customers – ₹ 20,000.
You are required to prepare revised Manufacturing A/c, and Raw Material A/c.
SOLUTION
SOLUTION

Manufacturing A/c

Particulars Amount Particulars Amount

₹ ₹

To Raw Material Consumed

(Balancing Figure) 10,00,000 By Trading A/c (W.N. 4) 18,00,000

To Wages (W.N. 2) 3,00,000

To Depreciation (W.N. 1) 3,00,000

To Direct Expenses (W.N. 3) 2,00,000

18,00,000 18,00,000

Raw Material A/c

Date Particulars Amount Date Particulars Amount

₹ ₹
To Opening Stock A/c 1,00,000 By Raw Material 10,00,000
Consumed
(from Trading A/c
above)
To Creditors A/c (W.N. 5) 13,00,000 By Closing Stock A/c 4,00,000

14,00,000 (Balancing Figure) 14,00,000

Working Notes:
1) Since purchase of Machinery worth ₹ 10,00,000 has been omitted.
So, depreciation omitted from being charged = ₹ 10,00,000 ₹ 10%
= ₹ 1,00,000
Correct total depreciation expense = ₹ (2,00,000 + 1,00,000)
2) Wages worth ₹ 50,000 will be excluded from manufacturing account as they pertain to office
and hence will be charged P&L A/c.
3) Expenses to be excluded from direct expenses:
Office Electricity Charges ( 80,000 ₹ 30%) 24,000
Delivery Charges to Customers 20,000
Total expenses not part of Direct Expenses 44,000
=> Revised Direct Expenses= ₹ (2,44,000 – 44,000)
= ₹ 2,00,000
Fuel charges are related to factory expenses and also freight inwards are incurred for bringing
goods to factory/ godown so they are part of direct expenses.
Revised Balance to be transferred to Trading A/c: 4)

Particulars Amount
₹
Current Balance transferred 17,94,000

Add: Depreciation charges not recorded earlier 1,00,000

Less: Wages related to Office (50,000)
Less: Office Expenses (44.000)

Revised balance to be transferred 18,00,000

5)
Creditors A/c

Date Particulars Amount Date Particulars Amount

₹ ₹

To Bank A/c 22,00,000 By Balance b/d 15,00,000

To Balance c/d 6,00,000 By Raw Materials A/c ( 13,00,000

Bal. figure)

28,00,000 28,00,000

QUESTION 12

The balance sheet of Thapar on 1 st January, 2017 was as follows:

Liabilities Amount Assets Amount

₹ ₹
Trade payables 15,00,000 Plant & Machinery 30,00,000
Expenses Payable 1,50,000 Furniture & Fixture 3,00,000
Capital 50,00,000 Trade receivables 14,00,000
 Cash at Bank 6,50,000

Inventories 13,000,000

66,50,000 66,50,000

During 2017, his Profit and Loss Account revealed a net profit of ₹ 15,30,000. This was after
allowing for the following:
(a) Interest on capital @ 6% p.a.
(b) Depreciation on Plant and Machinery @ 10% and on Furniture and Fixtures @5%.
(c) A provision for Doubtful Debts @ 5% of the trade receivables as at 31st December, 2017.
But while preparing the Profit and Loss Account he had forgotten to provide for (1) outstanding
expenses totaling ₹ 1,80,000 and (2) prepaid insurance to the extent of ₹ 120,000.
His current assets and liabilities on 31st December, 2017 were : Inventories ₹ 14,50,000; Trade
receivables ₹ 20,00,000; Cash at Bank ₹ 10,35,000 and Trade payables ₹ 11,40,000.
During the year he withdrew ₹ 6,00,000 for domestic use.

Required
Draw up his Balance Sheet at the end of the year.
SOLUTION
Profit and Loss Account (Revised)

Particulars ₹ Particulars ₹

To Outstanding expenses 1,80,000 By Balance b/d 15,30,000

To Net profit 13,70,000 By Prepaid insurance 20,000

15,50,000 15,50,000

Balance Sheet of Thapar as on 31st December, 2016

Liabilities ₹₹ Assets ₹

₹
Capital 50,00,000 Cash at Bank 10,35,000
₹
Add: Net Profit 13,70,000 Trade receivables 20,00,000
₹
63,70,000 Less: Provision for
₹
doubtful debts (1,00,000) 19,00,000
₹
Less . Drawings (6,00,000) Plant and Machinery 30,00,000
₹
57,70,000 Less: Depreciation (3,00,000) 27,00,000
 ₹
Add: Interest on 3,00,000 Furniture & Fixtures 3,00,000
capital
₹
Outstanding expenses Less: Depreciation (15,000) 2,85,000
₹
Trade payables Inventories 14,50,000
₹
Prepaid insurance 20,000
₹
73,90,000

QUESTION 13

BALANCE SHEET
As at 31 st December, 2017

Liabilities ₹ Assets ₹

Mahendra & Sons 5,60,000 Cash in hand 43,000

Capital 20,00,000 Cash at Bank 2,67,500
Trade receivables 7,49,500

Closing Inventory 9,00,000

Machinery and Equipment 6,00,000

25,60,000 25,60,000

Required
From the above given balance sheet prepare the relevant opening entry.
SOLUTION
The Opening Entry :01 -01 -2017

Dr. Cr.
₹ ₹
Cash A/c Dr. 43,000

Bank A/c Dr. 2,67,500

Trade receivables Dr. 7,49,500

Inventory A/c Dr. 9,00,000

Machinery and Equipment A/c Dr. 6,00,000

To Mahendra & Sons A/c 5,60,000

To Capital A/c 20,00,000

(Being the balances brought forward) 25,60,000 25,60,000

Posting the Opening Entry

All the assets show debit balance. Such accounts are opened and the relevant amounts written on
the debit side as "To Balance b/d". Following is the cash account arising from the entry given
above.
Cash Account

Date Particulars Amount ₹ Date Particulars Amount ₹

2017
Jan. 1 To Balance b/d 43,000

Similarly account should be opened for all other assets and relevant amount should be posted on
the Dr. side.
The accounts of liabilities show credit balances. An account for each liability is opened and the
relevant account is written on the credit side as "By Balance b/d". This is shown below by
opening the accounts of Mahendra & Sons mentioned in the entry given above.
Mahendra & Sons

Date Particulars Amount Date Particulars Amount

₹ 2017 ₹

Jan. 1 To Balance b/d 5,60,000

By posting the opening entry completely all the accounts of assets and liabilities in the beginning
are opened. We illustrate below a complete cycle of journalising, posting and trial balance.
Students should work through the following illustration given by way of practice on the method
of making adjustments in some of the accounts contained in a Trial Balance and afterwards
preparing the final Account.
QUESTION 14

Shri Mittal gives you the following Trial Balance and some other information:
Trial Balances as on 31st March, 2016

Particulars Dr. Cr.

₹ ₹
Capital 8,70,000

Purchases and Sales 6,05,000 12,10,000

Opening Inventory 72,000

Trade receivables and Trade payables 90,000 1,70,000

14% Bank Loan (loan taken at year end) 2,00,000

Overdrafts (overdraft taken at year end) 1,12,000

Salaries 2,70,000

Advertisements 1,10,000

Other expenses 60,000

Returns 40,000 30,000

Furniture 4,50,000

Building 8,90,000

Cash in Hand 5,000

25,92,000 25,92,000

Closing Inventory on 31st March, 2017 was valued at ₹ 1,00,000.

Required
Prepare final accounts of Shri Mittal for the year ended 31st March, 2017.
SOLUTION
In the books of Shri Mittal Trading Account
for the year ended 31st March, 2017

Particulars Amount Particulars Amount

₹ ₹
To Opening inventory 72,000 By Sales 12,10,000

To Purchases 6,05,000 Less: Returns (40,000) 11,70,000

Less: Returns (30,000) 5,75,000 By Closing inventory 1,00,000

To Gross Profit 6,23,000

 12,70,000 12,70,000

Profit and Loss Account

For the year ended 31 st March,
March, 2016

Particulars Amount Particulars Amount

₹ ₹
To Salaries 2,70,000 By Gross profit 6,23,000
To Advertisement 1,10,000

To Other expenses 60,000

To Net profit 1,83,000

6,23,000 6,23,000

Balance Sheet as on 31 st March, 2017

Liabilities Amount Assets Amount

₹ ₹ ?

Capital 8,70,000 Building 8,90,000

Add: Net profit 1,83,000 10,53,000 Furniture 4,50,000

14% Bank Loan 2,00,000 Trade receivables 90,000

Trade payables 1,70,000 Closing inventory 1,00,000

Overdrafts 1,12,000 Cash in hand 5,000

15,35,000 15,35,000

Note: As loan and overdraft taken at year end so no interest shown.

QUESTION 15

Mr. Mohan gives you the following trial balance and some other information:
Trial Balance as on 31 st March, 2017

Particulars ₹ ₹

Capital 6,50,000

Sales 9,70,000

Purchases 4,30,000

Opening Inventory 1,10,000

Freights Inward 40,000

Salaries 2,10,000

Other Administration Expenses 1,50,000

Furniture 3,50,000

Trade receivables and Trade payables 2,10,000 1,90,000

Returns 20,000 12,000
Discounts 19,000 9,000
Bad Debts 5,000

Investments in Government Securities 1,00,000

Cash in Hand and Cash at Bank 1,87,000

18,31,000 18,31,000

Other Information:
(i) Closing Inventory was ₹ 1,80,000;
(ii) Depreciate Furniture @ 10% p.a.
Required
Prepare Trading and Profit and Loss Account for the year ended on 31.3.2016 and Balance Sheet
of Mr. Mohan as on that date.
SOLUTION
In the books of Mr. Mohan
Trading Account for the year
ended 31 st March, 2017

Particulars Amount ₹ Particulars ₹ Amount ₹

To Opening 1,10,000 By Sales 9,70,000

Inventory
To Purchases Less: 4,30,000 4,18,000 Less: Returns By (20,000) 9.50.000
Returns (12,000) Closing Inventory 1.80.000

To Freight Inwards 40,000

To Gross profit 5,62,000

11,30,000 11,30,000
 Profit and Loss Account for the year ended 31 st March, 2017

Particulars ₹ Particulars ₹

To Depreciation 35,000 By Gross profit 5,62,000

To Salaries 2,10,000 By Discount received 9,000
To Administration expenses 1,50,000

To Discount allowed 19,000

To Bad debts 5,000

To Net profit 1,52,000

5,71,000 5,71,000

Balance Sheet as on 31 st March, 2017

Liabilities Amount Assets Amount

₹ ₹
Capital 6,50,000 Furniture 3,50,000

Add: Net profit 1,52,000 8,02,000 Less: Depreciation (35,000) 3,15,000

Trade payables 1,90,000 Closing Inventory 1,80,000

Trade receivables 2,10,000

Investment in Govt

Securities 1,00,000

Cash in Hand and

Cash at Bank 1,87,000

9,92,000 9,92,000

QUESTION 16

The Balance
Balance Sheet of Mr. Popatlal, a merchant on 31st March, 20 1 7 stood as below:

Liabilities Amount Assets Amount

₹ ₹
Capital 2,40,000 Fixed Assets 1,25,600

Trade payables 1,64,000 Inventories 2,06,400

Bank Overdraft 1,46,000 Trade receivables 1,88,000

Less: Provision (6,200) 1,81,800

 Cash 36,200

5,50,000 5,50,000

Required
Show opening journal entry on 1st April, 2017 in the books of Mr. Popatlal.
SOLUTION
Opening entry

(Dr.) ₹ (Cr.) ₹

Fixed Assets A/c Dr. 1,25,600

Inventories A/c Dr. 2,06,400

Trade receivables A/c Dr. 1,88,000

Cash A/c Dr. 36,200

To Trade payables A/c 1,64,000

To Bank Overdraft A/c 1,46,000

To Provision for Doubtful Debts A/c 6,200

To Capital A/c 2,40,000

QUESTION 17

The following is the schedule of balances as on 31.3.17 extracted from the books of Shri
Gavaskar, who carries on business under the same name and style of Messrs Gavaskar Viswanath &
Co., at Bombay:

Particulars Dr. Cr.

₹ ₹
Cash in hand 14,000

Cash at bank 26,000

Sundry Debtors 8,60,000

Stock on 1.4.2016 6,20,000

Furniture & fixtures 2,14,000

Office equipment 1,60,000

Buildings 6,00,000

Motor Car 2,00,000

Sundry Creditors 4,30,000

Loan from Viswanath 3,00,000

Provision for bad debts 30,000

Purchases 14,00,000

Purchase Returns 26,000

Sales 23,00,000

Sales Returns 42,000

Salaries 1,10,000

Rent for Godown 55,000

Interest on loan from Viswanath 27,000

Rates & Taxes 21,000

Discount allowed to Debtors 24,000

Discount received from Creditors 16,000

Freight on purchases 12,000

Carriage Outwards 20,000

Drawings 1,20,000

Printing and Stationery 18,000

Electricity Charges 22,000

Insurance Premium 55,000

General office expenses 30,000

Bad Debts 20,000

Bank charges 16,000

Motor car expenses 36,000

Capital A/c 16,20,000

TOTAL 47,22,000 47,22,000

Prepare Trading and Profit and Loss Account for the year ended 31st March 2017 and the
Balance Sheet as at that date after making provision for the following:
1. Depreciate: (a) Building used for business by 5 percent; (b) Furniture and fixtures by 10
percent; One steel table purchased during the year for ₹ 14,000 was sold for same price but
the sale proceeds were wrongly credited to Sales Account; (c) Office equipment by 15
 percent; Purchase of a typewriter during the year for ₹ 40,000 has been wrongly debited to
purchase; and (d) Motor car by 20%.
2. Value of stock at the close of the year was ₹ 4,40,000.
3. Two month's rent for godown is outstanding.
4. Interest on loan from Viswanath is payable at 12 percent per annum, this loan was taken on
1.5.2016.
5. Reserve for bad debts is to be maintained at 5 percent of Sundry Debtors.
6. Insurance premium includes ₹ 40,000 paid towards proprietor's life insurance policy and the
balance of the insurance charges cover the period from 1.4.2016 to 30.6.17
SOLUTION
M/s Gavaskar Viswanath & Co.
Trading for the year ended
ended 31 st March 2017

Particulars Details Amount Particulars Details Amount

₹ ₹

To opening Stock 6,20,000 By Sales 23,00,0

00
To Purchases 14,00,0 Less: Sale of 14,000
00 furniture included
in sale
Less: Typewriter included 40,000 Less: Sales Returns 42,000 22,44,000
in purchases
Less: Purchase Returns 26,000 13,34,000 By Closing Stock 4,40,000

To Freight on purchase 12,000

To Gross Profit c/d 7,18,000

26,84,000 26,84,000

M/s Gavaskar Viswanath & Co.

Profit/Loss Account
for the year ended 31 st March 2017.

Particular Details Amount Particular Details Amount

₹ ₹

To Salaries 1,10,000 By Gross profit 7,18,000

b/d
To Rent for Godown 55,000
Add: Outstanding 11,000 66,000 By Discount 16,000
received

To provision for doubtful 33,000

debts(4)
To Rent and Taxes 21,000

To Discount Allowed 24,000

To Carriage outwards 20,000

To printing and stationery 18,000

To Electricity charges 22,000

To Insurance premium (1) 12,000

To Depreciation (2) 1,20,000

To general office expenses 30,000

To Bank Charges 16,000

To interest on loan 27,000

Add: Outstanding (3) 6,000 33,000

To Motor car expenses 36,000

To Net Profit transferred to 1,73,000

Capital a/c

7,34,000 7,34,000

Balance Sheet of M/s Gavaskar Vishwanath & Co.

as at 31 st March 2017

Liabilities Details Amount Assets Details Amount

₹ ₹
Capital 16,20,000 Building 6,00,000

Add: Net Profit 1,73,000 Less: Dep. (30,000) 5,70,000

Less: Drawings (1,20,000)

Less: Insurance Premium (40.000) 16,33,000 Motor Car 2,00,000

Less: Dep. (40,000) 1,60,000

Loan from Vishwanath 3,00,000

Add: Outstanding 6,000 3,06,000 Office equipment 2,00,000

 Less: Dep. (30,000) 1,70,000

Sundry Creditors 4,30,000

Outstanding rent 11,000 Furniture & 2,00,000

Fixture
Less: Dep. (20,000) 1,80,000

Stock in Trade 4,40,000

Sundry Debtors 8,60,000

Less: Provision (43,000) 8,17,000

for doubtful
debts

Cash at hand 26,000

Cash in bank 14,000

Prepaid insurance 3,000

(1)

23,80,000 23,80,000

Working Notes:
(1) Insurance premium

Insurance premium as given in trial balance 55,000

Less: Personal premium (40,000)
Less: Prepaid for 3 months

( 15,000/15× 3 ) (3,000)

Transfer to P/L a/c 12,000

(2). Depreciation

Building @ 5% on 6,00,000 30,000

Motor Car @ 20% on 2,00,000 40,000
Furniture & Fittings @ 10% on 2,00,000(2,14,000-14,000) 20,000
Office Equipment @ 15% on 2,00,000 (1,60,000 + 40,000) 30,000

Total 1,20,000
(3). Interest
Interest on Loan

Interest on Loan (3,00,000 x 12% x 11/12) = 33,000

Less: interest as per Trial Balance (27,000)

P/L account (Outstanding) 6,000

(4)
Provision for bad debts a/c

Particulars Amount Particulars Amount

₹ ₹
To bad debts a/c 20,000 By balance b/d 30,000
To balance c/d 43,000 By P&L a/c 33,000

63,000 63,000

QUESTION 18

Crimpson Ltd.'s profit and loss account for the year ended 31 st March, 20 1 6 includes the
following information:

(i) Depreciation 57,500

(ii) Bad debts written off 21,000
(Hi) Increase in provision for doubtful debts 18,000
(iv) Proposed dividend 15,000
(v) Retained profit for the year 20,000
(vi) Liability for tax 4,000
Required

State which one of the items (i) to (vi) above are – (a) transfer to provisions; (b) transfer to
reserves; and (c) neither related to provisions nor reserves.
Solution
(a) Transfer to provisions – (i), (iii) (vi)
(b) Transfer to reserves – (v)
(c) Neither related to provisions nor reserves – (ii), (iv).
QUESTION 19

From the following particulars extracted from the books of Ganguli, prepare trading and profit
and loss account and balance sheet as at 31st March, 2016 after making the necessary
adjustments:
₹ ₹

Ganguli's capital account (Cr.) 5,40,500 Interest received 7,250

Stock on 1.4.2015 2,34,000 Cash with Traders Bank Ltd. 40,000
Sales 14,48,000 Discounts received 14,950
Sales return 43,000 Investments (at 5%) as on 25,000
1.4.2015
Purchases 12,15,500 Furniture as on 1 -4-2015 9,000
Purchases return 29,000 Discounts allowed 37,700
Carriage inwards 93,000 General expenses 19,600
Rent 28,500 Audit fees 3,500
Salaries 46,500 Fire insurance premium 3,000
Sundry debtors 1,20,000 Travelling expenses 11,650
Sundry creditors 74,000 Postage and telegrams 4,350
Loan from Dena Bank Ltd. 1,00,000 Cash in hand 1,900
(at 12%)
Interest paid 4,500 Deposits at 10% as on 1,50,000
1-4-2015 (Dr.)

Printing and stationery 17,000 Drawings 50,000

Advertisement 56,000

Adjustments:
(1) Value of stock as on 31st March, 2016 is ₹ 3,93,000. This includes goods returned by
customers on 31st March, 2016 to the value of ₹ 15,000 for which no entry has been
passed in the books.
(2) Purchases include furniture purchased on 1st January, 2016 for ₹ 10,000.
(3) Depreciation should be provided on furniture at 10% per annum.
(4) The loan account from Dena bank in the books of Ganguli appears as follows:
₹ ₹

31.3.2016 To Balance c/d 1,00,000 1.4.2015 By Balance b/d 50.000

31.3.2016 By Bank 50.000

1,00,000 1,00,000

(5) Sundry debtors include ₹ 20,000 due from Robert and sundry creditors include ₹ 10,000
due to him.
(6) Interest paid include ₹ 3,000 paid to Dena bank.
(7) Interest received represents ₹ 1,000 from the sundry debtors and the balance on
investments and deposits.
(8) Provide for interest payable to Dena bank and for interest receivable on investments and
deposits.
(9) Make provision for doubtful debts at 5% on the balance under sundry debtors. No such
provision need to be made for the deposits.
SOLUTION

In the books of Ganguli Trading and

and
Profit & Loss Account
for the year ended 31-
31-3-2016
₹ ₹ ₹ ₹

To Opening stock 2,34,000 By Sales 14,48,000

To Purchases 12,15,500 Less: Returns (58,000) 13,90,000

Less: Transfer to (10,000) By Closing stock 3,93,000

furniture A/c

12,05,500

Less: Returns (29,000) 11,76,500

To Carriage inwards 93,000

To Gross profit c/d 2,79,500

17,83,000 17,83,000

To Salaries 46,500 By Gross profit b/d 2,79,500

To Rent 28,500 By Interest 17,250

To Advertisement 56,000 By Discount received 14,950

To Printing & stationery 17,000

To Interest 7,500

To Discount allowed 37,700

To General expenses 19,600

To Travelling expenses 11,650

To Fire insurance premium 3,000

To Postage & telegrams 4,350

To Provision for doubtful 4,750

debts (W.N.I)

To Depreciation on 1,150
furniture
To Audit fees 3,500

To Capital A/c (Net 70,500

profit
transferred)

3,11,700 3,11,700

Balance sheet as on 31-

31-3-2016

Liabilities ₹ ₹ Assets ₹ ₹

Capital account: Furniture 9,000

Balance on 1-4-15 5,40,500 Additions during the 10,000

year

Add: Net profit 70,500 19,000

6,11,000 Less: Depreciation (1,150) 17,850

Less: Drawings (50,000) 5,61,000 Investments 25,000

Loan from Dena Bank 1,00,000 Deposits 1,50,000

Ltd.
Insurance accrued on bank 3,000 Interest accrued on 10,000

loan (W.N.2) investment &

deposits
 (W.N.3)

Sundry creditors 64,000 Stock in trade 3,93,000

Sundry debtors 95,000

Less: Provision (4,750) 90,250

Cash with Traders 40,000

Bank Ltd.
Cash in hand 1,900

7,28,000 7,28,000

Working Notes:

1. Calculation of provision for doubtful debts: ₹

Sundry debtors as per trial balance 1,20,000

Less: Sales returns not recorded (15.000)

1,05,000

Less: Cancellation against sundry creditors (10,000)

Adjusted balance of sundry debtors 95,000

Provision for doubtful debts @ 5% 4,750

2. Accrued interest on bank loan:

Annual interest @12% 6,000

Less: Interest paid to Dena bank (3,000)

Accrued interest 3,000

3. Interest accrued on investments and deposits: 1,250

Annual interest on investments @ 5%
Annual interest on deposits @ 10% 15,000

Less: Interest received on investments and deposits 16,250

(6,250)
Accrued interest 10,000
QUESTION
QUESTION 20

Sengupta & Co. employs a team of eight workers who were paid ₹ 30,000 per month each
in the year ending 31st December, 2015. At the start of 2016, the company raised salaries
by 10% to ₹ 33,000 per month each.
On July 1,2016 the company hired two trainees at salary of ₹ 21,000 per month each. The
work force are paid salary on the first working day of every month, one month in arrears, so
that the employees receive their salary for January on the first working day of February etc.
You are required to calculate:
(i) Amount of salaries which would be charged to the profit and loss for the year ended 31st
December, 2016.
(ii) Amount actually paid as salaries during 2016
(iii) Outstanding Salaries as on 31 st December, 2016.

SOLUTION

(i) Salaries to be charged to profit and loss account for the year ended 31st 31,68,000
December, 2016:
Salaries of 8 employees for full year @ ₹ 33,000 per month each
Salaries of 2 trainees for 6 months @ ₹ 21,000 p.m. 2,52,000

34,20,00
0

(ii) Salaries actually paid in 2016 2,40,000

December, 2015 salaries paid in January, 2016 (8 x 30,000)
Salaries of 8 employees for January to November, 2016 paid in 29,04,000
February-December, 2016 @ ₹ 33,000 for 11 months
Salaries of 2 trainees for July to November paid in August- 2,.10,000
December @ ₹ 21,000 for 5 months

33,54,000

(iii) Outstanding salaries as at 31 st December, 2016 2,64,000

8 employees @ ₹ 33,000 each for 1 month
2 trainees @ ₹ 21,000 each for 1 month 42,000

3,06,000
QUESTION 21
Following are the extracts from the Trial Balance of Mr. Bharat Tulsian as at 31st March, 2018:

Particulars ₹ Particulars ₹

Purchases 5,70,000 Sales 7,77,500

Wages and Salaries 23,500 Capital 4,93,400

Freight Inward 25,000 Provision for Doubtful Debts 10,000

(01.04.2017)

Bad Debts [after recovery of bad 500 Provision for Discount on 1,800
debts of ₹ 2,500 w/o during 2016- Debtors (01.04.2017)
2017]

12% Investments 1,00,000 Trade Creditors 10,000

Trade Debtors 2,92,500 Interest on Investments 6,000

Salaries and Wages 11,200 Plant and Machinery 2,02,000

Salesmen’s Commission 20,000 Furniture and Fixtures 30,000

Discount Allowed 2,000 Income Tax paid 10,000

Fire Insurance Premium 9,000 Prepaid Fire Insurance Premium 3,000

Additional Information:
1. Stock in hand on 31st March was ₹ 2,30,000. Market Value on 31st March 80%,
Estimated Realisable Expenses 5%
2. Write off further ₹ 4,000 as bad. Additional discount of ₹ 1,000 given to debtors.
Maintain Provision for Discount on Debtors@ 2%. Maintain a Provision for Doubtful debts @
10%.
3. Goods costing ₹ 20,000 (Sale Price ₹ 25,000) were taken by the proprietor for his
personal use but not recorded .
4. Goods costing ₹ 30,000 (Sale Price ₹ 37,500) were given away as free samples to
Mahesh a customer recorded in the sales book
5. On 31st March Goods costing ₹ 10,000 (Sale Price ₹ 12,500) were destroyed by fire it
was fully insured but the insurance company admitted the claim to the extent of 60% only and
paid the claim money on 10th April, 2018.
6. On 31st March, Goods for ₹ 50,000 were sent to a customer on ‘Sale or Return’ basis at
a profit of 25% on cost and recorded as actual sales.
7. A Machine costing ₹ 1,90,000 was purchased on 1st July 2017. Wages ₹10,000 paid for
its Installation have been debited to Wages Account.
8. On 1.4.2017 Machinery of the value of ₹ 10,000 was destroyed by fire and the insurance
claim settled at ₹ 8,000 was credited to Machinery Account.
9. A Furniture costing ₹ 45,000 was purchased on 1st July 2017 but it was not recorded in
the books as no payment was made for it. Wages ₹ 5,000 paid for its Installation have been
debited to Wages Account.
10. On 1st Jan. 2018 Investments were sold at 10% profit, but the entire sales proceeds have
been taken as Sales.
11 Provide for depreciation on Plant & Machinery @ 10% p.a. on straight line basis. Write 10%
off the Furniture & Fixtures..
Required: Prepare Trading & P & L A/c for the year ended 31st March, 2018 and Balance Sheet
as on that date.

SOLUTION
TRADING AND PROFIT AND LOSS ACCOUNT
Dr. for the year ended 31st March, 2018 Cr.

Particulars ₹ Particulars ₹

To Purchases 5,70,000 By Sales 7,77,500

Less: Goods for personal 20,000 Less: Goods sent on 50,000
use Less: Free Samples 30,000 approval Less: Sale 1,10,000
of Investments

Less: Goods destroyed by 10,000 5,10,000 Less: Free Samples 37,500 5,80,000
fire

To Wages & Salaries 23,500 By Closing Stock [Refer 2,05,200

to WN 1]

Less: Installation of 10,000

Machine

Less: Installation of 5,000 8,500

Furnitures

To Freight Inward 25,000

To Gross Profit c/d 2,41,700

7,85,200 7,85,200

To Salaries & Wages 11,200 By Gross Profit b/d 2,41,700

To Fire Insurance Premium 9,000 By Bad Debt recovered 2,500

To Sales Promotion Exp (Samples) 30,000 By Profit on Sale of 10,000
Investments

To Loss of Stock by fire 4,000 By Interest on

Investments

To Loss of Machine by fire 2,000 Received 6,000

To Bad Debts [2,500 + 3,000 Add: Accrued 3,000 9,000

500]

Add: Further Bad Debts 4,000

Add: New Provision 20,000

Less: Old Provision 10,000 17,000

To Discount Allowed 2,000

Add: Further Discount 1,000

Allowed

Add: New Provision 3,600

Less: Old Provision 1,800 4,800

To Depreciation on 16,000
Machinery

[Refer WN 3]

To Depreciation on 8,000
Furniture

[ ₹ 80,000 x 10/100 x
12/12]

To Salesmen's Commission 20,000

To Net Profit t/f to 1,41,200

Capital A/c

2,63,200 2,63,200

BALANCE SHEET OF BHARAT TULSIAN AS AT 31 ST MARCH, 2018

Liabilities ₹ Assets ₹

Capital Account: Fixed

Fixed Assets:

Opening balance 4,93,400 Plant and Machinery [Refer WN 1,94,000

4]
Less: Goods for personal (20,000) Furniture & Fixtures 30,000
use (OB)

Less: Income Tax (10,000) Add: Purchased 45,000

Add: Net Profit 1,41,200 6,04,600 Add: Installation 5,000

charges

Current Liabilities: Less: Depreciation 8,000 72,000

Supplier of Furniture 45,000 Current Assets:

Trade Creditors 10,000 Closing Stock [Refer 2,05,200

to WN 1]

Trade Debtors 2,92,500

Less: Samples 37,500

Less: Good sent on 50,000

approval

Less: Further Bad 4,000

debts

Less: Further Discount 1,000

Allowed

2,00,000

Less: Provision for Doubtful

Debts @ 10% 20,000 1,80,000

Less: Provision for 3,600

Discount 1,76,400

@ 2% 6,000
Insurance Company
(claim)

Accrued Interest on Investments 3.000

Prepaid Fire Insurance Premium 3.000

6,59,600 6,59,600

Working Notes:
1. Calculation of Closing Stock

A. Stock in hand as on 31 st March ₹ 2,30,000

B. Add: Cost of Stock with customer [ ₹ 50,000 x 80%] ₹ 40,000

C. Total Stock as on 31st March [A+B] ₹ 2,70,000

D. Market Value [ ₹ 2,70,000 x 80%] ₹ 2,16,000

E. Realisable Expenses [ ₹ 2,16,000 x 5%] ₹ 10,800

F. Net Realisable Value ₹ 2,05,200

2. Book Value of Machinery on 1.4.2017 = ₹ 2,02,000 -11,90,000 + ₹ 8,000(Claim) = ₹

20,000
3. Calculation of Depreciation 5

Old Machine I 01.04.2017 10,000 x 10% x 12/12 1,000

New Machine I 01.07.2017 2,00,000 x 10% x 9/12 15,000

16,000

DR 4. MACHINERY ACCOUNT CR

Date Particulars ₹ Date Particulars ₹

01.04.2017 To Balance b/d [Refer 20,000 01.04.2017 By Bank A/c 8,000

WN 1]

01.07.2017 To Bank A/c 1,90,000 01.04.2017 By P & L A/c (Loss) 2,000

01.07.2017 To Wages A/c 10,000 31.03.2018 By Depreciation A/c 16,000

[Refer WN 3]

By Balance c/d 1,94,000

2,20,000 2,20,000

5. Depreciation on furniture has been charged for the full year because a flat rate of 10% (and
not 10% p.a.) has been given, whereas depreciation on new machinery has been charged for 9
months from 1st July to 31st Mar.

QUESTION
QUESTION 22 (a)
You are required, prepare a Trading and Profit and Loss Account for the year ending 31st March,
2016 and a Balance Sheet as on that date from the Trial Balance given below:

Particulars ₹ Particulars ₹

Debit Balance:

Trade receivables 3,50,000 Salaries 2,20,000

Inventory 1 st April, 2015 5,00,000 Purchases 12,50,00
Cash in Hand 5,60,000 Plant and Machinery 15,70,000
Wages 3,00,000 Credit Balance:
Bad Debts 50,000 Capital 25,00,00
0
Furniture and Fixtures 1,50,000 Trade payables 9,00,000
Depreciation 1,50,000 Sales 17,00,000

On 31 st March, 2016 the Inventory was valued at ₹ 10,00,000.

SOLUTION
Trading and Profit and Loss Account for the year ending 31 st March, 2016

Particulars ₹ Particulars ₹

To Opening Inventory 5,00,000 By Sales 17,00,000

To Purchases 12,50,000 By Closing Inventory 10,00,000
To Wages 3,00,000

To Gross Profit 6,50,000

27,00,000 27,00,000

To Bad Debts 50,000 By Gross Profit 6,50,000

To Depreciation 1,50,000

To Salaries 2,20,000

To Net Profit transferred, to 2,30,000

Capital A/c
6,50,000 6,50,000

Balance Sheet as at 31 st March, 2016

Liabilities ₹ ₹ Assets ₹ ₹

Trade payables 9,00,000 Cash in Hand 5,60,000

Capital: Trade receivables 3,50,000

Previous Balance 25,00,000 Closing Inventory 10,00,000 19,10,000

Add: Net Profit 2,30,000 27,30,000

Furniture & 1,50,000

Fixtures
Plant& 15,70,000 17,20,000
Machinery

36,30,000 36,30,000
QUESTION
QUESTION 22 (b)
Mr. Kotriwal is engaged in business of selling magazines. Several of his customers pay money in
advance for subscribing his magazines. Information related to year ended 31st March 2017 has
been given below:
On 1.4.2016 he had a balance of ₹ 2,00,000 advance from customers of which ₹ 1,50,000
is related to year 2016-17 while remaining pertains to year 2017-18. During the year 2016-
17 he made cash sales of ₹ 5,00,000. You are required to compute:
i) Total income for the year 2016-17.
ii) Total money received during the year if the closing balance in advance from customers
account is ₹ 1,70,000.
SOLUTION
SOLUTION

i) Computation of Income for the year 2016-17:

₹

Money received during the year related to 2016-17 5,00,000

Add: Money received in advance during previous years 1,50,000

Total income of the year 2016-17 6,50,000

ii) Advance from customers A/c

Date Particulars ₹ Date Particulars ₹

To Sales A/c 1,50,000 1.4.2016 By Balance 2,00,000

b/d
(Advance related to current By Bank A/c 1,20,000
year
transferred to sales) (Balancing
Figure)
31.3.17 To Balance c/d 1,70,000

3,20,000 3,20,000

So, total money received during the year is:

₹

Cash Sales during the year 5,00,000

Add: Advance received during the 1,20,000
year 6,20,000
Total money received during the
year
QUESTION 23
Mr. Birla is a proprietor engaged in business of trading electronics. An excerpt from his Trading &
P&L account is as follows:
Trading and P&L A/c for the year ended 31st March, 2017

Particulars ₹ Particulars ₹

To Cost of Goods Sold 45,00,00 By Sales C

0
To Gross Profit c/d D

E E

To Rent A/c 26,00,00 By Gross Profit b/d D

0
To Office Expenses 13,00,00 By Miscellaneous Income E
0
To Selling Expenses B

To Commission to Manager (on Net 2,00,000

Profit before charging such
commission)
To Net Profit A

G 60,00,00
0

Commission is charged at the rate of 10%.

Selling Expenses amount to 1% of total sales.
You are required to compute the missing figures.

SOLUTION
A) Computation of Net Profit:
Commission Manager = Rate of Commission X Net Profit before charging such commission So,
Commission to manager = 10/100 X Net Profit before charging such commission =
> ₹ 2,00,000 = 10/100 X Net Profit before charging such commission
=> Net Profit before charging such commission = ₹ 20,00,000
=> Net Profit (A) = ₹ (20,00,000 – 2,00,000) = ₹ 18,00,000
B) Computation of Selling Expenses:
Total income appearing in P&L A/c = ₹ 60,00,000
Total expenses other than selling expenses = ₹ (26,00,000 + 13,00,000 + 2,00,000)
= ₹ 41,00,000
So,
Selling Expenses + Remaining Expenses + Net Profit = Total Income
=> Selling Expenses = ₹ 60,00,000 – ₹ 41,00,000 – ₹ 18,00,000
=> Selling Expenses = ₹ 1,00,000
C) Computation of Sales:
We have been given selling expenses amount to 1% of Sales
So, Sales = Selling Expenses/ 1 × 100
1,00,000 / 1 × 100
= ₹ 100,00,000
D) Computation of Gross Profit:
In Trading A/c

Particulars ₹ Particulars ₹

To COGS 45,00,000 By Sales (from C above) 100,00,000

To Gross Profit (Balancing 55,00,000
Figure)

Total (F) 100,00,000 Total (F) 100,00,000

So, Gross Profit (D) = ₹ 55,00,000

E) Miscellaneous
Miscellaneous Income = Total Income in P&L – Gross Profit
= ₹ (60,00,000 – 55,00,000)
= ₹ 5,00,000
F = ₹ 100,00,000 (As computed in D above)
G = ₹ 60,00,000 (Total of both sides of P&L is equal after balancing has been done)