Financial Statements – I – Numerical Questions Solutions

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Financial Statements – I – Numerical Questions Solutions
1. From the following balances taken from the books of Simmi and Vimmi Ltd. for the year ending March 31, 2014, calculate the gross profit.

(₹)
Closing Stock
2,50,000
Net sales during the year
40,00,000
Net purchases during the year
15,00,000
Opening stock
15,00,000
Direct expenses
80,000

Trading account as on March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
15,00,000
By Net sales
40,000
To Net purchases
15,00,000
By Closing stock
2,50,000
To Direct expenses
80,000
To Gross profit
11,70,000
42,50,000
42,50,000
2. From the following balances extracted from the books of M/s Ahuja and Nanda. Calculate the amount of :
  1. Cost of goods available for sale
  2. Cost of goods sold during the year
  3. Gross Profit
(₹)
Opening Stock
25,000
Credit Purchases
7,50,000
Cash Purchases
3,00,000
Credit Sales
12,00,000
Cash Sales
4,00,000
Wages
1,00,000
Salaries
1,40,000
Closing stock
30,000
Sales return
50,000
Purchases return
10,000

Trading A/c of M/s Ahuja and Nanda
Dr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
25,000
By Sales
To Purchases
Add: Credit Sales
12,00,000
Add: Credit Purchases
7,50,000
Add: Cash Sales
4,00,000
Add: Cash Purchases
3,00,000
16,00,000
10,50,000
Less: Sales Return
  (50,000)
15,50,000
Less: Purchases Return
  (10,000)
10,40,000
To Wages
1,00,000
By Closing Stock
30,000
To Gross Profit
4,15,000
15,80,000
15,80,000

Cost of goods available for sale
= Opening Stock + Net Purchases + Wages
= 25,000 + 10,40,000 + 1,00,000
= 11,65,000
Cost of goods sold during the year
= Opening Stock + Net Purchases + Wages – Closing Stock
= 25,000 + 10,40,000 + 1,00,000 – 30,000
= 11,35,000
This can also be computed as
Cost of goods sold during the year
= Net Sales – Gross Profit
= 15,50,000 – 4,15,000
= 11,35,000

3. Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv & Sons for the year ended March 31, 2014.

(₹)
Opening Stock
50,000
Net sales
11,00,000
Net purchases
6,00,000
Direct expenses
60,000
Administration expenses
45,000
Selling and distribution expenses
65,000
Loss due to fire
20,000
Closing stock
70,000

Trading account of M/s Rajiv & Sons as on March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
50,000
By Net sales
11,00,000
To Net purchases
6,00,000
By Closing stock
70,000
To Direct expenses
60,000
To Gross profit
4,60,000
11,70,000
11,70,000

In the given problem, we have
Indirect expenses
= Administrative expenses + Selling and distribution expenses
= 45,000 + 65,000
1,10,000
Thus, we’ve
Operating Profit
= Gross Profit + Other Incomes – Indirect Expenses
= 4,60,000 + 0 – 1,10,000
= 3,50,000

Note: The loss due to fire will be considered when calculating the net profit. But in the given problem we just have to calculate the operating profit and not net profit. So, the loss due to fire not considered.

4. Operating profit earned by M/s Arora & Sachdeva in 2013-14 was ₹ 17,00,000. Its non-operating incomes were ₹ 1,50,000 and non-operating expenses were ₹ 3,75,000. Calculate the amount of net profit earned by the firm.

The formula for computing the the operating profit is giving as
Operating Profit
= Net Profit + Non Operating Expenses – Non Operating Incomes
⇒ 17,00,000
= Net Profit + 3,75,000 – 1,50,000
⇒ 17,00,000
= Net Profit + 2,25,000
⇒ Net Profit
= 17,00,000 – 2,25,000
= 14,75,000

5. The following are the extracts from the trial balance of M/s Bhola & Sons as on March 31, 2014
Account Title
Debit
Credit
Opening Stock
2,00,000
Purchases
8,10,000
Sales
10,10,000
10,10,000
10,10,000
(Only relevant items)

Closing Stock as on date was valued at ₹ 3,00,000.
You are required to record the necessary journal entries and show how the above items will appear in the trading and profit and loss account and balance sheet of M/s Bhola & Sons.
Books of M/s Bhola & Sons
Journal
Date
Particulars
L.F.
Debit
Amount
Credit
Amount
2014
Mar 31
Trading A/c
Dr
10,00,000
To Opening Stock A/c
2,00,000
To Purchases A/c
8,10,000
(Being the balances from the opening stock and purchases accounts transferred to the Trading A/c)
Mar 31
Sales A/c
Dr.
10,10,000
Closing Stock A/c
Dr.
3,00,000
To Trading A/c
13,10,000
(Being the balances from the sales and closing stock A/c transferred to the Trading A/c)
Mar 31
Trading A/c
Dr.
3,00,000
To Profit and Loss A/c
3,00,000
(Being the balance from the Trading Account i.e. Gross proit transferred to the Profit and Loss A/c)
Trading A/c of M/s Bhola & Sons as on March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
2,00,000
By Sales
10,10,000
To Purchases
8,10,000
By Closing Stock
3,00,000
To Gross Profit
3,00,000
3,10,000
3,10,000
Balance Sheet of M/s Bhola & Sons as on March 31, 2014
Liabilities
Amount
Assets
Amount
Closing Stock
3,00,000

6. Prepare trading and profit and loss account and balance sheet as on March 31, 2014 :
Account Title
Amount
Account Title
Amount
Machinery
27,000
Capital
60,000
Sundry debtors
21,600
Bills payable
2,800
Drawings
2,700
Sundry creditors
1,400
Purchases
58,500
Sales
73,500
Wages
15,000
Sundry expenses
600
Rent & taxes
1,350
Carriage inwards
450
Bank
4,500
Opening stock
6,000
Closing stock as on March 31, 2014 ₹ 22,400
Trading and Profit and Loss account for the year ended March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
6,000
By Sales
73,500
To Purchases
58,500
By Closing Stock
22,400
To Wages
15,000
To Carriage Inwards
450
To Gross profit c/d
15,950
95,900
95,900
To Sundry expenses
600
By Gross profit b/d
15,950
To Rent and taxes
1,350
To Net profit
14,000
15,950
15,950
Balance sheet as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
60,000
Non current assets
Add: Net profit
14,000
Machinery
27,000
74,000
Less: Drawings
  2,700
71,300
Current Assets
Bank
4,500
Sundry creditors
1,400
Closing stock
22,400
Bills payable
2,800
Sundry debtors
21,600
75,500
75,500

7. The following trial balance is extracted from the books of M/s Ram on March 31, 2014. You are required to prepare trading and profit and loss account and the balance sheet as on date :
Account Title
Amount
Account Title
Amount
Debtors
12,000
Apprenticeship premium
5,000
Purchases
50,000
Loan
10,000
Coal, gas and water
6,000
Bank overdraft
1,000
Factory wages
11,000
Sales
80,000
Salaries
9,000
Creditors
13,000
Rent
4,000
Capital
20,000
Discount
3,000
Advertisement
500
Drawings
1,000
Loan
6,000
Petty
500
Sales return
1,000
Machinery
5,000
Land and building
10,000
Income tax
100
Furniture
9,900
Trading and Profit and Loss account of M/s Ram for the year ended March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Purchases
50,000
By Sales
80,000
To Coal, gas and water
6,000
Less: Sales return
(1,000)
79,000
To Factory wages
11,000
To Gross profit c/d
12,000
79,000
79,000
To Salaries
9,000
By Gross profit b/d
12,000
To Rent
4,000
By Apprenticeship premium
5,000
To Discount
3,000
To Advertisement
500
To Net profit
500
17,000
17,000
Balance sheet of M/s Ram as on March 31, 2014
Dr.
Cr.
Liabilities
Amount
Assets
Amount
Capital
20,000
Machinery
5,000
Add: Net Profit
500
Land and building
10,000
20,500
Furniture
9,900
Less: Drawings
(1,000)
Loan (Lent)
6,000
Less: Income tax
   (100)
19,400
Debtors
12,000
Loan (Borrowed)
10,000
Petty cash
500
Creditors
13,000
Bank overdraft
1,000
43,400
43,400

8. The following is the trial balance of Manju Chawla on March 31, 2014. You are required to prepare trading and profit and loss account and a balance sheet as on date :
Account Title
Debit Amount
Credit Amount
Opening stock
10,000
Purchases and sales
40,000
80,000
Returns
200
600
Productive wages
6,000
Dock and Clearning charges
4,000
Donation and charity
600
Delivery van expenses
6,000
Lighting
500
Sales tax collected
1,000
Bad debts
600
Misc. incomes
6,000
Rent from tenants
2,000
Royalty
4,000
Capital
40,000
Drawings
2,000
Debtors and Creditors
6,700
7,000
Cash
3,000
Investment
6,000
Patents
4,000
Land and Machinery
43,000
Closing stock ₹ 2,000.
Trading and Profit and Loss account of Manju Chawla for the year ended March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
10,000
By Sales
80,000
To Purchases
40,000
Less: Sales Returns
  (200)
79,800
Less Purchase returns
  (600)
39,400
By Closing stock
2,000
To Productive wages
6,000
To Dock and Clearning charges
4,000
To Royalty
4,000
To Gross profit c/d
18,400
81,400
81,400
To Donation and charity
600
By Gross profit b/d
18,400
To Delivery van expenses
6,000
By Misc. incomes
6,000
To Lighting
500
By Rent from tenants
2,000
To Bad debts
600
To Net profit
18,700
26,400
26,400
Note: Royalty is usually the payment done to the owner of a patent or mine for using their patent or mine. Royalty adds to the cost of the production and should be considered in the trading account. This is what we did in our problem. Sometimes the question clearly states that the royalty should be considered as a sales expense. In this case we should consider the royalty in the profit and loss account (This is not the case here. This is just for your information)
Balance sheet of as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
40,000
Patents
4,000
Add: Net profit
18,700
Land and Machinery
43,000
58,700
Investment
6,000
Less: Drawings
(2,000)
56,700
Debtors
6,700
Sales tax collected
1,000
Cash
3,000
Creditors
7,000
Closing stock
2,700
64,700
64,700
Note: Note that we’ve considered the debtors as ₹ 6,700 instead of the given value of ₹ 6,0000 (this seems to be a typo in the text book).

9. The following is the trial balance of Mr. Deepak as on March 31, 2014. You are required to prepare trading account, profit and loss account and a balance sheet as on date :
Account Title
Debit Amount
Account Title
Credit Amount
Drawings
36,000
Capital
2,50,000
Insurance
3,000
Bills payable
3,600
General expenses
29,000
Creditors
50,000
Rent and taxes
14,400
Discount received
10,400
Lighting (factory)
2,800
Purchases return
8,000
Travelling expenses
7,400
Sales
4,40,000
Cash in hand
12,600
Bills receivable
5,000
Sundry debtors
1,04,000
Furniture
16,000
Plant and Machinery
1,80,000
Opening stock
40,000
Purchases
1,60,000
Sales return
6,000
Carriage inwards
7,200
Carriage outwards
1,600
Wages
84,000
Salaries
53,000
Trading and Profit and Loss account of Mr. Deepak for the year ended March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
40,000
By Sales
4,40,000
To Purchases
1,60,000
Less: Sales return
(6,000)
4,34,000
Less: Purchases return
(8,000)
1,52,000
By Closing stock
35,000
To Lighting (Factory)
2,800
To Carriage inwards
7,200
To Wages
84,000
To Gross profit c/d
1,83,000
4,69,000
4,69,000
To Insurance
3,000
By Gross profit b/d
1,83,000
To General expenses
29,000
By Discount received
10,400
To Rent and taxes
14,400
To Travelling expenses
7,400
To Carriage outwards
1,600
To Salaries
53,000
To Net profit
85,000
1,93,400
1,93,400
Balance sheet of as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
2,50,000
Plant and machinery
1,80,000
Add: Net profit
85,000
Furniture
16,000
3,35,000
Sundry debtors
1,04,000
Less: Drawings
 (36,000)
2,99,000
Closing stock
35,000
Creditors
50,000
Bills receivable
5,000
Bills payable
3,600
Cash in hand
12,600
3,52,600
3,52,600

10. Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2014.
Account Title
Debit
Credit
Purchases and Sales
3,52,000
5,60,000
Return inwards and Return outwards
9,600
12,000
Carriage inwards
7,000
Carriage outwards
3,360
Fuel and power
24,800
Opening stock
57,600
Bad debts
9,950
Debtors and Creditors
1,31,200
48,000
Capital
3,48,000
Investment
32,000
Interest on investment
3,200
Loan
16,000
Repairs
2,400
General expenses
17,000
Wages and salaries
28,800
Land and buildings
2,88,000
Cash in hand
32,000
Miscellaneous receipts
160
Sales tax collected
8,350
Trading and Profit and Loss A/c for the year ended March 31, 2014.
Dr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
57,600
By Sales
5,60,000
To Purchases
3,52,000
Less: Return inwards
(9,600)
5,50,400
Less: Return outwards
(12,000)
3,40,000
By Closing stock
30,000
To Carriage inwards
7,000
To Fuel and power
24,800
To Wages and salaries
28,800
To Gross profit c/d
1,22,200
5,80,400
5,80,400
To Carriage outwards
3,360
By Gross profit b/d
1,22,200
To Bad debts
9,950
By Interest on investment
3,200
To Repairs
2,400
By Miscellaneous receipts
160
To General expenses
17,000
To Net profit
92,850
1,25,560
1,25,560
Balance sheet of as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
3,48,000
Land and building
2,88,000
Add: Net profit
   92,850
4,40,850
Investment
32,000
Loan
16,000
Debtors
1,31,200
Creditors
48,000
Closing stock
30,000
Sales tax collected
8,350
Cash in hand
32,000
5,13,200
5,13,200

11. From the following trial balance of Mr. A. Lal, prepare trading, profit and loss account and balance sheet as on March 31, 2014
Account Title
Debit
Credit
Stock as on April 01, 2013
16,000
Purchases and Sales
67,600
1,12,000
Returns inwards and outwards
4,600
3,200
Carriage inwards
1,400
General expenses
2,400
Bad debts
600
Discount received
1,400
Bank overdraft
10,000
Interest on bank overdraft
600
Commission received
1,800
Insurance and taxes
4,000
Scooter expenses
200
Salaries
8,800
Cash in hand
4,000
Scooter
8,000
Furniture
5,200
Building
65,000
Debtors and Creditors
6,000
16,000
Capital
50,000
Closing stock ₹ 15,000.
Trading A/c and Profit and Loss A/c of Mr. A. Lal for the year ended on March 31, 2014
Dr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
16,000
By Sales
1,12,000
To Purchases
67,600
Less: Return inwards
  (4,600)
1,07,400
Less: Return outwards
(3,200)
64,400
By Closing stock
15,000
To Carriage inwards
1,400
To Gross profit c/d
40,600
1,22,400
1,22,400
To General expenses
2,400
By Gross profit b/d
40,600
To Bad debts
600
By Discount received
1,400
To Interest on bank overdraft
600
By Commission received
1,800
To Insurance and taxes
4,000
To Scooter expenses
200
To Salaries
8,800
To Net profit
27,200
43,800
43,800
Balance sheet of as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
50,000
Building
65,000
Add: Net profit
27,200
77,200
Furniture
5,200
Creditors
16,000
Scooter
8,000
Bank overdraft
10,000
Debtors
6,000
Closing stock
15,000
Cash in hand
4,000
1,03,200
1,03,200

12. Prepare trading and profit and loss account and balance sheet of M/s Royal Traders from the following balances as on March 31, 2014.
Account Title
Amount
Account Title
Amount
Stock
20,000
Sales
2,45,000
Cash
5,000
Creditors
10,000
Bank
10,000
Bills payable
4,000
Carriage on purchases
1,500
Capital
2,00,000
Purchases
1,90,000
Drawings
9,000
Wages
55,000
Machinery
1,00,000
Debtors
27,000
Postage
300
Sundry expenses
1,700
Rent
4,500
Furniture
35,000
Closing stock ₹ 8,000
Trading and Profit and Loss account of M/s Royal Traders for the year ended on March 31, 2014
Dr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
20,000
By Sales
2,45,000
To Purchases
1,90,000
By Closing stock
8,000
To Carriage on purchases
1,500
By Gross loss c/d
13,500
To Wages
55,000
2,66,500
2,66,500
To Gross loss b/d
13,500
By Net loss
20,000
To Postage
300
To Sundry expenses
1,700
To Rent
4,500
20,000
20,000
Balance sheet as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
2,00,000
Machinery
1,00,000
Less: Net loss
(20,000)
Furniture
35,000
Less: Drawings
  (9,000)
1,71,000
Debtors
27,000
Creditors
10,000
Closing stock
8,000
Bills payable
4,000
Bank
10,000
Cash
5,000
1,85,000
1,85,000

13. Prepare trading and profit and loss account from the following particulars of M/s Neema Traders as on March 31, 2014.
Account Title
Amount
Account Title
Amount
Buildings
23,000
Sales
1,80,000
Plant
16,930
Loan
8,000
Carriage inwards
1,000
Bills payable
2,520
Wages
3,300
Bank overdraft
4,720
Purchases
1,64,000
Creditors
8,000
Sales return
1,820
Capital
2,36,000
Opening stock
9,000
Purchases return
1,910
Machinery
2,10,940
Insurance
1,610
Interest
1,100
Bad debts
250
Postage
300
Discount
1,000
Salaries
3,000
Debtors
3,900
Stock on March 31, 2014 ₹ 16,000.
Trading and Profit and Loss account of M/s Neema for the year ended March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
9,000
By Sales
1,80,000
To Purchases
1,64,000
Less:Sales return
(1,820)
1,78,180
Less: Purchases return
(1,910)
1,62,090
By Closing stock
16,000
To Carriage inwards
1,000
To Wages
3,300
To Gross profit c/d
18,790
1,94,180
1,94,180
To Insurance
1,610
By Gross profit b/d
18,790
To Interest
1,100
To Bad debts
250
To Postage
300
To Discount
1,000
To Salaries
3,000
To Net profit
11,530
18,790
18,790
Balance sheet as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
2,36,000
Building
23,000
Add: Net profit
      11,530
2,47,530
Plant
16,930
Loan
8,000
Machinery
2,10,940
Creditors
8,000
Debtors
3,900
Bills payable
2,520
Closing stock
16,000
Bank overdraft
4,720
2,70,770
2,70,770
Note: Note that the answers for gross profit, net profit and balance sheet totals provide in the text book have typo and hence the answers in our solution differ from those provided in the text book.

14. From the following balances of M/s Nilu Sarees as on March 31, 2014. Prepare trading and profit and loss account and balance sheet as on date.
Account Title
Amount
Account Title
Amount
Opening stock
10,000
Sales
2,28,000
Purchases
78,000
Capital
70,000
Carriage inwards
2,500
Interest
7,000
Salaries
30,000
Commission
8,000
Commission
10,000
Creditors
28,000
Wages
11,000
Bills payable
23,700
Rent & taxes
2,800
Repairs
5,000
Telephone expenses
1,400
Legal charges
1,500
Sundry expenses
2,500
Cash in hand
12,000
Debtors
30,000
Machinery
60,000
Investments
90,000
Drawings
18,000
Closing stock as on March 31, 2014 ₹ 22,000.
Trading and Profit and Loss account of M/s Neema for the year ended March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
10,000
By Sales
2,28,000
To Purchases
78,000
By Closing stock
22,000
To Carriage inwards
2,500
To Wages
11,000
To Gross profit c/d
1,48,500
2,50,000
2,50,000
To Salaries
30,000
By Gross profit b/d
1,48,500
To Commission
10,000
By Interest
7,000
To Rent and taxes
2,800
By Commission
8,000
To Repairs
5,000
To Telephone expenses
1,400
To Legal charges
1,500
To Sundry expenses
2,500
To Net profit
1,10,300
1,63,500
1,63,500
Note: Note that the text book has a typo with the value of the gross profit where it is give as ₹ 1,56,500 but in our solution we got it as 1,48,500
Balance sheet as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
70,000
Machinery
60,000
Add: Net profit
1,10,300
Investments
90,000
1,80,300
Debtors
30,000
Less: Drawings
(18,000)
1,62,300
Closing stock
22,000
Creditors
28,000
Cash in hand
12,000
Bills payable
23,700
2,14,000
2,14,000
Note: Note that the bills payable is printed with a typo as 2,370 in the text book instead of the 23,700. We’ve considered the correct value of 23,700 in the balance sheet.

15. Prepare trading and profit and loss account of M/s Sports Equipments for the year ended March 31, 2014 and balance sheet as on that date :
Account Title
Debit Amount
Amount
Opening stock
50,000
Purchases and sales
3,50,000
4,21,000
Sales returns
5,000
Capital
3,00,000
Commission
4,000
Creditors
1,00,000
Bank overdraft
28,000
Cash in hand
32,000
Furniture
1,28,000
Debtors
1,40,000
Plants
60,000
Carriage on purchases
12,000
Wages
8,000
Rent
15,000
Bad debts
7,000
Drawings
24,000
Stationery
6,000
Travelling expenses
2,000
Insurance
7,000
Discount
5,000
Offline expenses
2,000
Closing stock as on March 31, 2014 ₹ 2,500
Trading and Profit and Loss account of M/s Sports Equipment for the year ended March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening stock
50,000
By Sales
4,21,000
To Purchases
3,50,000
Less: Sales returns
  (5,000)
4,16,000
To Carriage on purchases
12,000
By Closing stock
2,500
To Wages
8,000
By Gross loss c/d
1,500
4,20,000
4,20,000
To Gross loss b/d
1,500
By Commission
4,000
To Rent
15,000
By Net loss
41,500
To Bad debts
7,000
To Stationery
6,000
To Travelling expenses
2,000
To Insurance
7,000
To Discount
5,000
To Office expenses
2,000
45,500
45,500
Balance sheet as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
3,00,000
Plants
60,000
Less: Net loss
(41,500)
Furniture
1,28,000
Less: Drawings
 (24,000)
2,34,500
Debtors
1,40,000
Creditors
1,00,000
Closing stock
2,500
Bank overdraft
28,000
Cash in hand
32,000
3,62,500
3,62,500