Financial Statements II – Numerical Questions Solutions

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This page contains solutions to numerical questions for the chapter 10, Financial Statements – II. If you’re looking for solutions theoretical questions, you can find them at Financial Statements – II

Financial Statements – II – Numerical Questions Solutions
1. Prepare a trading and profit and loss account for the year ending March 31, 2014. from the balances extracted of M/s Rahul Sons. Also prepare a balance sheet at the end of the year.
Account Title
Amount
Account Title
Amount
Stock
50,000
Sales
1,80,000
Wages
3,000
Purchases Return
2,000
Salary
8,000
Discount Received
500
Purchases
1,75,000
Provision for doubtful debts
2,500
Sales Return
3,000
Capital
3,00,000
Sundry Debtors
82,000
Bills Payable
22,000
Discount Allowed
1,000
Commission Received
4,000
Insurance
3,200
Rent
6,000
Rent, Rates and Taxes
4,300
Loan
34,800
Fixtures and Fittings
20,000
Trade Expenses
1,500
Bad Debts
2,000
Drawings
32,000
Repairs and Renewals
1,600
Travelling Expenses
4,200
Postage
300
Telegram expenses
200
Legal fees
500
Bills Receivable
50,000
Building
1,10,000
5,51,800
5,51,800
Ajustments:

1. Commission received in advance ₹ 1,000.
2. Rent receivable ₹ 2,000.
3. Salary outstanding ₹ 1,000 and insurance prepaid ₹ 800.
4. Further bad debts ₹ 1,000 and provision for doubtful debts @ 5% on debtors and discount on debtors @ 2%.
5. Closing stock ₹ 32,000.
6. Depreciation on building @ 6% p.a.

Working Notes:
1. Provision for Doubtful Debts
=
(82,000 – 1,000) ×
5
100
=
81,000 ×
5
100
=
4,050
2. Discount on Debtors
=
(82,000 – 4,0501,000) ×
2
100
=
76,950 ×
2
100
=
1,539
3. Depreciation on Building
=
1,10,000 ×
6
100
=
6,600
Trading and Profit and Loss Account of M/s Rahul Sons for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
50,000
By Sales
1,80,000
To Purchases
1,75,000
Sales Returns
  (3,000)
1,77,000
Purchase Returns
   (2,000)
1,73,000
By Closing Stock
32,000
To Wages
3,000
By Gross Loss c/d
17,000
2,26,000
2,26,000
To Gross Loss b/d
17,000
By Discount Received
500
To Salary
8,000
By Commission Received
4,000
To Outstanding Salary
1,000
9,000
Advance Commission
1,000
3,000
To Discount Allowed
1,000
By Rent
6,000
To Insurance
3,200
Accrued Rent (Rent Receivable)
2,000
8,000
To Insurance Prepaid
 (800)
2,400
By Net Loss
43,189
To Rent, Rates and Taxes
4,300
To Trade Expenses
1,500
To Bad Debts
2,000
To Further Bad Debts
1,000
To Provision for Doubtful Debts
4,0501
To Old Provision
(2,500)
4,550
To Discount on Debtors
1,5392
To Depreciation on Building
6,6003
To Repairs and Renewals
1,600
To Travelling Expenses
4,200
To Postage
300
To Telegram Expenses
200
To Legal Fees
500
54,689
54,689
Balance Sheet as M/s Rahul and Sons as on on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
3,00,000
Buildings
1,10,000
Net Loss
(43,189)
6% Depreciation
 (6,600)3
1,03,400
Drawings
(32,000)
2,24,811
Fixtures and Fittings
20,000
Loan
34,800
Prepaid Insurance
800
Advance Commission
1,000
Debtors
82,000
Bills Payable
22,000
Further Bad Debts
(1,000)
Outstanding Salary
1,000
New Provision
(4,050)1
Discount on debtors
(1,539)2
75,411
Bills Receivable
50,000
Rent Receivable
2,000
Closing Stock
32,000
2,83,611
2,83,611

2. Prepare a trading and profit and loss account of M/s Green Club Ltd. for the year ending March 31, 2014. from the following figures taken from his trial balance :
Account Title
Amount
Account Title
Amount
Opening stock
35,000
Sales
2,50,000
Purchases
1,25,000
Purchase Return
6,000
Return inwards
25,000
Creditors
10,000
Postage and Telegram
600
Bills Payable
20,000
Salary
12,300
Discount
1,000
Wages
3,000
Provision for bad debts
4,500
Rent and Rates
1,000
Interest received
5,400
Packing and Transport
500
Capital
75,000
General expense
400
Insurance
4,000
Debtors
50,000
Cash in hand
20,000
Cash at bank
40,000
Machinery
20,000
Lighting and Heating
5,000
Discount
3,500
Bad debts
3,500
Investment
23,100
3,71,900
3,71,900
Ajustments:

1. Depreciation charged on machinery @ 5% p.a.
2. Further bad debts ₹ 1,500, discount on debtors @ 5% and make a provision on debtors @ 6%.
3. Wages prepaid ₹ 1,000.
4. Interest on investment @ 5% p.a.
5. Closing stock ₹ 10,000.

Working Notes:
1. Depreciation on machinery
=
20,000 ×
5
100
=
1,000
2. Provision for Doubtful Debts
=
(50,000 – 1,500) ×
6
100
=
48,500 ×
6
100
=
2,910
3. Discount on Debtors
=
(50,000 – 2,9101,500) ×
5
100
=
45,590 ×
2
100
=
2,279.50
2,280
4. Interest on Investment
=
23,100 ×
5
100
=
1,155
Trading and Profit and Loss Account of M/s Green Club Ltd. for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
35,000
By Sales
2,50,000
To Purchases
1,25,000
Sales Returns
 (25,000)
2,25,000
Purchase Returns
  (6,000)
1,19,000
By Closing Stock
10,000
To Wages
3,000
Prepaid Wages
(1,000)
2,000
To Gross Profit c/d
79,000
2,35,000
2,35,000
To Postage and Telegram
600
By Gross Profit b/d
79,000
To Salary
12,300
By Discount
1,000
To Rent and Rates
1,000
By Interest Received
5,400
To Packing and Transport
500
By Interest on Investment
1,1554
To General Expenses
400
To Insurance
4,000
To Lighting and Heating
5,000
To Discount
3,500
To Depreciation on Machinery
1,0001
To Bad Debts
3,500
Further Bad Debts
1,500
Provision for Doubtful Debts
2,9102
Old Provision
(4,500)
3,410
To Discount on Debtors
2,2803
To Net Profit
52,565
86,555
86,555
Balance Sheet of M/s Green Club Ltd. as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
75,000
Machinery
20,000
Net Profit
52,565
1,27,565
Depreciation
(1,000)
19,000
Creditors
10,000
Investment
23,100
Bills Payable
20,000
Interest on Investment
  1,1554
24,255
Debtors
50,000
Further Bad Debts
(1,500)
Provision for Doubtful Detbs
(2,910)2
Discount on Debtors
(2,280)3
43,310
Prepaid Wages
1,000
Cash at Bank
40,000
Cash at Hand
20,000
Closing Stock
10,000
1,57,565
1,57,565

3. The following balances has been extracted from the trial of M/s Runway Shine Ltd. Prepare a trading and profit and loss account and a balance sheet as on March 31, 2014.
Account Title
Amount
Account Title
Amount
Purchases
1,50,000
Sales
2,50,000
Opening Stock
50,000
Return Outwards
4,500
Return Inwards
2,000
Interest Received
3,500
Carriage Inwards
4,500
Discount Received
400
Cash in Hand
77,800
Creditors
1,25,000
Cash at Bank
60,800
Bills Payable
6,040
Wages
2,400
Capital
1,00,000
Printing and Stationery
4,500
Discount
400
Bad Debts
1,500
Insurance
2,500
Investment
32,000
Debtors
53,000
Bills Receivable
20,000
Postage and Telegraph
400
Commission
200
Interest
1,000
Repair
440
Lighting Charges
500
Telephone Charges
100
Carriage Outward
400
Motor Car
25,000
4,89,440
4,89,440
Adjustments:

1. Further bad debts ₹ 1,000. Discount on debtors ₹ 500 and make a provision on debtors @ 5%.
2. Interest received on investment @ 5%.
3. Wages and interest outstanding ₹ 100 and ₹ 200 respectely.
4. Depreciation charged on motor car @ 5% p.a.
5. Closing Stock ₹ 32,500.

Working Notes:
1. Provision on Debtors
=
(53,000 – 1,000) ×
5
100
=
52,000 ×
5
100
=
2,600
2. Interest Received on Investment
=
32,000 ×
5
100
=
1,600
3. Depreciation on Motor Car
=
25,000 ×
5
100
=
1,250
Trading and Profit and Loss Account of M/s Runway Shine Ltd. for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
50,000
By Sales
2,50,000
To Purchases
1,50,000
Return Inwards
  (2,000)
2,48,000
Return Outwards
  (4,500)
1,45,500
By Closing Stock
32,500
To Carriage Inwards
4,500
To Wages
2,400
Outstanding Wages
   100
2,500
To Gross Profit c/d
78,000
2,80,500
2,80,500
To Printing and Stationery
4,500
By Gross Profit b/d
78,000
To Discount
400
By Interest Received
3,500
To Bad Debts
1,500
By Discount Received
400
Further Bad Debts
1,000
By Interest Received on Investment
1,6002
New Provision
2,6001
5,100
To Discount on Debtors
500
To Insurance
2,500
To Postage and Telegraph
400
To Commission
200
To Interest
1,000
Outstanding Interest
   200
1,200
To Repairs
440
To Lighting Charges
500
To Telephone Charges
100
To Carriage Outwards
400
To Depreciation on Motor Car
1,2503
To Net Profit
66,010
83,500
83,500
Balance Sheet of M/s Runway Shine Ltd. as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
1,00,000
Motor Car
25,000
Net Profit
  66,010
1,66,010
Depreciation
(1,250)3
23,750
Creditors
1,25,000
Investment
32,000
Bills Payable
6,040
Debtors
53,000
Outstanding Interest
100
Further Bad Debts
(1,000)
Outstanding Wages
200
New Provision
(2,600)1
Discount on Debtors
     (500)
48,900
Bills Receivable
20,000
Cash at Bank
60,800
Cash in Hand
77,800
Interest Received
 1,6002
79,400
Closing Stock
32,500
2,97,350
2,97,350

4. The following balances have been extracted from the trial of M/s Haryana Chemical Ltd. You are required to prepare a trading and profit and loss account and balance sheet as on March 31, 2014 from the given information.
Account Title
Amount
Account Title
Amount
Opening Stock
50,000
Sales
3,50,000
Purchases
1,25,500
Purchases Return
2,500
Sales Return
2,000
Creditors
25,000
Cash in hand
21,200
Rent
5,000
Cash at bank
12,000
Interest
2,000
Carriage
100
Bills Payable
1,71,700
Free hold land
3,20,000
Capital
3,00,000
Patents
1,20,000
General Expenses
2,000
Sundry Debtors
32,500
Building
86,000
Machinery
34,500
Insurance
12,400
Drawings
10,000
Motor Vehicle
10,500
Bad debts
2,000
Light and Water
1,200
Trade expenses
2,000
Power
3,900
Salary and Wages
5,400
Loan @ 10% (01.10.2013)
3,000
8,56,200
8,56,200
Adjustments:

1. Closing stock was valued at the end of the year ₹ 40,000.
2. Salary amounting ₹ 500 and trade expense ₹ 300 are due.
3. Depreciation charged on building and machinery are @ 4% and @ 5% respectively.
4. Make a provision of @ 5% on sundry debtors.

Note: In the text book, it is giving that the Loan @ 15% (01.09.2013) (it has to be calculated for 7 months from 1-Sep-2013 to 31-Mar-2014). However, if we consider that value we’re getting the accrued interest on the loan as 262.50 which will make the Net profit as 1,85,672.50. To make it equal to the answer given in the book i.e. 1,85,560, we’ve considered that the Loan @10% (01.10.2013), which will make the acrued interest on loan as 150 and the answers for net profit and the balance sheet totals match.
Working Notes:
1. Depreciation on Building
=
86,000 ×
4
100
=
3,440
2. Depreciation on Machinery
=
34,500 ×
5
100
=
1,725
3. Provision on Sundry Debtors
=
32,500 ×
5
100
=
1,625
4. Interest on Loan
=
3,000 ×
10
100
×
6
12
(for 6 months)
=
150
Trading and Profit and Loss Account of M/s Haryana Chemical Ltd. for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
50,000
By Sales
3,50,000
To Purchases
1,25,500
Sales Returns
  (2,000)
3,48,000
Purchase Returns
(2,500)
1,23,000
By Closing Stock
40,000
To Carriage
100
To Power
3,900
To Gross Profit c/d
2,11,000
3,88,000
3,88,000
To General Expenses
2,000
By Gross Profit b/d
2,11,000
To Bad Debts
2,000
By Rent
5,000
Provision on Sundry Debtors
1,6253
3,625
By Interest
2,000
To Depreciation on Building
3,4401
By Accured Interest on Loan
1504
To Depreciation on Machinery
1,7252
To Insurance
12,400
To Light and Water
1,200
To Trade Expenses
2,000
Outstanding Trade Expenses
   300
2,300
To Salary and Wages
5,400
Outstanding Salary
   500
5,900
To Net Profit
1,85,560
2,18,150
2,18,150
Balance Sheet of M/s Haryana Chemical Ltd. as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
3,00,000
Building
86,000
Net Profit
1,85,560
Depreciation
(3,440)1
82,560
Drawings
 (10,000)
4,75,560
Freehold Land
3,20,000
Creditors
25,000
Patents
1,20,000
Bills Payable
1,71,700
Machinery
34,500
Outstanding Trade Expenses
300
Depreciation
(1,725)2
32,775
Outstanding Salary
500
Motor Vehicle
10,500
Loan
3,000
Interest on Loan
   1504
3,150
Sundry Debtors
32,500
Provision on Sundry Debtors (Provision for Bad Debts)
(1,625)3
30,875
Cash at Bank
12,000
Cash in Hand
21,200
Closing Stock
40,000
6,73,060
6,73,060

5. From the following information prepare trading and profit and loss account of M/s Indian sports house for the year ending March 31, 2014.
Account Title
Amount
Account Title
Amount
Drawings
20,000
Capital
2,00,000
Sundry debtors
80,000
Return outwards
2,000
Bad debts
1,000
Bank overdraft
12,000
Trade Expenses
2,400
Provision for bad debts
4,000
Printing and Stationery
2,000
Sundry creditors
60,000
Rent, Rates and Taxes
5,000
Bills payable
15,400
Freight
4,000
Sales
2,76,000
Return inwards
7,000
Opening stock
25,000
Purchases
1,80,000
Furniture and Fixture
20,000
Plant and Machinery
1,00,000
Bills receivable
14,000
Wages
10,000
Cash in hand
6,000
Discount allowed
2,000
Investments
40,000
Motor car
51,000
5,69,400
5,69,400
Adjustments:

1. Closing stock was ₹ 45,000.
2. Provision for doubtful debts is to be maintained @ 2% on debtors.
3. Depreciation charged on : furniture and fixture @ 5%, plant and Machinery @ 6% and motor car @ 10%.
4. A Machine of ₹ 30,000 was purchased on July 01, 2013.
5. The manager is entitled to a commission of @ 10% of the net profit after charging such commission.

1. Provision for Doubtful Debts
=
80,000 ×
2
100
=
1,600
2. Depreciation on Furniture and Fixtures
=
20,000 ×
5
100
=
1,000
3. Depreciation on Plant and Old Machinery
=
(1,00,00030,000) ×
6
100
=
70,000 ×
6
100
=
4,200
4. Depreciation on New Machinery
=
30,000 ×
6
100
×
(6)
12
(for 9 months)
=
900
5. Depreciation on Motor Car
=
51,000 ×
10
100
=
5,100
6. Profit Before Commission
=
75,800
Managers Comission
=
75,800 ×
10
(100 + 10)
=
75,800 ×
10
110
=
6,890.90
6,891
Note: In this problem, the old provision is more than the sum of bad debts and provision for doubtful debtors. So, it is considered on the Revenues/Gains side instead of the Expenses/Losses side.
Trading and Profit and Loss Account of M/s Indian Sports House for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
25,000
By Sales
2,76,000
To Purchases
1,80,000
Return Inwards
  (7,000)
2,69,000
Return Outwards (Purchase Returns)
  (2,000)
1,78,000
By Closing Stock
45,000
To Freight
4,000
To Wages
10,000
To Gross Profit c/d
97,000
3,14,000
3,14,000
To Trade Expenses
2,400
By Gross Profit b/d
97,000
To Printing and Stationery
2,000
By Old Provision for Bad Debts
4,000
To Rent, Rates and Taxes
5,000
Bad Debts
(1,000)
To Depreciation on Furniture and Fixtures
1,0002
By New Provision
(1,600)1
1,400
To Depreciation on Plant and Old Machinery
4,2003
To Discount Allowed
2,000
To Depreciation on Motor Car
5,1005
To Depreciation on New Machinery
9004
To Manager’s commission
6,8916
To Net Profit
68,909
98,400
98,400
Note: In the text book answers, the gross profit is given with a typo as ₹ 1,01,000. However, as per our calculation, we got ₹ 97,000.
Balance Sheet of M/s Indian Sports House as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
2,00,000
Plant and Machinery
1,00,000
Net Profit
68,909
Depreciation on Plant and Old Machinery
(4,200)3
Drawings
(20,000)
2,48,909
Depreciation on New Machinery
     (900)4
94,900
Manager’s Commission Outstanding
6,8916
Furniture and Fixtures
20,000
Bank Overdraft
12,000
Depreciation
(1,000)2
19,000
Creditors
60,000
Motor Car
51,000
Bills Payable
15,400
Depreciation
(5,100)5
45,900
Investments
40,000
Sundry Debtors
80,000
New Provision (Provision for Doubtful Debts)
(1,600)1
78,400
Bills Receivable
14,000
Cash in Hand
6,000
Closing Stock
45,000
3,43,200
3,43,200

6. Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. from the following particulars.
Account Title
Amount
Account Title
Amount
Sundry debtors
1,00,000
Bills Payable
85,550
Bad debts
3,000
Sundry Creditors
25,000
Trade expenses
2,500
Provision for bad debts
1,500
Printing and Stationary
5,000
Return outwards
4,500
Rent, Rates and Taxes
3,450
Capital
2,50,000
Freight
2,250
Discount received
3,500
Sales return
6,000
Interest Received
11,260
Motor Car
25,000
Sales
1,00,000
Opening Stock
75,550
Furniture and Fixture
15,500
Purchases
75,000
Drawings
13,560
Investments
65,500
Cash in hand
36,000
Cash in bank
53,000
4,81,310
4,81,310
Adjustments:

1. Closing stock was valued ₹ 35,000.
2. Depreciation charged on furniture and fixture @ 5%.
3. Further bad debts ₹ 1,000. Make a provision for bad debts @ 5% on sundry debtors.
4. Depreciation charged on motor car @ 10%.
5. Interest on drawing @ 6%.
6. Rent, rates and taxes was outstanding ₹ 200.
7. Discount on debtors 2%.

1. Depreciation on Furniture and Fixture
=
15,500 ×
5
100
=
775
2. Provision for Bad Debts
=
(1,00,0001,000) ×
5
100
=
99,000 ×
5
100
=
4,950
3. Depreciation on Motor Car
=
25,000 ×
10
100
=
2,500
4. Interest on Drawings
=
13,560 ×
6
100
=
813.60
814
5. Discount on Debtors
=
(1,00,0001,0004,950) ×
2
100
=
94,050 ×
2
100
=
1,881
Trading and Profit and Loss Account of M/s Shine Ltd. for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
75,550
By Sales
1,00,000
To Purchases
75,000
Sales Returns
  (6,000)
94,000
Return Outwards
(4,500)
70,500
By Closing Stock
35,000
To Freight
2,250
By Gross Loss c/d
19,300
1,48,300
1,48,300
To Gross Loss b/d
19,300
By Discount Received
3,500
To Bad Debts
3,000
By Interest Received
11,260
To Further Bad Debts
1,000
By Interest on Drawings
8144
New Provision
4,9502
By Net Loss
27,482
Old Provision
(1,500)
7,450
To Discount on Debtors
1,8815
To Trade Expenses
2,500
To Printing and Stationery
5,000
To Rent, Rates and Taxes
3,450
Rent, Rates and Taxes Outstanding
(200)
3,250
To Depreciation on Furniture and Fixture
7751
To Depreciation on Motor Car
2,5003
43,056
43,056
Balance Sheet of M/s Shine Ltd as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
2,50,000
Investments
65,500
Net Loss
(27,482)
Furniture and Fixtures
15,500
Drawings
(13,560)
Depreciation
 (775)1
14,725
Interest on Drawings
    (814)4
2,08,144
Motor Car
25,000
Sundry Creditors
25,000
Depreciation
(2,500)3
22,500
Bills Payable
85,550
Sundry Debtors
1,00,000
Rent, Rates and Taxes Outstanding
200
Further Bad Debts
(1,000)
New Provision (Provision on Bad Debts)
(4,950)2
Discount on Debtors
(1,881)5
92,169
Cash in Bank
53,000
Cash in Hand
36,000
Closing Stock
35,000
3,18,894
3,18,894
Note: The text book has a typo where in the Net Loss is given as ₹ 17,050, Net Loss as ₹ 27,344, the balance total is given as ₹ 3,19,032. However, as per our calculation, we got the gross loss as ₹ 19,300, Net Loss as ₹ 27,482 and the total of the balance sheet is ₹ 3,18,894.

7. Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss account and a balance sheet as on March 31, 2014.
Account Title
Amount
Account Title
Amount
Opening stock
2,26,000
Sales
6,80,000
Purchases
4,40,000
Return Outwards
15,000
Drawings
75,000
Creditors
50,000
Building
1,00,000
Bills Payable
63,700
Motor Van
30,000
Interest Received
20,000
Freight Inwards
3,400
Capital
3,50,000
Sales Return
10,000
Trade Expense
3,300
Heat and Power
8,000
Salary and Wages
5,000
Legal Expense
3,000
Postage and Telegram
1,000
Bad Debts
6,500
Cash in Hand
79,000
Cash in Bank
98,000
Sundry Debtors
25,000
Investments
40,000
Insurance
3,500
Machinery
22,000
11,78,700
11,78,700
Adjustments:

The following additional information is available :

1. Stock on March 31, 2014 was ₹ 30,000.
2. Depreciation is to be charged on building at 5% and motor van at 10%.
3. Provision for doubtful debts is to be maintained at 5% on Sundry Debtors.
4. Unexpired insurance was ₹ 600.
5. The Manager is entitled to a commissiion @ 5% on net profit before after charging such commission.

Note: In the text book, it is given that the adjustment for the manager’s commission is calculated from the net profit after charging such commission. However, the provided answer can be arrived at only if we calculate the net profit after charging such commission. So, instead of “before”, we’ve considered “after” while calculating the manager’s commission.
1. Depreciation on Building
=
1,00,000 ×
5
100
=
5,000
2. Depreciation on Motor Van
=
30,000 ×
10
100
=
3,000
3. Provision for Doubtful Debts
=
25,000 ×
5
100
=
1,250
4. Managers Comission
=
26,650 ×
5
(100 + 5)
=
26,650 ×
5
105
=
1,269.04
1,269
Trading and Profit and Loss Account of M/s Keshav Electronics Ltd. for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
By Opening Stock
2,26,000
By Sales
6,80,000
By Purchases
4,40,000
Sales Returns
(10,000)
6,70,000
Returns Outwards
(15,000)
4,25,000
By Closing Stock
30,000
By Freight Inwards
3,400
By Heat and Power
8,000
By Gross Profit c/d
37,600
7,00,000
7,00,000
By Trade Expenses
3,300
By Gross Profit b/d
37,600
By Salary and Wages
5,000
By Interest Received
20,000
By Legal Expenses
3,000
By Postage and Telegram
1,000
By Bad Debts
6,500
New Provision (Provision for Doubtful Debts)
1,2503
7,750
By Depreciation on Building
5,0001
By Depreciation on Motor Van
3,0002
By Insurance
3,500
Unexpired Insurance
 (600)
2,900
By Manager’s Commission
1,2694
By Net Profit
25,381
57,600
57,600
Balance Sheet of M/s Keshav Electronics Ltd as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
3,50,000
Buildings
1,00,000
Net Profit
25,381
Depreciation
  (5,000)1
95,000
Drawings
(75,000)
3,00,381
Machinery
22,000
Creditors
50,000
Investments
40,000
Bills Payable
63,700
Unexpired Insurance
600
Manager’s Commission Outstanding
1,2694
Motor Van
30,000
Depreciation
(3,000)2
27,000
Sundry Debtors
25,000
New Provision (Provision for Doubtful Debts)
(1,250)3
23,750
Cash at Bank
98,000
Cash in Hand
79,000
Closing Stock
30,000
4,15,350
4,15,350

8. From the following balances extracted from the books of Raga Ltd. prepare a trading and profit and loss account for the year ended March 31, 2014 and a balance sheet as on that date.
Account Title
Amount
Account Title
Amount
Drawings
20,000
Sales
2,20,000
Land and Buildings
12,000
Capital
1,01,110
Plant and Machinery
40,000
Discount
1,260
Carriage inwards
100
Apprentice Premium
5,230
Wages
500
Bills Payable
1,28,870
Salary
2,000
Purchases Return
10,000
Sales Return
200
Bank Charges
200
Coal, Gas and Water
1,200
Purchases
1,50,000
Trade Expenses
3,800
Stock (Opening)
76,800
Cash at bank
50,000
Rates and Taxes
870
Bills Receivable
24,500
Sundry Debtors
54,300
Cash in Hand
30,000
4,66,470
4,66,470
The additional information is as under :

1. Closing stock was valued at the end of the year ₹ 20,000.
2. Depreciation on plant and machinery charged at 5% and land and building at 10%.
3. Discount on debtors at 3%.
4. Make a provision at 5% on debtors for doubtful debts.
5. Salary outstanding was ₹ 100 and Wages prepaid was ₹ 40.
6. The manager is entitled a commission of 5% on net profit after charging such commission.

1. Depreciation on Plant and Machinery
=
40,000 ×
5
100
=
2,000
2. Depreciation on Land and Building
=
12,000 ×
10
100
=
1,200
3. Provision for Doubtful Debts
=
54,300 ×
5
100
=
2,715
4. Discount on Debtors
=
(54,300 – 2,715) ×
3
100
=
51,585 ×
3
100
=
1,547.55
1,548
5. Managers Comission
=
13,297 ×
5
(100 + 5)
=
13,297 ×
5
105
=
633.20
633
Trading and Profit and Loss Account of Raga Ltd. for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
76,800
By Sales
2,20,000
To Purchases
1,50,000
Sales Returns
     (200)
2,19,800
Purchase Returns
(10,000)
1,40,000
By Closing Stock
20,000
To Carriage Inwards
100
To Wages
500
Prepaid Wages
(40)
460
To Coal, Gas and Water
1,200
To Gross Profit c/d
21,240
2,39,800
2,39,800
To Salary
2,000
By Gross Profit b/d
21,240
Outstanding Salary
   100
2,100
By Discount
1,260
To Bank Charges
200
By Apprentice Premium
5,230
To Trade Expenses
3,800
To Rates and Taxes
870
To Depreciation on Plant and Machinery
2,0001
To Depreciation on Land and Building
1,2002
To Provision for Doubtful Debts
2,7153
To Discount on Debtors
1,5484
To Manager’s commission
6335
To Net Profit
12,664
27,730
27,730
Balance Sheet of Raga Ltd as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
1,01,110
Land and Building
12,000
Net Profit
12,664
Depreciation
(1,200)2
10,800
Drawings
(20,000)
93,774
Plant and Machinery
40,000
Bills Payable
1,28,870
Depreciation
(2,000)1
38,000
Outstanding Salary
100
Sundry Debtors
54,300
Manager’s Commission Outstanding
6335
New Provision (Provision for Doubtful Debts)
(2,715)3
Discount on Debtors
(1,548)4
50,037
Bills Receivable
24,500
Prepaid Wages
40
Cash at Bank
50,000
Cash in Hand
30,000
Closing Stock
20,000
2,23,377
2,23,377

9. From the following balances of M/s Jyoti Exports, prepare trading and profit and loss account for the year ended March 31, 2014 and balance sheet as on this date.
Account Title
Debit
Amount
Account Title
Credit
Amount
Sundry debtors
9,600
Sundry Creditors
2,500
Opening stock
22,800
Sales
72,670
Purchases
34,800
Purchases returns
2,430
Carriage inwards
450
Bills payable
15,600
Wages
1,770
Capital
42,000
Office rent
820
Insurance
1,440
Factory rent
390
Cleaning charges
940
Salary
1,590
Building
24,000
Plant and Machinery
3,600
Cash in hand
2,160
Gas and Water
240
Octroi
60
Furniture
20,540
Patents
10,000
1,35,200
1,35,200
Closing stock ₹ 10,000.

1. To provision for doubtful debts is to be maintained at 5 per cent on sundry debtors.
2. Wages amounting to ₹ 500 and salary amounting to ₹ 350 are outstanding.
3. Factory rent prepaid ₹ 100.
4. Depreciation charged on Plant and Machinery @ 5% and Building @ 10%.
5. Outstanding insurance ₹ 100.

1. Provision for Doubtful Debts
=
9,600 ×
5
100
=
480
2. Depreciation on Plant and Machinery
=
3,600 ×
5
100
=
180
3. Depreciation on Building
=
24,000 ×
10
100
=
2,400
Trading and Profit and Loss Account of M/s Jyoti Exports for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
22,800
By Sales
72,670
To Purchases
34,800
By Closing Stock
10,000
Purchases Return
(2,430)
32,370
To Carriage Inwards
450
To Wages
1,770
Outstanding Wages
   500
2,270
To Factory Rent
390
Prepaid Factory Rent
(100)
290
To Cleaning Charges
940
To Gas and Water
240
To Octroi
60
To Gross Profit c/d
23,250
82,670
82,670
To Office Rent
820
By Gross Profit b/d
23,250
To Insurance
1,440
Outstanding Insurance
   100
1,540
To Salary
1,590
Outstanding Salary
   350
1,940
To Provision for Doubtful Debts
4801
To Depreciation on Plant and Machinery
1802
To Depreciation on Building
2,4003
To Net Profit
15,890
23,250
23,250
Balance Sheet of M/s Jyoti Exports as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
42,000
Building
24,000
Net Profit
15,890
57,890
Depreciation
(2,400)3
21,600
Sundry Creditors
2,500
Plant and Machinery
3,600
Bills Payable
15,600
Depreciation
(180)2
3,420
Outstanding Insurance
100
Patents
10,000
Outstanding Salary
350
Furniture
20,540
Outstanding Wages
500
Sundry Debtors
9,600
New Provision (Provision for Doubtful Debts)
(480)1
9,120
Prepaid Factory Rent
100
Cash in Hand
2,160
Closing Stock
10,000
76,940
76,940
Note: The text book has a typo for the values of the Net Profit (it is given as ₹ 16,370) and balance sheet total (it is given as ₹ 63,530). As per our calculation, the net profit is ₹ 15,890 and the balance sheet total is ₹ 76,940.

10. The following balances have been extracted from the books of M/s Green House for the year ended March 31, 2014, prepare trading and profit and loss account and balance sheet as on this date.
Account Title
Debit
Amount
Account Title
Credit
Amount
Purchases
80,000
Capital
2,10,000
Bank balance
11,000
Bills payable
6,500
Wages
34,000
Sales
2,00,000
Debtors
70,300
Creditors
50,000
Cash in hand
1,200
Return outwards
4,000
Legal expenses
4,000
Building
60,000
Machinery
1,20,000
Bills receivable
7,000
Office expenses
3,000
Opening stock
45,000
Gas and fuel
2,700
Freight and Carriage
3,500
Factory lighting
5,000
Office furniture
5,000
Patent right
18,800
4,70,500
4,70,500
adjustments :

(a) Machinery is depreciated at 10% and buildings depreciated at 6%.
(b) Interest on capital @ 4%.
(c) Outstanding wages ₹ 50.
(d) Closing stock ₹ 50,000.

1. Depreciation on Machinery
=
1,20,000 ×
10
100
=
12,000
2. Depreciation on Building
=
60,000 ×
6
100
=
3,600
3. Interest on Capital
=
2,10,000 ×
4
100
=
8,400
Trading and Profit and Loss Account of M/s Green House for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
45,000
By Sales
2,00,000
To Purchases
80,000
By Closing Stock
50,000
Return Outwards
(4,000)
76,000
To Wages
34,000
Wages Outstanding
       50
34,050
To Gas and Fuel
2,700
To Freight and Carriage
3,500
To Factory Lighting
5,000
To Gross Profit c/d
83,750
2,50,000
2,50,000
To Legal Expenses
4,000
By Gross Profit b/d
83,750
To Office Expenses
3,000
To Depreciation on Machinery
12,0001
To Depreciation on Building
3,6002
To Interest on Capital
8,4003
To Net Profit
52,750
83,750
83,750
Balance Sheet of M/s Green House as on March 31, 2014
Liabilties
Amount
Assets
Amount
Capital
2,10,000
Building
60,000
Interest on Capital
8,400
Depreciation
(3,600)
56,400
Net Profit
52,750
2,71,150
Machinery
1,20,000
Bills Payable
6,500
Depreciation
(12,000)
1,08,000
Creditors
50,000
Patent Right
18,800
Outstanding Wages
50
Office Furniture
5,000
Debtors
70,300
Bills Receivable
7,000
Bank Balance
11,000
Cash in Hand
1,200
Closing Stock
50,000
3,27,700
3,27,700

11. From the following balances extracted from the book of M/s Manju Chawla on March 31, 2014. You are requested to prepare the trading and profit and loss account and a balance sheet as on this date.
Account Title
Amount
Amount
Opening Stock
10,000
Purchases and Sales
40,000
80,000
Returns
200
600
Wages
6,000
Dock and Cleaning Charges
4,000
Lighting
500
Misc. Income
6,000
Rent
2,000
Capital
40,000
Drawings
2,000
Debtors and Creditors
6,000
7,000
Cash
3,000
Investment
6,000
Patent
4,000
Land and Machinery
43,000
Donations and charity
600
Sales tax collected
1,000
Furniture
11,300
1,36,600
1,36,600
Closing stock was ₹ 2,000.

(a) Interest on drawings @ 7% and interest on capital @ 5%.
(b) Land and Machinery is depreciated at 5%.
(c) Interest on investment @ 6%.
(d) Unexpired rent ₹ 100.
(e) Charge 5% depreciation on furniture.

1. Interest on Drawings
=
2,000 ×
7
100
=
140
2. Interest on Capital
=
40,000 ×
5
100
=
2,000
3. Depreciation on Land and Machinery
=
43,000 ×
5
100
=
2,150
4. Interest on Investment
=
6,000 ×
6
100
=
360
5. Depreciation on Furniture
=
11,300 ×
5
100
=
565
Trading and Profit and Loss Account of M/s Manju Chawla for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
10,800
By Sales
80,000
To Purchases
40,000
Sales Returns
  (200)
79,800
Purchases Returns
(600)
39,400
By Closing Stock
2,000
To Dock and Cleaning Charges
4,000
To Gross Profit c/d
22,400
22,400
81,800
To Lighting
500
By Gross Profit b/d
22,400
To Donations and Charity
600
By Misc. Income
6,000
To Interest on Capital
2,0002
By Rent
2,000
To Depreciation on Land and Machinery
2,1503
Unexpired Rent
(100)
1,900
To Depreciation on Furniture
5655
By Interest on Drawings
1401
To Net Profit
24,985
By Interest on Investment
3604
30,800
30,800
Balance Sheet of M/s Manju Chawla as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
40,000
Land and Machinery
43,000
Interest on Capital
2,0002
Depreciation
(2,150)3
40,850
Net Profit
24,985
Investment
6,000
Drawings
(2,000)
Interest on Investment
 3604
6,360
Interest on Drawings
  (140)1
64,845
Patent
4,000
Creditors
7,000
Furniture
11,300
Sales Tax Collected
1,000
Depreciation
 (565)5
10,735
Unearned Rent
100
Debtors
6,000
Cash
3,000
Closing Stock
2,000
72,945
72,945
Note: The text book has a typo for the values of Gross Proit (it is given as ₹ 30,900), Net Profit (it is given as ₹ 26,185) and Balance Sheet Totals (it is given as ₹ 71,185). As per our calculation we got the gross profit as ₹ 22,400, net profit as ₹ 24,985 and the balance sheet total as ₹ 72,945.

12. The following balances were extracted from the books of M/s Panchsheel Garments on March 31, 2014.
Account Title
Debit
Amount
Account Title
Credit
Amount
Opening stock
16,000
Sales
1,12,000
Purchases
67,600
Return outwards
3,200
Return Inwards
4,600
Discount
1,400
Carriage inwards
1,400
Bank overdraft
10,000
General expenses
2,400
Commission
1,800
Insurance
4,000
Creditors
16,000
Scooter expenses
200
Capital
50,000
Salary
8,800
Cash in hand
4,000
Scooter
8,000
Furniture
5,200
Buildings
65,000
Debtors
6,000
Wages
1,200
1,94,400
1,94,400
Prepare the trading and profit and loss account for the year ended March 31, 2014 and a balance sheet as on that date.

(a) Unexpired insurance ₹ 1,000.
(b) Salary due but not paid ₹ 1800.
(c) Wages outstanding ₹ 200.
(d) Interest on capital 5%.
(e) Scooter is depreciated @ 5%.
(f) Furniture is depreciated @ 10%.

1. Interest on Capital
=
50,000 ×
5
100
=
2,500
2. Depreciation on Scooter
=
8,000 ×
5
100
=
400
3. Depreciation on Furniture
=
5,200 ×
10
100
=
520
Note: The closing stock is not provided in the given problem. However, only if we consider a closing stock equivalent of 15,000, then only the gross profit, net profit and the balance sheet totals will match. So, we’ve assumed that the closing stock is ₹ 15,000.
Trading and Profit and Loss Account of M/s Panchsheel Garments for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
16,000
By Sales
1,12,000
To Purchases
67,600
Return Inwards>
(4,600)
1,07,400
Return Outwards
(3,200)
64,400
By Closing Stock
15,000
To Carriage Inwards
1,400
To Wages
1,200
Outstanding Wages
   200
1,400
To Gross Profit c/d
39,200
1,22,400
1,22,,400
To General Expenses
2,400
By Gross Profit b/d
39,200
To Insurance
4,000
By Discount
1,400
Unexpired Insurance
(1,000)
3,000
By Commission
1,800
To Scooter Expenses
200
To Salary
8,800
Outstanding Salary
1,800
10,600
To Interest on Capital
2,5001
To Depreciation on Scooter
4002
To Depreciation on Furniture
5203
To Net Profit
22,780
42,400
42,400
Balance Sheet of M/s Panchsheel Garments as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
50,000
Buildings
65,000
Interest on Capital
2,5001
Scooter
8,000
Net Profit
22,780
75,280
Depreciation
(400)2
7,600
Bank Overdraft
10,000
Furniture
5,200
Creditors
16,000
Depreciation
(520)3
4,680
Outstanding Salary
1,800
Unexpired Insurance
1,000
Outstanding Wages
200
Debtors
6,000
Cash in Hand
4,000
Closing Stock
15,000
1,03,280
1,03,280
13. Prepare the trading and profit and loss account and balance sheet of M/s Control Device India on March 31, 2014 from the following balance as on that date.
Account Title
Debit
Amount
Credit
Amount
Drawings and Capital
19,530
67,500
Purchases and Sales
45,000
1,12,500
Salary and Commission
25,470
1,575
Carriage
2,700
Plant and Machinery
27,000
Furniture
6,750
Opening stock
42,300
Insurance premium
2,700
Interest
7,425
Bank overdraft
24,660
Rent and Taxes
2,160
Wages
11,215
Returns
2,385
1,440
Carriage Outwards
1,485
Debitors and Creditors
36,000
58,500
General Expenses
6,975
Octroi
530
Investment
41,400
2,73,600
2,73,600
Closing stock was valued ₹ 20,000.

(a) Interest on capital @ 10%.
(b) Interest on drawings @ 5%.
(c) Wages outstanding ₹ 50.
(d) Outstanding salary ₹ 20.
(e) Provide a depreciation @ 5% on plant and machinery.
(f) Make a 5% provision on debtors.

1. Interest on Capital
=
67,500 ×
10
100
=
6,750
2. Interest on Drawings
=
19,530 ×
5
100
=
977.50
977
3. Depreciation on Plant and Machinery
=
27,000 ×
5
100
=
1,350
4. Provision on Debtors
=
36,000 ×
5
100
=
1,800
Trading and Profit and Loss Account of M/s Control Device India for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Opening Stock
42,300
By Sales
1,12,500
To Purchases
45,000
Sales Returns
(2,385)
1,10,115
Purchase Returns
(1,440)
43,560
By Closing Stock
20,000
To Carriage
2,700
To Wages
11,215
Outstanding Wages
       50
11,165
To Octroi
530
To Gross Profit
29,760
1,30,115
1,30,115
To Salary
25,470
By Gross Profit
29,760
Outstanding Salary
       20
25,490
By Commission
1,575
To Insurance Premium
2,700
By Interest
7,425
To Rent and Taxes
2,160
By Interest on Drawings
9772
To Carriage Outwards
1,485
By Net Loss
8,973
To General Expenses
6,975
To Interest on Capital
6,7501
To Depreciation on Plant and Machinery
1,3503
To Provision on Debtors
1,8004
48,710
48,710
Balance Sheet of M/s Control Device India as on March 31, 2014
Liabilities
Amount
Assets
Amount
Capital
67,500
Plant and Machinery
27,000
Interest on Capital
6,7501
Depreciation
(1,350)3
25,650
Net Loss
(8,973)
Furniture
6,750
Drawings
(19,530)
Investment
41,400
Interest on Drawings
   (977)2
44,770
Debtors
36,000
Creditors
58,500
New Provision
(1,800)4
34,200
Bank Overdraft
24,660
Closing Stock
20,000
Outstanding Salary
50
Outstanding Wages
20
1,28,000
1,28,000
14. The following balances appeared in the trial balance of M/s Kapil Traders as on March 31, 2014
Sundry debtors
30,500
Bad debts
500
Provision for doubtful debts
2,000
The partners of the firm agreed to records the following adjustments in the books of the Firm: Further bad debts ₹ 300. Maintain provision for bad debts 10%. Show the following adjustments in the bad debts account, provision account, debtors account, profit and loss account and balance sheet.
1. Provision for Bad Debts
=
(30,500300) ×
10
100
=
30,200 ×
10
100
=
3,020
Bad Debts Account
Dr.
Cr.
Date
Particulars
J.F.
Amount
Date
Particulars
J.F.
Amount
2014
2014
Mar 31
To Balance b/d
(Bad Debts)
500
Mar 31
By Balance c/d
(Provision for Doubtful Debts)
800
Mar 31
To Debtors
300
800
800
Provision for Doubtful Debts Account
Dr.
Cr.
Date
Particulars
J.F.
Amount
Date
Particulars
J.F.
Amount
2014
2013
Mar 31
To Bad Debts
800
Apr 01
By Balance b/d
(Old Provision)
2,000
To Debtors
(New Provision)
3,020
Apr 01
By Balance c/d
(Profit and Loss)
1,820
3,820
3,8201
Debtors Account
Dr.
Cr.
Date
Particulars
J.F.
Amount
Date
Particulars
J.F.
Amount
2014
2014
Mar 31
To Balance b/d
30,500
Mar 31
By Further Bad Debts
300
Mar 31
By Provision for Doubtful Debts
3,0201
Mar 31
By Balance c/d
27,180
30,500
30,500
Profit and Loss Account of M/s Kapil Traders for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Bad Debts
500
Further Bad Debts
300
New Provision
3,0201
Old Provision
(2,000)
1,820
 
 
Balance Sheet of M/s Kapil Traders as on March 31, 2014
Liabilities
Amount
Assets
Amount
Debtors
30,500
Further Bad Debtors
(300)
New Provision
(3,020)1
27,180
 
 
15. Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on March 31, 2014
Debtors
80,000
Bad debts
2,000
Provision for doubtful debts
5,000
Adjustments :
Bad debts ₹ 500 Provision on debtors @ 3%.
1. Provision for Doubtful Debts
=
(80,000500) ×
3
100
=
79,500 ×
3
100
=
2,385
Bad Debts Account
Dr.
Cr.
Date
Particulars
J.F.
Amount
Date
Particulars
J.F.
Amount
2014
2014
Dec 31
To Balance b/d
2,000
Dec 31
By Provision for Doubtful Debts
2,500
Dec 31
To Sundry Debtors
500
2,500
2,500
Provision for Doubtful Debts Account
Dr.
Cr.
Date
Particulars
J.F.
Amount
Date
Particulars
J.F.
Amount
2014
2014
Dec 31
To Bad Debts
2,500
Jan 01
By Balance b/d
(Old Provision)
5,000
Dec 31
To New Provision
2,3851
Dec 31
To Profit and Loss
(Balance)
115
5,000
5,000
Profit and Loss Account for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
To Bad Debts
2,000
By Old Provision
5,000
Further Bad Debts
500
New Provision for Bad Debts
2,3851
4,885
Balancing Amount
 (115)
5,000
5,000
Profit and Loss Account for the year ending March 31, 2014
Dr.
Cr.
Expenses/Losses
Amount
Revenues/Gains
Amount
By Old Provision
5,000
Bad Debts
(2,000)
Further Bad Debts
(500)
New Provision for Doubtful Debts
(2,385)1
115
 
Balance Sheet of M/s Kapil Traders as on March 31, 2014
Liabilities
Amount
Assets
Amount
Debtors
80,000
Further Bad Debtors
(500)
New Provision on Debtors
(2,385)1
77,115
 
 
Note: In this problem, the old provision is more than the sum of bad debts, further bad debts and provision for doubtful debtors. So, it is considered on the Revenues/Gains side instead of the Expenses/Losses side.