Home » Class 11 Accountancy » NCERT Solutions for Class 11 Accountancy Financial Accounting Part-2 Chapter 1 – Financial Statements – I

NCERT Solutions for Class 11 Accountancy Financial Accounting Part-2 Chapter 1 – Financial Statements – I


Short answers : Solutions of Questions on Page Number : 364


Q1 :What are the objectives of preparing financial statements?
Answer :
The following are the objectives of preparing financial statements.
1. To ascertain profit earned or loss incurred by a business during an accounting period. This is estimated by preparing Trading and Profit and Loss Account.
2. To ascertain the true financial position of a business. This is reflected by the Balance Sheet.
3. To enable comparison of current year’s performance with that of the previous year’s, i.e., intra-firm comparisons. Also, to compare own performance with that of the other firms in the same industry, i.e., inter-firm comparisons.
4. To assess the solvency and credit worthiness of the business
5. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business
6. To provide vital information to facilitate various users of accounting information in decision making process.


Q2 :What is the purpose of preparing trading and profit and loss account?
Answer :
The purposes of preparing Trading Account are:
1. To calculate gross profit earned or gross loss incurred during an accounting period
2. To estimate the cost of goods sold
3. To record direct expenses (i.e., expenses incurred on the purchases and manufacturing of goods)
4. To measure the adequacy and reasonability of direct expenses incurred by comparing purchases with direct expenses incurred
5. To compare the realised efficiency and performance with the desired or proposed targets
The purposes of preparing Profit and Loss Account are:
1. To calculate net profit or net loss
2. To ascertain net profit ratio and to compare this year’s net profit ratio with that of the desired and proposed target in order to assess the efficiency and effectiveness
3. To measure the adequacy and reasonability of indirect expenses incurred by ascertaining ratio between indirect expenses and net profit
4. To compare current year’s actual performance with desired and planned performance
5. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business


Q3 : Explain the concept of cost of goods sold?
Answer : Cost of goods sold (COGS) is the cost of merchandise that is sold to the customers. It includes cost of raw materials purchased, direct expenses incurred, value of opening stock, i.e., the value of the last year’s unsold stock and excludes closing stock if any, i.e., the value of current year’s unsold stock. The formula to calculate COGS is:
Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses – Closing Stock


Q4 :What is a balance sheet? What are its characteristics?
Answer :
Balance Sheet is a statement prepared to ascertain values of assets and liabilities of a business on a particular date. It is called Balance Sheet as it contain balances of real and personal accounts, which are not closed on a particular date.
Characteristics of Balance Sheet
1. It is a statement of assets and liabilities.
2. The total of Assets side must be equal to Liabilities sides.
3. It is prepared at a particular date.
4. It helps in ascertaining the financial position of the business.


Q5 :Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure:
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years.
Answer :

Basis of Difference

Capital Expenditure

Revenue Expenditure

Meaning

It is incurred to increase the earning capacity of a
business.

It is incurred to maintain the earning capacity of a
business.

Purpose

It is incurred to acquire fixed assets to carry out
operations.

It is incurred to conduct day to day activities.

Benefits

The benefits of such expenditures can be availed for
more than one year.

The benefits of such expenditures can only be availed
for one year.

Nature

It is non-recurring by nature.

It is generally recurring in nature.

Shown

Capital expenditure is shown in the assets side of the
Balance Sheet.

Revenue expenditure is shown in the debit side of the
trading and Profit and Loss Account.

(a) Capital expenditure
(b) Revenue expenditure
(c) Capital expenditure
(d) Capital expenditure
(e) Revenue expenditure
(f) Capital expenditure
(g) Deferred revenue expenditure


Q6 :What is an operating profit?
Answer :
Operating profit is a profit earned though normal activities of a business. It is the excess of gross profit over operating expenses. In other words, it is the excess of operating revenue over operating cost. It is also termed as earning before interest and tax (EBTI). It does not include incomes and expenses that are not related to main course of the business.
It is calculated by following formulae:
Operating Profit = Gross Profit – Operating Expenses
Or,
Operating Profit = Sales – Operating Cost
Operating Profit = Sales – COGS – Operating Expenses
Operating expenses include office and administrative expenses, selling and distribution expenses, discount, bad debts, etc.


Long answers : Solutions of Questions on Page Number : 364


Q1 : What are financial statements? What information do they provide?
Answer :
Every business firm wants to know its financial position at the end of an accounting period. In order to assess its financial position, profit earned or loss incurred during an accounting period, the book value of its assets and liabilities is to be ascertained. In order to serve this purpose, financial statements are prepared. Financial statements are the statements showing profitability and financial position of a business at the end of the year. It includes:
1. Income statements, viz., Trading and Profit and Loss Account, which represents direct and indirect expenses incurred to generate revenues. On one hand, trading account discloses either gross profit or gross loss, on the other hand, profit and loss account discloses either net profit or net loss.
2. Statement of financial position, viz., Balance Sheet, which enlists the book value of all the assets and liabilities of the firm. Balance Sheet discloses the true financial position, solvency and credit worthiness of the business.
The information provided by the financial statements is in the form of gross profit or gross loss, net profit or net loss and book value of the assets and their liabilities. The value and relevance of the information provided by the financial statements varies from one user of accounting information to another. Various users of accounting information can be explained graphically as below.

1. Internal: Internal users are those persons who are directly related to the business. For example, owners, management, employees, workers, etc.
a. Owners: The information required by owners about profit earned or loss incurred during an accounting period. This information is provided by the financial statements in form of gross (net) profit or gross (net) loss.
b. Management: Financial statements provide vital information to the management for decision making, designing policies and future plans. There are various parameters such as ratio of direct (indirect) expenses to gross (net) profit, by the help of which management can check the adequacy, control and relevance of various expenses incurred and plans and policies implemented.
c. Employees and workers: They expect bonus at the year end, which is directly related to the profit of that particular period. The net profit as disclosed by the profit and loss account forms the basis of this expectation.
2. External: External users are those persons and institutions that are indirectly related to the business. For example, government, tax authorities, investors, etc.
a. Government: Government needs information in order to ascertain various macroeconomic variables, such as national income, GDP, employment opportunities generated, etc.
b. Tax authorities: Tax department is interested in knowing the actual sales, production, turnovers and exports and imports by the business. Tax department levies various taxes, such as income tax, VAT, excise tax, etc. The information disclosed by the financial statements form the basis of estimation of the tax dues of the business.
c. Investors: Financial statements help to know about the earning capacity, scope and potential to grow and to assess financial position of the business. It also helps in knowing various investments made by the business and also investments made by the organisations and individuals in the business. This information helps the investors to assess and determine whether investments by them will be fruitful or not.
d. Bank and other financial institutions: Financial statements provide information to banks and other financial institutions, such as LIC, GIC, etc., about the credit worthiness, solvency and repaying capacity of the business.
e. Creditors: Financial statements provide information to the creditors about the goodwill of the business and its credit worthiness and repaying capacity.


Q2 :What are closing entries? Give four examples of closing entries.
Answer :
The balances of all nominal accounts are transferred to the Trading and Profit and Loss Account. The entries required for such transfers are termed as closing entries.
The examples of closing entries are given below.
1. Closing entries to transfer the following items to the debit side of trading account from Trial Balance:

Trading A/c

Dr.

To Opening Stock A/c
To Purchase A/c
To Wages A/c
To Carriage A/c
To All Other Direct Expenses A/c
(Transferred debit balances to Trading Aaccount)

2. Closing entries to transfer the following items to the credit side of trading account from Trial Balance:

Sales A/c

Dr.

Closing Stock A/c

Dr.

To Trading A/c
(Transferred credit balances to Trading Account)

3. Closing entries to transfer the following items to the debit side of Profit and Loss Account from Trial Balance:

Profit and Loss A/c

Dr.

To Salaries
To Rent
To Bad Debts
To All in Direct Expenses

(Transferred debit balances to Profit and Loss Account)

4. Closing entries to transfer the following items to the credit side of Profit and Loss Account from Trial Balance:

Commission Received A/c

Dr.

Interest Received A/c

Dr.

All Other Indirect Income A/c

Dr.

To Profit and Loss A/c
(Transferred credit balances

to Profit and Loss Account)


Q3 :Discuss the need of preparing a balance sheet.
Answer :
The needs to prepare a Balance Sheet are given below.
1. It helps in determining the nature and book value of various assets, such as fixed assets, investments, current assets, etc. at the end of an accounting period.
2. It helps in ascertaining the nature and amount of various liabilities like long term liabilities, current liabilities, provisions, etc., which a business owes.
3. It discloses important information about capital invested in a business. The additional capital invested during the accounting period, drawings of the owners and profit (or loss) added to (or deducted from) the capital of the business.
4. It helps in assessing the solvency of a business.
5. It discloses the true financial position of a business at a particular point of time.
6. It lays down the basis for maintaining new books for next accounting period.


Q4 :What is meant by Grouping and Marshalling of assets and liabilities? Explain the ways in which a balance sheet may be marshalled.
Answer :
The rationale behind preparing financial statements is to present a summarised version of all financial activities in such a manner that all users can interpret and understand the information easily, appropriately and also take decisions accordingly.
Grouping of assets and liabilities: Grouping means showing similar assets and liabilities under a single head. For example, all assets that can be used for more than a year are clubbed together under the heading ‘fixed assets’, for example, building, furniture, machinery, etc.
Marshalling of asset and liabilities: When assets and liabilities are shown in a particular order of liquidity or permanence, they are said to be marshalled.

1. In order of liquidity: Liquidity means convertibility into cash. Assets that can be converted into cash in least possible time, i.e., more liquid assets are recorded first, followed by the lesser liquid assets. In a balance sheet, cash in hand is recorded at first and goodwill at last. In the same way, liabilities that are to be paid first, i.e., high priority liabilities are recorded first, followed by the lower priority ones. In a balance sheet, current liabilities are recorded first and then the long term liabilities and capital at the last.

Balance
Sheet of………………, as on…………….

Liabilities

Amount

Rs

Assets

Amount

Rs

Current Liabilities:

Current Assets:

Bills Payable

Cash in Hand

Sunday Creditors

Cash at Bank

Bank Overdraft

Bills Receivable

Long Term Loans

 

Debtors

Capital:

Closing Stock

Opening balance

Long Term Investments

 

Add:
Net Profit

Fixed Assets:

 

Less:
Drawings

Furniture

 

Plant and Machinery

 

Land and Building

 

Goodwill

 

 

 

 

 

 

 

 

 

2. In order of permanence: It is just the reverse of the above method. In this, assets and liabilities are arranged in their reducing level of permanence. The assets with higher degree of permanence are recorded first, followed by the assets with lower degree of permanence. For example, goodwill, land and building have the highest degree of permanence and hence are recorded at the top, whereas, cash at bank and cash in hand are recorded at the bottom. In the same way, liabilities are shown according to their life in the business. Liabilities with higher level of permanence like, capital is recorded at the top and other liabilities with lower permanence are recorded at the bottom.

 

Balance
Sheet of………………, as on…………….

Liabilities

Amount Rs

Assets

Amount

Rs

Capital:

Fixed assets:

 

Opening Balance

Goodwill

 

 

Add:
Net profit

Land and Building

 

Less:
Drawings

Plant and Machinery

 

Furniture

Long Term Loans

Long Term Investments

 

Current Liabilities:

Current Assets:

 

Bank Overdraft

Closing Stock

 

Sunday Creditors

Debtors

 

Bill Payable

Bills Receivable

 

Cash at Bank

 

Cash in Hand

 

 

 

 

 

 

 

 

 

 


Numerical questions : Solutions of Questions on Page Number : 364


Q1 : From the following balances taken from the books of Simmi and Vimmi Ltd. for the year ending March 31, 2003, calculate the gross profit.

 

Rs

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

Answer:

Trading Account as on
March 31, 2003

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

15,00,000

Net Sales

40,00,000

Net Purchases

15,00,000

Closing Stock

2,50,000

Direct Expenses

80,000

 

 

Gross Profit

11,70,000

 

 

 

42,50,000

 

42,50,000

 

 

 

 


Q2 : From the following balances extracted from the books of M/s Ahuja and Nanda. Calculate the amount of:
(a)Cost of goods available for sale
(b)Cost of goods sold during the year
(c)Gross Profit

 

Rs

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

Answer:
(a) Cost of Goods Sold Available for Sales

Or
Cost of Goods Manufactured = Opening Stock + Net Purchases + Wages
= 25,000 + 10,40,000 + 1,00,000
= Rs 11,65,000

(b) Cost of Goods Sold    = Opening Stock + Net Purchases + Wages – Closing Stock

= 25,000 + 10,40,000 + 1,00,000 – 30,000

= Rs 11,35,000

Or

Cost of Goods Sold = Net Sales – Gross Profit
= 15,50,000 – 4,15,000
= Rs 11,35,000
(c)

Trading Account

Dr.

Cr.

Particulars 

Amount

Rs

Particulars

Amount

Rs

Opening Stock

25,000

Sales

 

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

 

 

 

Wages

 

1,00,000

 

Closing Stock

 

30,000

Gross Profit

 

4,15,000

 

 

 

 

15,80,000

 

 

15,80,000

 

 

 

 

 

 

 

 

Gross Profit Rs 4,15,000


Q3 : Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv and Sons for the year ended March 31, 2005.

Rs

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

Answer:

Trading Account as on
March 31, 2005

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

50,000

Net Sales

11,00,000

Net Purchases

6,00,000

Closing Stock

70,000

Direct Expenses

60,000

Gross Profit

4,60,000

11,70,000

11,70,000

Operating Profit = Sales – (Opening Stock + Net Purchases + Direct Expenses + Administration Expenses +

Selling and Distribution Expenses) + Closing Stock
= 11,00,000 – (50,000 + 6,00,000 + 60,000 + 45,000 + 65,000) + 70,000
= Rs 3,50,000


Q4 :Operating profit earned by M/s Arora and Sachdeva in 2005-06 was Rs 17,00,000. Its non-operating incomes were Rs 1,50,000 and non-operating expenses were Rs 3,75,000. Calculate the amount of net profit earned by the firm.
Answer :
Net Profit = Operating Profit + Non-operating Income – Non-operating Expenses
= 17,00,000 + 1,50,000 – 3,75,000

= Rs 14,75,000
Net profit earned by M/S Arora and Sachdeva in 2005-06 is Rs 14,75,000.


Q5 : The following are the extracts from the trial balance of M/s Bhola and Sons as on March 31, 2005

Account title

Debit

Rs

Credit

Rs

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 Rs 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 and Sons.
Answer :

Books of M/s Bhola and Sons

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount
Rs

2006

Mar.31

Trading A/c

Dr.

10,10,000

To Opening Stock A/c

2,00,000

To Purchases A/c

8,10,000

(Balances from Purchases
Account and Stock Account

transferred to Trading
Account)

Mar.31

Sales A/c

Dr.

10,10,000

Closing Stock A/c

3,00,000

To Trading A/c

13,10,000

(Balance from sales and
closing stock transferred

to Trading Account)

Mar.31

Trading A/c

Dr.

3,00,000

To Profit and Loss (Gross
Profit) A/c

3,00,000

(Balance of Trading Account
(gross profit) transferred

to Profit and Loss
Account)

Trading Account as on
March 31, 2005

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

2,00,000

Sales

10,10,000

Purchases

8,10,000

Closing Stock

3,00,000

Profit and Loss A/c
– Gross Profit

3,00,000

13,10,000

13,10,000

Balance Sheet as on March 31, 2005

Liabilities

Amount

Rs

Assets

Amount

Rs

Closing Stock

3,00,000

 


Q6 :Prepare trading and profit and loss account and balance sheet, as on March 31, 2005 :

Account Title

Amount

Rs

Account Title

Amount

Rs

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 and taxes

1,350

   

Carriage inwards

450

   

Bank

4,500

   

Openings stock

6,000

   

Closing stock, as on March 31, 2005 Rs 22,400
Answer :

Trading Account as on
March 31, 2005

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

6,000

Sales

73,500

Purchases

58,500

Closing Stock

22,400

Wages

15,000

Carriage Inwards

450

Profit and Loss (Gross
Profit)

15,950

95,900

95,900

 

Profit and Loss
Account
as on March 31, 2005

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Sundry Expenses

600

Trading (Gross Profit)

15,950

Rent and Taxes

1,350

Net Profit

14,000

15,950

15,950

Balance Sheet as on March
31, 2005

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital

60,000

Fixed
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

 


Q7 : The following trial balance is extracted from the books of M/s Ram on March 31, 2011. You are required to prepare trading and profit and loss account and the balance sheet as on date:

Account title

Amount

Rs

Account title

Amount Rs

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 cash

500

Sales return

1,000

Machinery

5,000

Land and building

10,000

Income tax

100

Furniture

9,900

Answer :

 

Trading Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Purchases

50,000

Sales

80,000

Coal, Gas and Water

6,000

Less: Sales Return

1,000

79,000

Factory Wages

11,000

Profit and Loss (Gross Profit)

12,000

79,000

79,000

 

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Salaries

9,000

Trading (Gross Profit)

12,000

Rent

4,000

Apprenticeship Premium

5,000

Discount

3,000

Advertisement

500

Net Profit

500

17,000

17,000

 

Balance Sheet as on March 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital

20,000

Machinery

5,000

Add: Profit and Loss (Net Profit)

500

Land and Building

10,000

20,500

Furniture

9,900

Less: Drawings

(1,000)

Loan (Given)

6,000

Less: Income Tax

(100)

19,400

Debtors

12,000

Petty Cash

500

Loan (Taken)

10,000

Creditors

13,000

Bank Overdraft

1,000

43,400

43,400

 


Q8 : The following is the trial balance of Manju Chawla on March 31, 2011. You are required to prepare trading and profit and loss account and a balance sheet as on date:

Account title

Debit Amount Rs

Credit Amount Rs

Opening stock

10,000

Purchases and sales

40,000

80,000

Returns

200

600

Productive wages

6,000

Dock and Clearing 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

6,000

7,000

Cash

3,000

Investment

6,000

Patents

4,000

Land and Machinery

43,000

Closing stock Rs 2,000.
Answer :

Trading Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

10,000

Sales

80,000

Purchases

40,000

Less: Sales Returns

(200)

79,800

Less: Purchases Returns

(600)

39,400

Productive Wages

6,000

Closing Stock

2,000

Dock and Clearing Charges

4,000

Royalty

4,000

Profit and Loss (Gross Profit)

18,400

81,800

81,800

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Donation and Charity

600

Trading (Gross Profit)

18,400

Delivery Van Expenses

6,000

Misc. Incomes

6,000

Lighting

500

Rent from Tenants

2,000

Bad Debts

600

Net Profit

18,700

26,400

26,400

Note: As per the solution, net profit is Rs 18,700; however, according to the answer given in the book, it is Rs 18,400.

 

Balance Sheet as on March 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital

40,000

Patents

4,000

Add: Profit and Loss (Net Profit)

18,700

Land and Machinery

43,000

58,700

Investment

6,000

Less: Drawings

(2,000)

56,700

Debtors

6,700

Cash

3,000

Sales Tax Collected

1,000

Closing Stock

2,000

Creditors

7,000

64,700

64,700

Note: There is a misprint in the trial balance given in the question. In order to match the trial balance, debtors have been taken as Rs 6,700; however, the debtors given in the trial balance is Rs 60,000.


Q9 : The following is the trial balance of Mr. Deepak as on March 31, 2011. You are required to prepare trading account, profit and loss account and a balance sheet as on date:

Account title

Debit Amount Rs

Account title

Credit Amount
Rs

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

Closing stock Rs 35,000.
Answer :

 

Trading Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

40,000

Sales

4,40,000

Purchases

1,60,000

Less: Sales Return

6,000

4,34,000

Less: Purchases Return

(8,000)

1,52,000

Closing Stock

35,000

Lighting (Factory)

2,800

Carriage Inwards

7,200

Wages

84,000

Profit and Loss (Gross Profit)

1,83,000

4,69,000

4,69,000

 

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Insurance

3,000

Trading (Gross Profit)

1,83,000

General Expenses

29,000

Discount Received

10,400

Rent and Taxes

14,400

Travelling Expenses

7,400

Carriage Outwards

1,600

Salaries

53,000

Net Profit

85,000

1,93,400

1,93,400

 

Balance Sheet as on March 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

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

Bills Receivable

5,000

Creditors

50,000

Cash in Hand

12,600

Bills Payable

3,600

3,52,600

3,52,600

 


Q10 : Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2011.

Account Title

Debit Amount Rs

Credit Amount Rs

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

Closing stock Rs 30,000.

 

Trading Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

57,600

Sales

5,60,000

Purchases

3,52,000

Less: Return Inwards

(9,600)

5,50,400

Less: Return Outwards

(12,000)

3,40,000

Closing Stock

30,000

Carriage Inwards

7,000

Fuel and Power

24,800

Wages and Salaries

28,800

Profit and Loss (Gross Profit)

1,22,200

5,80,400

5,80,400

 

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Carriage Outwards

3,360

Trading (Gross Profit)

1,22,200

Bad Debts

9,950

Interest on Investment

3,200

Repairs

2,400

Miscellaneous Receipts

160

General Expenses

17,000

Net Profit

92,850

1,25,560

1,25,560

 

 

Balance Sheet as on March 31,2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital

3,48,000

Land and Building

2,88,000

Add: Net Profit

92,850

4,40,850

Investment

32,000

Debtors

1,31,200

Loan

16,000

Closing Stock

30,000

Creditors

48,000

Cash in Hand

32,000

Sales Tax Collected

8,350

5,13,200

5,13,200

 


Q11 : From the following trial balance of Mr. A. Lal, prepare trading, profit and loss account and balance sheet as on March 31, 2011.

Account Title

Debit Amount Rs

Credit Amount Rs

Stock as on April 01, 2005

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 over draft

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 Rs 15,000.
As per the question, this year should be 2010 and not 2005.
Answer:

 

Trading Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

16,000

Sales

1,12,000

Purchases

67,600

Less: Sales Return Inwards

(4,600)

1,07,400

Less: Return Outwards

(3,200)

64,400

Closing Stock

15,000

Carriage Inwards

1,400

Profit and Loss (Gross Profit)

40,600

1,22,400

1,22,400

 

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

General Expenses

2,400

Trading (Gross Profit)

40,600

Bad Debts

600

Discount Received

1,400

Interest on Bank Overdraft

600

Commission Received

1,800

Insurance and Taxes

4,000

Scooter Expenses

200

Salaries

8,800

Net Profit

27,200

43,800

43,800

 

Balance Sheet as on March 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Capital

50,000

Building

65,000

Add: Net Profit

27,200

77,200

Furniture

5,200

Scooter

8,000

Creditors

16,000

Debtors

6,000

Bank Overdraft

10,000

Closing Stock

15,000

Cash in Hand

4,000

1,03,200

1,03,200


Q12 : Prepare trading and profit and loss account and balance sheet of M/s Royal Traders from the following balances as on March 31, 2011.

Debit balances

Amount Rs

Credit balances

Amount Rs

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 Rs 8,000
Answer :

Trading Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

20,000

Sales

2,45,000

Purchases

1,90,000

Closing Stock

8,000

Carriage on Purchases

1,500

Profit and Loss (Gross Loss)

13,500

Wages

55,000

2,66,500

2,66,500

 

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Trading (Gross Loss)

13,500

Postage

300

Sundry Expenses

1,700

Rent

4,500

Net Loss

20,000

20,000

20,000

 

Balance Sheet of M/s Royal Traders as on March 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

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

Closing Stock

8,000

Creditors

10,000

Bank

10,000

Bills Payable

4,000

Cash

5,000

1,85,000

1,85,000


Q13 :Prepare trading and profit and loss account from the following particulars of M/s Neema Traders as on March 31, 2011.

Account Title

Debit Account Rs

Account Title

Credit Amount Rs

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, 2005 Rs 16,000.
Answer :

 

Trading Account as on March 31, 2011

Dr.

Cr.

Liabilities

Amount

Rs

Assets

Amount

Rs

Opening Stock

9,000

Sales

1,80,000

Purchases

1,64,000

Less: Sales Return

(1,820)

1,78,180

Less: Purchases Return

(1,910)

1,62,090

Closing Stock

16,000

Carriage Inwards

1,000

Wages

3,300

Profit and Loss (Gross Profit)

18,790

1,94,180

1,94,180

 

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Insurance

1,610

Trading (Gross Profit)

18,790

Interest

1,100

Bad Debts

250

Postage

300

Discount

1,000

Salaries

3,000

Net Profit

11,530

18,790

18,790

 

 

Balance Sheet as on March 31, 2011

Liabilities

Amount
Rs

Assets

Amount
Rs

Capital

2,36,000

Building

23,000

Add: Net Profit

11,530

2,47,530

Plant

16,930

Machinery

2,10,940

Loan

8,000

Debtors

3,900

Creditors

8,000

Closing Stock

16,000

Bills Payable

2,520

Bank Overdraft

4,720

2,70,770

2,70,770

Note: As per the solution, the gross profit, net profit and the total of balance sheet are Rs 18,790, Rs 11,530 and Rs 2,70,770 respectively; whereas, as per the answer given in the book, these are Rs 17,850, Rs 10,590 and Rs 2,69,830.


Q14 : From the following balances of M/s Nilu Sarees as on March 31, 2011. Prepare trading and profit and loss account and balance sheet as on date.
Answer:

Account Title

Debit Account Rs

Account Title

Credit Amount Rs

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

2,370

Rent and 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, 2005 Rs 22,000.
Answer :

Trading Account of M/s Nilu Sarees as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

10,000

Sales

2,28,000

Purchases

78,000

Closing Stock

22,000

Carriage Inwards

2,500

Wages

11,000

Profit and Loss (Gross Profit)

1,48,500

2,50,000

2,50,000

Note: As per solution, the Gross profit is Rs 1,48,500; however, the answer given in the book is Rs 1,56,500

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Salaries

30,000

Trading (Gross Profit)

1,48,500

Commission

10,000

Interest

7,000

Rent and Taxes

2,800

Commission

8,000

Repairs

5,000

Telephone Expenses

1,400

Legal Charges

1,500

Sundry Expenses

2,500

Net Profit

1,10,300

1,63,500

1,63,500

 

Balance Sheet as on March 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

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

Cash in Hand

12,000

Creditors

28,000

Bills Payable

2,370

Suspense

21,330

2,14,000

2,14,000


Q15 : Prepare trading and profit and loss account of M/s Sports Equipments for the year ended March 31, 2011 and balance sheet as on that date:

Account Title

Debit Amount Rs

Credit Amount Rs

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

Office expenses

2,000

losing stock as on March 31, 2011 Rs 2,500
Answer:

 

Trading Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

50,000

Sales

4,21,000

Purchases

3,50,000

Less: Sales Return

5,000

4,16,000

Carriage on Purchases

12,000

Closing Stock

2,500

Wages

8,000

Profit and Loss (Gross Loss)

1,500

4,20,000

4,20,000

 

Profit and Loss Account as on March 31, 2011

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Trading (Gross Loss)

1,500

Commission

4,000

Rent

15,000

Net Loss

41,500

Bad Debts

7,000

Stationery

6,000

Travelling Expenses

2,000

Insurance

7,000

Discount

5,000

Office Expenses

2,000

45,500

45,500

 

 

Balance Sheet as on March 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

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

Closing Stock

2,500

Creditors

1,00,000

Cash in Hand

32,000

Bank Overdraft

28,000

3,62,500

3,62,500