Home » Class 11 Accountancy » NCERT Solutions for Class 11 Accountancy Financial Accounting Part-2 Chapter 3 – Accounts from Incomplete Records

NCERT Solutions for Class 11 Accountancy Financial Accounting Part-2 Chapter 3 – Accounts from Incomplete Records


Short answers : Solutions of Questions on Page Number : 464


Q1 :State the meaning of incomplete records?
Answer :  Accounts that are not recorded as per the double entry system are known as incomplete records. According to Kohler (Dictionary for Accountants), single entry system is defined as, ” A system of book-keeping in which as a rule, only records of cash and of personal accounts are maintained; it is always incomplete double entry, varying with circumstances.”
Many small-sized business firms maintain incomplete records of their business transactions. They do not maintain proper books of accounts and mainly prepare books like, Cash Book, personal accounts (of debtors and creditors) and Balance Sheet at the end of the year. They maintain books as per their needs. This system is also known as defective double entry system. The preparation of financial statements is neither as easier nor as effective, as it is under double entry system. Consequently, accurate profit or loss is not possible to ascertain.


Q2 :What are the possible reasons for keeping incomplete records?
Answer :
The possible reasons for keeping incomplete records are:
1. Simple method: Proprietors, who do not have the proper knowledge of accounting principles, find it much convenient and easier to maintain their business records under this system.
2. Less time consuming: Maintaining books according to the single entry system is less time consuming, as only few books are to be maintained. Further, the books are not as comprehensive as they are under double entry system.
3. Less expensive: It is an economical mode of maintaining records, as there is no need to appoint specialised accountant.
4. Flexible: Owner may record transactions as per his/her own needs. It can be easily adjusted or changed whenever needed.


Q3 : Distinguish between statement of affairs and balance sheet.
Answer :

Difference between Statement of Affairs and Balance
Sheet

 

Basis of Difference

Statement of Affairs

Balance Sheet

Objective

It is prepared to determine the amount of capital at a
particular date.

It is prepared to ascertain the true financial
position.

Reliability

It is based on estimates; hence, it is less reliable.

It is based on sophisticated and well developed
principles; hence, it is more reliable.

Accounting Method

It is prepared from incomplete records of business
transactions under single entry system.

It is prepared when accounts are maintained under
double entry system.

Omission

Omission of assets and liabilities cannot be
easily identified.

Omission of assets and liabilities can be easily
identified, as omission will lead to mismatch of either
sides of the balance sheet.


Q4 :What practical difficulties are encountered by a trader due to incompleteness of accounting records?
Answer :
The following are the difficulties that are encountered by a trader due to incompleteness of accounting records.
1. Accuracy of accounts: Arithmetical accuracy of accounts can not be ascertained, since proper records of accounts are not maintained. Consequently, Trial Balance cannot be prepared.
2. Encourages fraud: As the arithmetical accuracy cannot be determined; so, this encourages fraud and provides sufficient scope for bluffing and carelessness.
3. Difficult to ascertain correct profit or loss: Since all expenses and income are not recorded, true profit or loss cannot be correctly ascertained.
4. Difficult to analyse the true financial position: As profit or loss cannot be ascertained easily, so the Balance Sheet cannot be easily prepared. Hence, the absence of Balance Sheet will not reflect the true financial position of the business.
5. Difficulty in comparison: Due to the incomplete records and non-availability of previous years’ data, comparison is not possible. By the same token, comparisons with other firms are also not possible.
6. Unacceptable to tax authorities: It does not reflect the true and acceptable presentation of expenses and revenues. Hence, these are not acceptable by the tax authorities.
7. Raising funds: Since analysis of solvency, profitability and liquidity of business cannot be done, it is difficult to raise fund from outside.


Long answers : Solutions of Questions on Page Number : 464


Q1 :What is meant by a ‘statement of affairs’? How can the profit or loss of a trader be ascertained with the help of a statement of affairs?
Answer :
A Statement of Affairs resembles Balance Sheet; however, it is not called a Balance Sheet. The statement of affairs is a Statement of Assets and Liabilities. The main difference between a Statement of Affairs and a Balance Sheet is that while the former is prepared on the basis of physical counts and improper source documents, the latter is prepared purely on the basis of ledger accounts. Thus, the authentication and relevance of the latter is guaranteed. The excess of assets over liabilities (i.e., balancing figure) is denoted as the capital of the firm. The performa of the statement of affairs is presented below.

Statement of Affairs as on…

Liabilities

Amount

Rs

Assets

Amount

Rs

Bills Payable

Land and Building

Creditors

Plant and Machinery

Outstanding Expense

Furniture

Capital (Balancing Figure)@

Stock

Debtors

Cash and Bank

Prepaid Expenses

Capital-Deficiency (Balancing Figure, if any)*

* When liabilities are more than assets, then the balancing figure is denoted by Capital-Deficiency in the assets side of the statement of affairs.
@ When the assets’ balance exceeds liabilities’ balance, the balancing figure is denoted by Capital in the liabilities side of the statement of affairs.
For ascertaining profit or loss, if capital in the beginning is not given, then opening statement of affairs is prepared in order to calculate the capital in the beginning. Once the opening capital and closing capital is calculated, a Statement of Profit or Loss is prepared to determine the amount of profit earned or loss incurred during the accounting period.

Statement of Profit or Loss for the year
ended………

Particulars

Amount

Rs

Closing capital at the
end of the year

 

Add: Drawings made during the year

 

Less: Additional capital introduced during
the year

Adjusted capital at the
end of the year

 

Less: Capital in the beginning of the
year

 

Profit (Loss) for the
year

 

 (Balancing
figure)


Q2 :Is it possible to prepare the profit and loss account and the balance sheet from the incomplete book of accounts kept by a trader’? Do you agree? Explain.
Answer :
The Profit and Loss Account and the Balance Sheet can be prepared from the incomplete book of accounts through Conversion Method. According to this method, incomplete records are converted into double entry records. In case of incomplete records, details of some transactions are easily available like cash sales, cash purchases, creditors, debtors; however, there are number of transactions, the details of which may not be available directly. Yet, these details can be found out indirectly or logically. Some of the important items that are vital for preparing Balance Sheet are given below.
1. Opening Capital
2. Closing Capital
3. Credit Purchases
4. Cash Purchases
5. Credit Sales
6. Cash Sales
7. Payment from Debtors
8. Payment to Creditors
9. Opening Stock
10. Closing Stock
Below given are the steps included in the conversion method in a chronological order.
1. If opening capital is not given, then the first step is to prepare opening Statement of Affairs that gives the Opening Capital.
2. The second step is to prepare Cash Book that gives the opening or the closing cash and bank balance.
3. The next step is to prepare Total Debtors Account. It is prepared in order to find out one of the missing figures, such ascredit sales, opening debtors, closing debtors and cash received from debtors.
4. The subsequent step is to prepare Total Creditors Account to ascertain one of the missing figures, such as credit sales, opening creditors, closing creditors and cash paid to the creditors.
5. The last step is to prepare final accounts. On the basis of the missing figures ascertained in each of the above steps, along with other mentioned information, Trading and Profit and Loss Account and Balance Sheet can be prepared.


Q3 :Explain how the following may be ascertained from incomplete records:
(a) Opening capital and closing capital
(b) Credit sales and credit purchases
(c) Payments to creditors and collection from debtors
(d) Closing balance of cash.
Answer :
1. Opening capital and closing capital: Opening capital can be ascertained by preparing opening statement of affairs at the beginning of the accounting period and closing capital can be ascertained by preparing closing Statement of Affairs at the end of the accounting period.

Statement of Affairs as on….

 

Liabilities

Amount

Rs

Assets

Amount

Rs

Bills Payable

Land and Building

Creditors

Machinery

Outstanding Expense

Furniture

Capital (Balancing Figure)@

Stock

Debtors

Cash and Bank

Prepaid Expenses

Capital-Deficiency (Balancing Figure)*

* When liabilities are more than assets, capital appears in assets side, as it is balancing figure.
@ When the assets’ balance exceeds liabilities’ balance, the balancing figure is denoted by capital in the Liabilities side of the Statement of Affairs.
2. Credit Sales and Credit Purchases: Credit sales are ascertained as the balancing figure of the Total Debtors Account and Credit Purchases are ascertained as the balancing figure of the Total Creditors Account.

Total Debtors Account

Dr.

Cr.

Particulars

J.F.

Amount

Rs

Particulars

J.F.

Amount

Rs

Balance b/d

 

Cash

 

Bills Receivable

 

Bank

 

(Bill Dishonoured)

 

Discount Allowed

 

Bank (Cheque Dishonoured)

 

Bad Debts

 

Credit Sales (Balancing Figure)

 

Sales Returns

 

 

 

Bills Receivable

(Bill Drawn)

 

 

 

Balance c/d

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Creditors Account

Dr.

Cr.

Particulars

J.F.

Amount Rs

Particulars

J.F.

Amount

Rs

Cash

– 

Balance b/d

 

Bank

 –

Bank

(Cheque Dishonoured)

 

Bills Payable

 –

Bills Payable (Bills Dishonoured)

 

Discount Received

 –

Credit Purchases

 

Purchases Returns

 –

(Balancing Figure )

 

Balance c/d

 –

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. Payment to creditors and collection from debtors: Payment to the creditors are ascertained from the Total Creditors Account as a balancing figure and collection from debtors are ascertained from the Total Debtors Account as a balancing figure.
4. Closing balance of cash: Closing balance of cash is ascertained from the Cash Book, which shows all receipts in the debit side and all payments in the credit side during an accounting year and the balancing figure of the cash book is the closing balance of cash.


Numerical questions : Solutions of Questions on Page Number : 464


Q1 : Following information is given below prepare the statement of profit or loss:

 

Rs

Capital at the end of the year

5,00,000

Capital in the beginning of the year

7,50,000

`Drawings made during the period

3,75,000

Additional Capital introduced

50,000

Answer:

Statement of Profit and Loss

Particulars

Amount

Rs

Capital at the end of the year

5,00,000

Add: Drawings made during the year

3,75,000

Less: Capital in the beginning of the year

(7,50,000)

Less: Additional capital introduced

(50,000)

Profit during the year

75,000


Q2 : Manveer started his business on January 01, 2005 with a capital of Rs 4,50,000. On December 31, 2005 his position was as under:

Rs

Cash

99,000

Bills receivable

75,000

Plant

48,000

Land and Building

1,80,000

Furniture

50,000

He owned Rs 45,000 from his friend Susheel on that date. He withdrew Rs 8,000 per month for his household purposes. Ascertain his profit or loss for this year ended December 31, 2005
Answer:

Books of Manveer

Statement of Affairs as on December 31, 2005

Liabilities

Amount Rs

Assets

Amount Rs

Loan from Susheel

45,000

Cash

99,000

Bills Receivable

75,000

Plant

48,000

Closing Capital

(Balancing Figure)

4,07,000

Land and Building

1,80,000

Furniture

50,000

4,52,000

4,52,000

 

Statement of Profit and Loss as on December 31,
2005

Particulars

Rs

Capital on December 31, 2005

4,07,000

Add: Drawings made during the year (Rs 8,000
x 12)

96,000

Less: Capital on January 01, 2005

(4,50,000)

Profit during the year 2005

53,000

 


Q3 : From the information given below ascertain the profit for the year:

Rs

Capital at the beginning of the year

70,000

Additional capital introduced during the year

17,500

Stock

59,500

Sundry debtors

25,900

Business premises

8,600

Machinery

2,100

Sundry creditors

33,400

Drawings made during the year

26,400

Answer :

Statement of Affairs

Liabilities

Amount Rs

Assets

Amount Rs

Sundry Creditors

33,400

Stock

59,500

Capital (Balancing figure)

62,700

Sundry Debtors

25,900

Business Premises

8,600

Machinery

2,100

96,100

96,100

 

Statement of Profit and Loss

Particulars

Amount

Rs

Capital at the end of the year

62,700

Add: Drawings made during the year

26,400

Less: Capital of the beginning of the year

(70,000)

Less: Additional capital introduced during the
year

(17,500)

Profit during the year

1,600

 


Q4 :From the following information, calculate capital at the beginning:

Rs

Capital at the end of the year

4,00,000

Drawings made during the year

60,000

Fresh capital introduce during the year

1,00,000

Profit of the current year

80,000

Answer:
Capital in the beginning = Capital at the end + Drawings – (Fresh Capital Introduced + Profit)
= 4,00,000 + 60,000 – (1,00,000 + 80,000)
= Rs 2,80,000
Note: As per the solution, the profit should be of Rs 2,80,000; but, the answer given in the book is Rs 2,60,000.


Q5 : Following information is given below: calculate the closing capital

Jan.01, 2005

Dec.31, 2005

Rs

Rs

Creditors

5,000

30,000

Bills payable

10,000

Loan

50,000

Bills receivable

30,000

50,000

Stock

5,000

30,000

Cash

2,000

20,000

Calculation of profit or loss and ascertainment of statement of affairs at the end of the year (Opening Balance is given)
Answer :

Statement of Affairs as on January 01, 2005

Liabilities

Amount Rs

Assets

Amount

Rs

Creditors

5,000

Bills Receivable

30,000

Bills Payable

10,000

Stock

5,000

Capital (Balancing figure)

22,000

Cash

2000

37,000

37,000

 

Statement of Affairs as on December 31, 2005

Liabilities

Amount Rs

Assets

Amount

Rs

Creditors

30,000

Bills Receivable

50,000

Loan

50,000

Stock

30,000

Capital (Balancing figure)

20,000

Cash

20,000

1,00,000

1,00,000

Capital on December 31, 2005 (Closing) is Rs 20,000

Statement of Profit and Loss

Particulars

Amount

Rs

Capital on December 31, 2005

20,000

Less: Capital on January 01, 2005

(22,000)

Loss during the year 2005

(2,000)

 


Q6 : Mrs Anu started firm with a capital of Rs 4,00,000 on 1st July 2011. She borrowed from her friends a sum of Rs 1,00,000 @ 10% per annum (interest paid) for business and brought a further amount to capital Rs 75,000 on Dec. 31, 2011, her position was :

Rs

Cash

30,000

Stock

4,70,000

Debtors

3,50,000

Creditors

3,00,000

He withdrew Rs 8,000 per month for the year. Calculate profit or loss for the year and show your working clearly.
Answer :

Books of Mrs. Anu

Statement of Affairs as on December 31, 2011

Liabilities

Amount Rs

Assets

Amount

Rs

Creditors

3,00,000

Cash

30,000

10% Loan from Friends

1,00,000

Stock

4,70,000

Capital (Balancing figure)

4,50,000

Debtors

3,50,000

8,50,000

8,50,000

 

Statement of Profit and Loss as on December 31,
2011

Particulars

Amount

Rs

Capital on December 31, 2005

4,50,000

Add: Drawings during the year (8,000
x 6 months)

48,000

Less: Capital on January 01, 2005

(4,00,000)

Less: Additional capital introduced

(75,000)

Mrs. Anu earned profit
during the year 2005

23,000

 


Q7 : Mr. Arnav does not keep proper records of his business he provided following information, you are required to prepare a statement showing the profit or loss for the year.

Rs

Capital at the beginning of the year

15,00,000

Bills receivable

60,000

Cash in hand

80,000

Furniture

9,00,000

Building

10,00,000

Creditors

6,00,000

Stock in trade

2,00,000

Further capital introduced

3,20,000

Drawings made during the period

80,000

Ascertainment of statement of affairs at the beginning and at the end of the year and calculation of profit or loss.
Answer :

Books of Mr. Arnav

Statement of Affairs at the end of year

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

6,00,000

Bills Receivable

60,000

Capital (Balance figure)

16,40,000

Cash in Hand

80,000

Furniture

9,00,000

Building

10,00,000

Stock in Trade

2,00,000

22,40,000

22,40,000

 

Statement of Profit and Loss

Particulars

Amount

Rs

Capital at the end of the year

16,40,000

Add: Drawings during the year

80,000

Less: Capital at the beginning of the year

(15,00,000)

Less: Further capital introduced

(3,20,000)

Loss during the year

1,00,000

 


Q8 : Mr. Akshat keeps his books on incomplete records following information is given below:

April 01, 2010

March 31, 2011

Rs

Rs

Cash in hand

1,000

1,500

Cash at bank

15,000

10,000

Stock

1,00,000

95,000

Debtors

42,500

70,000

Business premises

75,000

1,35,000

Furniture

9,000

7,500

Creditors

66,000

87,000

Bills payable

44,000

58,000

During the year he withdrew Rs 45,000 and introduced Rs 25,000 as further capital in the business compute the profit or loss of the business.
Answer:

Books of Mr. Akshat

Statement of Affairs as on April 01, 2010

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

66,000

Cash in Hand

1,000

Bills Payable

44,000

Cash at Bank

15,000

Capital (Balancing figure)

1,32,500

Stock

1,00,000

Debtors

42,500

Business Premises

75,000

Furniture

9,000

2,42,500

2,42,500

 

Statement of Affairs as on March 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

87,000

Cash in Hand

1,500

Bills Payable

58,000

Cash at Bank

10,000

Capital (Balancing figure)

1,74,000

Stock

95,000

Debtors

70,000

Business Premises

1,35,000

Furniture

7,500

3,19,000

3,19,000

 

Statement of Profit and Loss as on March 31, 2011

Particulars

Amount

Rs

Capital on March 31, 2005

1,74,000

Add: Drawings made during the year

45,000

Less: Capital on April 01, 2004

(1,32,500)

Less: Additional capital introduced

(25,000)

Profit earned by Mr. Akshat during the year 2010–2011

61,500

 


Q9 : Gopal does not keep proper books of account. Following information is given below:

Jan. 01, 2011

Dec. 31, 2011

Rs

Rs

Cash in hand

18,000

12,000

Cash at bank

1,500

2,000

Stock in trade

80,000

90,000

Sundry debtors

36,000

60,000

Sundry creditors

60,000

40,000

Loan

10,000

8,000

Office equipments

25,000

30,000

Land and Building

30,000

20,000

Furniture

10,000

10,000

During the year he introduced Rs 20,000 and withdrew Rs 12,000 from the business. Prepare the statement of profit or loss on the basis of given information
Answer :

Books of Gopal

Statement of Affairs as on January 01, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

60,000

Cash in hand

18,000

Loan

10,000

Cash at bank

1,500

Stock in trade

80,000

Sundry Debtors

36,000

Office Equipments

25,000

Capital (Balancing figure)

1,30,500

Land and Buildings

30,000

Furniture

10,000

2,00,500

2,00,500

 

Statement of Affairs as on December 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

40,000

Cash in Hand

12,000

Loan

8,000

Cash at Bank

2,000

Stock in Trade

90,000

Sundry Debtors

60,000

Office Equipments

30,000

Capital (Balancing figure)

1,76,000

Land and Buildings

20,000

Furniture

10,000

2,24,000

2,24,000

 

Statement of Profit and Loss as on December 31, 2011

Particulars

Amount

Rs

Capital on December 31, 2005

1,76,000

Add: Drawing made during 2005

12,000

Less: Capital on January 01, 2005

(1,30,500)

Less: Additional capital introduced

(20,000)

Profit during the year

37,500

Note: As per the solution, the profit during the year should be Rs 37,500; whereas, the profit given in the book is Rs 53,500.


Q10 : Mr. Muneesh maintains his books of accounts from incomplete records. His books provide the information:

Jan. 01, 2011

Dec. 31, 2011

Rs

Rs

Cash

1,200

1,600

Bills receivable

2,400

Debtors

16,800

27,200

Stock

22,400

24,400

Investment

8,000

Furniture

7,500

8,000

Creditors

14,000

15,200

He withdrew Rs 300 per month for personal expenses. He sold his investment of Rs 16,000 at 2% premium and introduced that amount into business.
Answer :

Statement of Affairs as on January 01, 2011

Liabilities

Amount Rs

Assets

Amount Rs

Creditors

14,000

Cash

1,200

Debtors

16,800

Stock

22,400

Furniture

7,500

Capital (Balancing figure)

33,900

47,900

47,900

 

Statement of Affairs as on December 31, 2011

Liabilities

Amount Rs

Assets

Amount Rs

Creditors

15,200

Cash

1,600

Bills Receivable

2,400

Debtors

27,200

Stock

24,400

Capital (Balancing figure)

56,400

Investment

8,000

Furniture

8,000

71,600

71,600

 

Statement of Affairs as on December 31, 2011

Liabilities

Amount Rs

Assets

Amount Rs

Creditors

15,200

Cash

1,600

Bills Receivable

2,400

Debtors

27,200

Stock

24,400

Capital (Balancing figure)

56,400

Investment

8,000

Furniture

8,000

71,600

71,600

Working Note:

Additional Capital Introduced

=

16,000 x

102

100

=

16,320


Q11 :Mr. Girdhari Lal does not keep full double entry records. His balance as on January 01, 2012 is as.

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry creditors

35,000

Cash in hand

5,000

Bills payable

15,000

Cash at bank

20,000

Capital

40,000

Sundry debtors

18,000

Stock

22,000

Furniture

8,000

Plant

17,000

90,000

90,000

His position at the end of the year is:

Rs

Cash in hand

7,000

Stock

8,600

Debtors

23,800

Furniture

15,000

Plant

20,350

Bills payable

20,200

Creditors

15,000

He withdrew Rs 500 per month out of which to spent Rs 1,500 for business purpose. Prepare the statement of profit or loss.
Answer:

Books of Mr. Girdhari Lal

Statement of Affairs as on December 31, 2012

Liabilities

Amount Rs

Assets

Amount Rs

Bills Payable

20,200

Cash in Hand

7,000

Creditors

15,000

Stock

8,600

Capital (Balancing figure)

39,550

Debtors

23,800

Furniture

15,000

Plant

20,350

74,750

74,750

 

Statement of Profit and Loss

Particulars

Amount

Rs

Capital at the end of the year

39,550

Add: Drawings (Rs 500 × 12 months)

6,000

Less: Capital at the beginning of the year 2012

(40,000)

Less: Additional capital introduced

(1,500)

Profit earned during the year 2012

4,050

 


Q12 : Mr. Ashok does not keep his books properly. Following information is available from his books.

Jan. 01, 20

Dec. 31, 2012*

Rs

Rs

Sundry creditors

45,000

93,000

Loan from wife

66,000

57,000

Sundry debtors

22,500

Land and Building

89,600

90,000

Cash in hand

7,500

8,700

Bank overdraft

25,000

Furniture

1,300

1,300

Stock

34,000

25,000

During the year Mr. Ashok sold his private car for Rs 50,000 and invested this amount into the business. He withdrew from the business Rs 1,500 per month upto July 31, 2011 and thereafter Rs 4,500 per month as drawings. You are required to prepare the statement of profit or loss and statement of affair as on December 31, 2011.
Answer :

Books of Mr. Ashok

Statement of Affairs as on January 01, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

45,000

Sundry Debtors

22,500

Loan from Wife

66,000

Land and Building

89,600

Bank Overdraft

25,000

Cash in Hand

7,500

Capital (Balancing figure)

18,900

Furniture

1,300

Stock

34,000

1,54,900

1,54,900

 

Statement of Affairs as on December 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

93,000

Land and Building

90,000

Loan from Wife

57,000

Cash in Hand

8,700

Furniture

1,300

Stock

25,000

Capital (Balancing figure)

25,000

1,50,000

1,50,000

 

Statement of Profit and Loss

Particulars

Amount

Rs

Capital on December 31, 2005

(25,000)

Add: Drawings (Rs 1,500 × 7 months) + (4,500 × 5 months)

33,000

Less: Capital on January 01, 2011

(18,900)

Less: Additional capital introduced (sale of car)

(50,000)

Loss during the year 2011

(60,900)

Note: As per the solution, the loss incurred during the year 2011 is Rs 60,900; while the answer given in the book shows Rs 57,900.


Q13 : Krishna Kulkarni has not kept proper books of accounts prepare the statement of profit or loss for the year ending December 31, 2011 from the following information:

Jan. 01, 2011

Dec. 31, 2011

Rs

Rs

Cash in hand

10,000

36,000

Debtors

20,000

80,000

Creditors

10,000

46,000

Bills receivable

20,000

24,000

Bills payable

4,000

42,000

Car

80,000

Stock

40,000

30,000

Furniture

8,000

48,000

Investment

40,000

50,000

Bank balance

1,00,000

90,000

The following adjustments were made:
(a) Krishna withdrew cash Rs 5,000 per month for private use.
(b) Depreciation @ 5% on car and furniture @10%.
(c) Outstanding Rent Rs 6,000.
(d) Fresh Capital introduced during the year Rs 30,000.
Answer:

Books of Krishna Kulkarni

Statement of Affairs as on January 01, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

10,000

Cash in Hand

10,000

Bills Payable

4,000

Debtors

20,000

Bills Receivable

20,000

Stock

40,000

Furniture

8,000

Investment

40,000

Capital (Balancing figure)

2,24,000

Cast at Bank

1,00,000

2,38,000

2,38,000

 

Statement of Affairs as on December 31, 2011

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

46,000

Cash in Hand

36,000

Bills Payable

42,000

Debtors

80,000

Outstanding Expenses

6,000

Bills Receivable

24,000

Car

80,000

Less: Depreciation 5%

(4,000)

76,000

Stock

30,000

Furniture

48,000

Less: Depreciation 10%

4,800

43,200

Capital (Balancing figure)

3,35,200

Investment

50,000

Cast at Bank

90,000

4,29,200

4,29,200

 

Statement of Profit and Loss

Particulars

Amount

Rs

Capital on December 31, 2005

3,35,200

Add: Drawings made during the year (Rs 5,000 × 12 months)

60,000

Less: Capital on January 01, 2011

(2,24,000)

Less: Fresh capital introduced during the year 2011

(30,000)

Profit earned during the year 2011

1,41,200

 


Q14 : M/s Saniya Sports Equipment does not keep proper records. From the following information find out profit or loss and also prepare balance sheet for the year ended December 31, 2011

Dec. 31, 2010

Dec. 31, 2011

Rs

Rs

Cash in hand

6,000

24,000

Bank overdraft

30,000

Stock

50,000

80,000

Sundry creditors

26,000

40,000

Sundry debtors

60,000

1,40,000

Bills payable

6,000

12,000

Furniture

40,000

60,000

Bills receivable

8,000

28,000

Machinery

50,000

1,00,000

Investment

30,000

80,000

Drawing Rs 10,000 p.m. for personal use, fresh capital introduce during the year Rs 2,00,000. A bad debts of Rs 2,000 and a provision of 5% is to be made on debtors outstanding salary Rs 2,400, prepaid insurance Rs 700, depreciation charged on furniture and machine @ 10% p.a.
Answer:

Statement of Affairs as on December 31, 2010

Liabilities

Amount

Rs

Assets

Amount

Rs

Bank Overdraft

30,000

Cash in Hand

6,000

Sundry Creditors

26,000

Stock

50,000

Bills Payable

6,000

Sundry Debtors

60,000

Furniture

40,000

Bills Receivable

8,000

Machinery

50,000

Capital (Balancing figure)

1,82,000

Investment

30,000

2,44,000

2,44,000

 

 

Statement of Affairs as on Dec. 31, 2011

Liabilities

Amount Rs

Assets

Amount Rs

Sundry Creditors

40,000

Cash in Hand

24,000

Bills Payable

12,000

Stock

80,000

Outstanding Salary

2,400

Sundry Debtors

1,40,000

Less: Bad-debt

2,000

1,38,000

Less: 5% Provision

(6,900)

1,31,100

Furniture

60,000

Capital (Balancing figure)

4,33,400

Less: Depreciation

(6,000)

54,000

Bills Receivable

28,000

Machinery

1,00,000

Less: Depreciation

(10,000)

90,000

Investment

80,000

Prepaid Insurance

700

4,87,800

4,87,800

 

 

Statement of Profit and Loss

Particulars

Amount

Rs

Capital on December 31, 2011

4,33,400

Add: Drawings made during the year (Rs 10,000 × 12)

1,20,000

Less: Capital on December 31, 2010

(1,82,000)

Less: Fresh capital introduced during the year 2011

(2,00,000)

Profit earned during the year 2011

1,71,400

Note: As per the solution, the profit earned during the year is Rs 1,71,400 while, according to the book, the answer is Rs 1,71,300.
In order to match our answer with NCERT, the treatment of provision will be made as,

Debtors

1,40,000

Less: 5% Provision

(7,000)

1,33,000

Less: Bad-debts

(2,000)

Debtors

1,31,000

However, as per the rule, the treatment of provision will be calculated as,

Debtors

1,40,000

Less: Bad-debts

(2,000)

1,38,000

Less: 5% Provision

(6,900)

Debtors

Rs 1,31,100

 


Q15 : From the following information calculate the amount to be paid to creditors:

Rs

Sundry creditors as on March 31, 2011

1,80,425

Discount received

26,000

Discount allowed

24,000

Return outwards

37,200

Return inward

32,200

Bills accepted

1,99,000

Bills endorsed to creditors

26,000

Creditors as on April 01, 2006*

2,09,050

Total purchases

8,97,000

Cash purchases

1,40,000

*As per the question, this date should be April 01, 2011
Answer:

 

Creditors Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Discount Received

26,000

By Balance b/d

1,80,425

Return Outwards

37,200

Purchases – credit

Bills accepted

1,99,000

(8,97,000 – 1,40,000)

7,57,000

B/R (endorsed to creditors)

26,000

Balance c/d

2,09,050

Cash/Bank (Balancing figure)

4,40,175

9,37,425

9,37,425

 


Q16 : Find out the credit purchases from the following:

Rs

Balance of creditors April 01, 2010

45,000

Balance of creditors March 31, 2011

36,000

Cash paid to creditors

1,80,000

Cheque issued to creditors

60,000

Cash purchases

75,000

Discount received from creditors

5,400

Discount allowed

5,000

Bills payable given to creditors

12,750

Return outwards

7,500

Bills payable dishonoured

3,000

Bills receivable endorsed to creditors

4,500

Bills receivable endorsed to creditors dishonoured

1,800

Return inwards

3,700

Answer:

 

Creditors Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Cash

1,80,000

Balance b/d

45,000

Bank

60,000

B/P (dishonoured)

3,000

Discount Received

5,400

B/R (dishonoured)

1,800

B/P (accepted)

12,750

Return Outwards

7,500

Purchases – credit

B/R (endorsed to creditors)

4,500

(Balancing figure)

2,56,350

Balance c/d

36,000

3,06,150

3,06,150

Credit Purchases Rs 2,56,350


Q17 : From the following information calculate total purchases.

Rs

Creditors Jan. 01, 2011

30,000

Creditors Dec. 31, 2011

20,000

Opening balance of Bills payable

25,000

Closing balance of Bills payable

35,000

Cash paid to creditors

1,51,000

Bills discharged

44,500

Cash purchases

1,29,000

Return outwards

6,000

Answer:

 

Creditors Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Cash

1,51,000

Balance b/d

30,000

Return Outwards

6,000

Purchases – credit

2,01,500

Bills Payable (accepted)

54,500

(Balancing figure)

Balance c/d

20,000

2,31,500

2,31,500

 

 

Bills Payable Account

Dr.

Cr.

Particulars

Amount Rs

Particulars

Amount Rs

Cash (Bills discharged)

44,500

Balance b/d

25,000

Creditors – (Bills Payable

accepted) (Balancing figure)

54,500

Balance c/d

35,000

79,500

79,500

Total Purchase = Cash Purchases + Credit Purchases (as per Creditors Account)
= 1,29,000 + 2,01,500
= Rs 3,30,500


Q18 : The following information is given

Rs

Opening creditors

60,000

Cash paid to creditors

30,000

Closing creditors

36,000

Returns Inward

13,000

Bill matured

27,000

Bill dishonoured

8,000

Purchases return

12,000

Discount allowed

5,000

Calculate credit purchases during the year
Answer:

 

Creditors
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Cash

30,000

Balance b/d

60,000

Purchases Return

12,000

B/P (dishonoured)

8,000

B/P (accepted) (see note)

27,000

By Purchases  credit Â

37,000

Balance c/d

36,000

(Balancing figure)

1,05,000

1,05,000

Note: In order to match the answer with NCERT book, in the solution bills payable matured has been assumed as bills payable accepted.


Q19 : From the following, calculate the amount of bills accepted during the year.
Rs
Bills payable as on April 01, 2005 1,80,000
Bills payable as on March 31, 2006 2,20,000
Bills payable dishonoured during the year 28,000
Bills payable honoured during the year 50,000
Answer :

 

Bills Payable Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Creditors (dishonoured)

28,000

Balance b/d

1,80,000

Cash/Bank

50,000

Creditors (acceptance)

1,18,000

Balance c/d

2,20,000

(Balancing figure)

2,98,000

2,98,000


Q20 : Find out the amount of bills matured during the year on the basis of information given below;

Rs

Bills payable dishonoured

37,000

Closing balance of Bills
payable

85,000

Opening balance of Bills
payable

70,000

Bills payable accepted

90,000

Cheque dishonoured

23,000

Answer:

 

Bills Payable
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Creditors (Bill dishonoured)

37,000

Balance b/d

70,000

Cash/Bank (Balancing figure)

38,000

Creditors – acceptance

90,000

Balance c/d

85,000

(Balancing figure)

1,60,000

1,60,000

Bill Payable matured during the year is Rs 38,000.


Q21 :Prepare the bills payable account from the following and find out missing figure if any :

Rs

Bills accepted

1,05,000

Discount received

17,000

Purchases returns

9,000

Return inwards

12,000

Cash paid to accounts payable

50,000

Bills receivable endorsed to
creditor

45,000

Bills dishonoured

17,000

Bad debts

14,000

Balance of accounts payable
(closing)

85,000

Credit purchases

2,15,000

Answer:

 

Bills Payable
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Creditors (Bills dishonoured)

17,000

Creditors (acceptance)

1,05,000

Cash/Bank (Balancing figure)

88,000

1,05,000

1,05,000

 

 

Account Payable
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Discount Received

17,000

Purchases – Credit

2,15,000

Purchases Return

9,000

B/P (dishonoured)

17,000

Cash

50,000

B/R (endorsed)

45,000

Balance b/d

79,000

B/P (acceptance)

1,05,000

(Balancing figure)

Balance c/d

85,000

3,11,000

3,11,000

Bills payable discharged is Rs 88,000 and the opening balance of creditors is Rs 79,000.


Q22 : Calculate the amount of bills receivable during the year.

Rs

Opening balance of bills
receivable

75,000

Bill dishonoured

25,000

Bills collected (honoured)

1,30,000

Bills receivable endorsed to
creditors

15,000

Closing balance of bills
receivable

65,000

Answer:

 

Bills Receivable
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

75,000

Debtors (B/R dishonoured)

25,000

Cash/Bank (honoured)

1,30,000

Creditors (endorsed)

15,000

Debtors (B/R received)

1,60,000

Balance c/d

65,000

(Balancing figure)

2,35,000

2,35,000

Bills receivable received from Debtors Rs 1,60,000.


Q23 : Calculate the amount of bills receivable dishonoured from the following information.

Rs

Opening balance of bills receivable

1,20,000

Bills collected (honoured)

1,85,000

Bills receivable endorsed

22,800

Closing balance of bills receivable

50,700

Bills receivable received

1,50,000

Answer :

 

Bills Receivable
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

1,20,000

Cash/Bank (honoured)

1,85,000

Creditors (endorsed)

22,800

Balance c/d

50,700

Debtors (B/R received)

1,50,000

Debtors (dishonoured)

11,500

(Balancing figure)

(Balancing figure)

2,70,000

2,70,000

Bills Receivable dishonoured is Rs 11,500.


Q24 : From the details given below, find out the credit sales and total sales.

Rs

Opening debtors

45,000

Closing debtors

56,000

Discount allowed

2,500

Sales returns

8,500

Irrecoverable amount

4,000

Bills receivables received

12,000

Bills receivable dishonoured

3,000

Cheque dishonoured

7,700

Cash sales

80,000

Cash received from debtors

2,30,000

Cheque received from debtors

25,000

Answer:

 

 

Debtors Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

45,000

Discount Allowed

2,500

B/R (dishonoured)

3,000

Sales Returns

8,500

Bank (cheque dishonoured)

7,700

Bad-debts (irrecoverable amount)

4,000

Sales – Credit

2,82,300

B/R (received)

12,000

(Balancing figure)

Cash

2,30,000

Bank

25,000

Balance c/d

56,000

3,38,000

3,38,000

Credit sales is Rs 2,82,300
Total Sales = Cash Sales + Credit Sales
= 80,000 + 2,82,300
= Rs 3,62,300


Q25 : From the following information, prepare the bills receivable account and total debtors account for the year ended December 31, 2011.

Rs

Opening balance of debtors

1,80,000

Opening balance of bills receivable

55,000

Cash sales made during the year

95,000

Credit sales made during the year

14,50,000

Return inwards

78,000

Cash received from debtors

10,25,000

Discount allowed to debtors

55,000

Bills receivable endorsed to creditors

60,000

Cash received (bills matured)

80,500

Irrecoverable amount

10,000

Closing balance of bills receivable on Dec. 31, 2011

75,500

Answer:

 

Debtors Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

1,80,000

Return Inwards

78,000

Sales—Credit

14,50,000

Discount Allowed

55,000

Cash

10,25,000

Bad debt (irrecoverable amount)

10,000

B/R (received)

1,61,000

Balance c/d

3,01,000

(Balancing figure)

16,30,000

16,30,000

 

 

Bills Receivable Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

55,000

Cash (Bills matured)

80,500

Creditors (endorsed)

60,000

Balance c/d

75,500

Debtors (received)

1,61,000

(Balancing figure)

2,16,000

2,16,000

The missing figure in the bills receivable account–B/R received from debtors Rs 1,61,000 and the missing figure in the debtors account–closing balance is Rs 3,01,000.


Q26 :Prepare the suitable accounts and find out the missing figure if any.

Rs

Opening balance of debtors

14,00,000

Opening balance of bills
receivable

7,00,000

Closing balance of bills receivable

3,50,000

Cheque dishonoured

27,000

Cash received from debtors

10,75,000

Cheque received and deposited
in the bank

8,25,000

Discount allowed

37,500

Irrecoverable amount

17,500

Returns inwards

28,000

Bills receivable received from
customers

1,05,000

Bills receivable matured

2,80,000

Bills discounted

65,000

Bills endorsed to creditors

70,000

Answer :

 

Debtors Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

14,00,000

Cash

10,75,000

Bank (cheque dishonoured)

27,000

Bank

8,25,000

B/R (dishonoured)

40,000

Discount Allowed

37,500

Bad debt (irrecoverable amount)

17,500

Return Inwards

28,000

Sales—Credit (Balancing figure)

6,21,000

B/R (received)

1,05,000

20,88,000

20,88,000

 

 

Bills Receivable
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

7,00,000

Cash (B/R matured)

2,80,000

Bank (Bill endorsed)

65,000

Creditors (endorsed)

70,000

Debtors (B/R received)

1,05,000

Balance c/d

3,50,000

Debtors (dishonoured)

40,000

(Balancing figure)

8,05,000

8,05,000

Note: As per solution, the missing figure in the bills receivable account is B/R dishonoured of Rs 40,000. The missing figure in the debtors account is the credit sales of Rs 6 ,21,000 However, the NCERT book shows a credit sales Rs 5,16,000.
In order to match our answer with that of the book, B/R received from the customers is not shown in the debtors account.


Q27 : From the following information ascertain the opening balance of sundry debtors and closing balance of sundry creditors

Rs

Opening stock

30,000

Closing stock

25,000

Opening creditors

50,000

Closing debtors

75,000

Discount allowed by creditors

1,500

Discount allowed to customers

2,500

Cash paid to creditors

1,35,000

Bills payable accepted during
the period

30,000

Bills receivable received
during the period

75,000

Cash received from customers

2,20,000

Bills receivable dishonoured

3,500

Purchases

2,95,000

The rate of gross profit is 25% on selling price and out of the total sales
Rs 85,000 was for cash sales.
(Hint: Total sales = 4,00,000 = 3,00,000 x 100 x 10075
Answer :

 

Sundry Debtors
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

54,000

Discount Allowed

2,500

(Balancing figure)

B/R (received)

75,000

B/R (dishonoured)

3,500

Cash

2,20,000

Sales—Credit

3,15,000

Balance c/d

75,000

3,72,500

3,72,500

 

 

Sundry Creditors
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Discount Received

1,500

Balance b/d

50,000

Cash

1,35,000

Purchases credit

2,95,000

B/P (accepted)

30,000

Balance c/d

1,78,500

(Balancing figure)

3,45,000

3,45,000

Opening balance of debtors is Rs 54,000 and the closing balance of creditors is Rs 1 ,78,500
Total Sales = Cash Sales + Credit Sales
Total Sales = Cost of Goods Sold + Gross Profit
Cost of Goods Sold = Opening Stock + Purchases + Closing Stock
= 30,000 + 2,95,000 + 25,000
= Rs 3,00,000

Let sales be 100%
Sales = Cost of Goods sold + Gross Profit
Or,100 = Cost of Goods sold + 25%
Cost of Goods Sold = 100% – 25% = 75%
Gross Profit = Cost of Goods Sold % of Cost of Goods Sold × % of Gross Profit
= 3,00,00075× 25
= 1,00,000


Q28 : Mrs Bhavana keeps his books by Single Entry System. You.re required to prepare final accounts of her business for the year ended December 31, 2005. Her records relating to cash receipts and cash payments for the above period showed the following particulars.

Summary of Cash

Dr.

Cr.

Receipts

Amount
Rs

Payments

Amount
Rs

Opening balance of cash

12,000

Paid to creditors

53,000

Further capital

20,000

Business expenses

12,000

Received from debtors

1,20,000

Wage paid

30,000

Bhavana’s drawings

15,000

Balance at bank on

35,000

Dec. 31,2005

Cash in hand

7,000

1,52,000

1,52,000

The following information is also available:

Jan. 01, 2005

Dec. 31, 2005

Rs

Rs

Debtors

55,000

85,000

Creditors

22,000

29,000

Stock

35,000

70,000

Plant

10,00,000

1,00,000

Machinery

50,000

50,000

Land and Building

2,50,000

2,50,000

Investment

20,000

20,000

ll her sales and purchases were
on credit. Provide depreciation on plant and building by 10% and machinery by 5%, make a provision for bad debts by 5%.
Answer:

 

Books
of Mrs. Bhavana

Debtors Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Balance b/d

55,000

Cash

1,20,000

Sales—Credit

1,50,000

Balance c/d

85,000

2,05,000

2,05,000

 

 

Creditors
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Cash

53,000

Balance b/d

22,000

Purchases Credit

60,000

Balance c/d

29,000

82,000

82,000

 

Statement
of Affairs as on Jan.01, 2005

Particulars

Amount

Rs

Particulars

Amount

Rs

Creditors

22,000

Debtors

55,000

Capital—Opening

5,00,000

Stock

35,000

(Balancing figure)

Plant

1,00,000

Machinery

50,000

Land and Building

2,50,000

Investment

20,000

Cash

12,000

5,22,000

5,22,000

Note: It has been assumed that total sales are credit sales (i.e. all sales are made on credit) and total purchases are credit purchases (i.e. all purchases are made on credit).
Plant of Rs 1,00,000 has been taken in to the statement of affairs on January 01, 2005, instead of Rs 10,00,000

 

Trading Account as
on December 31, 2005

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Opening Stock

35,000

Sales

1,50,000

Purchases

60,000

Closing Stock

70,000

Wages

30,000

Profit and Loss (Gross Profit)

95,000

(Balancing figure)

2,20,000

2,20,000

 

 

Profit and Loss
Account

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Business Expenses

12,000

Trading (Gross profit)

95,000

Depreciation on Plant

10,000

Depreciation on Building

25,000

Depreciation Machines

2,500

Provision for Doubtful Debt

4,250

Net Profit

41,250

(Balancing figure)

95,000

95,000

 

 

Balance Sheet as
on December 31, 2005

Liabilities

Amount

Rs

Assets

Amount

Rs

Creditors

29,000

Debtors

85,000

Capital—Opening

5,00,000

Less: 5% Provision

for Bad-debt

(4,250)

80,750

Add: Net Profit

41,250

Stock

70,000

Add: Further Capital

20,000

Plant

1,00,000

5,61,250

Less: 10% Depreciation

(10,000)

90,000

Less: Drawings

(15,000)

5,46,250

Machinery

50,000

Less: 10% Depreciation

(2,500)

47,500

Land and Building

2,50,000

Less: 10% Depreciation

(25,000)

2,25,000

Investment

20,000

Cash in Hand

7,000

Cash at Bank

35,000

5,75,250

5,75,250