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Page No 476:

Question 1:

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.

Page No 476:

Question 2:

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.

Page No 476:

Question 3:

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.

 

 

Page No 476:

Question 4:

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.

Page No 476:

Question 1:

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)

 

 

Page No 476:

Question 2:

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.

Page No 476:

Question 3:

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.

 

Page No 476:

Question 1:

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 

 

 

 

 



Page No 477:

Question 2:

Manveer started his business on April 01, 2016 with a capital of Rs 4,50,000. On March 31, 2017 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 March 31, 2017.

Answer:

Books of Manveer

Statement of Affairs as on March 31, 2017

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 March 31, 2017

Particulars

Rs

Capital on March 31, 2017

4,07,000

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

96,000

Less: Capital on April 01, 2016

(4,50,000)

 

 

Profit during the year 2017

53,000

 

 

 

Page No 477:

Question 3:

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

 

 

 

 

Page No 477:

Question 4:

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.

 

 

Page No 477:

Question 5:

Following information is given below: calculate the closing capital

 

April.01, 2016

March.31, 2017

 

 

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 April 01, 2016

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 March 31, 2017

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 March 31, 2017 (Closing) is Rs 20,000

 

Statement of Profit and Loss

Particulars

Amount

Rs

Capital on March 31, 2017

20,000

Less: Capital on April 01, 2016

(22,000)

   

Loss during the year 2017

(2,000)

 

 

 

 

Page No 477:

Question 6:

Mrs Anu started firm with a capital of Rs 4,00,000 on 1st October 2016. 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 March. 31, 2017, 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 March 31, 2017

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 March 31, 2017

Particulars

Amount

Rs

Capital on March 31, 2017

4,50,000

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

48,000

Less: Capital on October 01, 2016

(4,00,000)

Less: Additional capital introduced

(75,000)

   

Mrs. Anu earned profit during the year 2017

23,000

 

 

 

 



Page No 478:

Question 7:

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

 

 

 

 

Page No 478:

Question 8:

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

 

April 01, 2016

March 31, 2017

 

 

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, 2016

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, 2017

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, 2017

Particulars

Amount

Rs

Capital on March 31, 2017

1,74,000

Add: Drawings made during the year

45,000

Less: Capital on April 01, 2016

(1,32,500)

Less: Additional capital introduced

(25,000)

   

Profit earned by Mr. Akshat during the year 2016–2017

61,500

 

 

 

 

Page No 478:

Question 9:

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

 

April. 01, 2016

March. 31, 2017

 

 

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 April 01, 2016

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 March 31, 2017

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 March 31, 2017

Particulars

Amount

Rs

Capital on March 31, 2017

1,76,000

Add: Drawing made during 2017

12,000

Less: Capital on April 01, 2016

(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.

 

 



Page No 479:

Question 10:

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

 

 

April. 01, 2016

March. 31, 2017

 

 

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 April 01, 2016

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 March 31, 2017

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 Profit and Loss as on March 31, 2017

Particulars

Amount

Rs

Capital on March 31, 2017

56,400

Add: Drawing made during the year (Rs 300 × 12)

3,600

Less: Capital on April 01, 2016

(33,900)

Less: Additional Capital Introduced

(16,320)

   

Profit earned during the year 2017

9,780

 

 

 

 Working Note:

Additional Capital Introduced

=

16,000 ×

102

100

 

=

16,320

 

 

Page No 479:

Question 11:

Mr. Girdhari Lal does not keep full double entry records. His balance as on April 01, 2016 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 April 31, 2016

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 2016

(40,000)

Less: Additional capital introduced

(1,500)

   

Profit earned during the year 2017

4,050

 

 

 

 



Page No 480:

Question 12:

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

 

 

April. 01, 2016

March. 31, 2017

 

 

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 October 31, 2016 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 March 31, 2017.

Answer:

Books of Mr. Ashok

Statement of Affairs as on April 01, 2016

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 March 31, 2017

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 March 31, 2017

(25,000)

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

33,000

Less: Capital on April 01, 2016

(18,900)

Less: Additional capital introduced (sale of car)

(50,000)

   

Loss during the year 2017

(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.

 

 

Page No 480:

Question 13:

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:

 

 

April. 01, 2016

March. 31, 2017

 

 

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 April 01, 2016

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 March 31, 2017

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 March 31, 2017

3,35,200

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

60,000

Less: Capital on April 01, 2016

(2,24,000)

Less: Fresh capital introduced during the year 

(30,000)

   

Profit earned during the year 2017

1,41,200

   

 

 



Page No 481:

Question 14:

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 March 31, 2017

 

 

April. 31, 2016

March. 31, 2017

 

 

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 April 31, 2016

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 March. 31, 2017

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 March 31, 2017

4,33,400

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

1,20,000

Less: Capital on April 31, 2016

(1,82,000)

Less: Fresh capital introduced during the year 

(2,00,000)

   

Profit earned during the year 2017

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 1,41,200.

 

Page No 481:

Question 15:

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

 

Rs

Sundry creditors as on March 31, 2017

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, 2016

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

 

 

 

 

         

 

Amount paid to Creditors is Rs 4,40,175.

Page No 481:

Question 16:

Find out the credit purchases from the following:

 

Rs

Balance of creditors April 01, 2016

45,000

Balance of creditors March 31, 2017

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



Page No 482:

Question 17:

From the following information calculate total purchases.

 

Rs

Creditors April. 01, 2016

30,000

Creditors March. 31, 2017

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 Purchases

= Cash Purchases + Credit Purchases (as per Creditors Account)

 

= 1,29,000 + 2,01,500

 

= Rs 3,30,500

 

 

 

 

 

Page No 482:

Question 18:

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  

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.

 

 

Page No 482:

Question 19:

From the following, calculate the amount of bills accepted during the year.

Rs

Bills payable as on April 01, 2016 1,80,000

Bills payable as on March 31, 2017 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

 

 

 

 

         

 

Page No 482:

Question 20:

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.

 

 

Page No 482:

Question 21:

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

 

Rs

Bills accepted