Chapter 2 from Textbook Book Keeping Accountancy Solutions for Class 12 ACCOUNTANCY

Question 1.A1:

Objective type questions :-
Answer in one sentence only.

What is Balance Sheet?

Answer:

A Balance Sheet is a statement which contains all the assets and liabilities of the business enterprise. It helps in knowing the exact financial position of the business. Liabilities are shown on the left hand side of the Balance Sheet whereas Assets are shown on the right hand side.

Question 1.A2:

Objective type questions :-
Answer in one sentence only.

State the meaning of debit balance of Trading Account.

Answer:

Debit balance of Trading Account implies the gross loss suffered as a result of the trading activities of a business. If the amount of sales falls short in comparison to the amount of purchases and expenses directly connected with such purchases, the difference figure is termed as gross loss, i.e. showing debit balance of Trading Account.

Question 1.A3:

Objective type questions :-
Answer in one sentence only.

When is partner’s current account opened?

Answer:

A current account is opened when the capital of partners is fixed. In such a case, all transactions relating to (except introduction and withdrawal of capital) interest on capital, interest on drawings, salary to partners, etc. are recorded in current account.

Question 1.A4:

Objective type questions :-
Answer in one sentence only.

To which account Gross Profit transferred?

Answer:

Gross Profit, which is calculated by preparing Trading Account, is transferred on the credit side of Profit & Loss Account.

Question 1.A5:

Objective type questions :-
Answer in one sentence only.

What is closing stock?

Answer:

The goods which remain unsold at the end of the financial year are known as closing stock. It is valued at cost price or market price, whichever is less. It includes closing stock of raw-material, semi-finished goods and that of finished goods.

Question 1.A6:

Objective type questions :-
Answer in one sentence only.

How is closing stock valued?

Answer:

Closing stock is valued at cost price or market price, whichever is less.

Question 1.A7:

Objective type questions :-
Answer in one sentence only.

What is Final Accounts?

Answer:

Final accounts are those accounts which are prepared at the end of the accounting period in order to give a report on the profitability and financial position of the business. These include two statements, i.e. Income statement (Trading and Profit & Loss Account) and Statement of Financial Position (Balance Sheet).

Question 1.A8:

Objective type questions :-
Answer in one sentence only.

What do you mean by direct expenses?

Answer:

These are the expenses that are incurred in connection with production or manufacturing of goods and services. It also includes the expenses incurred to bring the purchased goods at its place of business for the purpose of sale. For example, wages, carriage/freight inward etc. All the direct expenses are debited to the Trading Account.

Question 1.A9:

Objective type questions :-
Answer in one sentence only.

What do you mean by indirect expenses?

Answer:

Those expenses which are not directly related with the manufacturing of goods but are incurred by the firm in the course of its normal business activities, such as administrative expenses, selling expenses, distribution expenses, etc., are known as indirect expenses. Such expenses are debited to the Profit & Loss Account.

Question 1.A10:

Objective type questions :-
Answer in one sentence only.

What do you mean by accrued Income?

Answer:

Income of the current year which is yet to be received by a business is known as accrued income. This is the income that a business earns during the current year but is not received in the same year. In short, this income is earned in the current year but is received in the next accounting year. This income is also known as Outstanding Income or Income Receivable or Earned Income.

Question 1.A11:

Objective type questions :-
Answer in one sentence only.

What is Trial Balance?

Answer:

According to William Pickles, "The statement prepared with the help of ledger balances, at the end of financial year to find out whether the debit total agrees with the credit total is called Trial Balance."

Question 1.A12:

Objective type questions :-
Answer in one sentence only.

What is bad debts?

Answer:

The amount that becomes irrecoverable from the debtors is known as bad debt. Bad debts are losses for a business and, therefore, are shown on the debit side of the Profit and Loss Account.

Question 1.A13:

Objective type questions :-
Answer in one sentence only.

In the absence of partnership deed, what is profit sharing ratio of the partners?

Answer:

According to Indian Partnership Act, 1932, in the absence of partnership deed, the profits or losses of a firm are to be shared equally among the partners.

Question 1.A14:

Objective type questions :-
Answer in one sentence only.

What do you mean by carriage inward?

Answer:

These are the expenses that are incurred to transport the goods from the supplier’s place to the firm’s place. These are direct expenses and recorded on the debit side of the Trading Account.

Question 1.A15:

Objective type questions :-
Answer in one sentence only.

What do you mean by freight?

Answer:

Freight is the fee charged for carrying goods by a vessel or vehicle from one place to another. It is an expense which is paid by a firm for bringing the goods to the place of business.

Question 1.B1:

Objective type questions :-
Answer in one sentence only.

A statement showing financial position of the business on a particular date.

Answer:

Balance Sheet

Explanation: A Balance Sheet is a statement showing the financial position of a business on a particular date. The balances of all the personal and real accounts are grouped as assets and liabilities and shown in the Balance Sheet.

Question 1.B2:

Give the word / term or phrase which can substitute each of the following statement.

The amount which is not recoverable from debtors.

Answer:

Bad debts

Explanation: The amount which is not recoverable from debtors due to their dishonesty, insolvency or death is regarded as bad debts for the firm. It is a loss to the firm and must be written on the debit side of the Profit & Loss Account.

Question 1.B3:

Give the word / term or phrase which can substitute each of the following statement.

Stock in hand at the end of the accounting year.

Answer:

Closing Stock

Explanation: Stock in hand at the end of the accounting year is termed as closing stock. It includes closing stock of raw material, semi-finished goods and finished goods.

Question 1.B4:

Give the word / term or phrase which can substitute each of the following statement.

The transport expenses incurred to carry the goods purchased by the firm.

Answer:

Carriage inward

Explanation: The transport expenses incurred to carry the goods purchased by a firm are known as carriage inward and are shown on the debit side of the Trading Account (being direct expenses).

Question 1.B5:

Give the word / term or phrase which can substitute each of the following statement.

Income which is received before its due date.

Answer:

Pre-received or Unearned Income

Explanation: Income which is received before its due date is known as pre-received or unearned income. It represents the income that is received in the current year but it is not related to the current year. Such amount is shown on the Liabilities side of the Balance Sheet.

Question 1.B6:

Give the word / term or phrase which can substitute each of the following statement.

The debit balance of Trading Account.

Answer:

Gross Loss

Explanation: The debit balance of the Trading Account is termed as gross loss because the amount of purchases and the expenses directly related with purchases is more than the amount of sales.

Question 1.B7:

Give the word / term or phrase which can substitute each of the following statement.

The credit balance of Trading Account.

Answer:

Gross Profits

Explanation: Credit balance of Trading Account implies gross profit earned as a result of the trading activities of the business. If the amount of sales exceeds the amount of purchases and expenses directly connected with such purchases, the difference is termed as gross profit, i.e. it shows credit balance of Trading Account.

Question 1.B8:

Give the word / term or phrase which can substitute each of the following statement.

A provision which is created on sundry debtors.

Answer:

Provision for Doubtful Debts

Explanation: A provision which is created on sundry debtors is called provision for doubtful debts. Even after deducting the amount of bad debts, debtors still include some debts which remain doubtful. But the amount of actual loss would be known only in the subsequent year. So, a provision is created to cover the possible losses which are likely to occur in future.

Question 1.B9:

Give the word / term or phrase which can substitute each of the following statement.

The amount withdrawn by the partners from the business for their personal use.

Answer:

Drawings

Explanation: Drawings are the amount withdrawn (in cash or in kind) by the partners from the business for their personal use. In case of fixed capital method, it is recorded in the Partners’ Current Account, while in case of fluctuating capital method, it is shown in the Partners’ Capital Account.

Question 1.B10:

Give the word / term or phrase which can substitute each of the following statement.

The accounts which are prepared at the end of each financial year.

Answer:

Final Accounts

Explanation: Final accounts are the accounts which are prepared at the end of each financial year in order to present a true and fair view of the financial performance (i.e. profit/loss) and financial position (i.e. assets/liabilities) of the business.

Question 1.B11:

Give the word / term or phrase which can substitute each of the following statement.

Expenses which are paid before due.

Answer:

Prepaid expenses

Explanation: Expenses which are paid before the due date are called prepaid expenses. These expenses are paid in advance as they are related to the next year but are paid during the current year itself. According to the matching concept, such expenses must be shown on the Assets side of the Balance Sheet.

Question 1.B12:

Give the word / term or phrase which can substitute each of the following statement.

The statement showing list of all ledger balances.

Answer:

Trial Balance

Explanation: The statement showing list of all ledger balances is termed as Trial Balance. It is prepared to find out whether the debit total agrees with the credit total or not.

Question 1.B13:

Give the word / term or phrase which can substitute each of the following statement.

The credit balance of Profit and Loss Account.

Answer:

Net Profit

Explanation: The credit balance of Profit and Loss Account is regarded as net profit. When the credit side of Profit & Loss Account exceeds its debit side, the resultant balance is net profit. It is added to the amount of capital.

Question 1.B14:

Give the word / term or phrase which can substitute each of the following statement.

Expenses which are due but not paid at the end of the year.

Answer:

Outstanding Expenses

Explanation: Expenses which are due but not paid at the end of the year are outstanding expenses. The benefit of such expenses has been derived in the current year but the payment of these has not been made yet. Outstanding expenses are classified under personal accounts because they represent those persons to whom the payment is to be made. Such expenses are shown on the Liabilities side of the Balance Sheet.

Question 1.B15:

Give the word / term or phrase which can substitute each of the following statement.

Assets which are held in the business for a long period.

Answer:

Fixed Assets

Explanation: Fixed Assets are the assets which are held in the business for a long period. These assets are not meant for resale; rather, these are used for the production or rendering of goods and services. These assets help the business to earn income. For example, land and building, plant and machinery, furniture, etc.

Question 1.C1:

Select the most appropriate alternative from those given below and rewrite the statement.

The gross profit is transferred to _________________ account.
a) trading
b) profit and loss
c) capital
d) current

Answer:

The gross profit is transferred to Profit & Loss Account.

Explanation: The gross profit ascertained from the Trading Account is transferred to the Profit & Loss Account. This is because the figure of net profit is determined by deducting indirect expenses from the sum of gross profit and indirect incomes. Net profit of the firm is calculated by preparing Profit and Loss Account.

Question 1.C2:

Select the most appropriate alternative from those given below and rewrite the statement.

Wages paid for installation of machinery should be debited to _________________ account.
a) machinery
b) wages
c) trading
d) profit and loss

Answer:

Wages paid for installation of machinery should be debited to Machinery account.

Explanation: Wages paid for the installation of Machinery should be debited to the Machinery Account. Such wages should not be debited to the Trading Account because these wages represent capital expenditure. So, it must be added to the cost of machine.

Question 1.C3:

Select the most appropriate alternative from those given below and rewrite the statement.

All indirect expenses are debited to_________________ account.
a) trading
b) capital
c) profit and loss
d) current

Answer:

All indirect expenses are debited to Profit & Loss Account.

Explanation: These expenses are not directly related with the production of goods. But they must be accounted for in order to calculate the true net profit earned or net loss incurred during the year. So, all the indirect expenses are debited to Profit & Loss Account.

Question 1.C4:

Select the most appropriate alternative from those given below and rewrite the statement.

A statement showing financial position of the business is called as _________________.
a) balance sheet
b) trial balance
c) capital
d) trading A/c

Answer:

A statement showing financial position of the business is called as Balance Sheet.

Explanation: A Balance Sheet is a statement containing balances of ledger accounts that are still open after the transfer of all nominal accounts to the Trading and Profit & Loss Account. The balances of all the personal and real accounts are grouped as assets and liabilities and transferred to the Balance Sheet.

Question 1.C5:

Select the most appropriate alternative from those given below and rewrite the statement.

To find out net profit or net loss of the business _________________ account is prepared.
a) trading
b) capital
c) current
d) profit and loss

Answer:

To find out net profit or net loss of the business, Profit & Loss Account is prepared.

Explanation: Trading account only discloses the gross profit earned/loss incurred. But a businessman is more interested in knowing the overall profit or loss of the business. So, a Profit & Loss Account is prepared to ascertain the net profit earned or net loss incurred at the end of the accounting period.

Question 1.C6:

Select the most appropriate alternative from those given below and rewrite the statement.

A_________________ is an intangible asset.
a) goodwill
b) stock
c) building
d) cash

Answer:

A goodwill is an intangible asset.

Explanation: Goodwill is an intangible asset as it has no physical existence. It cannot be seen or felt. On the other hand, stock and cash are current assets of the business, whereas, building is a fixed asset.

Question 1.C7:

Select the most appropriate alternative from those given below and rewrite the statement.

Trading account is prepared on the basis of __________________ expenses.
a) indirect
b) direct
c) revenue
d) other

Answer:

Trading account is prepared on the basis of direct expenses.

Explanation: Trading Account records only direct expenses of the business that are incurred in purchasing goods, bringing them to godowns and manufacturing goods. So, they are directly connected with production and manufacturing of goods and services.

Question 1.C8:

Select the most appropriate alternative from those given below and rewrite the statement.

The interest on drawings is transferred to _________________ side of the profit and loss account.
a) debit
b) credit
c) asset
d) liability

Answer:

The interest on drawings is transferred to credit side of the profit and loss account.

Explanation: Interest on drawings is a gain for the business and an expense for the proprietor. Since accounting records are maintained from business point of view, it is credited to the Profit and Loss Account.

Question 1.C9:

Select the most appropriate alternative from those given below and rewrite the statement.

Final accounts are prepared on the basis of _________________ and adjustments.
a) trial balance
b) capital A/c
c) trading A/c
d) profit and loss A/c

Answer:

Final accounts are prepared on the basis of trial balance and adjustments.

Explanation: Final accounts are prepared on the basis of Trial Balance and adjustments. A Trial Balance contains all the items recorded in the books prepared before, i.e. Journal or Subsidiary books. Certain adjustments related to bad debts, managers’ commissions etc are also considered while preparing final accounts.

Question 1.C10:

Select the most appropriate alternative from those given below and rewrite the statement.

_________________ is the list of all ledger balances.
a) balance sheet
b) trial balance
c) trading A/c
d) profit and loss A/c

Answer:

Trial Balance is the list of all ledger balances.

Explanation: A Trial Balance is the list of all ledger balances, as it is prepared to ensure whether the total of the debit column of the Trial Balance is equal to its credit column.

Question 1.C11:

Select the most appropriate alternative from those given below and rewrite the statement.

Return outward are deducted from __________________.
a) purchases
b) sales
c) capital
d) debtors

Answer:

Return outward are deducted from purchases.

Explanation: Returns outward means purchases return. It is deducted from purchases because these are the goods which are returned to the suppliers; therefore, these are not to be included in the amount of purchases. To find the accurate amount of gross profit, net purchases (i.e. purchases less purchases return) are debited to the Trading Account.

Question 1.C12:

Select the most appropriate alternative from those given below and rewrite the statement.

The withdrawals of partner from the business for their personal use is called as……………..
a) capital
b) profit
c) drawings
d) cash

Answer:

The withdrawals of partners from the business for their personal use are called drawings.

Explanation: Drawings refer to the amount withdrawn in cash or kind by any or all of the partners for their personal use. In case of fixed capital method, it is recorded in the Partners’ Current Account, while in case of fluctuating capital method, it is recorded in the Partners’ Capital Accounts.

Question 1.C13:

Select the most appropriate alternative from those given below and rewrite the statement.

Income received in advance is shown on the __________________.
a) debit
b) credit
c) asset
d) liability

Answer:

Income received in advance is shown on the liability side.

Explanation: Income received in advance is an example of Representative Personal Account and always shows a credit balance (being a liability). This income is received in the current year but belongs to the next year. So, it represents a liability; therefore, it is recorded on the Liabilities side of the Balance Sheet.

Question 1.C14:

Select the most appropriate alternative from those given below and rewrite the statement.

Prepaid expenses are shown on the __________________ side of the balance sheet.
a) assets
b) liability
c) debit
d) credit

Answer:

Prepaid expenses are shown on the assets side of the balance sheet.

Explanation: Prepaid expenses are those expenses that have been paid in advance for the next year in the current year itself. The benefit of such payments will be availed in the next accounting year. Thus, they become an asset of the business and, therefore, are shown on the Assets side of the Balance Sheet.

Question 1.D1:

State whether the following statement are True or False.

All direct expenses are debited to Trading account.

Answer:

True

Explanation: All the expenses that are directly related to the production, transportation and manufacture of goods are known as direct expenses. All direct expenses are debited to the Trading Account.

Question 1.D2:

State whether the following statement are True or False.

The Balance Sheet is a nominal account.

Answer:

False

Explanation: A Balance Sheet is a statement and not an account containing the summary of personal and real accounts. On the other hand, Trading and Profit & Loss Account is a nominal account.

Question 1.D3:

State whether the following statement are True or False.

Discount allowed to debtors is called as bad debts.

Answer:

False

Explanation: The amount that is not recoverable from the debtors is termed as bad debts. It is a loss for the firm. On the other hand, discount may be allowed to debtors in case of early payment.

Question 1.D4:

State whether the following statement are True or False.

Profit and loss account is a nominal account.

Answer:

True

Explanation: Profit and Loss Account is a nominal account. Therefore, all the expenses and losses are shown on its debit side and all the income and gains are shown on the credit side of this account.

Question 1.D5:

State whether the following statement are True or False.

The interest on drawings is an income of the firm.

Answer:

True

Explanation: While interest on drawings is an income of the firm, it is an expense for the proprietor. As all the transactions are recorded from the business perspective, interest on drawings is recorded on the credit side of the Profit and Loss Account.

Question 1.D6:

State whether the following statement are True or False.

The interest on capital is an income of the firm.

Answer:

False

Explanation: Interest on capital is an expense for the firm. It is the amount paid to the proprietor for the amount of capital invested by him in the business. According to the principle of separate legal entity, capital invested by the proprietor is treated as a liability of the firm. Hence, interest is provided to the proprietor.

Question 1.D7:

State whether the following statement are True or False.

Trading account is a nominal account.

Answer:

True

Explanation: All the direct expenses related to production are debited, while the incomes (i.e. sales) are credited in the Trading Account. As per the rule of nominal account, all the expenses/losses must be debited and all the incomes/gains must be credited. This rule is also followed while preparing a Trading Account. Therefore, it is regarded as a nominal account.

Question 1.D8:

State whether the following statement are True or False.

Prepaid expenses are shown on the asset side of the Balance Sheet.

Answer:

True

Explanation: Those expenses that have been paid in advance for the next year in the current year itself are known as prepaid expenses. The benefit of such payments will be availed in the next accounting year. So, these expenses are a kind of asset for the firm; therefore, they are shown on the Assets side of the Balance Sheet.

Question 1.D9:

State whether the following statement are True or False.

Closing stock is always valued at market price.

Answer:

False

Explanation: Closing stock is valued at cost price or market price or whichever is less. So, the given statement is incorrect/false.

Question 1.D10:

State whether the following statement are True or False.

Outstanding expenses are shown on the liability side of the Balance Sheet.

Answer:

True

Explanation: The expenses that have been incurred during the current year but have been left unpaid until the date of preparation of final accounts are called outstanding expenses. These are shown on the Liabilities side of the Balance Sheet. So, outstanding expenses represent a firm’s obligations.

Question 1.D11:

State whether the following statement are True or False.

Partners must share profits and losses equally.

Answer:

False

Explanation: It is not mandatory for partners to share profits and losses equally. They can share the profit/loss in any ratio as decided between them. The profits or losses will be distributed equally only when then there is an agreement to such effect or when the partnership deed is silent in this regard.

Question 1.D12:

State whether the following statement are True or False.

Trial Balance is the base of Final account.

Answer:

True

Explanation: A Trial Balance contains the list of all the ledger accounts. It provides a basis for further processing of accounting data, i.e. preparation of final accounts.

Question 1.D13:

State whether the following statement are True or False.

Debit balance of Trading account shows gross profit.

Answer:

False

Explanation: Debit balance of Trading Account shows gross loss, i.e. when the debit side of the Trading account exceeds its credit side.

Question 1.D14:

State whether the following statement are True or False.

Credit balance of profit and loss account shows net profit of the business.

Answer:

True

Explanation: The balance of the Profit & Loss Account is the net profit when the credit side of this account exceeds its debit side. This net profit is added to the capital of the proprietor appearing in the Balance Sheet.

Question 1.D15:

State whether the following statement are True or False.

Return Inward is deducted from purchases.

Answer:

False

Explanation: Returns inward represent sales return. So, these must be deducted from the amount of total sales. Sales return (i.e. returns inward) are the goods that are returned to the firm by the customers. Hence, the figure of net sales, i.e. sales less sales return, is credited to the Trading Account.

Question 1:

Practical Problem

From the following Trading Balance of M/s Ajay and Vijay you are required to prepared Trading and Profit and Loss Account for the year ended 31st March, 2009 and Balance Sheet as on that date

Trial Balance as on 31^st March, 2009
Particulars		Debit Amount Rs	Credit Amount Rs
Capital A/cs -	Ajay		60,000
	Vijay		35,000
Purchases and Sales		46,700	85,000
Sundry Debtors and Creditors		28,000	25,000
Bills Receivable and payable		5,000	6,000
Commission		4,600	1,800
Opening stock		18,000
Wages		9,900
Investment		13,500
Postage and Telegrams		3,600
Insurance		1,200
Plant and Machinery		40,700
Furniture		18,000
Cash in hand		2,500
Carriage		3,200
Bad debts		400
Prepaid Rent		7,000
Salaries		10,500
		2,12,800	2,12,800

Adjustments:

1) The closing stock is valued at Rs 31,000.

2) Outstanding expenses were wages Rs. 1,400, salaries Rs 800.

3) Depreciate Plant and Machinery by 10%.

4) Insurance at Rs 500 is paid in advance.

5) Provide for further bad debts of Rs 1,500.

6) Commission due but not received Rs 1,200.

Answer:

Trading Account for the year ended Mar.31,2009
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Opening Stock		18,000	Sales	85,000
Purchases		46,700	Closing Stock	31,000
Carriage		3,200
Wages	9,900
Add: Outstanding Wages	1,400	11,300
Gross Profit (Balancing Figure)		36,800
		1,16,000		1,16,000

Profit and Loss Account for the year ended March 31, 2009
Dr.						Cr.
Particulars		Amount (Rs)	Particulars		Amount (Rs)
Commission		4,600	Gross Profit		36,800
Salaries	10,500		Commission Received	1,800
Add: Outstanding Salaries	800	11,300	Add: Accrued Commission	1,200	3,000
Postage and Telegram		3,600
Insurance	1,200
Less: Prepaid Insurance	(500)	700
Depreciation on Plant and Machinery		4,070
Bad-Debts	400
Add: Further Bad-Debts	1,500	1,900
Net Profit (Balancing Figure)
Ajay	6,815
Vijay	6,815	13,630
		39,800			39,800

Balance Sheet as on March 31, 2009
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital of Ajay	60,000		Fixed Assets
Add: Net Profit	6,815	66,815	Investment		13,500
Capital of Vijay	35,000		Furniture		18,000
Add: Net Profit	6,815	41,815	Plant and Machinery	40,700
Current Liabilities			Less: Depreciation	(4,070)	36,630
Creditors		25,000	Current Assets
Bills Payable		6,000	Closing Stock		31,000
Outstanding Wages		1,400	Debtors	28,000
Outstanding Salaries		800	Less: Further Bad-Debts	(1,500)	26,500
			Bills Receivable		5,000
			Prepaid Rent		7,000
			Accrued Commission		1,200
			Prepaid Insurance		500
			Cash in Hand		2,500
		1,41,830			1,41,830

Question 2:

Practical Problem

Sanjay and Sudhir are partners sharing profit and losses in the ratio 3:2. The Trial Balance of the firm on 31st March, 2010 was follows:

Trial Balance as on 31^st March, 2010
Particulars		Amount Rs	Particulars		Amount Rs
Opening stock		20,000	Capital A/cs-	Sanjay	40,000
Purchases		30,000		Sudhir	30,000
Debtors		12,000	Sales		70,000
Wages		5,000	Sundry Creditors		21,000
Salaries		10,000	Bills payable		20,000
Land and Building		30,000	Discount		5,000
Plant and Machinery		25,000	Outstanding Rent		1,500
Furniture		16,000
Advertisement (for 2 years)		6,000
Bills Receivable		8,000
Insurance		2,000
Drawings-	Sanjay	2,000
	Sudhir	3,000
Cash in hand		5,500
Rent		10,000
Power and Fuel		3,000
		1,87,500			1,87,500

Adjustments:

1) Stock on hand on 31st March, 2010 was at Rs 35,000.

2) Write off Rs 2,000, for further Bad debts and maintain R.D.D. at 5% on debtors.

3) Depreciate Land and Building at 5% and Machinery at 10%.

4) Outstanding expenses were wages Rs 2,000 and salary Rs 1,000.

5) Credit purchases amounted to Rs 4,000 were not recorded in the books of accounts.

6) Provide interest on Partners Capital at 5% p.a.

From the above Trial Balance and adjustments prepare Trading and Profit and Loss Account for the year ended 31st March, 2010 and Balance Sheet as on that data.

Answer:

Trading Account for the year ended Mar.31,2010
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Opening Stock		20,000	Sales	70,000
Purchases	30,000		Closing Stock	35,000
Add: Further Purchases	4,000	34,000
Wages	5,000
Add: Outstanding Wages	2,000	7,000
Power and Fuel		3,000
Gross Profit (Balancing Figure)		41,000
		1,05,000		1,05,000

Profit and Loss Account for the year ended March 31, 2010
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Interest on Capital:			Gross Profit	41,000
Sanjay	2,000		Discount Received	5,000
Sudhir	1,500	3,500
Salaries	10,000
Add: Outstanding Salaries	1,000	11,000
Advertisement	6,000
Less: Prepaid Advertisement	(3,000)	3,000
Insurance		2,000
Rent		10,000
Bad-Debts	2,000
Add: R.D.D	500	2,500
Depreciation on:
Land and Building	1,500
Plant and Machinery	2,500	4,000
Net Profit (Balancing Figure)
Sanjay	6,000
Sudhir	4,000	10,000
		49,000		49,000

Balance Sheet as on March 31, 2010
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital of Sanjay	40,000		Fixed Assets
Less: Drawings	(2,000)		Land and Building	30,000
Add: Interest on Capital	2,000		Less: 5% Depreciation	(1,500)	28,500
Add: Net Profit	6,000	46,000	Plant and Machinery	25,000
Capital of Sudhir	30,000		Less:10% Depreciation	(2,500)	22,500
Less: Drawings	(3,000)		Furniture		16,000
Add: Interest on Capital	1,500		Current Assets
Add: Net Profit	4,000	32,500	Prepaid Advertisement		3,000
Current Liabilities			Bills Receivable		8,000
Creditors	21,000		Closing Stock		35,000
Add: New Creditors (purchase on credit)	4,000	25,000	Cash in Hand		5,500
Bills Payable		20,000	Debtors	12,000
Outstanding Expenses:			Less: Bad-Debts	(2,000)
Wages	2,000		Less: Reserve for doubtful Debts	(500)	9,500
Salaries	1,000
Rent	1,500	4,500
		1,28,000			1,28,000

Question 3:

Practical Problem

Rohan and Roshan are partners in ‘Shan Traders’ sharing profits and losses in the ratio of 2:1. From the following Trial Balance and adjustments prepare Trading and Profit and Loss Account for the year ended 31st March, 2011 and Balance Sheet as on that date

Trial Balance as on 31^st March, 2011
Particulars	Amount Rs	Particulars		Amount Rs
Opening stock	32,000	Sales		1,93,500
Purchases	64,000	Sundry Creditors		15,000
Plant and Machinery	30,000	Unpaid Wages		1,500
Furniture	18,500	Return outward		2,500
Carriage	1,500	Capital A/c-	Rohan	90,000
Wages and Salaries	35,000		Roshan	50,000
Bills Receivable	5,000
Sundry Debtors	32,000
Conveyance	4,000
Rent, Rates and Taxes	2,000
Return Inward	3,500
Cash in hand	14,750
Land and Building	83,500
Bad debts	1,750
Patents	25,000
	3,52,500			3,52,500

Adjustments:

1) Closing stock: Cost price Rs 25,000 and market price Rs 30,000.

2) An amount of Rs 3,500 spent for repairs to Building is debited to Building account.

3) Depreciate plant and Machinery and Building at 5% p.a.

4) Goods of Rs 750 taken by Roshan for this personal use.

5) Included in wages advances given to workers Rs 3,000.

6) Provide Rs 1,500 for bad and doubtful debts on Debtors.

Answer:

Trading Account for the year ended March 31,2011
Dr.						Cr.
Particulars		Amount (Rs)	Particulars		Amount (Rs)
Opening Stock		32,000	Sales	1,93,500
Purchases	64,000		Less: Return Inward	(3,500)	1,90,000
Less: Drawings	(750)		Closing Stock
Less: Return Outward	(2,500)	60,750			25,000
Wages and Salaries	35,000
Less: Prepaid Wages	(3,000)	32,000
Carriage		1,500
Gross Profit (Balancing Figure)		88,750
		2,15,000			2,15,000

Profit and Loss Account for the year ended March 31, 2011
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Depreciation on:			Gross Profit	88,750
Plant and Machinery	1,500
Building	4,000	5,500
Repair of Building		3,500
Conveyance		4,000
Rent, Rates and Taxes		2,000
Bad-Debts	1,750
Add: Provision for Doubtful Debts	1,500	3,250
Net Profit (Balancing Figure)
Rohan	47,000
Roshan	23,500	70,500
		88,750		88,750

Balance Sheet as on March 31, 2011
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital of Roshan	90,000		Fixed Assets
Add: Net Profit	47,000	1,37,000	Land and Building	83,500
Capital of Roshan	50,000		Less: Repairs	(3,500)
Less: Drawings	(750)		Less: 5% Depreciation	(4,000)	76,000
Add: Net Profit	23,500	72,750	Plant and Machinery	30,000
Current Liabilities			Less: 5% Depreciation	(1,500)	28,500
Creditors		15,000	Furniture		18,500
Unpaid Wages		1,500	Patents		25,000
			Current Assets
			Debtors	32,000
			Less: Provision for Doubtful-Debts	(1,500)	30,500
			Bills Receivable		5,000
			Cash in Hand		14,750
			Closing Stock		25,000
			Advance paid to Workers		3,000
		2,26,250			2,26,250

Question 4:

Practical Problem

Given below is the Trial Balance of M/s Roma and Mona partnership firm. Prepare Trading and Profit and Loss Account for the year ended 31st March, 2012 and Balance Sheet as on that date

Trial Balance as on 31^st March, 2012
Debit Balance	Amount Rs	Credit Balance		Amount Rs
Stock on 1^st April, 2011	52,000	Provident fund		50,000
Sundry Debtors	84,000	Interest on P.F. Investment		2,800
Bad debts	3,000	Sundry Creditors		84,000
Premises	78,000	Rent received		9,600
Salaries	28,000	Reserve for Doubtful Debts		2,000
Motor Vehicle	50,000	Discount received		3,600
Purchases	1,76,000	Sales		3,20,000
Provident Fund Investment	50,000	Capital A/c-	Roma	50,000
Provident Fund contribution	5,500		Mona	50,000
Wages	22,000
Rent (for 10 months)	16,000
Office Expenses	5,000
Discount allowed	2,500
	5,72,000			5,72,000

Adjustments:

1) Stock on 31st March, 2012 was valued at Rs 80,000.

2) Goods of Rs 6,000 were sold and despatched on 27th March, 2012, but no entry was made in the books of accounts.

3) Write off Bad debts of Rs 4,000 and provide for R.D.D. at 5% on sundry debtors.

4) Provide reserve for discount on debtors at 2% and on creditors at 3%.

5) Outstanding wages Rs 4,000 and outstanding salaries Rs 3,066.

6) Depreciate Motor Vehicle at 5% p.a.

Answer:

Trading Account for the year ended Mar.31,2012
Dr.						Cr.
Particulars		Amount (Rs)	Particulars		Amount (Rs)
Opening Stock		52,000	Sales	3,20,000
Purchases		1,76,000	Add: Additional Sales	6,000	3,26,000
Wages	22,000		Closing Stock		80,000
Add: Outstanding Wages	4,000	26,000
Gross Profit (Balancing Figure)		1,52,000
		4,06,000			4,06,000

Profit and Loss Account for the year ended March 31, 2012
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Bad-Debts	3,000		Gross Profit	1,52,000
Add: Further Bad-Debts	4,000		Rent Received	9,600
Add: New Reserve for Doubtful Debts	4,300		Discount Received	3,600
Less: Old Reserve for Doubtful Debts	(2,000)	9,300	Reserve for Discount on Creditors	2,520
Reserve for Discount on Debtors		1,634
Salaries	28,000
Add: Outstanding Salaries	3,066	31,066
Depreciation on Motor Vehicle		2,500
Rent	16,000
Add: Outstanding Rent $(16, 000 \times \frac{2}{10} = Rs 3, 200)$	3,200	19,200
Office Expenses		5,000
Discount Allowed		2,500
Provident Fund Contribution		5,500
Net Profit (Balancing Figure)
Roma	45,510
Mona	45,510	91,020
		1,67,720		1,67,720

Balance Sheet as on March 31, 2012
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital of Roma	50,000		Fixed Assets
Add: Net Profit	45,510	95,510	Motor Vehicle	50,000
Capital of Mona	50,000		Less: 5% Depreciation	(2,500)	47,500
Add: Net Profit	45,510	95,510	Premises		78,000
Current Liabilities			Machinery
Creditors	84,000		Current Assets
Less: Reserve for Discount on Creditors	(2,520)	81,480	Closing Stock		80,000
Outstanding Salaries		3,066	Debtors	84,000
Outstanding Wages		4,000	Add: Additional	6,000
Outstanding Rent		3,200	Less: Further Bad-Debts	(4,000)
Interest on Provident Fund Investment		2,800	Less: Reserve for Doubtful Debts	(4,300)
Provident Fund		50,000	Less: Reserve for Discount on Debtors	(1,634)	80,066
			Provident Fund Investment		50,000

		3,35,566			3,35,566

Question 5:

Practical Problem

From the following Trial Balance of M/s Kale and Gore, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2013 and Balance Sheet on that date. They share profits and losses in their capital ratio.

Trial Balance as on 31^st March, 2013
Debit Balance	Amount Rs	Credit Balance		Amount Rs
Opening stock	28,000	Capital Ac-	Kale	80,000
Purchases	1,16,400		Gore	40,000
Trade Expenses	2,400	Sundry Creditors		54,000
Royalties	6,200	Sales		2,12,000
Wages and Salaries	14,800	Reserve for Doubtful Debts		1,800
Advertisement	8,200	Bills payable		36,000
Salaries	11,000
Plant and Machinery	44,000
Freehold Property	36,000
Office Rent	4,000
Motor Van	63,000
Bills Receivable	16,000
Sundry Debtors	60,000
Cash in hand	10,000
Bad debts	1,000
General expenses	2,800
	4,23,800			4,23,800

Adjustments:

1) Closing stock was valued at cost Rs 76,000 while its market price was Rs 80,000.

2) Uninsured goods worth Rs 10,000 were stolen.

3) Goods worth Rs 10,000 were sold and delivered on 31st March 2013, but on entry is passed sales book.

4) Depreciate Plant and Machinery at 10% and Motor van at 15% p.a.

5) Bills Receivable includes a dishonoured bill of Rs 4,000.

6) Create a reserve for doubtful debts at 5% on Debtors.

Answer:

Trading Account for the year ended March 31,2013
Dr.						Cr.
Particulars		Amount (Rs)	Particulars		Amount (Rs)
Opening Stock		28,000	Sales	2,12,000
Purchases	1,16,400		Add: Additional Sale	10,000	2,22,000
Less: Goods Stolen	(10,000)	1,06,400	Closing Stock		76,000
Wages and Salaries		14,800
Trade Expenses		2,400
Royalties		6,200
Gross Profit (Balancing Figure)		1,40,200
		2,98,000			2,98,000

Profit and Loss Account for the year ended March 31, 2013
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Advertisement		8,200	Gross Profit	1,48,800
Salaries		11,000
Depreciation on:
Plant and Machinery	4,400
Motor Van	9,450	13,850
Office Rent		4,000
Bad-Debts	1,000
Add: New Reserve for Doubtful Debts	3,700
Less: Old Reserve for Doubtful Debts	(1,800)	2,900
General Expenses		2,800
Loss of Goods		10,000
Net Profit (Balancing Figure)
Kale	58,300
Gore	29,150	87,450
		1,48,800		1,48,800

Balance Sheet as on March 31, 2013
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital of Kale	80,000		Fixed Assets
Add: Net Profit	58,300	1,38,300	Motor Van	63,000
Capital of Gore	40,000		Less: 15% Depreciation	(9,450)	53,550
Add: Net Profit	29,150	69,150	Plant and Machinery	44,000
Current Liabilities			Less: 10% Depreciation	(4,400)	39,600
Creditors		54,000	Freehold Property		36,000
Bills Payable		36,000	Current Assets
			Closing Stock		76,000
			Debtors	60,000
			Add: Additional	10,000
			Add: B/R Dishonor	4,000
			Less: Reserve for Doubtful Debts	(3,700)	70,300
			Bills Receivable (16,000-4,000)		12,000
			Cash in Hand		10,000
		2,97,450			2,97,450

Question 6:

Practical Problem

Given below is the Trial Balance of M/s Seeta and Geeta as on 31^st March, 2010. You are required to prepare Trading and Profit and Loss Account for the year ended 31^st March, 2010 and Balance Sheet on that date.

Trial Balance as on 31^st March, 2010
Debit Balance		Amount Rs	Credit Balance		Amount Rs
Current A/c-	Geeta	4,000	Capital A/c-	Seeta	1,20,000
Opening stock		88,000		Geeta	1,20,000
Purchases		1,76,000	Current A/c- Seeta		5,000
Wages		23,500	Sundry Creditors		1,03,000
Salaries		15,000	Bank overdraft		60,000
Office expenses		8,000	Sales		3,08,000
Bank charges		2,600
Legal charges		3,000
Machinery		90,000
Land and Building		1,30,000
Interest		3,600
Export duty		3,800
Bad Debts		4,000
Sundry Debtors		82,000
Travelling Expenses		3,200
Electricity charges		2,300
Furniture		37,000
8% Debentures		40,000
(Purchased on 1.10.2009)
		7,16,000			7,16,000

Adjustments:

1) Stock on hand on 31st March, 2010 was valued at Rs 80,000.

2) Goods costing Rs 16,000 destroyed by fire and Insurance Company admitted a claim of Rs 13,000.

3) Provide for outstanding expenses: Salaries Rs 3,000, Wages Rs 2,400.

4) Depreciate Machinery at 10% p.a. Land and Building at 5% p.a.

5) Create Reserve for Bad and doubtful debts at 5% on Sundry Debtors.

6) Legal charges paid in advance Rs 1,200.

7) Provide interest on capital at 8% p.a.

Answer:

Trading Account for the year ended March 31,2010
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Opening Stock		88,000	Sales	3,08,000
Purchases		1,76,000	Closing Stock	80,000
Wages	23,500		Goods Destroyed by fire	16,000
Add: Outstanding Wages	2,400	25,900
Gross Profit (Balancing Figure)		1,14,100
		4,04,000		4,04,000

Profit and Loss Account for the year ended March 31, 2010
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Salaries	15,000		Gross Profit	1,41,100
Add: Outstanding Salaries	3,000	18,000	Accrued Interest	1,600
Office Expenses		8,000
Bank Charges		2,600
Legal charges	3,000
Less: Prepaid	(1,200)	1,800
Interest		3,600
Export Duty		3,800
Bad-Debts	4,000
Add: Reserve for Bad and doubtful Debts	4,100	8,100
Travelling Expenses		3,200
Electricity Charges		2,300
Goods destroyed by fire (not received from Insurance company)		3,000
Depreciation on:
Land and Building	6,500
Machinery	9,000	15,500
Interest on Capital:
Seeta	9,600
Geeta	9,600	19,200
Net Profit (Balancing Figure)
Seeta’s Current A/c	13,300
Geeta’s Current A/c	13,300	26,600
		1,15,700		1,15,700

Balance Sheet as on March 31, 2010
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital			Fixed Assets
Seeta	1,20,000		Land and Building	1,30,000
Geeta	1,20,000	2,40,000	Less: 5% Depreciation	(6,500)	1,23,500
Current A/c:			Machinery	90,000
Seeta	27,900		Less: 10% Depreciation	(9,000)	81,000
Geeta	18,900	46,800	Furniture		37,000
Current Liabilities			Current Assets
Creditors		1,03,000	Closing Stock		80,000
Bank Overdraft		60,000	Debtors	82,000
Outstanding Expenses:			Less: Reserve for Bad and Doubtful Debts	(4,100)	77,900
Salaries	3,000		Prepaid Legal Charges		1,200
Wages	2,400	5,400	Cash		13,000
			8% Debentures	40,000
			Add: Accrued Interest	1,600	41,600

		4,55,200			4,55,200

Working Notes:

Partners’ Current Accounts
Dr.						Cr.
Particulars	Seeta	Geeta	Particulars	Seeta	Geeta
Balance b/d		4,000	Balance b/d	5,000
Balance c/d	27,900	18,900	Interest on Capital A/c	9,600	9,600
			Profit and Loss A/c-Profit	13,300	13,300
	27,900	18,900		27,900	22,900

Question 7:

Practical Problem

Madhuri and Minakshi are in partnership sharing profits and losses in the ratio 3:2. From the following Trial Balance and adjustments given below, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2012 and Balance Sheet on that date.

Trial Balance as on 31^st March, 2012
Debit Balance		Amount Rs	Credit Balance		Amount Rs
Building		4,00,000	Capital A/cs-	Madhuri	3,00,000
Plant and Machinery		1,20,000		Minakshi	2,00,000
Purchases		6,50,000	Sales		8,10,000
Carriage		7,000	Sundry Creditors		1,00,000
Opening stock		90,000	Outstanding salaries		4,200
Wages		35,000	8% Bank loan		1,00,000
Sundry Debtors		1,50,000	(Taken on 1.10.2011 )
Salaries		28,000
Postage and Telegram		4,000
Insurance		5,000
Bad debts		3,000
Rent		4,000
Discount		3,200
Drawing A/c-	Madhuri	10,000
	Minakshi	5,000
		15,14,200			15,14,200

Adjustments:

1) Stock on hand on 31st March, 2010 was valued at Rs 1,10,000.

2) Depreciate Plant and Machinery at 10% p.a. and Building at 5% p.a.

3) Prepaid Insurance Rs 1,500.

4) Create R.D.D at 5% on Sundry Debtors.

5) Partners are allowed interest at 5% p.a. on their capitals.

6) Salaries include Rs 2,500 as advance to workers.

Answer:

Trading Account for the year ended March 31,2012
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Opening Stock	90,000	Sales	8,10,000
Purchases	6,50,000	Closing Stock	1,10,000
Carriage	7,000
Wages	35,000
Gross Profit (Balancing Figure)	1,38,000
	9,20,000		9,20,000

Profit and Loss Account for the year ended March 31, 2012
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Salaries	28,000		Gross Profit	1,38,000
Add: Prepaid	2,500	25,500
Postage and Telegram		4,000
Insurance	5,000
Less: Prepaid	(1,500)	3,500
Bad-Debts	3,000
Add: Reserve for Doubtful Debts	7,500	10,500
Rent		4,000
Discount		3,200
Interest on Loan Outstanding		4,000
Depreciation on:
Plant and Machinery	12,000
Building	20,000	32,000
Interest on Capital:
Madhuri	15,000
Minakshi	10,000	25,000
Net Profit (Balancing Figure)
Madhuri	15,780
Minakshi	10,520	26,300
		1,38,000		1,38,000

Balance Sheet as on March 31, 2012
Liabilities		Amount (Rs)	Assets			Amount (Rs)
Capital of Madhuri	3,00,000		Fixed Assets
Less: Drawings	(10,000)		Building	4,00,000
Add: Interest on Capital	15,000		Less: 5% Depreciation	(20,000)		3,80,000
Add: Net Profit	15,780	3,20,780	Plant and Machinery	1,20,000
Capital of Minakshi	2,00,000		Less:10% Depreciation	(12,000)		1,08,000
Less: Drawings	(5,000)		Current Assets
Add: Interest on Capital	10,000		Closing Stock			1,10,000
Add: Net Profit	10,520	2,15,520	Debtors		1,50,000
8% Bank Loan	1,00,000		Less: Reserve for Doubtful Debts		(7,500)	1,42,500
Add: Outstanding Interest on Loan	4,000	1,04,000	Prepaid Insurance			1,500
Current Liabilities			Prepaid Salary			2,500
Creditors		1,00,000
Outstanding Salaries		4,200
		7,44,500				7,44,500

Question 8:

Practical Problem

From the following Trial Balance of M/s Mahesh and Umesh, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2013 and Balance Sheet as on that date. Profit sharing ratio of Mahesh and Umesh was 3/5th and 2/5th respectively.

Trial Balance as on 31^st March, 2013
Debit Balance	Amount Rs	Credit Balance		Amount Rs
Investments	56,000	Capital A/c-	Mahesh	1,62,000
Carriage	7,000		Umesh	1,08,000
Loose Tools	17,000	Current A/c-	Mahesh	16,200
Building	1,50,000		Umesh	10,800
Salary	13,000	Sundry Creditors		99,000
Audit fees	8,500	Sales		4,20,000
Opening stock	83,000	Bank overdraft		56,400
Wages	7,500
Purchases	1,97,000
Motive Power	15,000
Bad debts	6,400
Printing and Stationery	4,000
Debtors	96,000
Cash at Bank	52,000
Machinery	72,000
Motor Van	88,000
	8,72,400			8,72,400

Adjustments:

1) Stock on hand on 31st March, 2013 was valued at Rs 76,000.

2) Interest on partner’s capital at 5% p.a. was allowed.

3) Goods worth Rs 2,000 and Rs 1,500 withdrawn by Mahesh and Umesh respectively for their personal use.

4) Mahesh is entitled to get salary of Rs 6,500 and Umesh is to be given 20% commission on sales.

5) Rs 2,500 due from customer is not recoverable.

6) Depreciate Motor Van at 8% p.a. and Building at 7% p.a.

Answer:

Trading Account for the year ended March 31,2013
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Opening Stock		83,000	Sales	4,20,000
Purchases	1,97,000		Closing Stock	76,000
Less: Drawings by Mahesh	(2,000)
Less: Drawings by Umesh	(1,500)	1,93,500
Carriage		7,000
Wages		7,500
Motive Power		15,000
Gross Profit (Balancing Figure)		1,90,000
		4,96,000		4,96,000

Profit and Loss Account for the year ended March 31, 2013
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Interest on Capital:			Gross Profit	1,90,000
Mahesh	8,100
Umesh	5,400	13,500
Depreciation on:
Motor Van	7,040
Building	10,500	17,540
Bad-Debts	6,400
Add: Further Bad-Debts	2,500	8,900
Salary to Mahesh		6,500
Commission to Umesh		8,400
Salary		13,000
Audit fees		8,500
Printing and Stationery		4,000
Net Profit (Balancing Figure)
Umesh	65,796
Mahesh	43,864	1,09,660
		1,90,000		1,90,000

Balance Sheet as on March 31, 2013
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital			Fixed Assets
Umesh	1,62,000		Building	1,50,000
Mahesh	1,08,000	2,70,000	Less: 7% Depreciation	(10,500)	1,39,500
Current A/c			Motor Van	88,000
Umesh	94,596		Less: 8% Depreciation	(7,040)	80,960
Mahesh	66,964	1,61,560	Investment		56,000
Current Liabilities			Machinery		72,000
Creditors		99,000	Current Assets
Bank Overdraft		56,400	Closing Stock		76,000
			Debtors	96,000
			Less: Further Bad-Debts	(2,500)	93,500
			Loose Tools		17,000
			Cash at Bank		52,000
		5,86,960			5,86,960

Working Notes:

Partners’ Current Accounts
Dr.						Cr.
Particulars	Umesh	Mahesh	Particulars	Umesh	Mahesh
Drawings	2,000	1,500	Balance b/d	16,200	10,800
Balance c/d	94,596	66,964	Salary to Umesh	6,500
			Commission to Mahesh		8,400
			Interest on Capital A/c	8,100	5,400
			Profit and Loss A/c-Profit	65,796	43,864
	96,596	68,464		96,596	68,464

Question 9:

Practical Problem

Mohini and Rohini are in partnership firm sharing profits and losses equally. From the following Trial Balance and adjustments given below, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2010 and Balance Sheet as on that date.

Trial Balance as on 31^st March, 2010
Particulars		Debit Amount Rs	Credit Amount Rs
Partner’s Capital Ac-	Mohini		1,20,000
	Rohini		90,000
Purchases and Sales		2,20,000	4,30,000
Sundry Debtors and Creditors		45,000	35,000
Bills Receivable and Bills Payable		45,000	50,000
Discount		4,000	3,500
Opening stock		25,000
Wages and Salaries		23,000
Manufacturing Expenses		9,000
Factory Insurances		5,000
Factory Building*		1,40,000
Plant and Machinery		75,000
Advertisement (for 2years w.e.f. 1^st Jan. 2010)		10,000
Salaries and Wages		45,000
Warehouse rent		6,000
Import duty		11,500
Cash in hand		5,000
10% Government Bond		60,000
(purchased on 1^st July, 2009)
		7,28,500	7,28,500

Adjustments:

1) Closing stock was valued at market price Rs 92,000 which is 15% above its cost price.

2) Goods costing Rs 3,000 purchased and received on 31st March, 2010 were not recorded in purchase book.

3) Depreciate Machinery at 10% p.a.

4) Outstanding Wages were Rs 2,500.

5) Goods of Rs 2,000 were taken by Mohini for personal use but no entry was made in the books of account.

6) Maintain R.D.D at 5% on Sundry Debtors.

Answer:

Financial Statement of….
Trading Account for the year ended March 31,2010
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Opening Stock		25,000	Sales	4,30,000
Purchases	2,20,000		Closing Stock	80,000
Add: Additions	3,000
Add: Import Duty	11,500
Less: Drawings by Mohini	(2,000)	2,32,500
Factory Insurance		5,000
Manufacturing Expenses		9,000
Wages and Salaries	23,000
Add: Outstanding wages	2,500	25,500
Gross Profit (Balancing Figure)		2,13,000
		5,10,000		5,10,000

Profit and Loss Account for the year ended March 31, 2010
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Discount		4,000	Gross Profit	2,13,000
Advertisement	10,000		Discount	3,500
Less: Prepaid $(10, 000 \times \frac{21}{24})$	(8,750)	1,250	Accrued Interest on Government Bonds $(60, 000 \times \frac{10}{100} \times \frac{9}{2})$	4,500
Salaries and Wages		45,000
Warehouse Rent		6,000
Depreciation on Machinery		7,500
Reserve on Doubtful Debts		2,250
Net Profit (Balancing Figure)
Mohini	77,500
Rohini	77,500	1,55,000
		2,21,000		2,21,000

Balance Sheet as on March 31, 2010
Liabilities		Amount (Rs)	Assets			Amount (Rs)
Capital			Fixed Assets
Mohini	1,95,500		Building			1,40,000
Rohini	1,67,500	3,63,000	Plant and Machinery	75,000
Current Liabilities			Less: 10% Depreciation	(7,500)		67,500
Creditors	35,000		Current Assets
Add: Additions	3,000	38,000	Closing Stock			80,000
Bills Payable		50,000	Debtors		45,000
Outstanding Wages		2,500	Less: Reserve for Doubtful Debts $(Rs 45, 000 \times \frac{5}{100})$		2,250	42,750
			Bills Receivable			45,000
			Cash in Hand			5,000
			10% Government Bond		60,000
			Add: Accrued Interest		4,500	64,500
			Prepaid Advertisement			8,750
		4,53,500				4,53,500

Working Notes:

Partners’ Capital Accounts
Dr.						Cr.
Particulars	Mohini	Rohini	Particulars	Mohini	Rohini
Drawings	2,000		Balance b/d	1,20,000	90,000
Balance c/d	1,95,500	1,67,500	Profit and Loss A/c-Profit	77,500	77,500
	1,97,500	1,67,500		1,97,500	1,67,500

Note: As per the textbook the Total of Balance sheet is Rs 4,48,500 but as per our solution it should be Rs 4,53,500.

*There is difference of Rs 10,000 in the Debit and Credit side of Trial Balance, therefore, Factory Building has been increased by Rs 10,000.

Question 10:

Practical Problem

From the following Trial Balance of M/s Sanjay and Vijay, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2013 and Balance Sheet as on that date after taking into consideration the adjustments given below.

Trial Balance as on 31^st March, 2013
Debit Balance	Amount Rs	Credit Balance		Amount Rs
Salaries and wages	12,000	Sales		1,10,000
Postage and Telegram	1,750	Sundry Creditors		72,700
Opening Stock	23,500	Bills Payable		40,000
Plant and Machinery	70,000	10% Bank loan (Taken on 1^st Oct. 2012)		60,000
Advertisement	5,000	Outstanding Audit fees		5,900
Import duty	2,100	Capital A/c-	Sanjay	45,000
Bad debts	1,000		Vijay	45,000
Purchases	98,500
Sundry Debtors	45,800
Bills Receivable	16,700
Carriage outward	1,800
Wages and stationery* (Note 2)	14,000
Printing and stationery	4,600
Cash in hand	1,850
Leasehold Premises	80,000
	3,78,600			3,78,600

Adjustments:
1) Closing stock was valued at Rs 30,000.

2) Postage stamps of Rs 250 and stationery of Rs 400 are unused.

3) Goods of Rs 2,500 distributed as free samples.

4) Leasehold property is to be run for 10 years w.e.f. 1st October, 2012.

5) Depreciate Plant and Machinery at 10% p.a.

6) Mr. Rajan, our customer become insolvent and could not pay his debts of Rs 1,500.

Answer:

Trading Account for the year ended March 31,2013
Dr.				Cr.
Particulars	Amount (Rs)	Particulars	Amount (Rs)
Opening Stock	23,500	Sales	1,10,000
Purchases	98,500	Closing Stock	30,000
Import duty	2,100	Goods distributed as Free Sample	2,500
Wages and Salaries	14,000
Gross Profit (Balancing Figure)	4,400
	1,42,500		1,42,500

Profit and Loss Account for the year ended March 31, 2013
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Salaries and Wages		12,000	Gross Profit	4,400
Postage and Telegram	1,750		Net Loss (Balancing Figure)	39,100
Less: Unused	250	1,500
Advertisement	5,000
Add: Free Sample	2,500	7,500
Bad debts	1,000
Add: Further Bad-Debts	1,500	2,500
Carriage outward		1,800
Printing and stationery	4,600
Less: Unused	400	4,200
Depreciation on:
Leasehold Premises	4,000
Plant and Machinery	7,000	11,000
Outstanding Interest on Loan		3,000
		43,500		43,500

Balance Sheet as on March 31, 2013
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital			Fixed Assets
Sanjay	45,000		Plant and Machinery	70,000
Vijay	45,000		Less: Depreciation	7,000	63,000
Less: Net Loss	(39,100)	50,900	Leasehold Premises	80,000
Current Liabilities			Less: Depreciation	4,000	76,000
Creditors		72,700	Current Assets
Bills Payable		40,000	Closing Stock		30,000
10% Bank Loan	60,000		Debtors	45,800
Add: Outstanding Interest	3,000	63,000	Less: Further Bad-Debts	1,500	44,300
Outstanding Audit fees		5,900	Bills Receivable		16,700
			Unused stock of Printing and Stationery		400
			Unused Stock of Postage and Telegram		250
			Cash in Hand		1,850
		2,32,500			2,32,500

Note 1: As per the textbook, the Gross Profit, the Net Loss and the total of Balance Sheet are Rs 15,900, Rs 27,600 and Rs 2,44,000, respectively, however, as per the above solution these should be Rs 4,400, Rs 39,100 and Rs 2,32,500 respectively.

Note 2: *It should be Wages and Salaries instead of Wages and stationery

Book Keeping Accountancy Solutions Solutions for Class 12 Commerce Accountancy Chapter 2 - Partnership Final Acounts

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