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11th | Adjustments in Preparation of Financial Statements | Question No. 7 and 8 | Ts Grewal Solution 2022-2023

Question 7:


Following are the balances extracted from the books of Narain on 31st March, 2022:

 

 

 

 

 

Particulars


(`)

Particulars 

 (`)

Narain's Capital

3,00,000

Sales

15,00,000

Narain's Drawings

50,000

Sales Return

20,000

Furniture and Fittings

26,000

Discounts (Dr.)

16,000

Bank Overdraft

42,000

Discounts (Cr.)

20,000

Creditors

1,38,000

Insurance

20,000

Business Premises

2,00,000

General Expenses

40,000

Stock on 1st April, 2018

2,20,000

Salaries

90,000

Debtors

1,80,000

Commission (Dr.)

22,000

Rent from Tenants

10,000

Carriage on Purchases

18,000

Purchases

11,00,000

Bad Debts Written off

8,000

Additional Information:
(i) Closing Stock as on 31st March, 2022 was ` 2,00,600, whereas its Net Realisable Value (Market Value) was ` 2,05,000.
(ii) Depreciate: Business Premises by ` 3,000 and Furniture and Fittings by ` 2,500.
(iii) Make a provision of 5% on debtors for doubtful debts.
(iv) Carry forward ` 2,000 for unexpired insurance.
(v) Outstanding salary was ` 15,000.
Prepare Trading and Profit and Loss Account for the year and Balance Sheet as at that date.

Answer:


Trading Account

for the year ended March 31, 2022

Dr.

 

 

Cr.

Particulars

 (`)

Particulars

 (`)

Opening Stock

2,20,000

Sales

15,00,000

 

Purchases

11,00,000

  Less: Returns

20,000

14,80,000

Carriage on Purchases

18,000

Closing Stock

2,00,600

Gross Profit

3,42,600

 

 

 

16,80,600

 

16,80,600

 

 

 

 

Note: As per the prudence concept, closing stock is taken to be at the market value or the book value whichever is less.
 

Profit & Loss Account

for the year ended March 31, 2022

Dr.

 

 

Cr.

Particulars

 (`)

Particulars

 (`)

Commission

22,000

Gross Profit

3,42,600

Insurance Premium

20,000

 

Discount

20,000

  Less: Prepaid

2,000

18,000

Rent from Tenants

10,000

Salaries

90,000

 

 

 

  Add: Outstanding Salaries

15,000

1,05,000

 

 

Bad Debts Written Off

8,000

 

 

Provision for Doubtful Debts

9,000

 

 

Discount

16,000

 

 

General Expenses

40,000

 

 

Depreciation on:

 

 

 

  Furniture

2,500

 

 

 

  Business Premises

3,000

5,500

 

 

Net Profit

1,49,100

 

 

 

3,72,600

 

3,72,600

 

 

 

 

 

Balance Sheet

as on March 31, 2022

Dr.

 

 

Cr.

Liabilities

 (`)

Assets

 (`)

Bank Overdraft

42,000

Furniture & Fittings

26,000

 

Creditors

1,38,000

  Less: Depreciation

2,500

23,500

Outstanding Salaries

15,000

Business Premises

2,00,000

 

Capital

3,00,000

 

  Less: Depreciation

3,000

1,97,000

  Less: Drawings

50,000

 

Debtors

1,80,000

 

  Add: Net Profit

1,49,100

3,99,100

  Less: Provision

9,000

1,71,000

 

 

Closing Stock

2,00,600

 

 

Prepaid Insurance

2,000

 

5,94,100

 

5,94,100

 

 

 

 

Question 8:


Following balances are taken from the books of Niranjan. Prepare Trading and Profit and Loss Account and Balance Sheet for the year ended 31st March, 2022:
 

Particulars

 `

Particulars

 `

Capital

12,00,000

Drawings

2,10,000

Opening Stock

4,50,000

Plant and Machinery

2,40,000

Furniture

15,000

Purchases

29,50,000

Sales

43,50,000

Insurances

15,000

Purchases Return

40,000

Sales Return

70,000

Rent

50,000

Trade Expenses

20,000

Salaries

2,40,000

Wages

4,00,000

Bad Debts

10,000

6% Investments

5,00,000

Sundry Debtors

4,00,000

Sundry Creditors

1,90,000

Bills Payable

8,000

Cash

1,22,000

Advertisement Expenses

60,000

Miscellaneous Income

12,000

Patents

48,000

 

 


Adjustments:
(i) Closing Stock
` 7,50,000.
(ii) Depreciate Machinery by 10% and Furniture by 20%.
(iii) Wages
` 50,000 and salaries ` 20,000 are outstanding.
(iv) Write off ` 50,000 as further Bad Debts and create 5% Provision for Doubtful Debts. Also, create a reserve for discount on Debtors @ 2%.
(v) Investments were made on 1st July, 2021 and no interest has been received so far.

Answer:


Financial statements of Mr. Niranjan

Trading Account

for the year ended March 31, 2022

Dr.

 

 

Cr.

Particulars

 (`)

Particulars

 (`)

Opening Stock

4,50,000

Sales

43,50,000

 

Purchases

29,50,000

 

Less: Sales Return

(70,000)

42,80,000

Less: Purchases Return

(40,000)

29,10,000

Closing Stock

7,50,000

Wages

4,00,000

 

 

 

Add: Outstanding wages

50,000

4,50,000

 

 

Gross Profit (Balancing Figure)

12,20,000

 

 

 

 

 

 

 

50,30,000

 

50,30,000

 

 

 

 

 

Profit and Loss Account

for the year ended March 31, 2022

Dr.

 

Cr.

Particulars

 (`)

Particulars

 (`)

Rent

50,000

Gross Profit

12,20,000

Salaries

2,40,000

 

 

 

Add: Outstanding Salaries

20,000

2,60,000

 

 

Bad Debts

10,000

 

Interest Accrued on Investment

 

Add: Further Bad Debts

50,000

 

(5,00,000 × 6% × 9/12)

22,500

Add: Provision for Doubtful Debts

17,500


77,500

Miscellaneous Receipts

12,000

Advertisement expenses

60,000

 

 

Provision for discount on debtors

6,650

 

 

Insurances

15,000

 

 

Trade Expenses

20,000

 

 

Depreciation on:

 

 

 

Machinery

24,000

 

 

 

Furniture

3000

27,000

 

 

Net Profit (Balancing Figure)

7,38,350

 

 

 

12,54,500

 

12,54,500

 

 

 

 

 

Balance Sheet

as on March 31, 2022

Liabilities

Amount

(`)

Assets

Amount

(`)

Capital

12,00,000

 

Fixed Assets

 

Less: Drawings

(2,10,000)

 

Patents

48,000

Add: Net Profit

7,38,350

17,28,350

Plant and Machinery

2,40,000

 

Current Liabilities

 

Less: 10% Depreciation

(24,000)

2,16,000

Sundry Creditors

1,90,000

Furniture

15,000

 

Wages Outstanding

50,000

Less: 20% Depreciation

(3,000)

12,000

Salaries Outstanding

20,000

6% Investment

5,00,000

 

Bills Payable

8000

Add: Accrued Interest

22,500

5,22,500

 

 

Current Assets

 

 

 

Closing Stock

7,50,000

 

 

Debtors

4,00,000

 

 

 

Less: Further Bad Debts

(50,000)

 

 

 

Less: Provision for Doubtful Debts

(17,500)

 

 

 

 

3,32,500

 

 

 

Less: Provision for Discount

(6,650)

3,25,850

 

 

Cash

1,22,000

 

19,96,350

 

19,96,350

 

 

 

 

 

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