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11th | Financial Statements of a Sole Proprietorship | Question No. 1 To 4 | Ts Grewal Solution 2022-2023

Question 1:


State whether the following expenses are capital or revenue in nature:
(i) Expenses on whitewashing and painting of a building purchased to make it ready for use.
(ii)  ` 10,000 spent on constructing platform for a new machine.
(iii) Repair expenses of `25,000 incurred for whitewashing of factory building.
(iv) Insurance premium paid as renewal premium.
(v) Purchased a new car.

(vi) Excise duty paid on purchase of new machine.
(vii) Wages paid to install a machine.

(viii) Repairs carried out on existing car.
(ix) Office block of building repainted for `50,000.
(x) Paid telephone bill `2,500.

Answer:


(1) Capital Expenditure: Paid to make an asset ready to use

(2) Capital Expenditure: Paid to make an asset ready to use

(3) Revenue Expenditure: Made for the maintenance of asset

(4) Revenue Expenditure: Part of normal operating cost

(5) Capital Expenditure: Used in business for a number of years

(6) Capital Expenditure: Paid for the acquisition of new asset
(7) Capital Expenditure: Paid to make the asset ready to use
(8) Revenue Expenditure: Paid for the running and maintenance of car
(9) Revenue Expenditure: Paid for the maintenance of Building
(10) Revenue Expenditure: Part of normal operating cost

 

Question 2:


From the following information, determine Gross Profit for the year ended 31st March, 2022:

 

 `

 

 `

Opening Stock (1st April, 2018)

25,000

Goods purchased during the year

1,40,000

Freight and Packing

10,000

Closing Stock (31st March, 2022)

30,000

Sales

1,90,000

Packing Expenses on Sales

6,000

Answer:


Gross Profit

=

 Sales + Closing Stock – (Opening Stock + Freight and Packing + Goods Purchased)

 

=

1,90,000 + 30,000 – (25,000 + 10,000 + 1,40,000)

 

=

2,20,000 – 1,75,000 =  `45,000

 

Alternatively,

Trading Account

for the year ended March 31, 2022

Dr.

 

Cr.

Particulars

 ( `)

Particulars

 ( `)

Opening Stock

25,000

Sales

1,90,000

Purchases

1,40,000

Closing Stock

30,000

Freight and Packing

10,000

 

 

Gross Profit (Balancing Figure)

45,000

 

 

 

2,20,000

 

2,20,000

 

 

 

 

Note: Packing Expenses (Rs 6,000) on Sales is an Indirect Expense, therefore it is not considered to compute the amount of Gross Profit.

 

 Question 3:


Prepare Trading Account from the transactions givne below:
 

 

 `

 

 `

Opening Stock

23,000

Purchases Return

2,400

Purchases

29,000

Closing Stock

47,700

Sales Return

500

Carriage Inwards

100

Sales

25,400

Depreciation

2,000


Also pass the Journal entries.

Answer:


Trading Account

Dr.

 

Cr.

Particulars

 (Rs)

Particulars

 (Rs)

Opening Stock

23,000

Sales

25,400

 

Purchases

29,000

 

Less: Sales Return

(500)

24,900

Less: Purchases Return

(2,400)

26,600

Closing Stock

47,700

Carriage Inwards

100

 

 

Gross Profit (Balancing Figure)

22,900

 

 

 

72,600

 

72,600

 

 

 

 

 

 

 

 

 

 

 

 

Note: Depreciation is an Indirect Expense, therefore it is not shown in the Trading Account.
 

Journal

Date

Particulars

L.F.

Debit

 (Rs)

Credit

 (Rs)

 

 

 

 

 

 

 

Trading A/c

Dr.

 

52,600

 

 

To Opening Stock A/c

 

 

 

23,000

 

To Purchases A/c

 

 

 

29,000

 

To Carriage Inwards A/c

 

 

 

100

 

To Sales Return A/c

 

 

 

500

 

(Transfer of balances to the debit side of Trading A/c)

 

 

 

 

 

 

 

 

 

 

 

Sales A/c

Dr.

 

25,400

 

 

Purchase Return A/c

Dr.

 

2,400

 

 

To Trading A/c

 

 

 

27,800

 

(Transfer of balances to the credit side of Trading A/c)

 

 

 

 

 

 

 

 

 

 

 

Closing Stock A/c

Dr.

 

47,700

 

 

To Trading A/c

 

 

 

47,700

 

(Recording of Closing Stock)

 

 

 

 

 

 

 

 

 

 

 

Trading A/c

Dr.

 

22,900

 

 

To Profit & Loss A/c

 

 

 

22,900

 

(Transfer of gross profit to the Profit & Loss A/c)

 

 

 

 

 

Question 4:


Calculate Closing Stock from the following details:

 

 `

 

 `

Opening Stock

20,000

Purchases

70,000

Cash Sales

60,000

Credit Sales

40,000

 

 

Rate of Gross Profit on Cost 331/3%

 

Answer:


Calculation of amount of Closing StockGross Profit=331/3% on cost =1/3rd on cost

Gross Profit on sales =14th on salesAnd, Sales = Cash Sales + Credit Sales 

        = 60,000+40,000 = Rs 1,00,000

So, Gross Profit =1,00,000×14

=Rs 25,000

Cost of Goods Sold=Sales−Gross Profit          

=1,00,000−25,000=Rs 75,000

Cost of Goods Sold=Opening Stock+Purchases+Direct Expenses−Closing Stock

75,000=20,000+70,000+0−Closing StockClosing Stock

=Rs 15,000

 

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