Samacheer Kalvi 11th Accountancy Guide Chapter 13 Final Accounts of Sole Proprietors – II

Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Accountancy Guide Pdf Chapter 13 Final Accounts of Sole Proprietors – II Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 11th Accountancy Solutions Chapter 13 Final Accounts of Sole Proprietors – II

11th Accountancy Guide Final Accounts of Sole Proprietors – II Text Book Back Questions and Answers

I. Multiple Choice Questions

Choose the correct answer.

Question 1.
A prepayment of insurance premium will appear in __________.
a) The trading account on the debit side
b) The profit and loss account on the credit side
c) The balance sheet on the assets side
d) The balance sheet on the liabilities side
Answer:
c) The balance sheet on the assets side

Question 2.
Net profit is __________.
a) Debited to capital account
b) Credited to capital account
c) Debited to drawings account
d) Credited to drawings account
Answer:
b) Credited to capital account

Question 3.
Closing stock is valued at __________.
a) Cost price
b) Market price
c) Cost price or market price whichever is higher
d) Cost price or net realisable value whichever is lower
Answer:
d) Cost price or net realisable value whichever is lower

Question 4.
Accrued interest on investment will be shown __________.
a) On the credit side of profit and loss account
b) On the assets side of balance sheet
c) Both (a) and (b)
d) None of these
Answer:
c) Both (a) and (b)

Question 5.
If there is no existing provision for doubtful debts, provision created for doubtful debts is __________.
a) Debited to bad debts account
b) Debited to sundry debtors account
c) Credited to bad debts account
d) Debited to profit and loss account
Answer:
d) Debited to profit and loss account

II. Very Short Answer Questions

Question 1.
What are adjusting entries?
Answer:
Adjusting entries are the journal entries made at the end of the accounting period to account for items which are omitted in the trial balance and to make adjustments for outstanding and prepaid expenses and revenues accrued and received in advance.

Question 2.
What is an outstanding expense?
Answer:

1. Expenses which have been incurred in the accounting period but not paid till the end of the accounting period are called outstanding expenses.
2. In other words, if certain benefits or services are received during the year but payment is not made for the services received and utilized, these are termed outstanding expenses.
3. An outstanding expense account is a representative personal account and an expense account is a nominal account.

Question 3.
What is a prepaid expense?
Answer:

1. Prepaid expenses refer to any expense or portion of expense paid in the current accounting year but the benefit of services of which will be received in the next accounting period.
2. They are also called unexpired expenses.
3. Though these expenses are paid in the accounting period, they are not incurred during the accounting period.
4. A prepaid expense account is a representative personal account.
5. An expense account is a nominal account.

Question 4.
What are accrued incomes?
Answer:

1. Accrued income is income or portion of income which has been earned during the current accounting year but not received till the end of that accounting year.
2. It generally happens in the case of the amount to be received on account of commission, interest, dividend, etc.

Question 5.
What is the provision for discounts on debtors?
Answer:

1. A cash discount is allowed by the suppliers to customers for prompt payment of the amount due either on or before the due date.
2. Provision for discount on debtors is made on the basis of past experience at an estimated rate on sundry debtors.

III. Short Answer Questions

Question 1.
What is the need for preparing final accounts?
Answer:

1. To record omissions in trial balance such as closing stock, interest on capital, interest on drawings, etc.
2. To bring into account outstanding and prepaid expenses.
3. To bring into account income accrued and received in advance.
4. To create reserves and provisions.

Question 2.
What is meant by provision for doubtful debts? Why is it created?
Answer:
Provision for bad and doubtful debts refers to the amount set aside as a charge against profit to meet any loss arising due to bad debt in the future. The amount of doubtful debts is calculated on the basis of some percentage on debtors at the end of the accounting period after deducting further bad debts (if any). A provision for doubtful debts is created and is charged to the profit and loss account.

Question 3.
Explain how dosing stock is treated in final accounts.
Answer:
The unsold goods in the business at the end of the accounting period are termed as closing stock. As per AS-2 (Revised), the stock is valued at cost price or net realizable value, whichever is lower.
Adjusting entry

Presentation in final accounts

Question 4.
Give the adjusting entries for interest on capital and interest on drawings.
Answer:
Adjusting entry

Interest on Drawings

Question 5.
Explain the accounting treatment of bad debts, provision for doubtful debts, and provision for discount on debtors.
Answer:
Bad debts: In other words, debts which cannot be recovered or irrecoverable debts are called bad debts. It is a loss for the business and should be charged against profit.

Provision for bad and doubtful debts:

• Provision for bad and doubtful debts refers to the amount set aside as a charge against profit to meet any loss arising due to bad debt in the future.
• At the end of the accounting period, there may be certain debts which are doubtful, i.e., the amount to be received from debtors may or may not be received.
• The reason may be the incapacity to pay the amount of deceit.
• In general, based on past experience, the amount of doubtful debts is calculated on the basis of some percentage on debtors at the end of the accounting period after deducting further bad debts (if any).
• Since the amount of loss is impossible to ascertain until it is proved bad, doubtful debts are charged against profit and loss accounts in the form of provision.
• A provision for doubtful debts is created and is charged to the profit and loss account. When bad debts occur, it is transferred to provision for doubtful debts account and not to profit and loss account.

Provision for discount on debtors:

• A cash discount is allowed by the suppliers to customers for prompt payment of the amount due either on or before the due date.
• A provision created on sundry debtors for allowing such discount is called a provision for discount on debtors.

IV. Exercises

Question 1.
Pass adjusting entries for the following
a) The closing stock was valued at ₹ 5,000
b) Outstanding salaries ₹ 150
c) Insurance prepaid ₹ 450
d) ₹ 20,000 was received in advance for commission.
e) Accrued interest on investments is ₹ 1,000.
Solution::
Adjusting Entries

Question 2.
For the following adjustments, pass adjusting entries
a) Outstanding wages ₹ 5,000.
b) Depreciate machinery by ₹ 1,000.
c) Interest on capital @ 5% (Capital ₹ 20,000)
d) Interest on drawings ₹ 50
e) Write off bad debts ₹ 500
Solution:
Adjusting Entries

Question 3.
On preparing final accounts of Suresh, bad debt account has a balance of ₹ 800 and sundry debtors account has a balance of ₹ 18,000 of which ₹ 1,200 Is to be written off as further bad debts. Pass adjusting entry for bad debts. And also show how it would appear in profit and loss account and balance sheet.
Solution:
Adjusting Entries

Profit & loss account for the year ended

Balance sheet

Question 4.
The trial balance on March 31, 2016, shows the following:
Sundry debtors ₹ 30,000; Bad debts ₹ 1,200
It is found that 3% of sundry debtors is doubtful of recovery and is to be provided for. Pass journal entry for the amount of provision and also show how it would appear in the profit and loss account and balance sheet.
Solution:
Adjusting Entries

Profit & loss account for the year ended 31^st March 2016

Balance sheet as of 31^st March 2016

Question 5.
The trial balance of a trader on 31^st December 2016 shows sundry debtors as ₹ 50,000.
Adjustments:
a) Write off ₹ 1,000 as bad debts
b) Provide 5% for doubtful debts
c) Provide 2% discount on debtors
Show how these items will appear in the profit and loss A/c and balance sheet of the trader.
Solution:
Profits loss account for the year ended 31^st December 2016

Balance Sheet as of 31^st December 2016

Question 6.
On 1st January 2016, the provision for doubtful debts accounts had a balance of ₹ 3,000. On December 31, 2016, sundry debtors amounted to ₹ 80,000. During the year, bad debts to be written off were ₹ 2,000. A provision for 5% was required for next year. Pass journal entries and show how these items would appear in the final accounts.
Solution:
Adjusting Entries

Profit & loss account for the year ended 31^st December 2016

Balance sheet as of 31^st December 2016

Question 7.
The following are the extracts from the trial balance.
Sundry debtors ₹ 30,000; Bad debts ₹ 5,000
Additional information
a) Write off further bad debts ₹ 3,000.
b) Create 10% provision for bad and doubtful debts.
You are required to pass necessary adjusting entries and show how these items will appear in profit and loss account and balance sheet.
Adjusting Entries

Profit and Loss A/c

Balance sheet

Question 8.
The following are the extracts from the trial balance

Additional information
a) Additional bad debts ₹ 3,000.
b) Keep a provision for bad and doubtful debts @ 10% on sundry debtors.
You are required to pass necessary adjusting entries and show how these items will appear in the profit and loss account and balance sheet.
Solution:
Adjusting Entries

Profit and Loss A/c

Balance sheet

Question 9.
The accounts of Lakshmi traders showed the following balance on 31^st March 2016.
Sundry debtors ₹ 60,000;
Bad debts ₹ 2,000
Provision for doubtful debts ₹ 4,200
At the time of preparation of final accounts on 31^st March, it was found that out of sundry debtors, ₹ 1,000 will be irrecoverable. It was decided to create a provision of 2% on debtors to meet any future possible bad debts.
Pass necessary journal entries and show how these items would appear in the final accounts.
Solution:
Adjusting Entries

Profit and Loss A/c

Balance sheet as on 31^st Mar 2016

Question 10.
The following are the extracts from the trial balance.

Additional information:
a) Create a provision for doubtful debts @ 10% on sundry debtors.
b) Create a provision for discount on debtors @ 5% on sundry debtors.
You are required to pass necessary adjusting entries and show how these items will appear in the final accounts.
Solution:
Adjusting Entries

Profit and Loss A/c

Balance sheet

Question 11.
Following are the extracts from the trial balance.

Additional information:
a) Additional bad debts ₹ 1,000
b) Create a provision for doubtful debts @ 5% on sundry debtors,
c) Create a provision for discount on debtors @ 2% on sundry debtors.
You are required to pass necessary journal entries and show how these items will appear in the final accounts.
Solution:
Adjusting Entries

Profit and Loss A/c

Balance sheet as on 31^st December 2016

Question 12.
The following are the extracts from the trial balance.

You are required to show how these items will appear in the profit and ioss account and balance sheet.
Solution:
Profit and Loss A/c
Balance sheet

Question 13.
Prepare trading account of Archana for the year ending 31^st December, 2016 from the following information

Adjustments:
a) Closing stock ₹ 1,00,000
b) Wages outstanding ₹ 12,000
c) Freight inwards paid in advance ₹ 5,000
Solution:
Trading A/c for the year ending 31^st Dec 2016

Question 14.
Prepare profit and loss account of Manoj for the year ending on 31^st March, 2016

Adjustments:
i) Salary outstanding ₹ 400
ii) Rent paid in advance ₹ 50
iii) Commission receivable ₹ 100
Solution:
Profit and loss A/c for the year ending 31^st Mar 2016

Question 15.
From the trial balance of Sumathi and the adjustments prepare the trading and profit and loss account for the year ended 31^st March 2016, and a balance sheet as on that date.

Adjustments:
a) Six months interest on the loan is outstanding.
b) Two months rent is due from the tenant, the monthly rent being ₹ 25.
c) Salary for the month of March 2016, ₹ 75 is unpaid.
d) Stock in hand on March 31, 2016, was valued at ₹ 1,030.
Solution:
Profit and loss A/c of Sumathi as 31^st Dec 2016

Balance sheet as on 31^st Dec 2016

Question 16.
The following trial balance was extracted from the books of Arun Traders as of 31^st March 2018.

Prepare trading and profit and loss account for the year ending 31^st March 2018 and balance sheet as of that date after considering the following:
a) Depreciate Plant and machinery @ 20%
b) Wages outstanding amounts to ₹ 750.
c) Half of the repairs and maintenance paid is for the next year.
d) Closing stock was valued at ₹ 15,000.
Solution:
Trading and loss account for the year ended 31^st March 2018

Balance sheet for the year ending 31^st March 2016.

Question 17.
The following is the trial balance of Babu as of 31^st December 2016.

Prepare trading and profit and loss accounts for the year ended 31^st December 2016 and a balance sheet as on that date after the following adjustments.
a) Salaries outstanding ₹ 500
b) Interest on investments receivable at 10%.
c) Provision required for bad debts is 5%.
d) Closing stock is valued at ₹ 9,900.
Solution:
Profit and loss A/c

Balance sheet for the year ended 31^st December 2016.

Question 18.
From the following trial balance of Ramesh as of 31^st March 2017, prepare the trading and profit and loss account and the balance sheet as of that date.

a) Closing stock was valued at ₹ 35,000
b) Unexpired advertising ₹ 250
c) Provision for bad and doubtful debts is to be increased to ₹ 3,000
d) Provide 2% for discount on debtors :
Solution:
Trading profit and loss account of Mrs. Ramesh for the year ended 31^st March, 2017

Balance sheet for the year ended 31^st March 2016

Question 19.
Following are the ledger balances of Devi as on 31^st December, 20:6

Prepare trading and profit and loss accounts for the year ended 31^st December 2016 and balance sheet as on that date.
a) Stock on 31^st December 2016 ₹ 5,800.
b) Write off bad debts ₹ 500.
c) Make a provision for bad debts @ 5%.
d) Provide for discount on debtors @ 2%.
Solution:
Trading and profit and loss account of Mrs. Devi for the year ended 31^st Dec 2016

The balance sheet of Mrs. Devi for the year ended 31^st December 2016

Question 20.
From the following trial balance of Mohan for the year ended 31^st March 2017 and additional information, prepare trading and profit and loss account and balance sheet.

Additional information:
a) Closing stock is valued at ₹ 15,500
b) Write off t 500 as bad debts and create a provision for bad debts @ 10% on debtors.
c) Depreciation @ 10% required
Solution:
Trading and profit and loss account of Mr. Mohan for the year ended 31^st March 2017

Balance sheet for the year ended 31^st March 2017

Question 21.
From the following t I balance of Subramaniam, prepare his trading and profit and loss account and balance sheet as on 31^st December, 2016.

Take into account the following adjustments:
a) Charge interest on drawings at 8%.
b) Outstanding salaries ₹ 3,000
c) Closing stock was valued at ₹ 48,000
d) Provide for 5% interest on capital.
Solution:
Trading and profit and loss A/c of Mrs. Subramanian for the year ended 31^st Dec.2016

Balance sheet for the ended 31^st December 2016.

Question 22.
Prepare trading and profit and loss account and balance sheet from the following trial balance of Madan as of 31^st March, 2018

Adjustments
a) The closing stock was ₹ 80,000
b) Provide depreciation on plant and machinery @ 20%
c) Write off ₹ 800 as further bad debts
d) Provide the doubtful debts @ 5% on sundry debtors
Solution:
Trading profit and loss account of Mrs.Madan for the year ended 31^st March 2018.

Balance sheet for the year ended 31^st March 2018.

Question 23.
From the following information prepare trading and profit and loss account and balance sheet of Kumar for the year ending 31^st December 2017.

Adjustments
a) The closing stock on 31^st December 2017 was valued at ₹ 3,900.
b) Carriage inwards prepaid ₹ 250
c) Rent received in advance ₹ 100
d) Manager is entitled to receive commission @ 5% of net profit after providing such commission
Solution:
Trading profit and loss a/c of Mrs.Kumar for the ended 31^st December 2017

Balance sheet for the year ended 31^st December 2017.

Question 24.
From the following information, prepare a trading and profit and loss account and balance sheet in the books of Sangeetha for the year ending 31^st March 2018.

Adjustments
a) Stock on 31^st March 2018 ₹ 14,200
b) Income tax of Sangeetha paid ₹ 800
c) Charge interest on drawings @12% p.a.
d) Provide managerial remuneration @ 10% of net profit before charging such commission.
Solution:
Trading and loss A/c of Mrs. Sangeetha for the ended 31^st March 2018

Balance sheet for the year ended 31^st March 2018.

11th Accountancy Guide Final Accounts of Sole Proprietors – II Additional Important Questions and Answers

I. Choose the correct answer.

Question 1.
If closing stock is already adjusted, adjusted purchase account and ………………. stock will appear in trial balance.
(a) Opening
(b) Closing
(c) Average
(d) None of these
Answer:
(b) Closing

Question 2.
The unsold goods in the business at the end of the accounting period are termed as __________.
a) Opening stock
b) Closing stock
c) Average stock
d) None of these
Answer:
b) Closing stock

Question 3.
When bad debts already appear in the trial balance, it is taken only to the debit side of ………………. account.
(a) Profit and Loss
(b) Balance sheet
(c) Asset side
(d) None of these
Answer:
(a) Profit and Loss

Question 4.
Unexpired expenses are also called as __________.
a) Outstanding expenses
b) Prepaid expenses
c) Accrued income
d) Income received in advance
Answer:
b) Prepaid expenses

Question 5.
All the items given in the adjustment will appear at __________ in the final account.
a) Four place
b) Three place
c) Two place
d) One place.
Answer:
c) Two place

Question 6.
The Trial balance shows bank loan ₹ 5,00,000 at 12% on 01-01-2017. Interest paid ₹ 40,000. Interest outstanding is ₹ __________ as on 31-12-2018.
a) 40,000
b) 5,40,000
c) 4,60,000
d) 20,000
Answer:
d) 20,000

Question 7.
As per Trial balance, capital as on 31.03,2018 is ₹ 5,00,000. Provide 6% Interest on capital ₹ __________.
a) 10,000
b) 20,000
c) 30,000
d) 40,000
Answer:
c) 30,000

Question 8.
Trial balance as of 31.12.2017. Shows sundry debtors t 55,000. As per given adjustments, if ₹ 5,000 is to be written off as bad debts, the provision for bad and doubtful debts at 2% will be ₹ __________.
a) 1,000
b) 1,100
c) 1,200
d) 1,300
Answer:
a) 1,000

Question 9.
The Trial balance shows Investment ₹ 3,00,000 at 10% on 61-01-2017. Income received ₹ 20,000. Accrued Interest on investment, yet to be received is ₹ __________ as on 31-12-2018.
a) 30,000
b) 10,000
c) 50,000
d) 25,000
Answer:
b) 10,000

Question 10.
__________ contributed by proprietor is a liability to the business.
a) Drawings
b) Profit
c) Loss
d) Capita
Answer:
d) Capita

Question 11.
__________ represents the number of goods withdrawn by the proprietor front the business for his personal use.
a) Drawings
b) Purchases
c) Sales
d) Capital
Answer:
a) Drawings

Question 12.
The decrease in book value of fixed assets due to usage or passage of time is called __________.
a) Bad debts
b) Depreciation
c) Closing stock
d) Capital
Answer:
b) Depreciation

Question 13.
Debts Which cannot be recovered or irrecoverable debts are called __________.
a) Bad debts
b) Depreciation
c) Closing stock
d) Capita
Answer:
a) Bad debts

Question 14.
Prepaid insurance is __________.
a) an asset
b) a liability
c) an income
d) an expense
Answer:
a) an asset

Question 15.
Wages outstanding is __________.
a) an asset
b) a liability
c) an income
d) an expense
Answer:
b) a liability

II. Short Answer Questions

Question 1.
What is closing stock?
Answer:
The unsold goods in the business at the end of the accounting period are termed dosing stock. As per AS-2 (Revised), the stock is valued at cost price or net realizable value, whichever is the tower.

Question 2.
What is Income received in advance?
Answer:
Income received in advance refers to income or portion of income received in an accounting year which is not earned in the accounting period. It is also known as unearned income or unexpired income. Though the amount is received in the current accounting year, the benefit is yet to be offered to the concerned person in the next accounting year.

Question 3.
What is Interest in the capital?
Answer:
According to the separate entity concept, business and proprietor are two separate entities. Capital contributed by the proprietor is a liability to the business. Hence, interest may be provided on capita contributed by the proprietor. It is treated as a business expense. The purpose is to know the true profit of the business.

Question 4.
What is Interest in drawings?
Answer:
Drawings represent the number of goods withdrawn by the proprietor from the business for his personal use. As business is separate from owner, interest charged on drawings, if any, is to be treated as business income.

Question 5.
What is Interest on a loan?
Answer:
Business entities may have loans borrowed from banks and other financial institutions, private money lenders, etc. If any interest is payable on the loan and not yet provided at the time of preparation of the trial balance, it is necessary to provide for outstanding interest on the loan. It is an outstanding expense.

Question 6.
What is Interest in investment?
Answer:
Business entitles may have investments in outside securities carrying a specified rate of interest. If interest is due but not yet received, adjustment is to be made for the same in the accounting records before preparation of final accounts. Interest receivable on any Investments in the form of shares, deposits, etc made outside the business is called accrued interest It is an accrued income.

Question 7.
What is Depreciation?
Answer:
The decrease in book value of fixed assets due to usage or passage of time is called depreciation. It is a loss to the business. Therefore, it must be written off from the value of asset. Generally, a certain percentage on the value of the asset is calculated as the amount of depreciation.

Question 8.
What is bad debt?
Answer:
In other words, debts which cannot be recovered or irrecoverable debts are called bad debts. It is a loss for the business and should be charged against profit.

Question 9.
Write notes on Provision for bad and doubtful debts?
Answer:
1. Provision for bad and doubtful debts refers to the amount set aside as a charge against profit to meet any loss arising due to bad debt in the future. At the end of the accounting period, there may be certain debts which are doubtful, i.e., the amount to be received from debtors may or may not be received.

2. In general, based on past experience, the amount of doubtful debts is calculated on the basis of some percentage on debtors at the end of the accounting period after deducting further bad debts.

Question 10.
Write notes on Provision for discount on creditors?
Answer:
Similar to the cash discount allowed to debtors, the firm may have a chance to receive the cash discount from the creditors for prompt payment. Provision for discount on Creditors is calculated at a certain percentage on Sundry Creditors.

III. Additional Sums

Question 1.
From the following Trial Balance prepare the Trading and Profit and Loss Account for the year ended 31^st December 2017 and a Balance Sheet as of that date

Adjustments
i. Closing Stock ₹ 9,800
ii. Salaries outstanding ₹ 600
iii. Rent paid in advance ₹ 400
iv. Depreciate Machinery at 10%
v. Bad debts written off ₹ 500
Solution:
Trading, Profit, and Loss Account for the year ended 3 .12.2017

Balance Sheet as on 31.12.2017

Question 2.
From the following trial balance of Shri, prepare Trading and Profit and Loss account for the year ended December 31^st, 2017, and a balance sheet as on that date.
Adjustments
1. Stock on 31.12.2017 ₹ 4,900
2. Salaries unpaid ₹ 300
3. Rent paid in advance ₹ 200
4. Insurance prepaid ₹ 90

Solution:
Trading, Profit and loss Account for the year ended 31.12.2017

Balance Sheet as on 31.12.2017

Question 3.
From the following trial balance prepare trading and profit and loss account for the year ended 2016 and balance sheet as on that data

Adjustments
1. Closing Stock ₹ 9,800
2. Salaries Outstanding ₹ 600
3. Rent paid in advance ₹ 400
4. Depreciate Machinery at 10%
5. Bad debts are written off ₹ 500
Solution:
Trading, Profit, and Loss Account for the year ended 31.12.2017

Balance Sheet as on 31.12.2017

Question 4.
Pass necessary adjusting entries for the following adjustments.

Solution:
Adjustment Entries

Question 5.
Pass necessary adjusting entries for the following adjustments.

Solution:
Journal Entries

Question 6.
The Trial balance as of 31^st March 2004 shows the following.
Sundry debtors – 40800
Bad debts are written off – 1400
Adjustment: Written off ₹ 800/- bad debts.
Solution:
Journal Entries

Profit and loss account for the year ending 31^st March 2004

Balance sheet as on 31^st March 2004.

Question 7.
The following items are found in the Trial Balance of Mr. Vivekanandan as of 31^st March 2004.
Sundry debtors – 64000
Bad debts – 1200
Provision for bad and doubtful debts – 2800
Adjustments:
Provide for bad and doubtful debts at 5% on sundry debtors give necessary entries and show how these items will appear in the final accounts.
Solution:
Transfer of bad debts

Adjusting Entry

Profit and Loss account for the period ended 31^st March 2004

Balance sheet as on 31^st March 2004

Question 8.
Following are the balances extracted from the Trial Balance Mr. Mohan as of 31^st March 2002.

Adjustments
Create provision for bad and doubtful debts @ 5% on sundry debtors pass adjusting entry and show how these items will appear final accounts.
Solution:
Adjusting Entry

Profit and loss Account for the Year ending 31^st March 2002

Balance sheet as of 31^st March 2002

Question 9.
Prepare trading account from the following ledger balance presented by P. Sen as on 31^st March 2016

Additional Information
a) Stock on 31^st March 2016, ₹ 20,000
b) Outstanding wages amounted to ₹ 4,000
c) Gas and Fuel paid in advanced ₹ 1000
Solution:
Trading account for the year ended 31^st March 2016

Question 10.
From the following particular presented by Thilak for the year ended 31^st March 2017 Prepare profit and loss A/c

Adjustments
1. Outstanding salaries amounted to ₹ 4,000
2. Rent paid for 11 month
3. Interest due but not received amounted to ₹ 2,000
4. Prepaid insurance amounted to ₹ 2,000
5. Depreciate buildings by 10%
6. Further bad debts amounted to ₹ 3000 and make a provision for bad debts @ 5% on sundry debtors
7. Commission received in advance amounted to ₹ 2,000
Solution:
Profit and loss account for the year ended 31^st Mar 2017

Question 11.
From the following balance as of 31^st December 2017, prepare a profit and loss account

Adjustments
a) Rent accrued by not yet received ₹ 500
b) Fire insurance premium prepaid to the extent of ₹ 1,500
c) Provide manages commission at 10% on profits before charging such commission.
Solution:
Profit and loss account for the year ended 31^st December 2017

Working Note
Manager’s commission = Net profit before charaing commission x \(\frac{\text { Rate of commission }}{100}\)
Net profit = 55,500 – (18,000 + 12,000 + 8,000 + 2,500 + 5,000 ) = ₹ 10,000
Manager’s commission = 10,000 x 10/100 = ₹ 1,000

Question 12.
From the following particulars, prepare the balance sheet of Madhu, for the year ended 31^st March 2018.

Adjustment
a. Outstanding liabilities: Salaries ₹ 10,000, Wages ₹ 20,000, Interest on bank overdraft ₹ 3000 Interest on bank loan ₹ 6,000
b. Provide interest on capital @ 10% P.a
c. Bad debts amounted to ₹ 10,000 and make a provision for bad and doubtful debts 10% on sundry debtors
d. Closing stock amounted to ₹ 1,20,000
e. Depreciate vehicles @10% P.a
Net profit for the year amounted to ₹ 96,000 after considering all the above adjustments.
Solution:
Balance Sheet of Madhu as on 31^st Mar, 2018

Question 13.
The trial balance shows on 31-03-2005 sundry debtors ₹ 56,000
Adjustments
a) Bad debts to be written off ₹ 6,000
b) Provision for bad and doubtful debts by 5%
c) Provision discount on debtors at 2% pass adjusting entries and show how these items will appear in the final accounts.
Solution:
Adjusting Entry

Profit and loss A/c

Balance sheet as on 31-03-2005

Question 14.
The trial balance shows the following as on 31-03-1998
Capital ₹ 5,00,000
Drawings ₹ 50,000
Charge interest on drawings at 5% pass adjusting and transfer entry his will appear in final accounts.
Solution:
Adjusting Entry

Transfer Entry

Balance sheet as on 31, March,1998

Question 15.
The following balance has been extracted from Mrs. Padma as of 31^st March 2002.

Adjustments
1) Closing stock was valued at ₹ 80,000
2) Provide for accrued on investment ₹ 500
3) Commission received in advance ₹ 400
4) A provision for bad and doubtful debts is to be created to the extent of 5% on sundry debtors
5) Sundry creditors is to the created an extent of 2% on sundry creditors
Solution:
Trading and profit loss A/c of Mrs. Padma for the year ended 31^st March 2002

Balance sheet as on Mrs. Padma 31^st March 2002.

Question 16.
The following are the balance extracted from the books of Mrs. Nandhini as 31-03-2002

Adjustments:
1) Closing stock ₹ 40,000
2) Interest on capital 6% to be provided
3) Interest on drawings 5% to be provided
4) Wages yet to be paid ₹ 1,000
5) Rent prepaid ₹ 900
Solution:
Trading, profit loss account of Mrs. Nandhini for the year ended 31^st March 2002

The balance sheet of Mrs. Nandhini as of 31^st March 2002.

Question 17.
From the following trial balance of Thiru. Rehman as of 31^st March 2016, prepare trading profit and loss A/c Balance sheet trading to the adjustments.

Adjustments
a) Stock on 31.3.1995 was ₹ 6,800
b) Salary outstanding ₹ 1,500
c) Insurance prepaid ₹ 150
d) Depreciate machinery @ 10% and patent 20%
e) Create a provision of 2% on debtors bad debts
Solution:
Trading, profit, and loss A/c of Thiru. Rehman for the year ended 31 March 2016

Balance sheet as of Thiru Rahaman 31^st March 2016