Financial Statements - II

Rahul’s trial balance provide you the following information: Debtors ₹ 80,000 Bad debts ₹ 2,000 Provision for doubtful debts ₹ 4,000 It is desired to maintain a provision for bad debts of ₹ 1,000 State the amount to be debited/credited in profit and loss account:

If the rent of one month is still to be paid the adjustment entry will be:

If the rent received in advance ₹ 2,000. The adjustment entry will be:

If the opening capital is ₹ 50,000 as on April 01, 2016 and additional capital introduced ₹ 10,000 on January 01, 2017. Interest charge on capital 10% p.a. The amount of interest on capital shown in profit and loss account as on March 31, 2017 will be:

If the insurance premium paid ₹ 1,000 and pre-paid insurance ₹ 300. The amount of insurance premium shown in profit and loss account will be:

From the following Trial Balance of M/s Karan on March 31, 2017, prepare a Trading and Profit and Loss Account and a Balance Sheet: [Trial Balance Data: Creditors/Debtors Dr 2,05,000/Cr 96,000; Bills Payable/Bills Receivables Dr 10,000/Cr 9,600; 15% Loan Cr 50,000; Sales/Purchases Dr 2,80,000/Cr 12,00,000; Discount Dr 4,000/Cr 3,000; Bad Debt Recovered/Bad Debt Dr 5,000/Cr 14,000; Interest on Investments Cr 6,000; Interest on Loan Dr 8,000/Cr 4,000; Vehicles Dr 6,50,000; Stock Dr 3,00,000; 10% Investments Dr 1,80,000; Cash in hand Dr 20,000; Cash at bank Dr 37,000] (I) Additional Information: (a) The cost of closing stock was ₹ 50,000 but the market value was ₹ 40,000. (b) Rent is due but not yet paid for March 2017 ₹ 500. (c) Insurance carried forward ₹ 900. (d) 1/3 of the commission received is in respect of work to be done in next year and commission paid represents only 1/4 of the actual commission to be paid during the year. (e) Vehicles were valued at 90% of the book value. (f) The Horse worth ₹ 30,000 was donated to a charitable organization. (II) Name the accounting concept followed while treating the adjustment (a), (b) and (d) above?

The following balances were extracted from the books of Avika Enterprises on 31st March 2017. [Trial Balance Data: Capital Cr 24,500; Drawings Dr 2,000; General Expenses Dr 2,500; Buildings Dr 21,000; Machinery Dr 9,340; Stock (1.4.2016) Dr 16,200; Power Dr 2,240; Taxes and Insurance Dr 1,315; Wages Dr 7,200; Debtors and Creditors Dr 6,280/Cr 2,500; Charity Dr 105; Bad debts Dr 550; Bank Overdraft Cr 11,180; Sales and Purchases Dr 13,500/Cr 65,360; Stock (31.03.2017) Dr 23,500; Motor Vehicles Dr 2,000; Motor Vehicle expenses Dr 500; Provision for doubtful debts Cr 900; Commission Cr 1,320; Trade expenses Dr 1,280; Bills payable Cr 3,850; Cash Dr 100] You are required to: (i) Prepare final accounts for the year ended March 31, 2017 after giving effect to the following adjustments: (a) 1/5th of General expenses and Taxes & Insurance to be charged to factory and the balance to the office. (b) Write off a further Bad debts of ₹ 160 and maintain the provision for doubtful debts at 5% and create a provision for discount on Debtors at 10%. (c) Depreciate Machinery at 10% and Motor Vehicles by ₹ 240. (d) Provide ₹ 700 for interest on Bank Overdraft to be paid. (e) ₹ 50 is to be carried forward to next year out of Insurance. (f) Provide for Manager’s Commission at 10% on the Net Profit after charging such commission. (ii) Name the accounting concepts which are followed while treating the adjustment (a), (b) and (d) above?

The following balances were extracted from the books of Anushka Enterprises on March 31, 2017. [Trial Balance Data: Creditors 2,00,000; Loan from SBI 2,00,000; Sales 12,30,000; Debtors 2,00,000; Dividend Received on Shares 20,000; Bad Debt 2,000; Bad Debt Recovered 12,000; Bills Receivables 1,50,000; Interest on Loan 50,000; Goodwill 4,00,000; Purchases 2,10,000; Stock (1.4.2016) 1,00,000; Cash at Bank 3,00,000; Factory Repairs 40,000; Capital 7,24,000; Audit Fees 6,000; Petty Expenses 4,000; Salary 70,000; Life Insurance Premium 15,000; Premises 4,00,000; Insurance 25,000; Sales Returns 12,000; Employees Provident Fund 60,000; Provision for Doubtful Debts 75,000; Delivery Expenses 8,000; Dock Charges (Outward) 6,000; Packing Charges 17,000; Advance Salary 30,000; Warehouse Insurance 13,000; Loss in Exchange 9,000; Bank Charges 5,000; Bonus from Suppliers 3,45,000; Purchases Returns 10,000; Machinery 8,00,000; Discounting of Bills of Exchange 1,000] You are required to: (i) Prepare final accounts for the year ended March 31, 2017 after giving effect to the following adjustments: (a) Insurance is due but not yet paid for 31 March 2017 ₹ 500. (b) Salary Unexpired ₹ 900. (c) Write off a further Bad debts ₹ 2,000 and maintain the provision for bad debts at 5% on Debtors. (d) Machinery is to be valued at 90% less than the book value. (e) Goods kept in warehouse worth ₹ 10,0000 were used for staff welfare. (f) Half of the Bills Receivable were irrecoverable. (h) Closing Stock is ₹ 40,000 (ii) Name the accounting concepts which will be followed while treating the adjustment (a), (b), (c) and (d) above?

The following balances were extracted from the books of Ankita Enterprises on March 31, 2017. [Trial Balance Data: Capital Cr 1,92,680; Cash Dr/Cr 60; Purchases Dr 17,980; Sales Cr 22,120; Bank Dr 1,770; Plant Dr 450; Freehold Land Dr 3,000; Heating and Lighting Dr 130; Bills Receivables Cr 1,650; Return Inwards Cr 60; Salaries Dr 2,150; Creditors Cr 63,780; Debtors Dr 11,400; Stock (as on 01.04.2016) Dr 6,000; Printing Dr 450; Bills Payable Dr 3,750; Taxes Dr 380; Discount Received Cr 890; Commission (Dr.) Cr 800; Trucks Dr 25,000; Furniture Cr 12,000; Wages Dr 2,00,000; Drawings Cr 340; Returns Outward Dr 400] You are required to: (i) Redraft the Trial Balance. (ii) Prepare final accounts for the year ended March 31, 2017 after giving effect to the following adjustments: (a) Taxes are paid for 10 months only. (b) Creditors worth ₹ 780 have accepted bills payables. (c) Depreciate furniture by 10%. (d) Trucks were depreciated to the extent of ₹ 21,000. (e) Wages includes ₹ 2,000 for the making of Furniture. (f) Closing Stock is of ₹ 20,000. (g) Provide for Manager’s Commission at 10% on the Net Profit before charging such commission. (h) Land was acquired on 1st April, 2016 by paying a claim at 50% less than market value to the owner. (iii) Name the accounting principles which will be followed while treating the adjustment (a), (c) and (e) above?

Why is it necessary to record the adjusting entries in the preparation of final accounts?

What is meant by closing stock? Show its treatment in final accounts?

State the meaning of: (a) Outstanding expenses (b) Prepaid expenses (c) Income received in advance (d) Accrued income

Give the Performa of income statement and balance in vertical form.

Why is it necessary to create a provision for doubtful debts at the time of preparation of final accounts?

What adjusting entries would you record for the following: (a) Depreciation (b) Discount on debtors (c) Interest on capital (d) Manager’s commission

What is meant by provision for discount on debtors?

Give the journal entries for the following adjustments: (a) Outstanding salary ₹ 3,500. (b) Rent unpaid for one month at ₹ 6,000 per annum. (c) Insurance prepaid for a quarter at ₹ 16,000 per annum. (d) Purchase of furniture costing ₹ 7,000 entered in the purchases book.

What are adjusting entries? Why are they necessary for preparing final accounts?

What is meant by provision for doubtful debts? How are the relevant accounts prepared and what journal entries are recorded in final accounts? How is the amount for provision for doubtful debts calculated?

Show the treatment of prepaid expenses depreciation, closing stock at the time of preparation of final accounts when: (a) When given inside the trial balance? (b) When given outside the trial balance?