Accounting

Illustration 6:
From the following Trail Balance of Mr. Naresh as at 31st December, 2009, you are required to
prepare his Trading Profit & Loss Account for the year ended 31st December 2009 and a Balance
Sheet as at that date after making the necessary adjustments:
Particulars Debit (Rs.) Credit (Rs.)
Capital 160,000
Drawings 16,000
Machinery balance as on
01st Jan 2009 40,000
Additions 1st July 2009 10,000
Stock- 1st Jan 2009 26,000
Purchases & Sales 164,000 240,000
Returns 4,000 2,400
Sundry Debtors & creditors 41,200 20,000
Furniture & Fixtures 10,000
Freight Inward 4,000
Carriage Outward 1,000
Rent, Rates & Taxes 9,200
Printing & Stationery 2,000
Office expenses 800
Postage & Telephone 1,600
Provision for Doubtful Debts 800
Insurance Charges paid 1,400
Salaries & Wages 42,600
Cash at Bank 49,400
Total 423,200 423,200

Adjustments:
1. Stock on 31st December, 2009 was valued at Rs. 29,200 (Market value Rs. 30,000).
Stock A/c Dr. 29,200 (in B/S as Asset)
To Trading A/c 29,200 (in Trading A/c to know correct amt. of COGS)
2. Write off Rs. 2,000 as bad debts.

Bad Debts A/c Dr. 2,000 (Loss

in P & L A/c on Dr. Side)
To Debtors A/c 2,000
2. The provision for doubtful debts is to be maintained at 5% on sundry debtors. Create a provision for
discount on debtors at 2%.
Bad Debts A/c Dr. 1,960 (In P & L A/c)
To Provision for Doubtful Debts A/c 1,960

Discount on Debtors A/c Dr. 745 (In P&L)

To provision for Discount on Debtors (in B/S)

3. Provide for depreciation on Furniture & Fixture at 5% p.a. and on Plant & Machinery at 20% p.a.
Depreciation A/c Dr. 9,500 (In P & L A/c)
To F & F A/c 500 (In B/S)
To P & M A/c 9,000 (In B/S)
 5. Insurance paid is for 14 months.
Prepaid Insurance A/c Dr. 200
To Insurance A/c 200

6. A fire occurred on 25th December 2009in the godown and stock of the value of Rs. 10,000 was destroyed.
It was fully insured and the Insurance Company admitted the claim to the extent of Rs. 8500.
Loss of Goods by Fire A/c Dr. 10,000
To Purchases A/c 10,000

Insurance Co. A/c Dr. 8,500

To Loss of Goods by Fire A/c 8,500

Adjustments are those transactions, usually internal, which are recorded at year end only.
Accountants of small business enterprises leave these transactions for year end as it is easy for him
to remember these transactions which have nothing to do with any external party (like customers,
suppliers, employees, government departments, etc.) Adjustments also include those transactions
which are to be recorded only at the year end like depreciation, provisions for losses and expenses,
or accrued/outstanding items.
Since, no record has been made yet for these transactions, while recording them at year end, for
each of the adjustments, two effects are recorded (double entry system of accounting or dual aspect
concept of accounting). However, instead of journalising these adjustments, their effects are
incorporated directly in final accounts (i.e., in Trading and Profit & Loss A/c and in Balance Sheet).
The two effects may go to –
1) Trading A/c, or
2) Profit & Loss A/c, or
3) Balance Sheet, or
4) One in Trading and other in P & L A/c, or
5) One in Trading and other in Balance Sheet, or
6) One in P & L A/c and other in Balance Sheet.
Prepaid Insurance A/c Dr. 200
To Insurance A/c 200

Particulars ₹ Particulars ₹
To Opening Stock 26,000 By Sales 2,40,000
To Purchases 1,64,000 Less : Sales Returns (4,000) 2,36,000
Less : Purchase By Closing Stock 29,200
Returns (2,400)
1,61,600
Less : Loss by Fire (10,000) 1,51,600
To Freight Inward 4,000
To Gross Profit c/d 83,600
2,65,200 1,81,600 2,65,200
To Bad Debts (TB) BY Gross Profit b/d 83,600
Add : Further Bad
Debts 2,000
Add : Provision for
DD as at 31/03/2009 1,960
3,960
Less : Provision for
DD as at 31/03/2008 (800) 3,160
 To Discount on Debtors 745
To Insurance 1,400
Less : Prepaid Insurance 1,200
(200)

To Loss by Fire 10,000 1,500

Less : Insurance Claim
(8,500)

To Depreciation : 9,500
On F & F 500 1,000
On P & M 9,000 9,200
To Carriage Outward 2,000
To Rent, Rates & Taxes 800
To Printing & Stationery 1,600
To Office Exps. 42,600
To Postage & Telephone
To Salaries & Wages 10,295
To Net Profit
transferred to Capital A/c
83,600 83,600

Balance Sheet
Particulars ₹ Particulars ₹
Capital 1,60,000 Debtors 41,200
Less : Drawings (16,000) Less : Bad Debts (2,000)
Add : Net Profit 10,295 1,54,295 39,200
Creditors 20,000 Less : PFDD (1,960)
37,240
Less : Provision for
Discount on Debtors (745) 36,495
Prepaid Insurance 200
Insurance Co. 8,500
Machinery
(40,000 + 10,000) 50,000
Less : Dep. (9,000) 41,000

F&F 10,000
Less : Dep. (500) 9,500
Closing Stock 29,200
Cash at Bank 49,400
1,74,295 1,74,295

1. Loan bears interest @12% p.a. The loan was taken on 1st June, 2021. One installment of Rs.1,000 (excludin
interest) was repaid and recorded on 1st December, 2021.
2. Cash received from a customer Rs. 10,000 on 31 stMarch, 2022 as Security Deposit has been embezzled by a
employee. There was no insurance cover taken to cover loss due to employee theft.
3. Investments include shares of X Ltd. purchased for Rs. 5,000 and it was decided to write off this investment a
the company is under liquidation.
4. A fire occurred on 23rd March, 2022 and goods costing Rs. 10,000(selling price Rs. 15,000) were destroyed
 The insurance company accepted claim for 60% only on 31 st March 2022 and paid the claim money on 10
April, 2022.

Illustration 6:
From the following Trail Balance of Mr. Naresh as at 31st December, 2009, you are required to prepare his Tradin
Profit & Loss Account for the year ended 31st December 2009 and a Balance Sheet as at that date after making th
necessary adjustments:
Particulars Debit (Rs.) Credit (Rs.)
Capital 160,000
Drawings 16,000
Machinery balance as on
01st Jan 2009 40,000
Additions 1st July 2009 10,000
Stock- 1st Jan 2009 26,000
Purchases & Sales 164,000 240,000
Returns 4,000 2,400
Sundry Debtors & creditors 41,200 20,000
Furniture & Fixtures 10,000
Freight Inward 4,000
Carriage Outward 1,000
Rent, Rates & Taxes 9,200
Printing & Stationery 2,000
Office expenses 800
Postage & Telephone 1,600
Provision for Doubtful Debts 800
Insurance Charges paid 1,400
Salaries & Wages 42,600
Cash at Bank 49,400
Total 423,200 423,200

Adjustments:
1. Stock on 31st December, 2009 was valued at Rs. 29,200 (Market value Rs. 30,000).
2. Write off Rs. 2,000 as bad debts.

3. The provision for doubtful debts is to be maintained at 5% on sundry debtors. Create a provision for
discount on debtors at 2%.
4. Provide for depreciation on Furniture & Fixture at 5% p.a. and on Plant & Machinery at 20% p.a.
5. Insurance paid is for 14 months.
6. A fire occurred on 25th December 2009in the godown and stock of the value of Rs. 10,000 was destroyed.
It was fully insured and the Insurance Company admitted the claim to the extent of Rs. 8500.

Illustration 7:
From the following Trial Balance of Alpha Enterprises, prepare Trading and Profit and Loss Account
for the year ended 31st March, 2022 and Balance Sheet as at that date.
Trial Balance as on 31st March, 2022
Credit
Particulars Debit (₹) (₹)
 Capital A/c 2,73,150
Stock On 1.4.2021 50,000
Sales 8,00,000
Purchase 7,70,000
Return Outward 25,000
Wages 5,000
Rent 1,25,000
Loan From Bank of Baroda 1,45,000
7% Fixed Deposit on 1.10.2021 1,50,000
12% Bonds On 1.12.2021 25,000
Interest Received 5000
Furniture 1,00,000
Discount Allowed 10,000
Discount Received 22,250
Freight Inward 5,500
Debtors 5,40,000
Creditors 6,60,000
Interest Paid on Loan 4,500
Carriage Outward 6,000
Advertisement 17,000
Cash 1,20,000
Bad Debts 4,500
Provision For Bad Debts 3,000
Pre-Paid Insurance 900
19,33,40
Total 0 19,33,400
Adjustments:
1) Closing stock valued at ₹4,00,000, however the net realisable value was ₹3,75,000.
2) Prepaid insurance was recorded in last financial year, which was supposed to be incurred in
the next year.
Insurance A/c Dr. 900
To Prepaid Insurance A/c 900
3) Interest Received represents 1000 from debtors (due to delay in payment) and balance on
Fixed deposits and Bonds.
So, interest on Fixed Deposits and Bonds = 5,000 – 1,000 = 4,000
Interest on FD for the AY 2021-22 = 1,50,000 x 7/100 x 6/12 = 5,250
Interest on Bonds for the AY 2021-22 = 25,000 x 12/100 x 4/12 = 1,000
Accrued Interest (Interest earned but nor received) = 5,250 + 1,000 – 4,000 = 2,250
Accrued Interest A/c Dr. 2,250
To Interest A/c 2,250

4) Depreciation is to be provided on fixed Asset at 10% p.a. on WDV basis.

5) Sale of furniture was wrongly recorded as sale of goods on cash basis. Furniture was
purchased on 1/12/2019 for ₹30,000 and is sold for ₹ 23000 on 31st January 2022.
Depreciation on Furniture in 2019-20 = 30,000 x 10/100 x 4/12 = 1,000
WDV of the furniture as on 31/03/2020 = 30,000 – 1,000 = 29,000
Depreciation on Furniture in 2020-21 = 29,000 x 10/100 = 2,900
WDV of the furniture as on 31/03/2021 = 29,000 – 2,900 = 26,100
It means the furniture which was sold during 2021-22 on 31/01/2022 had Book Value as on
01/04/21 of ₹ 26,100
It means the furniture which was not sold during the year has book value as on 01/04/21 =
1,00,000 – 26,100 = 73,900
Depreciation on Furniture in 2021-22 = 26,100 x 10/100 x 10/12 = 2,175
WDV of the furniture on the date of its sale (31/01/2022) = 26,100 – 2,175 = 23,925
Depreciation on remaining furniture = 73,900 x 10/100 = 7,390

Dep. A/c Dr. 2,175

To Furniture A/c 2,175

Sales A/c Dr. 23,000

P & L A/c Dr. 925
To Furniture A/c 23,925

Dep. A/c Dr. 7,390 (73,900 x 10/100)

To Furniture A/c 7,390

6) Create Provision for bad and doubtful debt @2% on Debtors.

Bad Debts A/c Dr. 10,800 (2% of 5,40,000)
To Provision for Doubtful Debts A/c 10,800
(Midterm 2022-23)

Particulars ₹ Particulars ₹
To Opening Stock 50,000 By Sales 8,00,000
To Purchases 7,70,000 Less : Sale of
Less : Purchase Furniture (23,000) 7,77,000
Returns (25,000) 7,45,000 By Closing Stock 3,75,000
To Wages 5,000
To Freight Inward 5,500
To Gross Profit c/d 3,46,500
11,52,000 11,52,000
To Rent 1,25,000 By Gross Profit b/d 3,46,500
To Bad Debts 4,500 By Interest 5,000
Add : Provision for Add : Accrued
DD as at 31/03/2022 Interest 2,250 7,250
10,800 By Discount Received 22,250
15,300
Less : Provision for 12,300
DD as at 31/03/2021
(3,000) 900
 To Insurance
9,565
To Depreciation on Furniture 10,000
(2,175 + 7,390) 925
To Discount Allowed 4,500
To Loss on Sale of Furniture 6,000
To Interest on Loan 17,000
To Carriage Outward
To Advertisement 1,89,810
To Net Profit
transferred to Capital A/c
3,76,000 3,76,000

Balance Sheet
Particulars ₹ Particulars ₹
Capital 2,73,150 Debtors 5,40,000
Add : Net Profit 1,89,810 4,62,960 Less : PFDD (10,800) 5,29,200
Creditors 6,60,000
Loan from BOB 1,45,000 Furniture 1,00,000
Less : Dep. Of
Sold one (2,175)
Less : Sold (23,925)
Remaining 73,900
Less : Dep. (7,390) 66,510
Closing Stock 3,75,000
Cash 1,20,000
Fixed Deposit 1,50,000
Bonds 25,000
Accrued Interest 2,250
12,67,960 12,67,960

Illustration 8:
From the following Trial Balance of Naruto Enterprises, prepare Manufacturing Account, Trading and
Profit and Loss Account for the year ended 31st December, 2021 and Balance Sheet as at that date.

Trial Balance as on 31st December 2021

Credit
Particulars Debit (₹) Particulars (₹)

Stock 01.01.2021: Sales 29,80,300

Raw Materials 157,000 Sale of Scrap 120,000

Work-in-process 50,000

Finished Goods 106,000 Capital 495,000

Purchases of Raw Materials 900,000 Reserve for Doubtful Debts 2,700

10% Bank Loan (loan taken on
Carriage Inward 137,000 01.10.2020) 200,000
 Wages 187,500 Creditors 80,000
Provision for Depreciation as on 01-
Rent (50%Factory) 137,000 01-2021:

Travelling 140,000 Plant & Machinery 360,000

Factory Insurance 118,000 Furniture 160,000

Bad Debts 14,000 Outstanding Interest on bank loan 5000

Carriage Outward 94,000

Salaries 62,500

Plant & Machinery 1200,000

Furniture 800,000

Debtors 300,000

44,03,000 44,03,000

Adjustments:
1. The Stock on 31st December, 2021 was as follows:
Raw Materials Rs 14,000; Work-in-process Rs 4,500;Finished Goods Rs.28,000
2. Write off Rs. 2,000 as bad debts.
3. Provision for Bad and Doubtful Debts to be created at 5% of Debtors.
4. Depreciation is to be provided on Plant & Machinery and Furniture at 10% p.a. using written
down value method.
5. Furniture costing Rs. 25,000 (date of purchase 01-01-2019) sold for Rs. 12,000 on 31st
December, 2021 and sale value received has been credited to Furniture Account.
What the Did
Cash or Bank A/c Dr. 12,000
To Furniture A/c 12,000
What they should have done
Cash or Bank A/c Dr. 12,000
P & L A/c Dr. 6,225
PFD A/c Dr. 6,775
To Furniture A/c 25,000

Original Cost 12,00,000

Less : PFD (Accumulated Dep) 3,60,000
WDV as at 01/01/21 8,40,000
Dep on P & M for the year 2021 = 8,40,000 x 10/100 = 84,000

Year Dep. WDV

2019 25,000 x 10/100 = 2,500 25,000 – 2,500 = 22,500
2020 22,500 x 10/100 = 2,250 22,500 – 2,250 = 20,250
Total Dep. Charged till 2,500 + 2,250 = 4,750
31/12/2020 or 01/01/2021
2021 20,250 x 10/100 = 2,025 20,250 – 2,025 = 18,225
Loss on Sale of Furniture = WDV – Sale Value = 18,225 – 12,000 = 6,225

As at 01/01/21 Furniture Sold Furniture Left Total

Original Cost 25,000 7,75,000 (8,00,000 – 25,000) 8,00,000
Accumulated Dep (PFD) 4,750 1,55,250 (1,60,000 – 4,750) 1,60,000
WDV as at 01/01/2021 20,250 6,19,750
Dep. For 2021 20,250 x 10/100 6,19,750 x 10/100
= 2,025 = 61,975

Particulars ₹ Particulars ₹
To Opening Stock : By Sale of Scrap 1,20,000
Raw Materials 1,57,000 By Closing Stock :
WIP 50,000 2,07,000 Raw Materials 14,000
To Purchase of RM 9,00,000 WIP 4,500 18,500
To Carriage Inward 1,37,000 By Cost of Production
To Wages 1,87,500 (Bal. Fig.) 15,63,500
To Factory Rent 68,500
To Factory Insurance 1,18,000
To Dep. On P & M 84,000
17,02,000 17,02,000
To Opening Stock (FG) 1,06,000 By Sales 29,80,300
To Cost of Production 15,63,500 By Closing Stock (FG) 28,000
To Gross Profit c/d 13,38,800
30,08,300 30,08,300
To Rent 68,500 By Gross Profit b/d 13,38,800
To Travelling 1,40,00
To Bad Debts 14,000
To Carriage Outward 94,000
To Salaries 62,500
To Dep on Furniture
To Interest on Bank Loan

13,38,800 13,38,800

Balance Sheet
Particulars ₹ Particulars ₹
Capital 2,73,150 Debtors 5,40,000
Add : Net Profit 1,89,810 4,62,960 Less : PFDD (10,800) 5,29,200
Creditors 6,60,000
Loan from BOB 1,45,000 Furniture 1,00,000
Less : Dep. Of
Sold one (2,175)
Less : Sold (23,925)
Remaining 73,900
Less : Dep. (7,390) 66,510
Closing Stock 3,75,000
 Cash 1,20,000
Fixed Deposit 1,50,000
Bonds 25,000
Accrued Interest 2,250
12,67,960 12,67,960

Illustration 15 of Module 3
Adjusted Trial Balance as on 31st Jan. 2022
Dr. Cr.
Rent 5,000
Prepaid Rent 10,000
Stationery Consumed 4,000
Stock of Stationery 21,000
Salaries 10,000
Unearned rent 3,000
Bank Overdraft 30,000
Purchases 1,16,000
Sales 1,05,000
Capital 18,000

Balances
Expenses Dr. Balance
Incomes Cr. Balance
Assets Dr. Balance
Liabilities Cr. balance
Losses Dr. balance
Gains Cr. Balance

Illustration 16 of Module 3
Debtors Account
Date Particulars ₹ Date Particulars ₹
01/03/2022 To Balance b/d 1,50,000 08/03/2022 By Sales Ret. 50,000
10/03/2022 To Sales A/c 4,50,000 20/03/2022 By Cash A/c 2,50,000
27/03/2022 By Bad Debts A/c 10,000
31/03/2022 By Balance c/d 2,90,000
6,00,000 6,00,000

Creditors Account
Date Particulars ₹ Date Particulars ₹
08/03/2022 To Purchase Ret. 20,000 01/03/2022 By Balance b/d 2,75,000
12/03/2022 To Cash A/c 2,00,000 10/03/2022 By Purchases A/c 2,50,000
31/03/2022 To Balance c/d 3,05,000
5,25,000 5,25,000
Provision for DD is b’cas of Concept of Conservatism or Prudence.

Working Notes
Let the total sales be ₹ 100
So, Cash Sales would be 25% of ₹ 100 = ₹ 25
It means, credit sales = Total Sales – Cash Sales = 100 – 25 = ₹ 75
If cash sales is ₹ 25…………..Credit Sales is ͅͅ₹ 75
So, if cash sales is 1,50,000………credit sales = 75 x 1,50,000/25 = ₹ 4,50,000
Actual Cash Purchases = Total Cash Purchases – Machinery Purchased = 1,75,000 – 50,000 = 1,25,000

Let total purchases be ₹ 1

So, cash purchases would be 1/3 x 1 = 1/3
So, Credit Purchases = Total Purchases – Cash Purchases = 1 – 1/3 = 2/3
So, if cash purchases is 1/3…..credit purchases is 2/3
So, if cash purchases is ͅ₹ 1,25,000………..credit purchases would be 2/3 x 1,25,000 x 3/1 = 2,50,000

Illustration 14 of Module 3
Trial Balance
(as on 30th June 2024)
Dr. Cr.
Sales 31,100
Ramesh 500
Commission 1,900
Purchases 20,400
Rent 600
Budhani 0
Furniture 10,000
Machinery 35,000
Capital 35,500
Cash 2,000

Dr. + Dr.
Cr. + Cr.
Dr. - Cr.
Cr. - Dr.

Final Accounts of Companies

In case of companies, unlike Proprioetorship and Partnership Businesses, there are formats of
Financial Statements, i.e., Statement of Profit & Loss, Balance Sheet and Cash Flow Statement, as
prescribed under Schedule III of the Companies Act 2013. These 3 statements are to be made in
vertical form, and not in horizontal form as they are made for Proprioetorship and Partnership
Businesses. Secondly, there is prescribed sequence of items to be presented in these statements
which every company has to follow mandatorily. This is for the sake of readers of these statements to
make the statements easy to read, understand and compare. Moreover, Statement of Profit & Loss
and Balance Sheet should not only carry information of the current year which has just ended, but
should also carry information of the immediate previous year so that one can compare these
information for 2 subsequent years. Besides, these statements are made only with prescribed heads
and sub-heads and account details under each of these sub-heads are presented separately in form
of lists, known as Notes to Accounts.
Format of Statement of Profit & Loss for Companies
Particulars Note No. For the year For the year
ended 31/03/24 ended 31/03/23
I. Revenue from Operations 21
II. Other Income 22
III. Total Income (Revenue)
IV. Expenses
(i) Cost of Materials Consumed
(ii) Purchase of Stock-in-Trade
(iii) Changes in Inventories of Finished Goods,
WIP, Stock-in-Trade and Conusmables
(iv) Employee Benefits Expenses
(v) Depreciation & Amortisation
(vi) Finance Cost
(vii) Other Expenses
Total Expenses
Profit or Loss before tax (III – IV)
Less : Tax for the Year
Profit or Loss after Tax (PAT or EAT) 50,000
EPS (Earning per Share)
- Normal
- Diluted
Details of Items presented in Statement of Profit & Loss
Revenue from Operations (Net Sales)
= Sales of Goods & Services for which the business was started – Their Sales Returns

Other Income = all indirect and operating and non-operating incomes and gains other than Sales =
Commission + Rent + Interest + Dividend + Profit on Sale of Fixed Assets or Investments

Cost of Materials Consumed (meant for Manufacturing Units) = Opening Stock of RM + Net
Purchases of RM + Expenses incurred directly to acquire RM – Closing Stock of RM
= 1,25,000 + 12,52,000 + 95,000 – 85,000
= 12,82,000 – 85,000
= 11,97,000

Purchase of Stock-in-Trade (mainly meant for Trading Units)

Changes in Inventories = Opening Stock – Closing Stock

Employee Benefit Expenses (Employee Cost) = Salaries + Wages + Bonus + Other Incentives,
Allowances and Perquisites + Employer’s Contribution to Social Security Measures (like PF, ESIC,
Gratuity, etc.) + Employees’ Welfare

Finance Cost = Interest on Borrowed Funds + Other related expenses like Filing/Administrative
Expenses charged by lenders + Expenses related to issue of new securities by the company + Interest
on Calls-in-Advance

Depreciation & Amortisation = Depreciation of Tangible Fixed Assets + Amortization of Intangible

Fixed Assets
Other Expenses = All other expenses which have not been included above plus losses = Carriage +
Advertisement + Rent + Discount Allowed + Travelling + Printing & Stationery + Bad Debts + Loss on
Sale of Fixed Assets or Investments + Manufacturing expenses other than employee cost and
materials/goods

Format of Balance Sheet of Companies

Particulars Note No. As at 31/03/24 As at 31/03/23
I. Equity & Liabilities
1) Shareholders’ Funds
(i) Share Capital 1
(ii) Reserves & Surplus 2 13,75,000
(iii) Share Warrants
2) Applications pending Allotment
3) Non-Current Liabilities
(i) Long Term Borrowings 3
(ii) Other Long Term Liabilities 4
(iii) Deferred Tax Liabilities (Net) 5
(iv) Long Term Provisions 6
4) Current Liabilities
(i) Short Term Borrowings 7
(ii) Trade Payables 8
(iii) Other Current Liabilities 9
(iv) Short Term Provisions 10
Total
II. Assets
1) Non-Current Assets
(i) Property, Plant, Equipment & Intangible
Assets
a) Property, Plant, Equipment 11
(ii) Intangible Assets
(iii) Capital Work in Progress
(iv) Intangible Assets under Development
(v) Long Term or Non-Current Investments
(vi) Long Term Loans & Advances
(vii) Other Non-Current Assets
(ii) Current Assets
a) Short Term Investments
b) Inventories
c) Trade Receivables
d) Cash & Cash Equivalents
e) Short Term Loans & Advances
f) Other Current Assets 20
Total
Illustration 1
Notes to Accounts
Note 2 : Reserves & Surplus As at 31/03/2023
(₹)
Debenture Redemption Reserve as at 31/03/22 5,00,000
Add : Transferred from Statement of P & L 1,00,000 6,00,000

General Reserve as at 31/03/22 --

Add : Transferred from Statement of P & L 1,25,000 1,25,000

Securities Premium Reserve as at 31/03/22 6,00,000

Surplus, i.e., Balance in Statement of Profit & Loss as at 31/03/22

(1,50,000)
Add : Profit after Tax of 2022-23 5,00,000
3,50,000
Less : Transferred to DRR (1,00,000)
Less : Transferred to GR (1,25,000) 50,000
Less : Interim Dividend Paid (75,000) (3,00,000)
13,75,000

Illustration 3
Notes to Accounts
Note 1 : Share Capital As at 31/03/2023
(₹)
Authorised Capital :
10,000 Equity Shares of ₹ 10 each 1,00,000

Issued, Subscribed and Paid-up Capital :

4,000 Equity Shares of ₹ 10 each 40,000
Total 40,000

Note 2 : Reserves & Surplus As at 31/03/2023

(₹)
Securities Premium Reserve as at 31/03/22 4,000

General Reserve as at 31/03/22 8,000

Add : Transferred from Statement of P & L 2,000 10,000

Surplus, i.e., Balance in Statement of Profit & Loss as at 31/03/22 3,420

Add : Profit after Tax of 2022-23 10,200
13,620
Less : Transferred to GR (2,000) 11,620
Total 25,620

Note 3 : Property, Plant & Equipment As at 31/03/2023

(₹)
Land 22,000
 Machinery at Cost 20,000
Less : Accumulated Depreciation (5,000) 15,000

Fixtures at Cost 2,200

Less : Accumulated Depreciation (1,000) 1,200
Total 38,200

Note 4 : Trade Receivables As at 31/03/2023

(₹)
Debtors 16,150
Less : Provision for Doubtful Debts (250)
Total 15,900

Particulars Note No. As at 31/03/23 As at 31/03/22

I. Equity & Liabilities
1) Shareholders’ Funds
(i) Share Capital 1 40,000
(ii) Reserves & Surplus 2 25,620
2) Non-Current Liabilities
(i) Long Term Borrowings
- 6% Debentures (Secured) 9,000
3) Current Liabilities
(i) Trade Payables
- Creditors 7,430
Total 82,050
II. Assets
1) Non-Current Assets
(i) Property, Plant, Equipment
& Intangible Assets
a) Property, Plant, Equipment 3 38,200
(ii) Current Assets
a) Inventories
- Stock-in-Trade 12,920
b) Trade Receivables 4 15,900
c) Cash & Cash Equivalents
- Cash-at-Bank 15,030
Total 82,050
Contingent Liabilities
Proposed Dividend ₹ 4,000 (10% of 40,000).

Illustration 4
Particulars Note No. As at 31/03/23 As at 31/03/22
I. Equity & Liabilities
1) Shareholders’ Funds
(i) Share Capital 1 10,00,000
(ii) Reserves & Surplus 2 2,50,000
2) Non-Current Liabilities
(i) Long Term Borrowings 3 4,00,000
3) Current Liabilities
 (i) Trade Payables 4 2,00,000
(ii) Other Current Liabilities 5 50,000
Total 19,00,000
II. Assets
1) Non-Current Assets
(i) Property, Plant, Equipment
& Intangible Assets
a) Property, Plant, Equipment 6 9,00,000
b) Capital Work-in-Progress 7 3,50,000
(ii) Non-Current Investments 8 6,00,000
2) Current Assets
Cash & Cash Equivalents 9 50,000
Total 19,00,000

Notes to Accounts
Note 1 : Share Capital As at 31/03/2023
(₹)
Authorised Capital :
…….. Equity Shares of ₹ 10 each --

Issued, Subscribed and Paid-up Capital :

1,00,000 Equity Shares of ₹ 10 each 10,00,000
Total 10,00,000

Note 2 : Reserves & Surplus As at 31/03/2023

(₹)
Securities Premium Reserve 2,00,000
Surplus, i.e., Balance in Statement of Profit & Loss 50,000
Total 2,50,000

Note 3 : Long Term Borrowings As at 31/03/2023

(₹)
12% Debentures 4,00,000
Total 4,00,000

Note 4 : Trade Payables As at 31/03/2023

(₹)
Creditors 2,00,000
Total 2,00,000

Note 5 : Other Current Liabilities As at 31/03/2023

(₹)
Dividend Payable 50,000
Total 50,000

Note 6 : Property, Plant & Equipment As at 31/03/2023

(₹)
Land & Building 9,00,000
Total 9,00,000
 Note 7 : Capital Work-in-Progress As at 31/03/2023
(₹)
Building under Construction 3,50,000
Total 3,50,000

Note 8 : Non-Current Investments As at 31/03/2023

(₹)
Government Bonds 6,00,000
Total 6,00,000

Note 9 : Cash and Cash Equivalents As at 31/03/2023

(₹)
Cash at Bank 50,000
Total 50,000
Illustration 5
Particulars Note No. For the year For the year
ended 31/03/23 ended 31/03/22
I. Revenue from Operations 42,50,000
II. Other Income 57,500
III. Total Income (Revenue) 43,07,500
IV. Expenses
(i) Cost of Materials Consumed 21,25,000
(ii) Changes in Inventories of Finished Goods,
WIP, Stock-in-Trade and Conusmables (5,000)
(iv) Employee Benefits Expenses 13,80,000
(v) Finance Cost 70,000
(vi) Depreciation & Amortisation 1,50,000
(vii) Other Expenses 2,57,500
Total Expenses 39,70,500
Profit or Loss before tax (III – IV) 3,37,000
Less : Tax for the Year (1,17,950)
Profit or Loss after Tax (PAT or EAT) 2,19,050
EPS (Earning per Share)
- Normal 2.1905
- Diluted --

Note 1 : Other Income As at 31/03/2023

(₹)
Sale of Scrap 50,000
Dividend on Investment 7,500
Total 57,500

Note 2 : Cost of Materials Consumed As at 31/03/2023

(₹)
Opening Inventory of Material 1,50,000
Add : Purchase of Material 21,00,000
22,50,000
Less : Closing Inventory of Material (1,25,000) 21,25,000
Total 21,25,000
 Note 3 : Change in Inventory of WIP & Finished Goods As at 31/03/2023
(₹)
Opening Inventory of WIP 75,000
Less : Closing Inventory of WIP 65,000 10,000

Opening Inventory of Finished Goods 1,25,000

Less : Closing Inventory of Finished Goods (1,40,000) (15.000)
Total (5,000)

Note 4 : Employees’ Benefit Expenses or Employee Cost As at 31/03/2023

(₹)
Wages 6,00,000
Salaries 7,20,000
Staff Welfare 60,000
Total 13,80,000

Note 5 : Finance Cost As at 31/03/2023

(₹)
Interest on Debentures 50,000
Interest on Bank Loan 20,000
Total 70,000

Note 6 : Depreciation & Amortisation As at 31/03/2023

(₹)
Depreciation 1,50,000
Total 1,50,000

Note 7 : Other Expenses As at 31/03/2023

(₹)
Carriage Inward 21,000
Audit Fees 42,500
Advertisement Expenses 75,000
Telephone & Internet Expenses 24,000
Courier Expenses 12,000
Power & Electricity Expenses 30,000
Bank Charges 3,000
Administrative Expenses 30,000
Marketing & Selling Expenses 20,000
Total 2,57,500

Normal or Ordinary EPS = (PAT – Dividend to Preference Shareholders)/No. of paid Equity Shares
= (2,19,050 – 0)/1,00,000 = 2.1905

Illustration 9
Statement of Profit & Loss (₹ in Lakhs)
Particulars Note No. For the year For the year
ended 31/03/23 ended 31/03/22
I. Revenue from Operations 9 700
 II. Other Income 10 2
III. Total Income (Revenue) 702
IV. Expenses
(i) Purchase of Materials (Adjusted) 11 320
(ii) Employee Benefits Expenses 12 60
(iii) Finance Cost 13 20
(iv) Depreciation & Amortisation 14 76
(v) Other Expenses 15 60
Total Expenses 536
Profit or Loss before tax (III – IV) 166
Less : Tax for the Year --
Profit or Loss after Tax (PAT or EAT) 166
EPS (Earning per Share)
- Normal 5.53
- Diluted

Working Notes
1) Depreciation on Furniture for the year 2022-23 = 10% of 160 lakhs = 16 lakhs
Depreciation on Plant & Machinery for the year 2022-23 = 10% of (610 – 10) = 60 lakhs
Total Depreciation for the year 2022-23 = 16 + 60 = 76 lakhs
2) EPS = PAT/No. of Equity Shares = 166 lakhs/30 lakhs = ₹ 5.53 lakhs

for Sale of Machinery on 01/04/22

Did Should
Cash A/c Dr. 4,00,000 Cash A/c Dr. 4,00,000
To Suspense A/c 4,00,000 Provision for Dep. A/c Dr. 8,00,000
To Machinery A/c 10,00,000
To Profit & Loss A/c 2,00,000
Rectification Entry
Suspense A/c Dr. 4,00,000
Provision for Dep. A/c Dr. 8,00,000
To Machinery A/c 10,00,000
To Profit & Loss A/c 2,00,000

Original or Acquisition Cost of Machine 10,00,000

Less : Total Dep. Charged on it till the date of its sale 8,00,000
Written Down Value of the Machine on the date of its sale 2,00,000
Sale Price 4,00,000
Profit 2,00,000

Balance Sheet (₹ in Lakhs)

Particulars Note No. As at 31/03/23 As at 31/03/22
I. Equity & Liabilities
1) Shareholders’ Funds
(i) Share Capital 1 300
(ii) Reserves & Surplus 2 390
2) Non-Current Liabilities
(i) Long Term Borrowings 3 200
3) Current Liabilities
(i) Trade Payables 4 52
 Total 942
II. Assets
1) Non-Current Assets
(i) Property, Plant, Equipment
& Intangible Assets
a) Property, Plant, Equipment 5 740

2) Current Assets
(i) Inventory 6 86
(ii) Trade Receivables 7 96
(iii) Cash & Cash Equivalents 8 20
Total 942

Notes to Accounts (₹ in Lakhs)

Note 1 : Share Capital As at 31/03/2023
(₹)
Authorised Capital :
…….. Equity Shares of ₹ 10 each --

Issued, Subscribed and Paid-up Capital :

30,00,000 Equity Shares of ₹ 10 each 300
Total 300

Note 2 : Reserves & Surplus As at 31/03/2023

(₹)
General Reserve 130
Securities Premium Reserve 40
Surplus, i.e., Balance in Statement of Profit & Loss as at 01/04/22 72
Add : Profit for the year 2022-23 166
238
Less : Interim Dividend paid (18) 220
Total 390

Note 3 : Long Term Borrowings As at 31/03/2023

(₹)
10% Debentures 200
Total 200

Note 4 : Trade Payables As at 31/03/2023

(₹)
Creditors 52
Total 52

Note 5 : Property, Plant & Equipment As at 31/03/2023

(₹)
Land at cost 220
Plant & Machinery at Cost 610
Less : Machine Sold (10)
 600

Less : Provision for Depreciation (100 – 8 + 60) (152) 448

Furniture at Cost 160

Less : Provision for Depreciation (72 + 16) (88) 72
Total 740

Note 6 : Inventories As at 31/03/2023

(₹)
Stock of Materials 86
Total 86

Note 7 : Trade Receivables As at 31/03/2023

(₹)
Debtors 96
Total 96

Note 8 : Cash and Cash Equivalents As at 31/03/2023

(₹)
Cash at Bank 18
Cash on Hand 2
Total 20

Note 9 : Revenue from Operations As at 31/03/2023

(₹)
Sales 700
Total 700

Note 10 : Other Income As at 31/03/2023

(₹)
Profit on Sale of Machinery 2
Total 2

Note 11 : Purchase of Stock-in-Trade As at 31/03/2023

(₹)
Purchase of Material (Adjusted with Closing Inventory) 320
Total 320

Note 12 : Employee Benefit Expenses As at 31/03/2023

(₹)
Salary Expenses 60
Total 60

Note 13 : Finance Cost As at 31/03/2023

(₹)
Debenture Interest 20
Total 20
 Note 14 : Depreciation & Amortisation As at 31/03/2023
(₹)
Depreciation on Machinery 60
Depreciation on Furniture 16
Total 76

Note 15 : Other Expenses As at 31/03/2023

(₹)
Administrative Expenses 30
Selling Expenses 30
Total 60

Illustration 10
Statement of Profit & Loss (₹ in Thousand)
Particulars Note No. For the year For the year
ended 31/03/23 ended 31/03/22
I. Revenue from Operations 11 34,000
II. Other Income 12 300
III. Total Income (Revenue) 34,300
IV. Expenses
(i) Purchase of Materials (Adjusted) 13 23,500
(ii) Changes in Inventory 14 (424)
(iii) Employee Benefits Expenses 15 4,315
(iv) Depreciation & Amortisation 16 629
(v) Other Expenses 17 1,280
Total Expenses 29,300
Profit or Loss before tax (III – IV) 5,000
Less : Tax for the Year (1,550)
Profit or Loss after Tax (PAT or EAT) 3,450
EPS (Earning per Share)
- Normal 0.00345
- Diluted

Working Notes
Profit before Managerial Remuneration 5,500 110
Less : Managerial Remuneration __500 10
Profit before Tax but after Managerial Remuneration 5,000 100
So, if 110 is equal to 5,500
10 would be equal to ………………5,500 x 10/110 = 500

Note 11 : Revenue from Operations As at 31/03/2023

(₹)
Sales 34,000
Total 34,000

Note 12 : Other Income As at 31/03/2023

(₹)
Discount Earned 300
Total 300

Note 13 : Purchase of Stock-in-Trade As at 31/03/2023

(₹)
Purchase of Stock-in-Trade 23,500
Total 23,500

Note 14 : Changes in Inventory As at 31/03/2023

(₹)
Stock as at 01/04/22 7,500
Less : Stock as at 31/03/23 (7,924)
Total (424)

Note 15 : Employee Benefit Expenses As at 31/03/2023

(₹)
Wages 3,000
Salaries 750
Add : Outstanding Salaries 65 815
Managerial Remuneration 500
Total 4,315

Note 16 : Depreciation & Amortisation As at 31/03/2023

(₹)
Depreciation on Plant & Machinery 435
Depreciation on Furniture 170
Amortization of Patents & Trademark 24
Total 629

Note 17 : Other Expenses As at 31/03/2023

(₹)
Carriage Inward 95
Sundry Office Expenses 705
Rent 400
Add : Outstanding Rent 80 480
Total 1,280

Balance Sheet (₹ in Thousand)

Particulars Note No. As at 31/03/23 As at 31/03/22
I. Equity & Liabilities
1) Shareholders’ Funds
(i) Share Capital 1 10,000
(ii) Reserves & Surplus 2 5,600
2) Current Liabilities
(i) Trade Payables 3 2,450
(ii) Other Current Liabilities 4 645
(iii) Short Term Provisions 5 1,550
Total 20,245
II. Assets
1) Non-Current Assets
(i) Property, Plant, Equipment
 & Intangible Assets
a) Property, Plant, Equipment 6 3,995
b) Intangible Assets 7 456
2) Current Assets
(i) Inventory 8 7,924
(ii) Trade Receivables 9 3,250
(iii) Cash & Cash Equivalents 10 4,620
Total 20,245

Notes to Accounts (₹ in Thousand)

Note 1 : Share Capital As at 31/03/2023
(₹)
Authorised Capital :
…….. Equity Shares of ₹ 10 each --

Issued, Subscribed and Paid-up Capital :

10,00,000 Equity Shares of ₹ 10 each 10,000
Total 10,000

Note 2 : Reserves & Surplus As at 31/03/2023

(₹)
General Reserve 1,550
Surplus, i.e., Balance in Statement of Profit & Loss as at 01/04/22 1,653
Add : Profit for the year 2022-23 3,450
5,103
Less : Dividend paid (1,053) 4,050
Total 5,600

Note 3 : Trade Payables As at 31/03/2023

(₹)
Creditors 1,750
Bills Payable 700
Total 2,450

Note 4 : Other Current Liabilities As at 31/03/2023

(₹)
Outstanding Rent 80
Outstanding Salaries 65
Outstanding Managerial Remuneration 500
Total 645

Note 5 : Short Term Provisions As at 31/03/2023

(₹)
Provision for Tax 1,550
Total 1,550

Note 6 : Property, Plant & Equipment As at 31/03/2023

(₹)
Plant & Machinery 2,900
Less : Depreciation (435) 2,465
 Furniture 1,700
Less : Depreciation (170) 1,530
Total 3,995

Note 7 : Intangible Assets As at 31/03/2023

(₹)
Patents and Trademark 480
Less : Amortised during the year 2022-23 (24)
Total 456

Note 8 : Inventories As at 31/03/2023

(₹)
Stock of Goods 7,924
Total 7,924

Note 9 : Trade Receivables As at 31/03/2023

(₹)
Debtors 2,750
Bills Receivables 500
Total 3,250

Note 10 : Cash and Cash Equivalents As at 31/03/2023

(₹)
Cash at Bank 4,620
Total 4,620

Illustration 11
Balance Sheet
Particulars Note No. As at 31/03/23 As at 31/03/22
I. Equity & Liabilities
1) Shareholders’ Funds
(i) Share Capital 1 9,99,000
(ii) Reserves & Surplus 2 3,21,300

2) Non-Current Liabilities 3 2,63,500

(i) Long Term Borrowings

3) Current Liabilities
(i) Trade Payables 4 2,00,000
(ii) Other Current Liabilities 5 77,700
(iii) Short Term Provisions 6 46,500
Total 19,08,000
II. Assets
1) Non-Current Assets
(i) Property, Plant, Equipment
& Intangible Assets
a) Property, Plant, Equipment 7 11,25,000
2) Current Assets
(i) Inventory 8 2,50,000
 (ii) Trade Receivables 9 2,00,000
(iii) Cash & Cash Equivalents 10 2,90,300
(iv) Short Term Loans & Advances 11 42,700
Total 19,08,000

Notes to Accounts
Note 1 : Share Capital As at 31/03/2023
(₹)
Authorised Capital :
…….. Equity Shares of ₹ 10 each --

Issued, Subscribed and Paid-up Capital :

For cash : 10,000
98,000 Equity Shares of ₹ 10 each 9,80,000
Less : Calls-in-Arrears (500 shares @ ₹ 2 per share) (1,000) 9,79,000

For Consideration other than Cash :

2,000 Equity Shares of ₹ 10 each 20,000 9,99,000

Total 9,99,000

Note 2 : Reserves & Surplus As at 31/03/2023

(₹)
General Reserve 2,21,300
Surplus, i.e., Balance in Statement of Profit & Loss 1,00,000
Total 3,21,300

Note 3 : Long Term Borrowings As at 31/03/2023

(₹)
Secured Loan :
From State Financial Corporation
(Secured by mortgage of Plant & Machinery) 1,50,000
Less : Interest accrued but not due (7,500) 1,42,500

Unsecured Loans 1,21,000

Total 2,63,500

Note 4 : Trade Payables As at 31/03/2023

(₹)
Creditors for Goods & Services 2,00,000
Total 2,00,000

Note 5 : Other Current Liabilities As at 31/03/2023

(₹)
Dividend Payable 60,000
Dividend Distribution Tax Payable 10,200
Interest Accrued but not Due on Loan from State Financial Corporation 7,500
Total 77,700

Note 6 : Short Term Provisions As at 31/03/2023

 (₹)
Provision for Tax 46,500
Total 46,500

Note 7 : Property, Plant & Equipment As at 31/03/2023

(₹)
Land 2,00,000
Building 4,00,000
Less : Provision for Depreciation (50,000) 3,50,000

Plant & Machinery 7,00,000

Less : Provision for Depreciation (1,75,000) 5,25,000

Furniture 62,500
Less : Provision for Depreciation (12,500) 50,000
Total 11,25,000

Note 8 : Inventories As at 31/03/2023

(₹)
Finished Goods 2,00,000
Raw Materials 50,000
Total 2,50,000

Note 9 : Trade Receivables As at 31/03/2023

(₹)
Debtors :
Due for less than or up to 6 months 1,48,000
Due for more than 6 months 52,000 2,00,000
Total 2,00,000

Note 10 : Cash and Cash Equivalents As at 31/03/2023

(₹)
Cash on Hand 43,300
Cash at Bank 2,47,000
Total 2,90,300

Note 11 : Short Term Loans & Advances As at 31/03/2023

(₹)
Advances 42,700
Total 42,700

Illustration 12
Statement of Profit & Loss
Particulars Note No. For the year For the year
ended 31/03/23 ended 31/03/22
I. Revenue from Operations 15 5,20,000
II. Other Income 16 12,000
III. Total Income (Revenue) 5,32,000
IV. Expenses
(i) Purchase of Goods (Adjusted) 17 2,10,000
(iii) Employee Benefits Expenses 18 60,000
(iv) Depreciation & Amortisation 19 20,000
(v) Finance Cost 20 28,000
(v) Other Expenses 21 62,000
Total Expenses 3,80,000
Profit or Loss before tax (III – IV) 1,52,000
Less : Tax for the Year (76,000)
Profit or Loss after Tax (PAT or EAT) 76,000
EPS (Earning per Share)
- Normal --
- Diluted --

Note 15 : Revenue from Operations As at 31/03/2023

(₹)
Sales 5,20,000
Total 5,20,000

Note 16 : Other Income As at 31/03/2023

(₹)
Interest on Investments 12,000
Total 12,000

Note 17 : Purchase of Stock-in-Trade As at 31/03/2023

(₹)
Purchase of Stock-in-Trade (Adjusted with Stock) 2,10,000
Total 2,10,000

Note 18 : Employee Benefit Expenses As at 31/03/2023

(₹)
Salaries 60,000
Total 60,000

Note 19 : Depreciation & Amortisation As at 31/03/2023

(₹)
Depreciation on Building 8,000
Depreciation on Machinery 12,000
Total 20,000

Note 20 : Finance Cost As at 31/03/2023

(₹)
Debenture Interest 28,000
Total 28,000

Note 21 : Other Expenses As at 31/03/2023

(₹)
Directors’ Fees 10,000
Rent 26,000
Bad Debts 6,000
Add : Provision for Bad Debts (4% of 1,25,000) 5,000
11,000
 Less : Provision for Bad Debts as at 31/03/22 (3,000) 8,000
Sundry Expenses 18,000
Total 62,000

Balance Sheet (₹ in Thousand)

Particulars Note No. As at 31/03/23 As at 31/03/22
I. Equity & Liabilities
1) Shareholders’ Funds
(i) Share Capital 1 2,00,000
(ii) Reserves & Surplus 2 1,41,000
2) Non-Current Liabilities
(i) Long Term Borrowings 3 2,00,000
3) Current Liabilities
(i) Trade Payables 4 92,000
(ii) Other Current Liabilities 5 21,000
(iii) Short Term Provisions 6 76,000
Total 7,30,000
II. Assets
1) Non-Current Assets
(i) Property, Plant, Equipment
& Intangible Assets
a) Property, Plant, Equipment 7 2,85,000
(ii) Long Term Investments 8 1,20,000
2) Current Assets
(i) Inventory 9 90,000
(ii) Trade Receivables 10 1,20,000
(iii) Cash & Cash Equivalents 11 53,000
(iv) Short Term Loans & Advances 12 60,000
(v) Other Current Assets 13 2,000
Total 7,30,000

Notes to Accounts (₹ in Thousand)

Note 1 : Share Capital As at 31/03/2023
(₹)
Authorised Capital :
_____ Equity Shares of ₹ __ each --

Issued, Subscribed and Paid-up Capital :

______ Equity Shares of ₹ __ each 2,00,000
Total 2,00,000

Note 2 : Reserves & Surplus As at 31/03/2023

(₹)
General Reserve 40,000
Surplus, i.e., Balance in Statement of Profit & Loss as at 01/04/22 25,000
Add : Profit for the year 2022-23 76,000 1,01,000
Total 1,41,000

Note 3 : Long Term Borrowing As at 31/03/2023

(₹)
14% Secured Debentures 2,00,000
Total 2,00,000

Note 4 : Trade Payables As at 31/03/2023

(₹)
Creditors 92,000
Total 92,000

Note 5 : Other Current Liabilities As at 31/03/2023

(₹)
Outstanding Salaries 2,000
Interest on Debentures (accrued but not due) 14,000
Unclaimed Dividend 5,000
Total 21,000

Note 6 : Short Term Provisions As at 31/03/2023

(₹)
Provision for Tax 76,000
Total 76,000

Note 7 : Property, Plant & Equipment As at 31/03/2023

(₹)
Building 2,90,000
Less : Provision for Depreciation (50,000) 2,40,000

Machinery 1,00,000
Less : Provision for Depreciation (55,000) 45,000
Total 2,85,000

Note 8 : Long Term Investments As at 31/03/2023

(₹)
12,000 Shares of ͅ₹ 10 each of A Ltd. 1,20,000
Total 1,20,000

Note 9 : Inventories As at 31/03/2023

(₹)
Stock 90,000
Total 90,000

Note 10 : Trade Receivables As at 31/03/2023

(₹)
Debtors 1,25,000
Less : Provision for Bad & Doubtful Debts (5,000)
Total 1,20,000

Note 11 : Cash and Cash Equivalents As at 31/03/2023

(₹)
Cash at Bank 53,000
Total 53,000
 Note 12 : Short Term Loans & Advances As at 31/03/2023
(₹)
Advance Tax 60,000
Total 60,000

Note 13 : Other Current Assets As at 31/03/2023

(₹)
Interest Accrued on Investments 2,000
Total 2,000

Note 14 : Contingent Liabilities As at 31/03/2023

(₹)
Proposed Dividend @ 25% 50,000
Total 50,000

Illustration 13
Statement of Profit & Loss
Particulars Note No. For the year For the year
ended 31/03/23 ended 31/03/22
I. Revenue from Operations 12 58,16,000
III. Total Income (Revenue) 58,16,000
IV. Expenses
(i) Purchase of Goods 13 40,20,000
(ii) Change in Stock 14 (80,000)
(iii) Employee Benefits Expenses 15 4,49,000
(iv) Depreciation & Amortisation 16 1,75,000
(v) Finance Cost 17 12,000
(v) Other Expenses 18 6,43,000
Total Expenses 52,19,000
Profit or Loss before tax (III – IV) 5,97,000
Less : Tax for the Year (2,38,800)
Profit or Loss after Tax (PAT or EAT) 3,58,200
EPS (Earning per Share)
- Normal 3.582
- Diluted --

Note 12 : Revenue from Operations As at 31/03/2023

(₹)
Sales 58,40,000
Less : Sales Returns (24,000) 58,16,000
Total 58,16,000

Note 13 : Purchase of Stock-in-Trade As at 31/03/2023

(₹)
Purchase of Goods 41,00,000
Less : Purchase Returns (30,000)
Less : Machine Purchased (50,000) 40,20,000
Total 40,20,000
Note 14 : Change in Inventories As at 31/03/2023
(₹)
Opening Stock 1,20,000
Less : Closing Stock (2,00,000)
Total (80,000)

Note 15 : Employee Benefit Expenses As at 31/03/2023

(₹)
Office Salaries 4,49,000
Total 4,49,000

Note 16 : Depreciation & Amortisation As at 31/03/2023

(₹)
Depreciation on Building 25,000
Depreciation on Plant & Machinery 1,50,000
Total 1,75,000

Note 17 : Finance Cost As at 31/03/2023

(₹)
Interest on Bank Loan 12,000
Total 12,000

Note 18 : Other Expenses As at 31/03/2023

(₹)
Directors’ Remuneration 3,50,000
Auditors’ Fees 60,000
Bad Debts 21,000
Add : Provision for Bad Debts (4% of 1,25,000) 10,000
31,000
Less : Provision for Bad Debts as at 31/03/22 (40,000) (9,000)
Miscellaneous Expenses 12,000
Trading Expenses 2,30,000
Total 6,43,000

Balance Sheet (₹ in Thousand)

Particulars Note No. As at 31/03/23 As at 31/03/22
I. Equity & Liabilities
1) Shareholders’ Funds
(i) Share Capital 1 10,00,000
(ii) Reserves & Surplus 2 6,68,200
2) Non-Current Liabilities
(i) Long Term Borrowings 3 2,00,000
3) Current Liabilities
(i) Trade Payables 4 1,60,000
(ii) Other Current Liabilities 5 12,000
(ii) Short Term Provisions 6 2,38,800
Total 22,79,000
II. Assets
1) Non-Current Assets
(i) Property, Plant, Equipment
 & Intangible Assets
a) Property, Plant, Equipment 7 15,05,000
2) Current Assets
(i) Inventory 8 2,00,000
(ii) Trade Receivables 9 4,90,000
(iii) Cash & Cash Equivalents 10 49,000
(iv) Short Term Loans & Advances 11 35,000
Total 22,79,000

Notes to Accounts (₹ in Thousand)

Note 1 : Share Capital As at 31/03/2023
(₹)
Authorised Capital :
_____ Equity Shares of ₹ __ each --

Issued, Subscribed and Paid-up Capital :

1,00,000 Equity Shares of ₹ 10 each 10,00,000
Total 10,00,000

Note 2 : Reserves & Surplus As at 31/03/2023

(₹)
Surplus, i.e., Balance in Statement of Profit & Loss as at 01/04/22 3,60,000
Add : Profit for the year 2022-23 3,58,200
7,18,200
Less : Interim Dividend (50,000)
Total 6,68,200

Note 3 : Long Term Borrowing As at 31/03/2023

(₹)
12% Bank Loan (Secured by Hypothecation of Plant & Machinery) 2,00,000
Total 2,00,000

Note 4 : Trade Payables As at 31/03/2023

(₹)
Creditors 1,60,000
Total 1,60,000

Note 5 : Other Current Liabilities As at 31/03/2023

(₹)
Interest on Bank Loan (accrued but not due) 12,000
Total 12,000

Note 6 : Short Term Provisions As at 31/03/2023

(₹)
Provision for Tax 2,38,800
Total 2,38,800

Note 7 : Property, Plant & Equipment As at 31/03/2023

(₹)
 Building 5,00,000
Less : Provision for Depreciation (1,05,000) 3,95,000

Machinery 15,00,000
Add : Machine Purchased 50,000
15,50,000
Less : Provision for Depreciation (4,40,000) 11,10,000
Total 15,05,000

Note 8 : Inventories As at 31/03/2023

(₹)
Closing Stock 2,00,000
Total 2,00,000

Note 9 : Trade Receivables As at 31/03/2023

(₹)
Debtors 5,00,000
Less : Provision for Bad & Doubtful Debts (10,000)
Total 4,90,000

Note 10 : Cash and Cash Equivalents As at 31/03/2023

(₹)
Cash at Bank 49,000
Total 49,000

Note 11 : Short Term Loans & Advances As at 31/03/2023

(₹)
Advance Tax 35,000
Total 35,000

Depreciation
For calculation of annual depreciation, 3 information are needed –
(i) Acquisition Cost of the Asset (C) = Purchase price of the asset + All expenses incurred on
it before it is used very first time in the business for commercial purpose, i.e., taxes
credit of which is not available, loading and unloading charges, transportation charges,
transit-insurance, installation and testing charges, registration & license fees,
repairs/renewals/renovation charges, brokerage, etc.
(ii) n = estimated commercial or economic life of the asset in years
(iii) s = Scrap or salvage or terminal value that the asset is expected to fetch at the end of its
commercial life.

WDV = Written Down Value of an asset = C – total depreciation charged on the asset so far

Methods of Calculating Depreciation

1) Straight Line Method (Fixed Installment Method or Original Cost Method)
Annual Depreciation = (C – s)/n = (10,00,000 – 64,000)/3 = 3,12,000
Depreciation Table
 Year Depreciation WDV at the end of the Year
1 3,12,000 10,00,000 – 3,12,000 = 6,88,000
2 3,12,000 6,88,000 – 3,12,000 = 3,76,000
3 3,12,000 3,76,000 – 3,12,000 = 64,000 = s
Total 9,36,000

Annual Rate of Depreciation = Annual Depreciation/C x 100 = 3,12,000/10,00,000 x 100 = 31.2%

2) Written Down Value Method (Declining Balance or Reducing Balance Method)

Annual Rate of Depreciation = {1 – n√(s/C)} x 100 = (1 - 3√64,000/10,00,000) x 100

= {(1 - 3√(40 x 40 x 40/100 x 100 x 100)} x 100
= (1 – 40/100) x 100 = 60/100 x 100 = 60%

Depreciation Table
Year Depreciation WDV at the end of the Year
1 6,00,000 10,00,000 – 6,00,000 = 4,00,000
2 2,40,000 4,00,000 – 2,40,000 = 1,60,000
3 96,000 1,60,000 – 96,000 = 64,000 = s
Total 9,36,000

2 Methods of Accounting for Depreciation

1) When Provision for Depreciation A/c is not maintained
Journal Entries
1 When an Asset is Purchased
Asset A/c Dr. With C of the asset
To Cash/Bank/Vendor’s A/c
2 When Depreciation is Charged on the Asset
Depreciation A/c Dr. With the Amt. of depreciation
To Asset A/c charged on the asset
3 When the Asset is Sold
Cash/Bank A/c Dr. Sale Value
Either or
Profit & Loss A/c Dr. Loss on Sale
Neither of
To Asset A/c WDV of the Asset
these 2 To Profit & Loss A/c Profit on Sale
st
4 At the end of Accounting Year (31 March)
Profit & Loss A/c Dr. With Dr. Balance of Depreciation A/c
To Depreciation A/c
Note that depreciation is charged either at the end of every accounting year, or on the date of sale of
the asset, whichsoever occurs earlier

2) When Provision for Depreciation A/c is maintained

Journal Entries
1 When an Asset is Purchased
Asset A/c Dr. With C of the asset
To Cash/Bank/Vendor’s A/c
2 When Depreciation is Charged on the Asset
Depreciation A/c Dr. With the Amt. of depreciation
To Provision for Depreciation A/c charged on the asset
 Depreciation of an asset keeps getting
accumulated in Provision for Depreciation A/c
year-on-year over life of the asset since when
it was purchased
3 When the Asset is Sold
Cash/Bank A/c Dr. Sale Value
Provision for Depreciation A/c Dr. Accumulated Dep.
Profit & Loss A/c Dr. Loss on Sale
To Asset A/c C
To Profit & Loss A/c Profit on Sale
E.g., A machinery was purchased on 01/07/20 for ͅ ₹ 8,00,000 and was sold on 15/02/24 for ₹
2,10,000. Total Depreciation charged on the machinery from 01/07/20 to 15/02/24 was ₹
4,60,000.
Original Cost 8,00,000
Accumulated Dep. 4,60,000
WDV of the Asset 3,40,000
Sale Value 2,10,000
Loss on Sale 1,30,000
Cash/Bank A/c Dr. 2,10,000
Provision for Depreciation A/c Dr. 4,60,000
Profit & Loss A/c Dr. 1,30,000
To Asset A/c 8,00,000
st
4 At the end of Accounting Year (31 March)
Profit & Loss A/c Dr. With Dr. Balance of Depreciation A/c
To Depreciation A/c

Ex.1 : A machinery was purchased on 01/07/20 for ͅ ₹ 8,00,000 and was sold on 15/02/24 for ₹
2,10,000. Depreciation on the machinery is charged @ 20% p.a. PNJE and prepare –
(i) Machinery A/c and Depreciation A/c (PFD A/c is not maintained by the business),
(ii) Machinery A/c, PFD A/c and Depreciation A/c (PFD A/c is maintained by the business)
Using both SLM and WDV Methods.
Solution
Working Notes
Depreciation Table under SLM
Year Depreciation WDV at the end of the Year
2020-21 8,00,000 x 20/100 x 9/12 8,00,000 – 1,20,000 = 6,80,000
= 1,20,000
2021-22 8,00,000 x 20/100 = 6,80,000 – 1,60,000 = 5,20,000
1,60,000
2022-23 8,00,000 x 20/100 = 5,20,000 – 1,60,000 = 3,60,000
1,60,000
2023-24 8,00,000 x 20/100 x 3,60,000 – 1,40,000 = 2,20,000
10.5/12 = 1,40,000
Total 5,80,000 [WDV of the Asset on the date of its sale
= 8,00,000 – 5,80,000 = 2,20,000]
Loss on Sale = WDV – Sale Value = 2,20,000 – 2,10,000 = 10,000

Depreciation Table under WDV Method

Year Depreciation WDV at the end of the Year
2020-21 8,00,000 x 20/100 x 9/12 8,00,000 – 1,20,000 = 6,80,000
 = 1,20,000
2021-22 6,80,000 x 20/100 = 6,80,000 – 1,36,000 = 5,44,000
1,36,000
2022-23 5,44,000 x 20/100 = 5,44,000 – 1,08,800 = 4,35,200
1,08,800
2023-24 4,35,200 x 20/100 x 4,35,200 – 76,160 = 3,59,040
10.5/12 = 76,160
Total 4,41,100 [WDV of the Asset on the date of its sale
= 8,00,000 – 4,40,960 = 3,59,040]
Loss on Sale = WDV – Sale Value = 3,59,040 – 2,10,000 = 1,49,040

When PFD A/c is not maintained

Journal Entries
01/07/20 Machinery A/c Dr. 8,00,000
To Bank A/c 8,00,000
31/03/21 Depreciation A/c Dr. 1,20,000
To Machinery A/c 1,20,000
31/03/21 Profit & Loss A/c Dr. 1,20,000
To Depreciation A/c 1,20,000
31/03/22 Depreciation A/c Dr. 1,60,000
To Machinery A/c 1,60,000
31/03/22 Profit & Loss A/c Dr. 1,60,000
To Depreciation A/c 1,60,000
31/03/23 Depreciation A/c Dr. 1,60,000
To Machinery A/c 1,60,000
31/03/23 Profit & Loss A/c Dr. 1,60,000
To Depreciation A/c 1,60,000
15/02/24 Depreciation A/c Dr. 1,40,000
To Machinery A/c 1,40,000
15/02/24 Bank A/c Dr. 2,10,000
Profit & Loss A/c Dr. 10,000
To Asset A/c 2,20,000
31/03/24 Profit & Loss A/c Dr. 1,40,000
To Depreciation A/c 1,40,000

Ledger
Machinery A/c
Date Particulars J.F. ₹ Date Particulars J.F. ₹
01/07/20 To Bank A/c 8,00,000 31/03/21 By Depreciation A/c 1,20,000
31/03/21 By Balance c/d 6,80,000
8,00,000 8,00,000
01/04/21 To Balance b/d 6,80,000 31/03/22 By Depreciation A/c 1,60,000
31/03/22 By Balance c/d 5,20,000
6,80,000 6,80,000
01/04/22 To Balance b/d 5,20,000 31/03/23 By Depreciation A/c 1,60,000
31/03/23 By Balance c/d 3,60,000
5,20,000 5,20,000
01/04/23 To Balance b/d 3,60,000 15/02/24 By Depreciation A/c
Depreciation A/c