11

Final Account
P.1. Rectification Entries

Particulars Dr. Cr.

(i) Returns inward account Dr. 2,575
Sales account Dr. 1,725
To Purchases account 2,575
To Returns outward account 1,725
(Being sales return and purchases return wrongly included in
purchases and sales respectively, now rectified)

(ii) Drawings account Dr. 3,500

To Purchases account 3,500
(Being goods withdrawn for own consumption included in
purchases, now rectified)
(iii) Plant and machinery account Dr. 450
To Wages account 450
(Being wages paid for installation of plant and machinery wrongly
debited to wages, now rectified)

(iv) Advertisement expenses account Dr. 825

To Purchases account 825
(Being free samples distributed for publicity out of
purchases, now rectified)

Trading and Profit and Loss Account of Mr. XYZ

For the year ended 31st March, 2019

Dr. Cr.

To Opening stock 32,250 By Sales 2,13,575

To Purchases 1,53,100 Less: Sales return 2,575 2,11,000

Less: Purchases return 1,725 1,51,375 By Closing stock 1,25,000

To Carriage inward Wages 1,125 80,000 * 100/80 *

To Gross profit c/d 11,715 100/80
To
1,39,535
3,36,000 3,36,000

To Salaries 22,550 By Gross profit b/d 1,39,535

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To Rent 4,300 By Bad debts 450

recovered
To Advertisement expenses 4,175
To Printing and 1,250
stationery
To Bad debts 1,100
To Carriage outward 1,350
To Provision for doubtful debts
5% of ₹ 1,20,000 6,000
Less: Existing provision 3,200 2,800
To Provision for discount on
debtors
2.5% of ₹ 1,14,000 2,850
Less: Existing provision 1,375 1,475
To Depreciation:
Plant and machinery 3,000
Furniture and fittings 1,025 4,025
To Office expenses 10,160
To Interest on loan 3,000
To Net profit
(Transferred to capital
account) 83,800 _______
1,39,985 1,39,985

Balance Sheet of Mr. XYZ as on 31st March, 2019

Amount Amount
Liabilities ₹ ₹ Assets ₹ ₹
Capital account 65,000 Plant and machinery 20,000

Add: Net profit 83,800 Less: Depreciation 3,000 17,000

1,48,800 Furniture and fittings 10,250
Less: 11,500 1,37,300 Less: Depreciation 1,025 9,225
Drawings
Bank overdraft 80,000 Closing stock 1,25,000
Sundry creditors 47,500 Sundry debtors 1,20,000

Payable salaries 2,450 Less: Provision for 6,000

doubtful debts
Provision for bad
debts 2,850 1,11,150
Prepaid rent 300
Cash in hand 1,450
_______ Cash at bank 3,125

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2,67,250 2,67,250

P.2. Trading & Profit and Loss Account of Mr. Sandeep

for the year ended 31st December, 2018
Particular s ₹ ₹ Particular s ₹ ₹
To Opening Stock 1,400 By Sales 9,000
To Purchase 12,000 Less: Sales return (1,000) 8,000
Less: Purchase return (2,000) 10,000 By Closing stock 4,500
To Gross Profit 1,100

12,500 12,500
To Salary 2,500 By Gross Profit 1,100
Add: Outstanding 100 2,600 By Commission 500
salary Less: Advance (100) 400

To Tax & Insurance 500 By Accrued interest 210

Add: Outstanding 200 By Net Loss 2,500
Prepaid insurance (50) 650
To Bad debt 500
Opening provision (1,000)
Closing provision 1,000 500
To Interest on overdraft 300
To Depreciation on 160
furniture
4,210 4,210

Balance Sheet of Mr. Sandeep as on 31.3.2018

Particular s ₹ ₹ Particular s ₹ ₹
Capital 16,000 By Furniture 1,600
Less: drawing (2,000) Less: Depreciation (160) 1,440
Net loss (2,500) 11,500 Bill receivable 3,000
Bank overdraft 2,000 Investment 4,000
Add: interest 300 2,300 Add: accrued interest 210 4,210
Creditors 2,000 Debtors 5,000
Bills payable 2,500 Less: Provision on bad debts (1,000) 4,000
Outstanding expenses:
Salary 100 Closing stock 4,500
Tax 200 300 Cash in hand 1,500
Commission received in advance 100 Prepaid insurance 50

18,700 18,700

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P.3. Trial Balance as on 31st March, 2019

Heads of Accounts Dr. ₹ Cr. ₹

Provision for Doubtful Debts – 250
Cash credit account (Bank overdraft) – 1,654
Capital – 4,591
Trade payables – 1,637
Dues from customers 2,983 –
Discount Received – 252
Discount allowed 733 –
Drawings 1,200 –
Office furniture 2,155 –
Carriage inward 829 –
Purchases 10,923 –
Returns Inward 330 –
Rent & Rates 314 –
Salaries 2,520 –
Inventory* 2,418 –
Provision for Depreciation on Furniture – 364
Sales – 16,882
Suspense Account (Balancing figure) 1,225
Total 25,630 25,630

* considered as opening inventory.

P.4. Trading and Profit and Loss Account for the year ending 31st March, 2020

Particulars ₹ Particulars ₹
To Opening Inventory 5,00,000 By Sales 17,00,000
To Purchases 12,50,000 By Closing Inventory 10,00,000
To Wages 3,00,000
To Gross Profit 6,50,000
27,00,000
27,00,000
50,000

To Bad Debts By Gross Profit 6,50,000

To Depreciation To 1,50,000
Salaries 2,20,000
To Net Profit transferred. to Capital A/c 2,30,000
6,50,000 6,50,000

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Balance Sheet as at 31st March,2020

Liabilities Trade ₹ ₹ Assets ₹ ₹
payables Capital: 9,00,000 Cash in Hand Trade 5,60,000
Previous Balance receivables Closing 3,50,000
Add : Net Profit 25,00,000 Inventory 10,00,000 19,10,000
2,30,000 27,30,000

1,50,000
Furniture & Fixtures 15,70,000
Plant & Machinery 17,20,000
36,30,000 36,30,000

P.5. Trading and Profit and Loss Account of Shah for the Year ended on December 31, 2015

Particulars Rs. Particulars Rs.

To Adjusted Purchases 6,99,200 By Sales 7,20,000
To Carriage on Purchases 400
To Gross Profit c/d 20,400
7,20,000 7,20,000
To Salaries 4,500 By Gross Profit b/d 20,400
To Carriage on Sales 500 By Discount 500
To Rates & Insurance:
40
Paid 0
Less: Prepaid 175 225
To Bad Debts written off 500
To Provision for Doubtful Debts
(5% of Rs. 7,500) 375
To Depreciation:
54
Buildings (2%) 0
60
Furniture (10%) 0 1,140
To Interest 1,800
To Commission payable to manager
(5% of Rs. 11,860*) 593
To Net Profit 11,267
20,900 20,900

*Rs. 20,900 less Rs. 9,040 (the total of all expenses so far), Manager is entitled to 5% of this figure.

(1) The trial balance gives “Adjusted Purchases”. It means that the opening stock has already been transferred to
the Purchases Account and thus been closed. Further, entry for closing stock has already been passed by debiting
the Closing Stock Account and crediting Purchases Account. That is why closing stock appears inside the trial
balance. It will now be shown in the Balance Sheet and not in the Trading Account since purchases already stand
reduced.

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(2) There is a Loan of Desai @ 9% taken in 2014 i.e. in last accounting year. As per mercantile system interest up
to 31.12.14 must have been provided in the last years a/c itself. The trial balance makes no mention of any interest
being paid to him. Hence, interest @ 9% must be provided for the whole of current year only.

Balance Sheet of Shah as at December 31, 2015

Liabilities Amount Assets Amount

Fixed Assets:
Capital Account 50,000 Buildings 27,000
Less: Depreciation 540 26,460
Add : Net Profit 11,267 Furniture: 6,000
Less: Drawings 1,500 59,767 Less: Depreciation 600 5,400
Current Assets:
Loan from Desai 20,000 Cash on hand 250
Add: Interest Due 1,800 21,800 Cash at Bank 1,500
Sundry Debtors 7,500
Less: Provision for Doubtful debt 375 7,125
Sundry Creditors 20,000 Stock 61,250
Commission Payable 593 Prepaid Rates 175
1,02,160 1,02,160

P.6. M/s Hari

Trading and Profit and Loss Account for the year ended on 31.3.2016
Particulars Rs. Particulars Rs.
To Opening stock 50,000 By Sales 3,21,000
To Purchases 1,50,000 (-) Return 10,000 3,11,000
(-) Return 5,100 1,45,000 By Goods used 6,000
To Wages 20,000 By Closing stock 60,000
To Gross profit c/d 1,62,000
3,77,000 3,77,000
To Salaries 30,000 By Gross Profit b/d 1,62,000
(+) Outstanding salary 3,000 By Interest 4,000
(-) Advance salary 2,000 31,000
To Rent 15,000
To Bad debts 7,000
(+) Provisions 4,000 11,000
To Printing and Stationery 8,000
To Insurance 12,000
(-) Prepaid 2,000 10,000
To Office expenses 12,000
(+) Outstanding 8,000 20,000
To Depreciation 2,000
To Net profit transferred to Capital a/c 69,000

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1,66,000 1,66,000

Balance Sheet as on 31.3.2016

Liabilities Rs. Assets Rs.
Capital 1,00,000 Furniture 20,000
(+) Net profit 69,000 (-) Dep. Provision: Bal. B/f 2,000
(-) Drawings 24,000 + Current year dep. 2,000 16,000
4,000
(-) Goods taken 6,000 1,39,000 Stock 60,000
Creditors 1,20,000 Debtors 2,00,000
Salary payable 3,000 (-) Provision: 10,000
Expense payable 8,000 1,90,000
Advance salary 2,000
Prepaid insurance 2,000
2,70,000 2,70,000

P.7. M/S K. K. Katrak

Trading and Profit & loss Account for the year ended on 31.13.16
Particulars Amount Particulars Amount
To Opening stock 20,000 By Sales 1,30,000
To Purchase 80,000 (-) Return Inward 5,000 1,25,000
(-) Return outward 2,000 78,000 By Closing stock 21,000
To Gross profit 48,000
1,46,000 1,46,000
To Depreciation: Furniture 200 By Gross Profit
48000
Plants & Mach. 3,000 By Discount
3,200 600
To Sundry expenses
300
To Travelling expenses
500
To Trade expenses
200
To Salary & wages 22,400
+ Salary payable 800
23,200
To Postage & Telegram
1,500
To Rent, Rates & Taxes
3,600
To Bad debts 400
+ Addl Bad debts written off 400
+ Provision for bad debts 1,000
1,800

To Interest on loan from Mr. Mehta150

+ Interest payable 150
300
To Insurance 800
(-) Prepared Insurance 100
700
To Discount on debtor Provided
475
To Net profit transferred to P&L app.
12,825
48,600 48,600

Profit & loss Appropriation Account

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Particulars Amount Particulars Amount

To Interest on capital 3,600 By Net profit as per P&L account 12,825
To Balance profit transferred to capital 9,555 By Interest on drawings 330
a/c
13,155 13,155

Interest on capital, interest on drawing, salary/commission etc. to owners and transfer to reserves etc. is taken
in P&L appropriation a/c.

Loan from Mr. Mehta has been taken 6 moth ago for which the interest accrued is Rs.300 out of which Rs.150
has already been paid and accounted balance Rs.150 is payable and is accounted now.

Balance sheet as on 31.13.16

Liabilities Rs. Assets Rs.
Capital 60,000 Furniture & fixture 4,000
(+) Interest on Capital 3,600 (-) Depreciation 200 3,800
(-) Drawing 12,000 Plant & Machinery 30,000
(-) Interest on drawing 330 (-) Depreciation 3,000 27,000
(+) Profit transfer from P&L a/c 9,555 60,825 Debtors 20,400
(-) Bad debt written off 400
Loan 10,000 20,000
Interest payable 150 (-) Provision for bad debt 5% 1,000
Creditors 12,000 19,000
Outstanding salary 800 (-) Provision for discount 2.5% 475 18,525
Closing stock 21,000
Prepaid Insurance 100
Cash 3,050
+ Bank 10,300 13,350
83,775 83,775

P.8. ,Redrafted Trial Balance of Mr. Bansal as on 31st March,2021

Particulars Dr. Cr.

Capital - 16,000
Opening stock 17,500 -
Drawings 3,305 -
Returns inward 550 -
Carriage inward 1,240 -
Deposit with X 1,400 -
Returns outward - 840
Carriage outward 725 -
Rent paid 800 -

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Rent outstanding - 150

Purchases 13,000 -
Sundry debtors 5,000 -
Sundry creditors - 2,200
Furniture 1,500 -
Sales - 29,000
Wages 850 -
Cash 1,370 -
Advertisement ___950 ___-__
48,190 48,190

Trading and Profit and Loss Account of Mr. Bansal for the year ended 31st March,2021
Particulars ₹ ₹ Particulars ₹ ₹
To Opening stock 17,500 By Sales 29,000
To Purchases 13,000 Less: Returns (550) 28,450
inward
Less: Returns outward (840) 12,160 By Stock 2,000
destroyed by fire
To Wages 850 By Closing stock 18,790
To Carriage inward 1,240
To Gross profit 17,490 ______
49,240 49,240
To Carriage outward 725 By Gross profit 17,490
To Rent 800
To Advertisement 950
To Bad debts 600
To Provision 220
for doubtful
debts (5% of
₹ 4,400)
To Loss of stock by fire 500
To Depreciation on furniture (10% of 150
₹1,500)

To Net profit 13,545

17,490

17,490

Balance Sheet of Mr. Bansal as at 31st March, 2021

Liabilities ₹ Assets ₹
Capital 16,000

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 FINAL ACCOUNT | 10

Add: Net profit 13,545 Furniture 1,500

29,545 Less: Depreciation 150 1,350
Less: Drawings 3,305 26,240 Deposit with X 1,400
Sundry creditors 2,200 Closing Stock 18,790
Outstanding rent 150 Sundry debtors 5,000
Less: Bad debts 600
4,400
Less: Provision for Doubtful 220 4,180
Debts
Insurance claim receivable 1,500
______ Cash 1,370
28,590 28,590

P.9.
A) Computation of Net Profit:

Commission Manager = Rate of Commission X Net Profit before charging such commission So,
Commission to manager = 10/100 X Net Profit before charging such commission
₹ 2,00,000 = 10/100 X Net Profit before charging such commission
Net Profit before charging such commission = ₹ 20,00,000
Net Profit (A) = ₹ (20,00,000 - 2,00,000) = ₹18,00,000

B) Computation of Selling Expenses:

Total income appearing in P&L A/c = ₹ 60,00,000

Total expenses other than selling expenses = ₹(26,00,000 + 13,00,000 + 2,00,000)

= ₹ 41,00,000

So,Selling Expenses + Remaining Expenses + Net Profit = Total Income

=> Selling Expenses = ₹ 60,00,000 -₹ 41,00,000 - ₹ 18,00,000

=> Selling Expenses = ₹ 1,00,000

C) Computation of Sales:

We have been given selling expenses amount to 1% of Sales

So, Sales = Selling Expenses/1 x 100
= 1,00,000/1 x 100 = 1,00,00,000
D) Computation of Gross Profit
Trading A/c

Particulars Rs. Particulars Rs.

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To COGS 45,00,000 By Sales (from C above) 1,00,00,000

To Gross Profit (Balancing Figure) 55,00,000

1,00,00,000 1,00,00,000

So, Gross Profit (D) = 55,00,000

E) Miscellaneous Income = Total Income in P&L - Gross Profit

= ₹ (60,00,000 - 55,00,000)

= ₹ 5,00,000

F = ₹ 100,00,000 (As computed in D above)

G = ₹ 60,00,000 (Total of both sides of P&L is equal after balancing has been done)

P.10. Manufacturing A/c

Particulars ₹ Particulars ₹
To Raw Material Consumed 9,15,000 By Trading A/c (W.N. 4) 18,32,000
(Balancing Figure)

To Wages (W.N. 2) 3,15,000

To Depreciation (W.N. 1) 3,95,000
To Direct Expenses (W.N. 3) 2,07,000

18,32,000 18,32,000

Raw Material A/c

Particulars ₹ Particulars ₹
To Opening Stock A/c 1,27,000 By Raw Material Consumed
(from Manufacturing A/c above) 9,15,000

To Creditors A/c (W.N. 5) 14,40,000 By Closing Stock 6,52,000

A/c (Balancing
Figure)
15,67,000 15,67,000

Working Notes:

(1) Since purchase of Machinery worth ₹ 12,00,000 has been omitted. So,
depreciation omitted from being charged = 12,00,000 X 15%
= ₹ 1,80,000

Correct total depreciation expense = ₹ (2,15,000 + 1,80,000)

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 FINAL ACCOUNT | 12

= 3,95,000

(2) Wages worth ₹ 50,000 will be excluded from manufacturing account as they pertain to office and
hence will be charged P&L A/c. So the revised wages amounting ₹ 3,15,000 will be shown in
manufacturing account

(3) Expenses to be excluded from direct expenses:

Office Electricity Charges (80,000 X 25%) 20,000

Delivery Charges to Customers 22,000
Total expenses not part of Direct Expenses 42,000

=> Revised Direct Expenses = ₹ (2,49,000 - 42,000)

= ₹ 2,07,000

Fuel charges are related to factory expenses and also freight inwards are incurred for bringing
goods to factory/ godown so they are part of direct expenses.

(4) Revised Balance to be transferred to Trading A/c:

Particulars ₹
Current Balance transferred 17,44,000
Add: Depreciation charges not recorded earlier 1,80,000
Less: Wages related to Office (50,000)
Less: Office Expenses (42,000)
Revised balance to be transferred 18,32,000

(5) Creditors A/c

Particulars ₹ Particulars ₹
To Bank A/c 23,50,000 By Balance b/d 15,70,000
To Balance c/d By Raw Materials
6,60,000 A/c (Bal. figure) 14,40,000

30,10,000 30,10,000

P.11. In the books of Mr. Black

Manufacturing Account for the year ended 31st March, 2021

Particulars ₹ Particulars ₹

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Raw material consumed: By Closing Stock of 78,000

Work in Progress
To Opening Stock of Raw 2,10,000 By Sale of Scrap 25,000
Materials By Cost of goods
Manufactured
Add: Purchases 8,50,000 (Transferred to 11,90,000
Less: Closing Stock 1,62,000 8,98,000 Trading Account)

To Opening Stock of WIP 95,000

To Wages 1,30,000
Add: Outstanding 20,000 1,50,000
Wages
To Carriage on 15,000
Purchases
To Repairs to Plant 11,000
To Rent (3/4) 45,000
To Lighting (2/3) 9,000
To Depreciation of Plant 70,000
12,93,000 12,93,000

Trading Account for the year ended 31st March, 2021

Particulars ₹ Particulars ₹
To Opening Stock of finished goods 1,55,000 By Sales 16,72,000
To Cost of goods transferred from 11,90,000 By Closing Stock 1,81,000
Manufacturing A/c
To Gross Profit c/d 5,08,000
18,53,000 18,53,000

Profit and Loss Account for the year ended 31st March, 2021

Particulars ₹ Particulars ₹

To Salaries 1,00,000 By Gross Profit b/d 5,08,000

Add: Outstanding 9,000 1,09,000 By Commission 4,500
To Telephone & Postage 10,000
To Repairs to Furniture 3,500

To Depreciation 7,500
of furniture
To Rent (1/4) 15,000
To Lighting (1/3) 4,500
To General Expenses 15,000

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To Provision for doubtful

Debts: Required (1% of 16,720
₹1,67,200)
Less: Existing Provision 16,500 220

To Net Profit 3,47,780

5,12,500 5,12,500

CLASS QUESTION
C.15 M/s Raghuram & Associates

Trading Account for the year ended 31st March 2018

Particulars Amount Particulars Amount

To Opening Stock 3,20,000 By Sales 15,00,000
To Purchases 12,00,000 Less: Sales Returns (24,000) 14,76,000
Less: Purchase (18,000) 11,82,000 By Closing Stock 4,10,000
Returns
To Freight 62,000
To Gross Profit c/d 3,22,000
18,86,000 18,86,000

Profit and Loss Account for the year ended 31st March 2018

Particulars Amount Particulars Amount

By Gross profit b/d
To Salaries 72,000 3,22,000

To Rent for Godown 55,000

Add: Outstanding 5,000 60,000 By Discount
To Provision for Doubtful Debts received
12,000
(W.N.4) 4,000
To Bad Debt 12,200

To Rent and Taxes 24,000

To Discount Allowed 7,500
To Carriage outwards 8,500
To Printing and stationery 6,000
To Electricity charges 14,000
To Insurance premium (W.N. 1) 4,800
To Depreciation (W.N. 2) 80,000
To General expenses 11,000
To Bank Charges 3,800

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 FINAL ACCOUNT | 15

To Interest on loan 4,400

Add: Outstanding (W.N. 3) 100 4,500
To Motor car expenses (Repairs) 13,000
To Net Profit transferred to Capital
A/c 8,700 3,34,000
3,34,000

Balance Sheet of M/s Raghuram & Associates as at 31st March

Liabilities Amount Assets Amount

Capital 14,11,400 Land & Building 5,00,000
Add: Net Profit 8,700 Less: Depreciation (25,000) 4,75,000
Less: Drawings (20,000) Motor Vehicles 1,00,000
Less: proprietor’s Less: Depreciation (20,000) 80,000
Insurance Premium (42,000) 13,58,100

Loan from Rajan 60,000 Office equipment 2,00,000

Add: Outstanding Interest 100 60,100 Less: Depreciation (30,000) 1,70,000

Sundry Creditors 62,000 Furniture & Fixture 50,000

Outstanding rent 5,000 Less: Depreciation (5,000) 45,000
Stock in Trade 4,10,000
Sundry Debtors 2,80,000
Less: Provision for doubtful debts (14,000) 2,66,000

Cash at hand 22,000

Cash in bank 16,000
Prepaid insurance (W.N. 1)
1,200
14,85,200
14,85,200

Working Notes:

1. Insurance premium

Insurance premium as given in trial balance 48,000

Less: Personal premium (42,000)
Less: Prepaid for 3 months (6,000/ 15 x 3) (1,200)

4,800

2. Depreciation

Building @ 5% on 5,00,000 25,000

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Motor Vehicles @ 20% on 1,00,000 20,000

Furniture & Fittings @ 10% on 50,000 5,000

Office Equipment @ 15% on 2,00,000 30,000

Total 80,000

3. Interest on Loan

Interest on Loan ` 60,000 X 10% X 9/12 = 4,500

Less: interest as per Trial Balance = (4,400)

Amount (Outstanding) 100

4. Provision for bad debts A/c

Particulars Amount Particulars Amount

To balance c/d 14,000 By balance b/d 10,000

(5% of 2,80,000) By P&L A/c 4,000

14,000 14,000

CA ZUBAIR KHAN