FINAL Accounts.pptx

Final Accounts
• Final accounts are those accounts that are prepared by
a joint stock company at the end of a fiscal year. The
purpose of creating final accounts is to provide a clear
picture of the financial position of the organisation to
its management, owners, or any other users of such
accounting information.
• Final account preparation involves preparing a set of
accounts and statements at the end of an accounting
year. The final account consists of the following
accounts:
• Trading and Profit and Loss Account
• Balance Sheet

Objectives of Final Account
• Final accounts are prepared with the following
objectives:
• To determine profit or loss incurred by a company
in a given financial period
• To determine the financial position of the
company
• To act as a source of information to convey the
users of accounting information (owners,
creditors, investors and other stakeholders) about
the solvency of the company.

Trading Account
• Trading accounts represents the Gross
Profit/Gross Loss of the concern out of sale and
purchase for the particular accounting period.
• Trading account is used to determine the gross
profit or gross loss of a business which results
from trading activities.
• Trading activities are mostly related to the buying
and selling activities involved in a business.

Trading Account
Trading Account of M/s ABC Limited
(For the period ending 31-03-2021)
Particulars Amount Particulars Amount
To Opening Stock XX By Sales XX
To Purchases XX By Closing Stock XX
To Direct Expenses XX By Gross Loss c/d XXX
To Gross Profit c/d XXX
Total XXXX Total XXXX

Manufacturing Account
• Manufacturing account prepared in a case
where goods are manufactured by the firm
itself. Manufacturing accounts represent cost
of production.
• Cost of production then transferred to Trading
account where other traded goods also
treated in a same manner as Trading account.

(For the year ending……….)
To Opening Stock of Work-in-
Progress
XX
By Closing Stock of
Work-in-Progress
XX
To Raw Material Consumed XX By Scrap Sale XX
To Wages XXX By Cost of Production XXX
To Factory overheadxx (Balancing figure)
Power or fuelxx
Dep. Of Plantxx
Rent- Factoryxx
Other Factory Exp.xx xxx

Profit and Loss Account
• Profit & Loss account represents the Gross profit
as transferred from Trading Account on the credit
side of it along with any other income received by
the firm like interest, Commission, etc.
• Profit and loss account shows the net profit and
net loss of the business for the accounting
period. This account is prepared in order to
determine the net profit or net loss that occurs
during an accounting period for a business
concern.

Profit & Loss Account of M/s ………
(For the period ending ………..)
To Salaries XX By Gross Profit b/d XX
To Rent XX
To Office Expenses XX By Bank Interest received XX
To Bank charges XX By Discount XX
To Bank Interest XX By Commission Income XX
To Electricity Expenses XX
By Net Loss transfer to
Balance sheet
XX
To Staff Welfare Expenses XX
To Audit Fees XX
To Repair & Renewal XX
To Commission XX
To Sundry Expenses XX
To Depreciation XX
To Net Profit transfer to
Balance sheet
XX

Parameters Trading Account Profit and Loss Account
Meaning Trading account used to find the
gross profit/loss of the business
for an accounting period
Profit and loss account or
Income statement is used to
find the net profit/loss of the
business for an accounting
period
Timing Trading Account is prepared first
and then profit and loss account
is prepared.
Profit/Loss Account is prepared
after the trading account is
prepared.
Purpose For knowing the gross profit or
gross loss of a business
For knowing the net profit or
net loss of a business
Stage It is the first stage in the
creation of the final account.
it is the second stage in the
creation of the final account.
Dependency It is dependent on trial balance It is dependent on trading
account
Transfer of Balance The balance in the form of Gross
loss or Gross Profit of the
trading account will be
transferred to the Profit and
Loss Account
The balance in the form of Net
loss or Net Profit of the profit
and loss account will be
transferred to the Balance
Sheet

Balance Sheet
• A balance sheet reflects the financial position
of a business for the specific period of time.
The balance sheet is prepared by tabulating
the assets (fixed assets + current assets) and
the liabilities (long term liability + current
liability) on a specific date.

Balance Sheet Of XYZ Ltd (as at 31
March 2020)
Liabilities Rs. Assets Rs.
Current Liabilities:
Bank Overdraft
Bills Payable
Outstanding Expenses
Sundry Creditors
Income received-in-advance
Long-term Liabilities:
Loan
Capital:
Opening balance xxxx
Add: Net Profit xxxx
(Less: Net Loss)
Less: Drawing (xxxx)
Current Assets:
Cash-in hand
Cash at Bank
Bills Receivable
Sundry Debtors
Prepaid Expenses
Accrued Income
Closing Stock
Investment:
Fixed Assets:
Furniture an Fixture
Plant & Machinery
Building
Land
Goodwill

Meaning of Adjustment entries:
• Those entries which need to be passed at the
end of the accounting year to show the
accurate profit or loss and fair financial
position of the business.

Need of Adjustment:
• It helps us to record those adjustment which
were left or committed and were not recorded in
the accounts.
• A proper recording of adjusting entries assists us
to separate all the financial transactions into a
year-wise category.
• Recording of adjusting entries provides us the
room for making various provisions which are
made at the end of year, after assessing the
entire year’s performance.
– .

Closing Stock:
• Closing Stock: the closing stock represents the
cost of unsold goods lying in the stores at the
end of the accounting period.
Adjusting Entry
Trading
Account
Balance Sheet
Closing Stock A/c Dr
To Trading A/c
(Being the closing stock
recorded in the books)
Shown on
the credit
side.
Shown on the
assets side
under current
assets.

Outstanding Expenses:
• There are some expenses like salary, wages, rent
etc which are incurred but remain unpaid at the
end of the accounting period.
• For Example – Wages amounting 5000 becomes
due on 31st March but remains unpaid during the
respected financial year. These wages are termed
as outstanding wages.
• Such outstanding wages will be added in the
wages appearing in the trading and profit and
loss account and will also show as a liability in the
balance sheet of an entity.

Adjusting Entry
Trading
Account
Profit and Loss
Account
Balance
Sheet
Concerned Expenses
A/c Dr
To Outstanding
Expenses A/c
(Being the unpaid
expenses provided)
(If it is a
direct
expenses, e.g.
wages)Added
to the
concerned
expenses on
the debit
side.
(If it is an
indirect
expenses, e.g.
salaries)Added
to the
concerned
expenses on the
debit side.
Shown on the
liabilities side
as a current
liability.

Prepaid Expenses:
• These are the expenses which are paid in one
accounting period but its benefits are received
in another accounting year.
• For Example – Insurance premium for one
year amounting 12,000 paid on 1st February.
The accounting year ends on 31st March. Now,
in such case insurance premium for ten
months, April to January amounting 10,000 is
paid in advance i.e. prepaid.

Adjusting Entry Trading Account
Profit and Loss
Account
Balance Sheet
PrepaidExpens
es A/c Dr
To Concerned
Expenses A/c
(Being
concerned
expenses
paid in
advance)
(If it is a direct
expenses, e.g.
wages)Deduct
ed from the
concerned
expenses on
the debit
side.
(If it is an
indirect
expenses, e.g.
insurance
premium)Dedu
cted from the
concerned
expenses on
the debit
side.
Shown on the
assets side as a
current assets.

Accrued Income
• It is the income which is earned in the current
accounting period but the same is not
received during the accounting period.

Accrued Income
Adjusting Entry Profit and Loss Account Balance Sheet
Accrued Income A/c DrTo
Concerned Income
A/c
(Being concerned
income receivable)
Added to the respective
income on the credit side.
Shown on the assets side
as a current asset.

Income received in Advance
Adjusting Entry
Profit and Loss
Account
Balance Sheet
Concerned Income
A/c DrTo Income
Received in
Advance A/c
(Being
adjustment for
unearned
income)
Deducted from the
concerned income on
the credit side.
Shown on the
liabilities side.

Income received in Advance
• These are the incomes which are received in the
current accounting period but services against
the same will be rendered in the next accounting
period. For Example, Rent received in advance.
• Such advance rent will be deducted from the rent
received on the credit side of profit and loss
account. And also it will be shown as a liability in
the balance sheet as rent received in advance.

Depreciation on Fixed Asset
8.
Depreciation
Depreciation
account dr.
xxx
To respective
asset account
xxxx
It will go to the debit
side of profit and loss
account
It will deduct from fixed
asset . Because it
decrease the value of
asset
=fixed asset -
depreciation
Depreciation on the fixed asset is shown as an expense
on the debit side of the Profit and Loss Account.
Whereas, in a balance sheet, it is deducted from the
respected fixed asset.

Bad Debts
When debtors make failure in payment of debts they are
called bad debt. Bad debt is the amount which is
unrecoverable from the debtors.
• We show Bad debts on the debit side of Profit and loss
account. Also, in the Balance Sheet, we deduct the amount
of bad debts from the debtors. However, when the bad
debts appear in the trial balance then in such a case we will
debit it as an expense in the Profit & loss account only.
• Sometimes, a firm may recover these bad debts
subsequently. In such cases, the amount of bad debts
recovered is credited to the bad recovered account. Also,
such recovered amount is credited in the Profit & loss
account.

Interest on capital
• Interest on capital of proprietor or partners is a business
expense.
• Adjustment entry is as follows: This entry will increase the
balance in the capital account of proprietor or partners by the
amount of interest as it appears in the balance sheet. Thus,
we debit Interest on capital as an expense in the statement of
Profit and loss
Date Particulars Amount (Dr) Amount (Cr)
xx Interest on Capital A/c Dr . XXX
To Capital A/c XXX

Manager’s commission
• Sometimes the manager is also eligible to a commission on
profits at a fixed rate. The calculation of commission is as
follows: –
• Commission on profit before charging such commission: –
• Profit before commission x {Rate of Commission} /{100}
• Commission on profit after charging such commission: –
• Profit before commission x {Rate of Commission}/{100 +
Rate of Commission }
• We show the commission payable as an expense in Profit
and Loss account and also in the balance sheet on the
liabilities side.

basis Trial Balance Balance Sheet
1. Inherent meaning
Trial balance is created to record all
the balances of ledger accounts.
A balance sheet is created to see
whether the assets equal liabilities
plus equity.
2. Application
Trial balance is used to see whether
the total of debit balances equal
credit balances.
The balance sheet is used to show
the accuracy of the financial affairs
of a company.
3. Is it a financial
statement?
No. Yes.
4. Division – Trial
Balance vs. Balance
Sheet
Every account is divided between
debit and credit balances.
Every account is divided into
assets, liabilities, and shareholders’
equity.
5. Used for Internal purpose. External purpose.
6. Recorded when?
Trial balance is recorded at the end
of each month, quarter, half-year,
and year.
The balance sheet is only recorded
at the end of any financial year.
7. Source General ledger. Trial Balance.
8. Signature The auditor doesn’t need to sign it. The auditor needs to sign it.
9. Rule of thumb –
Trial Balance vs.
Balance Sheet
There’s no rule of thumb in
arranging ledger balances.
Assets, liabilities, and shareholders’
equity should be arranged in
proper order.
10. Part of the final
accounts
Trial balance is not part of the final
accounts.
The balance sheet is part of
the final accounts.

From the following information
determine Gross Profit for the year
ended 31st March, 2018
₹
₹
Opening Stock (1st
April, 2017)
25,000 Goods purchased
during the year
1,40,00
0
Freight and Packing 10,000 Closing Stock (31st
March, 2018)
30,000
Sales 1,90,000 Packing Expenses
on Sales
6,000

Trading Account
for the year ended March 31, 2018
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Opening Stock 25,000 Sales 1,90,000
Purchases 1,40,000 Closing Stock 30,000
Freight and Packing 10,000
Gross Profit (Balancing
Figure)
45,000
2,20,000 2,20,000
Note: Packing Expenses (Rs 6,000) on Sales is an Indirect Expense, therefore it is not
considered to compute the amount of Gross Profit.

Ascertain Gross Profit from the
following:
₹
₹
Opening Stock 2,00,000 Carriage on Sales 30,000
Closing Stock 1,80,000 Office Rent 58,000
Purchases 8,50,000 Sales 14,07,000
Carriage on
Purchases
23,000

Trading Account
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Opening Stock 2,00,000 Sales 14,07,000
Purchases 8,50,000 Closing Stock 1,80,000
Carriage on Purchases 23,000
Figure)
5,14,000
15,87,000 15,87,000

₹ ₹
Stock on 1st April,
2017
40,000 Returns Outward 80,000
Purchases 4,00,000 Wages and Salaries 50,000
Sales 3,80,000 Returns Inward 20,000
Carriage Inwards 20,000 Stock on 31st March, 2018 1,30,000
QUESTION
From the following information prepare Trading Account for the year
ended 31st March, 2018
Net Realisable Value (Market Value) of stock as on 31st March,
2018 was ₹ 1,20,000.

ANS
Trading Account
Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Purchases 4,00,000 Less: Return Inwards (20,000) 3,60,000
Less: Return Outwards (80,000) 3,20,000 Closing Stock 1,20,000
Carriage Inwards 20,000
Wages and Salaries 50,000
Gross Profit (Balancing Figure) 50,000
4,80,000 4,80,000
Note: Closing Stock is taken at its Market Price (i.e. Rs 1,20,000) instead of its Cost (i.e. Rs 1,30,000).
This is because, as per Principle of Conservatism, Closing stock is taken at Cost or Market Price
whichever is less.

Q.
• From the following information, prepare
Trading Account for the year ended 31st
March, 2018:
Adjusted Purchases ₹ 6,60,000; Sales ₹
7,44,000; Closing Stock ₹ 50,400; Freight and
Carriage Inwards ₹ 3,600; Wages ₹ 6,000;
Freight and Cartage Outwards ₹ 2,000.

ANS
Trading Account
Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Purchase (Adjusted) 6,60,000 Sales 7,44,000
Freight and Carriage Inwards 3,600
Wages 6,000
Figure)
74,400
7,44,000 7,44,000
1. Freight and Carriage Outwards are indirect expenses, therefore it is not
recorded in the Trading Account.
2. Closing Stock (i.e. Rs 50,400) is not recorded in the Trading Account as it is
already adjusted in the amount of Adjusted Purchases.

₹ ₹
Salaries and Wages 30,000 Advertising 10,000
Commission Paid 2,000 Discount Allowed 18,000
Postage and Courier 1,500 Rent Received 17,000
Insurance 3,000 Interest on Investment 15,000
Interest Paid 4,000 Bad Debts 9,000
Carriage Outwards 5,000 Brokerage Paid 950
From the following, prepare Profit and Loss Account of Sohan Lal as it
would appear in the 1st year that ended 31st March, 2019:
The Gross Profit was 45% of sales, which amounted to ₹ 6,50,000.

Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Salaries and Wages 30,000
Gross Profit (6,50,000
× 45%)
2,92,500
Commission Paid 2,000 Rent Received 17,000
Postage and Telegram 1,500 Interest on Investments 15,000
Insurance 3,000
Interest Paid 4,000
Carriage Outwards 5,000
Advertising 10,000
Discount Allowed 18,000
Bad Debts 9,000
Brokerage Paid 950
Net Profit (Balancing
Figure)
2,41,050
3,24,500 3,24,500

₹ ₹
Gross Profit 1,20,000 Discount Received 6,000
Rent 5,000 Printing and Stationery 4,000
Salary 35,000 Legal Charges 10,000
Commission Paid 19,000 Bad Debts 2,000
Interest on Loan 5,000 Loss by Fire 6,000
Advertisement 8,000 Depreciation 4,000
Interest Received 8,000
QUESTION -From the following information, prepare Profit
and Loss Account for the year ended 31st March, 2018:

Dr. Cr.
Particulars (Rs) Particulars (Rs)
Rent 5,000 Gross Profit 1,20,000
Salary 35,000 Interest Received 8,000
Commission Paid 19,000 Discount Received 6,000
Interest on Loan 5,000
Advertisement 8,000
Printing and Stationery 4,000
Legal Charges 10,000
Bad Debts 2,000
Loss by Fire 6,000
Depreciation 4,000
Figure)
36,000
1,34,000 1,34,000

Dr.
(₹)
Cr.
(₹)
Capital … 4,00,000
Drawings 44,000 …
Debtors and Creditors 64,000 42,000
Cash in Hand 3,600 …
Cash at Bank 72,000 …
Plant 1,00,000 …
Furniture 37,000 …
Net Profit … 16,600
General Reserve … 10,000
Closing Stock 1,48,000 …
Total 4,68,600 4,68,600
Q.From the following particular, prepare Balance Sheet as at 31st March, 2018:

ANS
Balance Sheet
as on March 31, 2018
Liabilities
Amount
(Rs)
Assets
Amount
(Rs)
Capital 4,00,000 Plant 1,00,000
Less: Drawings (44,000)
Furniture 37,000
Add: Net Profit 16,600 3,72,600 Closing Stock 1,48,000
General Reserve 10,000 Debtors 64,000
Creditors 42,000 Cash at Bank 72,000
Cash in Hand 3,600
4,24,600 4,24,600

From the following information, prepare Balance
Sheet of a trader as at 31st March, 2018
arranging the assets and liabilities
₹
₹
Goodwill 20,000 Bank 20,000
Capital 1,80,000 Sundry Creditors 63,000
Liabilities for Expenses 1,200 Bills Receivable 13,000
Cash in Hand 1,000 Plant and Machinery 40,000
Investment 20,000 Provision for Doubtful Debts 2,500
Bills Payable 10,700 Closing Stock 80,000
Net Profit 92,600 Furniture 16,000
Sundry Debtors 50,000 Drawing 30,000
Land and Building 60,000

Balance Sheet
Liabilities
Amount
(Rs)
Assets
Amount
(Rs)
Capital 1,80,000 Goodwill 20,000
Less: Drawings (30,000) Land and Building 60,000
Add: Net Profit 92,600 2,42,600 Plant and Machinery 40,000
Sundry Creditors 63,000 Furniture 16,000
Bills Payable 10,700 Investment 20,000
Liabilities for Expenses 1,200 Closing Stock 80,000
Sundry Debtors 50,000
Less: Provision for
Doubtful Debts (2,500) 47,500
Bill Receivable 13,000
Bank 20,000
Cash in Hand 1,000
3,17,500 3,17,500

Prepare Trading and Profit and Loss Account and Balance Sheet
of Jagat Shah as at 31st March, 2018 from the following
balances:
The Closing Stock was valued at ₹ 2,00,000.
₹ ₹
Capital (Cr.) 3,60,000 Salaries 60,000
Machinery 70,000 General Expenses 20,000
Sales 8,20,000 Rent 50,000
Purchases 4,00,000 Purchases Return 5,000
Sales Return 10,000 Debtors 3,00,000
Stock on 1st April,
2017
1,00,000 Cash 40,000
Drawing 40,000 Carriage Outwards 20,000
Wages 1,00,000 Advertising 20,000
Carriage Inwards 5,000 Creditros 50,000

Financial Statements of Jagat Shah
Trading Account
Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Purchas
es
4,00,000 Less: Sales
Return
(10,000) 8,10,000
Less:
Purcha
ses
Return
(5,000) 3,95,000
Closing Stock 2,00,000
Wages 1,00,000
Carriage Inwards 5,000
Gross Profit
(Balancing Figure)
4,10,000
10,10,000
10,10,000

Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Salaries 60,000 Gross Profit 4,10,000
General Expenses 20,000
Rent 50,000
Carriage Outwards 20,000
Advertising 20,000
Figure)
2,40,000
4,10,000 4,10,000

Balance Sheet
Liabilities
Amount
(Rs)
Assets
Amount
(Rs)
Capital 3,60,000 Fixed Assets
Less: Drawings (40,000) Machinery 70,000
Add: Net Profit 2,40,000 5,60,000 Current Assets
Current Liabilities Closing Stock 2,00,000
Creditors 50,000 Debtors 3,00,000
Cash 40,000
6,10,000 6,10,000

From the following balances, prepare Trading and Profit
and Loss Account and Balance Sheet:
Closing Stock was valued at ₹ 30,000.
Debit Balances: ₹ Debit Balances (Contd.): ₹
Machinery 3,50,000 Rent 45,000
Debtors 2,70,000 Sundry Expenses 20,000
Drawings 90,000 Carriage 15,000
Purchases 9,50,000 Credit Balances:
Wages 5,00,000 Capital 10,00,000
Bank 1,50,000 Creditors 1,40,000

Trading Account
Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Opening Stock 2,00,000 Sales
14,50,00
0
Purchases 9,50,000
Closing Stock 30,000
Wages 5,00,000 Gross Loss
(Balancing Figure)
1,85,000
Carriage 15,000
16,65,000 16,65,00
0

Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Gross Loss 1,85,000
Rent 45,000 Net Loss (Balancing
Figure)
2,50,000
Sundry Expenses 20,000
2,50,000 2,50,000

Balance Sheet
Liabilities
Amount
(Rs)
Assets
Amount
(Rs)
Less: Drawings (90,000)
Machinery 3,50,000
Less: Net Loss (2,50,000) 6,60,000
Current Assets
Current Liabilities Closing Stock 30,000
Creditors 1,40,000 Debtors 2,70,000
Bank 1,50,000
8,00,000 8,00,000

From the following balances of Anand, prepare Trading Account, Profit
and Loss Account and Balance Sheet as at 31st March, 2018:
Value of goods on hand (31st March, 2018) was ₹ 1,43,000.
₹ ₹
Credit Balances: Debit Balances (Contd.):
Capital 3,60,000 Postage 2,730
Creditors 87,200 Bad Debts 2,870
Bills Payable 25,270 Interest 12,950
Sales 7,81,820 Insurance 4,170
Bad Debts
Recovered
1,750 Machinery 1,00,000
Loan 1,20,000 Stock (Opening) 99,450
Debit Balances: Purchases 6,20,920
Debtors 38,850 Wages 43,000
Salaries 40,000 Building 2,37,800
Discount 10,000 Selling Expenses 1,750
Fixtures and Fittings 1,61,550

Financial Statement of Anand
Trading Account
Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Purchases 6,20,920 Closing Stock 1,43,000
Wages 43,000
Gross Profit
(Balancing Figure)
1,61,450
9,24,820 9,24,820

Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Salaries 40,000 Gross Profit 1,61,450
Discount 10,000 Bad debts Recovered 1,750
Selling Expense 1,750
Postage 2,730
Bad Debts 2,870
Interest 12,950
Insurance 4,170
Figure)
88,730
1,63,200 1,63,200

Balance Sheet
Liabilities
Amou
nt
(Rs)
Assets
Amount
(Rs)
Capita 3,60,000 Fixed Assets
Add: Net Profit 88,730 4,48,73
0
Building 2,37,800
Loan 1,20,00
0
Machinery 1,00,000
Current Liabilities Fixtures and fittings 1,61,550
Creditors 87,200 Current Assets
Bills Payable 25,270 Closing Stock 1,43,000
Debtors 38,850
6,81,20
0
6,81,200

Following are the balances extracted from the books of
Manish Gupta on 31st March, 2018:
₹
₹
Capital 1,90,000 Cash at Bank 26,000
Drawing 7,000 Salaries 8,000
Plant and Machinery 1,20,000 Repairs 1,900
Delivery Vehicle 26,000 Stock on 1st April, 2017 16,000
Sundry Debtors 36,000 Rent 4,500
Sundry Creditors 26,000 Manufacturing Expenses 1,500
Purchases 20,000 Bills Payable 23,500
Sales 42,000 Bad Debts 5,000
Wages 8,000 Carriage 1,600
Prepare Trading and Profit and Loss Account and Balance Sheet as at 31st
March, 2018 after following adjustments are made:
(i) Closing Stock was ₹ 16,000.
(ii) Depreciate Plant and Machinery @ 10% and Delivery Vehicle @ 15%.
(iii) Unpaid Rent amounted to ₹ 500.

Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Opening stock 16,000 Sales 42,000
Purchases 20,000 Closing
Stock
16,000
Wages 8,000
Manufacturing Expenses 1,500
Carriage 1,600
Gross Profit (Balance Figure) 10,900
58,000 58,000
Trading Account

Particulars
Amount
(Rs)
Particulars
Amoun
t
(Rs)
Salaries 8,000 Gross Profit 10,900
Repairs 1,900 Net Loss (Balancing Figure) 24,900
Rent 4,500
Add: Unpaid Rent 500 5,000
Bad Debts 5,000
Depreciation on:
Plant and
machinery
12,000
Delivery
Vehicle
3,900 15,900
35,800 35,800

Balance Sheet
Liabilities
Amount
(Rs)
Assets
Amount
(Rs)
Less: Drawings (7,000) Plant and
Machinery
1,20,000
Less: Net Loss (24,900) Less:10%
Deprecation
(12,000) 1,08,000
1,58,100 Delivery Vehicle 26,000
Less:15%
Depreciation
(3,900) 22,100
Current Liabilities
Sundry Creditors 26,000 Current Assets
Bills Payable 23,500 Closing Stock 16,000
Unpaid Rent 500 Sundry Debtors 36,000
Cash at Bank 26,000
2,08,100 2,08,100

Prepare Trading and Profit and Loss Account and
Balance Sheet from the following balances
relating to the year ended 31st March, 2018
₹ ₹
Capital 1,00,000 Wages 50,000
Creditors 12,000 Bank 10,000
Returns Outward 5,000 Repairs 500
Sales 1,64,000 Stock on 1st April, 2017 20,000
Bills Payable 5,000 Rent 4,000
Plant and Machinery 40,000 Manufacturing Expenses 8,000
Sundry Debtors 24,000 Trade Expenses 7,000
Drawing 10,000 Bad Debts 2,000
Purchases 1,05,000 Carriage 1,500
Returns Inward 3,000 Fuel and Power 1,000
Additional Information:
(i) Closing Stock was valued at ₹ 14,500.
(ii) Depreciate Plant and Machinery by ₹ 4,000.
(iii) Write off Bad Debts ₹ 5,000.
(iv) A sum of ₹ 400 is due for repairs.

Trading Account
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Opening stock 20,000 Sales 1,64,000
Purchases 1,05,000 Less: Return Inwards (3,000) 1,61,000
Less: Return out
words
(5,000) 1,00,000 Closing Stock 14,500
Wages 50,000 Gross Loss (Balancing Figure) 5,000
Manufacturing Expenses 8,000
Carriage 1,500
Fuel and Power 1,000
1,80,500 1,80,500

Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Gross Loss 5,000
Repairs 500
Add:
outstanding
400 900
Rent 4,000
Miscellaneous Expenses 7,000
Bad Debts 2,000 Net Loss (Balancing
Figure)
27,900
Add: Additional bad
debts
5,000 7,000
Depreciation on Plant and
Machinery
4,000
27,900 27,900

Balance Sheet
Liabilities
Amou
nt
(Rs)
Assets
Amou
nt
(Rs)
Less: Drawings (10,000) Plant and
Machinery
40,000
Less: Net Loss (27,900) 62,100 Less: Depreciation (4,000) 36,000
Current Liabilities Current Assets
Creditors 12,000 Closing Stock 14,500
Bills Payable 5,000 Sundry Debtors 24,000
Outstanding Repairs 400 Less: Further Bad
Debts
(5,000) 19,000
Bank 10,000
79,500 79,500

Following Trial Balance has been extracted from the books of
M/s. Ram Prasad & Sons on 31st March, 2018:
Particulars Dr. Particulars Cr.
Machinery 4,00,000 Capital 9,00,000
Cash at Bank 1,00,000 Sales 16,00,000
Cash in Hand 50,000 Sundry Creditors 4,50,000
Wages 1,00,000 Interest Received 30,000
Purchases 8,00,000
Stock on 1st April, 2017 6,00,000
Sundry Debtors 4,40,000
Bills Receivable 2,90,000
Rent 45,000
Commission 25,000
Salaries 50,000
29,80,000 29,80,000
(i) Outstanding salaries were ₹ 45,000.
(ii) Depreciate Machinery at 10%.
(iii) Wages outstanding were ₹ 5,000.
(iv) Rent prepaid ₹ 10,000.
(v) Provide for interest on capital 5% per annum.
(vi) Stock on 31st March, 2018 ₹ 8,00,000.
Prepare Trading and Profit and Loss Account for the year ended 31st March, 2018 and Balance Sheet
as at that date.

.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Purchases 8,00,000 Closing
Stock
8,00,000
Wages 1,00,000
Add: Outstanding Wages 5,000 1,05,000
Gross Profit (Balancing Figure) 8,95,000
24,00,000 24,00,000
Financial Statement of M/s. Ram Prasad & Sons
Trading Account

Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Rent 45,000 Gross Profit 8,95,000
Less: Prepaid Rent (10,000) 35,000 Interest Received 30,000
Commission 25,000
Salaries 50,000
Add: Outstanding
Salaries
45,000 95,000
Depreciation on Machinery 40,000
Net Profit (Balancing Figure) 6,50,000
9,25,000 9,25,000

Balance Sheet
Liabilities
Amount
(Rs)
Assets
Amount
(Rs)
Add: Net Profit 6,50,000 15,50,00
0
Machinery 4,00,00
0
Current Liabilities Less: 10%
Depreciation (40,000) 3,60,000
Sundry Creditors 4,50,000 Current Assets
Outstanding Salary 45,000 Closing Stock 8,00,000
Outstanding Wages 5,000 Sundry Debtors 4,40,000
Bills Receivable 2,90,000
Prepaid Rent 10,000
Cash at Bank 1,00,000
Cash in Hand 50,000
20,50,00
0
20,50,000

From the following Trial Balance of M/s. Shradha & Sons as on 31st March,
2018, prepare Trading and Profit and Loss Account and Balance Sheet.
Heads of Accounts Dr. Balance Cr.Balance
Capital … 80,000
Drawings 18,000 …
Sales … 1,55,000
Purchases 82,600 …
Stock(1stApri 42,000 …
Returns Outward … 1,600
Carriage Inwards 1,200 …
Wages 4,000 …
Power 6,000 …
Machinery 50,000 …
Furniture 14,000 …
Rent 22,000 …
Salary 15,000 …
Insurance 3,600 …
8% Bank Loan … 25,000
Debtors 20,600 …
Creditors … 18,900
Cash in Hand 1,500 …
Total 2,80,500 2,80,500
Adjustments:
(i) Closing Stock ₹ 64,000.
(ii) Wages outstanding ₹
2,400.
(iii) Bad Debts ₹ 600.
(iv) Provision for Doubtful
Debts to be 5%.
(v) Rent is paid for 11
months.
(vi) Insurance premium is
paid per annum, ended 31st
May, 2018.
(vii) Loan from the bank was
taken on 1st October, 2017.
(viii) Provide Depreciation on
machinery @ 10% and on
Furniture @ 5%.

Financial statement of M/s. Shradha & Sons
Trading Account
Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Purchases 82,600
Less: Return
Outwards
(1,600) 81,000
Carriages Inwards 1,200 Closing Stock 64,000
Wages 4,000
Add:
Outstanding
Wages
2,400 6,400
Power 6,000
Gross Profit (Balancing Figure) 82,400
2,19,000 2,19,000

Dr. Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Rent 22,000 Gross Profit 82,400
Add: Outstanding for One
month (22,000/11)
2,000 24,000
Salary 15,000
Insurance 3,600
Less: Prepaid 2 month(3,600
× 2/12)
(600) 3,000
Outstanding Interest on Bank Loan
(25,000 × 8% × 6/12)
1,000
Bad Debts 600
Add: Provision for Doubtful
Debts
1,000 1,600
Depreciation on:
Machinery 5,000
Furniture 700 5,700
Net Profit (Balancing Figure) 32,100
82,400 82,400

Balance Sheet
Liabilities
Amount
(Rs)
Assets
Amount
(Rs)
Capital 80,000 Fixed Assets
Add: Net Profit 32,100 Machinery 50,000
Less: Drawings (18,000) 94,100 Less: 10%
Depreciation
(500) 45,000
8% Bank Loan 25,000 Furniture 14,000
Add: Outstanding
Interest
1,000 26,000 Less: 5% Deprecation (700) 13,300
Current Liabilities Current Assets
Creditors 18,900 Closing Stock 64,000
Wages Outstanding 2,400 Debtors 20,600
Rent Outstanding 2,000 Less: Bad Debts (600)
Less: 5% Provision for
doubtful Debts
(1,000) 19,000
Prepaid Insurance 600
Cash in hand 1,500
1,43,400 1,43,400

Particulars Dr.(₹) Particulars Cr.(₹)
Stock on 1st April,
2017
25,000 Sales
2,27,800
Furniture 8,000 Commission 500
Plant and Machinery 1,50,000
Returns
Outward
1,000
Debtors 30.000 Creditors 40,000
Wages 12,000 Capital 1,50,000
Salaries 20,000
Bad Debts 1,000
Purchases 1,20,000
Electricity Charges 1,200
Telephone Charges 2,400
Postage Expenses 1,800
Returns Inward 900
Insurance Premium 1,500
Cash in Hand 2,500
Cash at Bank 40,000
4,19,300 4,19,300
Trial Balance of a business as at 31st March, 2018 is given below
(i) Closing Stock was
valued at ₹7,000.
(ii) Outstanding
liabilities for wages
were ₹600 and
salaries ₹1,400.
(iii) Depreciation is to
be provided @ 5%
p.a. on all fixed
assets.
(iv) Included in Plant
and Machinery is a
machine purchased
for ₹10,000 on 1st
October, 2017.
(v) Insurance
premium paid in
advance ₹200.
Prepare Trading and Profit and Loss Account for the year ended 31st March, 2018 and Balance
Sheet as at that date after taking into account the following adjustments:

Trading Account
Dr. Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Purchases 1,20,000 Less: Returns 900 2,26,900
Less: Returns 1,000 1,19,000 Closing Stock 7,000
Wages 12,000
Add: Outstanding
Wages
600 12,600
Gross Profit 77,300
2,33,900 2,33,900

Profit & Loss Account
Dr. Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Bad Debts 1,000Gross Profit 77,300
Insurance Premium 1,500 Commission 500
Less: Prepaid 200 1,300
Salaries 20,000
Add: Outstanding
Salaries
1,400 21,400
Electricity Charges 1,200
Postage Expenses 1,800
Telephone Charges 2,400
Depreciation on:
Furniture 400
Plant & Machinery 7,250 7,650
Net Profit 38,050
77,800 77,800

Balance Sheet
Dr. Cr.
Liabilities
Amount
(₹)
Assets
Amount
(₹)
Creditors 40,000 Furniture 8,000
Outstanding Wages 600 Less: Depreciation 400 7,600
Outstanding Salaries 1,400 Plant & Machinery 1,50,000
Capital 1,50,000 Less: Depreciation 7,250 1,42,750
Add: Net Profit 38,050 1,88,050 Cash at Bank 40,000
Cash in Hand 2,500
Closing Stock 7,000
Debtors 30,000
Prepaid Insurance 200
2,30,050 2,30,050

Particulars
Amount
(₹)
Particulars
Amount
(₹)
Narain Lal's Capital 3,00,000 Sales 15,00,000
Narain Lal's Drawings 50,000 Sales Return 20,000
Furniture and Fittings 26,000 Discount (Dr.) 16,000
Bank Overdraft 42,000 Discounts (Cr.) 20,000
Creditors 1,38,000 Insurance 20,000
Business Premises 2,00,000 General Expenses 40,000
Stock on 1st April, 2017 2,20,000 Salaries 90,000
Debtors 1,80,000 Commission (Dr.) 22,000
Rent from Tenants 10,000 Carriage on Purchases 18,000
Purchases 11,00,000 Bad Debts Written off 8,000
(i) Closing Stock as on 31st March, 2018 was ₹2,00,600.
(ii) Depreciate: Business Premises by ₹3,000 and Furniture and Fittings by ₹2,500.
(iii) Make a provision of 5% on debtors for doubtful debts.
(iv) Carry forward ₹2,000 for unexpired insurance.
(v) Outstanding salary was ₹15,000.
Prepare Trading and Profit and Loss Account for the year and Balance Sheet as at that
date.
Following are the balances extracted from the books of Narain Lal on 31st March,
2018:

Trading Account
Dr. Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Purchases 11,00,000 Less: Returns 20,000 14,80,000
Carriage on Purchases 18,000 Closing Stock 2,00,600
Gross Profit 3,42,600
16,80,600 16,80,600

Profit & Loss Account
Dr. Cr.
Particulars Amount(₹) Particulars Amount(₹)
Commission 22,000Gross Profit 3,42,600
Insurance Premium 20,000 Discount 20,000
Less: Prepaid 2,000 18,000Rent from Tenants 10,000
Salaries 90,000
Add: Outstanding
Salaries
15,000 1,05,000
Bad Debts Written Off 8,000
Provision for Doubtful Debts 9,000
Discount 16,000
Depreciation on:
Furniture 2,500
Business Premises 3,000 5,500
Net Profit 1,49,100
3,72,600 3,72,600

Balance Sheet
Dr. Cr.
Liabilities
Amount
(₹)
Assets
Amount
(₹)
Bank Overdraft 42,000 Furniture & Fittings 26,000
Creditors 1,38,000 Less: Depreciation 2,500 23,500
Outstanding Salaries 15,000 Business Premises 2,00,000
Capital 3,00,000 Less: Depreciation 3,000 1,97,000
Less: Drawings 50,000 Debtors 1,80,000
Add: Net Profit 1,49,100 3,99,100 Less: Provision 9,000 1,71,000
Closing Stock 2,00,600
Prepaid Insurance 2,000
5,94,100 5,94,100

MCQ -1
• Business is said to be in a profit when
• A) Expenditure exceeds income
• B) Income exceeds expenditure
• C) Income exceeds liability
• D) Assets exceed expenditure

ANS -MCQ -1
• Business is said to be in a profit when
• A) Expenditure exceeds income
• B) Income exceeds expenditure
• C) Income exceeds liability
• D) Assets exceed expenditure

MCQ -2
• As per the accounting double-entry system, an
account that receives the benefit is
• A) No need to show as an accounting record
• B) Income
• C) Debit
• D) Credit

ANS -MCQ -2
• As per the accounting double-entry system, an
account that receives the benefit is
• A) No need to show as an accounting record
• B) Income
• C) Debit
• D) Credit

MCQ -3
• What kind of expenses are paid from Gross
Profit?
• A) Selling Expenses
• B) Financial Expenses
• C) General Expenses
• D) All of the above

ANS MCQ -3
• What kind of expenses are paid from Gross
Profit?
• A) Selling Expenses
• B) Financial Expenses
• C) General Expenses
• D) All of the above

MCQ 4
• Which option gives a review report on the
firm’s financial status at a specified date?
• A) Income & Expenditure Account
• B) Balance Sheet
• C) Cash Flow Statement
• D) Profit & Loss Account

ANS MCQ 4
• Which option gives a review report on the
firm’s financial status at a specified date?
• A) Income & Expenditure Account
• B) Balance Sheet
• C) Cash Flow Statement
• D) Profit & Loss Account

MCQ 5
• Which of the options is not an intangible
asset?
• A) Land
• B) Patents
• C) Goodwill
• D) Franchise rights

ANS MCQ 5
• Which of the options is not an intangible
asset?
• A) Land
• B) Patents
• C) Goodwill
• D) Franchise rights

MCQ 6
• Which of the options is an example of
business liability?
• A) Creditors
• B) Cash
• C) Building
• D) Land

ANS MCQ 6
• Which of the options is an example of
business liability?
• A) Creditors
• B) Cash
• C) Building
• D) Land

MCQ -7
• The unfavorable balance of Profit and Loss
account should be
• A) Subtracted from liabilities
• B) Subtracted from capital
• C) Subtracted from current assets
• D) Added in liabilities

ANS -MCQ -7
• The unfavorable balance of Profit and Loss
account should be
• A) Subtracted from liabilities
• B) Subtracted from capital
• C) Subtracted from current assets
• D) Added in liabilities

MCQ 8
• Gross profit is
(a) Cost of goods sold + Opening stock
(b) Excess of sales over cost of goods sold
(c) Sales fewer Purchases
(d) Net profit fewer expenses of the period

ANS MCQ 8
• Gross profit is
(a) Cost of goods sold + Opening stock
(b) Excess of sales over cost of goods sold
(c) Sales fewer Purchases
(d) Net profit fewer expenses of the period

MCQ 9
• Net profit is computed in the
(a) Profit and loss account
(b) Balance sheet
(c) Trial balance
(d) Trading account

ANS MCQ 9
• Net profit is computed in the
(a) Profit and loss account
(b) Balance sheet
(c) Trial balance
(d) Trading account

MCQ 10
• Trading Account discloses-
(a) Gross profit
(b) Net profit
(c) Net loss
(d) Gross profit or Gross loss

ANS MCQ 10
• Trading Account discloses-
(a) Gross profit
(b) Net profit
(c) Net loss
(d) Gross profit or Gross loss

MCQ 11
• Direct Expenses are entered in:
(a) Trading Account
(b) profit & Loss Account
(c) Balance sheet
(d) None of these

ANS MCQ 11
• Direct Expenses are entered in:
(a) Trading Account
(b) profit & Loss Account
(c) Balance sheet
(d) None of these

MCQ 12
• Profit and loss Account discloses:
(a) Gross profit
(b) Net profit or Net loss
(c) Gross profit or Gross loss
(d) None of these

ANS MCQ 12
• Profit and loss Account discloses:
(a) Gross profit
(b) Net profit or Net loss
(c) Gross profit or Gross loss
(d) None of these

MCQ 13
• Drawing is deducted from:
(a) Sales
(b) Purchase
(c) Returns outward
(d) Capital

ANS MCQ 13
• Drawing is deducted from:
(a) Sales
(b) Purchase
(c) Returns outward
(d) Capital

MCQ 14
• Closing stock is shown in Trial Balance
A. Balance sheet
B. P&L account
C. Both A & B
D. All of the above

ANS MCQ 14
• Closing stock is shown in Trial Balance
A. Balance sheet
B. P&L account
C. Both A & B
D. All of the above

MCQ 15
• Outstanding expenses are
A. Expenses due but not paid
B. Expenses not due but paid
C. Expense forgot to show in P&L
D. None of the above

ANS MCQ 15
• Outstanding expenses are
A. Expenses due but not paid
B. Expenses not due but paid
C. Expense forgot to show in P&L

MCQ 16
• Outstanding expenses are shown in
A. Asset side of Balance sheet
B. Liability side of Balance sheet
C. By adding in expenses in P&L
D. Both b & c

ANS MCQ 16
• Outstanding expenses are shown in
A. Asset side of Balance sheet
B. Liability side of Balance sheet
C. By adding in expenses in P&L
D. Both b & c

MCQ -17
• Ram paid rent 50000 in the year. But actual
rent was 4000 pm. Here2000 is
A. outstanding expenses
B. Accrued expense
C. Prepaid expense

ANS MCQ -17
• Ram paid rent 50000 in the year. But actual
rent was 4000 pm. Here2000 is
A. outstanding expenses
B. Accrued expense
C. Prepaid expense

MCQ 18
• Interest on capital is shown in
A. Debit side of P &L
B. Credit side of P &L
C. Deducting from capital in balance sheet
D. Both a & C

ANS MCQ 18
• Interest on capital is shown in
A. Debit side of P &L
B. Credit side of P &L
C. Deducting from capital in balance sheet
D. Both a & C

MCQ 19
• Bad debts are transfer to…….at the year end
A. P&L account
B. Provision for bad & doubtful debts account
C. First Provision for bad & doubtful debts
account than remaining in P&L
D. First P&L than remaining to Provision for bad
& doubtful debts

ANS MCQ 19
• Bad debts are transfer to…….at the year end
A. P&L account
B. Provision for bad & doubtful debts account
C. First Provision for bad & doubtful debts
account than remaining in P&L
D. First P&L than remaining to Provision for bad
& doubtful debts

MCQ 20
• Provision for bad & doubtful debts is created
as % of
A. Debtors amount
B. Profit amount
C. Sale amount

ANS MCQ 20
• Provision for bad & doubtful debts is created
as % of
A. Debtors amount
B. Profit amount
C. Sale amount

MCQ 21
• Depreciation is a
A. Cash expense
B. Non cash expense
C. Fictitious expense

ANSMCQ 21
• Depreciation is a
A. Cash expense
B. Non cash expense
C. Fictitious expense

MCQ 22
• In case of Loss by fire, which account is
credited
A. Purchase account
B. P&L account
C. Loss by fire account

ANS MCQ 22
• In case of Loss by fire, which account is
credited
A. Purchase account
B. P&L account
C. Loss by fire account

MCQ 23
• Goods purchased on credit but omitted to be
recorded, what entry will be passed at the
time of finalising financial statements
A. Dr. Purchase Cr. Suspense account
B. Dr. Purchase Cr. cash account
C. Dr. Purchase account Cr. Creditor account

ANS MCQ 23
• Goods purchased on credit but omitted to be
recorded, what entry will be passed at the
time of finalising financial statements
A. Dr. Purchase Cr. Suspense account
B. Dr. Purchase Cr. cash account
C. Dr. Purchase account Cr. Creditor account

• 1. Indirect Expenses are entered in ……………..
account.

• 2. Gross profit or loss is transferred to
…………….. account.

• ………….. accounts are prepared at the end of
the year.

Column A Column B
1. Goodwill (a) Profit & loss Account
2. Creditors (b) Fixed Asset
3. Building (c) Intangible Asset
4. Net profit (d) Liabilities
5. Balance sheet (e) Direct expenses
6. Cartage (f) Closing capital.

Column A Column B
1. Goodwill (c) Intangible Asset
2. Creditors (d) Liabilities
3. Building (b) Fixed Asset
4. Net profit (a) Profit & loss Account
5. Balance sheet (f) Closing capital.
6. Cartage (e) Direct expenses

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

• (1) Capital Expenditure: Paid to make an asset
ready to use
• (2) Capital Expenditure: Paid to make an asset
ready to use
• (3) Revenue Expenditure: Made for the
maintenance of asset
• (4) Revenue Expenditure: Part of normal
operating cost
• (5) Capital Expenditure: Used in business for a
number of years

State with reasons whether the following
are Capital or Revenue Expenses:
(i) Excise duty paid on purchase of new machine.
(ii) Wages paid to install a machine.
(iii) Repairs carried out on existing car.
(iv) Office block of building repainted for ₹
50,000.
(v) Paid telephone bill ₹ 2,500.

• (1) Capital Expenditure: Paid for the acquisition of new
asset
(2) Capital Expenditure: Paid to make the asset ready to
use
(3) Revenue Expenditure: Paid for the running and
maintenance of car
(4) Revenue Expenditure: Paid for the maintenance of
Building
(5) Revenue Expenditure: Part of normal operating cost

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