DK Goel Solutions Class 11 Accountancy Chapter 22 Financial Statements With Adjustments (2024)

Short Answer Questions

Question 1. What is the necessity of doing adjustments? Give four adjustment entries with their explanations.

Solution 1: Necessity of doing adjustments:

To ascertain the true net Profit or loss of the business.
To ascertain the true financial position of the business.
To make a record of the transaction omitted from the books.

Question 2.Why is provision for doubtful debts created? How is it shown in the balance sheet?

Solution 2:The term provision should be used instead of reserve because the aim is not to strengthen the financial position of the business but to cover an expected future loss.

Question 3.What is meant by outstanding expenses? Give its adjusting entry.

Solution 3:

These are the expenses which have been incurred during the year but have been left unpaid on the date of preparation of final accounts.

Question 4.Write notes on the following:-

Accrued income
Unearned income
Provision for doubtful debts

Solution 4:

Accrued Income: It is quite common that certain items of income such as interest on securities, commission, rent etc., are earned during the current year but have not been actually received by the end of the current year. Such incomes are known as accrued income.
Unearned Income: Certain income is received in the current year but the whole amount of it does not belong to the current year. Such portion of this income which belongs to the next year is known as unearned income.
Provision for doubtful debts: such a provision is created at a fixed percentage on debtors every year and is called ‘provision for bad and doubtful debts’.

Question 5.Explain the followings with examples:-

Capital expenditure
Revenue expenditure
Deferred revenue expenditure

Solution 5:

1) Capital Expenditure: If benefit of expenditure is received for more than one year, it is called capital expenditure. Example: Purchase of Machinery.

2) Revenue Expenditure: It is the amount spent to purchase goods and services that are used during an accounting period is called revenue expenditure. For Example: Rent, interest, etc.

3) Deferred Revenue Expenditure: There are certain expenditures which are revenue in nature but benefit of which is derived over number of years. For Example: Huge Advertisem*nt Expenditure.

Question 6.Give any two examples of Capital expenditure.

Solution 6:

Purchase of machinery.
Expenditure on installation of machinery.

Question 7.Distinguish between capital expenditure and revenue expenditure.

Solution 7:

1) Capital Expenditure: If benefit of expenditure is received for more than one year, it is called capital expenditure. Example: Purchase of Machinery.

2) Revenue Expenditure: It is the amount spent to purchase goods and services that are used during an accounting period is called revenue expenditure. For Example: Rent, interest, etc.

Question 8.Show the treatment of the following in Final Accounts when given inside the Trial Balance.

Prepaid expenses
Depreciation
Closing stock
Interest on capital
Commission received in advance

Solution 8:

Assets
of P & L A/c
Assets
of P & L A/c

Question 9.Give the adjustment entry and the treatment in Final Accounts of the following:

Accrued Income
Unearned Income

Solution 9:

Question 10.Give the adjustment entry and accounting treatment of the following items while preparing financial statements:

Outstanding Salaries
Accrued Interest.

Solution 10:

Practical Questions

Question 1. The following are the balances extracted from the books of Raghunath Ji as on 31st March, 2019. From these balances, prepare his Trading and Profit & Loss Account and Balance Sheet as at that date:

Adjustments:-

Closing Stock was valued at Rs. 16,000.
Wages Rs. 2,000 and salaries Rs. 1,200 are outstanding.
Rent for two months at the rate of Rs. 500 per month is outstanding.
Depreciate Buildings by 5% and machinery by 10%.
Prepaid Insurance Rs. 200.

Solution 1:

Working Note:-

Calculation of Depreciation:-

Depreciation on Building = Rs. 50,000 × 5%

Depreciation on Building = Rs. 2,500

Depreciation on Machinery = Rs. 20,000 × 10%

Depreciation on Machinery = Rs. 2,000

Question 2.From the following Trial Balance prepare Trading and Profit & Loss Account for the year ended 31st March, 2019 and Balance Sheet as at that date:-

Adjustments:-

1. Stock at 31st March 2019 is Rs. 70,000.

2. Write off 5% Depreciation on Freehold Premises and 20% on office furniture.

3. Commission earned but not received Rs. 500.

4. Interest earned but not received Rs. 600.

5. Rs. 200 for rent have been received in advance.

6. Charge interest on Capital @ 6% and Rs. 500 on Drawings.

Solution 2:

Working Note:-

Calculation of Depreciation:-

Depreciation on Freehold Premises = Rs. 1,00,000 × 5%

Depreciation on Freehold Premises = Rs. 5,000

Depreciation on Office Furniture = Rs. 9,000 × 20%

Depreciation on Office Furniture = Rs. 1,800

Calculation of Interest on Capital:-

1,50,000 × 6% = Rs. 9,000

Question 3.On 31st March, 2017 the following Trial Balance was extracted from the books of Mohan:-

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date after taking into account the following:-

(a) Private purchases amounting to Rs. 4,000 have been debited to Purchases Account.

(b) Depreciate Land and Buildings at 5/2 % and Motor Vehicles at 20%.

(c) Salaries outstanding Rs. 200.

(d) Prepaid Insurance Rs. 200.

(e) Provision for Doubtful Debts is to be maintained at 5% on Debtors.

(f) Stock on 31st March, 2017 was valued at Rs. 7,000.

Solution 3:

Working Note:-

Calculation of Depreciation:-

Depreciation on Land & Building = Rs. 12,000 × 2.5%

Depreciation on Land & Building = Rs. 300

Depreciation on Motor Vehicles = Rs. 10,000 × 20%

Depreciation on Motor Vehicles = Rs. 2,000

Calculation of Interest on Capital:-

20,000 × 5% = Rs. 1,000

Calculation of Drawings:-

Rs. 5,000 + Rs. 4,000 = Rs. 9,000

Question 4. Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date from the following Trial Balance:-

Adjustments:-

Salaries Rs. 100 and taxes Rs. 200 are outstanding but insurance Rs. 50 is prepaid.
Commission Rs. 100 is received in advance for next year.
Interest Rs. 210 is to be received on Deposits and Interest on Bank overdraft Rs. 300 is to be paid.
Bad-debts provision is to be maintained at Rs. 1,000 on Debtors.
Depreciate furniture by 10%.
Stock on 31st March, 2017 was valued at Rs. 4,500.

Solution 4:

Working Note:-

Calculation of Depreciation:-

Depreciation on Furniture = Rs. 600 × 10%

Depreciation on Furniture = Rs. 60

Question 5. From the following Trial Balance extracted from the books of A, prepare Trading and Profit & Loss Account for the year ending 31st March, 2019 and a Balance Sheet as at that date:-

The following adjustments are to be made:

(i) Stock in hand on 31st March, 2019 was Rs. 3,250.

(ii) Depreciate Building at 5% and Furniture at 10%. Loose Tools are revalued at Rs. 5,000 at the end of the year.

(iii) Salaries Rs. 300 and taxes Rs. 120 are outstanding.

(iv) Insurance amounting to Rs. 100 is prepaid.

(v) Write off a further Rs. 100 as Bad-Debts and provision for Doubtful Debts is to be made equal to 5% on Sundry Debtors.

(vi) Half of the stationery was used by the proprietor for his personal purposes.

Solution 5:

Working Note:-

Calculation of Depreciation:-

Depreciation on Building = 7,500 × 5% = Rs. 375

Depreciation on Furniture = 640 × 10% = Rs. 64

Depreciation on Patents = Rs. 6,250 – Rs. 5,000 = Rs. 1,250

Calculation of Doubtful Debts:-

Provision for Doubtful Debts = Sundry Debtors – Bad Debts on Furniture × Rate of Provision

Provision for Doubtful Debts = (3,800 – 100) × 5%

Provision for Doubtful Debts = 3,700 × 5%

Provision for Doubtful Debts = Rs. 185

Question 6.From the following figures prepare the Trading and Profit and Loss Account for the year ended 31st March, 2019 and the Balance Sheet as at that date:-

Adjustments:-

(i) Commission include Rs. 1,600 being commission received in advance.

(ii) Write off Rs. 2,000 as further Bad-debts and maintain Bad-debts provision at 5% on debtors.

(iii) Expenses paid in advance are: Wages Rs. 5,000 and Insurance Rs. 1,200.

(iv) Rent and Salaries have been paid for 11 months.

(v) Loan from X has been taken at 18% p.a. interest.

(vi) Depreciate furniture by 15% p.a. and Motor Car by 20% p.a.

(vii) Closing Stock was valued at Rs. 60,000.

Solution 6:

Working Note:-

Calculation of Depreciation:-

Depreciation on Furniture = 20,000 × 15% = Rs. 3,000

Depreciation on Motor Car = 1,50,000 × 20% = Rs. 30,000

Calculation of Provision for Doubtful Debts:-

Provision Doubtful Debts = Sundry Debtors – Further Bad Debts × Rate

Provision Doubtful Debts = 82,000 – 2,000 × 5%

Provision Doubtful Debts = Rs. 4,000

Question 7.

Extract of a Trial Balance as at March 31, 2017 is as follows:

Additional information:

A debtor of Rs. 2,000 could not be recovered. It is decided to maintain Provision for Doubtful Debtors @ 5% on Debtors and Provision for Discount at @ 2%.

How these adjustments will be shown in Financial Statements?

Solution 7:

Working Note:-

Calculation of Provision for Doubtful Debts:-

Provision Doubtful Debts = Sundry Debtors – Further Bad Debts × Rate

Provision Doubtful Debts = 1,02,000 – 2,000 × 5%

Provision Doubtful Debts = Rs. 5,000

Calculation of Provision for Discount on Debtors:-

Provision for Discount on Debtors = Debtors – Further Bad Debts – Provision for Doubtful Debts × Rate

Provision for Discount on Debtors = 1,02,000 – 2,000 – 5,000 × 2%

Provision for Discount on Debtors = Rs. 1,900

Question 8.Prepare a Trading and Profit & Loss account for the year ending March 31, 2018, from the balances extracted of M/s Rahul Sons. Also prepare a balance sheet as at that date.

Adjustments:-

(i) Commission received in advance Rs. 1,000.

(ii) Rent receivable Rs. 2,000, subject to levy of CGST and SGST @ 9% each.

(iii) Salary outstanding Rs. 1,000 and insurance prepaid Rs. 800.

(iv) Further Bad-debts Rs. 1,000 and provision for Bad-debts @ 5% on debtors and provision for discount on debtors @ 2%.

(v) Closing Stock Rs. 32,000.

(vi) Depreciation on Building @ 6% p.a.

Solution 8:

Working Note:-

Adjustment Entry of Accrued Rent:-

Calculation of Depreciation:-

Depreciation on Building = Rs. 1,10,000 × 6% = Rs. 6,600

Calculation of Provision for Doubtful debts:-

Provision for doubtful debts = Debtors – Further Bad debts × Rate

Provision for doubtful debts = Rs. 82,000 – Rs. 1,000 × 5%

Provision for doubtful debts = Rs. 81,000 × 5%

Provision for doubtful debts = Rs. 4,050

Calculation of Provision for Discount on Debtors:-

Provision for Discount on Debtors = Debtors – Further Bad Debts – Provision for Doubtful Debts × Rate

Provision for Discount on Debtors = 82,000 – 1,000 – 4,050 × 2%

Provision for Discount on Debtors = Rs. 1,539

Question 9.From the following balances, prepare Final Accounts of Mr. Bal Gopal :-

Adjustments:-

(i) Stock on 31st March, 2018 was Rs. 10,000 and stationery unused at the end was Rs. 400.

(ii) Rent of Premises Sublet received in advance Rs. 100.

(iii) Provision for Doubtful Debts is to be created @ 10% on Debtors.

(iv) Provision for discount on Debtors is to be created @ 2%.

(v) Stock of the Value of Rs. 4,000 was destroyed by fire on 25th March, 2018. Stock was purchased paying IGST @ 12%. A Claim of Rs. 3,000 has been admitted by Insurance Co.

(vi) Bank Loan has been taken at 12% p.a. interest.

Solution 9:

Working Note:-

Calculation of Outstanding Interest On bank loan:-

Interest on Bank Loan = Rs. 5,000 × 12% = Rs. 600

Interest charged by bank = Rs. 450

Solution 20:

Working Note:-

Calculation of Provision for Doubtful debts:-:-

Provision for doubtful debts = Sundry Debtors – Further Bad debts – Amount recovered × Rate

Provision for doubtful debts = (Rs. 4,80,000 – Rs. 15,000 - Rs. 5,000) × 6%

Provision for doubtful debts = Rs. 27,600

Question 21.From the following Trial Balance extracted from the books of S. Sujan Singh, prepare a Trading and Profit & Loss Account for the year ended 31st March, 2016 and a Balance Sheet as at that date:

Adjustments:-

1. Carry forward the following unexpired amounts:-

(i) Fire Insurance Rs. 125

(ii) Rates and Taxes Rs. 240

2. Transfer to Building Account Rs. 3,000 from purchases and Rs. 2,000 from wages, representing cost of material and labour spent on additions to Building made during the year.

3. Charge Depreciation on Land and Buildings at 2.5% and on Plant & Machinery at 10%.

4. Make a Provision of 5% on Sundry Debtors for Bad-debts.

5. Charge 5% Interest on Capital but not on Drawings.

6. The value of Stock as on 31st March, 2016 was Rs. 29,390.

Solution 21:

Working Note:-

Land and Building = Rs. 25,000 + Rs. 3,000 + Rs. 2,000 = Rs. 30,000

Calculation of Depreciation:-

Depreciation of Land and Building = Rs. 30,000 × 2.5% = Rs. 750

Depreciation of Plant and Machinery = Rs. 14,470 × 10% = Rs. 1,427

Calculation of Provision for Doubtful debts:-:-

Provision for doubtful debts = Sundry Debtors – Further Bad debts × Rate

Provision for doubtful debts = Rs. 30,000 × 5%

Provision for doubtful debts = Rs. 1,890

Question 22.From the following Trial Balance extracted from the books of Sh. Pawan Kumar, prepare a Trading Account, Profit & Loss Account for the year ended 31st March, 2019 and a Balance Sheet as at that date :

Adjustments:-

Plant and Machinery includes a new machinery purchased on 1st October, 2018 for Rs. 2,00,000.
Depreciate Plant and Machinery by 10% p.a. and Horses and Carts by 20% p.a.
Salaries for the month of February and March 2019 are outstanding.
Goods worth Rs. 15,000 were sold and despatched on 27th March but no entry was passed to this effect.
Make a provision for Doubtful Debts at 5% on Debtors.

Solution 22:

Working Note:-

Calculation of Depreciation:-

Depreciation of Land and Building = Rs. 30,000 × 2.5% = Rs. 750

Depreciation of Plant and Machinery = Rs. 14,470 × 10% = Rs. 1,427

Calculation of Provision for Doubtful debts:-

Provision for doubtful debts = Sundry Debtors + Unrecorded sales × Rate

Provision for doubtful debts = (Rs. 3,40,000 + Rs. 15,000) × 5%

Provision for doubtful debts = Rs. 17,750

Calculation of Outstanding Expenses:-

Salaries for 10 months = Rs. 80,000

Question 23. The following balances were extracted from the books of Modern Traders as at 31st March, 2017:-

Prepare Final Accounts for the year ended 31st March, 2017 after taking into account the following:

(i) Stock on 31st March, 2017 was valued at Rs. 15,000.

(ii) Goods costing Rs. 6,000 were sent to a customer on "Sale on Return basis" for Rs. 7,200 on 26th March, 2017 and had been recorded in the books as actual sales.

(iii) Provision for Doubtful Debts is to be maintained at 5% of the Debtors.

(iv) Prepaid Insurance was Rs. 100.

(v) Provide Depreciation on Plant and Machinery @ 10% and on Furniture @ 5%.

Solution 23:

Working Note:-

Calculation of Depreciation:-

Depreciation of Land and Building = Rs. 40,000 × 10% = Rs. 4,000

Depreciation of Plant and Machinery = Rs. 5,000 × 5% = Rs. 250

Calculation of Provision for Doubtful debts:-

Provision for doubtful debts = Sundry Debtors – Sales on Approval × Rate

Provision for doubtful debts = (Rs. 20,600 - Rs. 7,200) × 5%

Provision for doubtful debts = Rs. 670

Question 24.The following Trial Balance has been extracted from the books of Shri Santosh Kumar as at 31st March, 2017:-

The following additional information is available:-

(i) Stock on 31st March, 2017 was Rs. 30,800.

(ii) Depreciation is to be charged on Plant and Machinery at 5% and Furniture at 6%. Loose Tools are revalued at Rs. 16,000.

(iii) Create a provision of 2% for Discount on Debtors.

(iv) Salary of Rs. 2,000 paid to Shri B. Barua, a temporary employee, stands debited to his personal account and it is to be corrected.

(v) Write off 1/5th of advertisem*nt expenses.

You are to prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and a Balance Sheet as at that date.

Solution 24:

Working Note:-

Calculation of Depreciation:-

Depreciation of Machinery = Rs. 1,00,000 × 5% = Rs. 5,000

Depreciation of Furniture = Rs. 12,000 × 6% = Rs. 720

Depreciation of Furniture = Rs. 20,000 – Rs. 16,000 = Rs. 4,000

Calculation of Provision for Discount on Debtors:-

Provision for doubtful debts = Sundry Debtors × Rate

Provision for doubtful debts = Rs. 56,000 × 2%

Provision for doubtful debts = Rs. 1,120

Question 25.From the following Trial Balance of Sh. Swamy Narain, prepare Trading and Profit & Loss Account for the year ended 31st March 2018 and a Balance Sheet as at that date :

Adjustments:

(i) Stock on 31 March, 2018 was valued at Rs. 60,000.

(ii) A new machine was installed during the year costing Rs. 2,00,000 but it was not recorded in the books. Wages paid for its installation Rs. 10,000 have been debited to Wages Account.

(iii) An advance of Rs. 10,000 given alongwith purchase order was wrongly recorded in purchases.

(iv) General expenses include Rs. 20,000 paid for Wages.

(v) Wages include a sum of Rs. 50,000 spent on the erection of a Scooter Stand for employees.

(vi) Advance for Furniture is for furniture at proprietor's residence.

(vii) Depreciate Furniture at 15%, Plant & Machinery at 20% and Building at 10%.

(viii) Carry forward 2/3 of Advertisem*nt Expenses as unexpired.

(ix) A B/R of Rs. 20,000 was discounted with bank on 15 Nov. 2017, but not yet matured.

Solution 25:

Question 26.Following is the Trial Balance as on 31st March 2016. Prepare Trading and Profit and Loss Account and Balance Sheet :-

Additional Information :

(a) Stock on 31st March 2016 is Rs. 20,600.

(b) Depreciate machinery @ 10% p.a.

(c) Make a Provision @ 5% for Doubtful Debts.

(d) Provide 212%212% for discount on sundry debtors.

(e) Rent and Rates include security deposit of Rs. 400.

(f) Insurance prepaid Rs. 120.

Solution 26:

Question 27.From the following Trial Balance and other information prepare Trading and Profit and Loss Account for the year ended 31st March 2016 and Balance Sheet as at that date.

Additional Information:

Stock on 31st March 2016 was Rs. 12,450. Rent was unpaid to the extent of Rs. 85 and Rs. 150 were outstanding for Trade Expenses. Rs. 400 are to be written off as bad debts out of the above debtors, and 5% is to be provided for doubtful debts. Depreciate plant and machinery 10% and premises by 2%. Manager is entitled a commission of 5% on net profit after charging his commission.

Solution 27:

Question 28.Following are balances from the trial balance of Ritesh Traders as at 31st March 2019:

Prepare Trading and Profit & Loss Account for the year ended 31st March 2019 and Balance Sheet as at that date after taking into account the following adjustments :

(i) Closing Stock was valued at Rs. 19,000.

(ii) Depreciation to be provided on Land and Building @ 5% p.a. and on Plant & Machinery @ 10% p.a.

(iii) Write off Rs. 2,000 as Bad debt.

(iv) Insurance was prepaid Rs. 700.

(v) Create provision for doubtful debts @ 5% on debtors.

(vi) Wages include Rs. 4,800 for installation of a new machinery.

Solution 28:

Question 29.Prepare Trading and Profit and Loss Account and Balance Sheet from the following Trial Balance and information as on 31st March, 2019:

Adjustments:-

(i) Closing Stock was valued at Rs. 1,12,500.

(ii) Commission include Rs. 1,200 being commission received in advance.

(iii) Salaries and wages is outstanding for the month of Feb. & March, 2019.

(iv) Depreciate Plant & Machinery by 15% and Motor Vehicle by 20%.

(v) Write off Rs. 500 as further Bad Debts and maintain provision for doubtful debts at 1% on debtors.

Solution 29:

Working Note:-

Calculation of Depreciation:-

Depreciation of Machinery = Rs. 2,00,000 × 15% = Rs. 30,000

Depreciation of Motor Vehicle = Rs. 1,50,000 × 20% = Rs. 30,000

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate

Provision for doubtful debts = (Rs. 70,000 – Rs. 500) × 1%

Provision for doubtful debts = Rs. 695

Question 30.The following balances were taken from the books of Shri R. Lal as at 31st March, 2017.

Prepare Trading and Profit & Loss A/c and a Balance Sheet as at 31st March, 2017, after keeping in view the following adjustments:

(i) Depreciate old Building at 2 1/2% and addition to Building at 2% and Office Furniture at 5%.

(ii) Write off further Bad-debts Rs. 570.

(iii) Increase the Bad-debts Provision to 6% of Debtors.

(iv) On 31st March, 2017 Rs. 570 are outstanding for salary.

(v) Rent receivable Rs. 200 on 31st March, 2017.

(vi) Interest on capital at 5% to be charged.

(vii) Unexpired Insurance Rs. 240.

(viii) Stock was valued at Rs. 14,290 on 31st March, 2017.

Solution 30:

Working Note:-

Calculation of Depreciation:-

Depreciation of Building = Rs. 25,000 × 2.5% = Rs. 625

Depreciation of Building2 = Rs. 7,000 × 2% = Rs. 140

Depreciation of office furniture = Rs. 3,500 × 5% = Rs. 175

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate

Provision for doubtful debts = (Rs. 62,070 – Rs. 570) × 6%

Provision for doubtful debts = Rs. 3,690

Question 31. From the following balances extracted from the books of Karan and the additional information, prepare the trading and profit and loss account for the year ended 31st March, 2010 and also show the balance sheet as at that date:

Additional Information:-

(i) Closing stock on 31st March, 2010 is valued at Rs. 6,50,000. Goods worth Rs. 5,000 are reported to have been taken away by the proprietor for his personal use at home during the year.

(ii) Interest on investments Rs. 5,000 is yet to be received while Rs. 10,000 of the commission received is yet to be earned.

(iii) Rs. 5,000 of the fire insurance premium paid is in respect of the quarter ending 30th June, 2010.

(iv) Salaries Rs. 10,000 for March, 2010 and bank overdraft interest estimated at Rs. 20,000 are yet to be recorded as outstanding charges.

(v) Depreciation is to be provided on land and buildings @ 5% per annum and on furniture and fittings @ 10% per annum.

(vi) Make a provision for doubtful debts @ 5% of trade debtors.

Solution 31:

Working Note:-

Calculation of drawings = Rs. 45,000 + Rs. 5,000 = Rs. 50,000

Calculation of Depreciation:-

Depreciation of Building = Rs. 3,00,000 × 5% = Rs. 15,000

Depreciation of Furniture = Rs. 80,000 × 10% = Rs. 8,000

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate

Provision for doubtful debts = Rs. 2,50,000 × 5%

Provision for doubtful debts = Rs. 12,500

Question 32. The following is the trial balance of Mr. Amar Chand as at 31st March, 2016:-

Taking into account the following adjustments, prepare Trading and Profit & Loss Account and the Balance Sheet as at 31st March, 2016:-

Stock on 31st March, 2016 was valued at Rs. 46,000.
Depreciate Furniture at 15% p.a. and Sales Van at 20% p.a.
A sum of Rs. 200 is due for repairs.
Write off Rs. 2,000 as further bad-debts and create a provision for doubtful debts @ 5% on Debtors. Also provide 2% for discount on Debtors.
Rent is paid at the rate of Rs. 1,000 per month.
Allow 8% interest on Capital and charge Rs. 1,500 as interest on Drawings.

Solution 32:

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate

Provision for doubtful debts = (Rs. 80,000 – Rs. 2,000) × 5%

Provision for doubtful debts = Rs. 3,900

Question 33. From the following balances extracted from the books of Sharma, prepare the Trading and Profit & Loss Account for the year ended 31st March 2019 and Balance Sheet as at that date after taking into consideration the adjustments given below:

Adjustments:

(i) Closing Stock was valued at Rs. 61,700.

(ii) Depreciate Furniture and Machinery @10% p.a. and Sale Van @20% p.a.

(iii) Outstanding Rent amounted to Rs. 900.

(iv) Bad Debts Rs. 200.

(v) Make a provision for Doubtful Debts @5% on Debtors.

(vi) Charge one-fourth of salaries and wages to the Trading Account.

(vii) A new machinery was purchased on credit and installed on 31st December 2018 costing Rs. 15,000. No entry for the same has yet been passed in the books.

Solution 33:

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate

Provision for doubtful debts = (Rs. 18,200 – Rs. 200) × 5%

Provision for doubtful debts = Rs. 900

Q34. Prepare a trading and profit & loss account of M/s Green Club Ltd. for the year and a Balance Sheet as at that date from the following figures taken from their trial balance:

Adjustments:-

(i) Depreciation charged on Machinery @ 5% p.a.

(ii) Further Bad-debts Rs. 1,500, provision for discount on debtors @ 5% and provision for Doubtful Debts on debtors @ 6%.

(iii) Wages prepaid Rs. 1,000.

(iv) Interest on investments @ 5% p.a.

Solution 34:

Working Note:-

Calculation of Depreciation:-

Depreciation of Machinery = Rs. 20,000 × 5% = Rs. 1,000

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate

Provision for doubtful debts = (Rs. 50,000 – Rs. 1,000) × 6%

Provision for doubtful debts = Rs. 2,910

Calculation of Provision for Discount on Debtors:-

Provision for doubtful debts = Sundry Debtors – future Bad debts – Pro. For Bad debts × Rate

Provision for doubtful debts = (Rs. 50,000 – Rs. 1,500 - Rs. 2,910) × 5%

Provision for doubtful debts = Rs. 2,280

Question 35.Below is given the Trial Balance of Mr. Ram as at 31st December, 2015. You are required to prepare Trading and Profit & Loss Account and Balance Sheet as at that date.

Adjustments:-

Create a provision for Doubtful Debts @ 5% on Debtors and 2% for discount on Debtors.
Provide up-to-date interest on Investments.
Expenses for rent, wages, salaries and office expenses are uniform throughout the year and those for December, 2015 have not been paid.
Depreciate Plant by 10% p.a. and Furniture by 20% p.a.
Unearned Commission Rs. 1,500.

Solution 35:

Working Note:-

Calculation of Depreciation:-

Depreciation of Plant = Rs. 60,000 × 10% = Rs. 6,000

Depreciation of Furniture = Rs. 15,000 × 20% = Rs. 3,000

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = Sundry Debtors × Rate

Provision for doubtful debts = Rs. 1,00,000 × 5%

Provision for doubtful debts = Rs. 5,000

Calculation of Provision for Discount on Debtors:-

Provision for doubtful debts = Sundry Debtors – Pro. For Bad debts × Rate

Provision for doubtful debts = (Rs. 1,00,000 – Rs. 5,000) × 2%

Provision for doubtful debts = Rs. 1,900

Question 36. On 31st March, 2017 the following Trial Balance of Sh. Ajay Oswal was taken out. Prepare Trading and Profit & Loss Account for the year and Balance Sheet at that date after making the following adjustments:-

(i) Stock on 31st March, 2017 was valued Rs. 26,000.

(ii) General Manager is entitled to a Commission of 5% on Net Profits after charging such Commission.

(iii) Rs. 2,000 paid for Salary & Wages have been included in Sundry Debtors.

(iv) Increase Bad-debts by Rs. 800 and create provision for Doubtful Debts at 10%.

(v) General Expenses include insurance premium paid up to 30th June, 2017 @ Rs. 3,000 per annum.

(vi) Rs. 600 out of the Advertisem*nt Expenses are to be carried forward to the next year.

(vii) Charge one-fourth of 'Salaries and Wages' to Trading A/c.

(viii) Accrued Income Rs. 2,500.

Solution 36:

Working Note:-

Calculation of Salaries & Wages = 1/4th× 40,000 = Rs. 10,000

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = Sundry Debtors – Further Bad Debts × Rate

Provision for doubtful debts = (Rs. 73,800 – Rs. 800) × 5%

Provision for doubtful debts = Rs. 7,300

Question 37.Prepare Trading and Profit & Loss Account and Balance Sheet as at 31st March, 2017, from the following balances:

Adjustments:-

Stock on hand on 31st March, 2017 was Rs. 80,000.
Further Bad-debts written off Rs. 2,000 and Create a provision of 5% of Sundry Debtors.
Rent has been paid up to 31st May, 2017.
Manufacturing wages include Rs. 10,000 of a new Machinery purchased on 1st October, 2016.
Depreciate Plant and Machinery by 10% p.a. and Fixtures and Fittings by 20% p.a.
Commission earned but not received Rs. 1,000.
Interest on Loan for the last two months is not paid.
Goods worth Rs. 4,000 were distributed as free samples.

Solution 37:

Working Note:-

Calculation of Depreciation:-

Depreciation of Plant and Machinery = Rs. 3,80,000 × 10% = Rs. 38,000

Depreciation of Fixtures and Furniture = Rs. 12,000 × 20% = Rs. 2,400

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = (Sundry Debtors – Further Bad Debts) × Rate

Provision for doubtful debts = (Rs. 58,000 – Rs. 2,000) × 5%

Provision for doubtful debts = Rs. 2,800

Question 38.From the following Trial Balance extracted from the books of Mr. Karuna Sagar, prepare a Trading and Profit & Loss A/c for the year ended 31st March, 2019 and a Balance Sheet as at that date:

Information’s:-

(i) Goods Costing Rs. 2,000 were taken away by the proprietor for his personal use and goods costing Rs. 1,500 were given away as charity.

(ii) Expenses for wages, rent and salaries are uniform throughout the year and those for March have not been paid.

(iii) Provide 10% depreciation on Furniture and 20% on Motor Car.

(iv) Provide for Manager's Commission at 10% on Net Profit after charging such Commission.

Solution 38:

Working Note:-

Calculation of Depreciation:-

Depreciation of Motor car = Rs. 2,00,000 × 20% = Rs. 40,000

Depreciation of Fixtures and Furniture = Rs. 8,000 × 10% = Rs. 800

Question 39.From the following Trial Balance of Sh. Parveen Kumar, prepare Trading and Profit & Loss Account for the year ending 31st March, 2019 and a Balance Sheet as at that date:

Informations:-

(1) Closing Stock was valued at Rs. 60,000. You are informed that goods valued Rs. 12,000 were sold and despactched on 29th March, 2019, but no entry was passed to this effect.

(2) Insurance Premium include Rs. 1,200 paid on 1st October, 2018 to run for one year from Oct. 1, 2018 to Sept. 30, 2019.

(3) Loan from Mr. Naresh was taken on 1st July, 2018. Interest has not been paid so far.

(4) Create provision for Doubtful Debts at 5% on Sundry Debtors after writing off Rs. 600 as Bad-debts during the year.

(5) A bill of Rs. 3,200 for advertisem*nt in newspaper remained unpaid at the end of the year.

(6) Purchases include Furniture costing Rs. 5,000 purchased on 1st April, 2018.

(7) Charge 10% p.a. depreciation on Furniture and write off 1/5th of patents.

Solution 39:

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = (Sundry Debtors + Unrecorded – Further Bad Debts) × Rate

Provision for doubtful debts = (Rs. 80,000 + Rs. 12,000 – Rs. 2,000) × 5%

Provision for doubtful debts = Rs. 4,570

Question 40. The following Trial Balance was extraced from the books of Mr. Gupta as at 31st March, 2019:

Adjustments:-

(i) Goods costing Rs. 20,000 were purchased and included into stock but no entry was passed to record the purchase.

(ii) Loan from Mr. Yadav was taken on 1st June, 2018.

(iii) Sundry Debtors include an amount of Rs. 2,000 due from a customer who has become insolvent and nothing is recoverable from his estate.

(iv) Create a provision of 5% for Doubtful Debts and 2% for discount on Debtors.

(v) Three months lighting and heating bill due but not paid Rs. 3,000.

(vi) Rent is paid for 11 months but is received for 13 months.

(vii) Stock amounted to Rs. 90,000 on 31st March, 2019.

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2019 and a Balance Sheet as at that date.

Solution 40:

Calculation of Provision for Doubtful Debts:-

Provision for doubtful debts = (Sundry Debtors – Further Bad Debts) × Rate

Provision for doubtful debts = (Rs. 1,42,000 – Rs. 2,000) × 5%

Provision for doubtful debts = Rs. 7,000

Question 41. From the following Trial Balance of Mr. Tarun Ghosh, prepare Trading and Profit and Loss A/c for the year ending 31st March, 2017 and a Balance Sheet as at that date:

Adjustments:-

(i) Closing Stock amounted to Rs. 50,000.

(ii) Goods costing Rs. 8,000 were sent to a customer on sale or return basis for Rs. 10,000 on 30th March, 2017 and had been recorded in the books as actual sales.

(iii) Allow 8% interest on Capital and charge Rs. 3,000 as interest on drawings.

(iv) Depreciate: Business premises by 5%; Furniture and Fixtures by 20% and Packing Machinery by 10%. Tools are to be revalued at Rs. 12,000.

(v) 5/2% for discounts is to be provided on Debtors.

(vi) Rs. 1,500 is to be provided for Bad and Doubtful Debts.

Solution 41:

Working Note:-

Calculation of Depreciation:-

Depreciation of Premise = Rs. 2,00,000 × 5% = Rs. 10,000

Depreciation of Furniture = Rs. 40,000 × 20% = Rs. 8,000

Depreciation of Packing Machinery = Rs. 60,000 × 10% = Rs. 6,000

Depreciation of Tools = Rs. 15,000 –Rs. 12,000 = Rs. 3,000

Calculation of Provision for Discount on Debtors:-

Provision for Discount on Debtors = (Sundry Debtors – Further Bad Debts) × Rate

Provision for Discount on Debtors = (Rs. 80,000 + Rs. 1,500) × 2.5%

Provision for Discount on Debtors = Rs. 3,250

Question 42. The following balances were extracted from the books of Mr. Din Dayal as at 31st March, 2019:

Prepare Trading and Profit & Loss Account for the year and a Balance Sheet as at 31st March, 2019, after taking into account the following:

(1) Stock was valued at Rs. 75,000 on 31st March, 2019. You are informed that a fire occurred on 28th March, 2019 in the go down and stock of the value of Rs. 10,000 was destroyed. Insurance Company admitted a claim of 75%.

(2) One-third of the commission received is in respect of work to be done next year.

(3) Create a provision of 5% for Doubtful Debts.

(4) 50% of Printing and Advertising is to be carried forward as a charge in the following year.

(5) Rs. 900 is due for interest on loan.

(6) Provide for Manager's Commission at 10% on Net Profit before charging such commission.

Solution 42:

Working Note:-

Calculation of Provision for Doubtful Debts:-

Provision for Doubtful Debts = Sundry Debtors × Rate

Provision for Doubtful Debts = Rs. 40,000 × 5% = Rs. 2,000

Calculation of Manager’s Commission:-

Manager’s Commission = Rs. 1,06,000 - Rs. 46,900

Manager’s Commission = Rs. 60,000 × 10% = Rs. 6,000

Question 43. From the following information prepare financial Statements of M/s Raj & Bros, for the year ending March 31, 2017.

Additional Information:-

(i) Depreciation on Plant and Machinery @ 10% p.a., a Machine has been purchased on July 01, 2016 for Rs. 12,000.

(ii) The manager is entitled to a commission of 10% of the net profit before charging such commission.

(iii) Closing stock in trade is valued at Rs. 6,000 (cost); Rs. 6,200 (Market Price).

(iv) Rent outstanding Rs. 5,000.

Solution 43:

Calculation of Manager’s Commission:-

Manager’s Commission = Rs. 50,150 - Rs. 48,350

Manager’s Commission = Rs. 1,800 × 10% = Rs. 180

DK Goel Solutions Class 11 Accountancy Chapter 22 Financial Statements With Adjustments (2024)

FAQs

What are the adjustments in financial statements? ›

Through adjustments in the financial statement, we consider all the accounting items which are relevant to the current financial year, but not recorded in the books due to any reason or wrongly recorded. This helps us in getting the actual profit or loss for the year and the accurate financial position of the company.

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What is accounting in DK Goel Class 11? ›

Accounting is the method of collecting, reporting, interpreting, and summarising financial transactions. It reveals the economic status of a business. Accountancy is also termed as 'financial language' sometimes. In the first chapter of DK Goel Accountancy Class 11, students are briefed on: Debtors.

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What is the full name of DK Goel? ›

Dinesh Kumar Goel - FIITJEE LTD | LinkedIn.

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What accounts are to be maintained under final accounts of the company? ›

Final Accounts Meaning

The final account consists of the following accounts: Trading and Profit and Loss Account. Balance Sheet. Profit and Loss Appropriation account.

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What are the 4 adjustments? ›

There are four different types of adjusting Journal Entries; Accrued expenses. Accrued revenues. Deferred expenses.

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What are the 5 adjusting entries? ›

The five types of adjusting entries

Accrued revenues. When you generate revenue in one accounting period, but don't recognize it until a later period, you need to make an accrued revenue adjustment. ...
Accrued expenses. ...
Deferred revenues. ...
Prepaid expenses. ...
Depreciation expenses.

Feb 25, 2022

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Who is the father of accounting class 11? ›

Luca Pacioli is the father of accounting.

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Which reference book is best for accountancy class 11? ›

Class 11 Commerce Books- Accountancy

Books	Author	Publisher
Accountancy	D. K. Goel, Rajesh Goel & Shelly Goel	Arya Publication
Double Entry Book Keeping Financial Accounting	T. S. Grewal	Sultan Chand
Accountancy	Divya Sharma	VK Global PublicationsPvt. Ltd.
Accountancy	R. S. Singal and Seema Singal	Prachi (India) Pvt. Ltd.

Dec 12, 2023

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What is accounting class 11 very short answer? ›

Accounting can be defined as a process of reporting, recording, interpreting and summarising economic data. The introduction of accounting helps the decision-makers of a company to make effective choices, by providing information on the financial status of the business.

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What are the golden rules of accounting? ›

1) Debit what comes in - credit what goes out. 2) Credit the giver and Debit the Receiver. 3) Credit all income and debit all expenses.

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How to prepare final accounts with adjustments? ›

Some common adjustments:

Closing Stock.
Outstanding Expenses.
Prepaid or Unexpired Expenses.
Accrued or Outstanding Income.
Income Received In Advance or Unearned Income.
Depreciation.
Bad Debts.
Provision for Doubtful Debts.

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What are the three types of final accounts? ›

Under this, it is compulsory to make a trading account, the profit and loss account, and balance sheet. The term "final accounts" includes the trading account, the profit and loss account, and the balance sheet.