Read below DK Goel Solutions Class 11 Chapter 22 Financial Statements With Adjustments. These answers have been developed based on the latest Class 11 DK Goel Accountancy book used by commerce stream students issued for current year and the questions given in each chapter.

This chapter of DK Goel includes various value-based calculations of financial statements after proper adjustment of the data. Once you extract the financial statements, there are times when some adjustments have to be passed to reflect the true financial position of an organization.

In this chapter you will understand what these adjustments are. The chapter contains lot of questions which can be very helpful for Class 11 commerce students of Accountancy and will also help build strong concepts which will be really helpful in your career.

DK Goel Solutions Class 11 Chapter 22 solutions are free and will help you to prepare for Class 11 Accountancy. Just scroll down and read through the answers provided below

Financial Statements With Adjustments DK Goel Class 11 Accountancy Solutions

Students can refer below for solutions for all questions given in your DK Goel Accountancy Textbook for Class 11 in Chapter 22

Short Answer Questions for DK Goel Solutions Class 11 Chapter 22:

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

Solution 1: Necessity to make modifications:

1. To determine the company’s actual net profit or loss.
2. To assess the company’s real financial status.
3. To document a transaction that has been removed from the accounts.
   Entries for adjustment:-
4. Wages A/c
   To Outstanding wages A/c
   (wages due) Dr.
5. Salary A/c
   To outstanding Salary A/c
   (salary due) Dr.
6. Prepaid Insurance A/c
   To Insurance A/c
   (Insurance prepaid in advance) Dr.
7. Depreciation A/c
   To Machinery A/c
   To Furniture A/c
   (Depreciation charge) Dr.

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

Solution 2: Instead of reserve, the term provision should be used when the purpose is not to improve the business’s financial position, but to compensate an anticipated potential loss.
In balance sheet:
Liabilities Amount Assets Amount
Debtors 50,000
Less: Provision for bad
and doubtful debts 2,000

48,000

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

Solution 3:
This are the costs that were accumulated during the year but were left outstanding on the day of final account planning.

Name of Accounts Dr. Balances Cr. Balances
Wages paid 2,20,000
Salary paid 55,000

Question 4: Write notes on the following:-
I. Accrued income
II. Unearned income
III. Provision for doubtful debts

Solution 4:
i. 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.
ii. 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.
iii. 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:-
i. Capital expenditure
ii.Revenue expenditure
iii.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 Advertisement Expenditure.

Question 6: Give any two examples of Capital expenditure.

Solution 6:
i. Purchase of machinery.
ii.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.
a) Prepaid expenses
b) Depreciation
c) Closing stock
d) Interest on capital
e) Commission received in advance

Solution 8:
a) Assets
b) Dr. of P & L A/c
c) Assets
d) Dr. of P & L A/c
e) Liabilities.

Question 9: Give the adjustment entry and the treatment in Final Accounts of the following:
i. Accrued Income
ii.Unearned Income

Solution 9:
Adjustment Entry Treatment in P & L A/c Treatment in Balance Sheet
i. Accrued income Accrued income A/c Dr.
To Income A/c Added in income on credit side of Profit & Loss A/c Shown on the Assets side.
ii. Unearned income Income A/c Dr.
To Unearned income A/c Deducted from income on the credit side of Profit and Loss A/c Shown on the liabilities side.

Question 10: Give the adjustment entry and accounting treatment of the following items while preparing financial statements:
a) Outstanding Salaries
b) Accrued Interest.

Solution 10:
a) Outstanding Salary
Adjustment Entry:-
Salary A/c Dr.
To Outstanding Salary

Treatment in Financial Statement:-
Outstanding Salary is added to debit side of Profit and loss account and shown in the Liabilities side of balance sheet.

b) Accrued interest
Adjustment Entry:-
Accrued Interest A/c Dr.
To Interest Received A/c

Treatment in Financial Statement:-
Accrued Interest is added to on the credit side of Profit and Loss Account and shown on the Assets side of balance sheet.

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:-

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

Solution 1:

Profit and Loss Account for the year ended March 31, 2019

Working Note:-
Depreciation on Building = Rs. 50,000 × 5% = Rs. 2,500
Depreciation on Machinery = Rs. 20,000 × 10% = 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:
   Trading Account for the year ended March 31, 2019

Working Note:-
Depreciation on Freehold Premises = Rs. 1,00,000 × 5% = Rs. 5,000
Depreciation on Office Furniture = Rs. 9,000 × 20% = Rs. 1,800
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 2 1/2% 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:-
Depreciation on Land & Building = Rs. 12,000 × 2.5% = Rs. 300
Depreciation on Motor Vehicles = Rs. 10,000 × 20% = Rs. 2,000
Interest on Capital = 20,000 × 5% = Rs. 1,000
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:-

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

Solution 4:

Trading Account for the year ended March 31, 2017

Working Note:-
Depreciation on Furniture = Rs. 600 × 10% = 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:-
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

Provision for Doubtful Debts = Sundry Debtors – Bad Debts on Furniture × Rate of Provision
Provision for Doubtful Debts = (3,800 – 100) × 5% = 3,700 × 5% = 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 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:-
Depreciation on Furniture = 20,000 × 15% = Rs. 3,000
Depreciation on Motor Car = 1,50,000 × 20% = Rs. 30,000

Provision Doubtful Debts = Sundry Debtors – Further Bad Debts × Rate
Provision Doubtful Debts = 82,000 – 2,000 × 5% = Rs. 4,000

Salaries for 11 months = Rs. 35,200
Salary per month = 35,200/11 = 3,200
Outstanding Salary for one month = 3,200×1 = Rs. 3,200

Rent for 11 months = Rs. 5,500
Outstanding Rent for one month = 5,500/11×1 = Rs. 500

Outstanding Interest on loan = Rs. 10,000 × 18/100 = Rs. 1,800
Total Interest paid = Rs. 1,500
Outstanding Interest = Rs. 1,800 – Rs. 1,500
Outstanding Interest = Rs. 300

Question 7: Extract of a Trial Balance as at March 31, 2017 is as follows:
Sundry Debtors Rs. 1,02,000
Bad Debts Rs. 1,400
Provision for doubtful debts Rs. 3,400
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:-
Provision Doubtful Debts = Sundry Debtors – Further Bad Debts × Rate
Provision Doubtful Debts = 1,02,000 – 2,000 × 5% = Rs. 5,000

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% = 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:

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

Provision for doubtful debts = Debtors – Further Bad debts × Rate
Provision for doubtful debts = Rs. 82,000 – Rs. 1,000 × 5% = Rs. 81,000 × 5% = Rs. 4,050

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% = 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:-
Outstanding Interest On bank loan:-
Interest on Bank Loan = Rs. 5,000 × 12% = Rs. 600
Interest charged by bank = Rs. 450
Outstanding Interest = Rs. 600 – Rs. 450 = Rs. 150

Provision for doubtful debts = Sundry Debtors × Rate
Provision for doubtful debts = Rs. 10,500 × 10% = Rs. 1,050

Question 10 (A): From the following balances, prepare Trading, Profit and Loss A/c and a Balance Sheet as at 31st March 2018:-

Take the following adjustments into account:
(a) General expenses include Rs. 5,000 chargeable to Furniture purchased on 1st October 2017.
(b) Create a provision of 5% on debtors for Bad and Doubtful Debts after treating Rs. 30,000 as a Bad-debt.
(c) Depreciation on Furniture and Fittings for the year is to be at the rate of 10% per annum.
(d) Closing Stock was Rs. 40,000, but there was a loss by fire on 20th March to the extent of Rs. 8,000. Insurance Company admitted the claim in full.
(e) (i) Goods costing Rs. 2,500 were used by the proprietor.
(ii) Goods costing Rs. 1,500 were distributed as free samples.
Goods were purchased paying CGST and SGST @ 6% each.

Solution 10 (A):

Working Note:-
Calculation of Drawings = Rs. 58,100 + Rs. 2,800 = Rs. 60,900

Depreciation on Furniture (i) = 58,000 × 10% = 5,800
Depreciation on Furniture (ii) = 5,000 × 10% × 6/12 = 250
Total Depreciation = Rs. 5,800 + Rs. 250 = Rs. 6,050

Outstanding Rent = 10,000 × 2/10 = Rs. 2,000

Calculation of Provision for Doubtful debts:-
Provision for doubtful debts = Sundry Debtors – further Bad debts × Rate
Provision for doubtful debts = (Rs. 2,30,000 – Rs. 30,000) × 5% = Rs. 10,000

Question 10 (B): From the following particulars taken out from the books of Subhash General Store, prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at the date:-

The following information is relevant:-

1. Closing Stock Rs. 55,000. Stock valued at Rs. 10,000 was destroyed by fire on 18th March, 2017 but the Insurance Company admitted a claim of Rs. 6,800 only which was received in April, 2017.
2. Stationery for Rs. 150 was consumed by the Proprietor.
3. Goods costing Rs. 1,200 were given away as charity.
4. A new Signboard costing Rs. 1,500 is included in Advertising.
5. Rent is to be allocated 2/3rd to Factory and 1/3rd to Office.
6. Depreciate machinery by 10% and Motor Car by 20%.

Solution 10 (B):

Working Note:-
Depreciation on Plant and Machinery (i) = Rs. 80,000 × 10% = Rs. 8,000
Depreciation on Plant and Machinery (ii) = Rs. 20,000 × 10% × 9/12 = Rs. 9,500
Depreciation on Motor Car = Rs. 70,000 × 20% = Rs. 14,000

Drawings = Rs. 12,000 + Rs. 150 = Rs. 12,150

Question 11: Give journal entries for the following adjustments in final accounts:
(i) Salaries Rs. 5,000 are outstanding.
(ii) Insurance amounting to Rs. 2,000 is paid in advance.
(iii) Rs. 4,000 for rent have been received in advance.
(iv) Commission earned but not received Rs. 1,000.
(v) Interest on capital Rs. 1,500.
(vi) Interest on Drawings Rs. 300.
(vii) Write off Rs. 2,000 as further bad-debts.
(viii) Closing Stock Rs. 3,000.

Solution 11:

Question 12: Give Journal Entries for the following adjustments in final accounts:

1. Extract of Trial Balance as on 31st March, 2019

Particulars	Debit (Rs.)	Credit (Rs.)
Sundry debtors	6,60,000
Bad debts	15,000
Provision for doubtful debts		40,000

Additional Information:
(a) Additional Bad Debts Rs. 20,000.
(b) Maintain the provision for doubtful debts @ 5% on debtors.

2. Goods costing Rs. 20,000 were distributed among staff members as free of cost. These goods were purchased paying IGST @ 12%.
3. Two month’s rent @ Rs. 15,000 per month is outstanding. Rent is subject to levy of 12% IGST.
4. Included in general expenses is annual Insurance Premium of Rs. 10,000 paid for the year ending 30th June, 2019. IGST is levied @ 12%.
5. Accrued commission Rs. 5,000. IGST is levied @ 12%.
   Solution 12:

Working Note:-
Calculation of bad debts

Question 13: Give journal entries for the following adjustments in final accounts assuming CGST and SGST @ 9% each:
(i) Closing Stock Rs. 80,000.
(ii) Outstanding salaries Rs. 21,000.
(iii) Insurance premium amounting to Rs. 15,000 is paid in advance.
(iv) Rs. 9,000 received for rent related to the next accounting period.
(v) Commission accrued but not received during the accounting year Rs. 1,500.
(vi) Write off Rs. 500 as further bad debts.
(vii) Goods costing Rs. 8,000 destroyed by fire and insurance company admitted a claim for Rs. 5,000 only.
(viii) Goods costing Rs. 10,000 (Market value Rs. 11,000) were taken by proprietor for personal use.

Solution 13:

Question 14: Following is the Trial Balance of Mr. Gautam as at 31st March, 2017:

You are required to prepare Final Accounts after taking into account the following adjustments:
(a) Closing Stock on 31st March, 2017 was Rs. 60,000.
(b) Depreciate Plant and Machinery at 5%, Loose Tools at 15% and Furniture and fixtures at 5%.
(c) Provide 21/2% for discount on Sundry Debtors and also provide 5% for Bad and Doubtful Debts on Sundry Debtors.
(d) Only three quarter’s rent has been paid, the last quarter’s rent outstanding.
(e) Interest earned but not received Rs. 600.
(f) Write off 1/4th of Advertisement expenses.

Solution 14:

Working Note:-
Depreciation of Plant and Machinery = Rs. 40,000 × 5% = Rs. 2,000
Depreciation of Furniture and Fixtures = Rs. 1,200 × 5% = Rs. 60
Depreciation on Loose tools = Rs. 3,000 × 15% = Rs. 450

Rent paid for 3 quarters = Rs. 2,700
Rent for a quarter = 2700/3 = Rs. 900

Provision for doubtful debts = Sundry Debtors × Rate
Provision for doubtful debts = Rs. 45,000 × 5%
Provision for doubtful debts = Rs. 2,250

Question 15: From the following Trial Balance, extracted from the books of Raga Ltd., prepare a Profit and Loss Account for the year ended 31st March, 2019 and a Balance Sheet as at that date:

The additional information’s are as under:
(i) Closing stock was valued at the end of the year at Rs. 20,000.
(ii) Depreciation on Plant and Machinery charged at 5% and on Land and Building at 10%.
(iii) Make a provision for discount on debtors at 3%.
(iv) Make a provision at 5% on debtors for Bad-debts.
(v) Salary outstanding was Rs. 100 and Wages prepaid were Rs. 40.
(vi) The manager is entitled to a Commission of 5% on Net Profit after charging such Commission.

Solution 15:

Working Note:-
Depreciation of Plant and Machinery = Rs. 40,000 × 5% = Rs. 2,000
Depreciation of Building = Rs. 12,000 × 10% = Rs. 1,200

Provision for doubtful debts = Sundry Debtors × Rate
Provision for doubtful debts = Rs. 54,300 × 5% = Rs. 2,715

Provision for doubtful debts = Sundry Debtors – Provision for bad debts × Rate
Provision for doubtful debts = (Rs. 54,300 – Rs. 2,715) × 3% = Rs. 1,548

Question 16: The following balances were extracted from the books of Shri Krishan Kumar as at 31st March, 2017:

Adjustments:-
(i) Stock on 31st March, 2017 was valued at Rs. 23,500.
(ii) 1/5th of general expenses and taxes & insurance to be charged to factory and the balance to the office.
(iii) Write off a further Bad-debts of Rs. 160 and maintain the provision for Bad-debts at 5% on Debtors.
(iv) Depreciate Machinery at 10% and Scooter by Rs. 240.
(v) Provide Rs. 700 for outstanding interest on Bank Overdraft.
(vi) Prepaid Insurance is to the extent of Rs. 50.
(vii) Provide for Manager’s Commission at 10% on the Net Profit after charging such Commission.
Prepare final accounts for the year ended 31st March, 2017 after giving effect to the above adjustments.

Solution 16:

Working Note:-
Depreciation of Machinery = Rs. 9,340 × 10% = Rs. 934

Provision for Manager’s Commission = Rs. 9,900 × 10/110 = Rs. 900

Calculation of Provision for Doubtful debts:-:-
Provision for doubtful debts = Sundry Debtors – Provision for bad debts × Rate
Provision for doubtful debts = (Rs. 6,280 – Rs. 160) × 5% = Rs. 306

Question 17 (A): On 31st March, 2017 the following Trial Balance was extracted from the books of Sh. Ghanshyam Das:-

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date, after making adjustments for the following matters:

1. Depreciate Land and Building at 2.5% and Motor Vehicles at 20%.
2. Interest on Loan at 15% p.a. is unpaid for six months.
3. Ghanshyam Das withdrew Rs. 2,000 for his private use. This amount was included in general expenses.
4. Interest on Investments is receivable for full year @ 10%.
5. Provide for Manager’s Commission at 10% on Net Profit after charging such commission.
6. Stock in hand on 31st March, 2017 was valued at Rs. 25,000 (Realisable value Rs. 22,000).

Solution 17 (A):

Working Note:-
Depreciation of Land and Building = Rs. 2,80,000 × 2.5% = Rs. 7,000
Depreciation of Motor Vehicle = Rs. 50,000 × 20% = Rs. 10,000

Provision for Manager’s Commission = Rs. 2,08,900 – Rs. 62,600
Provision for Manager’s Commission = Rs. 1,46,300
Provision for Manager’s Commission = Rs. 1,46,300 × 10% = Rs. 13,300

Question 17 (B): Prepare Trading and Profit and Loss Account and Balance Sheet as at 31st March, 2017 from the following Balances of Mr. Sardari Lal :

Adjustments:- The Closing stock was Rs. 23,000 but there has been a loss by fire on 20th March, 2017, to the extent of Rs. 20,000, not covered by insurance. Depreciate Plant and Machinery by 10% and Traveller’s Samples by 33.33%. Increase the Bad-debts Provision to Rs. 2,000. Write 20% off Advertising Development Account. Annual premium on insurance expiring 1st June, 2017 was Rs. 1,200. Provide for Manager’s commission @ 5% on Net Profits after charging such Commission.

Solution 17 (B):

Working Note:-
Depreciation of Plant and Machinery = Rs. 20,000 × 10% = Rs. 2,000
Depreciation of Traveller’s Samples = Rs. 2,700 × 100/300 = Rs. 900

Prepaid Insurance = Rs. 1,200 × 2/12 = Rs. 200

Point in Mind:-
In the event of loss managers are not entitled to get and commission.

Question 18: State with reasons whether the following are capital or revenue expenditures:
(i) A new machine is purchased for Rs. 60,000, Rs. 800 were spent on its carriage and Rs. 1,500 were paid as wages for its installation.
(ii) A sum of Rs. 40,000 was spent on painting the new factory.
(iii) Rs. 6,000 were paid for annual insurance premium.
(iv) Rs. 20,000 were spent on repairs before using a second hand generator purchased recently.
(v) Rs. 5,000 were spent on the repair of a machinery.
(vi) Rs. 50,000 were spent for air-conditioning of the office of the manager.

Solution 18:

1. Capital Expenditure
   Reason: Purchases of machinery is a capital expenditure all expenses related to machinery on the purchasing date is treated as capital expenditure.
2. Capital Expenditure
   Reason: Whitewashing on the new building will increase the revenue generating capacity of the building, thus, it will be capitalised and treated as capital expenditure.
3. Revenue Expenditure
   Reason: Annual insurance premium is a recurring expenditure to carry on day-to-day business activities. Thus, it is a revenue expense.
4. Capital Expenditure
   Reason: To enhance the working capacity of the assets if any expenditure is incurred once in a while, then it will be treated as capital expenditure. So, the expenses made on repairing of second hand machinery will be capitalised and treated as capital expenditure.
5. Revenue Expenditure
   Reason: The expenditure on repairing of machinery will help to raise the working capacity of the machinery, so it is revenue expenditure.
6. Capital Expenditure
   Reason: To enhance the working capacity of the assets if any expenditure is incurred once in a while, then it will be treated as capital expenditure. So, the expenses made on air conditioner will be treated as capital expenditure.

Question 19: From the following Trial Balance of Mr. Alok, 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 the shop on 31st March, 2019 was Rs. 64,480.
(ii) Half the amount of X’s Bill is irrecoverable.
(iii) Create a provision of 5% on other debtors.
(iv) Wages include Rs. 600 for erection of new Machinery.
(v) Depreciate Machinery by 5% and Furniture by 10%.
(vi) Commission includes Rs. 300 Commission received in advance.

Solution 19:

Working Note:-
Depreciation of Machinery = Rs. 14,400 + Rs. 600 × 5% = Rs. 750

Provision for doubtful debts = Sundry Debtors – Further Bad debts – Amount recovered × Rate
Provision for doubtful debts = (Rs. 30,000 – Rs. 500 – Rs. 500) × 5%
Provision for doubtful debts = Rs. 1,450

Question 20: Extracts of Trial Balance as at 31st March, 2017:

Adjustments:
(i) 3/4th of Dewan’s bill is irrecoverable.
(ii) Create a provision of 6% on Sundry Debtors.
Show the effect on Profit and Loss Account and Balance Sheet.
Solution 20:

Working Note:-
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% = 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

Depreciation of Land and Building = Rs. 30,000 × 2.5% = Rs. 750
Depreciation of Plant and Machinery = Rs. 14,470 × 10% = Rs. 1,427

Provision for doubtful debts = Sundry Debtors – Further Bad debts × Rate
Provision for doubtful debts = Rs. 30,000 × 5% = 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:-

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

Solution 22

Working Note:-
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% = Rs. 17,750

Salaries for 10 months = Rs. 80,000
Salaries for 2 months = 80,000/10 × 2 = Rs. 16,000
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:-
Depreciation of Land and Building = Rs. 40,000 × 10% = Rs. 4,000
Depreciation of Plant and Machinery = Rs. 5,000 × 5% = Rs. 250

Provision for doubtful debts = Sundry Debtors – Sales on Approval × Rate
Provision for doubtful debts = (Rs. 20,600 – Rs. 7,200) × 5% = 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 advertisement 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: Trading Account for the year ended March 31, 2017

Working Note:-
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

Provision for doubtful debts = Sundry Debtors × Rate
Provision for doubtful debts = Rs. 56,000 × 2% = 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 Advertisement 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:

Q29. 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 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:-
Depreciation of Machinery = Rs. 2,00,000 × 15% = Rs. 30,000
Depreciation of Motor Vehicle = Rs. 1,50,000 × 20% = Rs. 30,000

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate
Provision for doubtful debts = (Rs. 70,000 – Rs. 500) × 1% = 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:-
Depreciation of Building (i) = Rs. 25,000 × 2.5% = Rs. 625
Depreciation of Building (ii) = Rs. 7,000 × 2% = Rs. 140
Depreciation of office furniture = Rs. 3,500 × 5% = Rs. 175

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate
Provision for doubtful debts = (Rs. 62,070 – Rs. 570) × 6% = 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

Depreciation of Building = Rs. 3,00,000 × 5% = Rs. 15,000
Depreciation of Furniture = Rs. 80,000 × 10% = Rs. 8,000

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate
Provision for doubtful debts = Rs. 2,50,000 × 5% = 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:-

1. Stock on 31st March, 2016 was valued at Rs. 46,000.
2. Depreciate Furniture at 15% p.a. and Sales Van at 20% p.a.
3. A sum of Rs. 200 is due for repairs.
4. 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.
5. Rent is paid at the rate of Rs. 1,000 per month.
6. Allow 8% interest on Capital and charge Rs. 1,500 as interest on Drawings.

Solution 32:

Working Note:-
Depreciation of Sales van = Rs. 75,000 × 20% = Rs. 15,000
Depreciation of Furniture = Rs. 10,000 × 15% + Rs. 6,000 × 15% × 3/12 = Rs. 1,725

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate
Provision for doubtful debts = (Rs. 80,000 – Rs. 2,000) × 5% = 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

Trading Account for the year ended March 3 , 2019

Working Note:-
Depreciation of Sales van = Rs. 15,000 × 20% = Rs. 3,000
Depreciation of Furniture = Rs. 5,000 × 10% = Rs. 500
Depreciation of Machinery = Rs. 15,000 × 10% × 3/12 = Rs. 375

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate
Provision for doubtful debts = (Rs. 18,200 – Rs. 200) × 5% = Rs. 900

Question 34: 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:-
Depreciation of Machinery = Rs. 20,000 × 5% = Rs. 1,000

Provision for doubtful debts = Sundry Debtors – future Bad debts × Rate
Provision for doubtful debts = (Rs. 50,000 – Rs. 1,000) × 6% = Rs. 2,910

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% = 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:-

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

Solution 35:

Working Note:-
Depreciation of Plant = Rs. 60,000 × 10% = Rs. 6,000
Depreciation of Furniture = Rs. 15,000 × 20% = Rs. 3,000
Depreciation of Furniture-II = Rs. 5,000 × 20% × 6/12 = Rs. 500

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

Provision for doubtful debts = Sundry Debtors – Pro. For Bad debts × Rate
Provision for doubtful debts = (Rs. 1,00,000 – Rs. 5,000) × 2% = 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 Advertisement 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 = 1/4 × 40,000 = Rs. 10,000

Depreciation of Furniture = Rs. 10,000 × 8% × 9/12 = Rs. 1,350

Accrued Interest = Rs. 1,350 – Rs. 900 = Rs. 450

Provision for doubtful debts = Sundry Debtors – Further Bad Debts × Rate
Provision for doubtful debts = (Rs. 73,800 – Rs. 800) × 5% = Rs. 7,300

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

Adjustments:-

1. Stock on hand on 31st March, 2017 was Rs. 80,000.
2. Further Bad-debts written off Rs. 2,000 and create a provision of 5% of Sundry Debtors.
3. Rent has been paid up to 31st May, 2017.
4. Manufacturing wages include Rs. 10,000 of new Machinery purchased on 1st October, 2016.
5. Depreciate Plant and Machinery by 10% p.a. and Fixtures and Fittings by 20% p.a.
6. Commission earned but not received Rs. 1,000.
7. Interest on Loan for the last two months is not paid.
8. 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 Plant and Machinery-II = Rs. 10,000 × 10% × 6/12 = Rs. 500
Depreciation of Fixtures and Furniture = Rs. 12,000 × 20% = Rs. 2,400

Provision for doubtful debts = (Sundry Debtors – Further Bad Debts) × Rate
Provision for doubtful debts = (Rs. 58,000 – Rs. 2,000) × 5% = 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:

Trading Account
for the year ended March 31, 2019

Working Note:-
Depreciation of Motor car = Rs. 2,00,000 × 20% = Rs. 40,000
Depreciation of Fixtures and Furniture = Rs. 8,000 × 10% = Rs. 800

Outstanding Rent = Rs. 7,480 × 1/11 = Rs. 680
Outstanding Wages = Rs. 33,000 × 1/11 = Rs. 3,000
Outstanding Rent = Rs. 30,800 × 1/11 = Rs. 2,800

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:

Information’s:-
(1) Closing Stock was valued at Rs. 60,000. You are informed that goods valued Rs. 12,000 were sold and despatched on 29th March, 2019, but no entry was passed to this effect.
(2) Insurance Premium includes 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 advertisement 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:

Working Note:-
Depreciation of Patents= Rs. 8,000 × 1/5 = Rs. 1,600
Depreciation of Furniture = Rs. 15,000 × 10% = Rs. 1,500

Calculation of Prepaid Insurance = Rs. 1,200 × 6/12 = Rs. 600

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% = 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:

Working Note:-
Interest on loan = Rs. 20,000 ×15/100 × 10/12 = Rs. 2,500
Interest paid = Rs. 1,500
Outstanding Interest = Rs. 2,500 – Rs. 1,500 = Rs. 1,000

Provision for doubtful debts = (Sundry Debtors – Further Bad Debts) × Rate
Provision for doubtful debts = (Rs. 1,42,000 – Rs. 2,000) × 5% = Rs. 7,000

Advance Rent = Rs. 3,900 × 1/13 = Rs. 300

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) 21/2% 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:- (DK Goel Solutions Class 11 Chapter 22)
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

Provision for Discount on Debtors = (Sundry Debtors – Further Bad Debts) × Rate
Provision for Discount on Debtors = (Rs. 80,000 + Rs. 1,500) × 2.5% = 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 godown 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:-
Provision for Doubtful Debts = Sundry Debtors × Rate
Provision for Doubtful Debts = Rs. 40,000 × 5% = Rs. 2,000

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:- (DK Goel Solutions Class 11 Chapter 22)
(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:

Working Note:-
Depreciation of Machinery = Rs. 18,000 × 10% = Rs. 1,800
Depreciation of Machinery = Rs. 12,000 × 10% × 9/12 = Rs. 900

Manager’s Commission = Rs. 50,150 – Rs. 48,350
Manager’s Commission = Rs. 1,800 × 10% = Rs. 180