Financial Accounting.

Page :159; Illustration:9.4;

Prepare the correct Trial Balance.

Particulars Debit Credit

RS. RS.
Capital 8,950
Drawings 1,050
Opening 3,725
Inventory
Purchases 23,100
Sales 34,425
Salaries 6,205
and
Wages
Lighting 310
And Heating
Equipments 3,600
Freights 230
Outwards
Sales Returns 105
Purchases 290
Return
Postage 350
and
Telephones
Discount 285
Allowed
Discount 315
Received
Insurance 1,115
Motor 1,474
Vehicles
Cash 110
In
hand
Amount 18,920
Receivable
Accounts 4,925
Payable
Bank 975
Overdrafts

55,230 55,230
 Financial Accounting
Page :168; Illustration :9.11;

Give the necessary adjusting entries for the following items as on 31ST
March ,2000.

A. Closing stock as on 31ST March ,2000 –10,000

B. Salary due not paid – Rs1,000
C. Unexpired insurance on 31ST March,2000 –RS 2,000
D. Rent received in advance –RS 3,000
E. Interest due not received –RS6,00
F. Depreciation on fixed assets @ 33 1\3 %
G. Bad debts to be written off Rs 5,000
H. Create provision for bad and doubtful debts @12%
I. Create provision for discount on debtors @ 2%
J. Create reserve for discount on creditors @2%
K. Allow interest on capital @ 10% charge interest on drawing @ 12%

IMFORMATION AS PER TRIAL BALANCE:

Fixed Assets RS 60,000; Debtors RS 2,05,000;

Creditors RS 1,00,000; Capital RS 5,00,000;
Drawings RS 10,000
 Financial Accounting
Page :172; Illustration :10.1;
From The following Trial Balance of Sovera Medicos prepare a Profit and
Loss account for the year ended December 31,2001.
Trial Balance

Particulars Dr Cr
RS. RS.
Capital 2,50,000
Inventory 60,000
(on Jan 1,2001)
Accounts 1,00,000
Receivable
Accounts 70,000
Payable
Sales 6,00,000
Purchases 3,70,000
Sales 20,000
Returns
Purchases 10,000
Returns
Discount 10,000
Received
Bills 40,000
Payable
Rent 10,000
Payable
Insurance 10,000
Drawings 20,000
Land and 1,50,000
Buildings
Freehold 50,000
Property
Plant and 50,000
Machinery
Petty 6,000
Expenses
Cash at 20,000
Bank
Furniture 30,000
Freight 20,000
Wages 15,000
Salaries 15,000
Advertising 10,000
Postage and 10,000
Telephones
General 34,000
Expenses

Total 9,90,000 9,90,000

Adjustments :
1. Inventory was valued on 31ST December ,19X1 AT RS 95,000
2. Depreciate Plant and Machinery by 15% and furniture by 10%
3. Provide for interest on capital at 10% and interest on drawing at 6%
4. Provide for following outstanding expenses:
Wages RS 10,000
Salaries RS 7,000
General RS 5,000
Expenses
5. Insurance was prepaid to the extent of RS 3,000.
6. A sum of RS2,000 was earned by the of discount, but not yet received and hence not included in
accounts.
7. A sum of RS 3,000 represents rent received in advance but not yet due.
8. A provision of 2% is required on debtors towards bad and doubtful debts.
9. A provision of 50% towards taxation on profits (before taxation) is required.
 Financial Accounting
Page :73; Illustration:5.2;
The following is the trial balance of Gupta as on 30th June ,2001
Trial Balance Of Gupta For The Year Ending 30TH June ,2001

Dr Cr
RS RS
Cash 540 Sales 98,780
Cash 2,630 Accounts
At Returns 500
Bank Outwards
Purchases 40,675 Capital 62,000
Return 680 Accounts 6,300
Inwards Payable
Wages 8,480 Rent 9,000
Fuel and 4,730
Power
Carriage 3,200
On Sales
Carriage 2,040
On purchases
Inventory 5,760
(1ST July,1991 )
Buildings 32,000
Freehold land 10,000
Machinery 20,000
Patents 75,000
Salaries 15,000
General 3,000
Expenses
Insurance 600
Drawings 5,245
Accounts 14,500
Receivable

1,76,580 1,76,580

Taking into account the following adjustments prepare the Trading ,Profit and Loss Account as on 30TH
June ,2001.
1. Inventory on hand on 30TH June ,2001 is RS 6,800
2. Machinery to be depreciated at the rate of 10% and patents at the rate of 20%
3. Salaries for the month of June 2001 amounting to RS1,500 were unpaid.
4. Insurance includes an annual premium of RS 170 on a policy expiring on 31ST December ,2001
5. Bad debts to be written of are RS 725
6. Rent receivableRS1,000.

Financial Accounting
Page :176; Illustration:10.6
From the following Trial Balance of Pratibha and company, prepare Trading & Profit and Loss
Account for the year ending 31ST Dacamber,2002 after giving effect to the undermentioned
adjustments.

Trial balance for the year ending 31ST December ,2002

Dr Cr
RS RS
Opening 8,000 Capital a\c on 50,000
Stock 1-1-92
Purchases 20,000 Sales 80,000
Sales 1,500 Purchase 400
Return Return
Carriage 1,200 Apprenticeship 1,500
Inwards Premium
Carriage 2,500 Bills 2,500
Outwards Payable
Wages 3,300 Sundry 15,800
Salaries 5,500 Creditors
Rent 1,100
Freight 2,400
Fire 900
Insurance
Premium
Bad Debts 2,100
Discount 500
Printing 250
and Stationary
Rates and Taxes 350
Travelling 150
Expenses
Sundry 200
Trade
Expenses
Business 55,000
Premises
Furniture and 2,500
Fixtures
Bills Receivable 3,000
Sundry Debtors 20,000
Packing 4,500
Expenses
Loan given to 5,000
Smith
Investments 3,500
Cash in hand 250
Cash at bank 3,500
Proprietor’s 3,000
Withdrawals

1,50,200 1,50,200

Adjustments to be made for the current period are:

1. Inventory in hand 31ST December,2002,RS 7,000

2. Wages to laborers of RS 300 for the last month are outstanding.
3. Salaries to the clerk of the month of December ,2002 are outstanding RS 500.
4. Rent for the godown for the last month is outstanding RS100
5. Fire insurance premium includes RS 600 paid on 17TH July ,2002 to run for one year from 1st
July ,2002 TO 30TH June 2003
6. Apprentice premiums are for three years paid in advance on 1ST Janaury,2002
7. A stationary for RS 30 remains unpaid and unrecorded.
8. Depreciate business premises by 5% ,Furnitures and Fixtures by 10%and packing Machinery by
10%
9. Interest on Smith’s loan has accrued as on 31ST December ,2002
10. Interest on investments RS 75 has accrued as on 31ST December ,2002
11. Interest on capital to be allowed at 5% for the year.
12. Interest on drawings to be charged to him as ascertained for the year RS 80.
13. Create a provision on debtors for doubtful debts 5% and discount at 3%.
14. Create a reserve on creditors for discount at 3%.
 Financial Accounting
Page :183; Illustration:11.1
From the following trial balance of Evergreen and company prepare trading and profit and loss account
and balance sheet.

Trial balance as on December 31,2003

Particulars debit credit

RS RS
Cash in hand 2,400
Purchases 2,40,000
Stock as on 1-1-20x1 70,000
Debtors 1,00,000
Plant and machinery 1,20,000
Furniture 30,000
Bills receivable 40,000
Rent and taxes 20,000
Wages 32,000
Salaries 37,600
Capital 2,00,000
Bills payable 44,000
Creditors 48,000
Sales 4,00,000

Total 6,92,000 6,92,000

Additional Information:

1. Closing Inventory as on 31st December ,2003,RS 50,000

2. Outstanding wages RS 5,000
3. Depreciation on Plant and Machinery at 10% and Furniture at 5%
 Financial Accounting
Page :184; Illustration:11.2;
From the following Trial Balance of Sun shine and Company prepare Trading ,Profit ,and Loss
Account and Balance sheet.
Trial Balance as on 31.12.2004

Particulars Debit Credit

RS RS
Capital 25,000
Loans 5,000
Sales 35,000
Accounts Payable 4,000
Bills Payable 5,000
Purchase Returns 2,000
Dividends Payable 3,000
Plant and Machinery 13,000
Buildings 17,000
Receivables 9,650
Purchases 18,000
Discount Allowed 1,200
Wages 7,000
Salaries 3,000
Travelling Expenses 750
Freight 200
Insurance 300
Commission Paid 100
Cash on Hand 100
Bank 1,600
Repairs 500
Interest on Loans 600
Opening Inventory 6,000

Total 79,000 79,000

Additional Data:

1. Closing Inventory RS 8,000

2. Depreciation on Plant and Machinery at 15% and 10% on Buildings
3. Provision for doubtful receivables RS 500
4. Insurance Prepaid RS50
5. Outstanding rent RS100
 Financial Accounting
Page :184; Illustration :11.3;
Prepare Trading and Profit and Loss account and Balance sheet from the following data of Premier and
Company.
Trial Balance as on 31.12.2005

Particulars Debit Credit

RS RS

Sales 3,00,000
Plant and Machinery 1,20,000
Rent ,Rates and Taxes 20,000
Sales ,Return 30,000
Freight 4,000
Accounts Receivable 70,000
Opening Inventory 1,20,000
Purchases 2,30,000
Discount Paid 5,000
Interest on Bank Loan 5,000
Salaries 70,000
Cash in Hand 5,000
Purchase Returns 10,000
Bank Loan 1,50,000
Capital 1,81,500
Accounts payable 40,000
Bills payable 26,000
Legal charges 500
General Expenses 8,000
Cash at Bank 20,000

Total 7,07,500 7,07,500

Adjustments:

1. Provision for bad and doubtful receivables @5% on accounts receivables

2. Interest on Bank Loan outstanding RS 7,000
3. Closing Inventory as on 31.12.2005 RS 1,20,000.
 Financial Accounting
Page :185 ;Illustration :11.4;
The following is the Trial Balance of Raman Traders as on 31st December ,2006.

Trial Balance

Dr Cr

Particulars RS Particulars RS

Cash on hand 1,500 Sales 2,50,000

Cash at bank 3,000 Returns outwards 2,000
Purchases 1,10,000 Capital 56,000
Returns inwards 1,500 Accounts payable 30,000
Wages 20,000
Power and Fuel 8,000
Carriage outwards 6,000
Carriage inwards 5,000
Opening Inventory 6,000
Land 10,000
Buildings 80,000
Machinery 30,000
Patents 15,000
Salaries 12,000
Sundry expenses 6,000
Insurance 1,000
Drawings 8,000
Accounts receivable 15,000

Total 3,38,000 3,38,000

You are required to prepare a Trading and Profit and Loss account for the year ended 31.12.2006 and a
Balance as at 31.12.2006.Adjustments to be made are given below.

1. Closing Inventory as at 31.12.2006,RS20,000.

2. provisions for bad and doubtful receivables at 5% on debtors.
3. Outstanding salaries RS5,000 ,outstanding wages RS 3,000.
4. Depreciation at 10% on all assets.
 Financial Accounting
Page :186 ;Illustration :11.5
The following is The Trial Balance of Kamal Enterprises for the year ended 31st December ,2006.
You are required to prepare a Profit and a Loss account and Balance Sheet after taking into account the
adjustments given below.

Trial Balance

Dr. Cr.

Particulars Rs Particulars Rs
Cash in hand 500 Sales 1,50,300
Cash at bank 1,200 Purchase returns 5,000
Office furniture 6,000 Accounts payable 12,000
Accounts receivable 15,000 Bills payable 8,000
Commissions 1,200 Discount received 1,000
Bills receivables 3,500 Dividend received 2,000
Power and Fuel 6,000 Rent received 3,500
Plant and Machinery 24,000 Capital 27,000
Office expenses 2,000
Carriage inwards 1,200
Carriage outwards 3,500
Rent, Rates and Taxes 1,700
Leasehold premises 25,000
Wages 30,000
Salaries 7,000
Opening Inventory 12,000
Sales returns 2,000
Purchases 60,000
Drawings 7,000

2,08,800 2,08,00

Adjustments:

1. Closing Inventory as on 31-12-2006,RS18,000.

2. Depreciate Plant and Machinery at 10%.
3. Salaries outstanding RS 1,000, Power and Fuel outstanding RS 2,000.
4. RS5,000 was spent on Plant and Machinery but wrongly included in wages.
5. to provide for bed and doubtful debts for RS 1,500.
6. Discount earned but not received RS100.
7. Commission due but not recorded RS200.
8. Rent received includes RS500received in advance.

Financial Accounting
Page :187; Illustration:11.6;
The following is the Trial Balance of Rajan Jewelers as on December 31,2005.

Dr. Cr.

Particulars RS Particulars RS
Opening Inventory 72,000 Capital 5,00,000
Purchases 2,25,000 Sales 3,50,000
Furniture 15,000 Purchase returns 1,800
Motor car 30,000 Murthy 32,000
Buildings 4,25,000 Varadan 24,000
Gangappa 12,000 Commission 7,500
Gourishankar 20,000
Mathews 18,000
Advertisements 22,000
Repairs and maintenance 13,000
General expenses 16,000
Insurance 7,000
Cash in hand 3,500
Cash at bank 6,000
Salaries 30,000

9,15,300 9,15,300

Note:
To arrive at accounts receivables and accounts payables you have to add necessary ledger accounts.

You are required you draft Profit and Loss accounts and Balance sheet as on 31st December 2005.

1. Closing Inventory as at 31.12.2005,Rs 80,000.

2. Interest on capital at 6%.
3. Prepaid advertisements RS2,000.
4. Goods used for domestic purpose RS 1,800.
5. Outstanding salaries RS3,000.
6. Depreciation on buildings at 5%,furniture 5%, and Motor car at 10%.
 Financial Accounting
TUTORIAL :1
JOURNALISING
Q1. Multiple choices:-
A. All those to whom bus owes money are :-
a. Drs
b. Investors
c. Creditors
d. Shareholders
B. Which of the following is an example of personal a\c
a. Mach
b. Rent
c. Cash
d. Creditors
C. Payment recd. from debtors
a. downwards cash balance and upwards debtors balance.
b. Upwards cash balance and downwards debtors balance.
c. Downwards cash and debtors balance.
D. purchase of goods on credits from A is recorded as
a. debit purchases a\c ,credit cash a\c.
b. debit A a\c, credit purchases a\c
c. debit purchases a\c , credit A a\c
d. debit A a\c, credit stock a\c
E. Goods returned from X is entered as :-
a. debit sales returned a\c , credit X a\c
b. Debit X a\c ,credit purchase returns a\c
c. Debit X a\c, credit sales a\c
d. Debit sales a\c, credit X a\c
F. The total assets of the firm were RS50,000.Outside liabilities were RS 30,000..capital contributed
by the owner is :
a. RS50,000
b. RS 30,000
c. RS 20,000
d. RS 80,000
G. Carriage inwards refers to the cost of
a. transportation for the purchases made
b. transportation for sales
c. return of unsold goods
d. return of extra purchases
H. Rent recd. from B is recorded by:-
a. debit rent a\c , credit B a\c
b. debit rent a\c, credit cash a\c
c. debit cash a\c , credit rent a\c
d. debit B a\c, credit rent a\c
I. Bank a\c is a :-
a. personal a\c
b. real a\c
c. nominal a\c
J. The accounting equation is :-
a. assets = liabilities +stockholders or Owner’s equity
b. liabilities=assets + stockholders or Owner’s equity
c. assets +liabilities =assets + stockholders equity

Q2. Journalize the following transaction in the book of X for the month of Jan 98.
Jan 98
Jan 1:- X commenced bus. with a capital of Rs10,000.
Jan 1:-Bought furniture for cash RS 3,000.
Jan 2:-bought goods for cash from B RS 500.
Jan 3:-sold goods for cash to A RS 1,000.
Jan 4:-purchased goods from C on credit RS 2,000.
Jan 5:-credit sales to D RS 1,500.
Jan 8:-bought mach. for cash RS 3,000.
Jan 12:-paid trade expenses RS 50.
Jan 18:-paid for advertising to Apple Advertising Ltd. RS 1,000.
Jan 19:-cash deposited in bank RS2,000.
Jan 20:-recd. interest RS500.
Jan 24:-paid insurance premium RS 200.
Jan 30:-paid rent RS 500.
Jan 31:-paid salary to P RS1,000.
Jan 32:-withdrawn RS 200for personal use.

Q3. Name any 8 accounting principles. 4

Explain any 4. 4

Q4. Name the rules of debit and credit for all the types of a\c s. 7
 Financial Accounting
TUTORIAL 2

Ledger A\C ,Cash Bank

Q1. Journalize the following transactions and post them to ledger.
8\1\2001 1.Ram invests RS 10,000 in the business.
10\1\2001 2.He bought goods worth RS 2000 from Sham.
12\1 3.He bought a machine for RS 5000 from Laxman on credit.
14\1 4.He paid Laxman RS 4,500.
18\1 5.he sold goods for cash RS 3,000.
19\1 6.he sold goods to A on credit RS 4000.
25\1 7.he paid Sham RS 2,000.
28\1 8.he received from A RS 3,500.

Q2. The cash transactions of Anand during the first week of Jan are as follows:
Jan 1:purchased stationery RS 100.
Jan 2:cash sales RS 500.
Jan 4:purchased goods for cash RS 400.
Jan 5:received from Ram an advance of RS 800.
Jan 6:paid for sign board RS300.
Jan 7:purchased calculator RS 1000.
Jan 8:cash sales RS 300.

Q3. Explain the principle of consistency.

Q4. Explain giving an example the difference between the cash methods of accounting and the
Accrual method of accounting.
Q5. 1)P&L account is prepared for a period of one year by following :-
a. consistency concept
b. conservation concept
c. time period
d. cost concept
2)Recording of capital contributed by the owner as liability insures the adherence of principal of :-
a. double entry
b. going concern
c. separate entity
d. materiality
3)Op. balance of creditors RS25000
purchases of creditors RS30,000
 payment made by creditors RS15,000
closing balance of creditors is
a. RS15000
b. RS40,000
c. RS70,000
d. Expense
4) opening capital RS 80,000
closing capital RS 1,20,000
net profit RS 20,000
the trader has
a. brought addl. Capital of RS 20,000.
b. Drawings of 20,000
c. Drawing of 40,000
d. Additional capital of RS40,000
5) Rent recd. is
a. income
b. asset
c. liability d. expense

FA AND FSA –WB

Page 47 –Problem 9
Anand started business with RS 10,000.,of this he paid RS 5,000.into his bank account. His cash
transactions during the first week of Jan are as follows.
Jan 1 purchased stationery RS 100.
Jan 2 cash sales RS 500.
Jan 4 purchased goods for cash RS400.
Jan 5 received from Ram an advance RS800.
Jan 5 paid for sign board RS300.
Jan 6 purchased typewriter RS1,000.
Jan 7 cash sales RS300.
Prepare single column cash book.
 Financial Accounting
Page 50 –problem 23
Prepare a Trial Balance as on 31.3.98 from the following data .

Particulars RS Particulars RS
Purchases 1,65,625 Trade expenses 2,314
Sales 2,56,650 Rent, rates and taxes 3,517
Sales returns 4,250 Bad debts 525
Purchase returns 3,120 Interest on investments 800
Stock 1.4.97 26,725 Loan to A 3,000
Sundry debtors 40,200 Investments 11,500
Wages 20,137 Capital 28,000
Salaries 8,575 Outstanding wages 2,017
Furniture 6,575 Outstanding rent 750
Bad debts reserve 5,200 Prepaid insurance 524
Sundry creditors 25,526 Cash in hand and at bank 5,725
Patents 4,500 Bills receivables 17,070
Postage 3,226 Drawings 6,000
Bills payable 8,950 Depreciation on furniture 675
Lighting 350
 Financial Accounting
Page 51 –problem 26
Comment whether the following Trial Balance is correct , if not, draw a correct Trial Balance.

Trial Balance

Debit Credit

Particulars RS RS

Commission received 2,500

Capital 40,000
Drawings 20,000
Stock 4,000
Purchases 35,000
Sales 60,000
Sundry creditors 17,500
Bank O.D 20,000
Carriage inwards 5,000
Discount received 2,500
Other income 2,500
Sundry debtors 80,000
Rent and rates 1,000

1,45,000 1,45,000
 Financial Accounting
Page 51-problem 28
From the following list of Balances prepare a Trial Balance as on 30.6.2000.

Particulars RS Particulars RS

1.opening stock 1,800 13.plant and machinery 750

2.wages 1,000 14.loose tools 180
3.sales 12,000 15.lighting 230
4.bank loan 440 16.creditors 800
5.coal and coke 300 17.capital 4,000
6.purchases 7,500 18.miscellaneous receipts 60
7.repairs 200 19.office salaries 250
8.carriage 150 20.office furniture 60
9.income tax 150 21.patents 100
10.debtors 2,000 22.goodwill 1,500
11.leasehold premises 600 23.cash at bank 510
12.cash in hand 20
 Financial Accounting
Page 52 –problem 29
From the following Ledger Accounts Balances prepare a Trail Balance of Choudhary Brothers as on
31.12.2001.

Particulars RS Particulars RS
1.opening stock 15,600 16.insurance 400
2.freehold premises 30,000 17.bad debt reserve 300
3.plant and machinery 9,000 18.commission received 3,000
4.wages 2,000 19.commission paid 1,000
5.sundry debtors 12,000 20.bad debts 300
6.carriage inwards 180 21.office expenses 1,500
7.carriage outwards 200 22.salaries 2,000
8.factory expenses 1,600 23.travelling expenses 200
9.royalty 200 24.legal expenses 200
10.purchase of raw 15,000 25.cash at bank 840
material 26.cash in hand 800
11.factory rent 1,400 27.loan taken 6,000
12.capital 16,000 28.office rent 800
13.discount allowed 800 29.sales (net) 66,000
14.discount received 720
15.sundry creditors 4,000
 Financial Accounting
Page 52-problem 31
Given below is the Trial Balance of Srinivas and company as on 31st December,2001.

Dr. Cr.
Particulars RS Particulars RS
Land 15,300 Sales 41,460
Purchases 21,200 Return outwards 420
Salaries 2,200 Interest 240
Rent 600 Accounts payable 4,920
Postage 300 Loan 3,000
Stationary 240 Capital 12,000
Wages 5,200
Freight and carriage 560
on purchases
Miscellaneous expenses 500
Carriage on sales 800
Repairs 900
Bad debts 120
Opening Inventory 3,100
Buildings 1,700
Furniture 1,000
Accounts receivables 6,000
Cash in hand 1,300
Return inwards 1,020

62,040 62,040

In addition ,the following information is also given:-

1. A provision at 5% for doubtful debts has to be made.
2.The value of inventory on 31st December ,2001 was estimated as RS 2,980.
3.Depreciation on buildings was to be charged at 10%.
4. Salaries for the month of December amounting to RS200. is still to be paid.
5.Miscellaneous expenses include insurance premium of RS 60 pertaining to 2001.

From the above information , prepare a Trading and Profit and Loss account of Srinivas and company.