St.

Marys School of Management Studies

Jeppiaar Educational Trust
Chennai 600 119
Department of Business Administration

MANAGEMENT ACCOUNTING

TRADING ACCOUNT for the year ending 31.3.XXXX

Dr.

Cr.
Particulars

To Opening Stock
To Purchases
(Less) Return Outwards
To Direct Expenses
To Carriage Inward
To Wages & Salaries
To Freight
To Import duty
To Gas, Fuel & Water
To Royalty on production
To Gross Profit

Amount
Rs.

Particulars

Amount
Rs.

By Sales
(Less) Return inwards
By
Loss
on
Fire
(Claimed
insurance
amount)
By Closing Stock
By Gross Loss c\d

Dr.N.KANNAN, Professor & Head in MBA Department.

-1-

Dr.

PROFIT AND LOSS ACCOUNT for the year ending 31st MARCH XXXX
Cr.

Particulars

Amount

To Gross Loss b\d

To Office salaries and wages
To Office Rent, Rates and Taxes
To Office Lighting and Insurance
To Printing and Stationary
To Postage, Telegrams
To Legal Expenses
To trade expenses
To Audit fees
To Upkeep expenses of Motor Vans
To Repairs & Maintenance
To Export Expenses
To Telephone expenses
To General expenses
To cash discounts allowed
To Interest on capital
To Interest on loans
To Discount or Rebate on
Bill of Exchange
To Discount allowed
To Bad debts
To selling & Distribution Expenses
To Travelers Salaries
To packing charges of finished goods
To Stores charges
To Bank charges
To carriage, freight, Cartage outwards
To cost of samples, Catalogue
Expenses
To salesmens salaries,
Expenses and commission
To Godown Rent
To Loss on Fire
To Carriage Outwards
To Agents Commission
To Advertising expenses
To Depreciation on fixed assets
To loss on sale of fixed assets
To net profit (transferred to capital
account)

Particulars

Amount

By Gross Profit b\d

By cash discounts received
By Interest received
By Bad debts recovered
By Income from investments
By commission received
By Rent from tenants
By Interest on Debentures
By interest on deposits
By Accrued income of
Investments
By gain on sale of fixed assets
By apprenticeship premium
By interest on drawings
By Net Loss (Transefered to
capital account)

Rs.

Rs.

Dr.N.KANNAN, Professor & Head in MBA Department.

-2-

Performa of a BALANCE SHEET as on March 31, XXXX

Rs.

Liabilities
Current Liabilities

Rs.

Assets
Current Assets

Creditors
Bills payable
Bank overdraft
Outstanding expenses
Income received in advance

Cash in hand
Cash at bank
Stock-in-trade
Debtors
Bills receivable
Prepaid expenses

Fixed Liabilities
Investments (give details)
Loan
Mortgage
Capital
(+) Net Profit
(+) Interest on Capital

Fixed Assets
Furniture and Fixtures
Plant and Machinery
Building
Land
Goodwill

(-) Drawings
(-) Interest on Drawings ..

Rs.
Rs.

Dr.N.KANNAN, Professor & Head in MBA Department.

-3-

DIFFERENCES BETWEEN TRIAL BALANCE AND BALANCE SHEET

Trial Balance
1. It is a list of balances debit and
credit-from the ledger accounts.
2. It contains balances of all
personal, real and nominal
accounts.
3. It is prepared before preparation
of trading and profit and loss
account
4. It is prepared to check the
arithmetical accuracy of posting
into ledger.
5. Closing stock does not appear in
the trial balance.
6. Outstanding
and
prepaid
expenses and incomes are not
shown.
7. Debit and credit balances are
shown side by side

Balance Sheet
1.
2.

3.

4.

5.
6.

7.

It is a statement of assets and

liabilities
It contains balances of only
those personal and real
accounts, which represent
assets and liabilities.
It is prepared after the
preparation of trading and
profit and loss account.
It is prepared to indicate the
financial position of the
business on particular date.
Closing stock is shown on the
assets side.
Outstanding
and
prepaid
expenses and incomes are
shown in the balance sheet.
Balance sheet is prepared on a
T form basis, the left hand
side showing liabilities while
right hand side representing
assets.

PROBLEMS:
1. Prepare Trading and Profit and Loss Account and balance Sheet from the following
balances, relating to the year ending 31st March 1998.
Rs.
Rs.
Capital
10,000
Wages
5000
Creditors
1,200
Bank
1000
Returns Outward
500
Repairs
50
Sales
16,400
Stock (1-4-1997)
2000
Bills Payable
500
Rent
400
Plant and Machinery
4,000
Manufacturing Expenses
800
Sundry Debtors
2,400
Trade Expenses
700
Drawings
1,000
Bad Debts
200
Purchases
10,500
Carriage
150
Returns Inward
300
Fuel and Power
100
The closing Stock was valued at Rs. 1,450.
Depreciate Plant and Machinery by Rs. 400
Allow 5% interest on Capital
A sum of Rs. 40 is due for repairs

Dr.N.KANNAN, Professor & Head in MBA Department.

-4-

2: From the following Trial Balance of Shri.R.Ranjan, prepare the Trading and P&L account
for the year ended 31st March 1998 and the Balance Sheet as at that date taking into account
the adjustments given below :
Dr.
Cr.
R.Ranjans Capital
29000
R.Ranjans Drawings
760
Purchases and sales
8900
15000
Sales and Purchases returns
280
450
Stock(1.4.1997)
1200
Wages
800
Building
22000
Freight and carriage
2000
Trade expenses
200
Advertisement
240
Interest
350
Taxes and Insurance
130
Debtors and Creditors
6500
1200
Bills receivable and bills payable
1500
700
Cash at Bank
1200
Cash in hand
190
Salaries
800
Rs. 46700
Adjustments:
(i)
(ii)
(iii)
(iv)

46700

Stock on 31st March 1998 was valued at Rs.1500

Insurance was prepaid to the extent of Rs.40.
Outstanding liabilities were: Salaries Rs.200, Taxes Rs.130.
Depreciate Building at 2% p.a.

3: From the following trial balance prepared from the books of A.Arthur on 31st December
1997, prepare trading and P&L account for the year ending 31st December 1997 and a
balance sheet as on that date:
A. Arthur Drawings
Rs. 10550
Bills receivable
9500
Plant and machinery
28800
Sundry Debtors (including
B.Madan for dishonoured
Cheque- Rs.1000)
62000
Wages (Manufacturing)
40,970
Returns Inward
2780
Purchases
256590
Rent and taxes
5620
st
Stock on 1 Jan 1997
89680
Salaries
11000
Travelling Expenses
1880
Insurance
400
Cash
530

A. Arthur capital
Rs. 1,19,400
Loan at 6% p.a.
20,000
Sales
3,56,430
Commission received
5,640
Sundry creditors
59,630

Dr.N.KANNAN, Professor & Head in MBA Department.

-5-

Bank
Repairs and renewals
Interest on loan
Interest and discount
Bad Debts
Fixtures and fittings

18970
3370
1000
4870
3620
8970

Rs. 5,61,100

Rs. 5,61,000

The following adjustments are to be made

(a) Stock-in trade in hand on December 31,1997 Rs. 1,28,960
(b) Write off half of B.Madans cheque
(c) Create a provision of 5% on Sundry debtors
(d) Manufacturing wages include Rs.1,200 for erection of new machinery purchased
(e) Depreciate plant and machinery by 5% p.a. and fixtures and fittings by 10% per
annum.
(f) Commission not earned but received amounts to Rs.600.
4: From the following Trial Balance prepare a Trading and P & L account for the year
ended 31-12-95 and a balance sheet on that date:

Trial balance
Capital
Drawings
Plant and Machinery
Stock on 1st Jan.
Purchases and Sales
Purchases and Sales returns
General Expenses
Rent
Rates
Apprentice Premium
Bank Overdrafts
Bad Debts
Debtors and Creditors
Cash on hand
Bad Debts reserve

Dr.
Rs.
710
950
1,460
10,362
210
440
120
200

Cr.
Rs.
4,250

11906
291

80
240
172
4,200
48

18,872
Make Provision for the following:
a) Depreciate Plant and Machinery at 10% p.a
b) Increase bad debts reserve to 5% on Sundry Debtors
c) Rent Accrued is Rs.40
d) Rates of Rs.80 are paid in advance
e) Stock on hand as on 31st December is Rs.1,700.
f) Apprentice premium received in advance is Rs.20.
Dr.N.KANNAN, Professor & Head in MBA Department.

2000
105

18,872

-6-

5: You are required to prepare Trading and P& L account & Balance sheet from the
following:

Particulars

Dr. (Rs.)

Purchases / Sales
Cash in hand
Cash in Bank
Stock as on 01.01.1997
Wages
Returns..
Repairs
Debtors/Creditors
Bad Debts
Loan (12% P.A)
Discounts
Capital
Interest on Loan
Salaries
Sales Tax
Octroi
Insurance
Charity
Rent
Machinery

1,30,295
500
9500
40000
22525
2400
1675
30000
2310
800

Cr. (Rs.)
1,80,500

195
30,305
20000
530
37500

600
8000
800
500
1000
125
2000
16000

2,69,030

2,69,030

Adjustments:
i)
Wages include Rs.2000 for erection of new machinery installed on 1.1.1997
ii)
Provide for depreciation on machinery @ 5% P.A.
iii)
Stock on 31.12.1997 is Rs. 40,925
iv)
Salaries unpaid Rs.800.
v)
Further Bad debts Rs.400
vi)
Make a provision of 5% on Debtors
vii)
Rent is paid up to 31st March 1998.
viii) Un expired insurance Rs.300.
6: From the following Trial balance and additional information pertaining to Mr.Balaji,
prepare Trading and Profit and Loss Account and balance Sheet.:

Stock on 1.4.97
Purchases
Wages
Carriage in

TRIAL BALANCE as on 31st March 1998

Rs.
Rs.
15,000
Sales
1,07,800
62,400
Return Outwards
2,400
10,600
Sundry creditors
32,500
1,400
Outstanding wages
1,400

Dr.N.KANNAN, Professor & Head in MBA Department.

-7-

Plant & Machinery

Coal, gas, water
Trade expenses
Furniture
Loose tools
Depreciation on
Plant & Machinery
Salaries
Bank charges
Sundry debtors
Factory premises
Commission
Sales returns
Drawings
Insurance

35,000
2,500
1,500
5000
3200

Capital
Discount
Bank Overdraft

1,00,000
1,800
20,000

2000
4500
500
15,000
100000
1000
2,800
3000
500

2,65,900
2,65,900
Adjustments:a) Stock on 31st March 1998 is valued at Rs. 3,00,000
b) Interest on overdraft outstanding Rs.1000
c) Three months insurance paid in advance.
d) Loose tools are to be valued ar Rs.2000
e) Provide 10% depreciation on furniture and 5% on factory premises.

7: From the following Trial Balance of Mr.Santhosh as at 31st March 1998, prepare Final
statements after making the necessary adjustments .Also give the closing and adjusting
entries.
Debit
Credit
Rs.
Rs.
Santhoshs Capital A/c
30000
Santhoshs Drawings Ac
2,600
Plant & Machinery
12,000
Stock on 1.4.1997
5,000
Purchases
35,000
Sales
50,000
Returns inward
2000
Returns Outward
1000
Sundry debtors
8000
Sundry Creditors
6000
Carriage inward
500
Carriage outward
500
Wages
3000
Salaries
2000
Factory Rent
200
Office Rent
500
Insurance
500
Discount received
600
Discount allowed
300
Furniture
2000
Bad Debts
400
Dr.N.KANNAN, Professor & Head in MBA Department.

-8-

Commission
Building
Bills Payable
Bills receivable
Cash on hand
Cash at bank

300
8000
2000
6000
200
600
89,600

89,600

Adjustments :
1) closing stock Rs. 20,000.
2) Prepaid insurance Rs.200
3) Outstanding wages Rs. 300; Salary Rs.200
4) Interest on capital 5%
5) Additional bad debts Rs.400.
6) Reserve for bad debts at 5% and Reserve for discount on debtors at 5%
7) Reserve for discount on creditors at 2%
8) Interest on drawings account at 6% for 6 months only.
9) Commission earned but not received Rs.200.
10) Rent outstanding (office) Rs.400.
11) Depreciation is to be provided at 10% on Furniture and Plant & machinery.
12) Appreciation on Building at 10%.

FACULTY

(Dr.N.KANNAN)

Dr.N.KANNAN, Professor & Head in MBA Department.

-9-