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ASSIGNMEN

  THEORETICAL QUESTIONS

 

A. Objective Type Questions:

I. Indicate the alternative which you consider to be appropriate :

1. The balance of petty cash is …….. .

(a) an asset

(c) an expense

2. Closing stock is valued of… ….. .

(b) a liability

(d) a revenue.

(a) cost price                           (b) market price

(c) sales price                           (d) cost price or market price whichever is lower.

3. Stock appearing in the Trial .Balance will be shown in …….. .

(a) Trading account

(c) Balance Sheet

(b) Profit and loss account. ……. .

(d) Trading account and also in Balance Sheet

4. Stock appearing outside the Trial balance will be shown in ………

(a) Trading account                                         (b) Balance Sheet

(c) Trading account and Balance sheet           (d) Profit and loss account

5. Liabilities have ……… balance.

(a) debit                                              (b) credit

(c) either debit or credit                      (d) no balance.

6. Net loss is ……… of the business.

(a) liability                               (b) an asset

(c) an expense                         (d) extraordinary loss.

7. Net profit is ……… of the firm.

(a) an asset                                          (b) a liability.

8. Which is a contingent liability.

(a) Liability for bills discounted         (b) Outstanding wages

(c) Bank Overdraft                             (d) Short term loans.

9. Goods costing $ 12,000 were damaged. Insurance company admitted claim for $ 10.500. Profit and loss account will be debited with ………

(a) $ 12,000

(c) $ 22,500

(b) $ 10,500

(d) $ 1,500.

Ans. 1. (a) 2. (d) 3. (a) 4. (c) S. (b) 6. (b) 7. (b) 8. (a) 9. (d).

 

III. Indicate whether following statements are True or False : 

  1. Prepaid expenses are assets of the business.
  2. Unearned income is the liability of the business.
  3. Accrued income or income due but not received are two different things.
  4. Unearned income means income received in advance.
  5. Outstanding expenses account is personal account.
  6. Outstanding income account is real account.
  7. Liabilities side of Balance sheet represents credit balance.
  8. Net loss is the asset of the firm because the business has to realize this loss from the proprietors.
  9. The debit and credit side of profit and loss account are always equal.
  10. Goods sent to the customers on ‘sale or return bases’ is also sales.

Ans. 1. True 2. True 3. False 4. True 5. True 6. False 7. True 8. True 9. False 10. False

 

B. Very Short Answer Type Questions :

  1. Mention the effect of net profit and net loss on the capital of the business.
  2. Stock is available both inside and outside of the trial balance. What is the difference between the treatment of the two.
  3. If sale of goods worth $ 10.000 is treated as sale of furniture, how will it affect Gross Profit and net profit?
  4. Where will you show unearned income in the financial statements, if it appear in the Trial Balance ?
  5. How will you treat wages owing in Final Accounts if it appears in the Trial Balance ?
  6. Name the account and its side. where from we may pick up the item of Net Loss. Also mention its treatment in the Balance Sheet.
  7. What adjusting entry will be passed for the prepaid rent ?
  8. What journal entry will you pass for the recovery of bad debts previously written off?

C. Short Answer Type Questions :

  1. Name any three current assets and four fixed assets.
  2. Mention items to be added to and deducted from capital at the liabilities side.
  3. Mention situation in which purchases A/c is credited.

D. Long Answer Type Questions :

  1. What do you mean by adjusting entries ? Why is it necessary to pass adjusting entries at the time of preparing final accounts ?
  2. Why is it necessary to create provision for bad and doubtful debts ? How is it treated in final accounts ?
  3. Explain the treatment of accidental loss of goods in the final accounts, if

(a) Goods are not insured.

(b) Goods are insured and full claim is admitted by the Insurance Company.

 

4. Write short notes on the following :

(a)   Expenses owing

(b)   Discount on creditors

(c)    Unexpired insurance

(d)   Unearned income

(e)    Interest on drawings

(f)     Increase in the value of assets.

5. Explain the rationale of making adjustments at the time of preparing the final accounts? Mention any important adjustments that are made for the preparation of the profit and Loss Account. 

PRACTICAL QUESTIONS

1. From the following Trial balance extracted from the books of J. N.S., prepare a Trading account, profit loss account for the year ended 31st March, 2004 and a balance sheet as on that date.

Name of Accounts Debit Credit                                                   Debit                           Credit

$                                  $

Capital ……………………………………………………….. ………. …….. .                                       20000

Drawings……… …. ….. …………………… ………………………. …… ….. 1,700

Plant and Machinery……. ………. ………………… …… …………………. 12,000

Horses and Carts………………………………………………………………… 2,600

Debtors………………………………… …………….. ………………………….. 3,600

Creditors………………………………………………….. ………………………..                                  2,600

Purchases and Sales ……………………… …………………………………. .2000

Wages ………………………………………………………………………….. …800

Cash at Bank. ………………………………………………………………… …2600

Salaries…………………………………………………………………………….. 800

Repairs… …………………………………. ………………………….. ……….. 190

Stock…………. …………………………… …………………………… …… … 1,600

Rent…………. …………. ………………………………………………………… 450

Manufacturing Expenses………………………………… ………………… 150

Bills Payable ………………………………………………………………… …                                    2350

Bad debts……… …………………………………………………………………… 500

Carriage……………………………………………….. …………………………… 160

  29,150                         29,150

The following adjustments are made: 

  1. Closing Stock $ 1,600.
  2. Depreciate Plant & Machinery 10%, Horses & Cans 15%.
  3. Allow interest on capital at 5% P.A.
  4. $ 150 is due for wages
  5. Paid rent $ 50 in advance.

[Ans. Gross profit = $ 940 ; Net loss = $ 3,540 ; Total of Balance Sheet = $ 20.860]

2. From the following Trial balance of A/c Ram & Sons prepare Trading and Profit and Loss A/c for the ending March 31 , 2003 and a Balance Sheet on that date:

Purchases …………… ………………………. .21750           Sales ……….. ….. ………………………….. …3500

Discount allowed …………………………. .1300              Capital ………………………………. ………….1300

Wages …. ……………………………………. ..6500             Creditors ……………… ………….. ………….2100

Salaries…… ….. ………………………………. 2,000

Travelling expenses……………………….. 400

Commission……… ………………………….. 425

Carriage Inward…………………………….. 275

Administrative expenses…………………. 105

Trade expenses……………………………… 600

Interest…. …………………………………….. 250

Building……………………………………….. 5,000

Furniture…. …… …………………………….. 200

Debtors……………………………………….. 4,250

Cash……………………………………………. 7.045

50,100                                                 50,100

Stock on 31st March 2003 was $ 6,000. Depreciate building by 20%, create a provision for ,bad debts @ 10% on debtors and outstanding wages amount to $ 475.

[Ans. Gross profit= $ 12,000 ; Net profit= $ 5,495 : and the total of the Balance Sheet = $ 21.070]

3. From the following balances, and the under mentioned particulars. you are required to make out a Trading and profit and loss account for the year ended 31st March, 2002, and a Balance sheet on that date: 

Name of Accounts                                           $         Name of Accounts                               $

Trade Creditors……………………………… 35,780           Discount received …………………………. 5,800

Bills Payable………………………………… 18,700            Bills Receivable…………………………….. 5,360

Law Charges ………………………………. .. 420               Purchases………………………………….. 1,17,200

General Expenses………………………….. 7,580              Stock (1-4-2001)…………………………. 63,900

Cash at Bank ……………………………….. 18,980            Trade Debtors ……………………. 63,220 Capital Account……………………………. 1,69,200         Carriage Inwards………………………… . 3,580

Premises……………… ………………………. 40,000           Returns Inward …………………………… 28,600

Loan from Bank……………………………. 40,000            Salaries……………………………………… 15,700

Returns Outward ………………………..16.200               Sales……………………………………….. 1,98,400

Bad Debts Provision …………………….. . 2,200            Bad Debts…………………………………….. 2.600

Cash in hand …………….. ……………….. .. 400              Rent, rates and taxes …………………… 11,200

Discount allowed …………………… ……  8.600             Plant and Machinery……………………. 59,000

Wages (manufacturing,) ………………….. 39940

The following, adjustments are necessary :

Bad Debts estimated at $ 2.9 10: Provision for discount on debtors 3% on creditors 2%: one year’s interest due to bank $ 1.600 ; depreciation on plant and machinery I 0%, stock in hand at 31st March, 2002 was $ 93,840.

[Ans. Gross profit = $ 55,220 : Net profit = $ 5.616.30 :Total of the Balance Sheet : $ 2,70,180. 70]

4. _The following is the Trial balance of Amrit Raj as on 31st March, 2004 : 

Name of Accounts                                                                   Dr. ($)                         Cr. ($)

Capital ………………………………………………………………… ..                                          25,000

Building ……………………………………………………………….. . 30.000

Furniture ……. ………………………………………………………… . 2,640

Scooter ………… …………. …………………………………………… . 4,000

Returns Inward and Outward ………………………………….. .. 2,300                             1,600

Stock on 1st April, 2003 ……………………………… ………….. . 8.000

Purchases and Sales ………… ……………. …………………. ….. .. 33,800                          56,040

Bad Debts ……………………………………………………………. .. 400

Carriage Inward ………… …………………………………………. .. 600

General expenses ……… …………………………………………… . 1,200

Bad Debts Provision ……… ……………………………………… .. 700

Bank Loan …………………… ………………………………………. .. 5,000

Interest on Bank Loan ………………….. ………………………… . 300

Commission …… …………………………………………………….. . 900

Insurance and Taxes …….. ….. ….. …………………. ……………. . 2,000

Scooter expenses …………………. ……………………… …… …… . 2,600

Salaries ……………………………………………… ….. …… ……… .. 4,400

Cash in hand ………………………………………………. …… …… . 2,000

Debtors and Creditors …………… ………… ………. …………… .. 3,000                           8,000

  97,240                         97.240 

You are required to prepare the final accounts for the year ending 31st March, 2004 working info account the following adjustments :

(a)    Closing Stock on 31-03-2004 was valued at $ 4,340.

(b)   Insurance is prepaid to the extent of $ 200 and carriage inward is unpaid $ 100.

(c)    Salaries have been paid for 11 months.

(d)   Bank loan has been taken at 10% p.a. interest.

(e)    Depreciate building by 5% and scooter by 15%.

(f)    Write off $ 200 as further bad debts and increase bad debts provision by 5% on debtors.

(g)   Scooter is used for business as well as for private purpose equally.

[Ans. Gross Profit= $ 17.180: Net Profit = $ 6.640: Total of Balance Sheet= $ 43,740]

5. Prepare final accounts from the following as on 31st March, 2002:

                                                                                                            Dr.                               Cr.

Name of Accounts                                                                               $                                  $

Cash in hand ……………………… ………………………………… …..                        1080

Cash at Bank ……………………………………………… ………… .                 5260

Purchases ……………………………………………………………… .                 81350

Sales ……………… ………. ……………………………………………. .                                                   197560

Returns Inward ……………………………………. …….. …….. …. .              1360

Returns Outward .. …. ………………………………………………. .                                                  1000

Wages ………………………………………………………… ……….. .                20960

Fuel & Power. ……………………………………………………….. .                 9460

Carriage on Sales …………………………………………………. .. .                6400

Carriage on Purchases ……………………………………………. .                  4080

Stock 1st April. 2001 ……………………………………………… .                 11520

Buildings ………………………………………………………………. .                 60000

Land …………………………………………… ………. ………………. .               20000

Machinery …… ……………………………………………………….. .                40000

Salaries …… ………….. …. …………………………. ……………….. .              30000

Patents ……… …. ….. ………. ……… …………………. ……….. ……. .         15000

General expenses ………………………. …… ……………. ……… ..              6000

Insurance … ………………………………. ……….. ……….. ……… ..              1200

Capital ……. ……… ………. : …………………. …………………….. ..                                                 142000

Drawings ……. ……… …………………………………….. …………. .              10490

Sundry Debtors ………………………………… ……………………. .               2900

Sundry Creditors …… ………………….. …… ……….. …………… ..                                               12600

353160                        353160

Adjustments :

(a)    Stock on hand on 31st March, 2002 is $ 13,600.

(b)   Machinery is to be depreciated at 10% and patent at 20%.

(c)    Salary outstanding $ 3,000.

(d)   Unexpired insurance $ 110

(e)    Wages include a sum of $ 4,000 spent on the erection of a cycle stand for employees.

(f)    A provision for bad doubtful debts is to be created to the extent of 5% on sundry debtors.

[Ans. Gross profit= $ 87,430; Net profit= $ 32.550 ; Total of Balance Sheet= $ 1 ,79,660] 

6. Prepare Trading Profit and loss account for the year ended 31st December; 2003 and a Balance sheet on that date from the following Trial Balances :

                                                                                                                        Dr.                   Cr. 

Name of Account                                                                                 $                      $

Capital … ……………… ….. …………… ………….. ………… ……… .                                    10000

Cash ……………. …. ………………….. ….. ……………. ………….. ..             1500

Bank overdraft .. …………………. …….. ……. ……………. ……… .                                    2000

Purchases and sales …. ….. ……… ….. ……… .. ….. …………….. ..          12000              15000

Returns ……… …… …. ……. …… ………. ………….. : …… …………. .        1000                2000

Establishment expenses…… ……………. ….. ….. …………….. …             2,200

Taxes and insurance……………… …….. …………………….. .. …               500

Bad debts and bad debts reserve ……… …. …………………. .. .             500                  700

Debtors and creditors …….. ….. …………………….. …… …….. ..                        5000                2000

Commission …….. ………………………………………….. …… … ..                                      500

Deposits .. …. ……………………… ………………………….. …….. ..             4000

Opening Stock ….. ….. ….. …….. ….. ……… ………… ………….. ..          3000

Drawings … ……………. …….. ……… ……….. ………. ………… .. ..           1400

Furniture … …………………….. ……………. …. ….. …………… …. .           600

B/R and B/P …………………….. ……………… ………….. …… …. .             3000                2500

34700              34700

Adjustments :

(a)    Salaries $ 100 and taxes $ 200 are outstanding but insurance $  50 is prepaid.

(b)   Commission $ 100 received in advance for next year.

(c)    Interest $ 210 is to be received on deposits and interest on bank overdraft $ 300 is to be paid.

(d)   Bad debts reserve is to be maintained at $. 1000.

(e)    Depreciate Furniture by 10%.

(f)    Stock on 31-12-2003 is $4,500.

[Ans. Gross profit= $ 5,500; Net profit= $ 2,000 ; Total of Balance Sheet= $ 17.800]

7. The following balances were extracted from the books of Modern Traders on .31st March. 2004 :

Name of Accounts                               $                      Name of Accounts                               $

Capital ……………. ……………………….. … .85000          Sales…………… …. ………. …. ………. 1 ,20.000

Drawings ……………………………………. .5000               Postage and Telegrams…………………..800

Plant & Machinery ……………. ………… ..40000           Bad Debts.. ……………………………….. 400

Accumulated depreciation …………….. .          9000    Provision for BID…. ……… ………….. 800

Stock on 1-4-2003 ………………………… .15000           Discount received………………………… 400

Purchases…………………………………….. 82,000            Rent received………………………………… 1,200

Sundry Debtors…………………………….. 20,600            Insurance………………………………………. 700

Furniture ……………………………………… 5.000 ·           Salaries……………………………………….. 20.000

Freight inward .. ………………………….. .. 2,000           Wages …. …. .. . .. .. .. . …. .. .. .. . .. .. . 1.300

Carriage Outward ………….. …………….. . 500                         Cash in hand…………………………………. 6.200

Rent, Rates & Taxes ……………………… . 4,600           Cash at Bank. ……………………………. 25 ,500

Printing & Stationery …………. ……….. .. 800              Reserve Fund……………………………….. 5,000

Sundry Creditors …………………………. .. 9.000 

Prepare final accounts for the year ended 31st March. 2004 after taking into account the following : 

(a)    Stock on 31st December was valued at $ 15,000.

(b)   Outstanding wages $ 500.

(c)    Provision for doubtful debts is to be maintained at 5 per cent of the debtors.

(d)   Prepaid insurance was $ 1 00.

(e)    Provide depreciation on plant and machinery at I 0% and on furniture at 5%. 

[Ans. Gross profit= $ 34,200 ; Net profit= $ 3.620 :Total of the balance sheet = $ 1.07, 120]

8. On 31st December, 2004, the following Trial balance was extracted from the books of a merchant : 

Debit Balances :                                              $          Credit Balances :                                $

Drawings………….. ………….. ……….. ….. 3,000            Capital ………………………………………. 28,000

Sundry Debtors…………………………….. 20, I 00          Sundry Creditors…. ……………………. 1 0.401

Interest on Loan……………………………. 300                 Loan on Mortgage………………………….. 9.500

Cash in hand…. ……………… …………….. 2,050            Bad Debts Reserve…………………………… 710

Stock on lst Jan., 2004………….. …. …… 6,839            Sales………………………………………. 1, 10,243

Motor Vehicles……………….. ….. ……….. 10,000         Purchases return…………….. …. ……….. 1.346

Cash at Bank………………………………… 3,555              Discount…… ……………………… ……….. .. 540

Land and Buildings……………………….. 12.000           Bills Payable……… …… ………………….. 2.614

Bad Debts …………………………….. , …….. 525                         Rent received………………………………….. 250

Purchases…… ……………………………….. 66.458

Sales Return …………………… …………… 7.821

Carriage Outward………………………….. 2,404

Carriage Inward …………………………… .2929

Salaries .. …………………………………….. .9097

Rates, Taxes and Insurance …………….. .2891

Advertising ……….. …. ….. ……… ………. ..3264

General expenses ………. ………………… .3489

Bills Receivable ………. ………………….. .6882

  163604                                                            163604 

Prepare Trading and Profit and loss account for the year ended 31st December; 2004 and Balance sheet as on that date after making adjustment for the following matters :

(1) Depreciate land and buildings at 2 1/2 and motor vehicles at 20%.

(2) Interest on loan at 6 per cent per annum is unpaid for six months.

(3) Goods costing $ 500 were sent to a customer on sale or return for $ 600 on 30th December. 2004 and has been recorded in the books as actual sales.

(4) Salaries amounting to $ 750 and rates amounting to $ 350 are outstanding.

(5) Prepaid insurance amounted to $ 150.

(6) The provision for bad debts is to be maintained at 5% on sundry debtors.

(7) Provide for Manager’s commission at 10% on net profits after charging such commission.

(8) Stock in hand on 3 1st December, 2004 was valued at $ 6,250.

[Ans. Gross Profit= $ 33,692; N.P. = $ 7,920; B/S Total = $ 57,612]

[Hint. (i) Goods sent on approval have been included in the closing stock with $ 500 and $ 600 deducted from sales and debtors.

(ii) The Manager’s commission on net profit is calculated as 10/110 on $ 8,7 12 i.e., $ 792.]

Debit Balances :                                  $          Credit Balance :          $

MachineryCash at Bank

Cash in hand

Wages

Purchases

Debit Balances :

Stock ( 1-7-2003)

Sundry debtors

Bills receivable

Rent

Commission

General Expenses·

Salaries

4,000    Capital1,000    Sales

500       Sundry Creditors

1.000    Interest received

8,000

6,000

4,400

2,900

450

250

800

500

29800

9,00016,000

4.500

300

 

 

 

 

 

 

 

 

29800

 

Additional Information :

(a)   Provide for interest on Capital at 5% p.a.

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

(c)    Wages outstanding amounting to $ 50.

(d)   Rent prepaid $ 100.

(e)    Stock on 30th June, 2004 $ 8.000.

[Ans. Gross profit = $ 8.950; Net profit= $ 6.500: Total of Balance Sheet = $ 20.500]

10. From the following Trial balance of M/s Kavita Stores on 30th June 2003, prepare trading and profit and loss account for the year ended 30th June 2003 and Balance Sheet as on that date.

Trial Balance

Debit                                       Credit 

Name of AccountsCapital account

Stock on 1st July 2002

Sales return and Sales

Purchases and Purchases returns

Freight and Carriage

Rem and taxes

Salaries and wages

Sundry debtors and Creditors

Bank Loan at 6% .

Bank Interest

Printing and Stationery

Income from investment

Cash at bank

Discount received

Investment

Furniture and Fittings

Discount allowed

General expenses

Audit Fees

Insurance

Travelling expenses

Cash in hand

Deposit with Suresh Jain @ 5%

Drawings

46,800

8,600

2,43.100

18,600

5,700

9,300

24,000

 

900

14,600

 

8.200

 

5,000

1,800

7.340

3,610

500

800

3.000

380

30,000

10,000

4,42,230

$1,08,090

 

2,89,600

5,800

 

 

 

 

14,800

20.000

 

250

 

3.690

 

 

 

 

 

 

 

 

 

 

4,42,230

 Adjustments:

The stock on 30th June 2003 was $ 78,600. 50% of printing and stationery is to be carried forward as charge in the following year. Depreciate Furniture and Fitting by 10%. Create 5% reserve for doubtful debts. Reserve 2% for discount on debtors and creditors. Insurance prepaid amounts to $ 200 and salaries Outstanding $ 500 and carriage outstanding $ 100. Bring in to account the full years interest on deposits with Suresh Jain.

[Ans. Gross profit= $ 56,800; Net profit = $ 21 ,650; Total of Balance Sheet= $ 1,55,144]

11. On 3 1st March 2001 the following Trial balance of M/s Ram Kumar & Sons was taken out. Prepare trading and profit and loss account for the year and the balance sheet as at that date after making the following adjustments :

(a)    Depreciation- S% of plant and machinery and 10% fixtures and fittings.

(b)   Reserve for bad debts 22% on boundary debtors.

(c)    Reserve for March, rent $ 150.

(d)   Insurance unexpired on 3 1st March $ 70.

(e)    Outstanding wages and salaries $ 800 and $ 350 respectively.

(f)    Stock on 31st March, 200 1was $16,580.

Trial Balance

Debit Balances :                                  $                      Credit Balance :                      $                       

Plant and MachineryFixtures and Fittings

Factory Fuel and Power

Office Salaries

Lighting (factory)

‘Travelling expenses

Carriage on sales

Cash at bank

Cash in hand

, Sundry debtors

Purchases

Manufacturing wages

Rent and Taxes

Office expenses

Carriage on purchases

Discount

Drawing account

Stock on 1-4-2000

Manufacturing expenses

Sales return

Insurance

55.0001,720

542

3,745

392

925

960

2,245

68

47,800

83,290

9,915

1,765

2.778

897

422

6,820

21,725

2,680

7,422

570

2,51 ,681

Ram Kumar & Sons Capital A/cSales

Sundry Creditors

Purchases return

Bills payable

93,2301,26,177

22,680

3,172

6,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.51,681

 

[Ans. Gross profit = $ 18,266: Net profit = $ 2.554: Total of Balance Sheet= $ 1, 19.366] 

12. Prepare trading and profit and loss account of Madan Saxena for 2002 and his Balance sheet on 31st December 2002 after making the necessary adjustments. 

Trial Balance

Name of Accounts                                                       Debit                           Credit

$                                  $

Opening stock on 1-1-2002                                        10,000

Cash and Bank                                                            4,000                           25,000

Purchase and Sales                                                      70,000                         90,000

Returns                                                                        3,000                           4,000

BuildingsCapital Account

Furniture and fittings

Debtors and Creditors

Bad debts reserve

Petty Cash and Stamps in hand

Caniage inward

Salaries

Sundry trade expenses

Interest charged by bank

Insurance premium paid for a year up to 30-6-2003

Telephone charges

Commission

30,000 

7,000

30,000

 

200

800

11,000

6,000

500

1,000

 

500

 

1,74,000

30.000

 

 

21.000

2.000

 

 

 

 

 

 

 

2,000

1,74.000

 

Also consider the following :

(a)    Stock of goods on 31 – 12-2002 $ 15,000.

(b)   Building and furniture and fittings are to be depreciated @ 10% and 20% respectively.

(c)    Bad debts $ 1,000 are to be written off and a reserve of 5% is to be kept on remaining debtors.

(d)   Commission received in advance $ 1.000.

[Ans. Gross profit= $ 25,200: Net profit= $ 2,850; Total of Balance Sheet= $ 79.8501]