final accounts

TRADING AND PROFIT AND LOSS A/C

FOR THE YEAR ENDING………………..

Dr Cr

PARTICULARS AMOUNT AMOUNT PARTICULARS AMOUNT AMOUNT

To Opening Stock By Sales ……

To Purchase …… Less: Sales return ……

Lesss: Purchase return …… …… By Closing Stock ……

To Carriage Inwards/ On purchase …… By Gross Loss c/d ……

To Wages …… (If debit side exceed credit side)

To wages & Salaries ……

To Octroi ……

To import duty ……

To custom duty ……

To lending Charges ……

To clearing Charges ……To clearing Charges ……

To coal, gas & water ……

To fuel ……

To heating/ lighting charges ……

To power ……

To manufacturing Expenses ……

To Consumable Stores ……

To assembling Charges ……

To Direct expenses ……

To Productive expenses ……

To royalty ……

To Gross profit c/d ……

(If credit side exceed debit side)

Total …… Total ……

To Gross Loss b/d …… By Gross profit b/d ……

To Salary …… By Interest Recived ……

To salary & Wages …… By rent received ……

To charity/ Donation …… By Discount received ……

To sample Distribution Expenses …… By Commission received ……

To Delivery Charges …… By dividend received ……

To Brokerage …… By profit from sale of assets ……

To sales Tax …… By refund of Tax ……

To loss on sale of asset …… By interest on drawings ……

To loss by fire/ theft …… By bad debts recovered ……

To rent,rates and taxes …… By miscellaneous receipts ……

To Insurance …… By income from investment ……

To stationery …… By Net loss ……

To printing & stationery …… (if debit side exceeds credit side)

To lighting ……

To establishment charges ……

To postage and telegram ……

To telephone expenses ……

To repairs & renewals ……To repairs & renewals ……

To distribution Expenses ……

To travelling expenses ……

To general expenses ……

To carriage outward/on sales ……

To interest Paid ……

To Discount allowed ……

To Bad Debts ……

To Bad debts Reserve ……

To Depriciation ……

To Interest on capital ……

To export charges ……

To trade expenses ……

To Administraive expenses ……

To sundry/ Miscellaneous expenses ……

To advertisement expenses ……

To Net Profit ……

(If credit side exceed debit side)


BALANCE-SHEET

AS ON …………….

LIABILITIES AMOUNT AMOUNT ASSETS AMOUNT AMOUNT

Capital …… Land & Building less depreciation ……

Add/Less: Net profit/Net loss …… Plant & Machinery ……

Add: Interest on capital ……Furniture & Fixtures less depreciation ……

Less:Drawings ……Stores/loose tools less depreciation ……

Less:Interest on drawings …… …… Stock (Closing) ……Less:Interest on drawings …… …… Stock (Closing) ……

Long term loan …… Debtors ……

Reseves & Surplus …… Bills Receivables ……

Creditors …… Investments ……

Bills Payable …… Cash at Bank ……

Bank Overdraft …… Cash in hand ……

Outstanding expenses …… Prepaid expenses ……

Advance income …… Accrued income ……

Goodwill/patents/copyrights ……


ADJUSTMENT ENTERIES

1. Outstanding Expenses

Effect: Add in corresponding expense And show in liability side of balance-sheet.

2. Prepaid Expenses

Effect: subtract from corresponding expense And show in asset side of balance-sheet.

3. Accrued Income

Effect: Add in corresponding income And show in asset side of balance-sheet.

4. Advance Income :

Effect: subtract from corresponding income And show in liability side of balance-sheet.Effect: subtract from corresponding income And show in liability side of balance-sheet.

5. Interest on Capital

Effect: Show in debit side of P&L a/c and add in capital in balance-sheet.

6. Interest on Drawings

Effect: Show in credit side of P&L a/c and subtract from capital.

7. Provision for bad and doubtful debts or bad debts reserve

Effect: Show in debit side of P&l a/c and subtract from debtors.

8. Provision for discount on debtors

Effect: Show in debit side of P&L a/c and subtract from debtors.

9. Provision for discount on creditors

Effect: Show in credit side of P&L a/c and subtract from creditors.

10. Depreciation

Effect: Show in debit side of P&L a/c and subtract from corresponding assets.

11. Closing Stock

Effect: Show in credit side of Trading account and Show in asset side of Balance-Sheet.

12.Goods damaged by fire/lost by theft/given as charity/distributed as free sample12.Goods damaged by fire/lost by theft/given as charity/distributed as free sample

Effect: Subtract from purchase and show in debit side of P&L a/c.

13. Goods taken for personal use

Effect: Add in drawings and subtract from purchase.

14. Purchase of assets wrongly written in purchase A/C

Effect: Subtracts from purchase and show in asset side of balance sheet.

15. Manager’s commission

Effect: Show in debit side of P&L a/c and Show in liability side of balance-sheet.

Calculation of provision for bad & doubtful debts or bad debts reserve

1. Old Bad Debts (given in trial balance) ****

2. Add: New Bad Debts (given in adjustment) ****

3. Add: New Bad Debts Reserve (given in adjustment) ****

4. Less: Old bad debts reserve (given in trial balance) ****

5 Amount of Bad Debts Reserve to be shown in P&L a/c ****

(If positive record in debit and if negative record in credit)

Calculation of Debtors to be shown in Balance-Sheet

1. Debtors ****1. Debtors ****

2. Less: New Bad Debts ****

3. Net Debtors (1-2) ****

4. Less: New bad debts reserve on net debtors (3*rate) ****

5. Debtors after deducting new B.D.R. (3-4) ****

6. Less: Reserve for discount on debtors (5*rate) ****

7. Debtors to be shown in Balance-Sheet (5-6) ****

Calculation of manager’s commission

1. If given fixed % on gross profit

Manager’s Commission = Gross Profit * Rate

100

2. If given fixed % on net profit before charging such commission

Manager’s commission = Profit before Commission * rate

100

3. If given fixed % on net profit after charging such commission

Manager’s commission = Profit before Commission * rate

100 + rate

Practical Problems

1.From the following information prepare Trading Account:

Opening stock 5000 Sales Return 400

Sales a/c 20000 Manufacturing Expenses 100

Purchase return 200 Octroi 500

Wages a/c 4000 Power 700

Carriage inward 300 Purchase a/c 8000

Closing Stock (31st December 2011) Rs. 2000.

2. Prepare Profit & Loss A/c:

Carriage on purchase 2000

Carriage on sales 1000Carriage on sales 1000

Duty on Export 2020

Lighting 1050

Water & Electricity 2120

Advertisement 100

Salary of factory manager 2200

Salary of office manager 1500

Gross Profit 15200

Rent received 1500

Rent paid 500

Commission (cr.) 1200

3. Following are the closing balances on 31st march 2012:

Outstanding rent 100

Creditors 1800

Bank 3000

Machinery 6300

Capital 20000

Prepaid wages 400

Net loss 4800

Debtors 5400

Drawing 1800

Closing stock 1200 Closing stock 1200

Particulars Debit Amount Credit

Amount

Debtors & Creditors 12000 7900

Capital & Drawings 2900 30000

Rent & Rates 250

Trade Expenses 670

Purchases & Sales 8640 14290

Returns 190 280

Carriage Inward 250

4. From the following Trial- Balance extracted from the books of M/S Rai Bros., prepare

Final Accounts for the year ending 31st march 2012.

TRIAL-BALANCE

Carriage Inward 250

Wages 2920

Salaries 1200

Opening Stock 3100

Discount 180 240

Bad Debts 200

Plant & Machinery 2510

Furniture 1800

Cash in hand 500

Cash at bank 15400

Total 52710 52710

Closing stock amounted to Rs. 14220.

Particulars Debit Amount Credit Amount



Rent & Rates 450

Sundry Expenses 200


5. From the following Trial- Balance prepare Final Accounts for the year ending 31st

march 2012.

TRIAL-BALANCE

Carriage 150

Wages 5000

Opening Stock 2000


Cash at bank 1500

Total 25900 25900

Closing Stock Rs. 300.




Carriage outward 4080


Returns 1360 1000

Carriage Inward 6400

Wages 20960

Opening Stock 11520

Building 60000

Salaries 30000

Patents 15000

6. The following is the trial-balance of Mr. Kapur on 31st march 2012.

Patents 15000

General expenses 6000

Insurance 1200

Fuel & Power 9460


Furniture 20000

Cash in hand 1080

Cash at bank 5260

Total 353160 353160

Taking into account the following adjustments, prepare Final Accounts.

1) Closing stock amounted to Rs. 13600. 2)Outstanding wages Rs. 4000.

3)Machinery is to be depreciated at the rate of 10% and patents at the rate of 20%.

4)Salaries for the month of March, 2012 amount to Rs. 3000 were unpaid.

4)Insurance include a premium of Rs. 170 for the next year.

5)Provision for bad & doubtful debt is 5% on debtors.

Particulars Debit Amount Credit

Amount


Capital 5000000

Advertisement 220000


Purchase returns 180000

Commission received 75000

Opening Stock 720000

Repairs & Maintenance 130000

Salaries 300000

Car 350000


7. The following is the trial-balance of Punjab Jewelers as on 31st march 2012.


Insurance 70000

Building 4258000

Furniture 100000

Cash in hand 35000

Cash at bank 60000

Total 9153000 9153000


1. Closing stock amounted to Rs. 800000.

2. Provide depreciation on Building @ 5%, Furniture @ 10% and car @ 20%.

3. Salaries for the month of March, 2012 amount to Rs. 30000 were unpaid.

4. Prepaid advertisement Rs. 20000.

5. Goods used for domestic purpose Rs. 18000.

6.Provision for bad & doubtful debt is 2% on debtors.




Carriage outward 4200


Returns 2500 1500

Carriage Inward 7500

Wages 10000

Opening Stock 30000

Loan @ 9% (1st may 11) 25000

Coal, Gas & Water 1200

Duty & Clearing Charges 1500

Office Rent 2500

Printing & Stationery 500

Bad Debts Reserve 750

Bills Receivable & Payble 45000 10000

Salaries 18000

8. From the following trial-balance of Mr. Ram prepare Trading and Profit & Loss Account for the year ended 31st December

2011 and Balance-Sheet on that date:

Salaries 18000

Bank Charges 25


Insurance 350

Factory Rent 1900


Furniture 3500

Cash in hand 1250

Cash at bank 4525

Total 365250 365250


1. Closing stock amounted to Rs. 40000.

2. Machinery is to be depreciated at the rate of 10%.

3. Outstanding expenses are: Salaries Rs. 2400, factory rent Rs. 1500, Office Rent Rs. 550.

4. Interest on capital at 5% per annum.

5. Goods withdrawn for personal use Rs. 2525.

6. Provision for bad & doubtful debt is 2.5% on debtors after elimination of bad debts amounting to Rs. 2000.

7.The manager is allowed a commission of 5% of net profit before charging the commission.




Freehold Property 66000


Returns 1100

Wages 35200

Opening Stock 38500

Loan to Krishna @ 10% (Balance on 1-1-11) 44000

Gas & Fuel 2970

Office expenses 2750

Freight 9900

Loose Tools 2200

Bad Debts Reserve 880

Interest on loan to 1100

Bills Receivable & Payble 5500

Salaries 13200

Discount 1320

Postage 1540

9. From the following trial-balance prepare Trading and Profit & Loss Account for the year ended 31st December 2011and

Balance-Sheet on that date:

Postage 1540

Bad Debts 660

Insurance 1760

Factory Lighting 1100

Office Rent 2860


Furniture 5500

Cash in hand 2640

Cash at bank 29260

Total 512820 512820


Closing stock amounted to Rs. 72600.

2. A Machinery was installed during the year costing Rs. 15400, but it was not recorded in the books as no payment was

made for it. Wages Rs. 1100 paid for its erection has been debited to wages account.

3. Depreciate: Plant & Machinery by 33.33% ,Furniture by 10% and Freehold Property by 5%

4. Loose tools were valued at Rs. 1760 on 31st December 2011.

5. Of the sundry debtors Rs. 600 are bad and should be written off.

Provision for bad & doubtful debt is 5% on debtors.

The manager is allowed a commission of 10% of net profit after charging the commission.

10. Mr. Krishna Kumar carries on the business as a retailer. He extracted the following balances from his books of accounts as on

31st March 2012.


Capital account 750000

Drawings 18000

Buildings 500000

Furniture & Fixtures 20000

Opening stock 225000

Sales 1800000

Purchases 1337000

Creditors 200000

Debtors 500000

Office expenses 24000

Salaries 18000

Rent 6000

Traveling & conveyance 4000

Insurance 1000

Motorcar expenses 15000

Postage & Telephones 3600

Electricity charges 2400Electricity charges 2400

Fixed deposits with bank@ 10% interest 50000

Cash in hand 1000

Cash at bank 10000

Loan from H.C. @ 12% interest 25000

Motor Car 40000


Provision for Bad & Doubtful Debts 5000

Total 2780000 2780000

You are required to prepare a Trading. Profit & Loss account and Balance-Sheet for the year ending 31st March 2012 taking into

consideration the following adjustments:

(i) Closing Stock amounts to be Rs.300000.

(ii) A customer returned goods on 31st March 2012amounting to Rs.4000, which was not accounted for , but already included in the closing

stock at selling price. The cost price of said goods was Rs.3200.

(iii) Annual insurance premium of Rs.1000 is valid upto 30th June 2012.

(iv) Provision for bad and doubtful debts is to be kept at ½% on debtors.

(v) interest on fixed deposit and payable on loan from H.C. is to be provided.

(vi) Provide depreciation on Buildings at 2.5%, on furniture 10% and on motorcar 20%.

(vii) Mr. Krishna Kumar withdraw goods for personal use costing Rs.2000.

(viii) Make a provision for discount on debtors at 2% and discount on creditors at 1%.

11. The following is the trial-balance of Mr. Kapur on 31st march 2012.


Debtors & Creditors 20,000 25,000

Capital & Drawings 4,000 9,30,000

Carriage outward 2,000

Purchases & Sales 5,00,000 12,00,000

Returns 15,000 25,000

Carriage Inward 7,000

Wages 50,000

Opening Stock 35,000

Building 5,50,000

Salaries 1,00,000

Patents 40,000

General expenses 20,000General expenses 20,000

Insurance 5,000

Fuel & Power 2,000

Plant & Machinery 7,00,000

Furniture 75,000

Cash in hand 10,000

Cash at bank 45,000

Total 2,18,00,000 2,18,00,000


•Closing stock amounted to Rs. 45,000.

•Machinery is to be depreciated at the rate of 10% and patents at the rate of 20%.

•Salaries for the month of March, 2012 amount to Rs. 10,000 were unpaid.

•Insurance include a premium of Rs. 500 for the next year.

•Outstanding wages Rs. 4000.

•Provision for bad & doubtful debt is 5% on debtors.

12. The following is the trial-balance of Punjab Jewelers as on 31st march 2012.


Debtors & Creditors 1,00,000 75,000

Capital 3,500 2,10,000

Advertisement 2,500

Purchases & Sales 2,10,000 5,00,000

Purchase returns 2,000

Commission received 5,000

Opening Stock 39,000

Repairs & Maintenance 2,100

Salaries 6,000

Car 2,400

General expenses 1,50,000

Insurance 500

Building 2,00,000

Furniture 50,000

Cash in hand 10,000

Cash at bank 12,000

Total 7,90,000 7,90,000


1. Closing stock amounted to Rs. 45,000.

2. Provide depreciation on Building @ 5%, Furniture @ 10% and car @ 20%.

3. Salaries for the month of March, 2012 amount to Rs. 300 were unpaid.

4. Prepaid advertisement Rs. 200.

5. Goods used for domestic purpose Rs. 18000.

6. Provision for bad & doubtful debt is 2% on debtors.

13. The following is the trial-balance prepare final accounts on 31st December 2012. Particulars Debit Amount Credit Amount


Capital 180000

Carriage 8200

Sales 240000

Returns 5000

Material consumed 150000

Wages 36100

Loan from Kapil @ 12% (balance on 1-4-12) 10000

Closing Stock 46500

Power & Fuel 5400

Coal, gas & water 2200

Trade expenses 14500

Rates & taxes 5200

Loose tools 16000

Bad debts reserve 7600

Interest on Kapil’s loan 600

Bills Receivable & Bills payable 4000 3700

Salaries 20000Salaries 20000

Discount 600

Outstanding trade expenses 2000

Insurance premium 4500

Bad debts 1800

Fire insurance 3000

Outstanding wages 3400

Bank charges 300


Furniture 18000

Cash in hand 1600

Bank 8200

Total 476900 476900


1. Provision for bad & doubtful debt is Rs.4000. 2. Carry forward the following unexpired amounts: (a) Fire insurance Rs.500

(b) Rates & taxes Rs.1200 © Insurance premium Rs.1500 . 3. Wages include Rs.5000 spent on installation of a new machine

on 1st January 2012. 4. Depreciate plant & machinery by 10% and furniture by 20%. 5. Loose tools were valued at

Rs.12000 on 31st December 2012. 6. accrued income Rs.2300.

Debit Balances Amount Credit balances Amount

Drawings A/c 3,000 Capital Account 30,000

Debtors 19,100 Creditors 8,401

Interest on Loan 200 5% loan on mortgage (1.4.2011) 8,500

Cash in hand 3,050 Bad Debts Provision 710

Opening Stock 5,839 Purchas Return 1,346

Motor Vehicles 9,000 Discount 440

Cash at bank 4,555 Bills Payable 2,714

Land & Building 12,000 Rent Received 250

Bad Debts 625 Sales 1,11,243

Purchases 67,458

Sales Return 7,821

Carriage Outward 1,404

14. On 31st March 2012 the following Trial Balance has been extracted from the books of a merchant:

Advertisement 2,264

General Expenses 4,489

Bills Receivables 6,882

Carriage Inward 3,929

Establishment 8,097

Rates, Taxes & Insurance 3,891

163604 163604

Prepare Trading and Profit & Loss Account for the year ending on 31st March 2012 and a Balance Sheet as on that

date after considering the following matters:

•Depreciate Land & Building at 5% p.a. and motor vehicles at 15% p.a.

•Goods costing Rs. 600 were sent to a customer on sale or return basis for Rs. 700 on 30th March 2012 and has

• been recorded in the books as actual sales.

•Salaries amounting to Rs. 700 and rates amounting to Rs. 400 due.

•A fire broke out on 1st April 2012 destroying goods worth Rs. 200.

•The provision for doubtful debts is to be brought up to 5% on sundry debtors.

•Stock in hand on 31st March 2012was valued at Rs. 6,250.

•Goods costing Rs. 500 were taken away by the proprietor for his personal use; no entry has been made in the books of accounts.

•Prepaid insurance amounted to Rs. 175.

•Provide for manager’s commission at 5% on net profit after charging such commission.

15. From the following trial balance and information, prepare Trading and Profit & Loss a/c of Mr. Rishabh for the year ended 31st March 2012 and a Balance-Sheet as on that date:


Capital/Drawing 12,000 1,00,000

Land & Building 90,000

Plant & Machinery 20,000

Furniture 5,000

Sales/Purchase 80,000 1,40,000

Returns 5,000 4,000

Debtors/Creditors 18,400 12,000

Loan from Gajanand on 1.7.2011 @6%p.a. 30,000

Carriage 10,000

Sundry Expenses 600Sundry Expenses 600


Insurance Expenses 1,000

Provision for doubtful debts 1,000

Provision for discount on Debtors 380

Bad Debts 400

Profit of Textile Dept. 10,000

Stock of General Goods on 1.4.2011 21,300

Salaries & Wages 18,500

Trade Expense 800

Stock of Textile Goods on 31.3.2012 8,000

Cash at Bank 4,600

Cash in Hand 1,280

297,380 297,380

Additional Information:

•Stock of general goods on 31.3.2012 valued at Rs. 27,300.

•Fire occurred on 23rd March 2012 and Rs.10,000 worth of general goods were destroyed. The

insurance company accepted claim for Rs. 6,00o only and paid the claim money on 10th April 2012.

•Bad Debts amounting to Rs. 400 are to be written off. Provision for doubtful debts is to be made at

5% and for discount at 2% on debtors. Make a provision of 2% on creditors for discount.

•Received Rs. 6,000 worth of goods on 27th March 2012 but the invoice of purchase was not

recorded in purchase book.

•Rishabh took away goods worth Rs. 2,000 for personal use but no record was made thereof.

•Charged depreciation at 2% on Land & Buildings, 20% on Plant & Machinery, and 5% on furniture.

Insurance prepaid amounts to Rs. 200.

MANUFACTURING ACCOUNT

Manufacturing account is prepared by those business concerns which

are engaged in manufacturing of products such as bricks, coal, pig iron

and cloth etc. The main objective of preparing manufacturing account is

to disclose the factory cost of production. It is necessary for to disclose the factory cost of production. It is necessary for

manufacturing concerns to prepare manufacturing account before

Trading account.

PARTICULARS AMOUNT AMOUNT PARTICULARS AMOUNT AMOUNT

To Opening Stock of Work In Progress ….. By Closing Stock

To Raw Material Consumed Raw Materials …..

Opening Stock ….. Work In Progress ….. …..

Add: Purchase ….. By Cost Of Production …..

Add: Carriage Inward …..

(Balancing figure transferred to

Trading Account)

Add: Freight Inward …..

Less: Return Outward …..

Less: Closing Stock …. ….

To Wages …..

To Salary of Work Manager …..

To power, electricity & water …..To power, electricity & water …..

To Fuel …..

To Factory Overheads …..

To Factory Rent …..

To Factory Insurance …..

To Supervisor's remuneration …..

To Plant Repairs …..

To Plant Depreciation …..

To Depreciation on Factory Building …..

To Depreciation on Machinery …..

To Manufacturing expenses …..

To Consumable Stores …..

To Packing Charges …..

To Royalty …..

Total ….. Total …..

TRADING ACCOUNT IN CASE OF MANUFACTURING CONCERN

Dr Cr

PARTICULARS

AMOU

NT

AMOU

NT PARTICULARS

AMOUN

T

AMOU

NT

To Opening Stock Of

Finished Goods …… By Sales ……

To Manufacturing Account …. .. Less: Sales return ……

By Closing Stock Of Finished

Goods ……Goods ……

To Gross profit c/d …… By Gross Loss c/d ……

(If credit side exceed debit

side)

(If debit side exceed credit

side)


Note: Profit and Loss Account and Balance-Sheet is same as trading Concern.

From the following particulars of Mr. Ganesh, Prepare, Manufacturing, Trading & Profit & Loss Accounts for the year ended

31st March 2012 and Balance-Sheet as on that date after adjustment entries:


Debtors & Creditors 11,000 80,000

Capital & Drawings 70,000 2,50,000

Building 1,50,000

Purchases & Sales 1,20,000 6,75,000

Returns 860 5,300

Manufacturing Wages 60,000

Manufacturing Expenses 50,000

Opening Stock

Raw Materials 40,000

Work In Progress 30,000

Finished Goods 20,000

Discount 1,500 5,720

Carriage Inward 4,000Carriage Inward 4,000

Carriage Outward 4,200

Interest & Bank Charges 1,260

Insurance 3,000

Bad Debts 1,500

Bad Debts Reserve 6,000

Bank Overdraft 40,000

Furniture 15,000

Plant & Machinery 4,50,000

Salaries 28,000

Cash in hand 1,400

Cash at bank 300

Total 10,62,020 10,62,020

Additional Information: Outstanding Manufacturing Expenses are Rs. 500. Depreciate Machinery @ 10% .Closing Stock of Raw Material Rs. 25,000, W.I.P. Rs. 20000 and Finished Goods Rs. 20,000

final accounts

Documents