FINANCIAL STATEMENTS WITH ADJUSTMENT

Adjustment entry is the entry that is required to be passed after ledger scrutiny reveals some transactions that are not yet passed in the journal. Such entries of course are not yet reflected in trial balance.

Adjustments that are required to be passed :

• Closing Stock.
• Outstanding Expenses.
• Prepaid Expenses.
• Accrued Income.
• Income Received in Advance.
• Bad Debit
• Provision for Doubtful Debts.
• Provision for Discount on Debtors.
• Manager’s Commission on Profit.
• Abnormal loss of stock.
• Goods taken for personal use.
• Goods distributed on free samples.

Adjustments 1 to 6

Questions Based on the Above Adjustment

Q.1    The following are the balances extracted from the books of ReghunathJi as on 31^st March, 2012. From these balances, prepare his Trading and Profit 7 Loss Account and Balance Sheet as at that date :

          Adjustment :-

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

4. Following Trial Balance has been extracted from the books of M/s Ram Prasad & Sons on 31^st March, 2014.

Adjustments :

(i)       Outstanding Salary `450.

(ii)      Depreciate Machinery at 10%.

(iii)     Wages outstanding amounted to `50.

(iv)     Rent prepaid amounted to `100.

(v)      Stock on 31^st March, 2014 amounted to `8,000.

Prepare Trading and Profit and Loss Account for the year ended 31^st March,

2014 and Balance Sheet as at the least date of the year.

DKG

1. From the following Trial Balance of PQ Associates, prepare Trading and Profit & Loss Account for the year ended 31^st March, 2012 and a Balance Sheet as at that date:-

3. You are asked to prepare Trading and Profit and Loss Account and Balance Sheet for the year ended 31^st March, 2014 of Dev Morarji from the following information :

Depreciate Furniture and Fixtures @ 5%, Plant and Machinery @ 10%. Tools were valued on 31^st March, 2014 at `4,500. Stock on 31<sup>st</sup>March, 2014 was
`18,000.

3. From the following extracts of the trial balance, show presentation in the final accounts and also pass journal entries in each case separately.

Case 1 A (Practice)

Additional Information :

1. i) Additional bad debts `12,000.
2. ii) Create a provision of 15% on debtors.

Case 2 A

Additional Information :

1. i) Additional bad debts `12,000.
2. ii) Create a provision of 8% on doubt debts.

Case 2 A (Practice)

Additional Information :

1. i) Write of `7,000 as bad debts.
2. ii) Provision for Bad Debts is to be maintained @ 5%

Case 3 A (Practice)

Additional Information:

1. i) Half of Santosh’s Bill is irrecoverable.
2. ii) Create a provision of 5% on debtors.

Case 3 A (Practice)

Additional Information :

1. i) Additional bad debts `7,000.
2. ii) Create a provision for discount on debtors @ 2%.

iii) Provision for doubtful debts is to be increased to `5,000.

Case 4 A (Practice)

Additional Bad Debtors

1. i) Additional Bad Debtors `11,000.
2. ii) Additional discount allowed to debtors `4,000.

iii) Maintain a provision for bad debtors @ 5%

1. iv) Mountain a provision for discount @ 2% on debtors.
2. From the following Trial Balance of M/s. Shardha& Sons as on 31^st March, 2014, prepare Trading and Profit and Loss Account and Balance Sheet:

          Adjustments :

(i)       Closing Stock `64,000.

(ii)      Wages outstanding `2,400.

(iii)     Bad Debts ` 600

(iv)     Provision for Bad and Doubtful Debts to be 5%.

(v)      Rent is paid for 11 months.

(vi)     Insurance premium is paid per annum, ended 31^st May, 2014.

(vii)    Loan from the bank was taken on 1^st October, 2013.

(viii)   Provide Depreciation on machinery @ 10% and on Furniture @ 5%.

DKG

4. The following are the balances of Messrs Gupta & Co. as at 31^st March, 2009 :-

Prepare Trading and Profit & Loss A/c and a Balance Sheet as at 31^st March, 2009 after taking into account the following adjustments : –

(i)       Stock on land as on 31^st March, 2009 is `6,800.

(ii)      Machinery is to be depreciated at 10% and Patents at 20%

(iii)     Salaries for the month of March, 2009 amounting to `1,500 were unpaid.

(iv)     Insurance includes a premium of 170 on a policy expiring on 30^th September, 2009.

(v)      Write off 500 as Bad-debts and create a provision for Doubtful Debts at 5% on Sundry Debtors.

(vi)     Rent Receivable 1,000.

3. Prepare Trading and Profit & Loss Account for the year ended 31^st March, 2005 and Balance Sheet as at that date from the following Trial Balance : –

(i)       Salaries `100 and taxes `200 are outstanding but insurance `50 is        prepaid.

(ii)      Commission `100 is received in advance for next year.

(iii)     Interest `210 is to be received on Deposits and Interest on Bank overdraft `300 is to be paid.

(iv)     Bad-debts provision is to be maintained at `1,000 on Debtors.

(v)      Depreciate furniture by 10%.

(vi)     Stock on 31^stMarch, 2005 was value date `4,500.

6. From the following Trial Balance extracted from the books of A, prepare Trading and Profit & Loss Account for the year ending 31^st March, 2008 and a Balance Sheet as at that date :

(i)       Salaries `100 and taxes `200 are outstanding but insurance `50 is        prepaid.

(ii)      Commission `100 is received in advance for next year.

(iii)     Interest `210 is to be received on Deposits and Interest on Bank overdraft `300 is to be paid.

(iv)     Bad-debts provision is to be maintained at `1,000 on Debtors.

(v)      Depreciate furniture by 10%.

(vi)     Stock on 31^stMarch, 2005 was value date `4,500.

Adjustments 7 to 9

5. The Net Profit of a business after debiting all expenses but before charging any commission for the year ended 31^st March 2014 is `55,000. Calculate commission payable to Manager if he is entitled to a commission of 10% on profits;
6. a) before charging any commission.
7. b) after charging such commission.

6. From the following particulars, prepare profit and loss A/c for the year ended 31^st March 2014.

          (i)       Gross Profit `50,000

(ii)      Administration expenses `16,000.

(iii)     Selling and distribution Expenses :`12,000.

(iv)     Non-operating Expenses `7,000.

(v)      Non-operating incomes :`5,000.

Adjustment : Manager is entitled to commission of

1. i) 20% on profits before charging such commission.
2. ii) 20% on profit after charging such commission.
3. Prepare Trading and Profit and Loss Account for the year ended 31^st March, 2014 and Balance Sheet as at 31^st March, 2014 from the following particulars.

You are further required to take into consideration the following information :

(i)       Salary `100 and Taxes `400 are outstanding but Insurance`50 prepaid.

(ii)      Commission amounted to `100 has been received in advance for work to be done the next year.

(iii)     Interest accrued on investments `210.

(iv)     Bad Debts Reserve is to be maintained at `1,000.

(v)      Depreciation on Furniture is to be charged at 10%.

(vi)     Stock on 31^stMarch, 2014 was valued at `4,500.

(vii)    A fire occurred on 25^th March, 2014 in the godown and stock of the value of `1,000 was destroyed. It was fully insured and the insurance company admitted the claim in full.

37. The following Trial Balance was extracted from the books of Mr. Bhakta as at
    31^st March, 2014.

Adjustments : –

(i)       Goods costing `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 1^st June, 2013.

(iii)     Sundry Debtors include an amount of `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 `3,000.

(vi)     Rent is paid for 11 months but is received for 13 months.

(vii)    Stock amounted to `90,000 on 31^st March, 2014.

Prepare Trading and Profit and Loss Account for the year ended 31^st March, 2014 and a Balance Sheet as that date.

39. The following balances were extracted from the books of Mr. DKG as at
    31^st March, 2014.

Prepare Trading and Profit & Loss Account for the year and a Balance Sheet as at 31^st March, 2014, after taking into account the following :

(i)       Stock was`75,000 on 31<sup>st</sup> March, 2014. You are informed that a fire occurred on 28<sup>th</sup> March, 2014 in the godown and stock of the value of `10,000 was destroyed. Insurance Company admitted a claim of 75%.

(ii)      One-third of the commission received is in respect of work to be done next year.

(iii)     Create a provision of 5% for Doubtful Debts.

(iv)     50% of Printing and Advertising is to be carried forward as a charge in the following year.

(v)      `900is due for interest on loan.

(vi)     Provide for Manager’s Commission at 10% on Net Profit before charging such commission.

36. From the following Trial Balance of Sh. Sushil, prepare Trading and Profit & Loss Account for the year ending 31^st March, 2014 and a Balance Sheet as at that date :

Information :

(i)       Closing Stock was valued at `60,000. You are informed that goods valued `12,000 were sold and dispatched on 29^th March, 2014, but no entry was passed to this effect.

(ii)      Insurance Premium include`1,200 paid on 1^st October, 2013 to run for one year from October 1, 2013 to Sept. 30, 2014.

(iii)     Loan from Mr. Naresh was taken on 1^st July, 2013. Interest has not been paid so far.

(iv)     Create provision for Doubtful Debts at 5% on Sundry Debtors after writing off `600 as Bad-debts during the year.

(v)      A bill of `3,200 for advertisement in newspaper remained unpaid at the end of the year.

(vi)     Purchases include Furniture costing `5,000 purchased on 1^st April, 2013.

(vii)    Charge 10% p.a. depreciation on Furniture and write off  of patents.

6. From the following Trial Balance, prepare Trading and Profit & Loss Account for the year ended 31^st March, 2012 and a Balance Sheet after making the adjustments given as on the date.

Information :

The stock on 31^st March, 2012 was `12,450. Rent was unpaid to the extent of
`85 and `150 were outstanding for trade expenses. `400 are to be written off as bad Debts out of the above debtors; and 5 per cent is to be provided for doubtful debts. Provide 2% for discount on Debtors. Depreciate Plant and Machinery by 10% and Business Premises by 2%.

8(B).  From the following particulars taken out from the books of Subhash General Store, prepare Trading and Profit & Loss Account for the year ended 31^st March, 2012 and Balance Sheet as on that date :

The following information is relevant :

(i)       Closing Stock `55,000. Stock valued at `10,000 was destroyed by fire on 18^th March, 2012 but the Insurance Company admitted a claim of `6,800 only which was received in April, 2012.

(ii)      Stationery for `150 was consumed by the Proprietor.

(iii)     Goods costing `1,200 were given away as charity.

(iv)     A new Signboard cost `1,500 is included in Advertising.

(v)      Rent is to be allocated 2/3^rd to Factory and 1/3^rd to Office.

(vi)     Depreciate machinery by 10% and Motor Car by 20%

(vii)    Motor Car is used partly for business and partly for private purposes, therefore, one half of Car expenses including Car Depreciation is to be charged to proprietor’s account.

11.(A) On 31^st March, 2012 the following Trial Balance was extracted from the books of Sh. Ghanshyam Das

          Prepare Trading and Profit & Loss Account for the year ended 31^st March, 2012 and Balance Sheet as on that date, after making adjustments for the following matters :

(i)       Depreciate Land and Building at 2.5% and Motor Vehicles at 20%.

(ii)      Interest on Loan at 15% p.a. is unpaid for six months.

(iii)     Ghanshyam Das withdrew `2,000 for his private use. This amount was included in general expenses.

(iv)     Interest on Investments is receivable for full year @ 10%.

(v)      Provide for Manager’s Commission at 10% on net profit after charging such commission.

(vi)     Stock in hand on 31^stMarch, 2012 was valued at `25,000 (Realisable Value `22,000).

17. From the following trial balance and information, prepare Trading and Profit and Loss Account of Mr. Rishabh for the year ended 31^st March, 2002 and a Balance Sheet as on that date :

          Information :

(i)       Stock of General goods on 31.3.2002 valued at `27,300.

(ii)      Fire occurred on 23^rd March, 2002 and `10,000 worth of general goods were destroyed. The Insurance Company accepted claim for `6,000 only and paid the claim money on 20^th April, 2002.

(iii)     Bad Debts amounting to `400 are to be written off. Provision for Bad and Doubtful debts is to be made at 5% and for discount at 2% debtors.

(iv)     Received `6,000 worth of goods on 27^th March, 2002 but the invoice of purchase was not recorded in Purchase Book.

(v)      Rishabh took away goods worth `2,000 for personal use but no record was made thereof.

(vi)     Charge depreciation at 2% on Land and Buildings, 20% on Plant and Machinery, and 5% on Furniture.

(vii)    Insurance prepaid amounts to `20.

24. 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 31^st March, 2010 and also show the balance sheet as on that date :

          Additional Information :

(i)       Closing stock on 31^st March, 2010 is valued at `6,50,000. Goods worth
`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 `5,000 is yet to be received while `10,000 of the commission received is yet to be earned.

(iii)     Salaries `10,00 for March, 2010 and bank overdraft interest estimated at `20,000 are yet to be recorded as outstanding charges.

(iv)     Depreciation is to be provided on land and buildings @ 5% per annum and on furniture and fittings @ 10% per annum.

(v)      Make a provision for doubtful debts @ 5% of trade debtors.

27. Prepare Trading and Profit & Loss Account and Balance Sheet as on 31^st March, 2012, from the following balances :

Adjustments :

(i)       Stock on hand on 31^stMarch, 2012 was `80,000.

(ii)      Further Bad-debts written off `2,000 and Create a provision of 5% on Sundry Debtors.

(iii)     Rent has been paid up to 31^st May, 2012.

(iv)     Manufacturing wages include `10,000 of a new Machinery purchased on 1^st October, 2011.

(v)      Depreciate Plant and Machinery by 10% p.a. and Fixtures and Fittings by 20% p.a.

(vi)     Commission earned but not received `1,000.

(vii)    Interest on Loan for the last two months is not paid.

(viii)   Goods worth `4,000 were distributed as free samples.

8. From the following Trial Balance and information, prepare Trading and Profit & Loss Account of Mr. Rishabh for the year ended 31^st March, 2007 and a Balance Sheet as on that date.

          Additional Information :

(i)       Value of closing stock on 31-3-2007 was `27,300.

(ii)      Fire occurred on 23^rd March, 2007 and `10,000 worth of general goods were destroyed. The insurance company accepted claim for `6,000 only and paid the claim money on 10^th April, 2007.

(iii)     Bad debts amounting to `400 are to be written off.Provisions for bad and doubtful debts is to be made at 5% and for discount at 2% on debtors. Make a provision of 2% on creditors for discount.

(iv)     Received `6,000 worth of goods on 27^th March, 2007 but the Invoice of purchases was not recorded in Purchase Book.

(v)      Rishabh took away goods worth `2,000 for personal use but no record was made thereof.

(vi)     Charge depreciation at 2% on land and building, 20% on plant and machinery and 5% on furniture.

(vii)    Insurance prepaid amounts to `200.

12. The following is the Trial Balance of a trader as on 31-3-2009.

          Additional Information :

(i)       Stock on 31^stMarch, 2009 was valued at `60,000.

(ii)      Bill receivable includes a bill of `4,000 which has become bad.

(iii)     Sale also includes sale of furniture on 1-4-2008 for `10,000 (Book value
` 12,000)

(iv)     Wages include `6,000 spent on erection of machine on 1-4-2008.

(v)      Depreciate machinery 10% furniture by 20%.

(vi)     Appreciate building by 10%.

(vii)    Interest includes `200 received from a debtor for late payment and balance for investments.

(viii)   Bad debts recovered `500 were taken as receipt from debtors.

Prepare Trading and Profit and Loss Account for the year ending 31-3-2009 and a Balance Sheet as on that date.