Page 153 - DEBK-XI(2020)

Adjustments in Preparation of Financial Statements 19.5

Solved Questions

1. From the following Trial Balance of Mr. Tip Top, prepare Trading Account and
Profit and Loss Account for the year ending 31st March, 2014 and Balance Sheet
as at that date.

Particulars Dr. (`) Cr. (`)
Drawings/Capital .......................................................................................................................... 6,000 72,000
Printing Charges ........................................................................................................................... 1,000 ...
Machinery .................................................................................................................................. 20,000 ...
Purchases/Sales ........................................................................................................................... 55,000 96,000
Salaries .................................................................................................................................. 9,300 ...
Advertising .................................................................................................................................. 2,500 ...
Bills Receivable/Bills Payable ....................................................................................................... 1,900 2,700
Income Tax .................................................................................................................................. 2,400 ...
Opening Stock .............................................................................................................................. 24,000 ...
Bank Loan .................................................................................................................................. ... 7,300
Rent .................................................................................................................................. 3,000 ...
Building .................................................................................................................................. 25,000 ...
Wages .................................................................................................................................. 6,500 ...
Sundry Debtors/Creditors ............................................................................................................. 30,000 12,000
Insurance Premium ...................................................................................................................... 1,400 ...
Furniture .................................................................................................................................. 2,000 ...
Total 1,90,000 1,90,000
Adjustments:
(i) Closing Stock valued at ` 27,500.
(ii) Salaries outstanding ` 1,500. Insurance premium prepaid ` 300.
(iii) Depreciate Machinery by 10% and Building by 2%.
(iv) Provision for Doubtful Debts to be created @ 5% on Sundry Debtors.
(MSE Chandhigarh 2015)
Solution:
Dr. TRADING AND PROFIT AND LOSS ACCOUNT for the year ended 31st March, 2014 Cr.
Particulars ` Particulars `
To Opening Stock 24,000 By Sales 96,000
To Purchases 55,000 By Closing Stock 27,500
To Wages 6,500
To Gross Profit c/d 38,000
1,23,500 1,23,500
To Printing Charges 1,000 By Gross Prof b/d 38,000
To Salaries 9,300
Add: Outstanding Salaries 1,500 10,800
To Advertising 2,500
To Rent 3,000
To Insurance Premium 1,400
Less: Prepaid 300 1,100
To Depreciation On:
—Machinery 2,000
—Building 500 2,500
To Provision for Doubtful Debts 1,500
To Net Profit Transferred to Capital A/c 15,600
38,000 38,000