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प्रश्न
Why is it necessary to record the adjusting entries in the preparation of final accounts?
उत्तर
It is extremely important to record the adjusting entries in the preparation of final accounts.
1. This is done in order to assess the true net profit or net loss of the business organisation.
2. It helps us record those adjustments which were left or omitted and were not recorded in the accounts.
3. It assists us to separate all the financial transactions into a year-wise category.
The financial statements include only those entries which belong to the current year.
It rules out the previous and forthcoming years’ entries which are the basis for accrual basis of accounting.
4. Further, it provides us the room for making various provisions which are made at the end of the year, after assessing the entire year’s performance.
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संबंधित प्रश्न
What is meant by closing stock? Show its treatment in final accounts?
What are adjusting entries? Why are they necessary for preparing final accounts?
Prepare a trading and profit and loss account for the year ending December 31, 2017. from the balances extracted of M/s Rahul Sons. Also prepare a balance sheet at the end of the year.
| Account Title | Amount ₹ |
Account Title | Amount ₹ |
| Stock | 50,000 | Sales | 1,80,000 |
| Wages | 3,000 | Purchases return | 2,000 |
| Salary | 8,000 | Discount received | 500 |
| Purchases | 1,75,000 | Provision for doubtful debts | 2,500 |
| Sales return | 3,000 | Capital | 3,00,000 |
| Sundry Debtors | 82,000 | Bills payable | 22,000 |
| Discount allowed | 1,000 | Commission received | 4,000 |
| Insurance | 3,200 | Rent | 6,000 |
| Rent Rates and Taxes | 4,300 | Loan | 34,800 |
| Fixtures and fittings | 20,000 | ||
| Trade expenses | 1,500 | ||
| Bad debts | 2,000 | ||
| Drawings | 32,000 | ||
| Repair and | 1,600 | ||
| renewals | |||
| Travelling | 4,200 | ||
| expenses | |||
| Postage | 300 | ||
| Telegram | 200 | ||
| expenses | |||
| Legal fees | 500 | ||
| Bills receivable | 50,000 | ||
| Building | 1,10,000 | ||
| 5,51,800 | 5,51,800 |
Adjustments
1. Commission received in advance ₹ 1,000.
2. Rent receivable ₹ 2,000.
3. Salary outstanding ₹ 1,000 and insurance prepaid ₹ 800.
4. Further bad debts ₹ 1,000 and provision for doubtful debts @ 5% on debtors and discount on debtors @ 2%.
5. Closing stock ₹ 32,000.
6. Depreciation on building @ 6% p.a.
Prepare a trading and profit and loss account of M/s Green Club Ltd. for the year ending March 31, 2017. from the following figures taken from his trial balance:
| Account Title | Amount ₹ |
Account Title | Amount ₹ |
| Opening stock | 35,000 | Sales | 2,50,000 |
| Purchases | 1,25,000 | Purchase return | 6,000 |
| Return inwards | 25,000 | Creditors | 10,000 |
| Postage and Telegram | 600 | Bills payable | 20,000 |
| Salary | 12,300 | Discount | 1,000 |
| Wages | 3,000 | Provision for bad debts | 4,500 |
| Rent and Rates | 1,000 | Interest received | 5,400 |
| Packing and Transport | 500 | Capital | 75,000 |
| General expense | 400 | ||
| Insurance | 4,000 | ||
| Debtors | 50,000 | ||
| Cash in hand | 20,000 | ||
| Cash at bank | 40,000 | ||
| Machinery | 20,000 | ||
| Lighting and Heating |
5,000 | ||
| Discount | 3,500 | ||
| Bad debts | 3,500 | ||
| Investment | 23,100 | ||
| 3,71,900 | 3,71,900 |
Adjustments:
- Depreciation charged on machinery @ 5% p.a.
- Further bad debts ₹ 1,500, discount on debtors @ 5% and make a provision on debtors @ 6%.
- Wages prepaid ₹ 1,000.
- Interest on investment @ 5% p.a.
- Closing stock ₹ 10,000.
The following balances has been extracted from the trial of M/s Runway Shine Ltd. Prepare a trading and profit and loss account and a balance sheet as on March 31, 2017.
| Account Title | Amount ₹ |
Account Title | Amount ₹ |
| Purchases | 1,50,000 | Sales | 2,50,000 |
| Opening stock | 50,000 | Return outwards | 4,500 |
| Return inwards | 2,000 | Interest received | 3,500 |
| Carriage inwards | 4,500 | Discount received | 400 |
| Cash in hand | 77,800 | Creditors | 1,25,000 |
| Cash at bank | 60,800 | Bill payable | 6,040 |
| Wages | 2,400 | Capital | 1,00,000 |
| Printing and | 4,500 | ||
| Stationery | |||
| Discount | 400 | ||
| Bad debts | 1,500 | ||
| Insurance | 2,500 | ||
| Investment | 32,000 | ||
| Debtors | 53,000 | ||
| Bills receivable | 20,000 | ||
| Postage and | 400 | ||
| Telegraph | |||
| Commission | 200 | ||
| Interest | 1,000 | ||
| Repair | 440 | ||
| Lighting Charges | 500 | ||
| Telephone | 100 | ||
| charges | |||
| Carriage outward | 400 | ||
| Motor car | 25,000 | ||
| 4,89,440 | 4,89,440 |
Adjustments
1. Further bad debts ₹ 1,000. Discount on debtors ₹ 500 and make a provision on debtors @ 5%.
2. Interest received on investment @ 5%.
3. Wages and interest outstanding ₹ 100 and ₹ 200 respectively.
4. Depreciation charged on motor car @ 5% p.a.
5. Closing Stock ₹ 32,500.
From the following information prepare trading and profit and loss account of M/s Indian sports house for the year ending March 31, 2017.
|
Account Title |
Amount |
Account Title |
Amount |
|
Drawings |
20,000 |
Capital |
2,00,000 |
|
Sundry debtors |
80,000 |
Return outwards |
2,000 |
|
Bad debts |
1,000 |
Bank overdraft |
12,000 |
|
Trade Expenses |
2,400 |
Provision for bad debts |
4,000 |
|
Printing and Stationery |
2,000 |
Sundry creditors |
60,000 |
|
Rent Rates and Taxes |
5,000 |
Bills payable |
15,400 |
|
Freight |
4,000 |
Sales |
2,76,000 |
|
Return inwards |
7,000 |
||
|
Opening stock |
25,000 |
||
|
Purchases |
1,80,000 |
||
|
Furniture and Fixture |
20,000 |
||
|
Plant and Machinery |
1,00,000 |
||
|
Bills receivable |
14,000 |
||
|
Wages |
10,000 |
||
|
Cash in hand |
6,000 |
||
|
Discount allowed |
2,000 |
||
|
Investments |
40,000 |
||
|
Motor car |
51,000 |
||
|
5,69,400 |
5,69,400 |
Adjustments
1. Closing stock was ₹ 45,000.
2. Provision for doubtful debts is to be maintained @ 2% on debtors.
3. Depreciation charged on : furniture and fixture @ 5%, plant and Machinery @ 6% and motor car @ 10%.
4. A Machine of ₹ 30,000 was purchased on October 01, 2016.
5. The manager is entitle to a commission of @ 10% of the net profit after charging such commission.
Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. from the following particulars.
|
Account Title |
Amount |
Account Title |
Amount |
|
Sundry debtors |
1,00,000 |
Bills payable |
85,550 |
|
Bad debts |
3,000 |
Sundry creditors |
25,000 |
|
Trade expenses |
2,500 |
Provision for bad debts |
1,500 |
|
Printing and Stationary |
5,000 |
Return outwards |
4,500 |
|
Rent, Rates and Taxes |
3,450 |
Capital |
2,50,000 |
|
Freight |
2,250 |
Discount received |
3,500 |
|
Sales return |
6,000 |
Interest received |
11,260 |
|
Motor car |
25,000 |
Sales |
1,00,000 |
|
Opening stock |
75,550 |
||
|
Furniture and Fixture |
15,500 |
||
|
Purchases |
75,000 |
||
|
Drawings |
13,560 |
||
|
Investments |
65,500 |
||
|
Cash in hand |
36,000 |
||
|
Cash in bank |
53,000 |
||
|
4,81,310 |
4,81,310 |
Adjustments
1. Closing stock was valued ₹ 35,000.
2. Depreciation charged on furniture and fixture @ 5%.
3. Further bad debts ₹ 1,000. Make a provision for bad debts @ 5% on sundry debtors.
4. Depreciation charged on motor car @ 10%.
5. Interest on drawing @ 6%.
6. Rent, rates and taxes was outstanding ₹ 200.
7. Discount on debtors 2%.
Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss account and a balance sheet as on March 31, 2017.
|
Account Title |
Amount |
Account Title |
Amount |
|
Opening stock |
2,26,000 |
Sales |
6,80,000 |
|
Purchases |
4,40,000 |
Return outwards |
15,000 |
|
Drawings |
75,000 |
Creditors |
50,000 |
|
Buildings |
1,00,000 |
Bills payable |
63,700 |
|
Motor van |
30,000 |
Interest received |
20,000 |
|
Freight inwards |
3,400 |
Capital |
3,50,000 |
|
Sales return |
10,000 |
||
|
Trade expense |
3,300 |
||
|
Heat and Power |
8,000 |
||
|
Salary and Wages |
5,000 |
||
|
Legal expense |
3,000 |
||
|
Postage and Telegram |
1,000 |
||
|
Bad debts |
6,500 |
||
|
Cash in hand |
79,000 |
||
|
Cash at bank |
98,000 |
||
|
Sundry debtors |
25,000 |
||
|
Investments |
40,000 |
||
|
Insurance |
3,500 |
||
|
Machinery |
22,000 |
||
|
11,78,700 |
11,78,700 |
The following additional information is available :
1. Stock on December 31, 2017 was ₹ 30,000.
2. Depreciation is to be charged on building at 5% and motor van at 10%.
3. Provision for doubtful debts is to be maintained at 5% on Sundry Debtors.
4. Unexpired insurance was ₹ 600.
5. The Manager is entitled to a commission @ 5% on net profit before charging such commission.
From the following balances extracted from the books of Raga Ltd. Prepare a trading and profit and loss account for the year ended March 31, 20117 and a balance sheet as on that date.
|
Account Title |
Amount |
Account Title |
Amount |
|
Drawings |
20,000 |
Sales |
2,20,000 |
|
Land and Buildings |
12,000 |
Capital |
1,01,110 |
|
Plant and Machinery |
40,000 |
Discount |
1,260 |
|
Carriage inwards |
100 |
Apprentice premium |
5,230 |
|
Wages |
500 |
Bills payable |
1,28,870 |
|
Salary |
2,000 |
Purchases return |
10,000 |
|
Sales return |
200 |
||
|
Bank charges |
200 |
||
|
Coal, Gas and Water |
1,200 |
||
|
Purchases |
1,50,000 |
||
|
Trade Expenses |
3,800 |
||
|
Stock (Opening) |
76,800 |
||
|
Cash at bank |
50,000 |
||
|
Rates and Taxes |
870 |
||
|
Bills receivable |
24,500 |
||
|
Sundry debtors |
54,300 |
||
|
Cash in hand |
30,000 |
||
|
4,66,470 |
4,66,470 |
The additional information is as under:
1. Closing stock was valued at the end of the year Rs, 20,000.
2. Depreciation on plant and machinery charged at 5% and land and building at 10%.
3. Discount on debtors at 3%.
4. Make a provision at 5% on debtors for doubtful debts.
5. Salary outstanding was Rs 100 and Wages prepaid was Rs 40.
6. The manager is entitled a commission of 5% on net profit after charging such commission.
The following balances have been extracted from the books of M/s Green House for the year ended March 31, 2017, prepare trading and profit and loss account and balance sheet as on this date.
|
Account Title |
Amount |
Account Title |
Amount |
|
Purchases |
80,000 |
Capital |
2,10,000 |
|
Bank balance |
11,000 |
Bills payable |
6,500 |
|
Wages |
34,000 |
Sales |
2,00,000 |
|
Debtors |
70,300 |
Creditors |
50,000 |
|
Cash in hand |
1,200 |
Return outwards |
4,000 |
|
Legal expenses |
4,000 |
||
|
Building |
60,000 |
||
|
Machinery |
120,000 |
||
|
Bills receivable |
7,000 |
||
|
Office expenses |
3,000 |
||
|
Opening stock |
45,000 |
||
|
Gas and fuel |
2,700 |
||
|
Freight and Carriage |
3,500 |
||
|
Factory lighting |
5,000 |
||
|
Office furniture |
5,000 |
||
|
Patent right |
18,800 |
||
|
4,70,500 |
4,70,500 |
Adjustments :
(a) Machinery is depreciated at 10% and buildings depreciated at 6%.
(b) Interest on capital @ 4%.
(c) Outstanding wages Rs 50.
(d) Closing stock Rs 50,000
The following balances were extracted from the books of M/s Panchsheel Garments on March 31, 2017.
|
Account Title |
Debit |
Account Title |
Credit |
| Opening stock | 16,000 |
Sales |
1,12,000 |
|
Purchases |
67,600 | Return outwards | 3,200 |
| Return Inwards | 4,600 |
Discount |
1,400 |
| Carriage inwards | 1,400 |
Bank overdraft |
10,000 |
| General expenses | 2,400 |
Commission |
1,800 |
|
Insurance |
4,000 |
Creditors |
16,000 |
| Scooter expenses | 200 |
Capital |
50,000 |
|
Salary |
8,800 |
||
| Cash in hand | 4,000 | ||
|
Scooter |
8,000 | ||
|
Furniture |
5,200 | ||
|
Buildings |
65,000 | ||
|
Debtors |
6,000 | ||
|
Wages |
1,200 | ||
| 1,94,400 |
1,94,400 |
Prepare the trading and profit and loss account for the year ended March 31, 2017 and a balance sheet as on that date.
(a) Unexpired insurance ₹ 1,000.
(b) Salary due but not paid ₹ 1,800.
(c) Wages outstanding ₹ 200.
(d) Interest on capital 5%.
(e) Scooter is depreciated @ 5%.
(f) Furniture is depreciated ₹ @ 10%.
(g) Closing stock was ₹ 15,000.
The following balances appeared in the trial balance of M/s Kapil Traders as on March 31, 2017
|
Rs |
|
|
Sundry debtors |
30,500 |
|
Bad debts |
500 |
|
Provision for |
2,000 |
The partners of the firm agreed to records the following adjustments in the books of the Firm: Further bad debts Rs.300. Maintain provision for bad debts 10%. Show the following adjustments in the bad debts account, provision account, debtors account, profit and loss account and balance sheet.
Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on March 31, 2017
|
Rs |
|
|
Debtors |
80,000 |
|
Bad debts |
2,000 |
|
Provision for doubtful |
5,000 |
Adjustments:
Bad Debts Rs 500 Provision on Debtors @ 3%.
