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Question
The following are the extracts from the trial balance.
| Particulars | Debit ₹ | Credit ₹ |
| Sundry debtors | 50,000 | |
| Discount on debtors | 2,000 | |
| Bad debts | 3,000 |
Additional information:
(a) Create a provision for doubtful debts @ 10% on sundry debtors.
(b) Create a provision for discount on debtors @ 5% on sundry debtors.
You are required to pass necessary adjusting entries and show how these items will appear in the final accounts.
Solution
Adjusting Entries
| Particulars | L.F. | Debit ₹ | Credit ₹ |
| Profit and loss A/c Dr. To Provision for bad & doubtful debts A/c (10% provision made) |
5,000 | 5,000 | |
| Profit and loss A/c Dr. To Provision for discount on debtors A/c (5% discount on debtors made) |
2,250 | 2,250 |
Profit and Loss Account
| Dr. | Cr. | ||||
| Particulars | ₹ | ₹ | Particulars | ₹ | |
| To Bad debts | 3,000 | 8,000 | |||
| Add: Provision for bad and doubtful debts |
5,000 | ||||
| To Discount on debtors | 2,000 | 4,250 | |||
| Add: Provision for discount on debtors |
2,250 | ||||
Balance Sheet
| Liabilities | ₹ | Assets | ₹ | ₹ |
| Sundry debtors | 50,000 | |||
| Less: Provision for bad and doubtful debts |
5,000 | |||
| 45,000 | ||||
| Less: Provision for discount on debtor |
2,250 | 42,750 |
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RELATED QUESTIONS
What is outstanding expense?
What are accrued incomes?
Give the adjusting entries for interest on capital and interest on drawings.
Pass adjusting entries for the following:
- The closing stock was valued at ₹ 5,000
- Outstanding salaries ₹ 150
- Insurance prepaid ₹ 450
- ₹ 20,000 was received in advance for commission.
- Accrued interest on investments is ₹ 1,000.
The trial balance on March 31, 2016, shows the following:
Sundry debtors ₹ 30,000; Bad debts ₹ 1,200
It is found that 3% of sundry debtors is doubtful of recovery and is to be provided for. Pass journal entry for the amount of provision and also show how it would appear in the profit and loss account and balance sheet.
The following are the extracts from the trial balance.
| Particulars | Debit ₹ | Credit ₹ |
| Sundry debtors | 50,000 | |
| Provision for doubtful debts | 5,000 | |
| Bad debts | 3,000 |
Additional information:
(a) Additional bad debts ₹ 3,000.
(b) Keep a provision for bad and doubtful debts @ 10% on sundry debtors.
You are required to pass necessary adjusting entries and show how these items will appear in the profit and loss account and balance sheet.
Prepare trading account of Archana for the year ending 31st December 2106 from the following information.
| Debit balance | ₹ | Credit balance | ₹ |
| Opening stock | 80,000 | Purchases returns | 10,000 |
| Purchases | 8,60,000 | Sales returns | 3,16,000 |
| Freight inwards | 52,000 | Import duty on purchases | 30,000 |
| Wages | 24,000 | Sales | 14,40,000 |
Adjustments:
(a) Closing stock ₹ 1,00,000
(b) Wages outstanding ₹ 12,000
(c) Freight inwards paid in advance ₹ 5,000
The following trial balance was extracted from the books of Arun Traders as of 31st March 2018.
| Particulars | Debit | Credit |
| Buildings | 17,500 | |
| Plant and machinery | 12,000 | |
| Cash purchases | 30,000 | |
| Credit purchases | 8,500 | |
| Sales | 63,250 | |
| Bills receivable | 6,750 | |
| Coal and water | 1,625 | |
| Office expenses | 5,250 | |
| Rent received | 1,750 | |
| Carriage outwards | 2,875 | |
| Repairs and maintenance | 500 | |
| Wages | 9,250 | |
| Debtors and creditors | 9,000 | 8,500 |
| Cash | 2,000 | |
| Capital | 44,750 | |
| Opening stock | 13,000 | |
| 1,18,250 | 1,18,250 |
Prepare trading and profit and loss account for the year ending 31st March, 2018 and balance sheet as on that date after considering the following:
- Depreciate Plant and machinery @ 20%
- Wages outstanding amounts to ₹ 750.
- Half of the repairs and maintenance paid is for the next year.
- Closing stock was valued at ₹ 15,000.
From the following trial balance of Ramesh as of 31st March 2017, prepare the trading and profit and loss account and the balance sheet as of that date,
| Particulars | Debit ₹ | Credit ₹ |
| Stock (01.04.2016) | 40,000 | |
| Purchases | 85,000 | |
| Sales | 1,90,000 | |
| Sundry creditors | 48,000 | |
| Furniture and fixtures | 65,000 | |
| Debtors | 45,000 | |
| Cash at bank | 21,000 | |
| Wages | 37,500 | |
| Drawings | 15,000 | |
| Telephone charges | 3,000 | |
| Bad debts | 2,000 | |
| Provision for bad debts | 2,500 | |
| Discount received | 3,000 | |
| Capital | 85,000 | |
| Advertising | 15,000 | |
| 3,28,500 | 3,28,500 |
Adjustments:
- The closing stock was valued at ₹ 35,000
- Unexpired advertising ₹ 250
- Provision for bad and doubtful debts is to be increased to ₹ 3,000
- Provide 2% for discount on debtors.
From the following information, prepare trading and profit and loss account and balance sheet in the books of Sangeetha for the year ending 31st March, 2018.
| Particulars | ₹ | Particulars | ₹ |
| Capital | 20,000 | Salaries | 6,600 |
| Bills receivable | 8,000 | Establishment expenses | 4,500 |
| Bills payable | 10,500 | Advertisement | 2,300 |
| Purchases | 75,000 | Furniture | 10,000 |
| Sales | 95,000 | Cash at bank | 3,200 |
| Opening stock | 12,000 | Miscellaneous receipts | 600 |
| Drawings | 4,500 |
Adjustments:
- Stock on 31st March, 2018 ₹ 14,200
- Income tax of Sangeetha paid ₹ 800
- Charge interest on drawings @ 12% p.a.
- Provide managerial remuneration @ 10% of net profit before charging such commission.
