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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 & 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 ...
Cash in Hand ............................................................................................................................................................. 1,900 ...
Income Tax ................................................................................................................................................................ 2,400 ...
Opening Stock .......................................................................................................................................................... 24,000 ...
Bank Loan ................................................................................................................................................................ ... 10,000
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 & 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