Page 181 - ISCDEBK-XI

20.14 Double Entry Book Keeping—ISC XI

2. (i) Book Value of Machinery wrongly charged to Profit & Loss A/c = Original Cost – Depreciation for 2 years
= ` 35,000 – (` 35,000 × 10% × 2) = ` 28,000 (Machinery Capitalised on 1st April, 2021)
(ii) Calculation of Depreciation on Machinery: `
(a) On Machinery wrongly charged to Profit & Loss A/c (on SLM Basis) (` 35,000 × 10/100) 3,500
(b) On other Machinery (10% of ` 75,000) 7,500
11,000
3. Since Net Realisable Value (Market Value) ` 2,25,000 of closing stock is lower than its cost, closing stock is
taken at ` 2,25,000.
Illustration 7.
Pass adjusting and closing entries in the books of Banerjee & Co. for the following adjustments:
(a) Salaries outstanding ` 10,000.
(b) Insurance paid ` 5,000 including paid in advance ` 1,000.
(c) Goods purchased from Amitabh & Co. ` 2,000 and taken into stock but omitted to be
recorded in the Purchases Book. Purchases given in the Trial Balance 30,000.
(d) Goods worth ` 1,000 given as charity, and worth ` 4,500 distributed as samples.
(e) Interest accrued on securities but not received ` 2,500.
(f) Apprenticeship premium ` 30,000 received in the beginning of the accounting period was
for three years.
(g) Charge depreciation on furniture of ` 60,000 at 10%.
(h) Wages paid to the firm’s own workmen for erection of machinery ` 3,000 was debited to
Wages Account. Wages given in the Trial Balance is ` 40,000.
(i) A cheque amounting to ` 10,000 received from a customer was dishonoured. The returned
cheque was correctly entered in the Cash Book but was posted therefrom to Machinery Account.
(j) A dishonoured Bills Receivable for ` 12,000 returned by the Bank with whom it had been
discounted, had been credited to Bank Account and debited to Bills Receivable Account.
(k) Make a provision for doubtful debts at 5%. Sundry Debtors given in the Trial Balance ` 42,000.
Solution: In the Books of Banerjee & Co.
JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
(a) (i) Salaries A/c ...Dr. 10,000
To Salaries Outstanding A/c 10,000
(Being the adjusting entry for salaries outstanding)
(ii) Profit & Loss A/c ...Dr. 10,000
To Salaries A/c 10,000
(Being the closing entry for transfer of salary to Profit & Loss Account)
(b) (i) Prepaid Insurance A/c ...Dr. 1,000
To Insurance A/c 1,000
(Being the adjusting entry for prepaid insurance)
(ii) Profit & Loss A/c ...Dr. 4,000
To Insurance A/c (` 5,000 – ` 1,000) 4,000
(Being the closing entry for insurance)
(c) Purchases A/c ...Dr. 2,000
To Amitabh & Co. 2,000
(Being adjusting entry for goods purchased but not recorded)