Page 75 - ISCDEBK-XI

11.4 Double Entry Book Keeping—ISC XI

Solved Questions

Illustration 1.

On the closing date of an accounting period of Mr. Singh that is on 31st March, 2022, make the
following transfer entries:

(i) Debtors include ` 2,000 due from A, whereas creditors include ` 1,000 due to A;
(ii) Gross profit ` 70,400;
(iii) Net profit ` 36,000, out of which 10% is to be transferred to reserve.

Solution: JOURNAL PROPER
Date Particulars L.F. Dr. (`) Cr. (`)

2022
March 31 Creditors A/c (WN 1) ...Dr. 1,000
To Debtors’ A/c 1,000
(Being the amount transferred from Creditors’ A/c to Debtors’ A/c)
Trading A/c ...Dr. 70,400
To Profit & Loss A/c 70,400
(Being the gross profit transferred to Profit & Loss A/c)
Profit & Loss A/c ...Dr. 3,600
To General Reserve A/c 3,600
(Being the amount transferred to general reserve)
Working Notes:
1. Amount due from A is ` 2,000 and amount due to A is ` 1,000. Therefore, ` 1,000 is to be deducted from the
Debtors’ balance as well as from the Creditors’ balance.
2. Adjustment entries are passed before they are transferred to the Trading and Profit & Loss Account and the
Balance Sheet. This is because adjustment entries always have a dual effect. They affect either the Trading
Account or the Profit & Loss Account but definitely the Balance Sheet.
Illustration 2.

Pass Adjustment Entries of the following transactions in the books of Rehman at the end of the
accounting year on 31st March, 2022:
(i) Annual insurance premium of ` 20,000 paid up to 30th June, 2022.

(ii) Salary of ` 10,000 for the month of March, 2022 is outstanding.
(iii) Rent @ ` 8,000 p.m. for April and May, 2022 received in advance.
(iv) Salary due to an employee but not received by him ` 2,500.

(v) Interest due on loan but not paid. Loan on ` 25,000 was taken at 8% per annum on
1st July, 2021.