Chapter 10 Accountancy Class 11 Important Questions

Class 11 Accountancy Extra Questions

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Financial Statements -II Adjustments Class 11 Accountancy Extra Questions

Ch-10 Financial Statements-II Adjustments

1. On which side of the balance sheet are prepaid expenses shown?
2. Following information is given in trial balance
   

   Bad debt	Rs 3,000
   Provision for bad debts	Rs 3,500
   Debtors	Rs 40,000

   Additional information
   It is desired to make a provision for doubtful debts @ of 10% on debtors. The amount debited to profit and loss account is.

3. Is provision for discount on debtors made before making provision for doubtful debts?
4. While Preparing final accounts, what treatment is made of prepaid expenses?

5. Extract of Trial Balance
   as on 31st March, 2013

   Name of Accounts	Debit Balance(Rs)	Credit Balance(Rs)
   Wages Paid	66,000
   Salary Paid	16,500

   Additional Information
   Wages Rs 6,000 and salary Rs 1,500 are outstanding.
   Pass an adjusting entry and show how will this appear in final accounts.

6. Why is it necessary to record the adjusting entries in the preparation of final accounts?

7. Extract of Trial Balance
   as on 31st March, 2013

   Name of Accounts	Debit Balance(Rs)	Credit Balance(Rs)
   Bad Debts	1,600
   Provision for doubtful Debts(1st April, 2012)		5,000
   Debtors	1,60,000

   Additional Information
   Create a provision for doubtful debts @ 5% on debtors.

   Pass necessary adjustment entries and show how will it appear in the financial statements of company.

8. From the following balances obtained from the accounts of Mr. Ranjeet, Prepare the Trading and Profit & Loss Account:
   

   Particulars	Rs.	Particulars	Rs.
   Stock on April 01, 2012	8,000	Bad debts	1,200
   Purchases for the year	22,000	Rent	1,200
   Sales for the year	42,000	Discount (Dr.)	600
   Wages	2,500	Commission paid	1,100
   Salaries & Wages	3,500	Sales Expenses	600
   Advertisement	1,000	Repairs	600

   Closing stock on March 31, 2013, is Rs. 4,500.

9. From the following balances, prepare the final accounts of M/s Mangal & Sons for the year ended 31st March 2018 :
   

   	Rs.
   Opening Stock	12,500
   B/R	2,000
   Sales	70,000
   Purchases	37,500
   Creditors	20,000
   Salaries	3,850
   Insurance	200
   Debtors	32,500
   Carriage	1,450
   Commission	750
   Interest	900
   Printing	250
   B/P	3,150
   Returns in	1,300
   Returns out	500
   Bank	5,250
   Rent and Taxes	1,300
   Furniture	1,000
   Capital	7,100

   Closing Stock on 31-3-2018 Rs.15,000

10. Suresh started buisness on 1st April, 2013 with a capital of Rs 30,000. The following trial balance was drawn up from his books at the end of the year.
    

    Name of Accounts	Amt(Rs)	Name of Accounts	Amt(Rs)
    Drawings	4,500	Capital	40,000
    Plant and fixtures	8,000	Sales	1,60,000
    Purchases	1,16,000	Creditors	12,000
    Carriage inward	2,000	Bills payable	9,000
    Wages	8,000
    Return inward	4,000
    Salaries	10,000
    Printing	800
    Advertisement	1,200
    Trade Charges	600
    Rent	1,400
    Debtors	25,000
    Bills Receivable	5,000
    Investments	15,000
    Discount	500
    Cash at bank	16,000
    Cash in hand	3,000
    	2,21,000		2,21,000

    The value of stock as at 31st March, 2014 was Rs 26,000. You are required to prepare his trading and profit and loss account for the year ended 31st March, 2014 and a balance sheet as on the date after taking the following facts into account.

    1. Interest on capital is to be provided at 6% per annum.
    2. An additional capital of Rs 10,000 was introduced by Suresh on 1st October, 2013.
    3. Plant and fixtures are to be depreciated by 10% per annum.
    4. Salaries outstanding on 31st March, 2014 amounted to Rs 500.
    5. Accrued interest on investment amounted to Rs 750.
    6. Rs 500 are bad debts and provision for doubtful debts is to be created at 5% on the balance of debtors.

Ch-10 Financial Statements-II Adjustments

Answer

1. Prepaid expenses are shown on Assets side of balance sheet.
2. Statement showing showing provision for doubtful debts 
   

   Particulars	Amount
   Bad Debts	3,000
   (+) New Provision @ 10 %	4,000
   	7,000
   (-) Old Provision	(3,500)
   	3,500

3. No, it is made after the provision for doubtful debts
4. Prepaid Expenses are deducted in Profit and Loss account and shown as Assets in Balance Sheet. When prepaid expenses are given in trial balance, it is to be debited in P&L A/c only.

5. Adjustment Entries

   Dr				Cr
   Date	Particulars		Debit	Credit
   31/03/2013	(i) Wages A/c	Dr	6,000
   	To Outstanding Wages A/c (Being wages due)			6,000
   	(ii) Salary A/c	Dr	1,500
   	To Oustanding Salary A/c (Being salary due)			1,500

   Effects on Final Account
   Trading Account

   Dr						Cr
   Date	Particulars		Amt(Rs)	Date	Particulars	Amt(Rs)
   31/03/2013	To Wages A/c	66,000		31/03/2013
   	(+)Outstanding Wages	6,000	72,000

   Profit and Loss A/c

   Dr						Cr
   Date	Particulars		Amt(Rs)	Date	Particulars	Amt(Rs)
   31/03/2013	To Salary A/c	16,500
   	(+)Outstanding Salary	1,500	18,000

   Balance Sheet

   Liabilities	Amt(Rs)	Assets	Amt(Rs)
   Outstanding Wages	6,000
   Outstanding salary	1,500

6. Before financial statements are prepared, additional journal entries, called adjusting entries, are made to ensure that the company’s financial records adhere to the revenue recognition and matching principles. Adjusting entries are necessary because a single transaction may affect revenues or expenses in more than one accounting period and also because all transactions have not necessarily been documented during the period.The following are the objectives of making adjustments ;
   • To show the assets and liabilities at their actual value.
   • to overcome the limitations of trial balance
   • Providing for depreciation and reserves to arrive at net profit. the purpose is to make provision for wear and tear of fixed asset and reserves for unforeseen losses which might accrue.
   • to account for all incomes pertaining to current year. The purpose is to adjust the accrued and unaccrued incomes.
   • to account for all expenses pertaining to current year. the purpose is to adjust the outstanding and prepaid expenses so that p/l a/c show actual position.
7. The following entries will be passed for recording the provision for doubtful debts :

   JOURNAL

   Date	Particulars		LF	Dr.(₹)	Cr.(₹)
   Mar 31	Provision for Doubtful Debts A/c	Dr.		1,600
   	To Bad Debts A/c (Being bad debts transferred to old provision)				1,600
   Mar 31	Profit and Loss A/c	Dr.		4,600
   	To Provision for Doubtful Debts A/c (Being creation of provision at 5% on debtors)				4,600

   The Provision for doubtful debts will be recorded in financial statements in the following manner:

    Extract of Profit and Loss Account
   for the year ended 31st March, 2013

   Dr				Cr
   Particulars		Amt(₹)	Particulars	Amt(₹)
   To Provision for Doubtful Debts A/c :
   Bad Debts	1,600
   Add : New Provision on Rs 1,60,000 @ 5%	8,000
   	9,600
   Less : Old Provision	(5,000)	4,600

   Balance Sheet
   as at 31st March, 2013

   Liabilities	Amt(₹)	Assets		Amt(₹)
   		Debtors	1,60,000
   		Less :New Provision (@5% on ₹1,60,000)	8,000	1,52,000

8. Trading account

   Particulars	Rs.	Particulars	Rs.
   To Opening stock	8,000	by Sales	42,000
   To Purchases	22,000	by Closing stock	4,500
   To Wages	2,500
   To gross profit c/d	14000
   	46,500		46,500

   Profit and loss A/c 

   Particulars	Rs.	Particulars	Rs.
   To Salaries and Wages	3,500	By gross profit b/d	14,000
   To Rent	1,200
   To Advertisement	1,000
   To Commission	1,100
   To Discount	600
   To Bad debts	1,200
   To Sales Expenses	600
   To Repairs	600
   To Net Profit (transferred to capital)	4,200
   	14,000		14,000

9. TRADING AND PROFIT AND LOSS ACCOUNT
   (for the year ended 31st March, 2018)

   Particulars		Rs.	Particulars		Rs.
   To Opening Stock		12,500	By Sales	70,000
   To Purchases	37,500		Less : Sale Return	1,300	68,700
   Less : Purchase Return	500	37,000	By Closing Stock		15,000
   To Carriage		1,450
   To Gross Profit		32,750
   		83,700			83,700
   To Insurance Premium		200	By Gross Profit		32,750
   To Salaries		3,850
   To Interest Paid		900
   To Printing		250
   To Rent		1,300
   To Commission		750
   To Net Profit		25,500
   		32,750			32,750

    BALANCE SHEET

   (AS AT 31-03-2018)

   Liabilities		Rs.	Assets	Rs.
   Capital	7,100		Bank	5,250
   Add : Net Profit	25,500	32,600	Bills Receivables	2,000
   Bills Payables		3,150	Debtors	32,500
   Creditors		20,000	Stock	15,000
   			Furniture	1,000
   		55,750		55,750

10. Trading and Profit and loss Account
    for the year ended 31st March, 2014

    Dr					Cr
    Particulars		Amt(Rs)	Particulars		Amt(Rs)
    To Purchases		1,16,000	By Sales	1,60,000
    To Wages		8,000	Less : Returns Inward	(4,000)	1,56,000
    To Carriage Inward		2,000	By Closing Stock		26,000
    To Gross Profit transferred to Profit & Loss A/c		56,000
    		1,82,000			1,82,000
    To Salaries	10,000		By Gross Profit transferred from trading A/c		56,000
    Add : Outstanding Salaries	500	10,500	By Accrued Interest on Investment		750
    To Printing		800
    To Advertisement		1,200
    To Trade Charges		600
    To Rent		1,400
    To Interest on Capital(W.N)(1,200 + 900)		2,100
    To Depreciation on plant & fixtures		800
    To Bad Debts	500
    Add : New Provision	1,225	1,725
    To Net Profit Transferred to Capital A/c		37,125
    		56,750			56,750

    Balance Sheet
    as at 31st March,2014

    Liabilities		Amt(Rs)	Assets		Amt(Rs)
    Bills Payable		9,000	Cash in hand		3,000
    Creditors		12,000	Cash at bank		16,000
    Salaries Outstanding		500	Bills Receivable		5,000
    Capital(30,000 + 10,000)	40,000		Debtors	25,000
    Add :Interest on Capital	2,100		Less : Bad Debts	( 500)
    Profit transferred from Profit & Loss A/c	37,125			24,500
    	79,225		Less :Provision for Bad Debts(5% on ₹ 24,500)	( 1,225)	23,375
    (-)Drawings	( 4,500)	74,725	Closing Stock		26,000
    			Investments	15,000
    			(+)Accrued Interest	750	15,750
    			Plants and fixtures	8,000
    			(-)Depreciation	( 800)	7,200
    		96,225			96,225

    Note :

    Calculation of Interest on Capital:

    On ₹ 30,000 @ 6% p.a. for 6 months ( from April to September) = ₹900

    On ₹40,000 @ 6% p.a. for 6 months ( from October to March ) = ₹1,200

    Total interest = 1200+900=₹2100