1.

From the following Trial Balance and given information, you are requested to prepare Final
Account

for the year ended on 31-12-1997.

Dr. Rs. Cr. Rs.

Purchases 11870 Capital 8000

Debtors 7580 Bad debts recovered 250

Return inwards 450 Creditors 1250

Bank Deposit 2750 Return Outwards 350

Rent 360 Bank overdraft 1570

Salaries 850 Sales 14690

Travelling Expenses 300 Bills Payable 1350

Cash 210

Stock 2450

Discount allowed 40

Drawings 600

27460 27460

The following adjustments are to be made:

(a) The closing stock on 31.12.1997 was Rs.4200.
(b)Write off Rs.80 as bad debts and create a reserve for bad debts at 5% on sundry debtors.
(c)Three months’ rent is outstanding.
(d) Interest on bank deposit Rs.135 credited by the bankers and interest on overdraft Rs.157
debited by them in the pass book have not been entered in the books.

Solution:

Trading account for the year ended 31.12.1997

Particulars Rs. Rs. Particulars Rs. Rs.

To opening stock 2450 By Sales 14690

To Purchases 11870 (-)Sales 450 14240

returns

(-) Return 350 11520 By closing 4200

outwards stock

To Gross Profit 4470

18440 18440

Profit and Loss Account for the year ended 31.12.1997

Particulars Rs. Rs. Particulars Rs. Rs.

To Rent 360 By Gross 4470

Profit

(+) Outstanding 3x30 90 450 By Bad debts 250

Recovered

To Salaries 850 By Interest on 135

Bank Deposit

To Travelling 300
Expenses

To Discount Allowed 40

To Bad debts & 455

Provisions (80+375)

To Interest on 157
Overdraft

To Net Profit 2603

4855 4855

alance Sheet as on 31.12.1997

 Liabilities Rs. Rs. Assets Rs. Rs.

Capital 8000 Cash 210

(-) Drawings 600 Debtors 7580

7400 (-)Bad debts 80

(+)Net Profit 2603 10003 7500

Creditors 1250 (-)New Reserve 375 7125

Bank Overdraft 1570 Bank Deposit 2750

(+)Interest 157 1727 (+)Outstanding 135 2885

Outstanding Interest

Bills Payable 1350 Closing Stock 4200

Rent Outstanding 90

14420 14420

2. From the following trial balance extracted from the books of a merchant on 31-12-1998.

Rs Rs

Furniture and fittings 640 Purchases 5475

Motor vehicles 6250 Sales 15450

Buildings 7500 Bank Overdraft 2850

Capital Account 12500 Sales Returns 200

Provision for Bad Debts 20 Purchase Returns 125

Bad debts 125 Advertising 450

Sundry debtors 3800 Interest A/c (Dr.) 118

Sundry creditors 2680 Commission A/c (Cr.) 375

Stock on 1.1.1998 3460 Cash 650

General Insurance 782 Taxes and Insurance 1250

Salaries 3300

The following adjustments are to be made:

(a)Closing stock was valued at Rs. 3250.

(b)Depreciate building @ 5%, furniture and fitting @ 10% and motor vehicle @ 20%.

(c)Rs.85 is due for interest on Bank Overdraft.

(d)Salaries Rs.300 and Taxes Rs.120 are outstanding.

(e)Insurance amounting to Rs.100 is prepaid.

(f)One third of the commission received is in respect of work to be done next year.

(g)Write off further Rs.100 as Bad debt and provision for bad debts is to be made equal to 5% on
sundry debtors.

Prepare Final Account for the year ended 31.12.1998.

Solution:

Trading Account for the year ended 31.12.1998

Particulars Rs. Rs. Particulars Rs. Rs.

To Opening stock 3460 By Sales 15450

To Purchase 5475 (-) Sales Returns 200 15250

(-) Purchase Returns 125 5350 By Closing stock 3250

To Gross Profit 9690

 18500 18500

Profit and Loss Account for the year ended 31.12.1998

Particulars Rs. Rs. Particulars Rs. Rs.

To Salaries 3300 By gross Profit 9690

(+) Outstanding 300 3600 By Commission 375

To Insurance 782 (-) Received in advance 125 250

(-) Prepaid 100 682

To Advertising 450

To Bad Debts 390

Provisions

To Interest 118

(+) Outstanding 85 203

To Taxes & Insurance 1250

(+) Outstanding 120 1370

To Depreciation:

Building 375

Furniture and Fittings 64

Motor vehicles 1250

Net profit 1556

9940 9940

Balance sheet as on 31.12.1998

Liabilities Rs. Rs. Assets Rs. Rs.

Capital 12500 Cash 650

(+) Net Profit 1556 14056 Furniture & 640

 Fittings

Sundry creditors 2680 (-) Depreciation 64 576

Bank overdraft 2850 Motor vehicles 6250

(+) Interest Due 85 2935 (-) Depreciation 1250 5000

Outstanding Salary 300 Buildings 7500

Outstanding Taxes 120 (-) Depreciation 375 7125

Insurance

Commission received in 125 Sundry Debtors 3800

advance

(-) Bad Debts 100

3700

(-) Provision 185 3515

Closing stock 3250

Prepaid Insurance 100

20216 20216