Artham

Resource Material
For Session 2024-25

Best Notes
CBSE
CLASS 11 Accountancy

100% updated as per 2024-25 curriculum.

Quick Revision, tips, notes & mind maps.

Easily Understandable & effective language.

To the point Answers.

ACCOUNTANCY
Chapter 9: Financial Statements - II
 FINANCIAL STATEMENTS - II
10

Financial Statements - II
Meaning of Adjustment entries:

Those entries which need to be passed at the end of the accounting year to show the accurate
profit or loss and fair financial position of the business.

Need for Adjustments:

Adjustments are required because sometimes payments and receipts made in the current year
may relate to previous or future years. So, these items must be adjusted so that the objectives
of financial statements can be achieved i.e., they depict true and fair financial performance of
the business.

Adjustments are required in the following items:

Closing Stock:
The closing stock represents the cost of unsold goods lying in the stores at the end of the
accounting period. The adjustment for the closing stock is done by
a. By posting it to the credit side of the Trading and Profit and Loss account
b. By posting it to the asset side of the Balance Sheet.
❖ Outstanding Expenses:
These are those unpaid expenses that the businesses haven’t paid in the present accounting
period and are due. The adjustment entry passed is:

Concerned Expense A/c ……… Dr.

To Outstanding Expenses A/c

❖ Prepaid Expenses:
Expenses that are paid in advance i.e., those expenses which are paid in the current year but
relate to the next accounting year. For example, Rent Paid in Advance, Prepaid Taxes,
Prepaid Insurance Premium, etc.

The adjustment entry that is passed is:

Prepaid Expenses A/c ………. Dr.

To Concerned expense A/c

❖ Accrued Income: It may sometime happen that certain items of income such as a interest on
loan, commission, rent, etc. are earned during the current accounting year but have not
been actually received by the end of the same year. Such incomes are known as accrued
income.

(1)
 FINANCIAL STATEMENTS - II
10

The adjustment entry that is passed is:

Prepaid Expenses A/c ………. Dr.

To Concerned expense A/c

❖ Income Received in Advance: This is that income which is received in advance but not yet
accrued. The adjustment entry passed is:

Concerned income A/c …… Dr.

To Income received in advance A/c

The income received in advance is deducted from the respective income head in the Trading
and Profit and Loss Account and is shown in the liabilities side of the balance sheet.

❖ Depreciation: Depreciation is the decline in the book value of the fixed asset because of
regular wear and tear and passage of time. The adjustment entry that is passed is:

Depreciation A/c ………. Dr.

To Concerned asset A/c

It is debited to the Profit and Loss Account and in the balance sheet the asset is shown at
cost minus depreciation.
❖ Bad Debts: The debtors from whom amounts cannot be recovered are treated in the books
of accounts as bad and are termed as bad debts.

This is regarded as loss and the adjustment entry passed is:

Bad debts A/c ………. Dr.

To Debtors A/c
❖ Provision for Doubtful Debts: Sometimes we make a provision for some amount of Debtors
that may not realise in future such provisions are called provisions for doubtful debts. That
Adjustment entry that is passed is:

Profit and Loss A/c ………Dr.

To Provision for doubtful debts A/c

❖ Provision for discount on Debtors: Discount is allowed to customers to encourage them to
make prompt payment. The discount likely to be allowed to customers in an accounting year
can be estimated and provided for by creating a provision for Discount on debtors.

The adjustment entry that is passed is:

(2)
 FINANCIAL STATEMENTS - II
10

Profit and loss A/c ………. Dr.

To Provision for discount on debtors A/c

❖ Manager’s Commission: The manager of the business is sometimes given the commission
on the net profit of the company. The percentage of the commission is applied to the profit
either before charging such commission or after charging such commission.

The adjustment entry that is passed is:

Profit and loss A/c ………Dr.

To Manager’s commission A/c

❖ Interest on Capital: It is the interest that is paid on the capital of the proprietor. This interest
is payable on the capital that was at the beginning of the accounting year. And in case of any
additional capital brought in by the proprietor the interest is charged from the date it is
brought. The adjustment entry that is passed is:

Profit and loss A/c ………. Dr.

To Manager’s commission A/c

Adjustment in Respect of Goods:

Abnormal Loss: Sometimes losses occur due to some abnormal circumstances such as
accident, fire, flood, earthquakes etc. Such losses are called Abnormal losses. These may be
divided into two categories: -
(A) Loss of Goods (B) Loss of fixed assets
Good taken for personal use {Drawings in goods): When the goods are withdrawn by
proprietor for personal use the cost of such goods deduct from purchases and the amount
should be deduct from capital in Balance Sheet.

Goods distributed as free samples: Sometime goods are distributed as free sample by the
businessman for the purpose of advertisement. The cost of free sample deducts from
purchase and shown in Debit side of profit and loss account.

(3)
 FINANCIAL STATEMENTS - II
10

(4)
 FINANCIAL STATEMENTS - II
10

Important Questions
Multiple Choice Questions-
Question 1. Outstanding Expenses are related to-
(a) Current year
(b) Next year
(c) Last year
(d) None of these.
Question 2. Prepaid expenses are shown in-
(a) Liability side
(b) Asset side
(c) Assets or Liability side
(d) None of these.
Question 3. Charity of goods is-
(a) Expenses
(b) Loss
(c) Profit
(d) None of these.
Question 4. If a person fails to pay his debt, such amount is considered as-
(a) Bad debts
(b) Bad debts recovered
(c) Provision for Bad debt
(d) None of these.
Question 5. The object of non – trading concerns-
(a) Social service
(b) Profit earning
(c) Both of these
(d) None of the above.
Question 6. Such persons who earn remuneration against their services are called –
(a) Seller
(b) Purchaser
(c) Professional
(d) None of these.

(5)
 FINANCIAL STATEMENTS - II
10

Question 7. Which of the following is not an item of income of Non – trading concern –
(a) Entrance fees
(b) Interest
(c) Govt. Aid
(d) Salary.
Question 8. Receipt and payment account is a summary of-
(a) Income & Expenditure account
(b) Profit & Loss A/c
(c) Cash – book
(d) None of these.
Question 9. Which of the following is recorded in income & expenditure account –
(a) Revenue items
(b) Capital items
(c) Revenue and capital items
(d) None of these.
Question 10. The debentures to be redeemed within 12 months from the date of balance
sheet is shown under
(a) Short term borrowings
(b) Long term borrowings
(c) Other current liabilities
(d) Long term liabilities
Very Short-
1. Give any three points of superiority of Accrual Basis of Accounting over Cash Basis of
Accounting.
2. Give a transaction that can break the Accounting Equation
3. Provide for all the possible losses but don't anticipate profits.' Identify the Accounting
concept referred in this sentence.
4. What is window dressing?
5. How does Cash book serve the dual purpose?
6. What is contra entry?
7. What do you mean by imprest?
8. Is Trial Balance the conclusive evidence of accuracy of accounting records?
9. What option is available to the accountant if Trial Balance doesn't match, and Final
Accounts are to be prepared?

(6)
 FINANCIAL STATEMENTS - II
10

10.What is the nature of Suspense Account?

Short Questions-
1. Why do we need adjustments in financial statements?
2. What are outstanding expenses?
3. Pass the following journal entries.
a. Closing stock
b. Outstanding expenses
4. What do you mean by accrued income?
5. Give details of few items which need adjustments.
Long Questions-
1. Explain the following items with adjustments entry:
a. Closing Stock
b. Outstanding expenses
c. Income earned but not received
d. Income received in advance
e. Depreciation
f. Manager’s commission
Adjustment Entry Treatment in
2. From the following balances prepare a Profit and loss account.

3. From the following balances, prepare the Profit and loss account and balance sheet.

(7)
 FINANCIAL STATEMENTS - II
10

4. Define following terms with adjustment entries:

Answer key
MCQ Answers-
1. Answer: (a) Current year
2. Answer: (b) Asset side
3. Answer: (b) Loss
4. Answer: (a) Bad debt
5. Answer: (a) Social service
6. Answer: (c) Professional
7. Answer: (d) Salary.
8. Answer: (c) Cash – book
9. Answer: (a) Revenue items
10. Answer: (c) other current liabilities
Very Short Answers-
1. Accrual basis of accounting considers all transactions cash transactions as well as credit
transactions whereas in case of cash basis of accounting only cash transactions are
considered.
2. No transaction can break the accounting equation.
3. Prudence concept or conservatism concept.
4. Manipulation of accounting records to show a different picture is called window dressing.
5. All the transactions relating to cash and Bank are recorded in cash book in chronological
order, so it becomes a journal. All the transactions relating to cash and Bank can be
checked at a single place with its balance, so it becomes ledger also.
6. Contra entry is the entry recorded on both sides of cash book one in cash column the
other in Bank column.

(8)
 FINANCIAL STATEMENTS - II
10

7. Imprest is the monthly advance given to the petty cashier for petty expense.
8. No, Trial Balance is not conclusive evidence of accuracy of accounting records. There can
still be some errors left after matching of the Trial Balance.
9. The difference in trial balance can be put to suspense account.
10.The nature of suspense account is not fixed as it is an artificial and Temporary account.
Short Answers-
1. Adjusting entries are used to bring accounts into compliance with the accrual principle.
Some revenue and costs may not have been recorded or updated at the end of the
accounting period, necessitating the adjustment of account balances.
Some revenue, cost, asset, and liability accounts may not represent their real values as
presented in the financial statements if correcting entries are not created. As a result,
altering entries is required.
2. Outstanding expenses are those that have not been paid at the conclusion of the fiscal
year. They're essentially in relation to income earned during the current financial year.
This expenditure becomes due to the firm when the benefit has been received but the
associated payment has not been made at the same time.
3. a. Closing stock

b. Outstanding expenses

4. Money that has been earned but not yet received is referred to as accrued income. By
definition, mutual funds or other pooled assets that accrue revenue over time but only
payout to owners once a year are accumulating income.
Earned income is divided into two categories:
(1) items of income earned during the year, and
(2) items of However, it is not received at the end of the accounting year.
the same year's end.
5. The following are the things in the books of accounts that need to be adjusted:
• Defaulted debts
(9)
 FINANCIAL STATEMENTS - II
10

• Depreciation is the second type of depreciation.

• Earnings that have been accumulated
• Capital interest
• Earnings of the manager
• Closing the stock market
Long Answers-
1. Answer:

2. Answer:

(10)
 FINANCIAL STATEMENTS - II
10

3. Answer:
Trading Profit and loss A/c

Balance sheet as of March 31

4. Answer:
A. Provisions for bad and doubtful debts.

(11)
 FINANCIAL STATEMENTS - II
10

Provision for bad and doubtful debts occurs when there is a possible reason for debtors who
are doubtful that they will not pay the debts on time.

B. Depreciation:
Depreciation means the value of an asset is declined due to its usage in the passage of time
+9*or wear and tear. It is usually treated as business expenses and is debited in profit and
loss account.

C. Accrued income: The items of income that are earned during the accounting year but
actually it is not received at the end of the same year.

D. Prepaid expenses: Prepaid expenses are the expense need to be paid in future, but they
are paid in advance.

E. Outstanding expenses: Prepaid expenses are the expense need to be paid in future, but
they are paid in advance.

(12)
 FINANCIAL STATEMENTS - II
10

(13)
CLICK TO DOWNLOAD MORE CHAPTERS
JOIN OUR
WHATSAPP
GROUPS
FOR FREE EDUCATIONAL
RESOURCES
JOIN SCHOOL OF EDUCATORS WHATSAPP GROUPS
FOR FREE EDUCATIONAL RESOURCES
We are thrilled to introduce the School of Educators WhatsApp Group, a
platform designed exclusively for educators to enhance your teaching & Learning
experience and learning outcomes. Here are some of the key benefits you can
expect from joining our group:

BENEFITS OF SOE WHATSAPP GROUPS

Abundance of Content: Members gain access to an extensive repository of

educational materials tailored to their class level. This includes various formats such
as PDFs, Word files, PowerPoint presentations, lesson plans, worksheets, practical
tips, viva questions, reference books, smart content, curriculum details, syllabus,
marking schemes, exam patterns, and blueprints. This rich assortment of resources
enhances teaching and learning experiences.

Immediate Doubt Resolution: The group facilitates quick clarification of doubts.

Members can seek assistance by sending messages, and experts promptly respond
to queries. This real-time interaction fosters a supportive learning environment
where educators and students can exchange knowledge and address concerns
effectively.

Access to Previous Years' Question Papers and Topper Answers: The group
provides access to previous years' question papers (PYQ) and exemplary answer
scripts of toppers. This resource is invaluable for exam preparation, allowing
individuals to familiarize themselves with the exam format, gain insights into scoring
techniques, and enhance their performance in assessments.
 Free and Unlimited Resources: Members enjoy the benefit of accessing an array of
educational resources without any cost restrictions. Whether its study materials,
teaching aids, or assessment tools, the group offers an abundance of resources
tailored to individual needs. This accessibility ensures that educators and students
have ample support in their academic endeavors without financial constraints.

Instant Access to Educational Content: SOE WhatsApp groups are a platform where
teachers can access a wide range of educational content instantly. This includes study
materials, notes, sample papers, reference materials, and relevant links shared by
group members and moderators.

Timely Updates and Reminders: SOE WhatsApp groups serve as a source of timely
updates and reminders about important dates, exam schedules, syllabus changes, and
academic events. Teachers can stay informed and well-prepared for upcoming
assessments and activities.

Interactive Learning Environment: Teachers can engage in discussions, ask questions,

and seek clarifications within the group, creating an interactive learning environment.
This fosters collaboration, peer learning, and knowledge sharing among group
members, enhancing understanding and retention of concepts.

Access to Expert Guidance: SOE WhatsApp groups are moderated by subject matter
experts, teachers, or experienced educators can benefit from their guidance,
expertise, and insights on various academic topics, exam strategies, and study
techniques.

Join the School of Educators WhatsApp Group today and unlock a world of resources,
support, and collaboration to take your teaching to new heights. To join, simply click
on the group links provided below or send a message to +91-95208-77777 expressing
your interest.

Together, let's empower ourselves & Our Students and

inspire the next generation of learners.

Best Regards,
Team
School of Educators
 Join School of Educators WhatsApp Groups

You will get Pre- Board Papers PDF, Word file, PPT, Lesson Plan, Worksheet, practical
tips and Viva questions, reference books, smart content, curriculum, syllabus,
marking scheme, toppers answer scripts, revised exam pattern, revised syllabus,
Blue Print etc. here . Join Your Subject / Class WhatsApp Group.

Kindergarten to Class XII (For Teachers Only)

Class 1 Class 2 Class 3

Class 4 Class 5 Class 6

Class 7 Class 8 Class 9

Class 10 Class 11 (Science) Class 11 (Humanities)

Class 11 (Commerce) Class 12 (Science) Class 12 (Humanities)

Class 12 (Commerce) Kindergarten

Subject Wise Secondary and Senior Secondary Groups
(IX & X For Teachers Only)
Secondary Groups (IX & X)

SST Mathematics Science

English Hindi-A IT Code-402

Hindi-B Artificial Intelligence

Senior Secondary Groups (XI & XII For Teachers Only)

Physics Chemistry English

Mathematics Biology Accountancy

Economics BST History

 Geography Sociology Hindi Elective

Hindi Core Home Science Sanskrit

Psychology Political Science Painting

Vocal Music Comp. Science IP

Physical Education APP. Mathematics Legal Studies

Entrepreneurship French IT

Artificial Intelligence

Other Important Groups (For Teachers & Principal’s)

Principal’s Group Teachers Jobs IIT/NEET

 Join School of Educators WhatsApp Groups

You will get Pre- Board Papers PDF, Word file, PPT, Lesson Plan, Worksheet, practical
tips and Viva questions, reference books, smart content, curriculum, syllabus,
marking scheme, toppers answer scripts, revised exam pattern, revised syllabus,
Blue Print etc. here . Join Your Subject / Class WhatsApp Group.

Kindergarten to Class XII (For Students Only)

Class 1 Class 2 Class 3

Class 4 Class 5 Class 6

Class 7 Class 8 Class 9

Class 10 Class 11 (Science) Class 11 (Humanities)

Class 11 (Commerce) Class 12 (Science) Class 12 (Humanities)

Class 12 (Commerce) Artificial Intelligence

(VI TO VIII)
Subject Wise Secondary and Senior Secondary Groups
(IX & X For Students Only)
Secondary Groups (IX & X)

SST Mathematics Science

English Hindi IT Code

Artificial Intelligence

Senior Secondary Groups (XI & XII For Students Only)

Physics Chemistry English

Mathematics Biology Accountancy

Economics BST History

 Geography Sociology Hindi Elective

Hindi Core Home Science Sanskrit

Psychology Political Science Painting

Music Comp. Science IP

Physical Education APP. Mathematics Legal Studies

Entrepreneurship French IT

AI IIT/NEET CUET
Groups Rules & Regulations:
To maximize the benefits of these WhatsApp groups, follow these guidelines:

1. Share your valuable resources with the group.

2. Help your fellow educators by answering their queries.
3. Watch and engage with shared videos in the group.
4. Distribute WhatsApp group resources among your students.
5. Encourage your colleagues to join these groups.

Additional notes:
1. Avoid posting messages between 9 PM and 7 AM.
2. After sharing resources with students, consider deleting outdated data if necessary.
3. It's a NO Nuisance groups, single nuisance and you will be removed.
No introductions.
No greetings or wish messages.
No personal chats or messages.
No spam. Or voice calls
Share and seek learning resources only.

Please only share and request learning resources. For assistance,

contact the helpline via WhatsApp: +91-95208-77777.
 Join Premium WhatsApp Groups
Ultimate Educational Resources!!

Join our premium groups and just Rs. 1000 and gain access to all our exclusive
materials for the entire academic year. Whether you're a student in Class IX, X, XI, or
XII, or a teacher for these grades, Artham Resources provides the ultimate tools to
enhance learning. Pay now to delve into a world of premium educational content!

Click here for more details

Class 9 Class 10 Class 11

Class 12

📣 Don't Miss Out! Elevate your academic journey with top-notch study materials and secure
your path to top scores! Revolutionize your study routine and reach your academic goals with
our comprehensive resources. Join now and set yourself up for success! 📚🌟

Best Wishes,

Team
School of Educators & Artham Resources
 SKILL MODULES BEING OFFERED IN
MIDDLE SCHOOL

Artificial Intelligence Beauty & Wellness Design Thinking & Financial Literacy
Innovation

Handicrafts Information Technology Marketing/Commercial Mass Media - Being Media

Application Literate

Data Science (Class VIII Augmented Reality /

Travel & Tourism Coding
only) Virtual Reality

Digital Citizenship Life Cycle of Medicine & Things you should know What to do when Doctor
Vaccine about keeping Medicines is not around
at home

Humanity & Covid-19 Blue Pottery Pottery Block Printing

 Food Food Preservation Baking Herbal Heritage

Khadi Mask Making Mass Media Making of a Graphic

Novel

Kashmiri Embroidery Satellites

Rockets
Embroidery

Application of Photography
Satellites
SKILL SUBJECTS AT SECONDARY LEVEL (CLASSES IX – X)

Retail Information Technology Automotive

Security

Introduction To Financial Introduction To Tourism Beauty & Wellness Agriculture

Markets

Food Production Front Office Operations Banking & Insurance Marketing & Sales

Health Care Apparel Multi Media Multi Skill Foundation

Course

Artificial Intelligence
Physical Activity Trainer Electronics & Hardware
Data Science
(NEW)

Foundation Skills For Sciences Design Thinking & Innovation (NEW)

(Pharmaceutical & Biotechnology)(NEW)
 SKILL SUBJECTS AT SR. SEC. LEVEL
(CLASSES XI – XII)

Retail InformationTechnology Web Application Automotive

Financial Markets Management Tourism Beauty & Wellness Agriculture

Food Production Front Office Operations Banking Marketing

Health Care Insurance Horticulture Typography & Comp.

Application

Geospatial Technology Electrical Technology Electronic Technology Multi-Media

 Taxation Cost Accounting Office Procedures & Shorthand (English)
Practices

Shorthand (Hindi) Air-Conditioning & Medical Diagnostics Textile Design

Refrigeration

Salesmanship Business Food Nutrition &

Design
Administration Dietetics

Mass Media Studies Library & Information Fashion Studies Applied Mathematics
Science

Yoga Early Childhood Care & Artificial Intelligence Data Science

Education

Physical Activity Land Transportation Electronics & Design Thinking &

Trainer(new) Associate (NEW) Hardware (NEW) Innovation (NEW)
 n o u r
Joi G r o up
g r a m
Tele s a m p le
o r e
for m
a p e r s
p

Join o
u
Teleg r
ra
for m m Chann
ore b el
Notes o oks &

Pdf Purchase
Print Purchase Scan QR Code to join
Telegram Groups &
Channels for more free
Amazon Print Purchase resources.