CA INTER NOV 2023

ACCOUNTS
SUPER REVISION (MARATHON): PART 1
S.No. Chapter Name
1 Departmental Accounts
2 Insurance Claims
3 Hire Purchase
4 Investment Accounts
5 Accounts from Incomplete Records (Single Entry)
6 Branch Accounting
 Commerce
Lecture No.- 01
- For CA Intermediate

Subject Name
Accounts

• Departmental Accounts

Nitin Goel
 DEPARTMENTAL ACCOUNTS

Departmental Accounts helps in identifying the performance of each department. Each

department is considered to be an Activity Centre. It is a tool which helps management in
decision-making.

Expenses Basis
Rent, rates & taxes, repairs & maintenance, insurance Floor area occupied by each department
of building
Lighting and Heating expenses Consumption of energy by each department
Selling expenses, e.g., discount allowed, bad debts, Sales (net) of each department
selling commission, freight outward, advertisement etc.
Carriage inward/ Discount received Purchases (net) of each department
Wages/Salaries Time devoted to each department
Depreciation, insurance, repairs & maintenance of Value of assets of each department
capital assets
Labour welfare expenses Number of employees in each department
PF/ESI contributions Wages and salaries of each department
Interest on Loan Utilisation of loan amount in each
department (if can be identified), otherwise in
Combined P&L A/c

Profit or Loss on sale of investment Value of investments sold in each department

(if can be identified), otherwise in Combined
P&L A/c

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
Question
M/s. Delta is a Departmental Store having three departments X, Y and Z. The information regarding
three departments for the year ended 31st March, 2020 are given below:
Dept. X Dept. Y Dept. Z
Opening Stock 18,000 12,000 10,000
Purchases 66,000 44,000 22,000
Debtors at end 7,500 5,000 5,000
Sales 90,000 67,500 45,000
Closing stock 22,500 8,750 10,500
Value of Furniture in each department 10,000 10,000 5,000
Floor space occupied by each department (in sq. ft.) 1,500 1,250 1,000
Number of employees in each Deptt. 25 20 15
Electricity consumed by each Department (in units) 300 200 100

Additional Information:
Items Amount
Carriage Inwards 1,500
Carriage Outwards 2,700
Salaries 24,000
Advertisement 2,700
Discount allowed 2,250
Discount received 1,800
Rent, Rates and Taxes 7,500
Depreciation on furniture 1,000
Electricity Expenses 3,000
Labour welfare expenses 2,400
Prepare Departmental Trading and Profit & Loss Account for the year ended 31st March, 2019 after
providing provision for Bad Debts at 5%.

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
Solution
Departmental Trading and Profit and Loss Account
for the year ended 31st March, 2020
Particulars Deptt.X Deptt.Y Deptt.Z Particulars Deptt.X Deptt.Y Deptt.Z
To Opening Stock 18,000 12,000 10,000 By Sales 90,000 67,500 45,000
To Purchases 66,000 44,000 22,000 By Closing Stock 22,500 8,750 10,500
To Carriage 750 500 250
Inwards
To G.P. c/d 27,750 19,750 23,250
1,12,500 76,250 55,500 1,12,500 76,250 55,500
To Carriage 1,200 900 600 By G.P. b/d 27,750 19,750 23,250
Outwards
To Electricity 1,500 1,000 500 By Disc.received 900 600 300
To Salaries 10,000 8,000 6,000
To Advertisement 1,200 900 600
To Disc. allowed 1,000 750 500
To Rent, Rates & 3,000 2,500 2,000
Taxes
To Depreciation 400 400 200
To Provision for 375 250 250
Bad Debts
To Labour 1,000 800 600
welfare Expenses
To Net Profit 8,975 4,850 12,300
28,650 20,350 23,550 28,650 20,350 23,550

Working Note:
Basis of allocation of expenses
Carriage inwards Purchases (3:2:1)
Carriage outwards Turnover (4:3:2)
Salaries No. of Employees (5:4:3)
Advertisement Turnover (4:3:2)
Discount allowed Turnover (4:3:2)
Discount received Purchases (3:2:1)
Rent, Rates and Taxes Floor Space occupied (6:5:4)
Depreciation on furniture Value of furniture (2:2:1)
Labour welfare expenses No. of Employees (5:4:3)
Electricity expenses Units consumed (3:2:1)
Provision for bad debts Debtors balances (3:2:2)

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Question
Z Ltd. has 3 departments & submits the following information for the year ending on 31st March, 2020:
A B C Total (Rs.)
Purchases (units) 6,000 12,000 14,400
Purchases (Amount) 6,00,000
Sales (Units) 6,120 11,520 14,976
Selling Price (per unit) 40 45 50
Closing Stock (units) 600 960 36
You are required to prepare departmental trading account of Z Ltd., assuming that the rate of profit on
sales is uniform in each case.

Solution
Departmental Trading Account for the year ended 31st March, 2020
Particulars A B C Particulars A B C
To Opening Stock 11,520 8,640 12,240 By Sales 2,44,800 5,18,400 7,48,800
(W.N.-4)
To Purchases 96,000 2,16,000 2,88,000 By Closing Stock 9,600 17,280 720
(W.N.-2) (W.N.-4)
To G.P. c/d 1,46,880 3,11,040 4,49,280
(Bal.Fig.)
2,54,400 5,35,680 7,49,520 2,54,400 5,35,680 7,49,520
Working Notes:
(1) Profit Margin Ratio
Rs.
Selling price of units purchased
Department A (6,000 units х Rs. 40) 2,40,000
Department B (12,000 units х Rs. 45) 5,40,000
Department C (14,400 units х Rs. 50) 7,20,000
Total selling price of purchased units 15,00,000
Less: Purchases (6,00,000)
Gross profit 9,00,000
Profit margin ratio = Gross profit x 100
Selling price
= 9,00,000 x 100 = 60%
15,00,000

(2) Statement showing department-wise per unit cost and purchase cost
Particulars A B C
Selling price per unit 40 45 50
Less: Profit margin @ 60% (24) (27) (30)
Purchase price per unit (Rs.) 16 18 20
No. of units purchased 6,000 12,000 14,400
Purchases 96,000 2,16,000 2,88,000
(Purchase cost per unit x units purchased)
(3) Statement showing calculation of department-wise Opening Stock (in units)
Particulars A B C
Sales (Units) 6,120 11,520 14,976
Add: Closing Stock (Units) 600 960 36
6,720 12,480 15,012
Less: Purchases (Units) (6,000) (12,000) (14,400)
Opening Stock 720 480 612
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
Question
M/s. Ravi Enterprises has two Departments, Finished Leather and Shoes. Shoes are made by the Firm
itself out of leather supplied by Leather Department at its usual selling price.
From the following figures, prepare Departmental Trading and Profit & Loss Account for the year ended
31st March, 2020:
Finished Leather Shoes Department
Department
Opening Stock (As on 01.04.2019) 30,20,000 4,30,000
Purchases 1,50,00,000 2,60,000
Sales 1,80,00,000 45,20,000
Transfer to Shoes Department 30,00,000 -
Manufacturing expenses - 5,00,000
Selling expenses 1,50,000 60,000
Rent & warehousing 5,00,000 3,00,000
Stock on 31.03.2020 12,20,000 5,00,000
The following further information are available for necessary consideration:
(i) The stock in Shoes Department may be considered as consisting of 75% of Leather and 25% of other
expenses.
(ii) The Finished Leather Department earned a Gross Profit @ 15% in 2018-19.
(iii) General expenses of the business as a whole amount to Rs. 8,50,000

Solution
Departmental Trading and P&L Account for the year ended 31st March, 2020
Particulars Finished Shoes Particulars Finished Shoes
Leather Leather
To Opening Stock 30,20,000 4,30,000 By Sales 1,80,00,000 45,20,000
To Purchases 1,50,00,000 2,60,000 By Transfer 30,00,000
To Manufacturing 5,00,000 By Closing Stock 12,20,000 5,00,000
expenses
To Transfer 30,00,000
To G.P. c/d 42,00,000 8,30,000
2,22,20,000 50,20,000 2,22,20,000 50,20,000
To Selling expenses 1,50,000 60,000 By G.P. b/d 42,00,000 8,30,000
To Rent & warehousing 5,00,000 3,00,000
To Net profit 35,50,000 4,70,000
42,00,000 8,30,000 42,00,000 8,30,000

General Profit and Loss Account

Particulars Rs. Particulars Rs.
To General expenses 8,50,000 By Net profit
To Unrealized profit/Stock Reserve 75,000 Department-Finished Leather 35,50,000
: Closing(Refer W.N.)
To General net profit (Bal.fig.) 31,43,375 Department-Shoes 4,70,000
By Unrealized profit/Stock 48,375
Reserve :Opening (Refer W.N.)
40,68,375 40,68,375

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Working Note:
Calculation of Stock Reserve
Rate of Gross Profit of Finished leather Department, for the year 2019-20
= Gross Profit x 100 = [(42,00,000)/ (1,80,00,000 + 30,00,000)] x100 = 20%
Total Sales

Closing Stock of Finished leather in Shoes Department = 75% i.e. Rs. 5,00,000 x 75% = Rs. 3,75,000
Stock Reserve required for unrealized profit @ 20% on closing stock Rs. 3,75,000 x 20% = Rs. 75,000

Stock reserve for unrealized profit included in opening stock of Shoes dept. @ 15% i.e.
(Rs. 4,30,000 x 75% x 15%) = Rs. 48,375

Question
Siva Ltd. has two departments X and Y. From the following particulars prepare departmental trading
accounts and general profits and loss account for the year ending 31st March, 2020:
X (Rs.) Y (Rs.)
Opening Stock (at cost) 80,000 48,000
Purchases 3,68,000 2,72,000
Sales 5,60,000 4,48,000
Wages 48,000 32,000
Carriage inward 8,000 8,000
Closing Stock:
Purchased goods 18,000 24,000
Finished goods 96,000 56,000
Purchased goods transferred:
by Y to X 40,000
by X to Y 32,000
Finished goods transferred:
by Y to X 1,40,000
by X to Y 1,60,000
Return of finished goods:
by Y to X 40,000
by X to Y 28,000
Purchased goods have been transferred mutually at their respective departmental purchase cost and
finished goods at departmental market price and that 25% of the closing finished stock with each
department represents finished goods received from the other department.

Solution

Departmental Trading Account for the year ended 31st March, 2020
Particulars X Y Particulars X Y
To Opening Stock 80,000 48,000 By Sales 5,60,000 4,48,000
To Purchases 3,68,000 2,72,000 By Transfers:
To Carriage inward 8,000 8,000 Purchased goods 32,000 40,000
To Wages 48,000 32,000 Finished goods (Net) 1,20,000 1,12,000
To Transfers: By Closing Stock
Purchased goods 40,000 32,000 Purchased goods 18,000 24,000
Finished goods (Net) 1,12,000 1,20,000 Finished goods 96,000 56,000
To G.P. c/d 1,70,000 1,68,000
8,26,000 6,80,000 8,26,000 6,80,000
The copyright of these notes is with C.A. Nitin Goel
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Net transfer of Finished Goods by
Department X to Y = Rs. (1,60,000 – 40,000) = Rs.1,20,000
Department Y to X = Rs. (1,40,000 – 28,000) = Rs.1,12,000

Profit and Loss A/c

for the year ended 31st March, 2020
Particulars Rs. Particulars Rs.
To Provision for unrealized By Gross profit b/d
profit included in closing stock
Department X (W.N. 3) 7,200 Department X 1,70,000
Department Y (W.N. 3) 3,500 Department Y 1,68,000
To Net profit 3,27,300
3,38,000 3,38,000

Working Notes:
1. Calculation of rates of gross profit margin on sales
Particulars X Y
Sales 5,60,000 4,48,000
Add: Transfer of finished goods 1,20,000 1,12,000
6,80,000 5,60,000
Gross Profit 1,70,000 1,68,000
Gross profit margin = 1,70,000 x 100 = 25% 1,68,000 x 100 = 30%
6,80,000 5,60,000

2. Finished goods from other department included in the closing stock

Particulars X Y
Stock of finished goods 96,000 56,000
Stock related to other department 24,000 14,000
(25% of finished goods)

3. Unrealized profit included in the closing stock

Department X = 30% of Rs. 24,000 = Rs. 7,200
Department Y = 25% of Rs. 14,000 = Rs. 3,500

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
Question
M/s Chandu has 3 departments viz. A,B & C. Department A sells goods to Department B & Department
C at a profit of 25% on cost. Department B sells goods to A and C at a profit of 33 1/3% on cost.
Department C sells goods to A and B at 20% profit on transfer price. Departmental managers are entitled
to 10% commission on net profit subject to unrealized profit on departmental transfers being eliminated.
Departmental profits after charging manager's commission,but before adjustment of unrealized profit are:
Department A 1,57,500
Department B 1,62,000
Department C 2,16,000

Stocks lying at different departments at the end of the year are as under:
Dept A Dept B Dept C
Transfer from Department A - 25,000 18,000
Transfer from Department B 9,000 - 6,000
Transfer from Department C 25,000 27,000 -
Find out the correct departmental Profits after charging Managers’ commission.

Solution
Calculation of Correct Departmental Profit
Particulars Departments
A B C
Profit before adjustment of unrealized profits 1,57,500 1,62,000 2,16,000
Add : Managerial commission (1/9) 17,500 18,000 24,000
1,75,000 1,80,000 2,40,000
Less: Unrealised profit on stock (Refer W.N.) (8,600) (3,750) (10,400)
Profit before Manager’s commission 1,66,400 1,76,250 2,29,600
Less: Managers’ commission @ 10% (16,640) (17,625) (22,960)
Profit after adjustment of unrealized profits & 1,49,760 1,58,625 2,06,640
after Manager’s commission

Working Notes:
Value of Unrealised profit
Particulars A B C Total
Department A - 25,000 x 25/125=5,000 18,000 x 25/125=3,600 8,600
Department B 9,000 x 1/4 = 2,250 - 6,000 x 1/4 = 1,500 3,750
Department C 25,000 x 20%= 5,000 27,000 x 20%= 5,400 - 10,400

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Question
Martis Ltd. has several departments. Goods supplied to each department are debited to a Memorandum
Departmental Stock Account at cost, plus a fixed percentage (mark-up) to give the normal selling price.
The mark-up is credited to a memorandum departmental 'Mark-up account', any reduction in selling
prices (mark-down) will require adjustment in the stock account and in mark-up account. The mark up
for Department A for the last three years has been 25%. Figures relevant to Department A for the year
ended 31st March, 2020 were as follows:
Opening stock as on 1st April, 2019, at cost 65,000
Purchase at cost 2,00,000
Sales 3,00,000

It is further ascertained that :

a) Shortages of stock found in the year ending 31.03.2020, costing Rs. 1,000 were written off.
b) Opening stock on 01.04.19 including goods costing Rs. 6,000 had been sold during the year and had
been marked down in the selling price by Rs. 600. The remaining stock had been sold during the year.
c) Goods purchased during the year were marked down by Rs. 1,200 from a cost of Rs. 15,000. Marked-
down stock costing Rs. 5,000 remained unsold on 31.03.20.
d) The departmental closing stock is to be valued at cost subject to adjustment for mark-up and mark-
down.
You are required to prepare :
(i) A Departmental Trading Account for Department A for the year ended 31st March, 2020 in the
books of Head Office.
(ii) A Memorandum Stock Account for the year.
(iii) A Memorandum Mark-up Account for the year.

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Solution
Department Trading Account
Particulars Rs. Particulars Rs.
To Opening Stock 65,000 By Sales 3,00,000
To Purchases 2,00,000 By Shortage 1,000
To Gross Profit c/d 58,880 By Closing Stock 22,880
3,23,880 3,23,880
Memorandum Stock Account (for Department A) (at selling price)
Particulars Rs. Particulars Rs.
To Balance b/d 81,250 By Profit & Loss A/c 1,000
(65,000+25% of 65,000) (Cost of Shortage)
To Purchases 2,50,000 By Memorandum Departmental Mark 250
(2,00,000 + 25% of 2,00,000) up A/c (Load on Shortage)(1,000 x 25%)
By Memorandum Departmental Mark-up 1,200
A/c (Mark-down on Current Purchases)
By Debtors A/c (Sales) 3,00,000
By Memorandum Departmental Mark-up 600
A/c (Mark Down on Opening Stock)
By Balance c/d 28,200
3,31,250 3,31,250
Memorandum Departmental Mark-up Account
Particulars Rs. Particulars Rs.
To Memorandum Departmental 250 By Balance b/d 16,250
Stock A/c (1,000 × 25/100) (81,250 x 25/125)
To Memorandum Departmental 1,200 By Memorandum Departmental 50,000
Stock A/c Stock A/c (2,50,000 x 25/125)
To Memorandum Departmental 600
Stock A/c
To Gross Profit transferred to 58,880
Profit & Loss A/c
To Balance c/d 5,320
[(28,200+400*) x 25/125 - 400]
66,250 66,250
*[1,200 ×5,000/15,000] = 400
Working Notes:
(i) Calculation of Cost of Sales
Sales as per Books 3,00,000
Add: Mark-down in opening stock (given) 600
Add: mark-down in sales out of current Purchases 800
(1,200 x 10,000 /15,000)
Value of sales if there was no mark-down 3,01,400
Less: Gross Profit (25/125 of 3,01,400) subject to (60,280)
Mark Down (600 + 800)
Cost of sales 2,41,120
(ii) Calculation of Closing Stock
Opening Stock 65,000
Add: Purchases 2,00,000
Less: Cost of Sales (2,41,120)
Less: Shortage (1,000)
Closing Stock 22,880

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 Commerce
Lecture No.- 01
- For CA Intermediate

Subject Name
Accounts

• Insurance Claims

Nitin Goel
 INSURANCE CLAIMS

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
Question
A fire engulfed the premises of a business of M/s X Ltd. in the morning, of 1st October, 2019. The entire
stock was destroyed except, stock salvaged of Rs. 50,000. Insurance Policy was for Rs. 3,00,000 with
average clause. The following information was obtained from the records saved for the period from 1st
April to 30th September, 2019:
Sales 27,75,000
Purchases (including Purchase of Machinery 1,00,000) 20,30,000
Carriage inward 35,000
Sales value of drawings 20,000
Cost of goods distributed as free sample 10,000
Wages (including installation of Machinery 10,000) 50,000
Cost of goods sent to Consignee on 20th September 2019, 30,000
lying unsold with them
Stock in hand on 31st March, 2019 (lower than 10% cost) 3,15,000
Additional Information:
(1) Sales upto 30th September, 2019, includes Rs. 75,000 for which goods had not been dispatched.
(2) On 1st June, 2019, goods worth Rs. 1,98,000 sold to Hari on approval basis which was included in
sales but no approval has been received in respect of 2/3rd of the goods sold to him till 30th
September, 2019.
(3) Purchases upto 30th September, 2019 did not include Rs. 1,00,000 for which purchase invoices had
not been received from suppliers, though goods have been received in godown.
(4) Past records show the gross profit rate of 25% on sales.
You are required to prepare the statement of claim for loss of stock for submission to the Insurance
Company
Solution
Memorandum Trading A/c
(1.4.19 to 30.9.19)
Particulars (Rs.) Particulars (Rs.)
To Opening stock 3,50,000 By Sales 25,68,000
(3,15,000*100/90)
To Purchases 20,05,000 By Goods with customers* 99,000
(for approval) (W.N.1)
To Wages 40,000 By Goods with consignee 30,000
(50,000 – 10,000)
To Carriage inward 35,000 By Closing stock (bal. fig.) 3,75,000
To Gross profit 6,42,000
(Rs. 25,68,000 x 25%)
30,72,000 30,72,000

Computation of claim for loss of stock

Rs.
Stock on the date of fire (i.e. on 1.10.2019) 3,75,000
Less: Stock salvaged (50,000)
Stock destroyed by fire (Loss of stock) 3,25,000

Insurance claim
Average clause is applicable as insurance policy amount (Rs. 3,00,000) is less than the value of closing
stock ie. Rs. 3,75,000
Claim = Loss of Stock x Policy Amount
Stock on date of fire
= 3,25,000 x 3,00,000
3,75,000
= 2,60,000
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Working Notes:
1. Computation of Purchases
Rs.
Purchases (Given) 20,30,000
Less: Purchase of Machinery (1,00,000)
Less: Cost of Drawings (20,000-25%) (15,000)
Less: Cost of Goods distributed as samples (10,000)
Add: Goods physically received in godown 1,00,000
20,05,000
2. Calculation of goods with customers
Since no approval for sale has been received for the goods of Rs. 1,32,000 (i.e. 2/3 of 1,98,000)
hence, these should be valued at cost i.e. Rs. 1,32,000 – 25% of Rs. 1,32,000 =Rs. 99,000.
3. Calculation of actual sales
Total sales – Goods not dispatched - Sale of goods on approval (2/3rd) =
Sales (Rs. 27,75,000 – 75,000 – Rs.1,32,000) = Rs. 25,68,000

ABNORMAL STOCK/ ABNORMAL ITEM

Trading Account [Last Year]
Particulars Amount Particulars Amount
To Opening Stock xx By Sales (net of Returns) xx
To Purchases By Closing Stock
(net of Returns) xx Actual Value shown in books xx
Add: Amount written off xx xx
To Gross Profit xx
(Bal. Figure)
XX XX

Memorandum Trading A/c

Particulars Normal Abnormal Total Particulars Normal Abnormal Total
To Opening Stock By Sales
To Purchases By Loss on sale
To Direct By Loss on
Expenses revaluation
To Gross Profit By Closing Stock
(% of Normal sales) (Bal. figure)

Treatment of Abnormal Items of Stock

1) If any abnormal items of stock is given in question, then amount which has been written off from this
stock shall be 1st of all added in closing stock while preparing last year Trading A/c.
2) Total value of this closing stock shall be written in Total column in Memo Trading A/c, the original
cost of abnormal items shall be written in abnormal column & the balance stock shall be written in
normal column.
3) For loss of stock on date of fire, closing stock includes both normal & abnormal stocks.
4) Unless otherwise stated, estimated value of stock on date of fire consists of book value of normal items
& book value of abnormal items. Sometimes specific valuation of abnormal items is given for purpose
of claim, then instead of book value such valuation should be taken.

The copyright of these notes is with C.A. Nitin Goel

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Question
A fire occurred in the premises of M/s. Z & Co. on 30-06-2019. From the salvaged accounting records,
the following particulars were ascertained
Stock at cost as on 01-04-2018 1,20,000
Stock valued as on 31-03-2019 1,30,000
Purchases less return during 2018-19 5,25,000
Sales less return during 2018-19 6,00,000
Purchases from 01-04-2019 to 30-06-2019 97,000
Purchases upto 30-06-2019 did not include Rs. 35,000 for which purchase invoices
had not been received from suppliers, though goods have been received in godown.
Sales from 1.4.2019 to 30.6.2019 1,66,000
In valuing the stock for the Balance Sheet at 31st March, 2019, Rs. 5,000 had been written off on certain
stock which was a poor selling line having the cost of Rs. 8,000. A portion of these goods were sold in
May, 2019 at a loss of Rs. 1,000 on original cost of Rs. 7,000. The remainder of the stock was now
estimated to be worth its original cost. Subject to that exception, gross profit had remained at a uniform
rate throughout the year.
The value of the salvaged stock was Rs. 10,000. M/s. Z & Co. had insured their stock for Rs. 1,00,000
subject to average clause. Compute the amount of claim to be lodged to the insurance company.

Solution
Trading A/c
(1.4.18 to 31.03.19)
Particulars Amount Particulars Amount
To Opening Stock 1,20,000 By Sales 6,00,000
To Purchases 5,25,000 By Closing Stock 1,35,000
(1,30,000 + 5,000)
To G.P (Bal. figure) 90,000
7,35,000 7,35,000
GP Ratio for 18-19 = 90,000 x 100 = 15%
6,00,000
Memorandum Trading A/c
(1.4.19 to 30.6.19)
Particulars Normal Abnormal Total Particulars Normal Abnormal Total
To Opening Stock 1,27,000 8,000 1,35,000 By Sales 1,60,000 6,000 1,66,000
T o Purchases 1,32,000 1,32,000 By Loss 1,000 1,000
(97,000+35,000)
To Gross Profit 24,000 24,000 By Closing Stock 1,23,000 1,000 1,24,000
(15% of 1,60,000) (Bal. figure)
2,83,000 8,000 2,91,000 2,83,000 8,000 2,91,000

Computation of Insurance Claim

Stock on the date of fire 1,24,000
Less: Stock salvaged (10,000)
Loss of stock 1,14,000
Claim subject to average clause:
Insurance Claim = 1,14,000 x 1,00,000 = 91,935
1,24,000

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 LOSS OF PROFIT
STEPS
Step 1: Calculate GP Ratio of Last/Previous Year:
It is calculated as per Insurance Rules & has nothing to do with GP ratios in accounts.
a) GP (%) = NP + Insured standing charges X 100
Sales

b) Effective GP(%)=
GP (%) xxx
+ Increase in Trend xxx
- Decrease in Trend (xxx)
Effective GP(%) xxx

Step 2: Calculate Short Sales

Turnover in corresponding period of Previous Year/ Standard Turnover xxx
[After adjusting trend, if any]
Less: Actual Turnover in dislocated/effected period (xxx)
Short Sales xxx

Step 3: Loss of Profit = Short Sales X GP ( %)

i.e. (Step 2 X Step 1)

Step 4:
a) Adjusted Annual turnover= Turnover during 12 months immediately the preceding date of fire
[After adjusting trend, if any]

b) Insurable Amount = Adjusted Annual Turnover X GP (%)

Step 5: Additional Expenses (Lower of the following to be considered)

a) Actual Additional expenses
b) Actual Additional Expenses X Insurable Amount .
Insurable Amount +Uninsured standing charges
c) Turnover achieved due to additional expenses X GP Ratio
(If not given then take Turnover in dislocated period)

Step 6: Calculate Total Loss

Loss of Profit (Step 3) xx
Add: Additional Expenses (Step 5) xx
Less: Saving in insured standing charges (xx)
Total Loss xx

Step 7: Applicability of Average Clause

It is applied if Insurable Amount > Insured Amount

Claim to be Lodged= Total Loss (Step 6) X Insured Amount

Insurable Amount
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Question
The premises of a company were partly destroyed by the fire which took place on 31st July, 2021 and as a
result of which the business was disorganized from 31st July to 30th November, 2021. Accounts are closed
on 31st March, every year. The company is insured under a loss of profit policy for Rs.7,50,000. The
period of indemnity specified in the policy is 6 months. From the following information you are required
to compute the amount of claim under the Loss of Profits policy:
Particulars Rs.
Turnover for the year 2020-21 40,00,000
Net profit for the year 2020-21 2,40,000
Insured standing charges 4,80,000
Uninsured standing charges 80,000
Turnover during the period of dislocation, i.e., from 1.8.2021 to 8,00,000
30.11.2021
Standard turnover for the corresponding period in the preceding year, i.e., 20,00,000
from 1.8.2020 to 30.11.2020
Annual turnover for the year immediately preceding the fire i.e., from 44,00,000
1.8.2020 to 31.7.2021
Increased cost of working 1,50,000
Savings in insured standing charges 30,000
Reduction in turnover avoided through increase in working cost 4,00,000
Owing to reasons acceptable to the insurer, the “special circumstances clause” stipulates for:
1. Increase of turnover (Standard and annual) by 10% and
2. Increase of rate of gross profit by 2%.

Solution
1) GP (%) = Net Profit + Insured standing charges X 100
Sales
= 2,40,000+4,80,000 X 100 = 18%
40,00,000

Effective GP Ratio
GP (%) 18%
+ Increase in Trend 2%
Effective GP(%) 20%

2) Short Sales =
Turnover in corresponding period of Previous Year i.e. from 01.08.20 to 30.11.20 20,00,000
Add: Trend in Turnover i.e. 10% 2,00,000
Expected Turnover 22,00,000
Less: Actual Turnover in dislocated period i.e. from 01.08.21 to 30.11.21 (8,00,000)
Short Sales 14,00,000

3) Loss of Profit = Short Sales X GP ( %)

= 14,00,000 X 20% = 2,80,000
4)
a) Adjusted Annual turnover=
Turnover during 12 months immediately the preceding date of fire 44,00,000
i.e. from 01.08.20 to 31.07.21
Add: Trend in Turnover i.e. 10% 4,40,000
Adjusted Annual turnover 48,40,000

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 b) Insurable Amount = Adjusted Annual Turnover X GP (%)
= 48,40,000 X 20% = 9,68,000
5) Additional Expenses
a) 1,50,000
b) 1,50,000 X . 9,68,000 . = 1,38,550
9,68,000+80,000
c) 4,00,000 X 20% = 80,000
(Turnover achieved due to additional expenditure)
Lower out of above is Rs. 80,000

6) Total Loss
Loss of Profit (Step 3) 2,80,000
Add: Additional Expenses (Step 5) 80,000
Less: Saving in insured standing charges (30,000)
Total Loss 3,30,000

7) Average clause applicable since Insurable Amount > Policy Amount

Claim to be Lodged= 3,30,000 X 7,50,000 = 2,55,682
9,68,000

Question
A fire occurred in the premises of M/s Kirti & Co. on 15th December, 2020. The working remained
disturbed upto 15th March, 2021 as a result of which sales adversely affected. The firm had taken out an
insurance policy with an average clause against consequential losses for ₹ 2,50,000.
Following details are available from the quarterly sales tax return filed/GST return filed:
Sales 2017-18 2018-19 2019-20 2020-21
(₹) (₹) (₹) (₹)
From 1st April to 30th June 3,80,000 3,15,000 4,11,900 3,24,000
From 1st July to 30th September 1,86,000 3,92,000 3,86,000 4,42,000
From 1st October to 31st December 3,86,000 4,00,000 4,62,000 3,50,000
From 1 January to 31 March
st st
2,88,000 3,19,000 3,80,000 2,96,000
Total 12,40,000 14,26,000 16,39,900 14,12,000

A period of 3 months (i.e. from 16-12-2020 to 15-3-2021) has been agreed upon as indemnity period.
Sales from 16-12-2019 to 31-12-2019 68,000
Sales from 16-12-2020 to 31-12-2020 Nil
Sales from 16-03-2020 to 31-03-2020 1,20,000
Sales from 16-03-2021 to 31-03-2021 40,000
Net profit was ₹ 2,50,000 and standing charges (all insured) amounted to ₹ 77,980 for the year ending 31st
March, 2020.
You are required to calculate the loss of profit claim amount.

Solution
Computation of Trend in Turnover:
Year Total Turnover
2017-18 12,40,000
2018-19 14,26,000
2019-20 16,39,900
% change in Turnover = Difference in Turnover X 100
The copyright of these notes is with C.A. Nitin Goel
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 Base Turnover
Year 2017-18 & 2018-19 = 14,26,000 - 12,40,000 X 100 = 15 %
12,40,000
Year 2018-19 & 2019-20 = 16,39,900 - 14,26,000 X 100 = 15 %
14,26,000
Average Rate = 15% + 15% = 15%
2

1) GP (%) = Net Profit + Insured standing charges X 100

Sales
= 2,50,000+77,980 X 100 = 20%
16,39,900
2) Short Sales =
Turnover in corresponding period of Previous Year i.e. from 16.12.19 to 15.03.20 3,28,000
[ 68,000+3,80,000-1,20,000]
Add: Trend in Turnover i.e. 15% 49,200
Expected Turnover 3,77,200
Less: Actual Turnover in dislocated period i.e. from 16.12.20 to 15.03.21 (2,56,000)
[ 0+2,96,000-40,000]
Short Sales 1,21,200

3) Loss of Profit = Short Sales X GP (%)

= 1,21,200 X 20% = 24,240
4)
a) Adjusted Annual turnover=
Turnover during 12 months immediately the preceding date of fire after adjusting trend
Turnover from 16.12.2019 to 31.03.2020 [68,000+3,80,000] 4,48,000
Add: Trend in Turnover i.e. 15% 67,200
5,15,200
Add: Turnover from 01.04.2020 to 15.12.2020 [3,24,000+4,42,000+3,50,000-0] 11,16,000
(Trend not applied since already adjusted with trend)
Total 16,31,200
b) Insurable Amount = Adjusted Annual Turnover X GP (%)
= 16,31,200 X 20% = 3,26,240
5) Additional Expenses = Nil
6) Total Loss
Loss of Profit (Step 3) 24,240
Add: Additional Expenses (Step 5) Nil
Total Loss 24,240
7) Average clause applicable since Insurable Amount > Policy Amount
Claim to be Lodged= 24,240 X 2,50,000 = 18,575
3,26,240

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Question
A trader intends to take a loss of profit policy with indemnity period of 6 months, however, he could not
decide the policy amount. From the following details, suggest the policy amount:
Turnover in last financial year ₹ 36,00,000
Standing charges in last financial year ₹ 7,20,000
Net profit earned in last year was 10% of turnover and the same trend expected in subsequent year.
Increase in turnover expected 25%.
To achieve additional sales, trader has to incur additional expenditure of ₹ 50,000.

Solution
Calculation of Gross Profit
GP (%) = Net Profit + Standing charges X 100
Sales
= 3,60,000+7,20,000 X 100 = 30%
36,00,000

Calculation of policy amount to cover loss of profit

Turnover in the last financial year 36,00,000
Add: 25% increase in turnover 9,00,000
45,00,000
Gross profit on increased turnover (45,00,000 x 30%) 13,50,000
Add: Additional standing charges 50,000
Policy Amount 14,00,000
Therefore, the trader should go in for a loss of profit policy of ₹ 14,00,000.

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Hire Purchase pdf Page 1
Hire Purchase pdf Page 2
Hire Purchase pdf Page 3
Hire Purchase pdf Page 4
 ACCOUNTING METHODS UNDER HIRE PURCHASE
I. Cash Price/ Sales Method
S.No Particulars Books of Hire Purchaser Books of Hire Vendor
1. On Agreement Asset A/c Dr. Hire Purchaser A/c Dr.
To Hire Vendor A/c To Sales/Asset A/c
(With Cash Price) (With Cash Price)
2. On Making Down Payment Hire Vendor A/c Dr. Cash & Bank A/c Dr.
To Cash & Bank A/c To Hire Purchaser A/c

3. When Interest is due Interest A/c Dr. Hire Purchaser A/c Dr.
To Hire Vendor A/c To Interest A/c

4. When Instalment is paid Hire Vendor A/c Dr. Cash & Bank A/c Dr.
To Cash & Bank A/c To Hire Purchaser A/c

5. On providing Depreciation* Depreciation A/c Dr.

To Asset A/c No Entry

6. Closure of Depreciation A/c P&L A/c Dr.

To Depreciation A/c No Entry

7. Closure of Interest A/c P&L A/c Dr. Interest A/c Dr.

To Interest A/c To P&L A/c

*Note:-
However a concern may maintain Provision for Depreciation A/c instead of charging to Hire
Purchase Asset A/c. In such case entry will be:

Depreciation A/c Dr.

To Provision for Depreciation A/c

DISCLOSURE IN BALANCE SHEET

BALANCE SHEET OF HIRE PURCHASER

Liabilities Amount Assets Amount

Hire Vendor A/c Hire Purchase Asset xx

xx
(Creditor) Less Depreciation (xx) xx

BALANCE SHEET OF HIRE VENDOR

Liabilities Amount Assets Amount

Hire Purchaser A/c

xx
(Debtor)
II. Interest Suspense Method
S.No Particulars Books of Hire Purchaser Books of Hire Vendor
1. On Agreement Asset A/c Dr. (CP) Hire Purchaser A/c Dr. (HPP)
Interest Suspense A/c Dr. (Int) To Sales/Asset A/c (CP)
To Hire Vendor A/c (HPP) To Interest Suspense A/c
(Int)
2. On Making Down Payment Hire Vendor A/c Dr. Cash & Bank A/c Dr.
To Cash & Bank A/c To Hire Purchaser A/c

3. When Interest is due Interest A/c Dr. Interest Suspense A/c Dr.
To Interest Suspense A/c To Interest A/c

4. When Instalment is paid Hire Vendor A/c Dr. Cash & Bank A/c Dr.
To Cash & Bank A/c To Hire Purchaser A/c

5. On providing Depreciation* Depreciation A/c Dr.

To Asset A/c No Entry

6. Closure of Depreciation A/c P&L A/c Dr.

To Depreciation A/c No Entry

7. Closure of Interest A/c P&L A/c Dr. Interest A/c Dr.

To Interest A/c To P&L A/c

*Note:-
However a concern may maintain Provision for Depreciation A/c instead of charging to Hire
Purchase Asset A/c. In such case entry will be:

Depreciation A/c Dr.

To Provision for Depreciation A/c

DISCLOSURE IN BALANCE SHEET

BALANCE SHEET OF HIRE PURCHASER

Liabilities Amount Assets Amount

Hire Vendor A/c xx

Hire Purchase Asset xx
(-) Interest Suspense (xx) xx
Less Depreciation (xx) xx

BALANCE SHEET OF HIRE VENDOR

Liabilities Amount Assets Amount

Hire Purchaser A/c xx

(-) Interest Suspense (xx) xx
 DEFAULT AND REPOSSESSION
In a hire purchase agreement the hire purchaser has to pay up to the last instalment to obtain the
ownership of goods. If the hire purchaser fails to pay any of the instalments, the hire vendor takes the
asset back in its actual form without any refund of the earlier payments to the hire purchaser. This act of
recovery of possession of the asset is termed as repossession.

I. Complete Repossession
In case of complete repossession the hire vendor takes back the possession of all the goods.
All entries till the date of default are passed in usual manner. The additional entries are as follows:
Books of Hire Purchaser
S.No Particulars Journal Entry
1. For Closing Hire Vendor’s Account Hire Vendor A/c Dr.
To Asset A/c
(With Value appearing in Hire Vendor A/c)

2. For Closing Asset Account Balance of Asset A/c transferred to P&L A/c
as Profit/Loss on surrender

Loss: Profit:
P&L A/c Dr. Asset A/c Dr.
To Asset A/c To P&L A/c

Books of Hire Vendor

S.No Particulars Journal Entry
1. On Repossession of Goods Goods Repossessed A/c Dr.
To Hire Purchaser A/c
(With agreed value of goods repossessed if
given. If not given then consider value
appearing in Hire Purchaser A/c)
Note: In case agreed value given then balance
in Hire Purchaser A/c is Profit/Loss on
repossession transferred to P&L A/c

2. For Amount spent on reconditioning / Goods Repossessed A/c Dr.

repair of repossessed goods To Cash & Bank A/c

3. For sale of repossessed goods Cash & Bank A/c Dr.

To Goods Repossessed A/c

4. For Profit/Loss on sale of repossessed Profit/Loss on sale transferred to P&L A/c

goods
Loss:
P&L A/c Dr.
To Goods Repossessed A/c

Profit:
Goods Repossessed A/c Dr.
To P&L A/c
II. Partial Repossession
In case of partial repossession the hire vendor takes back the possession of a part of the goods.
All entries till the date of default are passed in usual manner. The additional entries are as follows:

Books of Hire Purchaser

S.No Particulars Journal Entry
1. For transfer of the agreed value of Goods Hire Vendor A/c Dr.
Repossessed To Asset A/c
(With Agreed Value of Goods Repossessed)

2. For Transfer of Profit/Loss on Default First find out the closing balance of Asset A/c*
/Surrender
Thereafter balance of Asset A/c is transferred
to P&L A/c as Profit/Loss on surrender

Loss: Profit:
P&L A/c Dr. Asset A/c Dr.
To Asset A/c To P&L A/c
* Closing Balance
Value as if there is no Repossession x Balance no. of Assets
Total no. of Assets

Books of Hire Vendor

S.No Particulars Journal Entry
1. On Repossession of Goods at Agreed Goods Repossessed A/c Dr.
Value To Hire Purchaser A/c
(With agreed value of goods repossessed)

2./3./4.-

Same as in case of Complete Repossession

Hire Purchase pdf Page 11
Hire Purchase pdf Page 12
Hire Purchase pdf Page 15
Hire Purchase pdf Page 16
Question Inter Jan 2021 (8 Marks)
Jai Ltd. purchased a machine on hire purchase basis from KM Ltd. on the following terms:
a) Cash price ₹ 1,20,000.
b) Down payment at the time of signing the agreement on 1-1-2016, ₹ 32,433.
c) 5 annual instalments of ₹ 23,100, the first to commence at the end of twelve months from the date of
down payment.
d) Rate of interest is 10% p.a.
You are required to calculate the total interest and interest included in each instalment.
Also prepare the Ledger Account of KM Ltd. in the books of Jai Ltd.

Solution
Hire Purchase Price = (23,100*5)+32,433 = 1,47,933
Cash Price = 1,20,000
Total Interest = 1,47,933 – 1,20,000 = 27,933

Calculation of interest included in each instalment

A B C=B*10% D E= D-C F= B – E
Instalment Balance due at Interest @ Instalment Amount Principal Balance Due at
No. the beginning 10% the End
1 87,567 8,757 23,100 14,343 73,224
2 73,224 7,322 23,100 15,778 57,446
3 57,446 5,745 23,100 17,355 40,091
4 40,091 4,009 23,100 19,091 21,000
5 21,000 2,100 23,100 21,000 Nil
27,933

Books of Jai Ltd.

KM Ltd. A/c
Date Particulars Amount Date Particulars Amount
1/01/16 To Bank A/c 32,433 1/01/16 By Machinery A/c 1,20,000
31/12/16 To Bank A/c 23,100 31/12/16 By Interest A/c 8,757
31/12/16 To Balance c/d 73,224
1,28,757 1,28,757
31/12/17 To Bank A/c 23,100 1/01/17 By Balance b/d 73,224
31/12/17 To Balance c/d 57,446 31/12/17 By Interest A/c 7,322
80,546 80,546
31/12/18 To Bank A/c 23,100 1/01/18 By Balance b/d 57,446
31/12/18 To Balance c/d 40,091 31/12/18 By Interest A/c 5,745
63,191 63,191
31/12/19 To Bank A/c 23,100 1/01/19 By Balance b/d 40,091
31/12/19 To Balance c/d 21,000 31/12/19 By Interest A/c 4,009
44,100 44,100
31/12/20 To Bank A/c 23,100 1/01/20 By Balance b/d 21,000
31/12/20 By Interest A/c 2,100
23,100 23,100
Question Inter May 2019 (10 Marks)
M/s Amar bought six Scooters from M/s Bhanu on 1st April, 2019 on the following terms:
Down payment ₹ 3,00,000
1 instalment payable at the end of 1 year
st st
₹ 1,59,000
2nd instalment payable at the end of 2nd year ₹ 1,47,000
3 instalment payable at the end of 3 year
rd rd
₹ 1,65,000
Interest is charged at the end of 10% per annum.
M/s Amar provides depreciation @ 20% per annum on the diminishing balance method.
On 31st March, 2022 M/s Amar failed to pay the 3rd instalment upon which M/s Bhanu repossessed two
Scooters. M/s Bhanu agreed to leave the other four Scooters with M/s Amar and adjusted the value of
the repossessed Scooters against the amount due. The Scooters taken over were valued on the basis of
30% depreciation per annum on written down value. The balance amount remaining in the vendor’s
account after the above adjustment was paid by M/s Amar after 5 months with interest @ 15% per
annum. M/s Bhanu incurred repairing expenses of ₹ 15,000 on repossessed scooters and sold scooters for
₹ 1,05,000 on 25th April, 2022.
You are required to:
(a) Calculate the case price of the Scooters and the interest paid with each instalment.
(b) Prepare Scooters Account and M/s Bhanu Account in the books of M/s Amar.
(c) Prepare Goods Repossessed Account in the books of M/s Bhanu.

Solution
Statement Showing the Computation of Cash Price and Interest
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx10/110 Due at the
instalment payment of instalment Beginning
3 - 1,65,000 1,65,000 15,000 1,50,000
2 1,50,000 1,47,000 2,97,000 27,000 2,70,000
1 2,70,000 1,59,000 4,29,000 39,000 3,90,000
Total cash price = ₹ 3,90,000 + 3,00,000 (down payment) =₹ 6,90,000

Books of Amar
Scooter A/c
Date Particulars Amount Date Particulars Amount
1/04/19 To M/s Bhanu A/c 6,90,000 31/03/20 By Depreciation A/c 1,38,000
31/03/20 By Balance c/d 5,52,000
6,90,000 6,90,000
1/04/20 To Balance b/d 5,52,000 31/03/21 By Depreciation A/c 1,10,400
31/03/21 By Balance c/d 4,41,600
5,52,000 5,52,000
1/04/21 To Balance b/d 4,41,600 31/03/22 By Depreciation A/c 88,320
31/03/22 By M/s Bhanu A/c 78,890
31/03/22 By P&L A/c (Loss) 38,870
31/03/22 By Balance c/d 2,35,520
(4,41,600-88,320)*4/6
4,41,600 4,41,600

M/s Bhanu A/c

Date Particulars Amount Date Particulars Amount
1/04/19 To Bank A/c 3,00,000 1/04/19 By Scooter A/c 6,90,000
31/03/20 To Bank A/c 1,59,000 31/03/20 By Interest A/c 39,000
31/03/20 To Balance c/d 2,70,000
7,29,000 7,29,000
31/03/21 To Bank A/c 1,47,000 1/04/20 By Balance b/d 2,70,000
31/03/21 To Balance c/d 1,50,000 31/03/21 By Interest A/c 27,000
2,97,000 2,97,000
31/03/22 To Scooter A/c 78,890 1/04/21 By Balance b/d 1,50,000
31/03/22 To Balance c/d 86,110 31/03/22 By Interest A/c 15,000
5,50,000 1,65,000
31/08/22 To Bank A/c (Amount 91,492 1/04/22 By Balance b/d 86,110
settled after 5 months)
31/08/22 By Interest A/c 5,382
(86,110*15%*5/12)
91,492 91,492

Books of Bhanu
Goods Repossessed A/c
Date Particulars Amount Date Particulars Amount
31/03 To Amar A/c 78,890 25/04 By Bank A/c 1,05,000
25/04 To Bank A/c 15,000
25/04 To Profit & Loss A/c 11,110
(Profit on sale)
1,05,000 1,05,000

Working Notes:
Computation of the value of repossessed asset:
Particulars Depreciation
charged @ 30%
Cash price (6,90,000*2/6) 2,30,000
(-) Depreciation (1 year)
st
(69,000)
1,61,000
(-) Depreciation (2nd year) (48,300)
1,12,700
(-) Depreciation (3rd year) (33,810)
78,890
 INVESTMENT ACCOUNTS

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
Question
Mr. Harsh provides the following details relating to his holding in 10% debentures (face value of Rs. 100
each) of Exe Ltd., held as current assets:
1.4.2019 Opening balance – 12,500 debentures, cost Rs. 12,25,000
1.6.2019 Purchased 9,000 debentures @ Rs. 98 each ex-interest
1.11.2019 Purchased 12,000 debentures @ Rs. 115 each cum-interest
31.1.2020 Sold 13,500 debentures @ Rs. 110 each cum-interest
31.3.2020 Market value of debentures @ Rs. 115 each
Due dates of interest are 30th June and 31st December. Brokerage at 1% is to be paid for each transaction.
Mr. Harsh closes his books on 31.3.2020.
Show investment account as it would appear in his books assuming FIFO method is followed.

Solution
Investment Account of Mr. Harsh for the year ending on 31-3-2020
(Scrip: 10% Debentures of Exe Limited)
(Interest Payable on 30th June and 31st December
Date Particula Nom. Interes Cost Date Particulars Nom. Interes Cost
rs Value t Value t
1.4.19 To 12,50,00 31,250 12,25,00 30.06.1 By Bank - 1,07,50 -
Balance 0 0 9 21,50,000X10%X1 0
b/d /2
1.6.19 To Bank 9,00,000 37,500 8,90,820 31.12.2 By Bank 1,67,50
(W.N.1) 0 33,50,000X10%X1 0
/2
1.11.1 To Bank 12,00,00 40,000 13,53,80 31.1.20 By Bank (W.N.3) 13,50,00 11,250 14,58,90
9 (W.N.2) 0 0 0 0
31.1.2 To Profit 1,34,920 31.3.20 By Balance c/d 20,00,00 50,000 21,45,64
0 & Loss (W.N.4) 0 0
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 A/c
(W.N.3)
31.3.2 To Profit 2,27,50
0 & Loss 0
A/c
(Bal. fig.)
33,50,00 3,36,25 36,04,54 33,50,00 3,36,25 36,04,54
0 0 0 0 0 0

Working Notes:
1. Purchase of debentures on 1.6.19
Interest element = 9,000 x 100 x 10% x 5/12 = Rs.37,500
Investment element = (9,000 x 98) + [1%(9,000 x 98)] = Rs.8,90,820

2. Purchase of debentures on 1.11.2019

Interest element = 12,000 x 100 x 10% x 4/12 = Rs.40,000
Investment element = 12,000 X 115 X 101% less 40,000 = Rs.13,53,800

3. Profit on sale of debentures as on 31.1.20

Particulars Amount
Sales price of debentures (13,500 x Rs. 110) 14,85,000
Less: Brokerage @ 1% (14,850)
14,70,150
Less: Interest (1,35,000/ 12) (11,250)
14,58,900
Less: Cost of Debentures [(12,25,000 + (890820 X 1,00,000/9,00,000)] (13,23,980)
Profit on sale 1,34,920

4. Valuation of closing balance as on 31.3.2020:

Market value of 20,000 Debentures at Rs.115 = Rs.23,00,000
Cost of
8,000 Debentures 8,90,820/ 9,000 X 8,000 = 7,91,840
12,000 Debentures = 13,53,800
Total 21,45,640
Value at the end is Rs. 21,45,640, i.e., which is less than market value of Rs.23,00,000.

The copyright of these notes is with C.A. Nitin Goel

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 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
Question
Smart Investments made the investments in Equity Shares of X Ltd:
01.04.2019 Opening: 2,000 Equity Shares at cost of 3,00,000
15.04.2019 Purchased 5,000 equity shares @ Rs. 200 per share
Brokerage of 1% was paid in addition (Face Value of shares Rs.10)
03.06.2019 The company announced a bonus issue of 2 shares for every 5 shares held.
16.08.2019 The company made a rights issue of 1 share for every 7 shares held at Rs. 250 per share.
The entire money was payable by 31.08.2019.
22.08.2019 Rights to the extent of 20% was sold @ Rs. 60. The remaining rights were subscribed
02.09.2019 Dividend @ 15% for the year ended 31.03.2019 was received on 16.09.2019
15.12.2019 Sold 3,000 shares @ Rs. 300. Brokerage of 1% was incurred extra.
15.01.2020 Received interim dividend @ 15% for the year 2019-20
31.03.2020 The shares were quoted in the stock exchange @ Rs. 220
Prepare Investment A/cs in books of Smart Investments. Assume that average cost method is followed.

Solution
Investments in Equity shares of X Ltd. for year ended
31.3.2020
Date Particulars No.’s Income Amount Date Particulars No.’s Income Amount
01.04 To Balance 2,000 3,00,000 16.09 By Bank A/c - 3,000 7,500
b/d (Dividend)

15.04 To Bank A/c 5,000 - 10,10,000 15.12 By Bank A/c 3,000 - 8,91,000
03.06 To Bonus 2,800 - - 15.01 By Bank A/c - 11,880 -
Issue A/c (Interim
dividend)
31.08 To Bank A/c 1,120 - 2,80,000 31.03 By Balance 7,920 - 11,47,747
c/d
15.12 To P & L A/c- - - 4,56,247
(Profit)
31.03 To P & L A/c- - 14,880 -
Transfer
10,920 14,880 20,46,247 10,920 14,880 20,46,247

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Working Notes:
1. Cost of equity shares purchased on 15/4/2019 = Cost + Brokerage = (5,000 ×Rs. 200) +
1% of (5,000 × Rs. 200) = Rs. 10,10,000
2. Bonus shares = 7,000 x 2 = 2,800 shares
5
3. Right shares = 2,000 + 5,000 + 2,800 x 1 = 1,400 shares
7
Shares subscribed = 1,400 * 80% = 1,120 shares
Value of right shares subscribed = 1,120 shares @ Rs. 250 per share = Rs. 2,80,000
Calculation of sale of right entitlement: (1,400 shares x 20% ) x Rs. 60 per share = Rs. 16,800
Amount received from sale of rights will be credited to P & L A/c as per para 13 of AS 13
‘Accounting for Investments’.

4. Dividend received
On Opening holding: 2,000 shares x Rs. 10 x 15% = Rs.3,000 credited to Dividend Account
On shares purchased on 15th April, 2019 = 5,000 shares x Rs. 10 x 15% = Rs.7,500 will be
adjusted to Investment A/c
Note: It is presumed that no dividend is received on bonus shares & right shares.
5. Sale proceeds of equity shares on 15/12/2019 = Sale price – Brokerage = (3,000 ×Rs.
300) – 1% of (3,000 × Rs. 300) = Rs. 8,91,000.
6. Profit on sale of shares on 15/12/2019 = Sales proceeds – Average cost
Sales proceeds = Rs. 8,91,000
Average cost = [(3,00,000 +10,10,000+2,80,000-7,500) × 3,000
10,920
= [15,82,500 × 3,000/10,920] = 4,34,753
Profit = Rs. 8,91,000 – Rs. 4,34,753=Rs. 4,56,247.

7. Amount of Interim Dividend = (2,000+5,000+2,800+1,120-3,000) x 10 x 15% = 11,880

8. Valuation of equity shares on 31st March, 2020
Cost =Rs. [15,82,500 × 7,920/10,920] = Rs. 11,47,747
Market Value = 7,920 shares ×Rs. 220 =Rs. 17,42,400
Closing stock of equity shares has been valued at Rs. 11,47,747 i.e. cost being lower than the
market value.

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 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 CUM RIGHT PURCHASE: (Exception to Para 13 of AS 13)
PARA 13 of AS 13: When right shares offered are subscribed for, the cost of the right shares is added
to the carrying amount of the original holding. If rights are not subscribed for but are sold in the market,
the sale proceeds are taken to the profit and loss statement. However, where the investments are acquired
on cum-right basis and the market value of investments immediately after their becoming ex-right is
lower than the cost for which they were acquired, it may be appropriate to apply the sale proceeds of
rights to reduce the carrying amount of such investments to the market value.

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 Commerce
Lecture No.- 01
- For CA Intermediate

Subject Name
Accounts

• Accounts from Incomplete

Records (Single Entry)
Nitin Goel
ACCOUNTS FROM INCOMPLETE RECORDS
(SINGLE ENTRY SYSTEM)
The term “Single Entry System” is popularly used to describe the problems of accounts from incomplete
records. Very often the small sole proprietorship and partnership businesses do not maintain double entry
book keeping system. Sometimes they keep record only of the cash transactions and credit transactions.
Sometimes they maintain no record of many transactions. But at the end of accounting period they want
to know the performance and financial position of their businesses. This creates some special problems to
the accountants

Copyright of these notes is with CA. Nitin Goel

Question
Ravi keeps his books of account by single entry system. However, he is able to give you the following
lists of his assets and liabilities in the beginning as well as at the end of the year ended 31st March, 2021:
Particulars On 1st April,2020 (Rs.) On 31st March,2021 (Rs.)
Cash in hand 1,500 1,400
Cash at bank 20,000 -
Bank Overdraft - 2,000
Bills Receivable 15,000 25,000
Stock 93,500 98,600
Debtors 60,000 70,000
Furniture and Fittings 65,000 65,000
Building 1,00,000 1,20,000
Creditors 45,000 31,000
Bills Payable 5,000 Nil
Loan (Principal) 50,000 40,000
Ravi introduced Rs. 10,000 as fresh capital on 1st October, 2020. He also withdrew Rs. 5,000 every
month for his household expenses. He also withdrew 10,000 for his daughter’s marriage.
During the year, there was no sale or fresh purchase of furniture and fittings. However Building was
purchased on 01.01.2021
Loan amount of Rs. 10,000 was partly paid by him on 31-03-2021. Interest on Loan to be provided @ 12
p.a. and same is unpaid as on 31-03-2021. No interest of earlier period is outstanding.
During the year 2020-21, one life insurance policy of Mr. Ravi was matured and amount received Rs.
15,000 was retained in the business.
Ascertain the profit earned by Ravi during the year ended 31st March, 2021 after depreciating furniture
and fittings and Building @ 10% per annum

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Solution
Statement of Affairs as at 1/4/20 & 31/3/2021
Liabilities 1/4/20 31/3/21 Assets 1/4/20 31/3/21
Bank Overdraft - 2,000 Cash in hand 1,500 1,400
Creditors 45,000 31,000 Cash at bank 20,000 -
Bills Payable 5,000 - Bills Receivable 15,000 25,000
Loan 50,000 40,000 Stock 93,500 98,600
O/s Interest on Loan - 6,000 Debtors 60,000 70,000
Capital (Bal. Fig.) 2,55,000 2,84,000 Building (31/03/21) 1,00,000 1,09,500
[(1,20,000-(1,00,000*10%)-
(20,000*10%*3/12)]
Furniture (31/3/21) 65,000
Less Dep.@10% (6,500) 65,000 58,500
3,55,000 3,63,000 3,55,000 3,63,000

Statement of Profit or Loss

Particulars Amount
Capital as at 31/3/2021 (Closing) 2,84,000
Add Drawings [(5,000 x 12)+10,000] 70,000
Less Additional capital (10,000+15,000) (25,000)
Less Capital as at 1/4/2020 (Opening) (2,55,000)
Profit during year 74,000

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Copyright of these notes is with CA. Nitin Goel
Copyright of these notes is with CA. Nitin Goel
Copyright of these notes is with CA. Nitin Goel
Copyright of these notes is with CA. Nitin Goel
Question
The following information relates to the business of ABC Enterprises, who requests you to prepare a
Trading and Profit & Loss A/c for the year ended 31stMarch,2021 and a Balance Sheet as on that date.
(a) Assets and Liabilities as on:
01.04.2020 31.03.2021
Furniture 60,000 63,500
Stock 80,000 70,000
Sundry Debtors 1,60,000 ??
Sundry Creditors 1,10,000 1,50,000
Prepaid Expenses 6,000 7,000
Outstanding Expenses 20,000 18,000
Cash in Hand & Bank Balance 12,000 26,250
(b) Cash transaction during the year:
(i) Collections from debtors, after allowing discount of Rs. 15,000 (2.5% discount) amounted to
Rs. 5,85,000
(ii) Collections on discounting of bills of exchange, after deduction of discount of Rs. 1,250 (2%
discount) by the bank, totalled to Rs. 61,250.
(iii) Creditors of Rs. 4,00,000 were paid Rs. 3,92,000 (2% discount) in full settlement of their dues.
(iv) Payment for freight inwards Rs. 30,000.
(v) Amount withdrawn for personal use Rs. 70,000.
(vi) Payment for office furniture Rs. 10,000.
(vii) Investment carrying annual interest of 6% were purchased at Rs. 95 (200 shares, Face value
Rs. 100 each) on 1st October, 2020 and payment made thereof.
(viii) Expenses including salaries paid Rs. 95,000.
(ix) Miscellaneous receipts Rs. 5,000.
(x) Bills of exchange drawn on and accepted by customers during the year amounted to Rs.
1,00,000. Of these, bills of exchange of Rs. 20,000 were endorsed in favour of creditors. An
endorsed bill of exchange of Rs. 4,000 was dishonoured.
(xi) Goods costing Rs. 9,000 were used as advertising materials.
(xii) Goods are invariably sold to show a gross profit of 25% on cost.
(xiii) Difference in cash book, if any, is to be treated as further drawing or introduction of capital by
proprietor of ABC Enterprises.
(xiv) Provide at 2% for doubtful debts on closing debtors.

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Solution
Trading and P & L A/c for year ended 31/3/2021
Particulars Amount Particulars Amount
To Opening Stock 80,000 By Sales 6,08,750
To Purchases (4,56,000 – 9,000) 4,47,000 By Closing Stock 70,000
To Freight inwards 30,000
To G.P. (20% on sales) 1,21,750
6,78,750 6,78,750
To Advertisement Expenses 9,000 By GP b/d 1,21,750
To Dep. on Furniture 6,500 By Misc. income 5,000
To Expenses for year 92,000 By Interest on Investment 600
( 95,000 + 18,000 – 20,000 6
+ 6,000 – 7,000) (20,000 x 6% x )
12
To Discount Allowed By Discount Received 8,000
Debtor 15,000
B/R 1,250 16,250
To Provision for doubtful debts 1,455
To Net Profit 10,145
1,35,350 1,35,350
Balance Sheet as at 31/3/21
Liabilities Amount Assets Amount
Creditors 1,50,000 Furniture 63,500
(60,000 + 10,000 - 6,500)
O/s Expenses 18,000 6% Investment at cost 19,000
Capital Accrued Int. on Investment 600
Opening 1,88,000 Stock 70,000
Net Profit 10,145 Debtors 72,750
Drawings (91,000) 1,07,145 Less Prov. for D/debts (1,455) 71,295
Bills Receivable 17,500
Cash in hand & Bank 26,250
Prepaid expenses 7,000
2,75,145 2,75,145
Working Notes:
Balance Sheet as at 1/4/2020
Liabilities Amount Assets Amount
Creditors 1,10,000 Furniture 60,000
O/s Expenses 20,000 Stock 80,000
Capital (Bal. Fig.) 1,88,000 Debtors 1,60,000
Cash & Bank 12,000
Prepaid expenses 6,000
3,18,000 3,18,000

Creditors A/c
Particulars Amount Particulars Amount
To Bills Receivable (Endorsed) 20,000 By Balance b/d 1,10,000
To Bank 3,92,000 By Debtors (Endorsed Bill 4,000
Dishonoured)
To Discount Received 8,000 By Credit Purchases (Bal. Fig.) 4,56,000
To Balance c/d 1,50,000
5,70,000 5,70,000

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 Cost of Goods Sold = 80,000 + 4,56,000- 9,000 + 30,000 – 70,000 = 4,87,000
25
GP = (20% on Sales )= 25% on COGS = 4,87,000  = 1,21,750
100
Sales = COGS + GP = 6,08,750
Debtors A/c
Particulars Amount Particulars Amount
To Balance b/d 1,60,000 By B/R 1,00,000
To Sales 6,08,750 By Bank 5,85,000
To Creditors 4,000 By Disc. Allowed 15,000
By Balance c/d (Bal. Fig.) 72,750
7,72,750 7,72,750
Bills Receivable A/c
Particulars Amount Particulars Amount
To Debtors 1,00,000 By Creditors 20,000
By Bank 62,250
By Discount 1,250
By Balance c/d (Bal. Fig.) 17,500
1,00,000 1,00,000

Cash and Bank A/c

Particulars Amount Particulars Amount
To Balance b/d 12,000 By Freight Inwards 30,000
To Debtors 5,85,000 By Creditors 3,92,000
To B/R 61,250 By Expenses 95,000
To Misc. Income 5,000 By Investment 19,000
By Furniture 10,000
By Drawings 91,000
(70,000+21,000 bal.fig.)
By Balance c/d 26,250
6,63,250 6,63,250
Note: All sales & purchases are assumed to be on credit basis.

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Question
The following is the Balance Sheet of M/s. Care Traders as on 1-4-2020:
Rs.
Source of Funds
Capital 10,00,000
Profit and Loss 1,47,800
Unsecured loan @ 10% 1,75,000
Trade Payable 45,800
13,68,600
Application of Funds
Machinery 8,25,500
Furniture 1,28,700
Inventory 1,72,000
Trade Receivables 2,29,600
Bank Balance 12,800
13,68,600
A fire broke out in the premises on 31-3-2021 and destroyed the books of account. The accountant could
however provide the following information:
1) Sales for the year ended 31-3-2020 was Rs. 18,60,000. Sales for the current year was 20% higher than
the last year.
2) 25% sales were made in cash and the balance was on credit.
3) Gross profit on sales is 30%.
4) Terms of Credit
Debtor : 2 months
Creditors : 1 month
All creditor are paid by cheque, no cash purchases and all credit sales are collected in cheque.
5) The Bank Pass Book has following details (other than payment to creditors & collection from debtors)
Rs.
Machinery purchased 1,14,000
Rent paid 1,32,000
Advertisement expenses 80,000
Travelling expenses 78,400
Repairs 36,500
Sales of furniture 9,500
Cash withdrawn for petty expenses 28,300
Interest paid on unsecured loan 8,750
6) Machinery was purchased on 1-10-2020.
7) Rent was paid for 11 months only and 25% of the advertisement expenses relates to the next year.
8) Travelling expenses of Rs. 7,800 for which cheques were issued but not presented in bank.
9) Furniture was sold on l-4-2020 at a loss of Rs. 2,900 on book value.
10) Physical verification as on 31-3-2021 ascertained the stock position at Rs. 1,81,000 and petty cash
balance at nil.
11) There was no change in unsecured loan during the year.
12) Depreciation is to be provided at 10% on machinery and 20% on furniture.

Prepare Bank Account, Trading and Profit and Loss Account for the year ended 31-3-2021 in the books
of M/s. Care Traders & Balance Sheet as on that date. Make necessary assumptions wherever necessary.

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Solution
Bank Account
Particulars Amount Particulars Amount
To Opening Balance 12,800 By Creditors (WN 6) 14,86,250
To Cash sales (WN 1) 5,58,000 By Machinery Purchased 1,14,000
To Debtors (WN 4) 16,24,600 By Advertisement expenses 80,000
To Furniture (sold) 9,500 By Rent 1,32,000
By Travelling expenses 86,200
(78,400 + 7,800)
By Repairs 36,500
By Petty Expenses 28,300
By Interest on unsecured loan 8,750
By Balance c/d (Bal. Fig.) 2,32,900
22,04,900 22,04,900

Trading and P & L A/c for the year ended 31/03/2021

Particulars Amount Particulars Amount
To Opening Stock 1,72,000 By Sales (WN 1) 22,32,000
To Purchases (WN 2) 15,71,400 By Closing Stock 1,81,000
To Gross Profit c/d (WN 1) 6,69,600
24,13,000 24,13,000
To Rent (1,32,000 X 12/11) 1,44,000 By G.P. b/d 6,69,600
To Advertisement expenses 60,000
To Travelling expenses 86,200
To Repairs 36,500
To Petty cash expenses 28,300
To Interest on unsecured loan 17,500
To Loss on sale of furniture 2,900
To Depreciation
Machinery (WN 8) 88,250
Furniture 23,260
To Net Profit 1,82,690
6,69,600 6,69,600

Balance Sheet as at 31/03/2021

Liabilities Amount Assets Amount
Capital 10,00,000 Furniture 1,16,300
Profit & Loss Less depreciation (23,260) 93,040
Opening balance 1,47,800 Machinery(WN7) 9,39,500
Add: Profit 1,82,690 3,30,490 Less depreciation (88,250) 8,51,250
Unsecured Loan @10% 1,75,000 Stock 1,81,000
Interest on unsecured loan 8,750 Trade Receivables (WN 3) 2,79,000
Trade Payable (WN 5) 1,30,950 Prepaid expenses 20,000
(Advertisement)
Outstanding expenses Rent 12,000 Bank balance 2,32,900
16,57,190 16,57,190

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Working Notes:
1. Sale for the year ended 31.03.2021
Last year Sales 18,60,000
Add growth @20% 3,72,000
Sale for 2020-21 (A) 22,32,000
Cash Sales (25% of Rs. 22,32,000) 5,58,000
Credit sales (22,32,000 – 5,58,000) 16,74,000
Gross profit 30% on sales (B) 6,69,600

2. Purchases for the year ended 31.03.2021

Cost of Sales (A-B) (22,32,000 -6,69,600) 15,62,400
Add Closing stock 1,81,000
17,43,400
Less: Opening stock (1,72,000)
Purchases during the year 15,71,400

3. Debtors as on 31.03.2021
Total credit sales 16,74,000
Debtors 2 months credit (16,74,000 x 2/12) 2,79,000

4. Debtors A/c
Particulars Amount Particulars Amount
To Balance b/d 2,29,600 By Bank (Bal. Fig.) 16,24,600
To Credit Sales 16,74,000 By Balance c/d 2,79,000
19,03,600 19,03,600
5. Creditors as on 31.03.2021
Total credit purchases 15,71,400
Creditors 1 months credit
(15,71,400 x 1/12) 1,30,950

6.
Creditors A/c
Particulars Amount Particulars Amount
To Bank (Bal. Fig.) 14,86,250 By Balance b/d 45,800
To Balance c/d 1,30,950 By Credit Purchases 15,71,400
16,17,200 16,17,200

7.
Machinery A/c
Particulars Amount Particulars Amount
To Balance b/d 8,25,500 By Balance c/d (Bal. Fig.) 9,39,500
To Bank (Purchase) 1,14,000
9,39,500 9,39,500

8. Depreciation on Machinery
Existing Machinery for 1 Year 82,550
(Rs. 8,25,500 x 10%)
New Machinery (Purchased on 1.10.2020)
For 6 months (Rs. 1,14,000 x ½ x 10%) 5,700
88,250

Copyright of these notes is with CA. Nitin Goel

 Furniture A/c
Particulars Amount Particulars Amount
To Balance b/d 1,28,700 By Bank (Sale) 9,500
By P&L A/c (Loss on sale) 2,900
By Balance c/d 1,16,300
1,28,700 1,28,700

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 Commerce
Lecture No.- 01
- For CA Intermediate

Subject Name
Accounts

• Branch Accounting

Nitin Goel
CONCEPT 1A
DEBTORS METHOD
BRANCH ACCOUNT
Particulars Amount Particulars Amount
To Balance b/d By Balance b/d
Stock (At Invoice Price) xx Creditors xx
Debtors xx O/s Expenses xx
Cash in hand xx By Stock Reserve (on Opening stock) xx
Fixed Assets xx By Goods sent to branch (Loading) xx
Prepaid expenses xx By Goods Returned to H.O. (At I.P.) xx
To Goods sent to branch (At I.P.) xx By Bank (Remittances to H.O.)
To Goods returned to H.O. (Loading) xx • Cash Sales xx
To Bank (Cash sent by H.O. to branch xx • Collection from Debtors xx
for expenses/Purchase of fixed assets) • Recovery from Insurance Co. xx
• Expenses paid by branch (xx)
• Assets purchased by branch (xx) xx
To Stock Reserve (on Closing stock) xx By Balance c/d
To Balance c/d Stock (At I.P.) xx
Creditors xx Debtors xx
O/s Expenses xx Cash in hand xx
To Net Profit (Bal. Fig.)* xx Fixed Assets xx
Prepaid expenses xx
By Net Loss (Bal. Fig.)* xx
XXX XXX
*Any one of these

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 The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
Question 1
XYZ is having its Branch at Kolkata. Goods are invoiced to the branch at 20% profit on sale. All
expenses are paid by head office except petty expenses which are met by the Branch Manager.
Prepare branch account in the books of Head Office.
Rs. Rs.
Stock on 1st April 2019 (invoice price) 30,000 Expenses paid by head office:
Sundry Debtors on 1st April, 2019 18,000 Rent 1,800
Petty Cash as on 1st April, 2019 800 Salary 3,200
Office furniture on 1st April, 2019 3,000 Stationery & Printing 800
O/s Salary as on 1 April 2019
st
200
Prepaid Rent as on 1st April 2019 300
Goods invoiced from the head office 1,60,000 Petty expenses paid by the branch 600
(invoice price)
Goods return to Head Office 2,000 Discount allowed to debtors 160
Goods return by debtors 960 Furniture purchased by branch 8,000
From collections (01.10.2019)
Cash received from debtors 60,000 Abnormal Loss (Invoice Price) 5,000
Cash Sales 1,00,000 Insurance claim received 3,000
Credit sales 60,000 Depreciation to be provided on
branch furniture at 10% p.a.
O/s Salary as on 31st March 2020 350
Prepaid Rent as on 31st March 2020 500

Solution
Branch Account
Particulars Amount Particulars Amount
To Balance b/d By Balance b/d
O/s Salary 200
Stock 30,000 By Stock Reserve (Opening) 6,000
{30,000 * 20/100}
Debtors 18,000 By Goods sent to branch (Loading) 32,000
{1,60,000 * 20/100}
Petty Cash 800 By Goods Returned to H.O. 2,000
Office furniture 3,000 By Bank (Remittances)
Prepaid Rent 300 Cash Sales 1,00,000
To Goods sent to branch 1,60,000 Collection from Debtors 60,000
To Goods returned to H.O. 400 Insurance Claim Rec. 3,000
(Loading) {2,000 * 20/100} Purchase of Furniture (8,000) 1,55,000
To Bank: By Balance c/d
Rent 1,800 Stock (W.N.-2) 23,960
Salary 3,200 Debtors (WN-1) 16,880
Stationery & Printing 800 Cash in hand (800 - 600) 200
To Stock Reserve (Closing) 4,792 Office furniture 10,300
{23,960 * 20/100} (3,000-10%)+(8000- 8000*10%*6/12)
To Balance c/d Prepaid Rent 500
O/s Salary 350
To Net Profit (Bal. Fig.) 23,598
2,47,040 2,47,040

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WN-1
Memorandum Debtors A/c
To Balance b/d 18,000 By Bank 60,000
To Credit Sales 60,000 By Discount allowed 160
By Sale Returns 960
By Balance c/d (Bal. Fig) 16,880
78,000 78,000
WN-2
Memorandum Stock A/c
To Balance b/d 30,000 By Goods returned to HO 2,000
To Goods sent to branch 1,60,000 By Cash Sales 1,00,000
To Sales Returns 960 By Credit sales 60,000
By Abnormal Loss 5,000
By Balance c/d (Bal. Fig) 23,960
1,90,960 1,90,960

CONCEPT 1B
FINAL ACCOUNTS METHOD

BRANCH TRADING AND P & L A/C

Particulars Amount Particulars Amount
To Opening stock (at cost) xx By Sales
To Goods sent to branch xx Cash xx
(-) Returns (xx) xx Credit xx
To Direct Expenses xx ( - ) Sales Return (xx) xx
To Gross Profit (Bal. Fig.) xx By Abnormal Loss xx
By Closing stock (at cost) xx
XXX XXX
To Indirect expenses xx By Gross Profit xx
To Abnormal Loss xx By discount received xx
To Net Profit (Bal. Fig.) xx
XXX XXX

Solution of Question 1 by Trading and P&L A/c Method

Branch Trading and P & L A/c
Particulars Amount Particulars Amount
To Opening stock 24,000 By Sales:
(30,000-6,000)
To Goods sent 1,60,000 Cash 1,00,000
(-) Returns (2,000) Credit 60,000
(1,58,000-31,600) 1,26,400 ( - ) Sales Return (960) 1,59,040
By Abnormal Loss
(5,000-1,000) 4,000
To Gross Profit (Bal. Fig.) 31,808 By Closing stock 19,168
(23,960-4,792)
1,82,208 1,82,208
To Discount Allowed 160 By Gross Profit 31,808
To Abnormal Loss 1,000
(4,000-3,000)
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 To Rent (1800+300-500) 1,600
To Salary (3,200-200+350) 3,350
To Stationary & Printing 800
To Depreciation on 700
Furniture (300+400)
To Petty expenses 600
To Net Profit (Bal. Fig.) 23,598
31,808 31,808

CONCEPT 1C
STOCK & DEBTOR SYSTEM

Branch Stock Account (At Invoice Price)

Particulars Amount Particulars Amount
To Balance b/d xx By Goods sent to branch (returns) xx
To Goods sent to branch xx By Bank (Cash Sales) xx
To Branch Debtors A/c (Returns) xx By Branch Debtors A/c (Credit Sale) xx
To Surplus transferred to Branch xx By Shortage/Abnormal Loss xx
adjustment a/c [SP > IP]
By Branch Adjustment (Normal loss) xx
By Balance c/d Xx
XXX XXX

Note In case of Branch Stock Account, if Balance figure is on credit side then:
Case 1: Closing stock not given → then balance figure will be considered as Closing Stock.
Case 2: Closing stock is given → then consider the balance figure to be shortage/abnormal loss and
separate the same accordingly in Branch adjustment & Branch P&L account.

Branch Adjustment Account

Particulars Amount Particulars Amount
To Goods sent to branch-Returns xx By Stock Reserve (Opening stock) xx
(Loading)
To Stock Reserve (Closing stock) xx By Goods sent to branch (Loading) xx
To Abnormal Loss (Loading) xx By Surplus transferred from Branch Xx
Stock A/c
To Branch Stock a/c xx
(Normal loss)
To Branch P&L {Gross Profit} xx
XXX XXX

Branch Expenses Account

Particulars Amount Particulars Amount
To Bank A/c (expenses) xx By Branch P & L A/c xx
[like printing & stationery,
salaries, rent & rates, other
expense, etc.)
XXX XXX

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 Branch P & L Account
Particulars Amount Particulars Amount
To Branch Expenses A/c xx By Branch Adjustment (G.P.) xx
To Branch Debtors A/c By Branch Cash a/c
Discount (Claim received from insurance Co.) xx
Bad Debts xx
To Abnormal Loss (Cost) xx
To Net Profit (Bal. Fig.) xx
XXX XXX

Goods Sent to Branch Account

Particulars Amount Particulars Amount
To Branch stock A/c xx By Branch stock A/c xx
To Branch Adjustment A/c xx By Branch Adjustment A/c xx
To Purchases/Trading A/c xx
(Bal. Fig.)
XXX XXX

Branch Debtors Account

Particulars Amount Particulars Amount
To Balance b/d xx By Branch stock A/c (Returns) xx
To Branch stock A/c (Credit Sales) xx By Branch P&L A/c (Discount, Bad xx
Debts, etc.)
By Bank A/c (Collection) xx
By Balance c/d xx
XXX XXX

Question 2
X & Co. invoices goods to its branch at cost plus 33 1/3%. Prepare ledger accounts as per Stock &
Debtors System as they would appear in the books of head office.
Stock at commencement at Branch at invoice Price 3,60,000
Branch Debtors as on 1st April 2019 2,00,000
Stock at close at Branch at Invoice Price 2,88,000
Goods sent to Branch during the year at invoice price 24,00,000
(including goods invoiced at Rs. 48,000 to Branch on
31.03.2020 but not received by Branch before close of the year).
Return of goods to head office (invoice Price) 1,20,000
Sales return by Debtors to Branch 20,000
Credit Sales at Branch 1,40,000
Invoice value of goods pilfered 24,000
Insurance Claim Received 10,000
Normal loss at Branch due to wastage and deterioration of stock 36,000
(at invoice price)
Cash Sales at Branch 21,60,000
Branch Expenses paid by Head Office 20,000
Discount Allowed 5,000
Collection from Debtors 1,80,000
X & Co. closes its books on 31st March, 2020

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Solution

Branch Stock Account

Particulars Amount Particulars Amount
To Balance b/d 3,60,000 By Goods sent to branch (returns) 1,20,000
To Goods sent to branch 24,00,000 By Bank (Cash Sales) 21,60,000
To Branch Debtors A/c (Sales 20,000 By Branch Debtors A/c (Credit Sale) 1,40,000
Return)
To Surplus (Bal.Fig.) 36,000 By Goods Pilfered (Abnormal loss) 24,000
By Branch Adjustment (Normal Loss) 36,000
By Balance c/d
In Hand 2,88,000
In Transit 48,000
28,16,000 28,16,000

Branch Adjustment Account

Particulars Amount Particulars Amount
To Goods sent to branch-Returns 30,000 By Stock Reserve (Opening stock) 90,000
(Loading) [1,20,000  25%] [3,60,000  25%]
To Goods Pilfered (Loading on 6,000 By Goods sent to branch (Loading) 6,00,000
Abnormal Loss) [24,000  25%] [24,00,000  25%]
To Branch Stock A/c (Normal 36,000 By Surplus 36,000
Loss)
By Stock Reserve (Closing stock) 84,000
[3,36,000  25%]
To Branch P&L {G.P} (Bal. Fig) 5,70,000
7,26,000 7,26,000

Branch Expenses Account

Particulars Amount Particulars Amount
To Bank A/c (expenses) 20,000 By Branch P & L A/c ( Bal. Fig.) 20,000
20,000 20,000

Branch P & L Account

Particulars Amount Particulars Amount
To Goods Pilfered (Cost of 18,000 By Branch Adjustment (G.P.) 5,70,000
Abnormal Loss) [24,000  75%]
To Branch Expenses 20,000 By Bank ( Insurance Claim) 10,000
To Branch Debtors
(Discount Allowed) 5,000
To Net Profit (Bal. Fig.) 5,37,000
5,80,000 5,80,000

Goods Sent to Branch Account

Particulars Amount Particulars Amount
To Branch stock A/c 1,20,000 By Branch stock A/c 24,00,000
To Branch Adjustment A/c 6,00,000 By Branch Adjustment A/c 30,000
To Purchases (Bal. Fig.) 17,10,000
24,30,000 24,30,000
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 Branch Debtors Account
Particulars Amount Particulars Amount
To Balance b/d 2,00,000 By Branch stock A/c (Returns) 20,000
To Branch stock A/c (Credit Sales) 1,40,000 By Branch P&L A/c (Discount) 5,000
By Bank A/c (Collection) 1,80,000
By Balance c/d (Bal. Fig.) 1,35,000
3,40,000 3,40,000

CONCEPT 1D
WHOLESALE PRICE METHOD

TRADING AND P & L A/C

Particulars Head Office Branch Particulars Head Office Branch
By Goods sent to
To Opening stock    
Branch
To Purchases   By Sales  
To Goods Received
  By Closing Stock  
from Head Office
To Gross Profit   
XXX XXX XXX XXX
To Indirect expenses   By Gross Profit  
To Stock Reserve  
To Net Profit  
XXX XXX XXX XXX

Question 3
M/s. Ravi having Head Office at Delhi has a Branch at Kolkata. The Head Office does wholesale trade
only at cost plus 80%. The Goods are sent to Branch at the wholesale price viz. cost plus 80%. The
Branch at Kolkata wholly engaged in retail trade and the goods are sold at cost to Head Office plus
100%.
Following details are furnished for the year ended 31st March, 2020:
Head Office Kolkata Branch
Opening Stock (As on 01.04.2019) 1,25,000 36,000
Purchases 21,50,000 -
Goods sent to Branch (cost to H.O. plus 80%) 7,38,000
Sales 23,79,600 7,30,000
Office Expenses 50,000 4,500
Staff Salary 45,000 8,000

You are required to prepare Trading and Profit & Loss Account of the Head Office and Branch for the
Year ended 31st March, 2020.

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No part of these notes may be reproduced in any manner without his prior permission in writing.
Solution
Trading and P&L Account
Particulars H.O Branch Particulars H.O Branch
To Opening stock 1,25,000 36,000 By Goods sent to branch 7,38,000 -
To Purchases 21,50,000 - By Sales 23,79,600 7,30,000
To Goods received from - 7,38,000 By Closing Stock 5,43,000 1,17,000
HO (WN-1 & 2)
To Gross Profit 13,85,600 73,000
36,60,600 8,47,000 36,60,600 8,47,000
To Office Expenses 50,000 4,500 By Gross Profit 13,85,600 73,000
To Staff Salaries 45,000 8,000 By Stock Reserve 16,000
(Opening) (WN-3)
To Stock Reserve 52,000 -
(Closing) (WN3)
To Net Profit (Bal. Fig.) 12,54,600 60,500
14,01,600 73,000 14,01,600 73,000

WN-1 Calculation of closing stock of Head Office

Opening Stock of Head Office 1,25,000
Goods purchased by Head Office 21,50,000
22,75,000
Less : Cost of goods sold [31,17,600 *100/180] (17,32,000)
Closing Stock 5,43,000
WN-2 Calculation of closing stock of Branch
Opening Stock of Branch 36,000
Goods received from Head Office (At Invoice Value) 7,38,000
Less : Invoice value of goods sold [7,30,000 *180/200] (6,57,000)
Closing Stock 1,17,000
WN-3 Calculation of unrealized profit in branch stock:
Closing Opening
Branch stock 1,17,000 36,000
Profit Included 80% of cost 80% of cost
Unrealized Profit 1,17,000 *80/180 = 52,000 36,000 *80/180 = 16,000

CONCEPT 2
INDEPENDENT BRANCH

Features of Accounting System

1. Branch maintains its entire book of accounts under double entry system.
2. Branch opens in its books a Head Office Account to record all the transactions that takes place
between Head Office & Branch.
3. Head Office maintains a Branch account to record these transactions.
4. Branch prepares its trial balance, Trading & P & L a/c at the end of accounting period & sends copy
of these statements to Head Office for incorporation.
5. After receiving final statement from branch, Head Office reconciles between the two – Branch A/c in
Head Office Books & Head Office A/c in Branch Books.
6. Head Office prepares necessary entries to incorporate Branch trial balance in its books.

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 JOURNAL ENTRIES

S.No. Transaction Books of H.O Books of Branch

Branch A/c Dr. Goods Rec.from HO A/c Dr.
1 Goods Dispatched by Head Office
To Goods Sent to Branch A/c To HO A/c
Goods Sent to Branch A/c Dr. HO A/c Dr.
2 Goods Returned by Branch
To Branch A/c To Goods Rec.from HO A/c
Remittance by Branch to Head Cash & Bank A/c Dr. HO A/c Dr.
3
Office To Branch A/c To Cash & Bank A/c
Head Office sending cash to Branch A/c Dr. Cash & Bank A/c Dr.
4
Branch To Cash & Bank A/c To HO A/c
No Entry Purchases A/c Dr.
5 Direct purchases by Branch
To Cash/Creditors A/c
Purchases by Branch but payment Branch A/c Dr. Purchases A/c Dr.
6
by HO To Cash/Creditors A/c To HO A/c
No Entry Cash / Debtors A/c Dr.
7 Sales by Branch
To Sales A/c
No Entry Cash & Bank A/c Dr.
8 Collection from Debtors by branch
To Debtors A/c
Collection from Debtors directly Cash & Bank A/c Dr. HO A/c Dr.
9
by HO To Branch A/c To Debtors A/c
No Entry Expenses A/c Dr.
10 Expenses incurred at Branch
To Cash & Bank A/c
Expenses of Branch paid by Head Branch A/c Dr. Expenses A/c Dr.
11
Office To Cash & Bank A/c To HO A/c
Head Office expenses charged to Branch A/c Dr. Expenses A/c Dr.
12
Branch (Allocation to Branch) To Expenses A/c To HO A/c
Sending Branch
HO A/c Dr.
Transfer of goods from one branch Receiving Branch A/c Dr. To Goods Rec.from HO A/c
13
to another To Sending Branch A/c Receiving Branch
Goods Rec.from HO A/c Dr.
To HO A/c
Fixed Assets A/c maintained at
14
Branch
No Entry Fixed Assets A/c Dr.
a) Fixed Asset purchased by Branch
To Cash & Bank A/c
Fixed Asset purchased by Branch Branch A/c Dr. Fixed Assets A/c Dr.
b)
paid by Head Office To Cash & Bank A/c To HO A/c
No Entry Depreciation A/c Dr.
c) Depreciation on the above
To Fixed Assets A/c
Fixed Asset A/c maintained at
15
Head Office
Fixed asset purchased at Branch & Branch Fixed Assets A/c Dr. HO A/c Dr.
a)
recorded at Head Office Books To Branch A/c To Cash & Bank A/c
Branch Fixed Asset recorded in Branch Fixed Assets A/c Dr. No Entry
b)
HO books & payment by HO To Cash & Bank A/c
Branch A/c Dr. Depreciation A/c Dr.
c) Depreciation on the above
To Branch Fixed Assets A/c To HO A/c
No Entry Goods in Transit A/c Dr.
16 Goods in Transit
To HO A/c
Cash in Transit A/c Dr. No Entry
17 Cash in Transit
To Branch A/c
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Question 4
Pass necessary Journal Entries (with narration) in the books of branch to rectify or adjust the following:
a) Branch Paid Rs. 20,000 as salary to HO Supervisor and the amount was debited to Salaries Account
by the branch.
b) Head Office Expenses allocated to branch were Rs. 15,000, but these expenditure were not recorded
by the branch.
c) HO collected Rs. 70,000 directly from the customer on branch’s behalf.
d) Branch has sent remittance of Rs. 1,50,000 but the same has not yet been received by HO.
e) Branch assets accounts retained at head office, depreciation charged for the year Rs. 15,000 not
recorded by Branch.
f) Goods dispatched by the Head office amounting to Rs. 50,000, but not received by the Branch till date
of reconciliation.

Solution
Entries in the Books of Branch
S.No. Particulars L.F. Dr. Amount Cr. Amount
(a) Head Office A/c Dr. 20,000
To Salaries A/c 20,000
(Being the rectification of salary paid on behalf of H.O.)
(b) Expenses A/c Dr. 15,000
To Head Office A/c 15,000
(Being the allocated expenditure by the head office
recorded in branch books)
(c) Head Office A/c Dr. 70,000
To Debtors A/c 70,000
(Being the adjustment of collection from branch debtors)
(d) No entry in the books of branch for remittance sent by
branch not received by Head Office till end of year
(e) Depreciation A/c Dr. 15,000
To Head Office A/c 15,000
(Being depreciation of assets accounted for)
(f) Goods in transit A/c Dr. 50,000
To Head Office A/c 50,000
(Being goods sent by Head Office still in-transit)
Note: In entry (d) the cash in transit entry will be passed in the Books of the Head Office.

Question 5
Give the journal entries to rectify or adjust the following in the books of the Head Office:
(a) Goods purchased by branch ₹ 7,500 but payment made by Head Office. The Head Office has,
wrongly debited this amount to its own purchases account.
(b) Branch paid ₹ 6,500 as salary to a visiting Head Office official. The Branch has debited the amount
to salaries account.
(c) Depreciation ₹ 11,250 in respect of Branch Shop whose account is kept in Head Office Books.
(d) Expenses ₹ 5,600 to be charged to the Branch for work done on its behalf by the Head Office.
(e) Goods sent by the Head Office to Branch ₹ 25,000 not yet received by the Branch.

Solution
Entries in the Books of Head Office
S.No. Particulars L.F. Dr. Amount Cr. Amount
(a) Branch A/c Dr. 7,500
To Purchases A/c 7,500
(Being rectification of entry for payment for goods
purchased by branch wrongly debited to Purchase A/c)
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 (b) Salaries A/c Dr. 6,500
To Branch A/c 6,500
(Being salary paid by the branch for H.O. employee)
(c) Branch A/c Dr. 11,250
To Branch Fixed Asset (Shop) A/c 11,250
(Being depreciation of branch fixed assets, whose accounts
are kept by head office )
(d) Branch A/c Dr. 5,600
To Expenses A/c 5,600
(Being expenses charged to the Branch for work done on
its behalf by the Head Office)
(e) No entry in the books of head office for goods sent to
branch not received by branch till end of year
Note: In entry (e) the goods in transit entry will be passed in the Books of the Branch.

Question 6
Show adjustment Journal entry alongwith working notes in the books of Head Office at the end of April,
2020 for incorporation of inter-branch transactions assuming that only Head Office maintains different
branch account in its books.
A. Delhi Branch:
(1) Received goods from Mumbai – Rs. 1,40,000 and Rs. 60,000 from Kolkata.
(2) Sent goods to Chennai – Rs. 1,00,000, Kolkata – Rs. 80,000.
(3) Bill Receivable received – Rs. 80,000 from Chennai.
(4) Acceptances sent to Mumbai – Rs. 1,00,000, Kolkata – Rs. 40,000.
B. Mumbai Branch (apart from the above):
(5) Received goods from Kolkata – Rs. 60,000, Delhi – Rs. 80,000.
(6) Cash sent to Delhi – Rs. 60,000, Kolkata – Rs. 28,000.
C. Chennai Branch (apart from the above):
(7) Received goods from Kolkata – Rs. 1,20,000.
(8) Acceptances and Cash sent to Kolkata – Rs. 80,000 and Rs.40,000 respectively.
D. Kolkata Branch (apart from the above):
(9) Sent goods, cash & Acceptances to Chennai – Rs. 2,60,000

Solution
Journal Entry in the Books of Head Office
Date Particulars L.F. Dr. Amount Cr. Amount
30.04.2020 Mumbai Branch A/c Dr. 12,000
Chennai Branch A/c Dr. 2,80,000
To Delhi Branch A/c 60,000
To Kolkata Branch A/c 2,32,000
(Being adjustment entry passed by HO in respect of
inter-branch transactions for month of April, 2020)
Working Note:
Inter – Branch transactions
Delhi Mumbai Chennai Kolkata
A. Delhi Branch
(1) Received goods 2,00,000 (Dr.) 1,40,000 (Cr.) 60,000 (Cr.)
(2) Sent goods 1,80,000 (Cr.) 1,00,000 (Dr.) 80,000 (Dr.)
(3) Received B/R 80,000 (Dr.) 80,000 (Cr.)
(4) Sent acceptance 1,40,000 (Cr.) 1,00,000 (Dr.) 40,000 (Dr.)
B. Mumbai Branch
(5) Received goods 80,000 (Cr.) 1,40,000 (Dr.) 60,000 (Cr.)
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(6) Sent cash 60,000 (Dr.) 88,000 (Cr.) 28,000 (Dr.)
C. Chennai Branch
(7) Received goods 1,20,000 (Dr.) 1,20,000 (Cr.)
(8) Sent cash & acceptances 1,20,000 (Cr.) 1,20,000 (Dr.)
D. Kolkata Branch
(9) Sent goods 2,60,000 (Dr.) 2,60,000 (Cr.)
60,000 (Cr.) 12,000 (Dr.) 2,80,000 (Dr.) 2,32,000 (Cr.)

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CONCEPT 3
FOREIGN OPERATIONS
IFO It is a foreign operation, the activities of which are integral part of those of the reporting
enterprise. The business of IFO is carried on as if it were an extension of the reporting
enterprises operations.
NIFO It is a foreign operation that is not an integral foreign operation. The business of NIFO is
carried on in substantially independent way by accumulating cash & other monetary items,
incurring expenses, generating income & arranging borrowing in its own local currency.
Conversion Rates
Particulars IFO NIFO
1. Opening Stock Opening rate Opening rate
2. Expenses & Incomes Average rate Average rate
3. Closing Assets & Liabilities Closing rate Closing rate
(Other than Fixed Assets)
4. Fixed Assets (& Depreciation) Actual rate on purchase date Closing rate
Goods received from Head
Value appearing in HO Trial Value appearing in HO Trial
5. Office /Remittance to HO and
Balance Balance
Head Office account balance
Difference in Trial Balance Transferred to Foreign Currency
Transferred to P&L A/c as
6. (Exchange Difference) Translation Reserve A/c in
Exchange Gain/Loss
Balance sheet

Question 7
Omega has a branch at Washington. Its Trial Balance as at 30th September, 2020 is as follows:
Dr. (US $) Cr. (US $)
Plant and machinery 1,20,000 -
Furniture and fixtures 8,000 -
Stock, Oct. 1, 2019 56,000 -
Purchases 2,40,000 -

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 Sales - 4,16,000
Goods from Omega (H.O.) 80,000 -
Wages 2,000 -
Carriage inward 1,000 -
Office Expenses 10,000 -
Head Office A/c - 1,14,000
Trade debtors 24,000 -
Trade creditors - 17,000
Cash at bank 5,000 -
Cash in hand 1,000 -
5,47,000 5,47,000
The following further information is given:
(1) Wages outstanding – $ 1,000.
(2) Depreciate Plant and Machinery and Furniture and Fixtures @ 10 % p.a.
(3) The Head Office sent goods to Branch for Rs. 39,40,000.
(4) The Head Office shows an amount of Rs. 43,00,000 due from Branch.
(5) Stock on 30th September, 2020 – $ 52,000.
(6) There were no in transit items either at the start or at the end of the year.
(7) On September 1, 2018, when fixed assets were purchased, the rate of exchange was Rs. 38 to one $.
On October 1, 2019, the rate was Rs. 39 to one $.
On September 30, 2020, the rate was Rs. 41 to one $.
Average rate during the year was Rs. 40 to one $.
You are asked to prepare:
(a) Trial balance incorporating adjustments given under 1 to 4 above, converting dollars into rupees.
(b) Trading and Profit and Loss Account for the year ended 30th September, 2020 and Balance Sheet as
on that date depicting the profitability and net position of the Branch as would appear in India for
the purpose of incorporating in the main Balance Sheet

Solution
Washington Branch Trial Balance (in Rupees)
As on 30th September, 2020
Dr. Cr. Conversion
Particulars Dr. (in Rs.) Cr. (in Rs.)
(In US $) (in US $) Rate
Plant & Machinery 1,08,000 38 41,04,000
Furniture & Fixtures 7,200 38 2,73,600
Depreciation on
P&M =12,000 12,800 38 4,86,400
F&F = 800
Stock (01/10/19) 56,000 39 21,84,000
Purchases 2,40,000 40 96,00,000
Sales 4,16,000 40 1,66,40,000
Goods from HO (Omega) 80,000 Actual 39,40,000
Wages 2,000
3,000 40 1,20,000
(+) O/S 1,000
Carriages inward 1,000 40 40,000
Office Expenses 10,000 40 4,00,000
Head Office A/c 1,14,000 Actual 43,00,000
Debtors 24,000 41 9,84,000
Creditors 17,000 41 6,97,000
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 Cash at Bank 5,000 41 2,05,000
Cash in hand 1,000 41 41,000
O/s Wages 1,000 41 41,000
Exchange gain (Bal. Fig.) 7,00,000
2,23,78,000 2,23,78,000

Trading and P&L A/c

Particulars Amount Particulars Amount
To Opening stock 21,84,000 By Sales 1,66,40,000
To Goods from Head Office 39,40,000 By Closing Stock (52,000 x 41) 21,32,000
To Purchases 96,00,000
To Carriage inward 40,000
To Wages 1,20,000
To Gross Profit (Bal. Fig.) 28,88,000
1,87,72,000 1,87,72,000
To Depreciation 4,86,400 By Gross Profit 28,88,000
To Office Expenses 4,00,000 By Exchange gain 7,00,000
To Net Profit (Bal. Fig.) 27,01,600
35,88,000 35,88,000

Balance Sheet
Liabilities Amount Assets Amount
Head Office 43,00,000 Plant & Machinery 41,04,000
( + ) NP 27,01,600 70,01,600 Furniture & Fixtures 2,73,600
Creditors 6,97,000 Stock 21,32,000
O/s Wages 41,000 Debtors 9,84,000
Cash at Bank 2,05,000
Cash in Hand 41,000
77,39,600 77,39,600
Note: The above solution has been given assuming that the Washington branch is Integral foreign
operation of the Omega

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 CA INTER ACCOUNTS (Nov 2023 Attempt)
Important Questions List (Other than those covered in Revision Videos/Notes)
Chapter Name Assignment/Class Ques Practice Ques
Hire Purchase 3,8,9,11,16,17,19 3,11,15
Insurance Claims: Loss of Stock 5,7,9,11,18,20 10,13,17,20,21
Insurance Claims: Loss of Profit 4,11,12,19 4
Departmental Accounts 9,12,13,15,18 14,21,22,25
Branch Accounts 5,6,8,9,11,14,18,25 to 29,34,36,37,38 6,11,12,16,21
Investment Accounts 4,6,9,10,11,12,13,14,15,17,18,20
Accounts from Incomplete Records (Single Entry) 4,5,11,12,13,14,16,17,21 18,20,21,22