Illustration -5

From the following adjusted Trial Balance, prepared after Trading and Profit
& Loss Accounts are drafted, prepare Balance Sheet of Ramagopalan as at 31 st
December 1996. Under.
(a) Permanency order and (b) Liquidity order.
Dr.
Rs.
Cr.
Rs.
Capital - 1,00,000
Closing Stock 40,000 -
Fixed Assets less depreciation Rs.16,000 72,000 -
Sundry Debtors 1,00,000 -
Provision for Bad debts - 5,000
Profit & Loss Account - 42,000
Sundry Creditors - 80,000
Liabilities for expenses - 11,000
Drawings 6,000
Cash & Bank 20,000
2,38,000 2,38,000
Solution
(a) Permanency Order:-
Balance Sheet of Ramagopalan as on 31-12-96
Liabilities Rs. Assets Rs.
Capital opening bal. 1,00,000 Fixed Assets 88,00
Add: Net Profit 42,000 Less: Depreciation 16,000
1,42,000 Stock
Less: Drawing 6,000 1,36,00 Debtors 1,00,000
Sundry Creditors 80,000 Less: Provision for
Bad debts
5,000 95,000
Liabilities for expenses 11,000 Cash & Bank 20,000
2,27,000 2,27,000
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112
(b) Liquidity Order:
Balance Sheet of Ramagopalan as on 31-12-96
Liabilities Rs. Assets Rs.
Liabilities for expenses 11,000 Cash & Bank 20,000
Sundry Creditors 80,000 Debtors 1,00,000
Capital A/c Less: Provision for
Bad debts 5,000 95,000
Opening Balance: 1,00,000 Stock 40,000
Add: Net Profit 42,000 Fixed Assets 88,000
1,42,000 Less: Depreciation 16,000 72,000
Less: Drawings 6,000 1,36,000
2,27,000 2,27,000
9.8 ADJUSTMENTS
On preparing Trading and profit and Loss Account, adjustments re necessary
when accrual basis of accounting is followed. The following are the items for which
adjustments are usually required.
1. Closing Stock
This is the stock which remained unsold in the preceding accounting period.
Closing stock A/c Dr.
To Trading A/c
Trading A/c Balance Sheet
2. Outstanding Expenses
Outstanding expenses refer to those expenses which have become due during
the accounting period for which the final accounts have been preared, but have not yet
been paid.
Expenses A/c Dr
To Outstanding expenses A/c
Trading A/c Balance Sheet
By Closing stock Closing stock
To Wages
(+) O/s wages
O/S wages
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