Problems on Final Accounts- Sole Proprietorship

1. From the following Trial Balance, prepare Trading and Profit and Loss Account for
the year ended 31st March 2004 and a Balance Sheet as on that date
Debit Balance Credit Balance
(Rs.) (Rs.)
Capital and Drawings 5,000 30,000
Purchases and Sales 40,000 60,000
Carriage inwards 200
Carriage outwards 300
Returns 500 1,000
Sundry expenses 400
Rent 400
Bad Debts 600
Printing and Stationery 150
Postage 50
Wages 1,000
B/R and B/P 2,000 3,000
Discount 800 300
Land and Buildings 15,000
Plant and Machinery 6,000
Insurance 500
Debtors and Creditors 10,200 8,000
Salaries 1,300
Investments 3,000
Stock on 01-04-2003 13,000
Cash in hand 200
Cash at Bank 500
Reserve for Bad Debts 300
Furniture 1800
Commission 300
1,02,900 1,02,900

Adjustments
1. Closing Stock Rs.10,000
2. Outstanding expenses; Wages Rs.300, Salaries Rs.500
3. Prepaid expenses; Rent Rs.50, Insurance Rs.80
4. Commission received but not earned Rs.50
5. Interest on Investments outstanding Rs.200
6. Write off further bad debts Rs.200
7. Create 5% Reserve for Bad Debts, 3% Reserve for Discount on Debtors and
2% Reserve for Discount on Creditors
8. Depreciate Machinery by 10% and Furniture by 4%
9. Allow interest on capital at 5%
10 Charge interest on drawings Rs.100
2. The following is the Trial Balance of Shri Om as on 31st March 2001. You are
requested to prepare the Final Accounts for the year 2000-01 after making the
necessary adjustments

Debit Balance Credit Balance

(Rs.) (Rs.)
Sundry Debtors & Creditors 5,00,000 2,00,000
Wages 1,55,000
Carriage outwards 1,10,000
Carriage inwards 50,000
General expenses 70,000
Cash Discounts 20,000
Bad Debts 10,000
Motor Car 2,40,000
Printing and Stationery 15,000
Furniture and Fittings 1,10,000
Advertisement 85,000
Insurance 45,000
Salesmen’s Commission 87,500
Postage and Telephone 57,500
Salaries 1,60,000
Rates and Taxes 25,000
Drawings and Capital A/c 20,000 14,43,000
Purchases and Sales 15,50,000 19,87,500
Stock on 01-04-200 2,50,000
Cash at Bank 60,000
Cash in hand 10,500
36,30,500 36,30,500

Adjustments
1. Closing Stock was valued at Rs.7,25,000
2. A provision for Bad and Doubtful Debts is to be created to the extent of 5%
on Sundry Debtors
3. Depreciate Furniture and Fittings by 10%, Motor Car by 20%
4. Shri Om had withdrawn goods worth Rs.25,000 during the year for personal
use
5. Sales include goods worth Rs.75,000 sent out to Kranti & Company on
approval and remaining unsold on 31st March 2001. The cost of the goods was
Rs.50,000
6. The salesmen are entitled to a commission of 5% on total sales
7. Debtors include Rs.25,000 bad debts
8 Purchases include purchase of Furniture worth Rs.50,000
3. Mr. Fairdealer is the proprietor of a large business firm, Fairdeals. The following
Trial Balance was prepared from his books as on 31st March 2003. You are required
to prepare the Trading and Profit and Loss Account for the year ended 31st March
2003 and draw up the Balance Sheet as on that date

Debit Balance Credit Balance

(Rs.) (Rs.)
Land and Building 40,000
Purchases 3,26,700
Return Inwards 2,500
Travelling expenses 6,900
Printing and Stationery 1,600
Cash at Bank 30,795
Discount allowed 1,800
Misc. Expenses 12,620
Sundry Debtors 64,000
Insurance 6,000
Postage 800
Furniture 8,000
Cash in hand 5,900
Motor Car 16,000
Investments (market value Rs.14,000) 12,000
Drawings 10,000
Bills Receivable 4,800
Stock on 01-04-2002 63,680
Interest on Bank Loan 3,000
Salaries (includes advance Rs.1500) 22,000
Establishment expenses 1,595
Carriage inwards 3,000
Advertisements 16,000
Sales 4,68,100
Income from Investments 990
12% Bank Loan 40,000
Capital A/c 80,000
Bills Payable 2,600
Sundry Creditors 63,100
Return Outwards 3,700
Discount Received 1,200
6,59,690 6,59,690
 Adjustments
1. Closing Stock Rs.1,20,000
2. Sundry Debtors include a sum of Rs.3,000 due from Bharat and Sundry
Creditors include a sum of Rs.4,000 due to Bharat
3. Reserve for Bad Debts is to be maintained at 10% on Sundry Debtors and
Reserve for Discount on Debtors is to be created at 5%
4. Goods worth Rs.10,000 destroyed by fire on 25-02-2003 in respect of which
the insurance company admits claim for only Rs.7,500
5. The manager of the firm is entitled to a commission of 10% of Net Profit
calculated before charging such commission
6. 3/4th of the Advertisement expense is to be carried forward
7. 2 ½ % of the Net Profit is to be carried to Reserve Fund
8 Depreciate Land and Buildings at 2 ½ % , Furniture at 10% and Motor Car at
20%

Problems on Final Accounts- Company Final Accounts

1.Alpha Manufacturing Company Ltd, Mangalore, was registered with a nominal capital of Rs.6,
00,000 in equity shares of Rs.10 each. The following is the list of balances extracted from its
books on 31st March 2007.
Particulars Amount
Furniture 7200
Calls in arrears 7500
Plant & machinery 3,30,000
Business Premises 3,00,000
Interim Dividend paid 37,500
Freight & carriage 13,115
Salaries 14500
Director’s Fees 5725
Bad Debts 2110
Debenture interest paid 9000
Stock on 1/4/06 75,000
Sundry Debtors 87,000
Goodwill 25,000
Cash in hand 750
Cash at Bank 39,900
Purchases 1,85,000
Preliminary expenses 5000
Wages 84,865
General expenses 6835
Advertising 10,000
Subscribed, Called up and 4,00,000
Paid up capital
6% Debentures 3,00,000
Profit & loss a/c (Cr) 14,500
Bills payable 38,000
Sundry Creditors 50,000
Sales 4,15,000
General Reserve 25,000
Bad debts Reserve( 1/4/06) 3500

Prepare Trading and Profit and Loss Account and Balance Sheet after taking into account the
following adjustments
(i) Depreciate Plant & Machinery by 5%, Business premises by2%, and write off Rs.1200 on
furniture
ii) Write off Rs.1000 from preliminary expenses
iii) Provide for half year’s debenture interest
iv) The reserve for bad debts on 31st March 2007 should be equal to 1% on sales
v) Director’s fees are outstanding to the extent of Rs.275 and salaries Rs.500
vi) Goods of the value of Rs.1500 were distributed as free samples during the year, but no entry
in this respect has been made
vii) The stock on 31st March 2007 was valued at Rs.95, 000

2. The following is the trial balance of Bharath Company Ltd. as on 31-12-2007.

Particulars Debit Credit
Paid Up Capital 1,00,000
Reserve Fund 17,000
Provident Fund 3,000
Good Will 15,000
Machinery 25,000
Livestock 5,000
Buildings 37,000
8% Mortgage Debentures 30,000
Sundry Debtors 45,000
Sundry Creditors 16,000
Opening Stock of Raw Materials 30,000
Opening Stock of Manufactured Goods 16,000
Bills Receivable 4,000
Advance Payment of Income Tax 4,000
Bills Payable 5,490
Cash at bank 11,000
Purchases of Raw Material 88,000
Sales 1,83,700
Returns 2,400 1,000
Discount 2,000 1,000
Investments 8,000
Manufacturing Wages 32,000
Carriage Inwards 1,000
Factory Expenses 14,000
Office Salary 6,500
 Office Furniture 5,000
Preliminary Expenses 5,000
Bad Debts 1,500
Provident Fund Contribution 500
Director’s Fee 1,200
Interest on Debentures 1,200
Dividend on Investments 480
Profit and Loss appropriation account (1-1-2007) 2,630
Total 3,60,300 3,60,300

Prepare trading and profit & Loss account for the year ended 31 st December 2007 and balance
sheet as on that date after considering the following adjustments.
(1) The company has an authorised capital of Rs.2, 00, 00 divided into 2000 equity shares of
Rs.100 each of which 1000 shares was subscribed
(2) Stock on 31-12-2007 consisted of Raw Materials worth Rs.24, 000 and manufactured goods
worth Rs.14, 380
(3) Write off 50% of preliminary expenses
(4) Interest on mortgage debentures is paid for 6 months up to 30-06-2007
(5) Sundry debtors include Rs.1000 advances for expenses
(6) Provide depreciation on machinery at 10%, buildings at 5% and office furniture at 6%
(7) Provide Rs.1, 350 for doubtful debts
(8) Make provision for taxation Rs.4, 000 and transfer to reserve fund Rs.2, 000
(9) The director’s have proposes a dividend of 12% on paid up capital

3. The following are the balances of Basket Options Ltd as on 31st March 2004. Prepare
Final Accounts of the company

Debit Balance Credit Balance

(Rs.) (Rs.)
Buildings 30,72,000
Machinery 33,00,000
Stock on 01-04-03 7,50,000
Debtors 8,70,000
Share Capital 40,00,000
(4,00,000 Equity Shares of Rs.10 each)
12 % Debentures 30,00,000
P/L Account 2,62,500
Bills Payable 3,70,000
Goodwill 2,50,000
Cash and Bank 4,06,500
Calls in Arrear 75,000
Interim Dividend paid 3,92,500
Purchases 18,50,000
Preliminary expenses 50,000
Wages 9,79,800
Creditors 4,00,000
Sales 41,50,000
 General Reserve 2,50,000
Provision for Bad Debts 35,000
General expenses 68,350
Salaries 2,02,250
Bad Debts 21,100
Debenture Interest paid 1,80,000

1,24,67,500 1,24,67,500

Additional Information
1. Depreciate Buildings by 5% and Machinery by 15%
2. Write off Rs.5,000 from Preliminary expenses
3. Provide for Debenture interest due
4. Create 5% Provision for Bad Debts
5. Provide for Income Tax at 36%
6. Stock on 31st March 2004 was valued at Rs.9,50,000
7. A claim of Rs.25,000 for workmen’s compensation is being disputed by the
company

4. The following balances have been extracted from the books of ABC Ltd. as on 31st
March 2000. You are require to prepare Profit and Loss A/c and Balance Sheet for the
year 1999-2000

Debit Balance Credit Balance

(Rs.) (Rs.)
Cash in hand 3,800
Cash at Bank 12,600
Bills Receivable 4,000
Investment 1,000
Security Deposit 400
Advances 8,500
Debtors 75,000
Land and Building 1,00,000
Furniture 4,500
Motor Car 25,000
Closing Stock 95,000
Establishment expenses 35,200
Repairs and renewals 2,600
Motor car expenses 4,200
Traveling and conveyance 1,600
Printing and stationery 900
 Telephone 1,200
Debenture interest 2,025
Commission on sales 3,200
Advertisement 3,500
MDs Remuneration 3,600
Director’s fees 2,000
Share Capital 1,00,000
9% Debenture 30,000
Creditors 29,000
Profit and Loss A/c 2,000
Secured loan from Bank against Stock 50,000
Gross Profit 1,75,000
Bills Payable 3,400
Misc. Receipts 425
3,89,825 3,89,825

Additional Information
1. The authorized capital of the company is 20,000 equity shares of Rs.10 each
2. Depreciate Buildings at 5%, Furniture at 15% and Motor car at 25%
3. Sundry debtors include Rs.10,000 due for more than six months
4. Advertisement charges include unused materials of Rs.1,500
5. Investments represent purchase of 200 equity shares of Rs.10 each, Rs.5 per
share called-up and paid-up
6. The MD is entitled to 5% of the annual net profit as his remuneration. The net
profits for this purpose is without charging income tax and his remuneration
7. Provision for income tax is to be made for the year Rs.65,000
8. Transfer Rs.20,000 to General reserve
9. The directors proposed a dividend of 12% on the paid-up capital
10. Debentures are not secured

.
5. The authorised capital of Good Luck Company Ltd. is Rs.3, 00,000 consisting of 1500, 6%
preference shares of Rs.100 each and 15,000 equity shares of Rs.10 each Following are the
balances as on 31-12-2008
Particulars Debit Credit
Investment in Shares 25,000
Purchases 2,65,545
Packing Charges 9,000
Delivery Charges 17,700
Stock on 1-1-2008 72,600
Wages 15,000
Salaries 9,000
Director’s Fee 2,000
Rates and Taxes 7,750
Carriage Inwards 4,100
Dividend for 2007 6,000
Preference Dividend for half 3,000
year up to 30-06-2008
Machinery 12,500
Discount on issue of 1,000
Debentures
Preliminary Expenses 500
Bills Receivable 20,750
Interest on bank loan 2,900
Debenture Interest for half 1,875
year up to 30-06-2008
Sundry Debtors 25,050
Buildings 1,75,000
Furniture (Cost Rs.25,000) 17,500
Technical Know-how at Cost 75,000
Cash 2,075
Sundry Creditors 43,925
Preference Share Capital 1,00,000
Equity Share Capital 1,00,000
5% Mortgage Debentures 75,000
Dividend and Interest 22,420
Profit and Loss Account 14,250
Sales 3,40,250
Bank Loan 75,000

Prepare trading and Profit and Loss account for the year ended 31-12-2008 and the balance sheet
as on date after taking into account the following adjustments
(a) Closing Stock Rs.71,250
(b) Wages include Rs.1,000 incurred for installation of machinery
(c) Purchases include goods worth Rs.2,500 distributed freely among customers
(d) Depreciate furniture at 10% on original cost
(e) Write off half of the discount on issue of debentures
(f) Provide for the remaining half year’s preference dividend
(g) Technical Know-how is to be written down by Rs.5,000
(h) Provide for taxation Rs.5,000

6. From the following Trial Balance of Highland company Ltd as on 31 st Dec 2009. Prepare Final
accounts
Particulars Debit Credit
Cash at bank 28000
Machinery 20000
15% Bonds 10000
Interest on investments( 80% 1200
net)
Sinking fund investments 25000
Depreciation
Machinery 4000
Buildings 1600
Buildings 80,000
Interest on debentures( till 2000
30/6/2009)
Debtors & creditors 25000 28000
Purchases & sales 64,400 1,24,000
Sinking Fund 25000
Share capital ( Rs10 per share) 1,00,000
Interim dividend 5000
Unclaimed Dividend 200
Taxation provision 12,000
P/L account balance 6000
Director’s fee 2000
Carriage on purchases 2500
Wages 18000
Debenture discount 1500
Interest on Sinking fund 800
investment
Wages outstanding 8000
Stock 1/1/2009 12,000
Goodwill 30,000
Taxes paid 10,000
Office expenses 6000
Salary ( for 11 months) 9900
Bad debts 1300
5% debentures 30,000
General Reserve 32,300
Transfer fees 1200
Provision for bad debts 1500
3,64,200 3,64,200

Adjustments

1. Make provision for doubtful debts at 5% on debtors

2. Debtors include goods sent on approval basis Rs.5000 so as to earn a profit of 20% on sale
3. Closing stock at cost price Rs.25,000 ( estimated market price is Rs.22,500)
4. Transfer to sinking Fund Rs.2000
5. Write off 50% of discount on debentures
6. Provide fro taxation Rs.10,000
7. Tax liability for the accounting year 31/12/2008 is fixed at Rs.9000

7. The authorised capital of Benz Ltd is Rs.6,00,000 consisting of 3000, 6% preference

shares of Rs.100 each and 30000 equity shares of Rs.10 each. The balances appearing in
the books as of 31st December 2009 were shown as below
Particulars Debit Credit
Investment in shares @ cost 50000
 Purchases 490500
Packing Charges 18000
Delivery Expenses 35400
Stock on 1-1-2009 145200
Salaries and Wages 52000
Rent & Rates 17500
Freight and Carriage 8200
Final Dividend for 2008 12000
Preference Dividend: half year upto 31-06-2009 5000
Discount on issue of debentures 2000
Preliminary expenses 1000
Bills Receivable 41500
Interest on Bank Overdraft 7800
Debenture Interest: half year up to 31-06-2009 3750
Debtors and Creditors 50100 87850
Free Hold property at cost 350000
Furniture at cost; less depreciation of Rs.15000 35000
6% Preference Share Capital 200000
Equity Share Capital 200000
5% Mortgage Debentures secured on free hold properties 150000
Taxation Advance for 2009 15000
Dividends and Interest 4250
P&L Account 28500
Sales (Net) 670350
Bank Overdraft 150000
Technical Know-how at cost 150000
TOTAL 1490950 1490950
You are required to prepare final accounts for the year ended on 31 st December 2009 after taking
into account the following adjustments:
(a) Closing stocks was valued at Rs.142500
(b) Purchases include Rs.5000 worth of goods and articles for distribution among valued
customers
(c) Salaries and wages include Rs.2000 being wages incurred for installation of electrical fittings
in the factory. Electrical fittings have been recorded under furniture
(d) Bills receivable include Rs.1500 being dishonoured bills, 50% of Rs.1500 has been
considered to be irrecoverable.
(e) Bills of Rs.2000 maturing after December 2009 were discounted
(f) Charge depreciation at 20% on furniture
(g) Write off discount on debentures, Rs.1000
(h) Dividend @ 5% proposed on equity share capital
(i) Provision for taxation Rs.8000
(j) Technical Know-how is to be written off over a period of 15 years
(k) Salaries and wages include Rs.10000 being director’s remuneration