Chapter 18 & 19 : Financial Statement of Sole Proprietorship & Adjustments in Final Accounts

I. Very Short/ Multiple Choice Questions:-

1. Cost of Goods sold Rs 6,69,600, Sales Rs7,44,000, Closing Stock Rs 50,400 Gross profit for the year is
(a) Rs 1,24,800 (b) Rs 74,400
(c) Rs 5,25,000 (d) None of these.
2. Opening stock Rs1,00,000, Sales Rs 5,00,000, Gross Profit @ 25% on sales, Purchases RS 5,00,000,
Closing stock is
(a) Rs 1,25,000 (b) Rs 2,25,000
(c) Rs 3,00,000 (d) Rs 3,25,000

3. Wages and Salaries account is shown in

(a) Trading Account (b) Profit &Loss Account (c) Balance sheet (d) None of these.

4. Closing stock given as adjustment is shown in

$$$
(a) Trading Account (b) Balance sheet (c) Profit and Loss Account (d) Both (a) and (b)
5. Outstanding income is
a) an asset (b) a liability (c) an expense (d) All of these.

II. State whether the following statements are true or false:

6. Insurance claim received for loss of goods is a revenue receipt.
7. Purchase of machinery for production is a revenue receipt.
8. Interest received on loan is an income for the business.
9. Income tax paid on behalf of the proprietor is debited to the Profit & Loss Account.
10. Closing stock if it appears in the Trail Balance, it is taken to Trading Account.
III. Short Answer Type Questions / Fill in the blanks :
11. What is a Trading Account and why is it prepared?
12. Explain the object of preparing Profit & loss Account.
13. What is meant by Adjustment Entry.
14. Indirect Expenses are debited to________.
15 Unearned income means income received in _________ .
III. Higher Order Thinking Skills (HOTS) /Long Answer Type Question: -
16. From the following balances prepare Final Accounts of M/S Raja for the year ended 31 March 2019:

Salary Rs 5400 , Insurance Rs 2500, Cash Rs 400 , Purchases 84170 , Rent Received Rs 3150, Drawings Rs
2100, Bills Payable Rs 3900, Debtors 38080, Opening Stock Rs 29500, Bank overdraft Rs 9700, Carriage Rs
2200, Creditors Rs 4200, Trade Expenses Rs 4900, Sales return Rs 4700, Machinery Rs 12000, Wages 45000,
Sales Rs 147200, Purchase Return Rs 3900, Capital Rs 58900, Closing stock Rs 36200.

17. From the following balances prepare Final Accounts of M/S Mangal for the year ended 31 March 2018 :

Opening stock Rs 12500, Bill Recievable Rs 2000, Sales Rs 70,000, Purchases Rs 37500, Creditors Rs 20000,
Salaries Rs 3850, Insurance Rs 200, Debtors Rs 32500, Carriage Rs 1450, Commission Rs 750, Interest Rs 900,
Printing Rs 250, Bills Payable Rs 3150, Sales return Rs 1300, Purchase return Rs 500 , Bank Rs 5250, Rent Rs
1300, Furniture Rs 1000, Capital Rs 7100, Closing stock Rs 15000.
18. (Without GST). From the following Trial Balance of Ram Chandra on 31 st March, 2018, prepare Trading
and Profit and Loss Account and Balance Sheet:

TRIAL BALANCE

As on 31st March, 2018

Particulars Dr. (Rs.) Cr. (Rs.)

Capital - 1,50,000
Stock on 1st April, 2017 30,000 -
Cash at Bank 10,000 -
Cash in Hand 5,000 -
Machinery 1,00,000 -
Furniture 13,000 -
Purchase 2,00,000 -
Wages 50,000 -
Carriage Inwards 33,000 -
Salaries 70,000 -
Discount Allowed 4,000 -
Discount Received - 5,000
Advertising 50,000 -
Office Expenses 40,000 -
Sales - 5,00,000
Sundry Debtors 90,000 -
Sundry Creditors - 40,000
Total 6,95,000 6,95,000
Value of Closing Stock as on 31st March, 2018 was Rs. 50,000.

19. From the following Trial Balance of Rajan, prepare Trading and Profit and Loss Account for the year
ended 31st March, 2019 and Balance Sheet as at that date after taking into account the adjustments given
below
: TRIAL BALANCE as at 31st March, 2019

Particulars Dr. (Rs.) Cr. (Rs.)

Rajan’s Capital - 2,90,000
Rajan’s Drawings 7,600 -
Purchases 89,000 -
Sales - 1,50,000
Sales Return 2,800 -
Purchases Return - 4,500
Stock on 1st April, 2018 12,000 -
Wages 8,000 -
Building 2,20,000 -
Freight and Carriage Inwards 20,000 -
Trade Expenses 2,000 -
Advertisement 2,400 -
Interest - 3,500
Taxes and Insurance 1,300 -
Debtors 65,000 -
Creditors - 12,000
Bills Receivable 15,000 -
Bills Payable - 7,000
Cash at Bank 12,000 -
Cash in Hand 1,900 -
Salaries 8,000 -
Total 4,67,000 4,67,000
Adjustments:(a) Stock at cost on 31st March, 2019 was Rs. 18,000. Its Net Realisable Value (Market Value)
was Rs. 15,000;(b) Insurance of Rs. 400 was prepaid;(c) Outstanding liabilities were: Salaries Rs. 2,000;
Taxes Rs. 1,300; and (d) Depreciate Building at 2% p.a.
20.Following are the balances taken from Trial Balance of Komal Enterprises on 31st March, 2019:

Debit Balances (Rs.) Debit Balances (Rs.)

Drawings 3,000 Rates & insurance 2,800
Debtors 20,100 Advertising 3,200
Interest on loan 300 General expenses 3,400
Cash in hand 2,000 Bills receivable 6,800
Stock(01-04-2018) 6,800 Credit balances (Rs.)
Motor vehicles 10,000 Capital 28,000
Cash at Bank 3,500 Creditors 10,400
Land and building 12,000 Loan 10,000
Bad debts 500 Sales 1,00,200
Purchases 66,000 Purchases return 800
Sales returns 7,800 Discounts 500
Carriage outwards 2,400 Bills payable 2,600
Carriage inwards 3,000 Rent received 900
Salaries 9,000 Bank Overdraft 9,200
Prepare the Trading and Profit and Loss A/c for the year ended 31st March 2019 and Balance Sheet as on
that date after making adjustment for the following matters:

(a) Depreciate Land and Building at 5% and Motor vehicles at 20%.

(b) Interest on loan at 6% p.a. is unpaid for six months.

(c) Salaries amounting to Rs. 1,000 were due at the end of the year.

(d) Prepaid insurance amounted to Rs. 300.

(e) Stock in hand on 31st March 2019 was valued at Rs. 6,000.