CACell Intermediate Account Full Book-201-250

SINGLE ENTRY SYSTEM 10.
15
Prepare final accounts for the year ending 31st December, 1992 after providing depreciation at 10
percent on machinery and furniture and ` 800 against doubtful debts.
Solution: Trading and Profit & Loss a/c

For the year ended 31st March 2005
Particular Amounts(`) Particular Amounts(`)
To Opening Stock 3,900 By Sales (11,000 + 51,100) 62,100
To Purchase By Closing Stock 5,700
- Cash 12,000
- Credit 37,100 49,100
To Gross Profit 14,800
67,800 67,800
To Salaries 6,500 By Gross Profit 14,800
To General Expenses 2,500 By interest on investments 200
To Rent & Taxes 1,500
To Depreciation (750 + 120) 870
To Provision for D.D 800
To Net Profit 2,830
15,000 15,000
Balance Sheet
As at 31st March 2005
Liabilities Amounts(`) Assets Amounts(`)
Capital 29,100 Cash in Hand 500
Add: Add Cap 6,000 Bank Balance 6,400
Add: NP 2,830 Debtors 17,600
Less: Drawing 3,600 34,330 Less: Provision 800 16,800
Creditors 7,900 Stock 5,700
Machinery (7,500 – 750) 6,750
Furniture (1,200 – 120) 1,080
Investments 5,000
42,230 42,230
Balance Sheet
Capital (b/f) 29,100 Cash in Hand
Creditors 5,800 Bank Balance 2,800
Debtors 14,500
Stock 3,900
Machinery 7,500
Furniture 1,200
Investments 5,000
34,900 34,900
CA IQTIDAR A. MALIK [B.COM, ACA, CS]

SINGLE ENTRY SYSTEM 10. 16
Debtor’s a/c
To balance b/d 14,500 By Bank 48,000
To Sales(b/f) 51,100 By Balance c/d 17,600
65,600 65,600
Creditor’s a/c
To Bank 35,000 By Balance b/d 5,800
To balance c/d 7,900 By Purchase(b/f) 37,100
42,900 42,900
QUESTION 5.
Mr. X runs a retail business. Suddenly he finds on 31.03.2006 that his Cash and Bank balance
Have reduced considerably. He provides you the following information:
(i) Balances 31.03.2005 31.03.2006
` `
Sundry Debtors 35,400 58,800
Sundry Creditors 84,400 22,400
Cash at Bank 1,08,400 2,500
Cash in hand 10,400 500
Rent (Outstanding for one month) 2,400 3,000
Stock 11,400 6,400
Electricity and Telephone bills – outstanding - 6,400
(ii) Bank Pass – book reveals the followings: 31.03.2006
Total Deposits 10.34,000
Withdrawals:
Creditors 8,90,000
Professional charges 34,000
Furniture & Fixtures (acquired on 1.10.2005) 54,000
Proprietor’s drawings 1,61,900
(iii) Rent has been increased from January, 2006
(i) Mr. X deposited all cash sales and collections from debtors after meeting wages, shop
expenses, rent, and electricity and telephone charges.
(ii) Mr. X made all purchases on credit.
(iii) His credit sales during the year amounts to 9,00,000.
(iv) He incurred ` 6,500 per month towards wages.
(v) He incurred following expenses:
a. Electricity and telephone charges ` 24,000 (paid)
b. Shop expenses ` 18,000 (paid)
(vi) Charges depreciation on furniture and fixtures @ 10% p.a.
Finalize the accounts of Mr. X and compute his profit for the year ended 31.03.2006. Prepare his
statement of affairs and reconcile the profit and capital balance.
Ans. GP ` 2,86,500, Net Profit 1, 70,800, B/S 1, 19,500

QUESTION 6.
Mr. Y keeps his books under single entry system. On 31st March, his Balance Sheet was as
follows:
Liabilities ` Assets `
Capital or Mr. Y 4, 50,000 Fixed assets 2, 25,000
Creditors 8, 70,000 Stock 9, 15,000
Bills payable 1, 87,500 Debtors 2, 22,000
Expenses outstanding 67,500 Bills receivable 90,000
Prepaid insurance 3,000
Cash/Bank balance 1, 20,000
15,75,000 15,75,000
(i) Following are the summary of cash and bank transaction for the year ended 31st March,
2007:
`
Cash sales 1,10,70,000
Collection from debtors 22,65,000
Payments to creditors 1,12,60,500
Paid for bills payable 12,22,500
Sundry expenses paid 9,31,050
Drawings for domestic expenses by Mr. Y 3,60,000
Cash and bank balance as on 31.3.2007 1,90,950
(ii) Following further details are furnished:

Gross profit on sales @ 10%
Bills receivable from debtors during the year 6,52,500
Discount allowed to debtors 54,000
Discount received from creditors 42,000
Bills receivable endorsed to creditors 22,500
Annual fire insurance premium paid
(This is paid on 1st August every year) 9,000
Depreciate fixed assets @ 10%
(iii) Balances as on 31.3.2007 are given below:

`
Stock in hand 9,75,000
Debtors 2,28,000
Bills receivable 2,10,000
Outstanding expenses 7,500
Prepare Trading Profit and Loss Account for the year ended 31 st March, 2007 and Balance Sheet
On that Date.


To Opening Stock 9,15,000 By Sales 1,40,47,500
To Purchase(b/f) 1,27,02,750 (1,10,70,000 +29,77,500)
To Gross Profit(10% of 14,04,750 By Closing Stock 9,75,000
Sales)
1,50,22,500 1,50,22,500
To Depreciation 22,500 By Gross Profit 14,04,750
To Discount Allowed 54,000 By Discount Received 42,000
To Expenses 8,71,050
To Net Profit 4,99,200
14,46,750 14,46,750
Balance Sheet
Capital 4,50,000 Fixed Assets 2,25,000
Add: NP 4,99,200 Less: Dep. @ 10% 22,500 2,02,500
Less: Drawing 3,60,000 5,89,200 Bank Balance 1,90,950
Creditors 12,12,750 Debtors 2,28,000
Expenses o/s 7,500 B/R 2,10,000
Stock 9,75,000
Prepaid Insurance 3,000
18,09,450 18,09,450
Debtor’s a/c
To balance b/d 2,22,000 By Bank 22,65,000
To Sales(b/f) 29,77,500 By B/R 6,52,500
By Discount Allowed 54,000
By Balance c/d 2,28,000
31,99,500 31,99,500
Bill Receivable a/c
To balance b/d 90,000 By Bank(b/f) 5,10,000
To Debtors 6,52,500 By Creditors 22,500
7,42,500 7,42,500

Creditor’s a/c
To Bank 1,12,60,500 By Balance b/d 8,70,000
To Discount Received 42,000 By Purchase(b/f) 1,27,02,750
To B/R 22,500
To B/P 10,35,000
To balance c/d(b/f) 12,12,750
1,35,72,750 1,35,72,750
Bill Payable a/c
To Bank 12,22,500 By Balance b/d 1,87,500
To balance c/d - By Creditors (b/f) 10,35,000
12,22,500 12,22,500
Expenses a/c
To Balance b/d By Balance b/d (o/s) 67,500
(Prep Insurance) 3,000 By P&L a/c (b/f) 8,71,050
To Bank 9,31,050 By Balance c/d (Prep Insurance) 3,000
To balance c/d 7,500
9,41,550 9,41,550
Bank a/c
To balance b/d 1,20,000 By Creditors 1,12,60,500
To Cash Sales 1,10,70,000 By Bill Payable 12,22,500
To Debtors 22,65,000 By Expenses Paid 9,31,050
To B/R 5,10,000 (including insurance premium)
By Drawing 3,60,000
1,39,65,000 1,39,65,000

QUESTION 7.
Ram carried on business as retail merchant. He has not maintain regular account books
However, he Always maintain ` 10000 in cash and deposited the balance into the bank account.
He informs you that he has sold goods at a profit of 25% on sales.
Following information is given to you:
Assets and liabilities As on 1.4.2007 As on 31.3.2008
Cash in hand 10000 10000
Sundry creditors 40000 90000
Cash at Bank 50000 (Cr) 80000(Dr)
Sundry debtors 100000 350000
Stock in trade 280000 ?
Analyses of his bank pass-book reveals are following information:

(a) Payment to creditors ` 700000.
(b) Payment for business expenses ` 120000.
(c) Receipts from debtors 750000
(d) Loan from Laxman ` 10000 taken on 1.10.2007 at 10% per annum.
(e) Cash deposited in the bank ` 100000
He informs you that he paid creditors for goods ` 20000 in cash and salaries ` 40000 in cash. He
has drawn ` 80000 in cash for expenses.
During the year Ram had not introduced any additional capital. Surplus Cash if any, to be taken as
cash sales.
Prepare:
i. Trading and Profit and Loss Account for the year ended 31.3.2008
ii. Balance Sheet as at 31st March, 2008.
Working note should from part of your answer.

To Opening Stock 2,80,000 By Sales 13,30,000
To Purchase 7,70,000 (10,00,000 + 3,30,000)
To Gross Profit(25% of Sales) 3,32,500 By Closing Stock(b/f) 52,500
13,82,500 13,82,500
To Salaries 40,000 By Gross Profit 3,32,500
To O/s Interest 500
To Net Profit 92,000
3,32,500 3,32,500

Balance Sheet
Capital 3,00,000 Bank Balance 80,000
Add: NP 92,000 3,92,000 Cash In Hand 10,000
Creditors 90,000 Debtors 3,50,000
Loan From Laxman 10,000 Stock 52,500
Interest o/s on above 500
4,92,500 4,92,500
Balance Sheet
Capital (b/f) 3,00,000 Cash In Hand 10,000
Bank O/D 50,000 Stock 2,80,000
3,90,000 3,90,000
Debtor’s a/c
To Sales(b/f) 10,00,000 By Balance c/d 3,50,000
11,00,000 11,00,000
Creditor’s a/c
To Bank 7,00,000 By Balance b/d 40,000
To Cash 20,000 By Purchase(b/f) 7,70,000
8,10,000 8,10,000
Cash Book
Particular Cash (`) Bank (`) Particular Cash (`) Bank (`)
To balance b/d 10,000 By Balance b/d 50,000
To Debtors 7,50,000 By Creditors 20,000 7,00,000
To loan 10,000 By Expenses Paid 80,000 1,20,000
To Cash 1,00,000 By Salaries 40,000
To Bank 80,000 By bank 2,70,000
To Cash(b/f) 1,70,000 By Cash 80,000
To Sales(b/f) 3,30,000 By Balance c/d 10,000 80,000
4,20,000 10,30,000 4,20,000 10,30,000

QUESTION 8.
Shri Rashid furnishes you with the following information relating to his business:
1-1-1997 31-12-1997
Furniture (w.d.v.) 6,000 6,350
Stock at cost 8,000 7,000
Sundry debtors 16,000 ?
Sundry creditors 11,000 15,000
Prepaid expenses 600 700
Unpaid Expenses 2,000 1,800
Cash in hand and at bank 1,200 625
(a) Receipts and payments during 1997:
Collections from debtors, after allowing discount of ` 1,500 amounted to ` 58,500.
Collection on discounting of bills of exchange, after deduction of discount of ` 125 by the
bank, totaled to ` 6,125.
Creditors of ` 40,000 were paid ` 39,200 in full settlement of their dues.
Payment for freight inwards ` 3,000.
Amounts withdrawn for personal use ` 7,000.
Payment for office furniture ` 1,000.
Investment carrying annual interest of 4% was purchased at ` 96 (FV `100) on 1st July, 1997 and
payment made therefore. Expenses including salaries paid ` 14,500. Miscellaneous receipts ` 500.
(b) Bills of exchange drawn on and accepted by customers during the year amounted to `
10,000. Of these, bills of exchange of ` 2,000 were endorsed in favour of creditors. Endorsed
bills of exchange of 400 were dishonored.
(c) Goods costing ` 900 were used as advertising materials.
(d) Goods are invariably sold to show a gross profit of 33.33% on sales.
(e) Difference in cash book, if any, is to be treated as further drawing or introduction by Shri
Rashid.
(f) Provide at 2.5% for doubtful debts on closing debtors
Rashid asks you to prepare Trading and Profit, and Loss A/c for the year ended 31 st December, 1997 and
the Balance Sheet as on that date.
For the year ended 31st Dec.1997
To Opening Stock 8,000 By Sales (b/f) 73,050
To Purchase 45,600 By Advertise Material(at Cost) 900
To Freight 3,000 By Closing Stock 7,000
To Gross Profit(1/2 of COGS) 24,350
80,950 80,950
To Depreciation on Furniture 650 By Gross Profit 24,350

To Discount Allowed 1,500 By Discount Received 800
To Discount on B/R 125 By Interest Accrued 2
To Expenses 14,200 By Miscellaneous Income 500
To Advertisement Material 900
To Provision for D.Debts 486
To Net Profit 7,791
25,652 25,652

Balance Sheet
As at 31st Dec. 1997
Capital 1 8,800 Furniture 6,350
Add: NP 7,791 Investment in 4% Govt Sec.
Less: Drawing 7,904 18,687 (fv 100) 96
Creditors 15,000 Interest Accrued on above 2
Expenses o/s 1,800 (100 X 4% X 6/12)
Bank Balance 625
Debtors 19,450
Less: Provision 486 18,964
B/R 1,750
Stock 7,000
Prepaid Expenses 700
35,487 35,487
Balance Sheet as at 31st Dec. 1996

Capital (b/f) 1,8,800 Furniture 6,000
Creditors 11000 Bank Balance 1,200
Expenses o/s 2,000 Debtors 16,000
Stock 8,000
Prepaid Expenses 600
31,800 31,800
Debtor’s a/c
To balance b/d 16,000 By Bank 58,500
To Creditors(Bill Dishonor) 400 By Discount Allowed 1,500
To Sales(assumed all Credit) 73,050 By B/R 10,000
By Balance c/d(b/f) 19,450
89,450 89,450
Bill Receivable a/c

To Debtors 10,000 By Bank 6,125
By Discount 125
By Creditors 2,000
By Balance c/d 1,750
10,000 10,000

Creditor’s a/c
To Bank 39,200 By Balance b/d 11,000
To Discount Received 800 By Debtors(Bill Dishonor) 400
To B/R 2,000 By Purchase(b/f) 45,600
57,000 57,000
Expenses a/c
To Balance b/d(Prepaid) 600 By Balance b/d (o/s) 2,000
To Bank 14,500 By P&L a/c (b/f) 14,200
To balance c/d 1,800 By Balance c/d (Prepaid) 700
16,900 16,900
Furniture a/c
To Balance b/d 6,000 By Depreciation(b/f) 650
To Bank 1,000 By Balance c/d 6,350
7,000 7,000
Bank a/c
To balance b/d 1,200 By Creditors 39,200
To Debtors 58,500 By Expenses Paid 14,500
To B/R 6,125 By Freight paid 3,000
To Miscellaneous Income 500 By Drawing (b/f)
(including 7000 given) 7,904
By Furniture 1,000
By 4% Govt Securities 96
(FV ` 100)
By Balance c/d 625
66,325 66,325
QUESTION 9.
The following is the Balance Sheet of the retail business of Sri Srinivas as at 31 st December, 1998:
Liabilities ` Asset `
Sri Srinivas’s Capital 1,00,000 Furniture 10,000
Liabilities for goods 20,500 Stock 70,000
Rent 1,000 Debtors 25,000
Cash at Bank 14,500
Cash in hand 2,000
1,21,500 1,21,500

You are furnished with the following information:

(1) Sri Srinivas sells his goods at a profit of 20% on sales.
(2) Goods are sold for cash and credit. Credit customers pay by cheques only.
(3) Payments for purchases are always made by cheques.
(4) It is the practice of Sri Srinivas to send to the bank every weekend the collections of the
week after paying every week, salary of ` 300 to the clerk, Sundry expenses of ` 50 and
personal expenses ` 100.
Analysis of the Bank Pass-book for the 13 weeks period ending 31st March, 1999 disclosed the
following:
`
Payments to creditors 75,000
Payments of rent up to 31.3.99 4,000
Amounts deposited into the bank 1,25,000
(Include ` 30,000 received from debtors by cheques)
The following are the balances on 31st March, 1999:

`
Stock 40,000
Debtors 30,000
Creditors for goods 36,500
st
On the evening of 31 March, 1999 the Cashier absconded with the available cash in the cash box. There
was no cash deposit in the week ended on that date.
You are required to prepare a statement showing the amount of cash defalcated by the Cashier and also
a Profit and Loss Account for the period ended 31st March, 1999 and a Balance Sheet as on that date.
Ans. G.P ` 30,250, Net Profit 5, 300, B/S 1, 40,500
QUESTION 10.
A trader keeps his books of account under single entry system. On 31st March, 2000 his
statement of Affairs stood as follows:
Trade Creditors 5,80,000 Furniture, Fixtures and fittings 1,00,000
Bills Payable 1,25,000
Outstanding Expenses 45,000 Stock 6,10,000
Capital Account 2,50,000 Trade Debtors 1,48,000
Bills Receivable 60,000
Unexpired Insurance 2,000
Cash in Hand and at Bank 80,000
10,00,000 10,00,000
The following was the summary of Cash-book for the year ended 31st March, 2001:
Receipts ` Payment `
Cash in hand and at Payment to Trade
Bank on 1st April, 2000 80,000 Creditors 75,07,000

Cash Sales 73,80,000 Payments for Bills

Receipts from Trade Payable 8,15,000
Debtors 15,10,000 Sundry Expenses Paid 6,20,700
Receipts for Bills Drawings 2,40,000
Receivable 3,40,000 Cash in Hand and at
Bank on 31st March, 2001 1,27,300
93,10,000 93,10,000
Discount allowed to trade debtors and received from trade creditors amounted to ` 36,000 and ` 28,000
respectively. Bills endorsed amounted to ` 15,000. Annual Fire Insurance premium of ` 6,000 were paid
every year on 1st August for the renewal of the policy. Furniture, fixtures and fitting were subject to
depreciation @ 15% per annum on diminishing balances method.
You are also informed about the following balances as on 31st March, 2001:
`
Stock 6,50,000
Trade Debtors 1,52,000
Bills Receivable 75,000
Bills Payable 1,40,000
Outstanding Expenses 5,000
The trader maintains a steady gross profit ratio of 10% on sales.
Prepare Trading and Profit and Loss Account for the year ended 31st March, 2001 and Balance Sheet as
at that date.
To Purchase(b/f) 84,10,000 (73,80,000 +19,20,000)
To Gross Profit(10% of Sales) 9,30,000 By Closing Stock 6,50,000
99,50,000 99,50,000
9,58,000 9,58,000
Balance Sheet
Capital 2,50,000 Furniture 1,00,000
Add: NP 3,26,300 Less: Dep. @ 15% 15,000 85,000
Less: Drawing 2,40,000 3,36,300 Bank Balance 1,27,300
B/P 1,40,000 B/R 75,000
Expenses o/s 5,000 Stock 6,50,000
Prepaid Insurance 2,000
10,91,300 10,91,300
Debtor’s a/c
To Sales(b/f) 19,20,000 By B/R 3,70,000
By Discount Allowed 36,000
20,68,000 20,68,000
Bill Receivable a/c
To balance b/d 60,000 By Bank 3,40,000
To Debtors(b/f) 3,70,000 By Creditors 15,000
4,30,000 4,30,000
Creditor’s a/c
To Discount Received 28,000 By Purchase 84,10,000
To B/R 15,000
To B/P 8,30,000
89,90,000 89,90,000
Bill Payable a/c

To balance c/d 1,40,000 By Creditors (b/f) 8,30,000
9,55,000 9,55,000
Expenses a/c
To Balance b/d(Prep 2,000 By Balance b/d (o/s) 45,000
Insurance) 6,20,700 By P&L a/c (b/f) 5,80,700
To Bank 5,000 By Balance c/d (Prep Insurance) 2,000
To balance c/d
6,27,700 6,27,700
Assumption: it is assumed that sundry expenses paid includes fire insurance premium paid ` 6,000.

QUESTION 11.
Mr. Anup runs a wholesale business where in all purchases and sales are made on credit. He
Furnishes .The following closing balances:
31-12-91 31-12-92
Sundry Debtors 70,000 92,000
Bills Receivable 15,000 6,000
Bills Payable 12,000 14,000
Stock 1,10,000 1,90,000
Bank 90,000 87,000
Cash 5,200 5,300
Summary of cash transactions during 1992.
(i) Deposited to bank after payment of shop expenses @ ` 600 p.m., wages @ ` 9,200 p.m.
and personal expenses @ ` 1,400 p.m. ` 7,62,750
(ii) Withdrawals ` 1,21,000
(iii) Cash payment to suppliers ` 77,200 for supplies and ` 25,000 for furniture.
(iv) Cheques collected from customers but dishonored ` 5,700.
(ii) Bills accepted by customers ` 40,000
(iii) Bills endorse ` 10,000
(iv) Bills discounted through bank ` 20,000, discount ` 750
(v) Bills matured and duly collected in Bank ` 16,000.
(vi) Bills accepted ` 24,000.
(vii) Paid suppliers by cheque ` 3,20,000.
(viii) Received ` 20,000 on maturity of one LIC policy of the proprietor by cheque.
(ix) Rent received ` 14,000 by cheque.
(x) A building was purchased on 30-11-1992 for opening a branch for ` 3, 50,000 and some
expenses were incurred in bank details of which are not maintained.
(xi) Electricity and telephone bills paid by cash ` 18,700, due ` 2,200.
Other transactions:
(i) Claim against the firm for damages ` 1, 55,000 is under legal dispute. Legal expenses `
17,000. The firm anticipated defeat in the suit.
(ii) Goods returned to suppliers ` 4,200.
(iii) Goods returned by customers ` 1,200.
(i) Discount offered by suppliers ` 2,700.
(ii) Discount offered to the customers ` 2,400.
(iii) The business is carried on the premises owned by the proprietor. 50% of the ground floor
space is used for business and remaining 50% is let out for an annual rent of ` 20,000.
Prepare Trading and Profit and Loss A/c of Mr. Anup for the year ended 31-12-1992 and
Balance Sheet as on that date.

QUESTION 12.
The following information relates to the business of Mr. Shiv Kumar, who requests you to prepare a
Trading and Profit & Loss Account for the year ended 31 st March, 2003 and a Balance Sheet as on that
date:
(a) Balance as on Balance as on
st
31 March, 2002 31st March, 2003
` `
Building 3,20,000 3,60,000
Furniture 60,000 68,000
Motorcar 80,000 80,000
Stocks ? 40,000
Bills payable 28,000 16,000
Cash and Bank balances 1,80,000 1,04,000
Sundry Debtors 1,60,000 ?
Bills receivable 32,000 28,000
Sundry Creditors 1,20,000 ?
(b) Cash transactions during the year included the following besides certain other items:
` `
Sale of old paper and 20,000 Cash purchases 48,000
Miscellaneous income
Miscellaneous Trade expenses 80,000 Payment to creditors 1,84,000
(Including salaries etc.)
Collection from debtors 2,00,000 Cash Sales 80,000
(c) Other information:
(i) Bills receivable drawn during the year amount to ` 20,000 and Bills payable accepted `
16,000.
(ii) Some items of old furniture, whose written down value on 31 st March, 2002 was ` 20,000
was sold on 30th September, 2002 for ` 8,000 Depreciation is to be provided Building and
Furniture @ 10% p.a. and on Motorcar @ 20% p.a. Depreciation on sale of furniture to be
provided for 6 months and for additions to Building for whole year.
(iii) Of the Debtors, a sum of ` 8,000 should be written off as Bad Debt and a reserve for
doubtful debts is to be provided @ 2%.
(i) Mr. Shivkumar has been maintaining a steady gross profit rate of 30% on turnover.
(ii) Outstanding salary on 31st March, 2002 was ` 8,000 and on 31st March, 2003 was ` 10,000.
On 31st March, 2002. Profit & Loss Account had a credit balance of ` 40,000.
(iii) 20% of total sales and total purchases are to be treated as for cash.
(iv) Additions in Furniture Account took place in the beginning of the year and there was no
opening provision for doubtful debts.


To Opening Stock(b/f) 80,000 By Sales (80,000 + 3,20,000) 4,00,000
To Purchase(48,000 + 2,40,000 By Closing Stock 40,000
1,92,000) 1,20,000
To Gross Profit(30% of Sales)
4,40,000 4,4,000
To Loss on Sale of furniture 11,000 By Miscellaneous Income 20,000
To Bad Debts 8,000 By Net Loss 25,840
To Provision For D.Debts 5,040
To M T Expenses
(80,000 + 10,000 – 8,000) 82,000
1,65,840 1,65,840
Balance Sheet
Capital 7,16,000 Building (3,60,000 – 36,000) 3,24,000
Add: Profit Furniture 61,200
(40,000 – 25,840) 14,160 7,30,160 Motor Car(80,000 – 16,000) 64,000
Bill Payable 16,000 Less: Provision 5,040 2,46,960
O/S Salary 10,000 Bill Receivable 28,000
Stock 40,000
Cash and Bank Balance 1,04,000
8,68,160 8,68,160
Balance Sheet
Capital (b/f) 7,16,000 Building 3,20,000
Profit & Loss a/c 40,000 Furniture 60,000
Creditors 1,20,000 Motor Car 80,000
Bill Payable 28,000 Debtors 1,60,000
O/S Salary 8,000 Bill Receivable 32,000
Stock 80,000
Cash and Bank Balance 1,80,000
9,12,000 9,12,000

Debtor’s a/c
To Sales(Credit) 3,20,000 By B/R 20,000
By Bad debts 8,000
By Balance c/d(b/f) 2,52,000
4,80,000 4,80,000
Bill Receivable a/c
To Balance b/d 32,000 By Bank(b/f) 24,000
To Debtors 20,000 By Balance c/d 28,000
52,000 52,000
Creditor’s a/c
To B/P 16,000 By Purchase(Credit) 1,92,000
3,12,000 3,12,000
Bill Payable a/c
To Bank(b/f) 28,000 By Balance b/d 28,000
To balance c/d 16,000 By Creditors 16,000
44,000 44,000
Furniture a/c
To Balance b/d 60,000 By Depreciation 7,800
To Bank(b/f) 28,000 By Bank 8,000
By P & L a/c( loss) 11,000
By Balance c/d (68,000 – 6,800) 61,200
88,000 88,000
Bank a/c
To balance b/d 1,80,000 By Creditors 1,84,000
To Debtors 2,00,000 By Cash Purchase 48,000
To B/R 24,000 By B/P 28,000
To Miscellaneous Income 20,000 By M T Expenses 80,000
To Cash Sales 80,000 By Furniture 28,000
To Sale of Furniture 8,000 By Building 40,000
5,12,000 5,12,000

QUESTION 13.
AVL is an unemployed science graduate with typewriting qualification. Being unable to get
Employment For more than ` 500 p.m. he decided to start his own typewriting institute. He
Approached U.B.C.Bank, This sanctioned him a loan of ` 20,000 on 1-1-1992. His father gifted
him ` 5,000 on 1-1-1992. He Purchased 6 typewriters worth ` 24,000.
Unable to understand the accounts properly, he seeks your help in preparing a Profit and Loss Account
and Balance Sheet relating to the year ending 31-12-1992. His Pass Book reveals the following:
`
(a) Expenses of the Institute 8,400
(b) Salary to self 4,000
(c) Monthly Fees Collected 32,700
(d) Examination Fees Collected 4,200
The following are the additional details available:

(1) During the year AVL purchased a second-hand cycle costing ` 400 from a student who owed
monthly fees of ` 100. The balance was paid. The cycle is used for the Institute only.
(2) AVL helped a friend by encashing a cheque for ` 1,000 which was dishonored. The friend
has so far repaid only ` 400.
(3) AVL has taken ` 600 per month for personal expenses in addition to his salary.
(4) AVL runs the institute from his house for which he pays a rent of ` 600 p.m. 50% may
reasonably be allocated for his own living and 50% is use in business.
(5) The following are outstanding as at end of 31-12-1992
`
(a) Fees Receivable 2,200
(b) Expenses Payable 1,000
(c) Salary to self for Nov. and Dec. 5,000
(d) Stock of stationery on hand 200
(6) Provide Depreciation 20% on typewriters and cycle.
(7) The loan from Bank is repayable at ` 500 p.m. from the beginning of July onwards. Interest
is payable at 12% per annum in addition to installments for principal.
(8) Assume that all transactions are routed through Bank and no cash is handled.
Ans. Net Profit 19,225, B/S 27,425

QUESTION 14.
The following is the Balance Sheet of Mr. Rama Shankar as on 30th June, 1988:
Rama Shankar’s Capital A/c 96,000 Building 60,000
General Reserve 30,500 Furniture 12,000
Sundry Creditors 62,000 Motor car 18,000
Stock 40,000
Sundry Debtors 34,000
Cash in Hand 7,500
Cash Bank 17,000
1,88,500 1,88,500

A fire occurred in the evening of 30th June, 1989 in the premises of the trader destroying all books and
records. The cashier absconded with the available cash; Mr. Rama Shankar gives you the following
information:
(a) His sales for the year 20% higher than the previous year’s. He sells his goods at cost plus 25%;
20% of the total sales were for cash. There were no cash purchases.
(b) From 1st July, 1988 the stock level was raised to ` 50,000 and maintained at that level all
throughout the year.
(c) Collection from debtors amounted to ` 2, 60,000 of which ` 60,000 was received in cash.
Business expenses amounted to ` 42,000 of which ` 10,000 was outstanding on 30th June,
1989 and ` 12,000 was paid by cheque. Creditors were paid by cheques only.
(d) Analysis of the Pass Book revealed the following:
`
Payment to creditors 2,75,000
Personal Drawings 15,000
Cash deposited in Bank 1,33,700
Cash withdrawn from bank for office use 24,000
(e) Gross profit as per last year’s audited accounts was ` 60,000. Provide depreciation on
Building and Furniture at 5% and Motor Car at 20%.
You are required to ascertain the amount defalcated by the Cashier and prepare a Trading and Profit and
Loss Account for the year ended 30th June, 1989 and a Balance Sheet as on that date after defalcation.
Ans. G.P ` 72,000, Net Profit 13,000, B/S 2,19,500
QUESTION 15.
The statement of Affairs of Mr. Misfortune on Saturday, the 31st December 19____ was as
follows:
` `
Capital 50,000 Fixed Assets 30,000
Sundry Creditors 10,000 Stock 10,000
Liability for Expenses 1,000 Debtors 15,000
Bank 5,000
Cash 1,000
61,000 61,000
Mr. Misfortune did not maintain his books on the Double Entry System. But he carefully follows
the following system:
(a) Every week he was drawn ` 200.
(b) After meeting his weekly sundry expenses (` 100 on average) and his drawings, the balance
of weekly collections is banked at the commencement of the next week.
(c) No cash purchase is made and creditors are paid by cheques;
(d) Sales are at fixed price which include 20% profit on sales.
(e) Credit sales are few and are noted in diary. Payments are received in cheques only from such
parties.
(f) Expenses other than sundries and other special drawings are made in cheques
(g) All unpaid bills are kept in a file carefully.

The following his bank transactions for 13 weeks

` `
Balance of Jan. 1 5,000 Creditors paid 40,000
Cheques deposited 2,000 Rent paid 600
Cash deposited 42,000 Expenses (other than
Sundry Expenses) 3,000
Balance on April 1 5,400
49,000 49,000
After 13 week on 1st April (Monday) the entire cash was missing when it was to be deposited in the bank.
The following further facts are ascertained:
(a) Stock on that day was valued at ` 4,000;
(b) Sundry Debtors amounted to ` 20,000 as per diary;
(c) Sundry Creditors were ` 8,000 as per unpaid bills file.
Find out the amount of cash missing.
Ans. Cash missing 3,100
QUESTION 16.
From the following information in respect of a trader, Mr. Auland, prepare a Profit and Loss Account for
the year ended 31st December, 1992 and a Balance Sheet as at that date:
31-12-91 31-12-92
(1) Liabilities and Assets:
Stock in trade 80,000 70,000
Debtors for Sales, Bills Receivable 1,60,000 -----
Creditors for purchases 1,10,000 1,50,000
Furniture at written down value 60,000 63,500
Expenses outstanding 20,000 18,000
Prepaid expenses 6,000 7,000
Cash in hand 2,000 1,500
Bank balance 10,000 4,750
(2) Receipts and payments during 1992:

Collection from debtors (after allowing 2.5% discount) 5,85,000
Payments to Creditors (after receiving 2% discount) 3,92,000
Proceeds of Bills Receivable, discounted at 2% 61,250
Proprietor’s drawings 70,000
Purchase of furniture midway through the year 10,000
4% Government securities purchased, at 96% on 1-7-92 96,000
Expenses 1,75,000
Miscellaneous income 5,000
(3) Sales are effected so as to realize a gross profit of 33-1/3% on the sale proceeds.
(4) Goods, costing ` 9,000, were issued as advertisement articles.
(5) During the year, Bills Receivable, totaling ` 1, 00,000, were drawn on debtors of these Bills
amounting to ` 20,000 were endorsed in favour of creditors of this latter amount, a Bill for
` 4,000 was dishonored by the debtor.

(6) Capital introduced during the year by proprietor by Cheques was omitted to be recorded in
the Cash Book, though the Bank balance of ` 4,750 on 31st December, 92 (as shown above),
is after taking the same into account.
(7) Charge depreciation @ 10% p.a. on furniture.

For the year ended 31st Dec.1992
To Opening Stock 80,000 By Sales (b/f) 6,85,500
To Purchase 4,56,000 By Advertise Material(at Cost) 9,000
To Gross Profit(1/2 of COGS) 2,28,500 By Closing Stock 70,000
7,64,500 7,64,500
To Depreciation on Furniture 6,500 By Gross Profit 2,28,500
To Discount on B/R 1,250 By Interest Accrued 2,000
To Expenses 1,72,000 By Miscellaneous Income 5,000
To Advertisement Material 9,000
2,43,500 2,43,500
Balance Sheet
Capital 1,88,000 Furniture 63,500
Add: Add Cap 86,000 Investment in 4% Govt Sec. 96,000
Add: NP 39,750 Interest Accrued on above
Less: Drawing 70,000 2,43,750 (1,00,000 X 4% X 6/12) 2,000
Creditors 1,50,000 Bank Balance 4,750
Expenses o/s 18,000 Cash in Hand 1,500
Debtors 1,49,500
B/R 17,500
Stock 70,000
Prepaid Expenses 7,000
4,11,750 4,11,750
Balance Sheet
Capital (b/f) 1,50,000 Furniture 60,000
Creditors 1,10,000 Bank Balance 10,000
Expenses o/s 20,000 Cash in Hand 2,000
Debtors 1,60,000
Stock 80,000
Prepaid Expenses 6,000
3,18,000 3,18,000
Debtor’s a/c
To Creditors(Bill Dishonor) 4,000 By Discount Allowed
To Sales(assumed all Credit) 6,85,500 (5,85,000 X 2.5/97.5) 15,000
By B/R 1,00,000
8,49,500 8,49,500
Bill Receivable a/c

To Debtors 1,00,000 By Bank 61,250
By Discount
(61,250 X 2/98) 1,250
By Creditors 20,000
1,00,000 1,00,000
Creditor’s a/c
To Discount Received By Debtors(Bill Dishonor) 4,000
(3,92,000 X 2/98) 8,000 By Purchase(b/f) 4,56,000
To B/R 20,000
To balance c/d 1,50,000
5,70,000 5,70,000
Expenses a/c
To Balance b/d(Prepaid) 6,000 By Balance b/d (o/s) 20,000
To Bank 1,75,000 By P&L a/c (b/f) 1,72,000
To balance c/d 18,000 By Balance c/d (Prepaid) 7,000
1,99,000 1,99,000
Furniture a/c
To Balance b/d 60,000 By Depreciation(b/f) 6,500
To Bank 10,000 By Balance c/d 63,500
70,000 70,000

Bank a/c
To balance b/d By Creditors 3,92,000
- Cash in Hand 2,000 By Expenses Paid 1,75,000
- Cash at Bank 10,000 By Drawing 70,000
To Debtors 5,85,000 By Furniture 10,000
To B/R 61,250 By 4% Govt Securities 96,000
To Miscellaneous Income 5,000 (FV ` 1,00,000)
To Additional Capital(b/f) 86,000 By Balance c/d
- Cash in Hand 1,500
- Cash at Bank 4,750
7,49,250 7,49,250
QUESTION 17.
The following information of a concern is available:
(1) Assets and Liabilities:
1-1-91 31-12-91
Opening (`) Closing (`)
Furniture 6,000 6,350
Stock 8,000 7,000
Sundry Debtors 16,000
Prepaid Expenses 600 700
Unpaid Expenses 2,000 1,800
Cash in hand and at Bank 1,200 625
(2) Receipts and Payments during the year:

Receipt from Debtors ` 58,500 (after allowing 2 ½ % discounts)
Bills Receivable discounted ` 6,125 (Discounted at an average rate of 2%)
Creditors paid 39,200 discounted at 2%)
Freight inward paid 3,000
Drawings 7,000
Furniture purchased 1,000
Investment (4%) purchased
(On 1-7-91) as ` 96 9,600
Expenses including salaries 14,500
Miscellaneous Receipts 500
(3) During the year Bills Receivable Received was ` 10,000; ` 2,000 of which are endorsed in
favour of creditors. Of the latter a bill for ` 400 was dishonored.
(4) Goods costing ` 900 were used as advertising materials.
(5) Goods are invariably sold to show a profit of 33 1/3 % on sales.
(6) Difference in Cash Book, if any, is to be treated as drawings or introduction of capital by the
proprietor.

Prepare the Trading and Profit & Loss A/c for the year ended 31st December, 1991 and a Balance Sheet
as on that date after making a provision of 2 ½ % on Debtors for doubtful debts.
Ans. G.P ` 24,350, Net Profit 7,989, B/S 45,189
QUESTION 18.
The following is the Balance Sheet of Sanjay, a small trader’ as on 31-3-96
(Figures in ` ‘000)
Capital 200 Fixed Assets 145
Creditors 50 Stock 40
Debtors 50
Cash on Hand 5
Cash at Bank 10
250 250
A fire destroyed the accounting records as well as the closing cash of the trader on 31.3.97. However,
the following information was available:
(b) Debtors and creditors on 31.3.97 showed an increase of 20% as compared to 31.3.96.
(c) Credit period:
Debtors – 1 month Creditors – 2 months.
(d) Stock was maintained at the same level throughout the year.
(e) Cash sales constituted 20% of total sales.
(f) All purchases were for credit only.
(g) Current ratio as on 31-3-97 was exactly 2.
(h) Total expenses excluding depreciation for the year amounted to ` 2,50,000.
(i) Depreciation was provided at 10% on the closing value of fixed assets.
(i) Bank and cash transactions:
(1) Payments to creditors included ` 50,000 by cash.
(2) Receipts from debtors included ` 5,90,000 by way of cheques.
(3) Cash deposited into the bank ` 1, 20,000.
(4) Personal drawings from bank ` 50,000.
(5) Fixed assets purchased and paid by cheque ` 2, 25,000.
You are required to prepare:
(a) The Trading and Profit & Loss Account of Sanjay for the year ended 31.3.97 and
(b) A Balance Sheet on that date.
For your exercise, assume cash destroyed by fire is written off in the Profit & Loss Account.
Ans. G.P ` 540, Net Profit 243, B/S 453

QUESTION 19.
The following is the audited Balance Sheet of Shri Ram Chand as on 31 st March, 1992:
Capital Account 1,62,000 Machinery 40,000
Sundry Creditors for goods 30,000 Furniture 10,000
Stock 35,000
Debtors 90,000
Cash in Hand 6,000
Cash at Bank 11,000
1,92,000 1,92,000
A fire occurred in the evening of 31st March, 1993, destroying the books of account and furniture. The
cashier absconded with the available cash in the Cash Box.
The trader gives the following information:
(1) Sales are effected as 20% for cash and the balance on credit. His total sales for the year
ended March 31, 1993 were 20% higher than the previous year. All sales and purchases of
goods were evenly spread throughout the year (as also in the last year)
(2) Terms of credit
Debtors 2 Months
Creditors 1 Month
(3) Stock level was maintained at ` 35,000 all throughout the year.
(4) A steady Gross profit rate of 33 1/3 % on turnover was maintained throughout. Creditors are
paid by cheque only. There is no cash purchase.
(5) His private records and the Bank Pass Book kept with him disclosed the following transaction
for the year:
(i) Miscellaneous Business Expenses ` 1,80,000
(Including of which ` 5,000 was ` 35,000 paid by Cheque)
Out-standing on March 31, 93)
(ii) Repairs ` 2,500 (paid by cash)
(iii) Addition to Machinery ` 50,000 (paid by cheque)
(iv) Private drawings ` 36,000 (paid by cash)
(v) Travelling Expenses ` 12,000 (paid by cash)
(6) Collection from debtors (including ` 30,000 for cash) and payments to creditors were prompt
all along.
(7) Depreciation is to be provided on machinery @ 10% on the closing book value.
(8) The cash stolen is to be provided in the Profit & Loss Account.
Prepare Trading, Profit and Loss Account for the year ended 31 st March, 1993 and a balance sheet as at
that date.


To Opening Stock 35,000 By Sales (6,48,000 X 100/80) 8,10,000
To Purchase (b/f) 5,40,000 By Closing Stock 35,000
To Gross Profit(1/3 of Sales) 2,70,000
8,45,000 8,45,000
To Repair 2,500 By Gross Profit 2,70,000
To Miscellaneous Expenses 1,80,000
To Travelling Expenses 12,000
To Loss of furniture by fire 10,000
To Cash Lost by Fire 7,500
To Depreciation on machinery 9,000
2,70,000 2,70,000
Balance Sheet
Capital 1,62,000 Machinery
Add: NP 49,000 (40,000 + 50,000 – 9,000) 81,000
Less: Drawing 36,000 1,75,000 Furniture (lost by fire) -
o/s Expenses 5,000 Stock 35,000
Bank Balance 3,500
2,27,500 2,27,500
Debtor’s a/c
To balance b/d 90,000 By Bank(b/f) 6,00,000
To Sales(1,08,000 X 12/2) 6,48,000 By Cash 30,000
(90,000 X 120%)
7,38,000 7,38,000
Creditor’s a/c
To Bank (b/f) 5,22,500 By Balance b/d 30,000
To balance c/d(5,40,000 X 1/12) 47,500 By Purchase 5,40,000
5,70,000 5,70,000

Cash Book
Particular Cash (`) Bank (`) Particular Cash (`) Bank (`)
To balance b/d 6,000 11,000 By Creditors 5,22,500
To Debtors 30,000 6,00,000 By Miscell Expenses 1,40,000 35,000
To Sales 1,62,000 By Repair 2,500
By Machinery 50,000
By Travelling Expen. 12,000
By Drawing 36,000
By Cash Lost by Fire 7,500
1,98,000 6,11,000 1,98,000 6,11,000
QUESTION 20.
The following is the Balance Sheet of concern on 31st March, 2000:
Liability ` Assets `
Creditors (Trade) 1,40,000 Stock 3,00,000
Profit & Loss A/c 60,000 Debtors 1,50,000
Cash & Bank 3,50,000
12,00,000 12,00,000
The management estimates the purchases and sales for the year ended 31st March, 2001 as under:
Up to March
28-02-2001 2001
Purchases 14,10,000 1,10,000
Sales 19,20,000 2,00,000
It was decided to invest ` 1,00,000 in purchases of fixed assets, which are depreciated @ 10% on
cost.
The time lag for payment to Trade Creditors for purchase and receipt from Sales is one month.
The entity earns a gross profit of 30% on turnover. The expenses against gross profit amount to
10% of the turnover the amount of depreciation is not included in these expenses.
Draft a Balance Sheet as at 31st March, 2001 assuming that creditors are all Trade Creditors for
purchases and debtors for sales and there is no other item of current assets and liabilities apart
from stock and cash and bank balance.
To Purchase 15,20,000 By Closing Stock (b/f) 3,36,000
To Gross Profit(30% of Sales) 6,36,000
24,56,000 24,56,000
To Expenses (10% of Sales) 2,12,000
6,36,000 6,36,000
Balance Sheet
Add: NP 3,74,000 Less: Dep. @ 10% 50,000 4,50,000
Add: profit of PY 60,000 14,34,000 Debtors 2,00,000
Creditors 1,10,000 Stock 3,36,000
Bank Balance 5,58,000
15,44,000 15,44,000
Debtor’s a/c
To balance b/d 1,50,000 By Bank (b/f) 20,70,000
To Sales 21,20,000 By Balance c/d 2,00,000
22,70,000 22,70,000
Creditor’s a/c
To Bank(b/f) 15,50,000 By Balance b/d 1,40,000
To balance c/d 1,10,000 By Purchase 15,20,000
16,60,000 16,60,000
Fixed Assets a/c
To balance b/d 4,00,000 By Depreciation 50,000
To Bank 1,00,000 By Balance c/d 4,50,000
5,00,000 5,00,000
Bank a/c
To balance b/d 3,50,000 By Creditors 15,50,000
To Debtors 20,70,000 By Expenses 2,12,000
By Fixed Assets 1,00,000
24,20,000 24,20,000
QUESTION 21.
The following is the Balance Sheet of Sri Dev as on 31st March, 2001:
Balance Sheet
Capital Account 2,52,500 Machinery 1,20,000
Sundry Creditors for Furniture 20,000
Purchases 45,000 Stock 33,000
Debtors 1,00,000
Cash in Hand 8,000
Cash at Bank 16,500
2,97,500 2,97,500
Riots occurred and fire broke out on the evening of 31 st March, 2002, destroying the books of account
and Furniture. The cashier was grievously hurt and the cash available in the cash box was stolen.
The trader gives you the following information:
1. Sales are affected as 25% for cash and the balance on credit. His total sales for the year
ended 31st March, 2002 were 20% higher than the previous year. All the sales and purchases
of goods were evenly spread throughout the year (as also in the last year).
2. Terms of Credit
Debtors 2 Months
Creditors 1 Month
3. Stock level was maintained at ` 33,000 all throughout the year.
4. A steady Gross profit rate of 25% on the turnover was maintained throughout the year.
Creditors are paid by cheque only, except for cash purchase of ` 50,000.
5. His Private Records and the Bank Pass book disclosed the following transaction for the year.
i. Miscellaneous Business ` 1,57,500 (including ` 5,000
Expenses paid by cheque and ` 7,500 was
Outstanding as on 31st March, 2002)
ii. Repairs ` 3,500 (paid by cash)
iii. Addition to Machinery ` 60,000 (paid by cheque)
iv. Private drawings ` 30,000 (paid by cash)
v. Travelling Expenses ` 18,000 (paid by cash)
vi. Introduction of ` 5,000

Additional capital by
Depositing in to the Bank
6. Collection from debtors was all through cheques.

7. Depreciation on Machinery is to be provided @ 15% on the Closing Book Value.
8. The cash stolen is to be charged to the Profit and Loss Account.
9. Loss of furniture is to be adjusted from the Capital Account.
Prepare Trading, Profit and Loss Account for the year ended 31st March, 2002 and a Balance
Sheet as on that date, Make appropriate assumptions wherever necessary. All working should
form part of your answer.
Ans. GP ` 2,40,000, NP ` 32,500,
QUESTION 22.
Shri Kisan, a farmer, maintains cash book, through which the records all receipts and payments
and a Diary in which he records other relevant information. On 31st March, 1999 he had cash in
hand ` 1,000 And balance of ` 500 with local Grameen Bank. He also owed ` 600 to Beej
Bhandar for seeds Purchased by that date.
During the year ended 31st March, 2000, he realized:
`
Sale proceeds of crops 59,100
Sale proceeds of cattle products 12,500
Sale proceeds of wood and grass 3,000

Sale of cow dung. 5,000

Receipt on account from Babu (a credit customer) 12,000
Grant from Zila Parishad for installing tube well cheque 10,000
During the year ended 31st March, 2000 he paid:
`
Wages 65,000
Beej Bhandar 600
Seeds, feeds and fertilizer 3,000
Power 5,000
Land revenue 2,000
Tools purchased 2,500
Household expenses 10,000
During the year ended 31st March, 2000 his other transactions were:
(i) Sale of crop to Babu on credit ` 20,000
(ii) Purchase on 25th March, 2000 from Beej Bhandar on credit of one month seeds of ` 2,000
(iii) Efforts put in by self and family members on the farm were conservatively valued at ` 60,000.
(iv) Value of crop used for consumption by:
Self and family ` 30,000
Agricultural labourers ` 40,000.
On 31 March, 2000, his cash in hand was only ` 2,500.
st
The rest was banked. He did not have any stock of seeds.
The tube, well for which the grant cheque was received in the last week of March, 2000 is to be
Installed in April, 2000.
Shri Kisan asks you to prepare his cash and income summaries for the year ended 31 st March,
2000 and his statement of financial position as on that date.
Ans. Net Profit 52,600, B/S 25,500
QUESTION 23.
The following is the Balance Sheet of M/s. Care Traders as on 1-4-2014:
`
Sources of Funds
Capital 10,00,000
Profit and Loss 1,47,800
Unsecured loan @ 10% 1,75,000
Trade Payables 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 31-3-2015 and destroyed the books of account. The accountant could
however provide the following information:
(1) Sales for the year ended 31-3-2014 was ` 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
Debtors: 2 month
Creditors: 1 month
All creditors are paid by cheque and all credit sales are collected in cheque.
(5) The Bank Pass Book has the following details (other than payment to creditor and collection
from debtors)
`
Machinery purchased 1,14,000
Rent Paid 1,32,000
Advertisement expenses 80,000
Travelling expenses 78,000
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 1-10-2014.
(7) Rent was paid for 11 months only and 25% of the advertisement expenses relates to the next
year.
(8) Travelling expenses of ` 7,800 for which cheques were issued but not presented in bank.
(9) Furniture was sold on 1-4-2014 at a loss ` 2,900 on bank value.
(10) Physical vertification as on 31-3-2015 ascertained the stock position at ` 1,81,000 and petty
cash balance at nil.
(11) There was no change in unsecured loan during the year.
(12) Deprecation 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 31-3-2015 in the books of
M/s. Care Traders and a Balance Sheet as on that. Make necessary assumptions wherever necessary.
(May 2015 – 16 Marks)

QUESTION 24.
K. Azad, who is in business as a wholesaler in sunflower oil, is a client of your accounting firm.
You are required to draw up his final accounts for the year ended 31-03-1996. From the files,
You pick up his Balance Sheet as at 31-03-1995 reading as below:
Balance Sheet as at 31-03-1995
Liabilities ` `
K. Azad’s Capital 1,50,000
Creditors for Oil Purchases 2,00,000
12% Security Deposit from Customers 50,000
Creditors for Expenses:
Rent 6,000
Salaries 4,000
Commission 20,000
4,30,000
Assets
Cash and Bank Balances 75,000
Debtors 1,60,000
Stock of Oil (125 tins) 1,25,000
Furniture 30,000
Less: Depreciation 3,000 27,000
Rent Advance 12,000
Electricity Deposit 1,000
3-Wheeler Tempo Van 40,000
Less: Depreciation 10,000 30,000
4,30,000
A summary of the rough cash book of K. Azad for the year ended 31-3-1996 is as below:
Cash and Bank Summary
Receipts `
Cash Sales 5,26,500
Collection from Debtors 26,73,500
Payments
To Landlord 79,000
Salaries 48,000
Miscellaneous Office Expenses 12,000
Commission 20,000
Personal Income tax 50,000
Transfer on 1-10-1995 to 12% Fixed Deposit 6,00,000
To Creditors for oil supplies 24,00,000
A scrutiny of the other records gives you the following information:
(j) During the year oil was purchased at 250 tin per month basis at a unit cost of ` 1,000. 5 tins
were damaged in transit in respect of which insurance claim has been Preferred. The
surveyors have since approved the claim at 80%. The damaged ones were sold for ` 1,500
which is included in the cash sales. One tin has been used up for personal consumption.
Total number of tins sold during the year was 3,000 at a unit price of ` 1,750.

(xii) Rent until 30-9-95 was ` 6,000 per month and was increased thereafter by ` 1,000 per
month. Additional advance rent of ` 2,000 was paid and this is included in the figure of
payments to landlord.
(xiii) Provide depreciation at 10% and 25% of WDV on furniture and tempo van respectively.
(xiv) It is further noticed that a customer has paid ` 10,000 on 31-3-96 as security deposit by
cash. One of the staff has defalcated. The claim against the Insurance Company is pending.
You are requested to prepare final accounts for the year ended 31-3-96.
Ans. G.P ` 2,250, Net Profit 2126.3, B/S 3098.3

CHAPTER-11
DEPARTMENTAL
ACCOUNTING
After studying this chapter, you will be able to:
 Allocate common expenditures of the organization among various departments on
appropriate basis.
 Deal with the inter-departmental transfers and their accounting treatment.
 Calculate the amount of unrealized profit on unsold inter-departmental stock-in-hand at the
end of the accounting year.
 Work on problems based on inter-departmental transfers at profit and calculation of
unrealized profit on the remaining stock at the end of the accounting year
DEPARTMENTAL ACCOUNTS 11. 2
MANUFACTURING DEPARTMENTS
QUESTION 1.
Suman Ltd. is a departmental store having three departments X, Y and Z. The manager of each
department is entitled to a commission of 10% of the net profit of the department besides their annual
salary of ` 3,000 each. The information regarding three departments for the year ended 30 th June,
2015 is given below:
Particular X Y Z
Opening Stock 72,000 48,000 40,000
Purchase 2,64,000 1,76,000 88,000
Debtors at end 15,000 10,000 10,000
Sales 3,60,000 2,70,000 1,80,000
Closing stock 90,000 35,000 42,000
Floor space occupied (in sq. fit) 3,000 2,500 2,000
No of employees 25 20 15
The balance of other revenue items in the books for the year and the basis of their allocation amongst
three departments are given below:
Items Amounts Basis
Carriage Inwards 6,000 Purchases
Carriage Outwards 4,500 Turnovers
Salaries including Managers’ salaries 81,000 No. of Employees
Advertisement 5,400 Turnovers
Discount allowed 2,250 Turnover
Discount received 1,800 Purchases
Rent, Rates and Taxes 7,500 Floor Space occupied
Depreciation on furniture 1,500 equal
You are required to prepare Trading and Profit & Loss Account for the year ended 30 th June, 2015
(after providing provision for Bad Debts at 5%).
Ans.: Net Profit 62,325, 40,545, 59,940
QUESTION 2.
The following purchases were made during the year 2014 by a business house having three
departments:
Department A 1000 units
B 2000 units at total cost of ` 1, 00,000
C 2400 units
st
Stock on 1 January 2014 were: Department A 120 units
B 80 units
C 152 units
The sale during 2014 were: Department A 1,020 units at ` 20 each
B 1,920 units at ` 22.50 each
C 2,496 units at ` 25 each

The rate of gross profit is the same in each case, Prepare Department Trading Account for the year
2014.
Ans. G.P. Ratio 20%
QUESTION 3.
The Z Ltd has three departments and submits the following information for the year ending on 31 st
March, 2009:-
A B C Total
`
Purchases (Units) 6,000 12,000 14,400
Purchases (Amounts) 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 the uniform in each case.
QUESTION 4.
Mahul is earning uniform rate of gross profit in all three departments he is handling. Following are
the relevant details:
Purchases:-
Dept. A 15,000 cartons
Dept. R 20,000 cartons
Dept. Z 15,000 cartons
The total cost of the purchase amounted to Rs, 6, 00,000.
Sales:
Dept. A 16,000 cartons at ` 20 per carton
Dept. R 22,000 cartons at ` 15 per carton
Dept. Z 17,000 cartons at ` 10 per carton
Details of opening stock:
Dept. A 15,000 cartons
Dept. R 20,000 cartons
Dept. Z 15,000 cartons
Prepare the trading account for three departments in a columnar form. Also show the workings in
respect of the following:
(a) Gross profit (%) assuming that there is no stock situation.
(b) Department wise purchase price and value; and
(c) Valuation of opening and closing stocks.
Ans. G.P. Ratio 20%.

QUESTION 5.
JUHI & Co. purchased goods for 1st Thee department as follows:-
Department R – 4,000 units
Department L 0 9,000 units
Department Y – 4,000 units
Total cost of purchases Rs, 1,10,000
Sale of three Departments was as follows:
Department R – 3600 units @ ` 7.50 per unit
Department L – 9800 units @ ` 9.00 per unit
Department Y – 3650 units @ ` 13.50 per unit
Opening stock as on 1.1.2014 was as follows:-
Department R – 200 units
Department L – 1400 units
Department Y – 150 units.
Assuming that the gross profit ratio is uniform in all the three departments. Prepare Trading A/c for the
year ended 31st Dec. 2014.
Ans.:- Gross profit dept. R – ` 9,000; Dept. L – ` 29,400; Dept. Y – ` 16,425.
G.P. Ratio @ 33 1/3% on sales.
QUESTION 6.
You are given the following particulars of a business having three departments:
Purchases Opening Stock Closing stock
Deptt. A 1,500 units 200 units 100 units
Deptt. B 1,000 units’ 300 units 160 units
Deptt. C 2,000 units’ 150 units 200 units
Additional Information:
(1) Purchases were made at a total cost of ` 1,84,000.
(2) The percentage of gross profit on turnover is the same in each case.
(3) Purchases and sales prices are constant for the last few years.
(4) Selling price per unit
Deptt. A ` 40
Deptt. B ` 50
Deptt. C ` 60
You are required to prepare departmental trading accounts.
Ans.:- Profit – ` 47,600; GP Ratio 20%.

INTER DEPARMENTAL TRANSFER

QUESTION 7.
A firm has two departments, Timber and Furniture. Furniture was made by the firm itself out of timber
supplied by the Timber Department. The trading and Profit and Loss Accounts for the year 2014 is as
follows:
Particulars Timber Furniture
Opening Stock (1.1.2014) 3, 00,000 50,000
Purchases 20, 00,000 15,000
Sales 22, 00,000 4, 50,000
Transfer to Furniture Deptt. 3, 00,000 ––
Expenses –– Manufacturing –– 60,000
–– Selling 20,000 6,000
Stock – 31-12-2014 2, 00,000 60,000
The Stocks in the Furniture Department may be considered as consisting of 75 percent of timber and
25 percent other expenses. Timber Department earned gross profit at the rate of 20 percent in 2013.
General expenses of the business as a whole came to ` 1,00,000.
Ans.: NP 3,59,300
QUESTION 8.
A firm has two departments, Finished Leather and Shoes. Shoes are made by the firm itself out of
Leather supplied by the Leather Department at its usual selling price. The trading and Profit and Loss
Accounts for the year ended 31st March 2003 is as follows:
Particulars Leather Shoes
Opening Stock (1.4.2002) 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 Deptt. 30,00,000 ––
Manufacturing Expenses –– 5,00,000
Selling Expenses 1,50,000 60,000
Rent and Warehousing 5,00,000 3,00,000
Stock – 31-03-2003 12,20,000 5,00,000
The Stocks in the Shoes Department may be considered as consisting of 75 percent of Leather and 25
percent other expenses. Leather Department earned gross profit at the rate of 15 percent in 2001-02.
General expenses of the business as a whole came to ` 8,50,000.
Ans.: NP ` 31,43,375

QUESTION 9.
Telerad & Co. has two departments A and B. From the following particulars, prepare Departmental
Trading Account and consolidated Trading Account for the year ending 31st March 2015.
Deptt. A (`) Deptt. B (`)
Opening stock (at cost) 1, 00,000 60,000
Purchases 4, 60,000 3, 40,000
Wages 60,000 40,000
Sales (excl. inter transfers) 7, 00,000 5, 60,000
Carriage 10,000 10,000
Purchased goods transferred:
By B to A 50,000
By A to B 40,000
Finished goods transferred:
By B to A 1,75,000
By A to B 2,00,000
Return of finished goods:
By B to A 50,000
By A to B 35,000
Closing stock: Purchased goods 22,500 30,000
Finished goods 1,20,000 70,000
Purchased goods have been transferred at their respective departmental purchase cost and finished
goods at departmental market price. 20% of finished stock (closing) at each department represented
finished goods received from the other department.
Ans.: NP 4,11,800
QUESTION 10.
X Ltd. has two departments A and B. From the following particulars prepare that consolidated
Trading Account and Departmental Trading Account for the year ending 31st December, 2014.
A B
Opening Stock (at cost to departments) 20,000 12,000
Purchases 92,000 68,000
Sales 1,40,000 1,12,000
Wages 12,000 8,000
Carriage 2,000 2,000
Closing Stock:
(i) Purchased goods 4,500 6,000
(ii) Finished goods 24,000 14,000
Purchased goods transferred:
By B to A 10,000
By A to B 8,000
Finished goods transferred:
By A to B 35,000
By B to A 40,000

Return of finished goods:

By A to B 10,000
By B to A 7,000
You are informed that purchased goods have been transferred mutually at their respective
departmental purchase cost and finished goods at departmental market price and that 20% of the
finished stock (closing) at each department represented finished good received from the other
department.
Ans.:- Gross profit – A ` 38,500; B – ` 46,000
QUESTION 11.
Green & Co has two departments P and Q Department. P sells goods to Department Q at normal selling
prices. From the following particulars prepare Departmental Trading and Profit and Loss Account for
the year ended 31-3-2015 and also ascertain the Net Profit to be transferred to Balance Sheet:
Particulars Department P Department Q
` `
Opening Stock 1,00,000 Nil
Purchases 23,00,000 2,00,000
Goods from Department P ------ 7,00,000
Wages 1,00,000 1,60,000
Travelling Expenses 10,000 1,40,000
Closing Stock at cost to the Department 5,00,000 1,80,000
Sales 23,00,000 15,00,000
Printing and Stationery 20,000 16,000
The following expenses incurred for both the departments were not apportioned between the
departments:
(a) Salaries ` 2,70,000
(b) Advertisement expenses Rs, 90,000
(c) General expenses ` 8,00,000
(d) Depreciation @ 25% on the machinery value of ` 48,000, advertisement expenses are to be
apportioned in the turnover ratio, salaries in 2:1 ratio and depreciation in 1:3 ratio between the
departments P and Q General expenses are to be apportioned in 3:1 ratio.
Ans: NP 2,22,377
QUESTION 12.
Moon Ltd. three departments. They are ‘Cloth Stitching Deptt’, Selling Departments and General
Administration Department. Cloth Deptt. Transfers its goods to Selling Deptt 20% profit on Cost. From
the following details, prepare Departmental Trading A/c and Profit and Loss A/c for the year ended 31st
Dec. 2014.
Cloth Stitching Selling Deppt.
Opening Stock 1,20,000 80,000
Purchase 5,00,000 --
Wages and other Exp. 1,25,000 25,000
Clothing Stock 45,000 95,000
Sales ---- 11,05,000

The expenses of General Admn. Deppt. are as follows:

Manager’s Salary @ ` 1,000 p.m
Clerk’s Salary (2 Nos.) @ ` 600 p.m (each)
Maintenance Expenses ` 9,600
Apportion General Deppt. Expenses equally to the ‘Cloth stitching’ and ‘Selling Deptt.’
Ans. Net Profit ` 3,56,572
QUESTION 13.
Calculate stock reserves A, B & C are three departments:
Content Ratio Profit Ratio Closing Stock
A Nil 1 of Sale 15,000
4
B 2/ 10 1 of cos t 22,000
5
C 5/ 15 Not available 40,000
Assume A sales to B Sales to C
Ans: Stock reserve ` 3878
QUESTION 14.
Calculate stock A, B, C & D are four departments:
Content Ratio Profit Ratio Closing Stock
A Nil 1 of Sale 40,000
10
B 7/ 15 1 of cos t 50,000
4
C 8/ 20 1 of sales 70,000
6
D 6/ 24 1 of sales 80,000
10
Assume A sales to B to C Sales to D
Ans.: Stock reserve ` 13,893
QUESTION 15.
Complex Ltd. has three departments. AB & C The following information is provided;
Particulars A B C
` Rs `
Opening Stock 3,000 4,000 6,000
Consumption of Direct Materials 8,000 12,000 --
Wages 5,000 10,000 --
Closing Stock 4,000 14,000 8,000
Sales -- -- 34,000
Stocks of each department are valued at cost to the department concerned. Stocks of A department
are transferred to B at a margin of 50% above departmental cost. Stocks of B department are
transferred to C department at a margin of 10% above departmental cost.

Other expenses were:

Salaries ` 2,000
Printing & Stationery ` 1,000
Rent ` 6,000
Interest paid ` 4,000
Depreciation ` 3,000
Allocate expenses in the ratio of departmental gross profit. Opening figures of reserves for unrealized
profits on departmental stocks were: Department B - ` 1,000. Departmental C – ` 2,000. Prepare
Departmental Trading and Profit & Loss Account.
Ans.: Net Loss ` 4918 closing stock Reserve ` 3918
QUESTION 16.
IJK Ltd. Had three departments I .J.K. The following information is provided for the year ended
31.3.2004:-
I J K
Particulars ` ` `
Opening stock 5,000 8,000 19,000
Opening reserve for unrealized profit --- 2,000 3,000
Materials consumed 16,000 20,000 ----
Direct labour 9,000 10,000 ---
Closing stock 5,000 20,000 5,000
Sales --- --- 80,000
Area occupied (Sq. mtr.) 2,500 1,500 1,000
No. of employees 30 20 10
Stock of each department is at costs to the department concerned. Stock of I are transferred to J at
cost plus 20% and stocks of J are transferred to K at a Gross profit of 20% on sales. Other common
expenses are Salaries and Staff Welfare Rs, 18,000, Rent Rs, 6,000.
Prepare Departmental Trading, Profit and Loss Account for the year ending 31.3.2004.
Ans.:- Net Profit – Rs, 6,000; Balance transferred to P/L A/c ` 1,000.
RACTIFICATION OF ERRORS
QUESTION 17.
M/s bright & co., had four department A, B, C and D. Each department being managed by a
departmental manager whose commission was 10% of the respective departmental profit, subject to a
minimum of ` 6,000 in each case? Interdepartmental transfers took place at a ‘loaded’ price as follows:
From department A to department B 10% above cost
From department A to department D 20% above cost
From department C to department B 20% above cost
From department C to department D 20% above cost
st
For the year ended 31 March, 1991 the firm had already prepared and closed the departmental
trading and Profit & Loss account. Subsequently it was discovered that the closing stocks of
departments had included interdepartmentally transferred goods at loaded price instead of cost price.
From the following information, Prepare a statement re-computing the departmental profit or loss.
Departments A B C D
Final profit (loss) (`) (38,000) 50,400 72,000 1,08,000
Interdepartmental — - 70,000 70,000 — - 4,800 4,800
Transfers included (` 22,000fromA
(` 22,000 from Deptt. A (`
(`3,600 from Deptt. C3,600 from
At loaded price in and ` 48,000 from Deptt. C and `
Departmental stock and ` 48,000 from C) 1,200 from A)
Ans.
Statement Showing Correct Profit of Department
Particulars A B C D
Profit (Loss ) given (38,000) 50,400 72,000 108,000
Add: Commission 6,000 6,000 8,000 12,000
Profit before commission (32,000) 56,400 80,000 1,20,000
Less: Stock Reserve (wn1) 2,200 - 8,600 -
Correct profit before commission (34,200) 56,400 71,400 1,20,000
Less: commission 6,000 6,000 7,140 12,000
Correct Profit (40,200) 50,400 64,260 1,08,000
Wn 1 statement showing stock reserves

A C
In B’s Stock 22,000 x 1/11 = 2,000 48,000 x 1/6 = 8,000
In D’s Stock 1200 x 1/6 = 200 3,600 x 1/6 = 600
Total Stock Reserve 2,200 8,600
QUESTION 18.
Booming Limited has three departments. They are Alpha, Beta and Gamma. The profits of these
departments are ` 30,000, ` 40,000 and ` 17,400 respectively. (Before charging manager’s commission
and unrealized profit on stock transfers)
Department Alpha transfers its goods @ 20% profit on cost to other departments while Beta transfers
its goods @ 10% profit on cost. Department Gama transfers its goods at cost to other Departments.
However, original goods of respective departments are only transferred.
On scrutiny of records you find.
(i) Purchases made for Alpha Deptt. ` 10,000 has been debited in Beta Deptt. Account;
(ii) Goods sent on Sale or return basis by Beta Deptt. @ 120% have been recorded as regular sale at `
8,400.
(iii) General expenses amounting to ` 2,100 have been excessively charged in Gama Deptt. Instead of
Beta Deptt.
(iv) The following transfers were made :
Dept. Alpha To Beta ` 24,000 (` 12,000 still in closing stock)
To Gama ` 3,600
Dept. Beta To Gama ` 11,000 (` 4,400 still in closing stock)
Dept. Gama To Alpha ` 7,700 (` 3,000 still in closing stock)
(v) Commission payable to the Manager @ 10% on correct overall company profit after charging such
commission.
Find correct Net Profit of the Company and the commission payable to the General Manager.
Ans. Statement Showing Profit and commission

Particular Alpha Beta Gama Total
Profit before Rectification 30,000 40,000 17,400 87,400
Add/Less: Rectification of errors:
- Purchase for alpha debited to beta (10,000) 10,000 - -
- Profit on sale on Approval basis (8,400 x
20/120) - (1,400) - (1,400)
- General expenses of beta charged to
Gama - (2,100) 2,100 -
Profit after Rectification but before Stock 20,000 46,500 19,500 86,000
Reserve 2,000 400 - 2,400
Less: Stock Reserve
Profit Before Commission 18,000 46,100 19,500 83,600
Less: Commission of Manager ( Profit x 1/110) - - - 7,600
Profit after Commission 76,000
QUESTION 19.
Department P sell Goods to Department S at a Profit of 25% on Cost and to Department Q at a Profit of
15% on Cost. Department S sell Goods to Department P and Q at a Profit of 20% and 30% on Sale
respectively. Department Q sell Goods to Department P and S at a Profit of 20% and 10% on Cost
respectively.
Departmental Manager are entitled to 10% commission on net profit subject to unrealized profit on
department sales being eliminated. Departmental Profit after charging Manager Commission but
before adjustment of unrealized profits are as below:
`
Department P 90,000
Department S 63,000
Department Q 45,000
Stock lying at different Department at the end of the year are as below:
P S Q
Transfer From P - 18,000 14,000
Transfer From S 48,000 - 38,000
Transfer From Q 12,000 8,000 -
Find out current Departmental Profits after charging Manager’s Commission.

QUESTION 20.
Axe Limited has four departments, A, B, C and D. Department A sells goods to other departments at a
profit of 25% on cost. Department B sells goods to other department at a profit of 30% on sales.
Department C sells goods to other departments at a profit of 10% on cost, Department D sells goods to
other departments at a profit of 15% on sales. Stock lying at different departments at the year-end
was as follows:
A B C D
Transfer From A - 45,000 50,000 60,000
Transfer From B 50,000 - - 75,000
Transfer From C 33,000 22,000 - -
Transfer From D 40,000 10,000 65,000 -
Departmental managers are entitled to 10% commission on net profit subject to unrealized profit on
departmental sales being eliminated. Departmental profits after charging manager's commission, but
before adjustment of unrealized profit are as under:
`
Department A 2,25,000
Department B 3,37,500
Department C 1,80,000
Department D 4,50,000
Calculate the correct departmental profits after charging Manager's commission.

Ans. Correct profit after commission: A – 1,97,100, B- ` 3,03,750, C – 1,75,500, D - ` 4,34,475.

RETAIL DEPARTMENTS
MARK UP ACCOUNTING
Journal Entries
When Goods Sent To Departt. Loss of stock
Depart. Stock A/c – Dr. [Total] Shortage A/c – Dr.
To Shop stock A/c / Purchase A/c [Cost] To Depart stock A/c [At mark up price]
To Depart. Mark up A/c [Mark-up]
Depart. Mark-up A/c – Dr. [Mark- up]
Goods sent from one department to other departt. Departt P/L A/c – Dr. [cost]
Goods sent to other departt. To Shortage A/c [Mark-up price]
Receiving Departt A/c – Dr. [Cost]
Mark up A/c – Dr . [Loading] Mark down of Stock during the year
To Departt. Stock A/c [Total] Departt. Mark-up A/c – Dr. [Actual mark down]
To Departt stock A/c
Goods received from other departt.
Departt stock A/c -Dr. [Total] Balance in mark-up is transferred to
To Sending Departt A/c [Cost] departt P/L A/c
To Mark - up A/c [Own mark-up] Departt mark up A/c – Dr.
Sales To Departt P/L A/c
Debtors A/c – Dr. (Credit)
Cash A/c – Dr. (Cash )
To Depart. Stock A/c [ Mark-up price]
Department Stock A/c [ Mark up prices ]

To Balance B/d [ Opening stock] -- By Sales [cash or credit]
- cost By Mark up A/c [mark -Down]
- Actual Mark- up [x] By Receiving Depart A/c
To Purchases A/c - Cost (cost + Mark-up )
To Mark up A/c ------ By shortage (At Mark- up Price )
To Sending Depart A/c - Cost
To Mark- up A/c ------ By Balance C/d - Cost
To Bal c/d (Mark down on closing stock) - Actual mark - up [Y]
Mark - up A/c
To Departt. Stock A/c By Balance b/d [X]
-on transfer (Actual mark- up on opening stock )
-mark down -- By Departt. Stock A/c
To Shortage A/c [Mark-up on shortage] -- - on purchase
To Departt Profit & Loss A/c (B. f) - on transfer received
To Balance C/d ( actual mark up on [Y] - additional mark up
closing stock) By Bal c/d (Mark down on closing stock)

QUESTION 20.
Fairways limited are a retail organization with 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 memorandum departmental
mark up account; any reduction in selling prices (Mark-down) will require adjustment in stock account
and in mark-up account. The mark up for department A for the last three years has been 40%. Figures
for the year ended 30th June, 2014 were as follows:
Stock 1st July, 2013, at cost 80,000
Purchases at cost 1,80,000
Sales 3,20,000
It is further ascertained that;
(i) Goods purchased in the period were marked down by `1,400 from a cost of ` 16,000. Such
Marked down stock costing ` 4,000 remained unsold on 30th June 2014.
(ii) Stock shortages at the year end which had cost ` 1,200 were to be written off.
(iii) Stock at 1st July 2013 includes goods costing ` 8,200 which had been sold during the year and
had been marked down in the selling price by ` 740.
You are required to prepare A departmental trading account for the year ended June 2014 in head
office books. A memorandum stock account for the year; & memorandum mark-up account for the
year
Ans: Profit 90,150
QUESTION 21.
RELAINCE Ltd a retail store has two departments. The mark of the department A is 331/3% of cost,
and for department B 50% of cost. The following figures relating to the year 2014 have been taken
from the books.
Deptt. A Deptt. B
` `
st
Stock on 1 January at cost 12,300 17,400
Purchases 81,600 94,800
Sales 1,05,000 1,40,000
The stock of department A on 1st January included goods which cost ` 2,700 selling price of
which had been marked down by ` 250. These goods were sold during 2014 at the reduced
prices.
(1) Goods purchased in 2014, at a cost of ` 1,440 for department A, were later in the year
transferred to department B for ` 2,160. The cost and sale proceeds are included
respectively in the purchases of department A and the sales department B, given above
but no entries for the transfer have been made in the books.
(2) Some items of the goods purchased in 2014 were marked down as follows:
Cost Mark Down
(`) (`)
Department A 4,860 430
Department B 10,000 2,000
(3) With the exception of certain stock in department B at the year which cost ` 5,000 and
were marked down by ` 1,000 all goods marked down in 2014 were sold during the year
at the reduced prices.
(4) At stock taking on 31st December, 2014 it was found that the goods had cost ` 120 were
missing from the department A and it was decided to regard this account as
irrecoverable and to show the loss separately in the profit and loss account.
(5) For the purpose of annual account the closing stock of both the departments is to be
valued at cost.
You are required to prepare in columnar form for each department for the year 2014.
(a) The trading account
(b) The memorandum stock account and the memorandum mark-up account.
QUESTION 22.
Gram Udyon, a retail store, has two departments, Khadi and Silks’ for each of which stock account
And Memorandum ‘mark up’ accounts are kept. All the goods supplied to each department are
Debited to the stock account at cost plus a ‘mark up’ which together mark-up the selling-price of
the goods and in the account of the sale proceeds of the goods are credited. The amount of ‘mark-
up’ is credited to the Departmental Mark up Account. If the selling price of any goods is reduced
below its normal selling price, the reduction ‘marked down’ is adjusted both in the Stock Account
and the Departmental ‘Mark up’ Account. The rate of ‘Mark up’ for Khadi Department is 33- 1/3%
of the cost and for silks Department it is 50% of the cost.
The following figures have been taken from the books for the year ended December 31, 2014:
Khadi D (`) Silks D (`)
st
Stock as on January 1 at cost 10,500 18,600
Purchases 75,900 93,400
Sales 95,600 1,25,000
(1) The stock of Khadi on January 1, 2014 included goods the selling price of which had been
marked down by ` 1,260. These goods were sold during the year at the reduced prices.
(2) Certain stock of the valued of Rs, 6,900 Purchased for the Khadi Department were later in
the year transferred to the Silks department and sold for 10,350. As a result though cost of
the goods is included in the Khadi department the sale proceeds have been credited to the
Silks Department.
(3) During the year 2014 to promote sales the goods were marked down as follows:-
Cost (`) Marked down (`)
Khadi 5,600 360
Silks 10,000 2,000
All the goods marked down, were sold except Silks of the cost of ` 5,000 marked down by
` 1,000.
(4) All the time of stock-taking on December 31, 2014 it was discovered that Khadi cloth of the
cost of ` 390 was missing and it was decided that the amount be written off.
You are required to prepare for both the departments for the year 2014.
(a) The Memorandum Stock Account; and
(b) The Memorandum Mark up Account.
Ans.:- Balance in Silk Stock Account – ` 51,350.

QUESTION 23.
Sone Ltd. has three departments – P, Q and R. From the following particulars given below, compute:
(i) The department results:
(ii) The value of stock as on 31st December, 2014:
Particulars P Q R
Stock as on 01.01.2014 30,000 45,000 15,000
Purchases 1,60,000 1,30,000 60,000
Actual Sales 1,88,000 1,66,000 93,000
Gross Profit on normal sales 25% 33 40%
price
During the year 2014 some items were sold at discount and these discounts were reflected in the
above sales value. The details are given below:
Particulars P Q R
Sales at normal price 15,000 8,000 6,000
Sales at actual price 11,000 6,000 4,000
(Nov – 2015)
Ans. (i) Gross Profit P - ` 44,000, Q - ` 54,000 R – ` 36,000.
(ii) Closing Stock P - ` 46,000, Q - ` 63,000 R – ` 18,000

Chapter-12
BRANCH
ACCOUNTING
After studying this chapter, you will be able to:
 Understand concept of branches and their classification from accounting point of view.
 Distinguish between the accounting treatment of dependent branches and independent
branches.
 Learn various methods of charging goods to branches.
 Solve the problems, when goods are sent to branch at wholesale price.
 Prepare the reconciliation statement of branch and head office transactions after finding the
reasons for their disagreement.
 Incorporate branch balances in the head office books.
 Prepare branch accounts even on the basis of incomplete information.
 Differentiate between integral and non-integral foreign branches.
 Learn the techniques of foreign currency translation.

CACell Intermediate Account Full Book-201-250

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SINGLE ENTRY SYSTEM 10.

Solution: Trading and Profit & Loss a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

(ii) Following further details are furnished:

(iii) Balances as on 31.3.2007 are given below:

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Solution: Trading and Profit & Loss a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Analyses of his bank pass-book reveals are following information:

Solution: Trading and Profit & Loss a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

To Depreciation on Furniture 650 By Gross Profit 24,350

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Balance Sheet as at 31st Dec. 1996

Bill Receivable a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

You are furnished with the following information:

The following are the balances on 31st March, 1999:

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Cash Sales 73,80,000 Payments for Bills

Bill Payable a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Solution: Trading and Profit & Loss a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

The following are the additional details available:

Ans. Net Profit 19,225, B/S 27,425

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

The following his bank transactions for 13 weeks

(2) Receipts and payments during 1992:

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Solution: Trading and Profit & Loss a/c

Bill Receivable a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

(2) Receipts and Payments during the year:

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Solution: Trading and Profit & Loss a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

vi. Introduction of ` 5,000

6. Collection from debtors was all through cheques.

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Sale of cow dung. 5,000

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

INTER DEPARMENTAL TRANSFER

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Return of finished goods:

CA IQTIDAR A. MALIK [B.COM, ACA, CS]