1st Sem Accounts (BHALOTIA) Book-Unlocked

(9883034569/8820696761)
Financial Accounting: [For B.com 1st Sem All] [21-22]

S. No. Chapters Page Number
Syllabus 01 – 02
1. Depreciation (10 Marks) 03 – 11
2. Provision for Bad debts (10 Marks) 12 – 19
3. Insurance claim (10 Marks) 20 – 31
4. Sale on approval (10 Marks) 32 – 36
5. Self Balancing (10 Marks) 37 – 50
6. Consignment (10 Marks) 51 – 60
7. Rectification of errors (10 Marks) 61 – 71
8. Adjustment Entries 72 – 74
9. Inventory (5 Marks) 75 – 78
10. Capital & Revenue expenditure 79 – 81
11. Introduction: (5 Marks) 82 – 85
12. Single entry (20 Marks) 86 – 106
13. Non-trading (20 Marks) 107 – 119
14. Final Account (20 Marks) 120 – 136
15. Accounts Theories: (20 Marks) 137– 147
16. Question Papers 2017 to 2020 (Honours & Pass) (8 papers) 148– 183
BOOK PRICE: ₹ 150

Bhalotia Classes (9883034569): Financial Acct (1st Sem) (Hons/Pass)
Financial Accounting 1: (Syllabus): Honours & General

1st Semester:
Internal Assessment: 20 marks; Semester-end Examinations: 80 marks
Unit-1: Introduction:
• Nature of accounting; Users of accounting information; Qualitative characteristics of accounting
information.
• Double entry book keeping system – Basic accounting equation, meaning of assets, liabilities, equity, revenue
and expenses. Accounting Cycle - Recording of transaction: Journal, Ledger and preparation of Trial Balance.
• Bases of accounting; cash basis and accrual basis.
• Basic concepts and conventions: entity, money measurement, going concern, cost, realisation, accruals,
periodicity, consistency, prudence (conservatism), materiality, matching and full disclosures.
Unit-2: Concepts for determination of business income

• Revenue recognition: Meaning of revenue; objective; timing of recognition. Recognition of expenses.
• Inventories: meaning. Significance of inventory valuation. Lower of cost or market rule; Inventory
ascertainment and reconciliation.
• The nature of depreciation. The accounting concept of depreciation. Factors in the measurement of
depreciation. Methods of computing depreciation: straight line method and diminishing balance method;
Disposal of depreciable assets; change in estimate and method of charging depreciation. Accounting for
depreciation: Asset-depreciation, Asset-provision.
• Reserves and provisions: Meaning; Objective; Types & Accounting
• Capital and revenue expenditures and receipts: general introduction only.
• Adjustment and rectification
Unit-3: Introduction to Accounting Standard & Accounting theory

• Financial accounting standards: concept, benefits, procedure for issuing accounting standards in India. Need
for a global standard, IFRS (concept only).
• Introduction to Accounting Theory: Concept of accounting theory; relation with practice; GAAP; Capital –
capital maintenance concepts; Limitations of Historic Cost accounting; Introduction to Fair Value accounting
– 1 – Admission going on for B.com all Semesters. Contact office for details.
Unit-4: Final accounts of Trading Concern :
• Preparation of financial statements: of sole proprietorship business entities from a trial balance
• Manufacturing, Trading, P/L A/c and Balance Sheet
Unit- 5: Financial statements from Incomplete records and of NPO

Preparation of financial statements:
• a) from incomplete records
• b) of non-profit organisation
Unit- 6: Accounting for special sales transaction

• Consignment: Basic features; difference with sales. Recording in the books of Consignor – at cost & at invoice
price, Valuation of unsold stock; Ordinary commission. Treatment and valuation of abnormal & normal loss.
Special commission; Del credere commission (with and without bad debt) - use of Consignment Debtors A/C.
Recording in the books of Consignee
• Accounting for sale on approval
• Sectional and Self balancing ledger: Concept of sectional balancing, preparation of control accounts. Self
balancing Ledger: advantages; Recording process; preparation of Adjustment accounts.
• Insurance claim for loss of stock and for loss of profit:
Loss of stock: Physical & ownership concept; concept of under-insurance and average clause; computation of
claim – with price change; consideration of unusual selling line; price reduction etc.
• Loss of profit: Concept – insured & uninsured standing charges, GP rate, short sales and increased cost of
working, average clause and computation of claim (simple type )
Course fees for complete course

Subject's Name Marks Course fees: Faculty
Financial Accounting II 100 2500 Ravi Bhalotia
Statistics 50 2500 Ravi Bhalotia
Business law 100 1500 CA Shruti Mam
Abhishek Sir 50 1500 Abhishek Sir
Principal of Management 100 1500 Rhythm Sir
 Discount: 20 % Discount for two subjects or More

 50% Group Discount for 5 students or more
Chapter 1: Depreciation
[10 Marks]
Meaning of ‘Depreciation’
1. Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable assets
arising from use, effluxion of time or obsolescence through technology and market changes.
2. Depreciation is allocated so as to charge a fair proportion of the depreciable amount ion each
accounting period during the expected useful life of the asset.
3. Depreciation includes amortization of assets whose useful life is predetermined.
Methods of Depreciation
Straight Line / Equal Installment Method
Cost of the Asset – Residual Value
Annual Depreciation
Estimated Economic Life
OR
Cost (including Installation charges) x Depreciation%
WRITTEN DOWN VALUE METHOD
Depreciation is computed under the written down value (wdv) method by the fallowing
formula: % of depreciation x opening wdv
Note:
In the year of purchase
Depreciation is charged from the date assets is put to use to year end
(Or date of purchase to year end)
In the year of sale
Depreciation is charged from the year beginning to date of sale.
Change in Depreciation method

Retrospective Effect:
1. Calculate the difference between the aggregate depreciation under existing method (as per step 1)
and that under new method (as per Step 2)
2. Adjust the short depreciation (excess of Step 2 over Step 1) by debiting profit & loss Adjustment
Account and crediting the Asset Account
OR
Adjust the excess depreciation (excess of Step 1 over step 2) by debiting Asset Account and
crediting profit & loss Adjustment Account.
3. Charge depreciation from the current accounting year and onwards by adopting new method.
Prospective Effect:
Step 1: Charge depreciation from the current accounting year and onwards by adopting new method.
1. Depreciation: [S.L.M Method] *
On 1st January, 2018, machinery was purchased by X for ₹ 50,000. On 1st July, 2019, additions were made to
the extent of ₹ 10,000. On 1st April, 2020, further additions were made to the extent of ₹ 6,400. On 30th June,
2021, machinery, original value of which was ₹ 8,000 on 1st January, 2018, was sold for ₹ 6,000. Depreciation
is charged @ 10% p.a. on original cost. Show Machinery Account for the years from 2018 to 2021 in the books
of X. X closes his books on 31st December.
Solution:
In the Books of X
Dr. Machinery Account Cr.
Date Particulars Amount Date Particulars Amount
₹ ₹
1.1.18 To Bank A/c (Purchase) 50,000 31.12.18 By Depreciation A/c 5,000
31.12.18 By Balance c/d 45,000
50,000 50,000
45,000 By Depreciation A/c 5,500
1.1.19 To Balance b/d 31.12.19
1.7.19 To Bank A/c (Purchase) 10,000 31.12.19 By Balance c/d 49,500
55,000 55,000
49,500 6,480
1.1.20 To Balance b/d 31.12.20 By Depreciation A/c
1.4.20 To bank A/c (Purchases) 6,400 31.12.20 By Balance c/d 49,420
55,900 55,900
49,420 6,000
1.1.21 To Balance b/d 1.1.21 By Bank A/c (Sale)
30.6.21 To Profit & Loss A/c [Note] 800 30.1.21 6,240
By Depreciation A/c[Note]
(Profit on Sale)
31.12.21 By Balance c/d 37,980
50,220 50,220
Working Notes:
2018 2019 2020 2021
On Purchase of ₹50,000 on 1.1.18 5,000 5,000 5,000 (10% of 42,000) = 4,200
(10% of 8,000 For ½ year ) = 400
On Purchase of ₹ 10,000 on --- 500 (for 1,000 1,000
1.7.19 half year)
On Purchase of ₹ 6,400 on --- --- 480 (for 9 640

months)
1.4.20
Annual Depreciation 5,000 5,500 6,480 6,240
1. Profit / Loss on sale
original cost (1.1.18) ₹ 8,000
Depreciation from 1.1.18 to 30/06/2021 ₹ 2,800
Depreciated value ₹ 5,200

∴ Profit on sale = Selling Price – Depreciated value = ₹ 6,000 – ₹ 5,200 = ₹ 800
2. Depreciation: (Straight line Method)

Kalyani Industries depreciates its machinery at 10% p.a. on straight line basis. On 1st April, 2020 the balance in
Machinery Account was ₹ 8,50,000 (original cost ₹ 12,00,000). On 1st July, 2020 a new machine was
purchased for ₹ 25,000. On 31st December, 2020 an old machine having written down value of ₹ 40,000 on
1.4.2009 (original cost ₹ 60,000) was sold for ₹ 30,000. Show the Machinery Account for the year ended on
31st March, 2021.
Solution:
In the books of Kalyani Industries
Date Particulars ₹ Date Particulars ₹

1.4.2020 To Balance b/d 8,50,000 31.12.2020 By Bank A/c (sale of old 30,000
machine)
1.7.2020 To Bank A/c 31.12.2020 By Depreciation A/ c

(new machine) 25,000 (Note 2) 4,500
31.12.2020 By Profit & Loss A/c 5,500

(Note 2)
31.3.2021 By Depreciation A/c 1,15,875
(Note 1)
31.3.2021 By Balance c/d 7,19,125
8,75,000 8,75,000
Working Notes:
(1) Calculation of Depreciation for 2020-21
₹
Opening Balance (original) 12,00,000
Less: Original cost of machine sold 60,000
Balance cost of old Machine 11,40,000
Depreciation @ 10% p.a. (old machine) 1,14,000
Depreciation for 9 months (new machine) 1,875
Total Depreciation for 2020-21 1,15,875
(2) Calculation of loss on sale of Machinery

₹
Written down value on 1.4.2020 40,000
Less: Depreciation (@ 10% p.a. on ₹ 60,000 for 9 months) 4,500
Written down value on 31.12.2020 (Date of sale) 35,500
Less: Sale value 30,000
Loss on sale 5,500
3. Depreciation: (Written down Value Method)
A firm purchased on 1st January, 2020 certain machinery for ₹ 5,82,000 and spent ₹ 18,000 on its erection. On
July 1, 2020 another machinery for ₹ 2,00,000 was acquired. On 1st July, 2021 the machinery purchased on 1st
January, 2020 having become obsolete was auctioned for ₹ 3,86,000 and on the same date fresh machinery was
purchased at a cost of ₹ 4,00,000. Depreciation was provided for annually on 31st December at the rate of 10
per cent p.a. on written down value. Prepare machinery account.
Solution:
₹ ₹
1.1.20 To Bank A/c (Purchase) 5,82,000 31.12.20 By Depreciation A/c (note) 70,000
1.1.20 To Bank A/c (Erection 18,000 31.12.20 By Balance c/d 7,30,000
charges)
1.7.20 To Bank A/c (Purchase) 2,00,000
8,00,000 8,00,000
7,30,000
1.1.21 To Balance b/d 1.7.21 By Bank A/c (Sale) 3,86,000
4,00,000 By Depreciation on Machine 27,000

1.7.21 To Bank A/c (Purchase)
1.7.21 sold
To Profit & Loss A/c [Note] 1,27,000
1.7.21
(Loss on Sale)
39,000
31.12.21 By Depreciation A/c[Note]
31.12.21 By Balance c/d 5,51,000
11,30,000 11,30,000
Working Notes:
Machine I (₹) Machine II (₹) Machine III (₹)

Cost 6,00,000 2,00,000 4,00,000
Depreciation for 2020 (60,000) (10,000) ---------
(for 6 months)
(July to December)
Written Down Value 5,40,000 1,90,000
Depreciation for 2021 (27,000) (19,000) (20,000)

(for 6 months) (for 6 months)
(Jan to June) (July to December)
Written Down Value 5,13,000 1,71,000 3,80,000
Sale Proceeds (3,86,000)
Loss on Sale 1,27,000
4. Depreciation: (Change of Method)
M/s Anshul commenced business on 1st January 2017, when they purchased plant and equipment for ₹
7,00,000. They adopted a policy of charging depreciation at 15% per annum on diminishing balance basis and
over the years, their purchases of plant have been:
1-1-2018 ₹ 1,50,000
1-1-2021 ₹ 2,00,000
On 1-1-2021 it was decided to change the method and rate of depreciation to 10 % straight line Method.
Calculate the difference in depreciation to be adjusted in the Plant and Equipment Account till 31.12.2020 and
prepare Plant & Equipment Account for the year 2021.
Solution:
(i) Computation of Total Depreciation under 15 % WDV (Old Method)
Purchased on Purchased on Total
Jan. 1, 2017 Jan. 1, 2018 Depreciation
₹ ₹ ₹
Cost as on 1.1.2017 7,00,000
Depreciation for 2017 (1,05,000) 1,05,000
Written Down Value (WDV) as on 1.1.2018 5,95,000
Cost as on 1.1.2018 - 1,50,000
Depreciation for 2018 ( 89,250) (22,500) 1,11,750
W.D.V. 5,05,750 1,27,500
Depreciation for 2019 (75,863) (19,125) 94,988
W.D.V. 4,29,887 1,08,375
Depreciation for 2020 (64,483) (16,256) 80,739
W.D.V. 3,65,404 92,119 3,92,477
(ii) Computation of Total Depreciation under 15 % SLM (New Method)
Machine 1 [2017 to 2020] [7,00,000 x 10 % x 4] 2,80,000

Machine 2 [2018 to 2020] [1,50,000 x 10 % x 3] 45,000
Total Depreciation 3,25,000
Excess deprecation to be cancelled ( 3,92,477 – 3,25,000) 67,477
Dr. (iii) Machinery Account Cr.

₹ ₹
4,57,523
To Balance b/d By Depreciation A/c
1.1.21 1,05,000
(3,65,404 + 92199) 31.12.21 (10,50,000 x 10 %)
2,00,000 By Balance c/d 6,20,000
1.1.21 To Bank (Purchase) 31.12.21
To Profit & Loss Ajustment 67,477
31.12.21
A/c
7,25,000 7,25,000
5. Depreciation: [S.L.M Method] [Compiled by Ravi Bhalotia]*
B Co. Ltd. purchased machinery as follows:
Date of Purchase Cost of Machine (in ₹ )
1.4.2019 60,000
1.10.2020 40,000
1.7.2021 20,000
On 1.1.2021, one-third of the machinery which was purchased on 1.4.2019, became obsolete and was sold for ₹ 6,000.
The machinery was to be depreciated by Fixed Instalment Method 10% p.a. Show how the Machinery Account
would appear in the Ledger of the Company for the years 2019, 2020 and 2021. Assume that the accounting year
ends on 31st Dec.
[Ans. Depreciation 2019-₹ 5,500; 2020-₹ 11,000; 2021 - ₹ 10,000, Loss on Sale ₹ 10,500; Balance of
Machinery as on 31.12.21: ₹ 77,000]
6. Depreciation: [S.L.M Method] [Compiled by Ravi Bhalotia]*

A trader purchased a machine on 1st July, 2020 at a cost of ₹ 50,000. The scrap value of the machine was
estimated at ₹ 5,000 and its life at 10 years. On 1st January, 2021 another machine of same type was purchased
at a cost of ₹ 22,000. The scrap value of the machine was estimated at ₹ 3,000 and its life at 10 years. The
installation costs of the first and the second machines were ₹ 5,000 and ₹ 1,000 respectively. Show the
machinery account for 2020 and 2021 assuming books are closed on 31st December every year
[Ans. Depreciation 2018-₹ 2,500; 2019- ₹ 7,000; Balance of Machinery as on 31.12.19 : ₹ 68,500]
7. Depreciation: [S.L.M Method] [2019 1st sem Pass]*

A trader purchased a machine on 01.04.2018 at a cost of ₹ 2,00,000 and installed it at a cost of ₹ 20,000. The
scrap value of the machine was estimated at ₹ 20,000 and its effective life at 5 years. On 01.04.2020 the
machine was sold for ₹ 1,20,000 and another machine of the same type was purchased at a cost of ₹ 1,00,000
on that date. Installation cost of the machine is ₹ 4,000. The scrap value of this machine was estimated at ₹
14,000 and its life at 10 years. Show Machinery Account for the years 2018-19, 2019-20 and 2020-21 in the
books of the trader.
8. Depreciation: [S.L.M Method] [2017 1st sem Honours]*

Mr. X is engaged in car rental business. On 1.4.2019 he purchased 3 second-hand motor cars at 3,00,000 each
and paid ₹ 60,000 each for overhauling and reconditioning of each of the car purchased, which was completed on
30.4.2019. these cars were put to use from 1.5.2019. He writes off depreciation @ 20% p.a. on original cost
from the date cars were put to use and close books on31st December every year.
On 1.10.2021, one car is completely destroyed in a road accident and a sum of ₹ 1,70,000 is received from the
insurance company in settlement of the claim. On the same day he purchased 3 new cars at ₹ 6,00,000 each and
put to use from that date.
Prepare Motor car account from 2019 to 2021 in the books of Mr. Working notes should form part of the
answer.
9. Depreciation: [S.L.M Method] [2018 1st sem General]*
On 01.01.2019 Mr. A Purchased Machinery worth ₹ 1,50,000. On 01.07.2020 Mr. A Purchased another
Machinery worth ₹ 30,000. On 01.01.2021 Machinery Worth ₹ 24,000 purchased on 1.1.2019 was sold for ₹
18,000. Depreciation to be charged @ 10% under Straight line Method. Prepare Machinery Account For
2019, 2020 and 2021. (year ending for this enterprise is 31st December.)
10. Depreciation: [C.U. B.Com 2007] [S.L.M Method] *

On April 1, 2019 B. Sarkar and Co. bought a machine at ₹ 80,000. The Company had to pay ₹ 5,000 as its
installation charges. On July 1 of the same year another machine was bought at ₹ 1,00,000.
On 30th June, 2021 the first machine was sold out for ₹ 65,000 to replace a new machine costing ₹ 1,00,000.
Show the Machinery A/c as it would appear in the books of the Company during all these years upto 31st
December, 2021 assuming that the books of accounts are closed on 31st December every year and Depreciation
is to be written off @ 10% p.a. on the original cost of these machines.
[Ans. Balance of Machinery Account as on 31.12.21 ₹ 1, 70,000; Annual Depreciation; 2021 ₹ 11,375,
2018 ₹ 18,500, 2019 ₹ 4,250 on machinery sold and ₹ 15,000 on machinery other than sold; Loss on sale
of Machinery ₹ 875.]
11. Depreciation: [C.U. B.Com 2012 supplementary] [S.L.M Method] *

On 1.1.2018 Ronald company Ltd. purchased a machine for ₹ 10,000. On 1.7.2018 the company again
purchased another machine for ₹ 5,000. On 1.7.2019, the machine purchased on 1.1.2018 was sold for ₹
4,000. On 1.7.2019 a new machine was bought for ₹ 12,000. On the same day the machine purchased on
1.7.2018 was sold for ₹ 4,200. Depreciation was provided @ 10% p.a. on Straight Line Method. Show the
Machinery Account on the basis of Ronald Ltd. upto 31.12.2021.
[Loss on sale: 4500, closing balance on 31.12.2019: ₹ 10,200]
12. Depreciation: [S.L.M Method] *

On 1st January, 2018, machinery was purchased by X for ₹ 50,000. On 1st July, 2019, additions were made to
the extent of ₹ 10,000. On 1st April, 2020, further additions were made to the extent of ₹ 6,400. On 30th June,
2021, machinery, original value of which was ₹ 8,000 on 1st January, 2018, was sold for ₹ 6,000. Depreciation
is charged @ 10% p.a. on original cost. Show Machinery Account for the years from 2018 to 2021 in the books
of X. X closes his books on 31st December.
[Profit ₹ 800, Book value: 37,980]
13. Depreciation: [S.L.M Method] [2020 1st sem Hons]*

ABC Industries depreciates its machines @10% p.a. on straight line basis. On 1st April, 2020 the balance in
purchased for ₹ 50,000. On 31st December, 2020 an old machine having w.d.v of ₹ 80,000 on 01 04.2020
(original cost ₹ 1,20,000) was sold for ₹ 60,000. Show the Machinery Account for the year ended 31st
March, 2021.
14. Depreciation: [W.D.V Method] [2019 1st sem Hons]*
ABC Ltd. purchased of the following machines:
₹
On 1st January, 2020 40,000
On 1st July, 2020 20,000
On 1st October, 2021 10,000
Depreciation was provided @ 10% p.a. under the diminishing balance method. The machine purchased on
1st July, 2020 was sold on 31st March, 2021 at ₹ 15,000.
Show the Machinery accounts in the books of ABC Ltd. for the year 2020 and 2021 assuming that accounts
are closed on 31st December every year.
[Depreciation — 2020 ₹ 5,000 ; 2021 ₹ 475 on machine sold and ₹ 3,850 on others. Loss on sale ₹ 3,525.
Balance of Machinery A/c on 31.12.19 ₹ 42,150]
15. Depreciation: [W.D.V Method] [2018 1st sem Hons]*

Plant and Machinery having value of ₹1,00,000 was bought on 1st January, 2018. On 15th July, 2019 a new
machine was purchased for ₹ 40,000. Installation charges paid for this machine was ₹ 5,000. The machine
(bought on 15th July, 2019) was sold at a profit of ₹ 7000 on 1st September, 2021. Write up the Plant and
Machinery Account for the four years ended 31st December, 2021 providing 10% p.a. depreciation under
Diminishing Balance Method.
16. Depreciation: [W.D.V Method] [Compiled by Ravi Bhalotia]***

The book value of plant and machinery of a firm shows ₹ 2,40,000 on 1st January, 2021. The same includes the
depreciated value of a machine purchased on 1st January, 2016 for ₹ 30,000. It was sold on 1st April, 2021 for ₹
14,900. On the same date a new machine was purchased for ₹ 40,000.
Show the plant and machinery account for the year 2021 assuming depreciation is charged @ 10% p.a. under
diminishing balance method. [Depreciation for 2019 : ₹ 443 on machinery sold and ₹ 25,229 on others.
Loss on sale ₹ 2,372. Balance of Plant and Machinery A/c on 31.12.19 ₹ 2,37,056]
17. Depreciation [B.U. B.Com (P)] [W.D.V Method]**

The book value of plant and machinery of a firm shows ₹ 2, 00,000 on 1st January, 2021. One of the machinery
which was purchased on 1st January, 2016 at ₹ 20,000 is sold for ₹ 9,000 on 30th June, 2021. In place of this
machine, another new machine was purchased at ₹ 30,000 on 30th September, 2021.
Show Plant & Machinery Account in the ledger for 2018 charging depreciation @ 10% p.a. on diminishing
balance method. (Year ending date 31st December).
[Ans. Depreciation ₹ 590.50 on machinery sold and ₹ 19,569 on others; Loss on sale ₹ 2,219.30; Balance
of Plant & Machinery A/c on 31.12.18 ₹ 1, 98,621]
18. Depreciation: [W.D.V Method] [2015 Honours]***

Plant and Machinery to the value of ₹ 40,000 was purchased on 1st January, 2018. On 1st July, 2021 the
machinery was replaced by a new machine costing ₹ 52,000, the vendor taking the old Machine in part
exchange at a valuation of ₹ 8,200. Write up the Plant and Machinery Account for the four years ended 31st
December, 2021 providing for deprecation by writing 10% off the diminishing value of the Plant and
Machinery employed at the end of each year.
19. Depreciation: [Change of Method] [SLM to WDV]
A firm purchased a Motor Lorry for ₹ 1,80,000 on 1st April. 2019. They used to write off depreciation @ 15%
on the original cost. In 2021 the firm decided that the depreciation should be on the basis of 20% under reducing
balance method with effect from 1st April, 2019, any difference in depreciation upto 31st December, 2020
should be adjusted through Profit & Loss Account. Show Motor Lorry Account for the first three years ending
31st December, 2021.
[Additional Depreciation ₹ 10,350; Balance of Motor Lorry account on 31.12.2001 ₹ 97,920]
20. Depreciation: [Change of Method] [B.com 2016 H] [SLM to WDV]

M/S ABC Concern purchased machinery for ₹ 1, 80,000 on 1st January, 2018 and followed straight line method
of depreciating the machine charging depreciation @ 15% p.a. On 1.1.2021 it was decided to follow the
diminishing balance method charging depreciation @ 10% p.a. from the date of purchase of the machinery and
the necessary adjustment for change of method of depreciation to be made as on 31.12.2021.
Prepare the Machinery Account for the year 2018 to 2021. Show the detailed workings.
21. Depreciation: [Change of Method] [B.com 2012] [WDV to SLM]

A company purchased machinery for ₹ 60,000 on 1st January, 2018 and followed the Diminishing Balance
Method of charging depreciation @ 15% p.a. At the end of 2021, it was decided to follow the straight line
Method of depreciation the machine at ₹ 6,000 per year from the date of purchase of the machinery and the
necessary adjustment for change of method of depreciation to be made in 2021.
Prepare the Machinery Account for the year 2018 to 2021. Show the necessary working in detail.
22. Depreciation: [Change of Method] [WDV to SLM]

Basab purchased a machine worth ₹ 1,00,000 on 1.4.2017. The life is estimated at 10 years and the scrap value
after the period is estimated at ₹ 10,000. Depreciation @ 10% is charged on it under Diminishing Balance
Method. On 31st March, 2021, it is decided to charge depreciation under Straight Line Method with effect from
1.4.2017 instead of Diminishing Balance method. The difference in depreciation upto 31.3.2020 is to be adjusted
through Profit & Loss Account for the year ended on 31.3.2021. Show Machinery A/c during these years.
23. Depreciation: [Prov. for Depreciation] [Compiled by Ravi Bhalotia]**

Goutam & Co, whose books are closed on 31st December, purchased a machine for ₹ 1,50,000 on 1st January
2019. Additional machinery was acquired for ₹ 50,000 on 1st July 2019. Certain machinery, which was
purchased for ₹ 50,000 on 1st July, 2019 was sold for ₹ 30,000 on 30th June 2021. Prepare Machinery Account
and Accumulated Depreciation Account for all the years upto the year ending 31st December, 2021 taking into
account depreciation @ 10% p.a. on straight line method. And also show Machinery Disposal Account.
[Loss on sale ₹ 10,000]

 50% Group Discount for 5 students or more
Chapter 2: Provision for Bad debts

[10 Marks]
Journal Entries
I. Credit Sales:
Debtors A/c …………………………………..Dr.
To Sales A/c
II. Collection from Debtors:

Cash A/c …………………………………..Dr.
To Debtors A/c
III. Sales Return (Return Inward)

Sales Return A/c …………………………………..Dr.
To Debtors A/c
IV. Mutual Set off

CreditorsA/c …………………………………..Dr.
To Debtors A/c
(least amount)
V. Further Bad Debts

Bad Debts A/c …………………………………Dr.
To Debtors A/c
VI. Bad debts is adjusted with provision for bad debts

Provision for bad debts A/c ………………….Dr.
To Bad debts A/c
(Total bad debts)
VII. Provision for bad debts to be raised

Profit and loss A/c …………………………..Dr.
To provision for bad debts A/c
VIII. Discount allowed is adjusted with provision for Discount

Provision for Discount A/c ………………….Dr.
To Discount allowed A/c
IX. Provision for discount to be raised

Profit and loss A/c …………………………..Dr.
To provision for discount A/c
X. Bad Debt Recovery

Bad debt recovery A/c ……………………Dr.
To Profit and loss A/c
Dr. Debtors Account (If closing Balance given) Cr.
Cl. Date To Bal. b/d **** Cl. Date By Bad Debts A/c (further) ***
Cl. Date By Balance. c/d ***
**** ****
Dr. Bad Debts Cr.

? To Debtors A/c (during *** Cl. Date By Provision for Bad Debts ***
the year) *** A/c
Cl. Date To Debtors A/c (Further)
*** ***
Dr. Discount Allowed Cr.

? To Debtors A/c *** Cl. Date By provision for discount ***
A/c
*** ***
Dr. Provision for bad debts Cr.

Cl. Date To Bad debts A/c *** Op. Date By balance b/d ***
Cl. Date To Bal c/d *** Cl. Date By P/L A/c ***
(closing balance) (balancing figure)
*** ***
Dr. Provision for discount allowed Cr.

Cl. Date To discount allowed A/c *** Op. Date By balance b/d ***
Cl. Date To Bal c/d *** Cl. Date By P/L A/c ***
(closing balance) (balancing figure)
**** ****
Dr. Profit and loss (Extract) for the year ended ……. Cr.
Particulars Amount Particulars Amount
To provision for bad debt A/c *** By bad debt recovery A/c ***
To provision for discount A/c ***
Working notes
Debtors (closing balance) ****
(-) Further bad debts ****

****
(-) provision for bad debts @ x % on above ****
****
(-) Provision for Discount @ y % on above ***
****
1. Provision for Bad Debts: [B.Com 2015 Pass]***
On 01.01.2021, Bapu & Co. had the following balances :
Sundry debtors ₹ 60,000 and Provision for doubtful debts ₹ 3,000.
During the year ending 31.12.2021, B. Sen sold goods on credit amounting to ₹ 15,00,000. During the year
customers returned goods of ₹ 5,000, while the firm collected in cash from debtors ₹ 12,00,000, allowed
discounts of ₹ 2,000 and received acceptance (B/R) amounting to ₹ 2,00,000. The firm could not collect ₹
5,000 from debtors and had to write off the amount. It was decided to maintain provision for doubtful debts
@ 5 % on debtors as on 31.12.2021.
You are required to show Sundry Debtors and Provision for doubtful debts accounts.
Solutions.
In the Books of Baptu & Co.
Dr. Sundry Debtors A/c Cr.
₹ ₹
1.1.21 To Balance b/d 60,000 1.1.21 By Cash A/c 12,00,000
1.1.21 To Sales A/c 15,00,000 to By Return Inward A/c 5000
To 31.12.21 By Discount Allowed A/c 2,000
31.12.21 By Bills Receivables A/c 2,00,000
By Bad Debts A/c 5,000
31.12.21 By Balance c/d 1,48,000
15,60,000 15,60,000
1.1.22 To Balance b/d 1,48,000
Dr. Provision for Doubtful Debts Account Cr.

₹ ₹
31.12.21 To Bad Debts A/c 5,000 1.1.21 By Balance b/d 3,000
31.12.21 To Balance c/d 7,400 31.12.21 By Profit & Loss A/c 9,400
[5% of ₹ 1,48,000] (Balancing Figure)
12,400 12,400
1.1.22 By Balance b/d 7,400
2. Provision for Bad Debts: [Compiled by Ravi Bhalotia]****
Sri Sovanlal chatterjee a trader, maintains provision for doubtful debts @ 5% and Provision for
discount on debtors @ 2%. On 1.1.2021, he had balances in these two accounts ₹ 3,000 and ₹ 1,000
respectively. The following particulars are available from his Trial Balances as on 31.12.2020 and
31.12.2021.
31.12.2020 31.12.2021
₹ ₹
Bad debts written off 3,600 600
Discount allowed 1,200 400
Sundry Debtors 40,000 12,000
Prepare Bad Debts, Discount Allowed, Provision for doubtful debts A/c and Provision for discount on
debtors A/cs in the books of Abinash for the years 2020 and 2021.
[Ans. Charge to P/L for P/B/D ₹ 2;600, (-) ₹ 800, Prov. for Discount. ₹ 760, (-) ₹ 132]
Solution:
Books of Sovanlal Chatterjee
Dr. Bad Debts Account Cr.
₹ ₹
? To Sundry Debtors A/c 3,600 31.12.2020 By Provision for Doubtful 3,600
(Written off) Debts A/c (Transfer)
? To Sundry Debtors A/c 600 31.12.2021 By Provision for Doubtful 600
(Written off) Debts A/c (Transfer)
Dr. Discount Allowed Account Cr.

₹ ₹
? To Sundry Debtors A/c 1,200 31.12.2020 By Provision for Discount on 1,200
(Written off) Debtors A/c (Transfer)
? To Sundry Debtors A/c 400 31.12.2021 By Provision for Discount on 400
(Written off) debtors A/c (Transfer)
Dr. Provision for Bad Debts Account Cr.
₹ ₹
31.12.2020 To Bad Debts A/c 3,600 1.1.2020 By Balance b/d 3,000
31.12.2020 To Balance c/d 2,000 31.12.2020 By Profit & Loss A/c 2,600
[5% of 40,000] (Balancing Figure)
5,600 5,600
31.12.2021 To Bad Debts A/c 600 1.1.2021 By Balance b/d 2,000
31.12.2021 To Profit & Loss A/c 800
(Balancing Figure)
31.12.2021 By Balance c/d 600
[5% of 12,000]
2,000 2,000
Dr. Provision for Discount on Debtors Account Cr.

₹ ₹
31.12.20 To Discount Allowed A/c 1,200 1.1.2020 By Balance b/d 1,000
31.12.20 To Balance c/d 760 31.12.2020 By Profit & Loss A/c 960
[2% of (40,000 – 2,000)] (Balancing Figure)
1,960 1,960
31.12.21 To Discount Allowed A/c 400 1.1.2021 By Balance b/d 760
31.12.21 To Profit & Loss A/c 132
[Note]
31.12.21 By Balance c/d 228
[2/10 of (1200 – 600)]
760 760
Note:
• The existing Provision for Doubtful Debts (Rs. 2,000) after adjusting bad Debts (Rs. 600) is more
than the new Provision (Rs. 600). Similarly Provision for Discount allowed exceeds by ₹ 132.
Hence, Provision for Bad Debts A/c ……………….Dr. 800
To P/L A/c 800
Similarly, Provision for Discount allowed A/c …………Dr. 132
To P/L A/c 132
3. Provision for Bad Debts [1st Sem 2017 General]
The following information has been extracted from the books of Das Enterprise.
Balance of Provision for Bad debts on 01.01.21 ₹ 2,500
Bad debts written off during the year ₹ 1,800
Sundry Debtors on 31.12.21 ₹ 34,000
Of the Debtors ₹ 1,000 was bad and hence to be written off. Provision for Bad debts to be made @ 10%
on Debtors.
4. Provision for Bad Debts [1st Sem 2018, 2013 General]

The following is the extract from the Trial Balance of Mr. M. Roy as on 31st December 2021.
Particulars Dr. Cr.
₹ ₹
Bad Debts 8,000 -
Sundry Debtors 3,00,000 -
Provision for Bad & Doubtful debts - 12,000
It is desired to maintain a provision of 5% for Bad and Doubtful Debts.
Prepare Bad debts Account and Provision for Bad and Doubtful Debts Account. Also show how the relevant
items would appear in the Profit and Loss Account and Balance Sheet.
5. Provision for Bad Debts [1st Sem 2019 General]

Sri Dulal Chatterjee maintains provision for doubtful debt @ 5% and Provision for discount on debtors @ 2%.
On 01.01.21 he had balances in these accounts ₹ 3,000 and ₹ 1,140 respectively. The following particulars are
available from his trial balances as on 31.12.2021.
₹
Bad Debt written off 3,600
Discount Allowed 1,200
Sundry Debtors 40,000
Prepare Bad Debt Account and Provision for Bad Debt Account for the year 2021.
6. Provision for Bad Debts: [Compiled by Ravi Bhalotia]***

The following figures appear in the books of Mr. X:
2020 ₹
June 1. Provision for Doubtful Debts 1,350
Provision for Discount Allowed 620
Bad Debts written-off during the year 395
Discount allowed during the year 845
Bad Debts recovered during the year 75
2021
May 31. Sundry Debtors 11,170
Write-off further ₹ 240 (judged completely irrecoverable). Maintain the provision for doubtful debts @ 10 %
and provision for discount allowed @ 2%.
You are required to show the Bad Debts Account, Provision for Doubtful Debts Account. Discount Allowed
Account and Provision for Discount Allowed Account for the year in question.
[Transferred to P & L A/c for Prov. for Bad Debts ₹ 378; for Prov. for Discount on Debtors ₹ 422]
7. Provision for Bad Debts: [B.Com 2016 Honours]***
A company maintains its Provision for Bad Debts @ 5% and Provision for Discount on Debtors @ 3%. From
the following particulars you are required to show (i) Provision for Bad Debts Account (ii) Provision for
Discount on Debtors Account for the year 2021.
Bad Debts – ₹ 800; Discount Allowed – ₹ 1,200; Recovery of Bad Debts written off in earlier years ₹ 500.
Sundry Debtors (before writing off bad debts and allowing discounts) amounted to ₹ 60,000 as on 31st
December, 2021. On 1.1.2021, Provision for Bad Debts was ₹ 4,550 and Provision for Discount on Debtors was
₹ 800.
8. Provision for Bad Debts: [B.Com 2015 Pass]***

On 01.01.2021, B. Sen had the following balances :
Sundry debtors ₹ 1,20,000 and Provision for doubtful debts ₹ 6,000.
During the year ending 31.12.2021, B. Sen sold goods on credit amounting to ₹ 15,00,000. During the year
customers returned goods of ₹ 5,000, while the firm collected in cash from debtors ₹ 12,00,000, allowed
discounts of ₹ 2,000 and received acceptance (B/R) amounting to ₹ 2,00,000. The firm could not collect ₹
5,000 from debtors and had to write off the amount. It was decided to maintain provision for doubtful debts
@ 5 % on debtors as on 31.12.2021.
You are required to show Sundry Debtors and Provision for doubtful debts accounts.
9. Provision for Bad Debts [1st Sem 2020 Hons, 2014 Pass]
Trial Balance as on 31.12.2020 of Mr. R. Sen contains the following items :
Provision for doubtful debts ₹ 15,000
Bad debt ₹ 10,000
Sundry Debtors ₹ 1,40,000
On enquiry it was ascertained that Debtors include :
(i) ₹ 20,000 due from S. Roy and Creditors include ₹ 15,000 due to S. Roy.
(ii) ₹ 8,000 due on account of sale of furniture.
(iii) Bad debts ₹ 8,000.
Prepare Provision for doubtful debt Account and Bad debt Account. Provision for doubtful debts is to
be created at 5% on trade debtors.
10. Provision for Bad Debts [1st Sem 2019 Hons, 2015 Hons]
On 31st December, 2020 Sundry Debtors and Provisions for Bad debts stood at ₹ 90,000 and ₹ 6,750
respectively. During the year 2021 Bad Debts amounting to ₹ 4,560 were written off. On 30th June, 2021 an
amount of ₹ 580 was received on account of a debt written off as bad last year. The Debtors list on 31st
December, 2021 was verified and it was found that amongst Sundry Debtors amounting to ₹ 65,940, an amount
of ₹ 940 was to be written off as bad. It was decided to maintain the provision for bad debts at the same
percentage as it was on 31st December, 2020. Prepare Bad Debts Account and Provision For Bad Debts
Account. Also show how the relevant items would appear in the Profit And Loss Account and Balance
Sheet as on 31.12.2021.
11. Provision for Bad Debts: [Compiled by Ravi Bhalotia]****
Abinash is a trader. He maintains provision for doubtful debts @ 5% and Provision for discount on
debtors @ 2%. On 1.1.2021, he had balances in these two accounts ₹ 6,000 and ₹ 2,000 respectively.
The following particulars are available from his Trial Balances as on 31.12.2020 and 31.12.2021.
31.12.2020 31.12.2021
₹ ₹
Bad debts written off 7,200 1,200
Discount allowed 2,400 800
Prepare Provision for doubtful debts A/c and Provision for discount on debtors A/cs in the books of
Abinash for the years 2020 and 2021.
12. Provision for Bad Debts [1st Sem 2018 Hons]

Saha Bros. has commenced a bakery business on 01.04.2019. During 2019-20 the firm was unable to recover a
considerable amount from its customer and subsequently at the end of the year; the firm has decided to create
Provision for Bad Debt @ 10 % to cope up with the future bad debt losses. The following information was
further obtained from its records:
₹
31.03.2020 Debtors balance 2,20,000
Bad debts written-off during the year 46,000
Bad debt to be written off 32,000
Recovery of Bad debts 6,000
You are required to prepare Bad Debt A/c and Provision for Bad Debt A/c for two consecutive years 2019- 20
and 2020-21.
13. Provision for Bad Debts**

In a business, Sundry debtors were ₹ 45,000 at the beginning of the year and provisions were made at 5 % for
bad debts and 2 % for discount allowed. During the year total sales were made for ₹ 2,60,000, 40 % of which
were in cash. Actual bad debts written off during the year were ₹ 2,000 and the discounts allowed were ₹ 1, 200;
collections from debtors amounted to ₹ 1,45,000. At the end of the year it is known that the debtors include ₹
3,000 due from a customer to whom amount due is ₹ 1,800.
Prepare Provision for Bad Debts and Provision for Discount Allowed Accounts assuming provisions are
maintained at the same rate as earlier.
[Provision required for bad debts ₹ 2,550 and for discount allowed ₹ 969.]

Ch. 3: Insurance claim [10 M]

Loss of stock
Step-1:
Memorandum Trading A/c
(From year beginning to Date of fire)
To opening stock By sales (Net)

To purchases (net) By closing stock (on the date of
fire) (Balancing figure)
To wages
To carriage inward
To manufacturing expenses
To commission on purchase
To Gross profit
(sales X G.P % on sales)
Step -2: Computation of Gross Claim

Closing stock on the date of fire ***
(-) salvage (Cost Price of stock saved + Expected Sales value of damaged goods) ***
Stock destroyed by fire ***
(+) Fire fighting Expenses (if any) ***
Gross claim ***
Step 3: Computation of Net claim

1. If policy value (sum assured) ≥ closing stock, Net claim=Gross claim
2. If policy value < closing stock, then average clause is applicable.
Net claim= Gross claim X (Policy value/Closing Stock)
If Gross profit % on cost is given:-

On cost on sales
20% =
25% =
33 % = 25%
If GP% is not given: -

Prepare Trading A/c for last year. Balancing figure = Gross Profit
Gross profit% = (Gross Profit/Sales) x 100
Loss of Profit
Steps:
(a) Dislocation period (b) Short sales (c) GP % (d) Loss of G.P= Short sales X GP % (e) Additional
expenses admitted (f) Gross claim (g) Net claim
1. Loss of stock : C.U. B.com Honours [2008, 2012, 2001] ****
The godown of Purple Ltd. caught fire on 31st March, 2021. As a result stock of goods in the godown of
the company were gutted. Goods worth ₹ 41,360 could, however, be saved from the accident. The
following particulars are supplied to you:
Stock on 1st January, 2021 60,000
Purchases to the date of fire 2,60,000
Carriage paid on purchases 1,600
Sales to the date of fire 1,80,000
Commission paid to the purchase manager at 2% on purchases. Average gross profit on sales 33 1/3%.
The company had a fire policy of ₹ 1,60,000 covering its stock of goods in the godown. The policy is
subject to average clause.
You are to ascertain (i) total loss of stock, and (ii) the amount of insurance claim to be made.
[Estimated stock on 31.3.21 ₹ 2,06,800. Stock destroyed by fire ₹ 1,65,440. Amount of claim having
regard lo average clause ₹ 1,28,000.]
Solution: Purple ltd.
Dr. Memorandum Trading Account for the period 1st January to 31st March, 2021 Cr.
Particulars ₹ Particulars ₹
To Opening Stock 60,000 By Sales 1,80,000
To Purchases 2,60,000 By Closing Stock 2,06,800

(Balancing Figure)
To Carriage on purchase 1,600
To Commission on purchase 5,200

(2,60,000 x 2 %)
To Gross Profit 60,000

(33.33% of ₹ 1,80,000)
3,86,000 3,86,800
Statement of Claim for Loss of Stock as on 31st March, 2021

Particulars ₹
Book value of Closing stock on the date of fire 2,06,800
Less: Salvage value 41,360
Loss of Stock (Gross Claim) 1,65,440
Computation of Net Claim

The insurance policy was taken for ₹ 1,60,000 but the value of stock on the date of fire was ₹ 2,06,800.
Here the policy value is less than closing stock hence, the average clause is applicable.
Net Claim = Gross Claim x (Policy Value/Value of stock on the date of fire)
= ₹ 1,65,440 x (1,60,000/ 2, 06,800) = ₹ 1,28,000
2. Loss of stock
A fire occurred in the premises of Sri. G. Vekatesh on 1.4.2013 and a considerable part of the stock was
destroyed. The stock salvaged was ₹ 28,000. Sri Venkatesh had taken a fire insurance policy for ₹
17,10,000 to cover the loss of stock by fire.
You are required to ascertain the insurance claim which the company should claim from the insurance
company for the loss of stock by fire. The following particulars are available:
Purchases for the year 2012 9,38,000 Stock on 1.1.12 1,44,000
Sales for the year 2012 11,60,000 Stock on 31.12.2012 2,42,000
Purchases from 1.1.13 to 1.4.13 1,82,000 Wages paid during 2012 1,00,000
Sales from 1.1.13-1.4.13 24,00,000 Wages paid 1.1.13-1.4.13 1,80,000
Sri Venkatesh had in June 2012 consigned goods worth ₹ 50,000, which unfortunately were lost in an
accident. Since there was no insurance cover taken, the loss had to be borne by him full.
Stocks at the end of each year for and till the end of calendar year 2011 had been valued at cost less
10%. From 2012, however there was a change in the valuation of closing stock which was ascertained
by adding 10% to its costs.
Solution:
In order to find the rate of gross profit on sales for the year 2012, the following Trading Account is to be
prepared for the same year as:
Dr. Trading Account for the year ended 31st March, 2020 Cr.
₹ ₹
To, Opening Stock 1,60,000 By, Sales 11,60,000
1,44,000 × (100/90) By, Stock lost by Accident 50,000
To, Purchases 9,38,000 By, Closing Stock (2,42,000 ×100/110) 2,20,000
To, Wages 1,00,000
To, Profit & Loss A/c (G.P. transferred) 2,32,000
14,30,000 14,30,000
Rate of Gross Profit on Sales = 2,32,000/11,60,000 × 100 = 20%
Dr. Memorandum Trading Account for the period 1st January to 31st March, 2021 Cr.
₹ ₹
To, Opening Stock 2,20,000 By, Sales 2,40,000
To, Purchases 1,82,000 By, Closing Stock 2,28,000
To, Wages 18,000
To, Profit & Loss A/c (G.P. @20% of
48,000
sales)
4,68,000 4,68,000
Amount of Gross Claim = Stock destroyed – Salvaged = ₹ 2,28,000 – ₹ 28,000 = ₹ 2,00,000

As the policy amount is less than the value of stock destroyed, average clause is applicable. Here, the amount
of claim will be:
Net Claim = Loss of Stock × (Amount of Policy / Stock at the date of fire)
= 2,00,000 × (1,71,000 / 2,28,000) = ₹ 1,50,000/-
3. Loss of stock (Poor selling goods)
On 30.09.2021 the stock of Harshvardhan was lost in a fire accident. From the available records the
following information is made available to you to enable you to prepare a statement of claim of the
insurer:
Particulars Amount (₹) Particulars Amount (₹)

Stock at cost on 1.4.2020 75,000 Sales less returns for the year ended 31.3.2021 6,30,000
Stock at cost on 31.3.2021 1,04,000 Purchase less returns up to 30.09.2021 2,90,000
Purchases less returns for the year 5,07,500 Sales less returns up to 30.09.2021 3,68,100
ended 31.3.2021
In valuing the stock on 31.03.2021 due to obsolescence 50% of the value of the stock which originally
cost ₹ 12,000 had been written-off. In May 2021, ¾th of these stocks had been sold at 90% of original
cost and it is now expected that the balance of the obsolete stock would also realize the same price,
subject to the above, G.P had remained uniform throughout stock to the value of ₹ 14,400 was salvaged.
Solution:
Dr. Memorandum Trading Account for the period 1/4/21 to 31/3/21 Cr.
Normal Abnormal Normal Abnormal
Particulars Items Items Total Particulars Items Items Total
₹ ₹ ₹ ₹ ₹ ₹
To Opening Stock 98,000 6,000 1,04,000 By Sales 3,60,000 8,100 3,68,100
,, Purchase 2,90,000 --- 2,90,000 (Less returns)
(Less: Returns) ,, Closing
Stock 1,18,000 2,700 1,20,700
,, Gross Profit 90,000 4,800 94,800
(25% on Normal
Sales)
4,78,000 10,800 4,88,800 4,78,000 10,800 4,88,800
∴ Amount of Gross Claim ₹

Stock at the date of fire 1,20,700
Less: Stock Salvaged 14,400
1,06,300
Workings:
Dr. (i) Trading Account for the year ended 31st March, 2020 Cr.
₹ ₹
To Opening Stock 75,000 By Sales (Less: Returns) 6,30,000
,, Purchase (Less: Returns) 5,07,500 ,, Closing Stock 1,10,000
,, Gross Profit 1,57,500

7,40,000 7,40,000
So, Percentage of Gross Profit on sales = (1,57,500/6,30,000) x 100 = 25%
(ii) Closing Stock
Particulars Amount (₹)
Closing Stock 1,04,000
Add: Stock Written off 6,000

1,10,000
(iii) Sale of Abnormal Items of goods = 12,000 x ¾ x 90% = 8,100
(iv) Closing Stock of Abnormal Items = 12,000 x ¼ x 90% = 2,700
4. Loss of Profit
A fire occurred on 1st July, 2021 in the premises of A. Ltd. and business was practically disorganized
up to 30th November 2021. From the books of account, the following information was extracted:
Particulars Amount
₹
Actual turnover from 1st July 2021 to November, 2021 1,20,000
Turnover from 1 July to 30 November, 2020
st th
4,00,000
Net Profit for the last financial year 1,80,000
Insured Standing Charges for the last financial year 1,20,000
Turnover for the last financial year 10,00,000
Turnover for the year ending 30 June, 2021
th
11,00,000
Total Standing Charges for the year 1,44,000
The company incurred additional expenses amounting to ₹ 18,000 which reduced the loss in turnover.
There was also a savings during the indemnity period of ₹ 4,972.
The company holds a ‘Loss of Profit’ policy for ₹ 3,30,000 having an indemnity period for 6 months.
There has been a considerable increase in trade and it has been agreed that an adjustment of 20% be
made in respect of upward trend in turnover.
Compute claim under ‘Loss of Profit Insurance’.
Solution:
(i) Dislocation Period:
Period of Disturbance(1/7/2021 to 30/11/2021) 5 Months
Indemnity period 6 Months
Dislocation Period : Least of the above (1/7/2021 to 30/11/2021) 5 Months
(ii) Computation of Short sales:

Standard Turnover (Turnover from 1st July 2020 to 30th November, 2020) ₹ 4,00,000
Add: Increase @ 20% ₹ 80,000
₹ 4,80,000
Less: Turnover of dislocation Period (Actual turnover from 1st July 2021 to Nov, 2021) ₹ 1,20,000
Short Sales ₹ 3,60,000
(iii) Rate of gross Profit on Sales
= {(Net Profit + Insured Standing Charges) / Sales of last financial year} x 100
= {(1,80,000 + 1,20,000) /10,00,000)} x 100 = 30%
(iv) Loss of Gross Profit

= Short Sales x GP %
= ₹ 3,60,000 x 30 %
= ₹ 1,08,000
(v) Additional Expenses admitted:

Least of the following:
(a) Actual amount of additional expenses incurred ₹ 18,000
(b) Gross Profit on additional sales @ 30% ₹ 36,000
(1,20,000 x 30%)
(c) Net Profit + Insured Standing Charges ₹ 16,972
× Additional Expenses
Net Profit + All Standing Charges
3,96,000
= × ₹ 18,000 = 16,972
₹ 4,20,000
Additional Expenses admitted ₹ 16,972
(vi) Computation of gross claim:

Loss of Gross Profit ₹ 1,08,000
Add: Additional Expenses admitted ₹ 16,972
₹ 1,24,972
Less: Savings in insured standing charges ₹ 4,972
Gross Claim ₹ 1,20,000
(vii) Computation of Net Claim:

Annual Turnover (Turnover for the year ending 30th June, 2021) ₹ 11,00,000
Add: Increase @ 20% ₹ 2,20,000
Adjusted Annual Turnover ₹ 13,20,000
G.P. on Annual Adjusted Turnover (13,20,000 x 30%) ₹ 3,96,000
Net Claim
= Amount of Claim x (Amount of Policy/G.P. on Annual Adjusted Turnover)
= ₹ 1,20,000 x ( ₹ 3,30,000/ ₹ 3,96,000) = ₹ 1,00,000 ₹ 1,00,000
5. Loss of Stock : [B.com 2005]****
On 17th September, 2021, a fire occurred in the premises of Mr. T, a book-seller. Most of the stocks
were destroyed, cost of salvaged stock being ₹ 11,200. In addition some stock was salvaged in
damaged condition and its value was agreed at ₹ 10,400. From Books of Accounts following particulars
were available:
Stock at close of account on 31st March, 2021 was valued at ₹ 83,500. Purchases from 01.04.2021 to
17.09.2021 amounted to ₹ 1,12,000 and sales during that period amounted to ₹ 1,54,000.
On the basis of past 3 years it appears that average Gross Profit of 33 1/3% was earned on cost. Stock
was insured for ₹ 75,000. Compute the amount of claim.
[Claim to be lodged ₹ 54,750. Estimated value of Stock (on 1.7.04) ₹ 80.000. Value of Stock lost
by fire ₹ 58,400]
6. Loss of stock : [Compiled by Ravi Bhalotia]******

The stock in the godown of a trader was destroyed by fire on 16th September, 2021. However, the trader
took out a fire policy against its stock for ₹ 40,000. The following data were available from the books of
the trader for the period from 1st January to 16th September, 2021:
₹
Opening Stock 25,000
Purchases 90,000
Purchase Return 5,000
Sales 1,68,000
Carriage Inward 15,000
Sales Return 10,000
Freight & Insurance 16,000
Expenses for extinguishing fire 2,000
It was also found that goods valuing ₹ 15,000 were purchased and took delivery before 16th September,
2021 but no entry was passed in the books. Again, a Sale of ₹ 8,000 to a customer was made and duly
entered in the books but not yet delivered till the date of fire. The rate of G.P. on cost followed in fixing up
selling price is 25 %. Amount realised from sale of damaged goods was ₹ 8,000.
You are required to draw a statement showing the amount of claim to be lodged with the Insurance
Company.
[Estimated value of stock on the date of fire ₹ 36,000; Amount of claim ₹ 30,000]
7. Loss of Stock : [B.com 2014 Honours] ****
The godown of X Ltd caught fire on 31.03.21. As a result part of the stock was destroyed. Goods worth ₹
30,000 could, however, be saved from the accident.
The following particulars are supplied to you:
₹
Stock of goods at 10% lower than the cost as on 01.01.21 1,08,000
Purchases less returns to the date of fire 2,30,000
Sales less returns to the date of fire 3,00,000
Average rate of Gross Profit on sales 33 %
Sales up to 31.03.21 included ₹ 30,000 for which goods had not been dispatched. Purchased up to 31.03.21
did not include ₹ 20,000 for which invoice had not been received from the suppliers, though goods have
been received at the godown.
The company had fire policy of ₹ 1,50,000 covering its stock of goods in the godown. The policy is subject
to Average Clause. Ascertain the amount of insurance claim to be made.
[Answer: Closing Stock ₹ 210,000; Gross Claim ₹ 160,000; Net Claim ₹ 126316]
8. Loss of stock : [C.U B.com Honours 1982] ****
There is a fire in the godown of Spark Ltd. on July 1, 2021. Stock worth ₹ 30,000 was saved. The
insurance policy was for ₹ 50,000 and there was an average clause in the policy.
(i) An average gross profit of 20% on sales is maintained by the company.
(ii) The stock is valued at 10% above cost.
The purchases and sales for first 6 months of the year were ₹ 2,10,000 and ₹ 4,50,000 respectively.
Stock on January I, 2021 was ₹ 1,48,500. The wages for that period amounted to ₹ 90,000.
Find out the amount of insurance claim.
[Cost of stock burnt ₹ 45,000 (on the assumption that the percentage given is on the basis of correct
valuation of stocks). Amount of claim (having regard to average clause) Net Claim ₹ 30,000]
9. Loss of stock [1st Semester 2017 Pass]

A fire occurred at the Godown of Royja Industries (P) Ltd. on 10.03.2021. The stock of the company was
fully insured against fire. From the following details, compute the amount of insurance claim:
Stock on 1st January, 2020 ₹ 50,000
Stock on 31 December, 2020
st
₹ 80,000
Purchases for the year 2020 ₹ 5,40,000
Sales for the year 2020 ₹ 6,80,000
Purchase for the period from 01.01.2021 to 10.03.2021 ₹ 1,80,000
Sales for the period from 01.01.2021 to 10.03.2021 ₹ 2,40,000
Gross profit rate was uniform and value of stock salvaged ₹ 15,500
10. Loss of stock [B.com 2013 Supplementary, 2016 Pass type] ***
The godown of P Ltd. Caught fire on June, 15, 2021 and as a result, stock of goods in the godown was
destroyed. Goods worth ₹ 7,200 were, however salvaged. The following particulars are supplied from the
record:
Stock at cost on 1-1-20 – ₹ 60,000, Stock at cost on 31-19-20 – ₹ 88,000, Purchases Less Returns for the
year 2020 – ₹ 5, 68,000, Sales Less Returns for the year 2020 – ₹ 7,20,000. Purchases Less Returns from
January, 1, 2021 to June, 15, 2021 – ₹ 1,80,000, Sales Less Returns from January, 1 to June, 15, 2021 –
₹ 2,46,000. Gross Profit had remained at uniform rate. Find the value of Loss of Stock.
11. Loss of stock : [Compiled by Ravi Bhalotia] ****

A fire was occurred in the store of M/s. Bhagwati Traders on 11th October, 2021. From the following
particulars compute the amount of claim to be submitted for loss of stock :
₹
Stock as on 1st April, 2020 74,800
Stock as on 31st March, 2021 66,000
Purchases for the year ended on 31st March, 2021 2,44,000
Purchases for the period 1.4.2021 to the date of fire 1,56,000
Sales for the year ended on 31st March, 2021 3,60.000
Sales for the period 1.4.2021 to the date fire 2,00,000
The concern valued its stock regularly at 10% above the cost price. Value of stock could be saved from the
heart of fire ₹ 15,000.
[Value of stock ₹ 76,000; Amount of claim ₹ 61,000; Rate of G.P. 30 % on Sales]
12. Loss of stock : [B.com 2014 Pass type] **
A fire broke out in the warehouse of Marchantile Traders Ltd. on 30th September, 2021. From the
following particulars compute the amount of claim to be submitted for loss of stock :
Sundry Debtors on 31st December, 2020 ₹ 40,000
Sundry Debtors on 30th September, 2021 ₹ 30,000
Cash received from Debtors ₹ 1,44,000
Stock on 31st December, 2020 ₹ 15,000
Purchases from 1st January, 2021 to 30th September, 2021 ₹ 1,25,000
Rate of Gross Profit to Cost of Sales 25 %
[Amount of claim ₹ 32,800; Amount of Sales ₹ 1,34,000]
13. Loss of stock***

On 13th July, 2021 a fire occurred and partly destroyed the goods of Kayjee Corporation. The cost of the
salvaged goods was ₹ 20,000. The following particulars could be obtained from books:
(a) Balance as at 31st March, 2021: ₹
Stock at cost 1, 20,000
Creditors for goods 10,000
(b) Transactions between 1 April, 2021 and 13 July 2021 were as follows:
st th
₹
Payment to Creditors for goods 62,000
Return outward 2,000
Return Inward 6,500
Carriage inward 9,000
Carriage outward 7,500
Sales 1, 10,000
(c) Unpaid Creditors for goods as on 13 July, 2021
th
₹ 8,000
All sales were made at a profit of 33 1/3% on selling price. There were no other purchases and sales.
The policy was for ₹ 90,000 and there was an average clause in the policy.
You are required to draw up a statement of claim for loss of stock on the basis of the above facts.
[Estimated value of stock on the date of fire ₹ 1, 20,000. Stock destroyed by fire ₹ 1, 00,000. Amount
of claim ₹ 75,000. Net purchase during the period 1.4.21 to 13.7.21 ₹ 60,000]
14. Loss of stock : [C.U., B.Com. (Hons.) '03]: [Poor selling goods]
On August 31st. 2021 the business house of Gupta & Co. were destroyed by a fire accident. The books
of accounts and records could, however, be saved and from these the following information were
gathered :
₹
Stock at cost on 31st March, 2020 44,390
Stock as per Balance Sheet, 31st March, 2021 37,550
Purchases, year to 31st March, 2021 1,03,900
Sales, year to 31st March, 2021 1,52,500
Purchases from 1st April, 2021 to 31st August, 2021 37,350
Sales, from 1st April, 2021 to 31st August, 2021 59,000
In valuing the stock on 3 1st March, 2021, ₹ 800 had been written off a particular line a goods which
had originally cost ₹ 1,800 and which was sold in May, 2021 for ₹ 1,750. Except as regards this
transaction, the ratio of Gross Profit has remained unchanged throughout. The value of stock salvaged
was ₹ 5,105.
You are required to ascertain the amount of claim to be put up before the Insurance Company concerned
in respect of the Loss of Stock.
[Ans. : Rate of Gross Profit on sales 27.9% ; Value of Closing Stock (31.8.21) ₹ 32,623 ; Stock lost
by fire and claim to be lodged ₹ 27,520]
15. Loss of stock : [1st Semester 2017 Honours] [Poor selling goods]
On 1.1.2021 there was a fire in the godown of M/s ABC & Co. destroying a part of stock. The entity
furnished the following information:
₹
Stock on 1.4.2019 56,000
Purchases during 2019-20 3,80,000
Sales during 2019-20 5,00,000
Stock on 31.3.20 30,000
Purchases from 1.4.2020 to 1.1.2021 2,00,000
Sale from 1.4.2020 to 1.1.2021 2,00,000
Stock on 31.3.2020 includes abnormal items costing ₹ 15,000 which was written down by ₹ 6,000. Two-
third of the abnormal items were sold on 30.6.2020 at a loss of ₹ 5,000. This amount is included in sales
during the relevant period. Balance of the abnormal items were valued at cost. Value of goods salvaged
₹ 7,000 and policy value was ₹ 50,000. Compute the insurance claim to be made by M/s ABC & co.
16. Loss of stock : [1st Semester 2019 Honours] [Poor Selling Goods]
On 7th June, 2021 the godown of a company was destroyed by fire. From the records following
particulars were extracted:
Stock as on 01.01.2020 ₹ 45,000
Stock as on 31.12.2020 ₹ 60,000
Purchases less returns as per 31.12.2020 ₹ 3,00,000
Sales less returns as per 31.12.2020 ₹ 3,73,000
Purchases less returns from 01.01.2021 to 07.06.2021 ₹ 1,25,000
Sales less returns from 01.01.2021 to 07.06.2021 ₹ 1,80,000
Poor selling goods worth ₹ 5,000 were written off while valuing closing stock as on 31.12.2020. The
original cost of goods was ₹ 8,000. A portion of this stock (original cost of which was ₹ 4,000) was sold
during March 2021 at a loss of ₹ 1,000. The balance of this stock is worth the original cost. Value of
salvage goods was ₹ 10,000. Gross profit remained at an uniform rate throughout. Compute the amout
of claim to be lodged.
17. Loss of stock : [C.U., B.Com. (Hons.) 2015]: Poor selling goods
A fire occurred in the godown of P Ltd. 20th March, 2021 destroying the entire stock. The books and
records were salvaged from which the following particulars were ascertained:
Particulars ₹
Sales for the year 2020 6,20,100
Sales for the period from 1.1.21 to 20.3.21 1,82,000
Purchases for the year 2020 4,96,600
Purchases for the period from 1.1.21 to 20.3.21 75,600
Stock on 1.1.20 1,98,640
Stock on 31.12.20 2,33,090
The company has been following the practice of valuing the stock of goods at actual cost plus 10%.
Included in the stock on 1.1.20 were some damaged goods which originally cost ₹ 1,250 but were valued at
₹ 640. These goods were sold during the year 2020 for ₹ 500. Subject to this, the rate of gross profit and the
valuation of stock were uniform.
Ascertain the value of stock destroyed.
[Ans: GP: 25%; Stock Destroyed: 1,51,000]
18. Loss of stock : [1st Semester 2018 Honours] Poor selling goods
On 09.11.21, the godown of ABC Ltd. Was destroyed by fire. The organization is insured for loss of stock
policy of ₹ 75,000 with an average clause. From the following information, prepare a Statement showing
claim to be lodged with the insurance company.
₹
Stock on 01.04.20 72,000
Wages for the year 20-21 16,000
Purchase for the year 20-21 2,84,000
Sales for the year 20-21 4,06,800
Stock on 31.3.21 64,000
Purchase from 01.04.21 to 09.11.21 1,40,000
Wages from 01.04.21 to 09.11.21 8,000
Sales from 01.04.21 to 09.11.21 1,65,200
An items of stock purchased during 19-20 at a cost of ₹ 20,000 was valued at ₹ 12,000 on 31.3.20. half of
these goods were sold during 20-21 for Rs 6,800 and remaining stock was valued at ₹ 4,000 on to be worth
40% of original cost. Stock valued ₹ 18,000 was salvaged.
19. Loss of profit : [1st Semester 2019 Pass]
The godown of U. Ltd. caught fire on 01.02.2021 and business was partially disorganized up to 30.06.2021.
From the books of accounts, the following information was extracted.
(a) Actual turnover from 01.02.21 to 30.06.21 ₹ 1,50,000
(b) Turnover from 01.02.20 to 30.06.20 ₹ 4,20,000
(c) Turnover from 01.02.20 to 31.01.21 ₹ 9,00,000
(d) Net profit for the last financial year ₹ 1,40,000
(e) Insured standing charges for the last financial year ₹ 1,12,000
(f) Total standing charges for the last financial year ₹ 1,28,000
(g) Turnover for the last financial year ₹ 8,40,000
Additional information besides above are as follows:
(a) Saving in insured standing charges – ₹ 5,000
(b) Loss of profit policy with an indemnity period of 6 months – ₹ – 2,50,000
(c) There is an upward trend in turnover by 15%. Compute claim for loss of profit under the policy.
20. Loss of profit : [1st Semester 2020 Hons]

From the following particulars, prepare a claim for loss of profit under the consequential loss policy :
Date of fire 30.06.21
Period of indemnity 6 months
Sum insured ₹ 80,000
Turnover for the year ended June 30, 2121 ₹ 4,00,000
Net profit for the accounting year ending March 31, 2121 ₹ 25,000
Standing charges for the accounting year ending March 31, 2121 ₹ 57,000
Turnover for the year ending March 31, 2121 ₹ 4,10,000
Turnover for the period from 01.07.21 to 31.12.21 ₹ 1,12,000
Saving in standing charges because of fire ₹ 6,000
Increased cost of working during dislocation period ₹ 12,000
21. Loss of profit : C.U B.com Hons 2007, 2013 Honours type
From the following particulars, compute a consequential loss claim :
(i) Date of fire: 30th June, 2021
(ii) Indemnity period : 6 months.
(iii) Sum assured : ₹ 40,000.
(iv) Turnover for the year ended June, 30 2021: ₹ 2,00,000
(v) Net profit for the accounting year ending on March 31, 2021: ₹ 12,500.
(vi) Standing charges : ₹ 28,500
(vii) Turnover for the year ending March, 31 2021: ₹ 1,98,000
(viii) Turnover for the indemnity period from 01.07.2021 to 31.12.2021: ₹ 56,000
(ix) Turnover for the period 01.07.2020 to 31.12.2020: ₹ 1,10,000
(x) It was agreed that the business trends would lead to an increase of 10% in the turnover.
Ch. 4: Sale on Approval [10 M]

Goods sent to customers are sale on approval basis.
I. Either customer may retain (approve) the goods.
II. Or, he may return the goods within a specified time.
Treated as ordinary sales:

Journal entries
1. At the time of sale:
Debtors ……………………………………….Dr.
To sales (at selling price)
2. Sales return
Sales return ………………………………….Dr.
To Debtors
3. If goods are approved at higher price:

Debtors A/c………………………………….Dr.
To sales (difference amount)
4. If goods are approved at lower price

Sales…………………………………………Dr.
To Debtors (difference amount)
5. If goods are approved at same selling price:

No entry
Adjustment entries at Year end: (Goods sent yet approved and time limit not yet expired)
6. Sales……………………………………….Dr. (less)
To Debtors (selling price) ………… (less)
7. Stock with customer ……………………….Dr.

To Trading A/c (at cost price)
Balance Sheet (extract)
Liabilities Amount Assets Amount
Closing stock
(+) stock with customer (at cost)
Debtors
(-) Goods with customer
(at selling price)
Next year
Journal
1. If goods are returned: No entry
2. If goods are retained

Debtors ………………………………………..Dr.
To sales (at selling price)
1. Sale or return [Compiled by Ravi Bhalotia]**
E Ltd. sends out its accounting machines costing ₹ 200 each to their customers on Sales or Return basis. All
such transactions are, however, treated like actual sales and are passed through the Day Book. Just before the
end of the financial year, i.e., on March 24, 2021, 300 such accounting machines were sent out at an invoice
price of ₹ 280 each, out of which only 90 accounting machines are accepted by the customers ₹ 250 each and as
to the rest no report is forthcoming. Show the Journal Entries in the books of the company for the purpose of
preparing Final Accounts for the year ended March 31, 2021.
Solution: In the books of E Ltd.
Date Particulars L.F. ₹ ₹
24.03.2021 Sales…………. ………………………………………Dr. 2,700
To Trade receivables A/c 2,700
(Being the adj. for reduction in the selling price of 90
accounting machines @ ₹ 30 each)
31.12.2021 Sales A/c……………………………………………….Dr. 58,800
(Being the cancellation of original entry for sale in respect of
goods lying with customers awaiting approval) (210 x ₹ 280)
31.12.2021 Stock with Customers on Sale or Return A/c ………. Dr. 42,000
To Trading A/c 42,000
(being the adjustment for cost of goods lying with customers
awaiting approval) (210 Machines @ ₹ 200 Each)
2. Sale or return [B.com 1st semester 2017 Honours]****

CE sends goods to his customers on Sale or Return basis. The following transactions took place during 2021:
Sept. 15 Sent goods to customers on sale or return basis at cost plus 33 1/3 % ₹ 1,00,000
Oct. 20 Goods returned by customers ₹ 40,000
Nov. 25 Received letters of approval from customers ₹ 40,000
Dec . 31 Goods with customers awaiting approval ₹ 20,000
CE records sale or return transactions as ordinary sales. You are required to pass the necessary Journal
Entries in the books of CE assuming that accounting year closes on 31st December, 2021.
Solution: In the books of CE
Dr. Journal Cr.
15.9.2021 Trade receivables A/c……………………………………Dr. 1,00,000
To Sales A/c 1,00,000
(Being the goods sent to customers on sale or return basis)
20.10.2021 Return Inward A/c ………………………………………Dr. 40,000
(Being the goods returned by customers to whom goods were
sent on sale or return basis)
31.12.2021 Sales A/c……………………………………………….Dr. 20,000
To Trade receivables A/c (Note 2) 20,000
goods lying with customers awaiting approval)
31.12.2021 Stock with Customers on Sale or Return A/c ………. Dr. 15,000
To Trading A/c (Note 2) 15,000
awaiting approval)
Note:
(1) No entry is required for receiving letter of approval from customer.
(2) Cost of goods with customers = (20,000 x 100)/133.33 = ₹ 15,000
3. Sale or return [Compiled by Ravi Bhalotia]**

R & Co. sends out goods on approval to a few customers and includes the same in the Sales Account. On
31.3.2021 the Sundry Debtors balance stood at Rs 1,00,000 which included ₹ 7,000 goods sent on approval
against which no intimation was received during the year. These goods were sent out at 25% over and above
cost price and were sent to Mr. X — ₹ 4,000 and Mr. Y — ₹ 3,000.
Mr. X sent intimation of acceptance on 30th April and Mr. Y returned the goods on 10th April, 2021.
Make the adjustment entries and show how these items will appear in the Balance Sheet on 31st March, 2021.
Show also the entries to be made during April, 2021. Value of closing stock as on 31st March, 2021 was ₹
60,000.
Solution: In the books of A & Co.
Dr. Journal Cr.
31.3.2021 Sales A/c………………………………………………… Dr. 7,000
To Sundry Debtors A/c (Note 1) 7,000
goods lying with customers awaiting approval)
31.3.2021 Stock with Customers on Sale or Return A/c……………Dr. 5,600
To Trading A/c (Note 2) 5,600
awaiting approval)
30.4.2021 Sundry Debtors A/c …………………………………… Dr. 4,000

To Sales A/c 4,000
(Being goods costing ₹ 3,200 sent to Mr. X on sale or return
basis has been accepted by him.)
Balance Sheet (extract) as on 31st March, 2021
Liabilities ₹ Assets ₹ ₹
Sundry Debtors (1,00,000 – 7,000) 93,000
Stock-in-trade 60,000
Add: Stock with customers on Sale or 5,600 65,600
Return
Notes:
(1) Cost of goods lying with customers = 100/125 x ₹ 7,000 = ₹ 5,600
(2) No entry is required on 10th April, 2021 for goods returned by Mr. Y. However Goods should be
included physically in the Inventories-in-trade.
M/s Bose Brothers, a trader sends goods to his customers on ‘Sale of Return’ basis. The following
transactions took place during 2021:
₹
25.9.2021 Sent goods to customers on sale or return basis at cost plus 30% 1,50,000
23.10.2021 Goods returned by customers 40,000
18.11.2021 Received letters of approval from customers confirming purchase 71,000
of goods
31.12.2021 Goods with customers awaiting approval (date of return has not yet 39,000
expired)
M/s Bose Brothers records sale or return transactions as ordinary sales.
You are required to pass necessary journal entries in the books of M/s Bose Brothers assuming that
accounting year closes on 31st December, 2021.
5. Sale or return [B.com 1st semester 2019 Pass]****

B.B.S. Electronics sends goods to their customers on Sale or Return basis. The following transactions took
place during 2021:
2021 ₹
Sept. 10 sent goods to customers on Sale or Return basic at cost plus 25% 1,25,000
Oct. 20 goods returned by customers Nov. 25 Received Letters of approval 40,000
from customers
Nov.25 Received Letters of approval from customers 60,000
Dec. 31 Goods with customers neither sold nor returned 20,000
B.B.S. Electronics records sale or return transactions as ordinary sales. You are required to pass the
necessary journal entries in the books of B.B.S. Electronics assuming that accounting year closes on
31.12.2021.
6. Sale or return [Compiled by Ravi Bhalotia]*

A Ltd. sends electrical heaters costing Rs 100 each to their customers on Sale or Return. These are
however treated like actual sales and passed through the Sales Day Book. A few days before the end of
financial year, 120 such heaters were sent out at a invoice price of Rs 150 each. Of these, 10 are accepted
by the customers at Rs 140 each, there was no report as to the rest of the articles. You are required to pass
necessary Journal Entries at the end of the accounting period.
7. Sale or return [C.U. B.Com Honours]****

Bull Co. sends out its new model cookers to dealers on “Sale of Return”. All such transactions are treated
like actual sales and are passed through the Day Book. 200 cookers costing ₹ 450 each have been sent to
dealers on “Sale of Return” before the preparation of the Final Accounts and have been debited to their
accounts at ₹ 600 each. Out of those only 50 cookers were sold @ ₹ 650 each and 80 cookers were
returned.
Give the necessary adjustment entries in the books of the Company.
8. Sale or return [B.com 1st semester 2020 Honours, 2011 Hons]****
A trader sends out goods on approval to some customers and includes the same in the sales account. On
31.12.20, the Sundry Debtors balance (₹ 2,50,000) includes ₹ 14,000 regarding goods sent on approval
against which no intimation was received as on 31.12.20. These goods were sent out at 25% above cost
price and were sent to A – ₹ 8,000 and B – ₹ 6,000. Stock in trade in godown was valued at ₹ 50,000
on 31.12.20. A sent intimation of acceptance on 31.01.21 and B returned the goods on 15.01.21.
Pass adjustment entries on 31.12.20. Show also the entries to be made during January, 21.
9. Sale or return [B.com 2013, 2017 Pass]****

A Trader sends out goods on approval basis to customers and includes the same in sales account. On
31.03.21 the stock in hand amounted to ₹ 80,000 and the sundry debtors balance stood at ₹ 1,50,000
which included ₹ 10,000 being invoice value of goods sent on ‘sale or return’ against which no intimation
was received during the year. These goods were sent out at 25% above cost and were sent to Mr. Amit ₹
4,000 and Mr. Ranjit ₹ 6,000.
Make necessary adjustment entries and show how these items will appear in the Balance Sheet on 31st
March, 2021.
10. Sale or return [Compiled by Ravi Bhalotia]****

On 1st November, 2021, M/s RK Traders sent goods valuing Rs 1,50,000 at invoice price to the customers
on sale or return basis. On 10th December, goods worth Rs 40,000 were returned by the customers On 23rd
December, intimation was received that goods worth Rs 80,000 has been accepted by the customers but at a
reduced price of 5% which was agreed by the Traders. The customers could not yet decide anything about
the rest of the goods. Show the journal entries in the books of M/s RK Traders at the end of financial year
31st December, 2021. Goods are invoiced to the customers at 25% above cost.

On March 01, 2021 Mr. Basu sent goods valuing ₹ 1,50,000 at an invoice price (Cost plus 25%) to few
customers on sale or return basis having two months approval period. He records sale or return transactions
as ordinary sales transaction.
During March, goods having Invoice Price of ₹ 40,000 were returned by a customer and another customer
was willing to accept the goods at a price of ₹ 76,000 which was lower than the Invoice Price by 5%. It was
accepted by Mr. Basu. The other customers could not yet decide anything about the goods sent.
Show the relevant extracts in the final accounts on 31.3.2021, if the balances of the sales Account and Sales
Ledger as on such date were ₹ 15,00,000 and ₹ 7,35,000 respectively.
[Ans. Adjustment to be made for increase in price ₹ 2,500; Debtors suspense to be created ₹ 42,000;
Cost of stock with customers on Sale or Return ₹ 31,500]

A trader has credited certain items of sales on approval aggregating ₹ 10,000 to sales accounting. Of these,
goods to the value of ₹ 3,000 have been returned and taken in stock at ₹ 1,500 though record of return was
committed in accounts; and in respect of another parcel of ₹ 1,000 (cost being ₹ 500), the period of
approval did not expire on the closing date.
Show adjustment and correcting entries in the books of the trader.
Chapter 5: Self Balancing

[10 Marks]
DIVISION OF LEDGER
the ledger is usually divided into three parts as follows:
(a) General Ledger It contains all the real and nominal account as well as the personal account other
(Nominal Ledger) than trade debtors and trade creditors.
(b) Debtors Ledger It is also known as 'Sales Ledger' or 'Sold Ledger'. It contains the accounts of
(Sales Ledger) trade debtors only i.e. the customers to whom goods are sold on credit.
(c) Creditors Ledger It is also known as 'Purchase Ledger' or 'Bought Ledger'. It contains the accounts
(Purchase Ledger) of trade creditors only i.e., persons or firms who have supplied goods on credit
SECTIONAL BALANCING SYSTEM

In General Ledger (Nominal Ledger):
(a) Total Debtors A/c
(b) Total Creditors A/c
SELF BALANCING SYSTEM

In General Ledger (Nominal Ledger)
(i) Debtors Ledger Adjustment A/c (Sales Ledger Adjustment A/c)
(ii) Creditors Ledger Adjustment A/c (Purchase/Bought Ledger Adjustment A/c)
In Debtors Ledger (sales Ledger)

(i) General Ledger Adjustment A/c (Nominal Ledger Adjustment A/c): (Opposite of debtors Ledger
Adjustment A/c)
In Creditors Ledger (Purchase Ledger) (Bought Ledger)

(i) General Ledger Adjustment A/c (Nominal Ledger Adjustment A/c): (Opposite of Creditors Ledger
Adjustment A/c)
(a) The accuracy of individual balances in each ledger is checked by comparing the total of their balances
with the balance of Control Account.
Self Balancing
A. In General Ledger (Nominal Ledger)
Sales Ledger Adjustment A/c (Debtors ledger adjustment A/c)
To bal. b/d By Balance b/d
(Opening Debit Balance of Debtors (open credit balance of Debtors)
A/c) By General Ledger Adjustment
To General ledger adjustment A/c :- Cash collection
:- Credit Sales :- Bad debts
:-Cheque dishonoured :- Discount Allowed
:- Bills dishonoured :- Bills receivable drawn
:-Discounted bills dishonoured :- Allowances given
:- Endorsed bill dishonoured :- sales Return (Return inward)
:- Interest/ Sundry charges charged to :- Transfer to creditors ledger
Debtors :- Transfer from creditors ledger
:- Cash refund to Debtors By Balance c/d (closing debit
To Bal c/d (closing credit balance) balance)
B. In General Ledger(Nominal Ledger):

Creditors Ledger Adjustment Account
(Purchase Ledger Adjustment Account, Bought Ledger Adjustment Account)

To balance b/d By Balance b/d
(Opening Debit Bal. Of creditors A/c) (opening credit balance of creditors
To General Ledger Adjustment A/c A/c)
:- Cash paid to creditors By General ledger adjustment A/c
:- Discount Received :- credit purchase
:- Bills payable accepted :- B/P dishonoured
:- Purchase return :- Endorsed bill dishonoured
(Return outward) :- Bills withdrawn for renewal
:- Bills receivable endorsed :-Interest/Sundry charges
:- Allowance received (charged by creditors)
:- Transfer to Debtors ledger :- Cash refund by creditors
:- Transfer from Debtors ledger By balance c/d
To Bal c/d (closing Debit balance)
(closing credit balance)
No entry (In self balancing):

(a) Cash sales (b) Cash purchases (c) Bills receivable discounted (d) Bills payable matured (e) Provision
for bad debts (f) Bad debts recovery (g) Bills received matured (h) Trade discount
In Debtors ledger (sales ledger)
General ledger adjustment (nominal ledger adjustment)
(Opposite of debtors ledger account)

To Bal b/d By bal b/d
(opening Credit balance of debtors (opening debit balance of debtors
A/c) A/c)
By Debtors Ledger Adjustment A/c
To Debtors Ledger Adjustment A/c - Credit Sales
:-Cash collection …….
… ………
…..
To Bal. c/d By balance c/d
(closing debit balance of debtors) (closing credit balance of debtors)
In creditors ledger
General Ledger Adjustment A/c (opposite of Creditors Ledger Adjustment A/c)

To balance b/d By balance b/d
To creditor ledger adjustment A/c By creditors ledger adjustment A/c
:- credit purchase :- cash paid
…….. …….
…….. …….
To balance c/d By balance c/d
Recorded in all ledgers

1) Endorsed bill Dishonoured-
Debtors ……………………………………..Dr.
To creditors
2) Transfer
Creditors……………………………………Dr.
To Debtors
Special Transaction:
(a) Endorsed bill Dishonoured
Debtors …………………………………..Dr.
To creditors
(b) Transfer : (Mutual set off)

Creditors …………………………………Dr.
To Debtors
(c) Bills Receivable endorsed :

Creditors………………………………….Dr.
To B/R
(d) Cash paid to Debtors to clear credit Balance:
Debtors…………………………………………Dr.
To Cash
(e) Bills payable renewed

i. Bills Payable …………………………Dr.
To creditors
ii. Interest ………………………………..Dr.

To creditors
iii. Creditors ……………………………Dr.

To Bills payable
(New bills accepted)
Sectional Balancing
In General Ledger
Total Debtors Account
Dr. Cr.
Particulars Rs Particulars Rs
To Balance B/D By Balance B/D

(Due From Customers In The (Advances From Customers In the
Beginning) xxx Beginning) Xxx
To Credit Sales xxx By Cash (Received) Xxx

To B/R (Dishnoured) xxx By Bank (Cheque Received) Xxx
To Bank (Cheque Dishnoured) xxx By B/R (Drawn) Xxx
To Interest & Cartage Charged xxx By Return Inwards Xxx
To B/R (Cancelled Upon Renewal) xxx By Discount Allowed Xxx
To Discount (Disallowed) xxx By Rebate & Allowances Xxx
To Creditors (Endorsed B/R Dish.) xxx By Bad Debts W/O Xxx
To Balance C/D (Advances From
Customers At The End) xxx By Creditors (Transfer) Xxx
By Balance C/D(Due From Customers
In The End) Xxx
xxx Xxx
Total creditors A/c

Same as Creditors ledger Adjustment A/c, (Only General Ledger Adj A/c is not written)
1. Self Balancing
From the following information prepare (1) Debtors Ledger Adjustment Account in the General Ledger,
and (2) General Ledger Adjustment Account in the Debtors Ledger:
Particulars Amount
₹
Opening balance of Sundry Debtors (Dr.) 40,000
(Cr.) 2,000
Cash and cheques receipts 1,60,000
Credit Sales as per Sales Day Book 2,00,000
Returns Inward 4,000
Bad Debts 3,000
Bills Receivable Received 20,000
Bills Receivable Discounted 2,000
Provision for Bad Debts 2,000
Closing Credit Balance of Sundry Debtors 6,000
Transfer from Debtors Ledger to Creditors Ledger 1,000

Transfer from Creditors Ledgers to Debtors Ledger 1,200
Solution:
In the books of …………….
In the General Ledger
Dr. Debtors Ledger Adjustment Account Cr.
₹ ₹
? To Balance b/d 40,000 ? By Balance b/d 2,000
,, General Ledger ,, General Ledger
Adjustment A/c — Adjustment A/c —
Credit Sales 2,00,000 Cash and Cheques 1,60,000
,, Balance c/d 6,000 Returns Inward 4,000
Bad Debts 3,000
Bills Receivable 20,000
Transfer to Cr. Ledger 1,000
,, Transfer from Creditors to
Debtors Ledger 1,200
,, Balance c/d 48,800
2,46,000 2,46,000
In the Debtors Ledger
General Ledger Adjustment Account
Dr. Cr.

₹ ₹
,, Debtors Ledger ,, Debtors Ledger
Adjustment A/c — Adjustment A/c —
Cash and Cheques 1,60,000 Credit Sales 2,00,000
Returns Inward
4,000 ,, Balance c/d 6,000
Discount Allowed Bad
6,000
Debts
3,000
Bills Receivable Transfer
20,000
to Cr. Ledger
1,000
,, Transfer from Creditors to
Debtors Ledger
,, Balance c/d 1,200
48,800
To Balance b/d 2,46,000 2,46,000
? 6,000 ? By Balance b/d 48,800
Notes:
(1) Bills receivable will not affect debtors balance. Therefore, it has been ignored.
(2) Provision for bad debts will not affect debtors balance. Therefore, it has been ignored.
2. Self Balancing
Prepare the Creditors Ledger Adjustment Account as it would appear in General Ledger and General Ledger
Adjustment Account as it would appear in Creditors Ledger for the year ended 31st March 2021 from the
following particulars.
Sundry Creditors (on 1.4.2020) (Cr.) 10,000 Bills Payable issues during the year 4,000
(Dr.) 1,000 Bills Payable dishonoured 2,000
Purchases (including Cash 50,000 Bills Payable renewed 1,000
Purchase of ₹ 10,000)
Returns Outward 2,000 Interest on Bills Payable renewed 100
Cash paid to Creditors 20,000 Sundry Charges paid for dishonour of 100
Bills Payable
Discount allowed by Creditors 3,000 Total of set-off in Debtors Ledger 3,000
Trade Discount 1,000 Sundry Creditors (on 31.3.2021) (Dr.) 4,000
Bills Receivable endorsed to Creditors 2,000
Solution:
In the books of …………….
In the General Ledger
Dr. Creditors Ledger Adjustment Account Cr.
(₹) (₹)
2020 2020
April 1 To Balance b/d 1,000 April 1 By Balance b/d 10,000
2021 “ General Ledger 2021
By General Ledger
March. 31 Adjustment A/c : March. 31
Adjustment A/c :
Returns Outward Purchase 40,000
2,000
Cash and cheques 20,000 Bills Payable 2,000
Discount Received dishonoured
3,000 100
Bills receivable Interest
2,000 100
Bills Payable Sundry Charges“
4,000 4,000
By Balance c/d
Bills Payable ( renewed ) 1,000
Transfer 3,000
“ Balance c/d 20,200
56,200 56,200
To Balance b/d 4,000 By Balance b/d 20,200

2021 2021
April 1 April 1
In the Creditors Ledger

General Ledger Adjustment Account
Dr. Cr.
2020 2020
April 1 To Balance b/d 10,000 April 1 By Balance b/d 1,000
2021 “ Creditors Ledger 2021 “ Creditors Ledger
March 31 Adjustment A/c : March 31 Adjustment A/c :
Purchase Returns Outward
40,000 2,000
Bills Payable Cash
2,000 20,000
dishonoured Discount Received 3,000
Interest Bills receivable 2,000
100
Sundry Charges “ 100 Bills Payable 4,000
Balance c/d 4,000 Bills Payable ( renewed ) 1,000
Transfer 3,000
“ Balance c/d 20,200
56,200 2021 56,200
April 1
20,200 By Balance b/d 4,000
2021
April 1 To Balance b/d
3. Self Balancing
From the following particulars for the year ended 31st March, 2021 extracted from the books of X Ltd.
prepare Sales Ledger Adjustment Account in the General Ledger:
₹
Sales Ledger Balances 1st April, 2020 (Dr.) 12,500
(Cr.) 300
Sales during the year (including cash sales of ₹ 2,000) 60,400
Cash received from customer 40,100
Return by customer 5,750
Bad debt written off 5,680
Bad debt previously written off recovered in cash during this year 900
Provision for Bad debts 5,950
Allowance to customers 740
Bills Receivable from customers 3,400
Bills Dishonoured 700
Transfer from sales ledger to purchase ledger 2,500
Payment to clear Credit Balance on sales ledger Accounts 100
Closing Credit Balance 1,440
Solution :
In the General Ledger of X Ltd.
Dr. Sales Ledger Adjustment Account Cr.
1.4.2020 To Balance b/d 12,500 1.4.2020 By Balance c/d 300
31.3.2021 To general Ledger 31.3.2021 By General Ledger
Adjustment A/c : Adjustment A/c :
Sales (Credit) 58,400 Cash Received 40,100
Bills Dishonored 700 Returned by customers 5,750
Payment to customers 100 Discount Allowed 2,600
31.3.2021 To Balance c/d 1,440 Bad Debt 5,680
(Closing credit Balance) Allowance to customers 740
Transfer 2,500
By Balance c/d
31.3.2021 (Closing debit Balance) 12,070
(Balancing figure)
73,140 73,140
Notes:
(1) Bad Debt recovered will not affect debtors balance. Therefore, it has been ignored.
(2) Provision for bad debts will not affect debtors balance. Therefore, it has been ignored.
4. Self Balancing: [B.com 2005 Honours] *
Prepare Sales Ledger Adjustment Account as would appear in the General Ledger from the following
particulars:
2021 ₹
January 1 25.200 (Dr.)
800 (Cr.)
Dec. 31 Sales 62,400
Returns 6,340
Cash Received 40,100
Bad Debts written off 7,420
Provision for Doubtful Debts 11,000
Bad Debts previously written off, now received 600
Allowances 840
Bills Dishonoured 1,000
Trade Discount 300
Transfer from Bought Ledger 2,400
Dec. 31 Closing Balance of Debtors 27,980 (Dr.)
2,480 (Cr.)
[Ans.: Closing Balance of Debtors' Ledger Adj. A/c. ₹ 27,980 (Cr.)]
5. Self Balancing: [B.com 2009 Honours, 2011 Honours type] [8]****

From the following particulars for the year ended 31st March, 2021 extracted from the books of X Ltd.
prepare Sales Ledger Adjustment Account in the General Ledger:
₹
Sales Ledger Balances 1st April, 2020 (Dr.) 12,500
(Cr.) 300
Sales during the year (including cash sales of ₹ 2,000) 60,400
Cash received from customer 40,100
Return by customer 5,750
Bad debt previously written off recovered in cash during this year 900
Provision for Bad debts 5,950
Allowance to customers 740
Bills Receivable from customers 3,400
Bills Dishonoured 700
Transfer from sales ledger to purchase ledger 2,500
Payment to clear Credit Balance on sales ledger Accounts 100
Closing Credit Balance 1,440
[Ans: Closing Debit Balance: ₹ 12070]
6. Self Balancing: [B.com 2009 Honours] [Old] *
From the following particulars prepare Debtors Ledger Adjustment Account as it will appear in the General
Ledger of a business:
₹
Debtors Balances on 1/1/2021 (Dr.) 32,645
Debtors Balances on 1/1/2021 (Cr.) 125
Sales as per sales Day Book 60,250
Sales as per Cash Book 5,000
Cash received from debtors as per Cash Book 44,865
Bills Receivable as per bill book 10,250
Bills Receivable dishonoured as per bill book 1,750
Bills Receivable discounted as per bill book 3,900
Returns as per Returns Inward Day Book 2,850
Discounts allowed as per Cash Book 2,100
Trade Discount Allowed 150
Credit Balance of Debtors on 31.12.2021 170
[Ans: Closing Debit Balance: ₹ 34625]
7. Self Balancing: [1st Sem 2018 Pass]

The following details were extracted from the books of Mr. Sen for the period ended 31st December, 2021:
Jan.1, 2021 ₹
Sales ledger Balances 12,400
Dec. 31, 2021
Sales (including Cash Sales ₹ 4,000) 23,000
Cash received from Customers 18,500
Bills Receivable received 3,000
Return from Customers 380
Bills endorsed 480
Bills dishonoured 120
Cheque dishonoured 100
Bills receivable as endorsed, dishonoured 120
Bills receivable discounted 500
Bad debt written off 50
Interest charged to customers 10
Bad debts previously written off, recovered 60
Transfer from Bought Ledger 150
Sundry Charges debited to customers 20
Prepare the Sales Ledger Adjustment Account in the General Ledger.
8. Self Balancing: [1st Sem 2019 Pass]
Following information have been extracted from the books of Bose & Co. for the year ended 31.12.2021 –
₹
01.01.21 Opening balance of creditors (Dr.) 3,000
(Cr.) 1,20,000
Transaction during the year 2021:
Total Purchase (including credit purchases ₹ 1,80,000) 2,00,000
Return to creditors 4,000
Cash & Cheque paid to creditors 1,75,000
Discount received 8,000
Allowances received 3,000
Bills payable accepted 5,000
Bills payable dishonoured 500
Out of cheque paid to creditors, cheque dishonoured 5,000
Interest charged by creditors 400
Transfer to sales ledger 500
Closing Balance (Dr.) on 31.12.21 1,000
Prepare Creditors Ledger Adjustment Account in General Ledger.
9. Self Balancing: [2015 Pass]

From the particulars, prepare General Ledger Adjustment Account in Sales ledger and bought ledger:
Dr. (₹) Cr. (₹)
On 01-01-2021:
Balances on Bought ledger 10,000 96,000
Balances on Sales ledger 1,41,000 2,250
Transactions during the year 2021: ₹
Purchase 5,40,000
Purchase Return 20,000
Total sales 9,68,000
Cash sales 40,000
Sales Return 10,000
Cash received from customers 6,24,000
Discount allowed 11,200
Cash paid to suppliers 4,80,000
Provision for bad debts 9,000
Bills Payable issued 22,400
Bills Receivable dishonoured 6,000
Closing Bought Ledger Balance (Dr.) 10,400
Closing Sales Ledger Balance (Cr.) 13,200
10. Self Balancing: [Complied by RKB] **
From the following particulars, prepare the General Ledger Adjustment A/c in Sales Ledger.
₹
Debtors' Ledger Balance on 1.1.2021(Dr.) 16,000
Debtors' Ledger Balance on 1.1.2021 (Cr.) 2,000
Transaction during the year
Sales (Including Cash Sales — ₹ 8,000)
80,000
Collection from Debtors 62,000
Discount Allowed 300
Bills Receivable drawn 10,000
Bills Receivable Discounted 4,000
Bills Receivable endorsed 4,500
Bills Receivable as endorsed dishonoured 1,000
Bad Debts 400
Transfer from Debtors' Ledger to Creditors' Ledger 500
Transfer from Creditors' Ledger to Debtors' Ledger 700
Debtors' Ledger Balance on 31.12.2021 (Cr.) 1,300
[Closing Balance of G. L. Adj. A/c ₹ 14,400 (Cr.)]
11. Self Balancing: [B.com 2013 Pass] **

From the following particulars which have been extracted from the books of Mr. ‘D’, for the year
ended 31.03.21, prepare the ‘Nominal Ledger Adjustment’ Account in the ‘Bought Ledger’.
₹ ₹
Creditors Ledger balances on Acceptances renewed 2,000
01.04.20 (Dr.) 1,800 Interest on renewal of bills 500
(Cr.) 14,000 Sundry charges for dishonoured bills
Purchases (Including cash payable 100
purchases ₹ 2,000) 36,500 Bills receivable endorsed to
Cash paid to creditors 21,000 Creditors 4,500
Discount received 400 Bills receivable as endorsed
Return outward 1,500 dishonoured 1,000
Bills payable accepted Transfer from:
(including renewed bills and Debtors Ledger to Creditors Ledger 500
interest thereon) 14,000 Creditors Ledger to Debtors Ledger 700
Acceptances matured 5,000 Creditors Ledger balance on
Acceptances dishonoured 3,000 31.03.21 (Dr.) 1,200
12. Self Balancing: [1st Sem 2017 Honours]
From the following details prepare a General Ledger Adjustment Account in the Creditors Ledger of ABC &
Company:
Credit Purchases 2,80,000 Bills payable accepted 16,000
Cash Purchases 75,000 Bills payable renewed for two more 2,000
month
Bills Receivable drawn 1,10,000 Payment to creditors 2,52,000
Cash Discount Received 5,000 Return Inward 10,500
Bills Payable Paid 6,500 Return Outward 5,000
Bills Receivable Endorsed to Creditor 10,000 Over Payments refunded by supplies 600
Opening Balance of Sundry Debtors 78,000 Endorsed Bills Receivable discounted 4,000
Opening Balance of Sundry Creditors 85,000
13. Self Balancing: [B.com 2014 Honours] **

From the following particulars prepare Sales Ledger Adjustment account as would appear in the Nominal
Ledger of a concern where Self Balancing Ledgers are kept.
01.04.2020: ₹
Debtors Balance in Nominal Ledger Adjustment account: Credit 45,000
Debit 1,000
31.03.2021: 3,20,000
Cash received from Debtors
Sales 4,10,000
Bills received 30,000
Bills Dishonoured 1,500
Allowance to customer for goods damaged in transit 1,000
Cash received in respect of debt previously written off as bad 450
Amount due from a customer as shown by Debtor’s Ledger, 2,500
set off against amount due to the same customer as shown by
the Creditor’s Ledger
On 31.03.2021 there was no credit balance in Debtor’s Ledger.
[Ans; ₹ 87,850]
14. Self Balancing: [B.com 2013 Honours]

(a) Why transactions like Cash sales, Provision for Doubtful Debts are not recorded under Self Balancing
Ledger System?
(b) The books of ABC Co. Show:
i. A sum of ₹ 6,000 due from PQR Co. In the Debtors Ledger and
ii. A sum of ₹ 2,000 due to PQR Co. In the Creditors Ledger.
Pass the transfer entries assuming that the ledgers are maintained on Self-Balancing System.
15. Sectional Balancing: [B.com 2001 Honours] ****
The following details were extracted from the books of Mr. Rahaman for the period ended 31st December,
2021:
2021 ₹
January 1 Debtors Ledger balances 12,400 (Dr.)
270 (Cr.)
Dec. 31 Sales (including cash sales ₹ 4,000) 23,000
Cash Received from customers 18,500
Returns from customers 380
Bill Endorsed 480
Bill Dishonoured 300
Cheques Dishonoured 200
Dishonour of Endorsed bills 240
Bills Receivable discounted 600
Bad Debts written off 100
Recovery of Bad Debt previously written off 60
Prepare Total Debtors Account.
[Ans: Closing Balance of Total Debtors A/c ₹ 9,600 (Dr.)]
16. Sectional Balancing

From the following particulars which have been extracted from the books of Mr. ‘D’, for the year
ended 31.03.21, prepare Total Creditors Account in ‘General Ledger’
₹ ₹
Creditors Ledger balances on Acceptances renewed 2,000
01.04.20 (Dr.) 1,800 Interest on renewal of bills 500
(Cr.) 14,000 Sundry charges for dishonoured bills
Purchases (Including cash payable 100
purchases ₹ 2,000) 36,500 Bills receivable endorsed to
Cash paid to creditors 21,000 Creditors 4,500
Discount received 400 Bills receivable as endorsed
Return outward 1,500 dishonoured 1,000
Bills payable accepted Transfer from:
(including renewed bills and Debtors Ledger to Creditors Ledger 500
interest thereon) 14,000 Creditors Ledger to Debtors Ledger 700
Acceptances matured 5,000 Creditors Ledger balance on
Acceptances dishonoured 3,000 31.03.21 (Dr.) 1,200
Ch. 6: Consignment [10 M]

MEANING
At times, goods are sent by a dealer to an agent for sale for commission, on the basis that the goods will be sold
on behalf of and at the risk of the dealer. The dispatch of goods is known as consignment; the person who sends
the goods is known as the consignor; and the agent who receives the goods is known as the consignee.
The consignee sells the goods on behalf of, at the expense of and at the risk of the consignor for a commission.
All the expenses/losses/profits on consignment belong to the consignor. The consignor sends the goods to the
consignee along with a pro-forma invoice which gives details regarding the description, quantity, price etc. of the
goods sent. As and when the consignee sells goods, he sends a statement to the consignor known as an account
sales giving details regarding goods sold, sale proceeds received, expenses incurred by the consignee,
commission due to the consignee, the amount due to the consignor and amount paid to the consignor as
advance/settlement by way of cheque/draft/bill receivable etc. If the consignor pays an extra commission known
as del credere commission to the consignee, loss due to bad debts is borne by the consignee; otherwise it is borne
by the consignor.
ACCOUNTING ENTRIES IN BOOKS OF CONSIGNOR
TRANSACTION A/C DEBITED A/C CREDITED

1. Goods consigned Consignment Goods sent on consignment
2. Consignor’s expenses Consignment Bank
3. Goods sold by Consignee Consignment
consignee
4. Consignee’s expenses Consignment Consignee
5. Consignee’s Consignment Consignee
commission
6. Consignee’s remittance Bank or B/R Consignee
7. Closing stock Stock on Consignment Consignment
8. Profit on consignment Consignment Profit & Loss a/c
9. Loss on consignment Profit & Loss A/c Consignment
10. Goods on consignment Goods on consignment Trading
Transferred
11. B/R discounted (1) Bank (net) B/R (total)
(2) Discount (P/L)
12. Bad debts Consignment Consignee

[No Del Credere]
VALUATION OF STOCK
The unsold stock lying with the consignee as at year-end is valued and recorded by the consignor in his books at
cost or market value whichever is less. The cost includes cost of goods sent plus proportionate direct expenses
incurred (by the consignor and the consignee) till the goods reach the consignee’s go down e.g. freight, Octroi,
clearing charges, transit insurance, loading and unloading etc.
Normal loss
Normal loss of stock (leakage etc.) is adjusted in the books at the time of stock valuation by deducting quantity
lost from the Quantity sent. No Entry to be passed for the Normal Loss.
ABNORMAL LOSS
The entries for abnormal loss are:
TRANSACTION A/C DEBITED A/C CREDITED
A Loss of goods Loss of goods Consignment
B Insurance claim recd. Bank Loss of goods
C Net loss in transit Profit & Loss A/c Loss of goods
(Loss – Ins. Claim)
GOODS INVOICED ABOVE COST

When goods are consigned invoice value, entries for goods consigned and for closing stock as shown above are
recorded by the consignor at invoice value initially; and then following entries are passed at the year-end to
cancel the excess loading (= Invoice value – cost):
TRANSATION A/C DEBITED A/C CREDITED
A Loading on goods sent Goods Sent on consignment Consignment
B Loading on stock Consignment Stock reserve
COMMISSION
Normal Commission: The consignee is remunerated by way of commission. This is normally calculated at an
agreed percentage of the gross amount of sales.
Del Credere commission: Since the consignee sells the goods as an agent of the consignor, it is the consignor
who normally runs the risk of bad debts arising from credit sales. However, the consignor is not in direct
contract of the ultimate buyers, and hence may wish to have a guarantee from the consignee that they will pay.
A consignee often gives such a guarantee of realizations of debts arising out of credit sales. He gives such
guarantee against additional commission known as del credere commission. In absence of specific information,
it is presumed that del credere commission is allowed on all sales.
Overriding Commission: Sometimes, an extra commission, known as overriding commission, may be allowed
by the consignor to the consignee to made sales at a price higher than expected or to promote a new product in
the market. Depending on the terms agreed, it is calculated on the total sales: or on the difference between actual
sales and sales at the specified price.
ACCOUNTING ENTRIES IN BOOKS OF CONSIGNEE

TRANSACTION A/c DEBITED A/c CREDITED
1 Cash sales by consignee Cash Consignor
2 Credit sales by consignee Consignment Debtors Consignor
3 Collection from debtors Cash or Bank Consignment
Debtors
4 Expenses of consignee Consignor Bank or Cash
5 Consignee’s commission Consignor Commission
6 Del credere commission Consignor commission
7 Bad debts commission Consignment
Debtors
8 Consignee’s remittance Consignor Bank/Cash/B.R.
1. Consignment: [Cost Price] [B.com 2005 Honours] **
100 cycles, costing ₹ 150 each were consigned to the agent at Jaipur. Expenses incurred on sending them were
Rs 1,000. On the way 5 cycles were damaged due to bad handling and insurance claim of ₹ 700 was accepted.
Consignee took delivery of the rest and incurred direct expenses of ₹ 285 and indirect expenses of ₹ 150. He
sold 80 cycles at ₹ 200 per cycle. Prepare Consignment Account when consignee gets 5% commission on gross
sales. Also show how abnormal loss and stock at the end is to be calculated.
Solution: In the books of…
Dr. Consignment to Jaipur Account Cr.
To Goods sent on Consignment A/c 15,000 By Abnormal Loss A/c 800
(Note 1)
To Cash A/c (Expenses) 1,000 By Consignee A/c (Sales) 16,000
To Consignee A/c : By Stock on Consignment 2,445
A/c (Note 2)
Direct Expenses 285
Indirect Expenses 150
To Consignee A/c 800
(Commission @ 5%)
To Profit or Loss A/c 2,010
(Profit on Consignment)
(Balancing Figure)
19,245 19,245
Dr. Abnormal Loss A/c (Loss In Transit) Cr.

To Consignment A/c 800 By Insurance Company A/c 700
(Claim Admitted)
By Profit or Loss A/c 100
(balancing Figure)
800 800
Working Notes:
(1) Valuation of goods lost in transit
₹
Cost of 100 cycles @ ₹ 150 each 15,000
Add: Non-recurring Expenses 1,000
Cost of 100 cycles just before lost in transit 16,000
Therefore, value of 5 cycles = ₹ 16,000/100 x 5
800
(2) Valuation of goods in hand at the end
₹
Cost of 100 cycles just before loss in transit 16,000
Less: Value of 5 cycles lost in transit 800
Cost of 95 cycles 15,200
Add: Direct expenses 285
Total cost of 95 cycles 15,485
Value of 15 cycles = ₹ 15,485/95 x 15 2,445
2. Consignment: [Cost Price]
Shri Babubhai oil mills of Baroda sent 10000 kg of oil to M/s Gupta & Sons in Delhi. The cost of oil is ₹ 40 per
kg. Babubhai paid ₹ 5,000 as freight and ₹ 2,500 as insurance. In transit 250 kg of oil was accidently destroyed
for which insurance company paid ₹ 450 in full settlement to Babubhai.
M/s Gupta & Sons took delivery of the balance. Later they reported that 7500 kg was sold @ ₹ 60 per kg.
Expenses incurred by them were rent ₹ 2,000, advertisement ₹ 5,000 and salaries ₹ 5000. M/s Gupta & Sons are
entitled to commission of 3% and Del Credre commission of 1.5%. One customer who purchased 1000 kg paid
only 80% of the amount due. M/s Gupta & Sons also reported loss of 100 kg due to leakage. The final amount
due was settled. Prepare necessary ledger accounts in the books of Babubhai.
Solution: In the books of…
Dr. Consignment to Delhi Account Cr.
To, Goods Sent on Consignment A/c 4,00,000 By, M/s Gupta & Sons’ A/c (sales) 4,50,000
To, Bank A/c (Freight and Insurance) 7,500 By, Abnormal Loss A/c (loss in transit) 10,188
To, M/s Gupta & Sons’ A/c : By, Consignment Stock A/c 88,520
Expenses 12,000
Commission 20,250
To P & L A/c (Balancing figure) 1,08,958
5,48,708 5,48,708
Dr. M/s Gupta & Sons’ Account Cr.

To, Consignment A/c 4,50,000 By Consignment A/c (expenses) 12,000
By Consignment A/c (commission) 20,250
By Bank A/c 4,17,750
(Balancing figure)
4,50,000 450,000
Working Notes:
(i) Computation of Loss in transit & Closing Stock
Particulars Units (kg) Value (₹)
Goods Sent on Consignment (10,000 kg @ ₹ 40 Each) 10,000 4,00,000
Add: Consignor’s expenses 7,500
4,07,500
Less: Loss in Transit [4,07,500 ÷ 10,000) x 250 250 10,188
3,97,312
Add: Consignee’s Expenses (Direct Expenses) NIL
3,97,312
Less: Normal Loss 100 ----------
9,650 3,97,312
Closing Stock [9650- 7500 = 2150 kg] [3,97,312 ÷ 9,650) x 2150 88,520
(ii) Computation of total commission:
Ordinary commission @ 3% on 4,50,000 = ₹ 13,500; Del Credre @ 1.5% on 4,50,000 = ₹ 6,750;
Total Commission = 20,250
3. Consignment: [Invoice Price]
Mr. X, the consignor, consigned goods to Mr. Y 100 Radio sets valued ₹ 50,000. This was made by adding 25% on
cost. Mr. X paid ₹ 5,000 for freight and insurance. 20 sets are lost – in- transit for which Mr. X recorded ₹ 5,000 from
the Insurance company.
Mr. Y received remaining goods in good condition. He incurred ₹ 4,000 for freight and miscellaneous expenses and ₹
3,000 for godown rent. He sold 60 sets for ₹ 50,000. Show the necessary ledger account in the books of Mr. X
assuming that Mr. Y was entitled to an ordinary Commission of 10% on sales and 5% Del Credere Commission on
sales. He also reported that ₹ 1,000 were provide bad .
Solution:
In the books of Mr. X
Dr. Consignment Account Cr.
(₹) (₹)
To Goods Sent on Consignment A/c 50,000 By Goods Sent on Consignment A/c 10,000
(Loading) (₹ 50,000 x 25/125)
(Invoice Price)
To Bank A/c – Expenses 5,000 By Y A/c – Sale Proceeds 50,000
To Y A/c By Abnormal Loss A/c 11,000
- Freight and Misc. Expenses 4,000
- Godown Rent 3,000
To Abnormal Loss A/c (Loading) 2,000 By Stock on Consignment A/c 12,000
(20 units @ ₹ 100 each)
To Stock Reserve c/d A/c 2,000
(loading on closing consignment stock)
(20 units @ ₹ 100 each)
To Y A/c
- Commission (ordinary) @ 10% 5,000
- Del credere Commission @ 5% 2,500
To Profit and Loss A/c
- Profit on Consignment A/c 9,500
83,000 83,000
Dr. Y Account Cr.

(₹) (₹)
To, Consignment A/c – Sale proceeds 50,000 By, Consignment A/c
- Expenses 7,000
- Commission
7,500
By, Balance c/d 35,500
50,000 50,000
Dr. Abnormal Loss Account Cr.
(₹) (₹)
To, Consignment A/c 11,000 By, Consignment A/c (Loading) 2,000
By, Bank A/c – Insurance Claim 5,000
By, Profit and Loss A/c 4,000
- Loss transferred
11,000 11,000
Workings:
(a) Loading = 25% on cost = 25/125 on Invoice Price = 20% on Invoice Price.
(b) Total loading on Goods sent on consignment = 50,000 x 20% = ₹ 10,000
Loading per radio set = ₹ 10,000 ÷ 100 = ₹ 100/set
(c) Computation of Loss in transit & Closing Stock
Particulars Units Value (₹)

Goods Sent on Consignment 100 50,000
Add: Consignor’s expenses 5,000
55,000
Less: Loss in Transit [55,000 ÷ 100) x 20 20 11,000
44,000
Add: Consignee’s Expenses (freight and miscellaneous expenses) 4,000
80 48,000
Closing Stock [80- 60 = 20 units] [48,000 ÷ 80] x 20 12,000
(d) Loading on Abnormal Loss = 20 x ₹ 100 = ₹ 2,000
(e) Stock Reserve = 20 x ₹ 100 = ₹ 2,000
(f) Since Del Credere Commission is given there will not be any entry for bad debts.
4. Consignment: [Cost Price] [2004 Honours, 2011 type, 2012 supple Type]****
Arup consigned 2,000 kg of fine Basmati Rice @ ₹ 10 per kg to Sintu. He paid freight ₹ 3,000, dock charges ₹
2,500 and insurance ₹ 1,500. 800 kg Rice was destroyed in transit due to an accident. Claim admitted by the
Insurance Company was ₹ 4,500. Sintu sold in cash and on credit 1,000 kg Rice @ ₹ 15 per kg. He incurred the
following expenses : Clearing charges - ₹ 2,000; Carrying charges - ₹ 1,000; Godown rent - ₹ 1,200 and selling
expenses - ₹ 1,500.
Sintu received commission @ 10% on sales. ₹ 2,000 could not be realised from a debtor. Show the Consignment
Account and determine profit or loss from consignment.
[Loss on consignment ₹ 7,200. Value of Goods destroyed ₹ 10,800 and amount charged to profit & loss
A/c ₹ 6,300 ; Value of unsold stock ₹ 3,200.]
5. Consignment: [Cost Price] [B.com 2013 Supplementary] ****
Sourav of Kolkata sent 100 bicycles to Dravid of Bangalore to be sold on consignment basis on January 1,
2021. The cost price of each bicycle was ₹ 800. Sourav incurred ₹ 550 for freight and ₹ 1,550 for
Insurance premium. On December, 31, 2021 Sourav received an Account Sales from Dravid which showed
that he had sold 80 bicycles @ ₹ 1200 each and after deducting his commission @ 15% on sale proceeds
and expenses of ₹ 20,000 he sent the balance amount by a demand draft. From the above particulars prepare
Consignment Account in the books of Sourav.
[Ans: Loss on consignment ₹ 4,080; Value of unsold stock ₹ 16,420]
6. Consignment: [Cost Price] [B.com 2015 Pass, 2018 Pass type] ****
A & Co. Consigned 100 bicycles costing ₹ 1,500 each to its agent B & Co. of Jaipur . A & Co. Incurred the
following expenses:
₹
Freight 8,000
Insurance 6,000
Coolie & Cartage 4,000
On the way 5 bicycles were damaged due to bad handling and insurance company admitted a claim of ₹
7,000. Consignee took delivery of the rest and incurred the following expenses:
₹
Clearing charges 1,200
Carrying charges 800
Godown rent 1,400
Selling expenses 1,600
The consignee sold 80 bicycles at ₹ 2,100 each. He is entitled to a commission of 5% on sales. Prepare (a)
Consignment Account (b) Consignee A/c (c) Loss in transit A/C in the books of consignor.
[Profit on cons ₹ 20,516; Value of unsold Stock ₹ 25,516; Value of Goods damaged ₹ 8,400; Net loss ₹
1,400]
7. Consignment [B.Com 2003 pass, 2019 Honours type]***

Bipasa Medicals of Amritsar sent on consignment 1,000 bottles of Medicine costing ₹ 60 each to Lalchand of
Kolkata and incurred ₹ 600 for carriage and ₹ 400 for insurance.
Account sales from Lalchand revealed the following:
₹ ₹
Sale proceeds of 600 bottles 60,000
Less: Carriage to godown 10,500
Rent of godown 500
Insurance 500
Commission 3,000 14,500
45,500
It is also revealed that 100 bottles were destroyed in godown and Lalchand collected ₹ 6,000 from Insurance
Company.
Prepare Consignment Account in the books of Bipasa Medicals.
[Profit on consignment ₹ 13,100; Value of unsold stock ₹ 21,450; Value of goods destroyed ₹ 7,150 (Net
Loss on goods destroyed in accident ₹ 1,150).]
8. Consignment: [Cost Price] [B.com 2016 Pass] ****
Mr. Saha of Kolkata sent 2,500 cases of goods on consignment to Mr. Kole of Mumbai, each case costing ₹
150. The following expenses were borne by Mr. Saha for sending the goods:
Freight: ₹ 6,000; Carriage ₹ 3,000 and Loading Charges ₹ 2,000.
Mr. Kole sold 1750 cases at ₹ 210 per case and made the following expenses in this connection:
Packaging and selling expenses: ₹ 1200; Storage Expenses ₹ 3,400 and clearing charges ₹ 1700. In the
Transit 125 cases have been lost. Mr. Kole is entitled to a commission of 10% on gross sales. Show
consignment Account in the books of Mr. Saha.
[Profit on consignment ₹ 54,697; Value of unsold Stock ₹ 96,947; Loss in Transit: 19,300]
9. Consignment: [Cost Price] [Compiled by Ravi Bhalotia]*

On 1st January, 2021, Amal of Kolkata sends goods costing ₹ 50,000 to Bimal of Mumbai on Consignment
basis. Amal paid ₹ 2,000 on various accounts for consigning the goods. Bimal paid ₹ 1,200 as Railway Charges
and ₹ 500 as Godown Rent. The Consignee sent a sight draft for ₹ 30,000. 4/5ths of the goods are sold at ₹
58,000 on credit. A customer who purchased goods for ₹ 500 failed to pay for which the debt proved bad. The
Consignee sent an Account Sales on 30th April, 2021 which showed that he charged 10 % as Ordinary
Commission and 2% as Del-credere Commission. You are required to give in the books of Amal (i) the
Consignment Account; (ii) Bimal's A/c
[Profit on consignment ₹ 7,980; Balance due from Bimal ₹ 19,340; Value of unsold stock ₹ 10,640]
10. Consignment: [Cost Price] [1st Semester 2017 pass]

On 1st April, 2020, K of Kolkata sent 200 packets of rice to D of Delhi to be sold on consignment basis. The
cost price of each packet was ₹ 1,000. K incurred ₹ 1,200 for freight and ₹ 800 for insurance premium. On 31st
March, 2021, K received Account sales from D, which showed that he sold 180 packets @ ₹ 1,400 each out of
which ₹ 5,000 was bad debt. D paid ₹ 6,000 as clearing charges, ₹ 1,000 for carriage to godown and ₹ 2,000 for
godown rent. D is entitles to get ordinary commission @ 10% and del-credere commission @ 5% on sale
proceeds.
Show consignment Account and D Account in the books of K.
11. Consignment: [Cost Price] [1st Semester 2020 Honours]

Sri Mehta of Bombay consigns 1,000 cases of goods costing ₹ 100 each to Sri Sundaram of Madras. Sri Mehta
pays the following expenses in connection with the consignment : carriage ₹ 1,000; freight ₹ 3,000 and loading
charges ₹ 1,000. Sri Sundaram sells 700 cases at ₹ 140 per case and incur the following expenses : clearing
charges ₹ 850; warehousing and storage ₹ 1,700; and packing and selling expenses ₹ 600. It is found that 50
cases have been lost in transit and 100 cases are still in transit. Sri Sundaram is entitled to a commission of 10%
on gross sales.
Draw up Consignment Account and Sri Sundaram Account in the books of Sri Mehta.
12. Consignment: [Cost Price] [1st Semester 2018 Honours]
Ganga consigned 5,000 kg of rice costing ₹ 32 per kg to Yamuna on February 01, 2021 by paying ₹ 5,000 as
freight. During transit 200 kg of rice were destroyed by an accident. Yamuna paid clearing charges ₹ 6,100,
Godown Rent ₹ 300 and Salesman’s salary ₹ 900. Yamuna is entitled to 6% ordinary commission and 4% Del
Credere Commission on sales.
Yamuna reported on June 30 that 4,000 kg were sold at ₹ 1,65,000 and 100 were lost due to some unavoidable
cause. Entire amount due was received except in case of a customer who bought rice for ₹ 1,500 could pay only
40% of his amount. Yamuna sent a cheque for final settlement to Ganga along with the Account Sales.
Show Consignment Account and Yamuna Account in the books of Ganga.
13. Consignment: [Cost Price] [B.com 2016 Honours] [Normal Loss]****

Prepare Consignment Account in the books of M/S Ramkrishna Concern as on 31st December, 2021 from the
following particulars given below:
On 1.1.2021, M/S Ramkrishna Concern of Kolkata consigned 20,000 kg of a particular variety of goods to M/S
Vasudha of Delhi at a cost of ₹ 120 per kg and paid ₹ 1, 20,000 on insurance and freight. 400 kg of the item was
lost – in – transit. M/S Vasudha took delivery of the remaining goods consigned and paid unloading charges of ₹
38,000. Printing and Advertisement expenses were ₹ 40,000 and godown rent ₹ 5,000. 450 kg was lost due to
leakage in the godown of M/S Vasudha. (Which was considered as normal loss). 16,600 kg of the goods
consigned was sold by M/S Vasudha @ ₹ 150 per kg. Commission @ 10% on sales is payable to M/S Vasudha.
[Value of unsold Stock ₹ 3,33,910; Loss in Transit: 50,400; Net Profit ₹ 22,310]
14. Consignment: [Cost Price] [1st Semester 2017 Honours] [Normal Loss]****
M/s Poddar & Co. of Kolkata deals with ‘Body Oil’ which is sold in one litre plastic bottle. Poddar & Co.
consigned 2,500 bottles of ‘body oil’ costing ₹ 240 per bottle to Sharma & Co. of Jalandhar, to be sold at ₹ 400
per bottle and paid ₹ 50,000 as freight and insurance.
Sharma & Co. took delivery of the remaining goods consigned and paid carriage inward and unloading charges
₹ 32,300. He is entitled to a commission of 10% on sales made by him. Sharma & Co. also incurred other
expenses covered under agreement amounting to ₹ 18,000.
Sharma & Co. reported that 100 bottles were lost due to leakage in the godown (loss due to leakage upto 5% of
goods received by the consignee is considered as normal loss) and 1,700 bottles were sold Sharma & Co. paid a
cheque of 5,50,000 in favour of poddar &Co. You are required to prepare consignment Account in the books of
M/s Poddar & Co.
Note: Working should for part of the answer.
15. Consignment: [Invoice Price] [1st Sem 2019 Pass]
On 25th March, 2021 X & Co. of Kolkata sends 100 saree costing ₹ 1,500 each to Y & Co. of Mumbai to be
sold by the latter on consignment basis. Invoice price of the above saree has been arrived at after adding 33.33 %
on cost. X & Co. spends railway freight ₹ 7,500, insurance ₹ 1,000 and loading charges ₹ 500 to send the
consignment. Y & Co. is entitled to a commission of 5% on gross sales. 5 sarees were lost – in – transit to
Mumbai for which a claim of ₹ 7,000 was received from the insurance company. On 31st December, 2021 X &
Co. received an account sale from Y & Co. which shows the following:
₹ ₹
Gross Sale proceeds of 80 sarees 1,60,000
Less: Clearing charges 1,900
3,100
Godown expenses
1,47,000
Show the following accounts in the books of X & Co.
(i) Consignment Account
(ii) Y & Co. Account
(iii) Ascertain the quantum of loss in respect of saree lost – in – transit
16. Consignment: [Invoice Price] [1st Sem 2020 Pass]

A & Co. of Kolkata sent goods of the invoice value of ₹ 80,000 on consignment basis to B. & Co. of Kanpur.
Invoice value was made by adding 33 1/3 % on cost. A & Co. paid ₹ 1,800 for Railway Freight, ₹ 360 for
Carriage and ₹ 1,200 for Insurance for sending the goods. B & Co. sold 1/2 of the goods at ₹ 50,000, incurring a
bad debt of ₹ 8,400. B & Co. paid Landing Charges ₹ 600, Godown Rent ₹ 750 and Selling expenses ₹ 840. B &
Co. is entitled to an ordinary commission @5% and a Del Credere commission @ 2½ % on sales.
Show following accounts in the books of A & Co. –
(a) Consignment Account
(b) B & Co. Account.
17. Consignment: [Invoice Price] [B.com 2014 Pass]

K of Kolkata consigned goods to D of Delhi for sale at loaded price. D is entitled to a commission on sale at
7 % on Proforma invoice price and 20% of any surplus price realised.
Goods consigned by K to D during the year ended 31st March, 2014 cost to K ₹ 41,800 and invoiced at ₹
56,800. K paid ₹ 2,500 freight and received ₹ 15,000 as advance from D. 80% of the goods were sold by
D for ₹ 50,000. D remitted the balance of proceeds after deducting his commission.
Show Consignment Account in the books of K.
[Commission; ₹ 912 + 3408 = ₹ 4320; Profit ₹ 11940; Consignment Stock ₹ 11,860]
Ch.7: Rectification [10 Marks]

Stages of rectification:
1. Before Trial Balance
2. After Trial Balance
3. After Final A/c
Types
1. One sided error- Debit mistake or credit mistake
2. Double sided error- Mistake in both side with same amount
Sales, income, purchase return, profit & gain, capital, liabilities – credit nature
Expenses, losses, purchases, sales return, assets, drawings – Debit nature
Example
Sales day book overcast by ₹ 1000
X 4000 – X A/c
Y 3000 – Y A/c
Z 2000 – Z A/c
10000 – Sales A/c
Sales day book overcast by ₹ 1000
Before trial balance

Being sales A/c debited by ₹ 1000 for rectification.
After trial balance:

Sales ………………………Dr. 1000
To suspense A/c 1000
After final A/c

Nominal A/c (expenses, income, sales, purchases, sales return, purchase return) - P/L Adjustment
P/L adjustment A/c………………………Dr. 1000
To Suspense 1000
If recording mistake, double sided mistake then both A/c to be rectified.

Example
Credit sales ₹ 1000, wrongly recorded in sales day book ₹ 100.
Correct entry
Debtors………………………Dr. 1000
To sales 1000
Wrong entry
Debtors ………………………Dr. 100
To sales 100
Rectified entry
Debtors ………………………Dr. 900
To sales 900
Posting Mistake – only concerned A/c to be rectified.

Example
Credit sales of ₹ 1000, wrongly posted to sales A/c as ₹ 100.
Correct entry
Debtors………………………Dr.. 1000
To Sales 1000
Wrong entry
To Sales 100
Rectified entry
Suspense A/c ………………………Dr. 900
To Sales 900
Example:
Rent paid to Ram ₹ 1000, wrongly debited to Ram A/c- Error of Principle
Correct entry
Rent………………………Dr.
To cash
Wrong entry
Ram ………………………Dr.
To cash
Rectified entry
Rent ………………………Dr.
To Ram
Types of Error according to Nature:-

1. Error of omission
(a) Partial – one sided
(b) Complete – double sided
Credit sales ₹ 1000, not recorded (Complete)

Debtors………………………Dr. 1000
To sales 1000
Credit sales ₹ 1000, not posted to sales A/c: (partial)

Suspense ………………………Dr. 1000
To sales A/c 1000
2. Error of commission
(a) Wrong account
(b) Wrong side
(c) Wrong total
(d) Wrong balance
(e) Wrong A/c
(f) Overcastting
(g) Under casting
3. Error of Principle
Conceptual Mistake
(a) Revenue Expenditure or receipts treated as capital expenditure or receipts or vice-versa.
(b) Personal A/c debited or credited instead of nominal A/c or vice versa.
4. Compensating Error
A set of Errors compensate each other.
Sub-Division of Journal
1. Cash book - All cash transactions.
Cash A/c debit side overcast by ₹ 1000/-

Suspense A/c………………………Dr. 1000
To cash A/c 1000
2. Sales Day Book: Credit sales of goods.

Debtors A/c ………………………Dr.
To sales
X 4000 X A/c
Y 3000 Y A/c
Z 2000 Z A/c
10000 sales A/c
Suspense A/c………………………Dr.. 1000
To Sales A/c 1000
3. Purchase Day book –credit purchase of goods

Purchase ………………………Dr.
To creditors
Overcastting/ under casting –Purchase A/c
4. Purchase Return day book

Creditors ………………………Dr.
To Purchase Return
5. Sales return day book

Sales return ………………………Dr..
To Debtors
6. Bills Receivable book

Bill receivable………………………Dr.
To Debtors
(Bills receivable drawn)
7. Bills payable book

Creditors ………………………Dr.
To bills payable
(Bills payable accepted)
8. Journal proper (General Journal)

(a) Open entries
(b) Closing entries
(c) Transfer
(d) Rectification
(e) Adjustment entries
(f) Purchase or sales of assets on credit
1. Rectification of Errors:*
Ravi Shastri could not agree his Trial Balance. He transferred to Suspense A/c an account of ₹ 296 being
excess of the debit side total. The following errors were subsequently discovered :
(a) Sales Book was overcast by ₹ 300.
(b) Purchase of Furniture for ₹ 615 passed through Purchase Book.
(c) An amount of ₹ 55 received from Jograj Singh was posted to his account as ₹ 550.
(d) Purchase Return Book total on a folio was carried forward as ₹ 221 instead of ₹ 112.
(e) A cash sale of ₹ 1,235 duly entered in the Cash Book but posted to Sales A/c as ₹ 235.
(f) Rest of the difference was due to wrong total in the Salaries Account.
Give Journal entries to rectify the above and prepare Suspense Account.
Solution:
In the books of Ravi Shastri
Dr. Journal Cr.
Sales A/c Dr. 300
To suspense A/c 300
(Being Sales book was overcast by ₹ 300, now rectified)
Furniture A/c Dr. 615
To Purchases A/c 615
(Being purchase of furniture passed through Purchase Day Book,
now rectified)
Yograj Singh A/c Dr. 495
To Suspense A/c 495
(Being an amount of ₹ 55 received from Yograj was wrongly
entered in his account as ₹ 550, now rectified)
Purchase Return A/c Dr. 109
To Suspense A/c 109
(Being total of purchase return book was carried forward as ₹ 221
in place of ₹ 112, now rectified)
Suspense A/c Dr. 1,000
To Sales A/c 1,000
(Being Cash Sales of ₹ 1,235 wrongly posted in the Sales Account
as ₹ 235, now rectified)
Suspense A/c Dr. 200
To Salaries A/c 200
(Being Salaries Account was overcast by ₹ 200, now rectified)
Dr. Suspense Account Cr.

To Sales A/c 1,000 By Balance b/d 296
To Salaries A/c 200 By Sales A/c 300
(balancing figure) By Yograj A/c 495
By Purchases Return A/c 109
1,200 1,200
The Trial Balance of S.Kumar as on 31 December, 2021 did not agree and the differences were transferred
st
to Suspense Account. Subsequently, the following errors were disclosed:

(a) The total of one page of the Sales Book was carried forward to the next page as ₹ 4,513
instead of ₹ 4,531.
(b) The total of the Purchases Book was ₹ 400 short.
(c) A cash discount of ₹ 150 received from a Creditor was debited to Cash Discount.
(d) ₹ 1,450 spent on repairs to Delivery Van was debited to Motor Vehicles Account.
(e) ₹ 300 received from M. Ghosh was debited to the account of N. Ghosh in the Sales Ledger.
(f) Goods amounting to ₹ 700 returned by Islam were not entered in the books at all.
(g) ₹ 211 interest on overdraft was credited to Interest Account.
Give the correcting entries.
Solution:
Books of S Kumar
Journal
Date Particulars L.F Amount Amount
₹ ₹
2021 (i) Suspense A/c Dr. 18
31.12 To Sales A/c 18
[Sales Account undercredited, now rectified]
(ii) Purchase A/c Dr. 400
To Suspense A/c 400
[Total of Purchase Day Book undercast by ₹ 400, now rectified]
(iii) Suspense A/c Dr. 300
To Discount allowed A/c 150
To Discount Received A/c 150
[Cash discount of ₹ 150 received from a creditor wrongly debited
to Discount Account, now rectified]
(iv) Repairs A/c Dr. 1,450
To Motor Vehicle A/c 1,450
[Amount spent on repair of Delivery Van wrongly debited to
Motor Vehicle account, now rectified]
(v) Suspense A/c Dr. 600
To M. Ghosh A/c (Debtors) 300
To N. Ghosh A/c (Debtors) 300
[₹ 300 received from M. Ghosh debited to N. Ghosh Account,
now rectified]
(vi) Return Inward A/c Dr. 700
To Islam A/c 700
[Return Inward from Islam omitted to be recorded, now entered)
(vii) Interest on Overdraft A/c Dr. 211
Interest Received A/c Dr. 211
To Suspense A/c 422
[Interest on overdraft ₹ 211 wrongly credited to Interest Account,
now rectified]
Note:
(i) When the page total was carried forward, ₹ 4,531 – 4,513 = ₹ 18 was extended less. As a result sales A/c
remained under credited by ₹ 18. It is now credited.
(ii) Due to undercasting of the Purchase Day Book, ₹ 400 was posted less to the debit of Purchase A/c. it is
debited.
The following errors were discovered in the books of a trader for the year ended December 31, 2021:
a) The total of the Purchase Day Book had been undercast by ₹ 100.
b) The discount column of the debit side of the Cash Book had been posted to the credit of the Discount
Received Account ₹ 20.
c) ₹ 76 paid for Repairs of Motor Van had been taken to Motor Van Account.
d) A cheque received from B ₹ 39 had been debited in Cash Bank but the double entry had not been
completed.
e) The Returns Outward Book had been overcast by ₹ 50.
Show the Rectification entries considering that the Final Account had already been prepared and the net
profit arrived at amounted ₹ 24,320 (before corrections). Show the calculation of the net profit.
Solution:
Books of………………
Journal Dr. Cr.
Date Particulars L.F. Amount (₹) Amount (₹)
(a) Profit & Loss Adjustment A/c Dr. 100
To Suspense A/c 100
[Purchase Day Book undercast, now rectified]
(b) Profit & Loss Adjustment A/c (Disc. Allowed
and Disc. Received) Dr. 40
To Suspense A/c 40
[Discount received credited instead of Disc.
Allowed debited, now rectified]
(c) Profit & Loss Adjustment Dr. 76
To Motor Van A/c 76
[Repairs of Motor van debited to Motor Van
Account, now rectified]
(d) Suspense A/c Dr. 39
To B A/c 39
[Cash Received from B not credited to his
account, now rectified]
(e) Profit & Loss Adjustment A/c Dr. 50
To Suspense A/c 50
[Overcasting of Return outward book, now rectified]
Dr. Profit & Loss Adjustment Account Cr.

Particular s Amount Particulars Amount
₹ ₹
To Suspense A/c 100 By Net Profit b/d 24,320
To Suspense A/c 40
To Motor Van A/c 76
To Suspense A/c 50
To Capital A/c 24,054
(Adjusted Net Profit)
24,320 24,320
4. Rectification of Errors: [1st Semester 2017 Pass]
Rectify the following error before preparation of Trial Balance
(a) Cash withdrawn by proprietor ₹ 2,000 for personal use was debited to trade expenses A/c.
(b) ₹ 2500 spent on installation of wages was debited to Machinery Account.
(c) ₹ 170 Discount allowed was wrongly credited to Discount A/c and Debited to Creditors Account.
5. Rectification of Errors: [1st Semester 2018 Hons]

The Trial Balance of Mr. Saha did not agrees as on 31.3.2021 and the difference were put to suspense
account and the following mistakes were detected before preparation of final accounts:
(a) Purchases Day Book was over cast by ₹ 2,200.
(b) ₹ 12,000 paid to Sudipta was wrongly debited to Sudipta Account.
(c) ₹ 6,900 paid for replacement of a mother board of a desktop, debited to Repairing Charges Account
as ₹ 900.
You are requires to pass necessary journal entries to rectify the above errors
6. Rectification of Errors: [1st Semester 2018 Pass, 2019 Hons type]

Rectify the following error after preparation of Trial Balance but before preparing Final Accounts by
passing necessary journals entries:
(a) Cash taken by proprietor ₹ 3000, were not recorded at all.
(b) ₹ 5,000 received from Bimal against debts previously written off as bad debts have been credited to
his personal account.
(c) A cheque received from Amal, a debtor, for ₹ 4,000 was directly received by the proprietor who
deposited it into his personal bank account.
(d) Purchase of Furniture for ₹ 10,000 passed through Purchase Day Book.
(e) Rent paid ₹ 5,000 to Landlord debited to the personal account of landlord.
(f) Sales Day Book Cast short by ₹ 1,000.
(g) Received interest ₹ 1,500, posted to Loan Account.
7. Rectification of Errors: [1st Semester 2020 Pass]

Pass journal entries to rectify the following errors detected after preparation of Trial Balance but before
preparation of Final Accounts :
(a) Return Inward Book was undercast by ₹ 800.
(b) ₹ 1,000 received from P was debited to the account of Q in the Sales Ledger.
(c) A purchase of ₹ 1,342 had been debited to supplier at ₹ 1,324.
(d) Salary paid ₹ 2,500 wrongly debited as Rent paid.
(e) An amount of ₹ 2,000 withdrawn by the proprietor for his personal use had been debited to
travelling expenses account.
8. Rectification of Errors: [After Trial Balance] [B.com 2011]*
At 31st March, 2021 , the Accountant finds a difference in the Trial Balance. The difference has been
carried to Suspense Account. Subsequently, the following errors are discovered before finalisation of
accounts. Give Journal entries to rectify these errors and prepare the Suspense Account :
(a) Purchase of furniture for ₹ 1,000 passed through Purchase Book.
(b) An amount of ₹ 550 received from Raja was posted to his account as ₹ 5,500.
(c) An amount of ₹ 800 received from A, a debtor, has been treated as cash sale.
(d) Discount allowed ₹ 150 was wrongly credited to Discount Received Account
9. Rectification of Errors: [After Trial Balance] [B.com 2013 Honours]*

A trader agreed his Trial Balance by putting the difference in a Suspense Account. On subsequently
scrutiny, the books disclosed certain errors detailed below:
i. A credit sale of goods to X for ₹ 700 had been credited to his account.
ii. Goods purchased from Q for ₹ 1,500 was entered in the Purchase Day Book but omitted to be
posted to his account in the Creditor Ledger.
iii. Goods returned by Z of ₹ 1,000 were not debited to Return Inward Account.
iv. An office typewriter purchased for ₹ 3,000 had been debited to Purchase Account.
Pass necessary rectification entries.
[Ans: ₹ 900 (Dr.)]
10. Rectification of Errors: [After Trial Balance] [B.com 2013 Pass]*

On 31.03.21 Mr. ‘B’ could not agree his Trial Balance. He transferred ₹ 1,596 (being excess of the debit
side total) to suspense account. The following errors were subsequently discovered:
i. ₹ 55 received from Mr. ‘A’ was posted to his account as ₹ 550.
ii. Purchase Return Book’s total on a page was carried forward as ₹ 5,221 instead of ₹ 5,112.
iii. A cash sale of ₹ 2, 935 duly entered in the Cash Book but posted to Sales Account as ₹ 1, 235.
iv. Salary paid was recorded in the Salaries Account ₹ 12, 500 instead of ₹ 12,000.
Make necessary journal entries to correct these errors and close the Suspense Account.

The trial Balance of Mr. A.K. Roy did not tally as on 31.03.21 and it has been tallied with the help of a
Suspense Account. The following errors were detected as a result of checking of the books of accounts.
a. An item of purchase of ₹ 351 was entered in the purchases book as ₹ 35 and posted to the supplier’s
account as ₹ 51.
b. Bills Receivable from Mr. X of ₹ 2,500 was posted to the credit of Bills Payable account and also
credited to the account of Mr. X.
c. A sale of ₹ 1,500 has been passed through Purchases Journal. The Customer’s account has, however,
been correctly debited.
d. Discount amounting to ₹ 300 received from a supplier had been entered in his account but not posted
to the discount account.
Pass the necessary Journal entries to rectify the above errors.
[Ans: ₹ 1716 (Dr.)]
The following errors were discovered after preparation of the Trial Balance but before preparation of Final
Accounts. Show journal entries to rectify these error:
(a) A sale of ₹ 3,400 made to Mr. X was correctly entered in the Sales Day Book but wrongly posted to
the debit of Mr.Y as ₹ 340.
(b) Goods of the value of ₹2,500 returned by Mr. Sengupta were entered in the Sales Day Book and posted
there from to the credit of his account.
(c) A cheque of ₹ 5,348 received from Mr. Sarkar after allowing him a discount of ₹58 was endorsed Mr.
Karmakar in full settlement for ₹ 5,400. The cheque was finally dishonoured but no entries for
dishonour were passed in the books.
(d) A payment of ₹ 8,500 towards cost of stamps and registration of new building acquired was posted to
the Legal Charges Account as 5,800.

The following errors were detected after preparing the Trial Balance but before the preparation of Final
Accounts in the books of Mr. Basu:
a) The total of Return Inwards Book has been cast ₹ 1000 short.
b) A sum of ₹ 4000 written off from machinery has not been posted to Depreciation Account.
c) The purchase of an office furniture costing ₹ 13,000 has been passed through the Purchase Day
Book.
d) ₹ 600 received from Mr. Roy has been debited to Mr. Sen.
Show the Journal entries for rectifying the above errors.
14. Rectification of Errors: [After Trial Balance] [B.com 2016 Pass]*

Mr. P. Sen could not agree his Trial Balance on March 31, 2021. The difference has been carried to
suspense A/c. The following errors were subsequently discovered:
a) Sales Day Book was over cost by ₹ 6,000.
b) Purchase of machinery 12,300 was passed through Purchase Day Book.
c) An amount of ₹ 1,100 received from Mr. Dey was posted to his account as ₹ 11,000.
d) Purchase Return Book total on a page was carried forward as ₹ 4,420 instead of ₹ 2,240.
Rectify the above errors by passing necessary journal entries.
15. Rectification of Errors: [After Trial Balance] [Compiled by Ravi Bhalotia]*

In taking out a trial balance a book-keeper finds that the debit exceeds by ₹ 41. After recording the
difference in Suspense Account he discovers that:
(a) A sum of ₹ 83 received from X was posted to his debit as ₹ 38.
(b) ₹ 62 written-off as depreciation on Furniture has not been posted to depreciation Account.
(c) ₹ 1,000 paid for new furniture has been charged to repai₹
(d) A discount of ₹ 21 allowed to a customer has been credited to his account as ₹ 20.
(e) The total of the Sales Returns has been added one rupee short.
(f) An item of sale of ₹ 68 was posted as ₹ 86 in the sales account.
You are required to give the journal entries for rectification of the above and show the Suspense Account..
16. Rectification of Errors: [After Trial Balance] [Compiled by Ravi Bhalotia]*
In taking out a trial balance, a book-keeper finds that debit total exceeds the credit total by ₹ 352. You are
required to pass the necessary entries for rectifying the mistakes, and show the Suspense Account.
(a) Sales Day Book was overcast by ₹ 100.
(b) A sale of ₹ 50 to Shri Ram was wrongly debited to Shri Krishna.
(c) General expenses ₹ 18 was posted ₹ 80.
(d) Cash received from Shri Govind was debited to his account ₹ 150.
(e) While carrying forward the total of one page of the Purchases Book to the next, the amount of
₹ 1,235 was entered as ₹ 1,325.
17. Rectification of Errors: [After Trial Balance]

Ravi Shastri could not agree his Trial Balance. He transferred to Suspense A/c an account of ₹ 296 being
excess of the debit side total. The following errors were subsequently discovered :
(g) Sales Book was overcast by ₹ 300.
(h) Purchase of Furniture for ₹ 615 passed through Purchase Book.
(i) An amount of ₹ 55 received from Jograj Singh was posted to his account as ₹ 550.
(j) Purchase Return Book total on a folio was carried forward as ₹ 221 instead of ₹ 112.
(k) A cash sale of ₹ 1,235 duly entered in the Cash Book but posted to Sales Account as ₹ 235.
(l) Rest of the difference was due to wrong total in the Salaries Account.
Give Journal entries to rectify the above and prepare Suspense Account.
18. Rectification of Errors: [C.U. B.Com 2012] [After Final A/c]**

In the books of Harinath Bhandar for the year ended 31.3.21, the following mistakes were committed and
the final accounts were completed with the help of a Suspense Account:
(i) Purchase Day Book was overcast by ₹ 600.
(ii) A credit sales of ₹ 780 was debited to the customer Account as ₹ 870
(iii) Credit purchase of ₹ 825 was debited to Supplier's Account ₹ 850.
(iv) Repairs to building ₹ 500 was charged to Building A/c on which depreciation was charged @5%.
Show necessary Journal Entries and Suspense Account
19. Rectification of Errors: [C.U. B.Com 2013 Supple] [After Final A/c]**
The following mistakes were committed in the books of Manish for the year ended 31.3.2021 and the final
accounts were completed with help of ‘Suspense’ Account:
a. Sales Day Book was under cost by ₹ 2,000.
b. An office table was purchased for ₹ 5,000 but wrongly included in purchases.
c. Salary paid to the manager ₹ 10,000 but debited to his personal account.
d. A credit sale of ₹ 3,500 was debited to the customer’s account as ₹ 5,300.
Show necessary journal entries and prepare Suspense Account.
Ch 8: Adjustment entries [0 M]
1) Closing stock
Closing stock A/c…………………………………Dr.
To Trading A/c
2) Outstanding expenses
Expenses A/c (P/L Debit) …………………….Dr.
To outstanding A/c (liabilities side)
3) Prepaid expenses
Prepaid expenses (assets) ……………………….Dr.
To Expenses (less)
4) Accrued income
Accrued income (assets) ……………………….Dr.
To Income (add)
5) Income received in advance

Income …………………………………….….Dr.
To income received in advance
6) Bad debts
a. Bad debts …………………………………Dr.
To Debtors (less)
b. P/L or Provision for bad debts…………….Dr.

To Bad debts
7) Provision for bad debts

P/L…………………………………………….Dr.
To Provision for bad debts
8) Depreciation
a. Depreciation A/c………………………..Dr.
To Assets
b. P/L …………………………………….Dr.
To Depreciation
9) Goods withdrawn for personal use

Drawings A/c………………………………Dr.
To purchases
10) Free sample distributed

Advertisement A/c……………………….Dr.
To purchases
11) Bad debts recovery
a. Cash A/c……………………………Dr.
To bad debts recovery
b. Bad debt recovery A/c …………….Dr.

To P/L
12) Goods destroyed by fire

a. Goods destroyed by fire…………..Dr.
To purchases/trading A/c
b. Insurance co. (claim admitted)………….Dr.

P/L (claim not admitted…………………Dr.
To goods destroyed by fire
The treatment of various items is summarized below in a tabular form for quick revision:
Adjustment If given in the trial Balance If Given in Adjustments below the
trial balance
1. Closing Stock Balance Sheet - Asset Side (a) Trading A/c - Credit Side
(b) Balance Sheet - Asset Side
2. Outstanding Balance Sheet - Liability Side (a) Trading / Profit & Loss A/c Debit
Side,
Expenses Add to the concerned expense.
(b) Balance Sheet - Liability Side
3. Prepaid Expenses Balance Sheet - Asset Side (a) Trading / Profit & Loss A/c Debit
side, Deduct from the concerned
expense.
(b) Balance Sheet - Asset Side.
4. Incomes Outstanding Balance Sheet - Asset Side (a) Profit & Loss A/c - Credit Side, Add
to the concerned income.
5. Income Received in Balance Sheet - Liability Side (a) Profit & Loss A/c –Credit side,
deduct
Advance from concerned income.
(b) Balance Sheet - Liability Side.
6. Bad Debts Profit & Loss A/c - Debit Side (a) Profit & Loss A/c Debit Side, Add to
the Bad Debts, if any, given in the T.
Bal.
(b) Balance Sheet - Asset Side, Deduct
from Debtors.
1. Adjustment Entries: [B.com 2012]****
Pass necessary adjustment entries before preparing final accounts for the year ended 31.03.2021 in respect
of the following:
(i) Closing stock as on 31st March, 2019 ₹ 20,000;
(ii) Unpaid salary for ₹ 3,000 is to be provided for in the accounts;
(iii) To carry forward ¼ th of insurance premium paid at ₹ 4,000;
(iv) Goods costing ₹ 1,500 were distributed by way of free samples during the year.
2. Adjustment Entries****
Give necessary Journal entries to record the following adjustments while preparing Final Accounts :
(a) Unpaid wages ₹ 250.
(b) Stock at the closing date ₹ 6,700.
(c) Insurance Premium paid in advance ₹ 200.
(d) Interest accured on Bank Deposit ₹ 150.
(e) Goods used by the proprietor for personal purposes ₹ 500.
(f) Goods used in the business as stationery ₹ 50.
(g) Sundry Debtors stood at ₹ 4,000 on the closing date. Provision for doubtful debts @ 5% be created.
3. Adjustment Entries:****
Pass the necessary adjustment entries for the following:
(a) Outstanding Salaries ₹ 4,000.
(b) Accrued Interest on Fixed Deposit ₹ 2,000.
(c) Insurance Premium paid in advance ₹ 400.
(d) Commission received in advance ₹ 200.
(e) Depreciate Machinery by ₹ 2,500.
(f) Closing Stock ₹ 20,000.
4. Adjustment Entries:****
Give journal entries for the following transactions:
(a) Proprietor has drawn goods of the selling price of ₹ 600 (cost being ₹ 500) but no record has been
made in the books.
(b) Wages for installation of Machinery have been debited to Wages A/c ₹ 400.
(c) Sale of Furniture ₹ 4,800 has been passed through Sales A/c.
(d) Salaries outstanding were ₹ 600.
(e) A credit purchase of ₹ 1,000 from A. Pathak has been credited to B. Pathak A/c.
5. Adjustment Entries: [Compiled by Ravi Bhalotia]***

Pass adjustment entries for the following before you prepare final accounts for the ended on 31.3.2021.
(a) Interest @ 6% p.a. were due on 31.03.2021 on Government Bonds of Rs 30,000 invested on 1.10.2020.
(b) Commission due to manager @ 6% on net profit after charging such commission. The profit before
charging such commission was ₹ 15,516.
(c) Provide for Provision for Bad debts @ 10% and Provision for discount on debtors @ 5% on debtors of ₹
40,000.
(d) Goods valued ₹ 10,000 were destroyed by fire but insurance company admitted 60% of the claim.
Chapter 9: Inventory [5 Marks]

Meaning of inventories Inventories are assets that are –
(a) Held for sale in ordinary business; e.g. Finished Goods
(b) In the process of production for such sale; e.g. WIP or
(c) In the form of materials or supplies to be consumed in the
production process or in the rendering of services. E.g. Raw
Materials
Inventory = Finished Goods + WIP + Raw Material
Cost of inventories Includes
1. Cost of purchase – [INCLUDES Purchase Price + Duties &Taxes
(which are NOT subsequently recoverable) + other expenditures
directly attributable to acquisition (Like Freight Inward) BUT
EXCLUDES Trade Discount, Rebates, Subsidies and Taxes
(which are subsequently recoverable)]
2. Cost of Conversation – [INCLUDES Direct Labour, Direct
Expenses, Sub Contracted Work and Production Overheads
absorbed on the basis of Normal Capacity]
3. Other Costs incurred in bringing the inventories to their present
location and condition e.g. costs incurred in designing products for
specific customers
Excludes
1. Abnormal Amounts of wasted materials, labour, or other
production costs;
2. Storage Costs, unless those cost are necessary in the production
process prior to a further production stage;
3. Administrative Overheads that do not contribute to bringing the
inventories to their present location and condition; and
4. Selling and Distribution Costs.
Lower of cost or net The inventories should be valued at the lower of cost and net realizable
realizable value value at each Balance Sheet date.
Note: Net Realizable Value = Estimated Selling Price – Estimated Cost of
Completion – Estimated Costs necessary to make the sale.
1. Inventory: Example on NRV
Unsold units with Agent 1,000

Cost per unit ₹ 10
Estimated Selling Price per unit as at Balance Sheet date ₹8
Agent’s Commission on sales 5%
What should be the Value of Closing Stock?
Solution
I. Cost Of Closing Stock 10,000
II. Net Realizable Value
A. Total Realizable Value (1,000 X ₹ 8) 8,000
B. Less: Realizable Expenses (Here Agent's Commission Is Realizable
400
Expense) (₹ 8,000 x 5/100)
C. Net Realizable Value (A - B) 7,600
III. Valuation since out of cost (which is ₹ 10,000 as calculated above) and NRV (which is ₹ 7,600),
NRV is lower, the said unsold stock should be valued at ₹ 7,600
2. Inventory: Stock Taking

X who was closing his books on 31.3.2021 failed to take the actual stock which he did only on 9th April,
2021, when it was ascertained by him to be worth ₹ 25,000. It was found that:
(a) Sales are entered in the sales book on the same day of dispatch and return inwards in the returns
book as and when the goods are received back.
(b) Purchases are entered in the purchases day book once the invoices are received.
(c) Sales between 31.3.2021 and 9.4.2021 as per the sales day book are ₹ 1,720.
(d) Purchases between 31.3.2021 and 9.4.2021 as per purchases day book are ₹ 120, out of these goods
amounting to ₹ 50 were not received until after the stock was taken.
(e) Goods invoiced during the month of March, 2021 but goods received only on 4th April, 2021
amounted to ₹ 100.
(f) Rate of gross profit is 33 1/3% on cost.
Ascertain the value of stock as on 31.3.2021.
Solution
In the Books of Mr. X
Statement showing value of Stock on 31.3.2021
Particulars Amount (₹) Amount (₹)
Stock as on 9.4.2021 25,000
Add: Cost of Goods Sold between 31.3.21 and 9.4.21 1,290
[Sales at selling price – Gross Profit on Sales or Rs. 1,720 – 1/4 of 1,720]
th
26,290
Less: (a) Purchases made and goods actually received between 31.3.21 and
9.4.21 purchases between these dates 120
Less: Goods not received till 9.4.21 50
70
Purchases related to March, 2021 but received on 4.4.2021 100 170
Value of Physical Stock on 31.3.2021 26,120
Add: Goods in Transit as on 31.3.2021 100
Value of Stock on 31.3.2021 26,220
3. Inventory: NRV [B.com 2011, 2012 supple] ***
Y Ltd. has an item in stock which costs ₹ 20,000 and can be sold for ₹ 24,000. However, before it can be
sold, it will require to be modified at a cost of ₹ 3,000. The expected selling expenses of the item are ₹
2,000. Calculate the Net Realisable Value (NRV) of the item & Value of stock to be shown in Balance Sheet.
4. Inventory: Effect on Profit [B.com 2011, 2015 Pass] ******

What will be the effect on profit for a period: —
(i) if the value of opening inventory is overstated.
(ii) if the value of opening inventory is understated;
(iii) If closing stock is overvalued by ₹ 10,000
(iv) if the value of closing inventory is understated and
5. Inventory: Valuation of Stock [B.com 2014 Honours] ***

From the following particulars for the year ended 31.03.21, determine the value of the closing stock at the
end of the year.
Opening stock on 01.04.20 ₹ 40,000
Purchases ₹ 2, 25,000
Sales ₹ 3, 00,000
At the end of the year goods purchased on credit for ₹ 25,000 were received but no entry passed for non-
receipt of invoice. Uniform rate of Gross Profit is 30%.
6. Inventory: Stock Taking

X who was closing his books on 31.3.2021 failed to take the actual stock which he did only on 9th April,
2021, when it was ascertained by him to be worth ₹ 2,50,000. It was found that:
(g) Sales are entered in the sales book on the same day of dispatch and return inwards in the returns
book as and when the goods are received back.
(h) Purchases are entered in the purchases day book once the invoices are received.
(i) Sales between 31.3.2021 and 9.4.2021 as per the sales day book are ₹ 17,200.
(j) Purchases between 31.3.2021 and 9.4.2021 as per purchases day book are ₹ 1,200, out of these
goods amounting to ₹ 500 were not received until after the stock was taken.
(k) Goods invoiced during the month of March, 2021 but goods received only on 4th April, 2021
amounted to ₹ 1,000.
(l) Rate of gross profit is 33 1/3% on cost.
Ascertain the value of physical stock as on 31.3.2021.
7. Inventory: Valuation of Stock [B.com 2013 Pass] ***

Calculate the value of closing stock as on 31.03.21 from the following information:
i. Value of physical stock taken on 10.04.21 (for the year ended 31.03.21) was ₹ 5 00,000.
ii. Purchased during the period from 01.04.21 to 10.04.21 was ₹ 50,000 out of which ₹ 10,000
worth of goods was received on 15.04.21.
iii. Freight paid on above purchases was ₹ 5,000
iv. Goods sold during the period from 01.04.21 to 10.04.21 (making a profit 25% on cost) were ₹
55,000.
v. Arithmetical error in the stock sheet on 4th April, 2021 resulted in an overvaluation of ₹ 600.
8. Inventory: Stock Taking [1st Semester 2020 Pass]
The financial year of M/s. A.B. Trading ends on 31 March, 2021 but actual stock is not taken until 5 April,
2021 when it is ascertained at ₹ 54,000. You find that :
(i) Sales between 1 April and 5 April are ₹ 3,000.
(ii) Purchases between 1 April and 5 April are ₹ 1,400.
(iii) Sales return between 1 April and 5 April are ₹ 200.
(iv) Purchases return between 1 April and 5 April are ₹ 300.
(v) All sales are made at 25% gross profit on cost.
You are required to calculate the value of stock on 31 March, 2021.

A trader prepared his accounts on 31st March, each year. Due to some unavoidable reasons, no inventory
taking could be possible till 15th April, 2021 on which date the total cost of goods in his godown came to
₹ 5,00,000. The following facts were established between 31st March and 15th April, 2021.
(a) Sales ₹ 4,10,000 (including cash sales ₹ 1,00,000)
(b) Purchases ₹ 50,340 (including cash purchases ₹ 19,900)
(c) Sales Return ₹ 10,000.
(d) Goods are sold by the trader at a profit of 20% on sales.
You are required to ascertain the value of inventory as on 31st March, 2021.

From the following data, calculate the value of closing inventory on 31st July, 2021 using FIFO method:
2021
July 1 Opening Stock 100 kg @ ₹ 10 per kg
July 6 Purchase 600 kg @ ₹ 11 per kg
July 15 Issued 450 kg
July 21 Purchases 800 kg @ ₹ 12 per kg

From the following data, calculate the value of closing inventory on 31st July, 2021 using LIFO method:
2021
Chapter 10: [0 or 5 Marks]

Capital & Revenue Expenditure
Capital Expenditure
A capital expenditure is one which increases the value at which a fixed or capital asset may
properly be carried on in the books. The term capital expenditure is generally used to signify that
expenditure which
(i) Increases quantity of fixed assets;
(ii) Increases quality of fixed assets; or
(iii) Results in the replacement of fixed assets.
Following are the examples of capital expenditure:

a) Expenditure resulting in the acquisition of long-lived (fixed) assets, e.g., land, building,
machinery, furniture, motor car, trade marks.
b) Expenditure resulting in extension or improvement of fixed assets, e.g., amount spent on
increasing the seating accommodation in the picture hall.
c) Expenditure in connection with the purchase, receipt or erection of a fixed asset, e.g.,
wages paid or expenses on the erection of plant and machinery, expenses on cartage,
insurance of a fixed asset.
d) Major repairs and replacement of parts resulting in increased efficiency of a fixed asset.
e) Expenditure incurred or acquiring the right to carry on a business e.g., patent rights,
copyright, goodwill.
f) Legal charges and stamp duty paid for conveyancing on acquisition of a property.
g) Architect fees paid for supervising construction of a property.
Revenue Expenditure
An amount spent for earning or providing revenue is called revenue expenditure. Revenue
expenditure is one which constitutes a proper deduction from income or revenue. It is an expense.
Examples are:
a) Expenses incurred in the normal course of business, e.g., expenses of administration,
expenses incurred in manufacturing and selling products. Examples of such expenses are
salaries, rent, insurance, postage, stationery and repairs to assets.
b) Expenses incurred to maintain the business
c) Cost of goods purchased for resale.
d) Depreciation on fixed assets, interest on loans for business, loss from sale of fixed asset.
Deferred Revenue Expenditure

A heavy expenditure of revenue nature incurred for getting benefit over a number of years is
classified as deferred revenue expenditure. Preliminary expenses, brokerage on issue of shares and
debentures, discount on issue of shares or debentures, exceptional repairs, heavy advertisement,
expenses incurred in removing the business to more convenient premises, are examples of such
expenses which are essential for carrying on the business and thus revenue in nature.
1. Capital & Revenue Expenditure ****
State which of the following expenditures are capital, revenue and deferred revenue expenditure and capital
loss:
(a) Cost of overhauling and painting a second hand truck newly purchased.
(b) Cost of making more exits in a cinema hall under order of the Government.
(c) ₹ 25,000 were spent on air conditioning the office of the General Manager.
(d) An old machine which stood in the books at ₹ 15,000 was sold for ₹ 13,000.
(e) ₹ 2,000 were paid as municipal tax in connection with a building which was purchased last year for ₹
2, 00,000.
(f) ₹ 30,000 were spent on heavy advertising in connection with the introduction of a new product.
(g) ₹ 500 was paid out in connection with carriage on goods purchased.
(h) A temporary room constructed for ₹ 25,000 for storing raw material for the construction of a big
building.
(i) ₹ 50,000 was spent on putting up a gallery in a theatre hall.
(j) Freight and cartage amounting to ₹ 4,000 were paid on purchase of a new plant and a sum of ₹ 2,000
was spent as erection charges of that plant.
Solution:
(a) When a second hand machine is purchased, all expenditure incurred in the beginning to make it fit for
working is treated as capital expenditure. The value of the machine is increased by the amount spent.
Therefore the cost of overhauling and painting the truck will be treated as capital expenditure.
(b) Making more exists in a cinema hall does not increase the capacity of the hall and therefore, it should
be treated as revenue expenditure.
(c) The sum of ₹ 25,000 spent on air conditioning the office of General Manager is capital expenditure
because it represents a fixed asset. Moreover, the effect of air conditioning will be available for
several years to come, and it can possible by disposed of, if desired, at a future date, when it will
fetch some return.
(d) The old machine costing ₹ 15,000 was sold for ₹ 13,000 only, and the loss of ₹ 2,000 is clearly
capital loss.
(e) ₹ 2,000 paid by way of municipal tax on a building purchased is an item of revenue nature. It is an
expenditure of routine nature, which was necessary for using the building.
(f) Since the benefit of ₹ 30,000 spent on advertising will occur for several years, it is of capital nature.
It may be treated as deferred revenue expenditure and be written off against the profit and loss
account of a number of years.
(g) The expenditure of ₹ 500 incurred on carriage on goods purchased is of revenue expenditure because
the goods are meant for resale.
(h) ₹ 25,000 spent on construction of temporary room should be treated as capital expenditure because it
was necessary for the construction of the main building. The cost of the room will be added to the
cost of the building.
(i) When a new gallery is put up, it will increase the number of seats (capacity) of the hall. Therefore,
this cost of ₹ 50,000 should be treated as capital expenditure.
(j) The expenditure incurred by way of freight and cartage amounting to ₹ 4,000 and the erection
charges of ₹ 2,000 are both of capital nature. The former has been incurred for erecting it so that it
may be used for business purposes.
2. Capital & Revenue Expenditure [B.com 2012]****
State with reason whether the following are capital expenditure or Revenue expenditure:
(i) ₹ 50,000 spent towards addition to the machinery;
(ii) Second-hand motor car purchased for ₹ 2,00,000and spent ₹ 20,000 for repairs immediately;
(iii) ₹ 10,000 spent for whitewashing the factory building;
(iv) Carriage of ₹ 15,000 spent on machinery purchased and installed.
(v) ₹ 10,000 spent for repair works of the building.
(vi) ₹ 10,000 spent for carriage of goods.
3. Capital & Revenue Expenditure [B.com 2017 + 2019 General]****

State which of the following are Capital Expenditure and which are Revenue Expenditure giving
reasons in each case:
(a) Purchase of Machinery ₹ 50,000
(b) Paid customs duty of ₹ 10,000 for importing machinery from foreign country.
(c) Carriage paid for bringing the machine ₹ 3,000
(d) Wages paid for installation of the machinery ₹ 4,000
(e) Repairing cost for the machinery ₹ 2,000 after installation
(f) Insurance premium paid for machinery ₹ 1,000
(g) Paid office rent for ₹ 5,000
(h) Spent ₹ 30,000 for repairing of building.
(i) Paid ₹ 10,000 as registration fees for registering Patent Right.
4. Capital & Revenue Expenditure **

State with reasons, how you would classify the following items of expenditure :
(a) Overhauling expenses of ₹ 25,000 for the engine of a motor car to get better fuel efficiency.
(b) Inauguration expenses of ₹ 25,00,000 incurred on the opening of a new manufacturing unit in an
existing business.
(c) Compensation of ₹ 2,50,00,000 paid to workers, who opted for voluntary retirement.
[(a) Capital expenditure ; (b) Revenue expenditure ; (c) Revenue expenditure (may be deferred over
a number of years having regard to the magnitude of the amount)]
5. Capital & Revenue Expenditure **

Classify the following expenditure between Capital and Revenue, giving reasons for your answer:
(a) ₹ 5,000 spent towards addition to Machinery.
(b) Repairs for ₹ 1,000 necessitated for every year.
(c) Payment by cheque of carriage on purchase.
(d) Purchase of packing materials for distribution of goods from Singhania Paper Mills Ltd.
(e) Purchase of duplicator for use in office.
(f) Mr. A one of the partner of the farm acquired a personal car.
[Capital expenditure (a), (e); Revenue expenditure (b), (c), (d), (f)]
Chapter 11: Introduction

[5 Marks]
1. Introduction
Mr. Anil Roy, a junior lawyer, provides the following particulars for the year ended 31st December,
2020:
₹
Fees received in cash in 2021 60,000
Salary paid to Staff in 2021 8,000
Rent of office in 2021 14,000
Magazine and Journal for 2021 1,000
Travelling and Conveyance paid in 2021 3,000
Membership Fees paid in 2021 1,600
Office Expenses paid in 2021 10,000
Additional Information:-
Fees include ₹ 3,000 in respect of 2020 and fees not yet received is ₹ 7,000. Office rent includes ₹
4,000 for previous year and rent of ₹ 2,000 not yet paid. Membership fees is paid for 2 years.
Compute his net income for the year 2021, under – (a) Cash Basis, (b) Accrual Basis.
Solution
Mr. Anil Roy
Statement of Income (Cash Basis) For the year ended 31st December, 2021
Particulars Amount (₹) Amount (₹)

Fees received 60,000
Less :
Salary 8,000
Office Rent 14,000
Magazine & Journal 1,000
Travelling & Conveyance 3,000
Membership Fees 1,600
Office Expenses 10,000 37,600
Net Income 22,400
Mr. Anil Roy
Statement of Income (Accrual Basis) For the year ended 31st December, 2021

Fees received 60,000
Add: Accrued fees for 2020 7,000
67,000
Less: Fees for 2019 received in 2020 3,000
64,000
Less :
Salary 8,000
Office Rent 14,000
Add: Outstanding rent 2,000
16,000
Less: Rent for 2019 paid in 2020 4,000 12,000
Magazine & Journal 1,000
Travelling & Conveyance 3,000
Membership Fees 1,600
Less: Advance fee paid for 2021 ( ½ x 1600) 800 800
Office Expenses 10,000 34,800
Net Income 29,200
2. Introduction
Using accounting equation, calculate total assets if ——
(i) Capital Rs 5,00,000 ;
(ii) Creditors ₹ 3,00,000 ;
(iii) Revenue during the period ₹ 5,20,000;
(iv) Expenses during the period ₹ 3,80,000.
Solution
Revenue during the period 5,20,000
Less: Expenses during the period 3,80,000
Net Proft for the Period 1,40,000
Add: Capital 5,00,000
Add: Creditors 3,00,000
Total Assets 9,40,000
3. Introduction [B.com 2020 Hons]
Dr. R. K. Das started his profession on 1st January, 2021 as medical practitioner. His incomes and
expenses for the year 2021 relating to his profession were as under :
Amount (₹)
Fees received in cash 24,000
Fees accrued but not received 6,000
Rent paid for the Chamber 6,000
Outstanding Rent 2,000
Salary paid to Staff 6,000
Salary paid in advance to Staff(included in the above) 1,000
Miscellaneous expenses paid 200
You are required to compute the net income of Dr. R. K. Das from his profession for the year ended
31.12. 2021 under (a) Cash Basis; (b) Accrual Basis.
4. Introduction [B.com 2020 Pass]

Mr. Samir Roy, a sole proprietor of a small trading house determines profit under cash basis. The profit
for the year ended March, 31, 2021 was determined at ₹ 2,40,000. He provides the following additional
information for 2020-21.
₹
Credit Sales 41,000
Credit Purchases 24,000
Outstanding expenses 10,000
Income earned but not received 8,400
Rent paid in advance 5,000
Determine profit earned by Mr. Roy under ‘accrual basis’.
5. Introduction [B.com 2019 Hons]

From the following information, ascertain income for the year ended 31.03.2021 according to (a) accrual
basis of accounting (b) Cash Basis of accounting
₹
(a) Income received in cash for the year ended 31.03.2021 2,00,000
(b) Accrued Income as on 31.03.2021 35,000
(c) Income received in advance during the year ended 31.03.2021 20,000
(d) Outstanding Expenses as on 31.03.2021 40,000
(e) Prepaid Expenses as on 31.03.2021 30,000
6. Introduction [B.com 2011] ***
Using accounting equation, calculate total assets if ——
(i) Capital ₹ 10,00,000 ;
7. Introduction [B.com 2012 Supplementary] ***

From the following information, ascertain Subscription Income for the year ended 31-12.21 according to
Accrual basis of accounting:-
₹
Subscription received in cash for the year ended 31. 12. 21 1,00,000
Accrued subscription as on 31. 12. 20 10,000
Subscription received in Advance during 2021 for 2022 30,000
Accrued Subscription as on 31.12.2021 14,000
8. Introduction [B.com 2019 Pass]

Fill in the blanks selecting the correct one out of words given in the bracket:
(a) Business goodwill is ................................(tangible / intangible fixed asset)
(b) Lenders are example of ............................. (external / internal) users of accounting information
(c) Purchase Day Book is a .............................. (Journal / Ledger)
(d) Depreciation is an example of ........................................ (Expenses / Losses)
(e) Profit under accrual basis will be ............................. (₹ 10,000 / ₹ 20,000).
9. Introduction [B.com 2011]

Mention the names of accounting concept or convention being followed in the following instances :
(a) Provision for depreciation is created:
(b) Unsold stock is valued at lower of cost or net realisable value.
(c) A business will continue its operation for an indefinite period and will not be dissolved in the near
future.
(d) A business is considered as an artificial person different from the owner.
(e) Profit is being determined by comparing the sales of an accounting period with the corresponding
cost of goods sold.
10. Introduction [1st Sem B.com 2017 Hons]

State the name of the accounting concept or convention applied in each of the following cases:
(a) Recording of capital contributed by the owner in a sole proprietorship business a liability.
(b) Valuation of inventories at lower of cost or net realizable value.
(c) Omission of paisa and showing the round figures in financial statements.
(d) Assets are classified into fixed assets and current assets.
(e) Showing outstanding expenses in the Balance Sheet.
Chapter 12: Single Entry

[20 Marks]
Introduction
Many small businesses have neither the time nor the experience necessary to maintain a full set of
accounting records using the double entry system; and cannot afford the expense of outside staff to keep
such records. However, every business is interested to know its profit from time to time. Any set of
procedures for ascertaining profits that does not provide for the analysis of each transaction in terms of the
double entry system of bookkeeping is generally referred to as ‘Single Entry System’.
Conversion to double entry system

Step 1
If no Cash Account or Bank Account is maintained properly, a careful scrutiny of the Bank Statement of
pass book shall be made and enquiry should be done in respect of the amount of cash takings which has
been used by the trader for meeting personal expenses, business expenses or for cash purchase, etc.
After collecting information through enquiry and Scrutiny, a cash book (with cash & bank columns etc.)
should be prepared
Step 2:
Prepare Total Debtors Account, Total Creditors Account, Bills Receivable Account and Bills Payable
Account, Total sales Account and Total Purchases Account. The preparation of these accounts will help for
finding out different missing information regarding; (i) opening/closing debtors balance; (ii)
Opening/closing creditors balances; (iii) Credit purchases; and (iv) Credit sales, etc.
Step 6
Write up the Asset a/c from the information contained in the Cash Book and other accounts. Every account
should be carefully scanned; and the double entry effect of every transaction must be given.
Step 4
Prepare the Statement of Affairs (opening Balance Sheet) with the available information. The Balance of
the statement of Affairs represents opening capital.
Step 5
From the allied information, prepare Trading, Profit and Loss Account and Balance Sheet.
Calculation of Missing Figures

Cash Book: Closing Cash or any other missing Figure
Debtors & B/R: Credit Sales or any other missing Figure
Creditors & P/P: Credit Purchase or any other missing Figure
Assets A/c: Depreciation or any other missing Figure
Trading A/c: If GP % is given, there must be a missing figure in Trading A/c
Opening Balance Sheet: Opening capital
1. Single Entry:
A sole proprietor does not maintain complete books of account. From the following information, prepare
trading and profit and loss account for the year ended 31st December, 2021 and balance sheet as at that date:
On 31-12-2020 (₹) On 31-12-2021 (₹)
Debtors 9,000 12,500
Stock 4,900 6,600
Furniture 500 750
Creditors 3,000 2,250
Transactions during the year ended 31 December, 2021 :
st
₹
Cash collected from debtors 30,400
Cash paid to creditors 22,000
Salaries 6,000
Rent 750
Office expenses 900
Drawings 1500
Fresh capital introduced 1,000
Cash sales 750
Cash purchases 2500
Discount received 350
Discount allowed 150
Returns inwards 500
Returns outwards 400
Bad debts 100
He had ₹ 2,500 cash at the beginning of the year.
Solution:
Dr. Trading and Profit & Loss Account for the year ended 31st December, 2021 Cr.
Particulars ₹ ₹ Particulars ₹ ₹
To Opening Stock 4,900 By Sales: Cash 750
To Purchases : Cash 2,500 Credit (Note 2) 34,650
Credit 22,000 35,400
24,500 Less: Return Inward 500 34,900
Less: Returns Outward 400 By Closing Stock 6,600
24,100
To Gross Profit c/d 12,500 41,500
41,500
12,500
To Salaries 6,000 By Gross Profit b/d 350
To Rent 750 By Discount Received
To Office Expenses 900
To Discount Allowed 150
To Bad Debts 100
To Net Profit 4,950
(transferred to Capital) 12,850 12,850
Balance Sheet of X as at 31st December, 2021
Liabilities ₹ Assets ₹
Capital :Opening balance (Note 3) 13,900 Furniture 750
Add: Capital Introduced 1,000 Stock 6,600
Net Profit 4,950 Debtors 12,500
19,850 Cash (Note 4) 750
Less: Drawing 1,500
18,350
Creditors 2,250
20,600 20,600
Working Notes:
Dr. (1) Creditors Account Cr.
? To Cash A/c 22,000 1.1.2021 By Balance b/d 3,000
? To Discount Received A/c 350 ? By Credit Purchase 22,000
? To Returns Outward A/c 400 (Bal. Fig.)
31.12.2021 To Balance c/d 2,250
25,000 25,000
Dr. (2) Debtors Account Cr.
1.1.2021 To Balance b/d 9,000 ? By Cash A/c 30,450
? To Credit Sales (Bal. Fig.) 34,650 ? By Discount Allowed A/c 150
? By Returns Inward A/c 500
? By Bad Debts A/c 100
31.12.2021 By Balance c/d 12,500
43,650 43,650
(3) Balance Sheet of X as at 31st January, 2021

Capital (Bal. Fig.) 13,900 Furniture 500
Creditors 3,000 Stock 4,900
Debtors 9,000
Cash 2,500
16,900 16,900
Dr. (4) Cash Account Cr.
1.1.2021 To Balance b/d 2,500 By Creditors A/c 22,000
To debtors A/c 30,400 By Sales A/c 6,000
To Capital (introduced) 1,000 By Rent A/c 750
To Sales 750 By Office Expenses A/c 900
By Drawings A/c 1,500
By Purchases A/c 2,500
By Furniture A/c 250
31.3.2021 By Balance c/d 750
34,650 34,650
2. Single Entry:
Following information is obtained from the books of Vinay, who maintained his books of account
under Single Entry System:
I. Receipts for the year ended 31st March, 2021: ₹

From Debtors 88,125
Cash Sales 20,625
Paid by Vinay 12,500
1,21,250
2. Payments during the year:
New plant bought 3,125
Drawings 7,500
Salaries 5,625
Wages 33,625
Interest paid 375
Rent paid 6,625
Light and power 2,375
Sundry Expenses 10,625
Sundry Creditors 38,125
1,08,000
Vinay banks all receipts and makes payments by means of cheque.
As at 31st March,2020 As at 31st March, 2021

Assests and Liabilities
(₹) (₹)
Sundry Creditors 12,625 12,000
Bank 3,125 ?
Stock 31,250 15,625
Plant 37,500 36,575
From the above information, prepare Trading and Profit and Loss Account for the year ended 31st
March, 2021 and Balance Sheet as on that date.
Solution:
Trading Account
for the year ended March 31, 2021
Dr. Cr.
Amount Amount
Particulars Particulars
(₹) (₹)
Opening Stock 31,250 Sales (1,00,000 + 20,625) 1,20,625
Purchases 37,500 Closing Stock 15,625
Light & Power 2,375
Wages 33,625
Gross Profit 31,500
1,36,250 1,36,250
Profit & Loss Account
Dr. Cr.
Amount Amount
(₹) (₹)
Depreciation on Plant 4,050 Gross Profit 31,500
Interest 375
Rent 6,625
Salary 5,625
Sundry Expenses 10,625
Net Profit 4,200
31,500 31,500
Balance Sheet
as on March 31, 2021
Dr. Cr.
Amount Amount
Liabilities Assets
(₹) (₹)
Capital 78,000 Bank 16,375
Less: Drawings 7,500 Closing Stock 15,625
Add: Additional 12,500 Debtors 30,625
Capital
Add: Net Profit 4,200 87,200 Plant 36,575
Creditors 12,000
99,200 99,200
Working Notes:
(i) Balance Sheet as on April 01, 2020
Amount Amount
Liabilities Assets
(₹) (₹)
Creditors 12,625 Bank 37,500
Capital (bal. fig.) 78,000 Closing Stock 18,750
Debtors 3,125
Plant 31,250
90,625 90,625
(ii) Debtors Account

Dr. Cr.
Amount Amount
(₹) (₹)
Balance b/d 18,750 Cash A/c 88,125
Sales A/c (bal.fig.) 1,00,000 Balance c/d 30,625
1,18,750 1,18,750
(iii) Creditors Account
Dr. Cr.
Amount Amount
(₹) (₹)
Cash A/c 38,125 Balance b/d 12,625
Balance c/d 12,000 Purchases A/c (bal.fig.) 37,500
50,125 50,125
Dr. (iv) Bank Cr.

Amount Amount
(₹) (₹)
Balance b/d 3,125 Creditors A/c 38,125
Capital A/c 12,500 Drawings A/c 7,500
Debtors A/c 88,125 Interest A/c 375
Sales A/c 20,625 Light & Power A/c 2,375
Plant A/c 3,125
Rent A/c 6,625
Salaries A/c 5,625
Sundry Expenses A/c 10,625
Wages A/c 33,625
Balance c/d 16,375
1,24,375 1,24,375
3. Single Entry:
Surya does not keep a systematic record of his transactions. He is able to give you the following
information regarding his assets and liabilities:
31st March 2020 31st March, 2021
(₹) (₹)
Creditors for goods 21,000 19,000
Creditors for expenses 1,500 1,800
Bills Payable 8,700 11,500
Stock (At cost) 28,000 25,000
Furniture and Fittings 10,000 12,000
Cash 5,100 4,600
Following additional information is also avialable for the year ended 31st March, 2021:
₹
Bills Payable Issued 20,800
Cash Sales 15,000
Payment to Sundry Creditors 31,000
Expenses paid 6,600
Drawings 8,000
Bad Debts during the year were ₹ 900. As regards sale, Surya tells you that he always sells goods at
Cost plus 25%. Furniture and Fittings are to be depreciated at 10 % of the value in the beginning of the
year.
Prepare Surya's Trading and Profit and Loss Account for the year ended 31st March, 2021 and his
Balance Sheet on that date.
Solution:
Trading Account for the year ended 31st March, 2021
Dr. Cr.
Amount Amount
(₹) (₹)
To Opening Stock 28,000 By Sales: Cash 15,000
To Purchases 49,800 Credit 51,000 66,000
To Gross Profit c/d 13,200 By Closing Stock 25,000
91,000 91,000
Profit and Loss Account

Dr. Cr.
Amount Amount
(₹) (₹)
To Bad Debts 900 By Gross Profit b/d 13,200
To Expenses 6,600
Add: Closing Creditors for 1,800
Expenses
8,400
Less: Opening Creditors for 1,500 6,900
Expenses
To Depreciation on 1,000
Furniture and Fittings
To Net Profi (Balancing figure) 4,400
(transferred to Capital)
13,200 13,200
Balance Sheet as on March 31, 2021

Amount Amount
Liabilities Assets
(₹) (₹)
Creditors for Goods 19,000 Cash Balance 4,600
Creditors for Expenses 1,800 Stock 25,000
Bills Payable 11,500 Debtors 34,000
Capital 46,900 Furniture and Fittings 12,000
Less: Drawings 8,000
38,900
Add: Net Profit 4,400 43,300
75,600 75,600
Working Notes
(i) Balance Sheet as on March 31, 2021
Amount Amount
Liabilities Assets
(₹) (₹)
Creditors for Goods 21,000 Cash Balance 5,100
Creditors for Expenses 1,500 Stock 28,000
Bills Payable 8,700 Debtors 35,000
Capital ( Balancing Figure) 46,900 Furniture and Fittings 10,000
78,100 78,100
(ii) Cash Account

Amount Amount
Liabilities Assets
(₹) (₹)
Balance b/d 5,100 Expenses 6,600
Sales 15,000 Sundry Creditors 31,000
Debtors 51,100 Furniture and Fittings 3,000
Bills Payable 18,000
Drawings (Balancing figure) 8,000
Balance c/d 4,600
71,200 71,200
Dr. (iii) Creditors for Goods Account

Amount Amount
(₹) (₹)
Bills Payable 20,800 Balance b/d 21,000
Cash 31,000 Purchases-Credit (B/F) 49,800
Balance c/d 19,000
70,800 70,800
Dr. (iv) Debtors Account Cr.

Amount Amount
(₹) (₹)
Balance b/d 35,000 Bad Debts 900
Sales-Credit 51,000 Cash (Balancing Figure) 51,100
Balance c/d 34,000
86,000 86,000
Dr. (v) Bills Payable Account Cr.

Amount Amount
(₹) (₹)
Cash (Balancing Figure) 18,000 Balance b/d 8,700
Balance b/d 11,500 Creditors for goods 20,800
29,500 29,500
Dr. (vi) Furniture and Fittings Account Cr.
Amount Amount
(₹) (₹)
Balance b/d 10,000 Depreciation 1,000
Cash-Purchases (B/F) 3,000 Balance c/d 12,000
13,000 13,000
(vii) Computation of Cost of Goods Sold and Credit Sales

COGS = Opening. Stock + Purchases – closing. Stock = 28,000 + 49,800 –25,000 = 52,800
Gross Profit = 52,800 × 25/100= 13,200
Total Sales = COGS + Gross Profit = 52,800 + 13,200 = 66,000

Credit Sales = Total Sales –Cash Sales
= 66,000 – 15,000 = 51,000
Note: It has been assumed that a Drawings in cash of Amount ₹ 8,000 has been made by Surya
during the year.
4. Single Entry: [Conversion into double Entry] [Compiled by RKB]**

Imtiaz commenced business on 1st January, 2021, with a capital of ₹ 45,000. He immediately purchased
furniture for ₹ 24,000. During the year he received from his uncle a gift of ₹ 3,000 and he borrowed
from his father a sum of ₹ 5,000. He had withdrawn ₹ 600 per month for his household expenses.
He had no bank account and all dealings were in cash. He did not maintain double entry books but the
following information is obtained from his records:
₹
Sales (including cash sales ₹ 30,000) 1,00,000
Purchases (including cash purchases ₹ 10,000) 75,000
Carriage inwards 700
Wages 300
Discount allowed to debtors 800
Salaries 6,200
Bad debts written off 1,500
Trade expenses 1,200
Advertisements 2,200
He used goods worth ₹ 1,300 for personal purposes and paid ₹ 500 to his son for examination and
college fees. On 31st December, 2021, his debtors were worth ₹ 21,000 and creditors ₹ 15,000. Stock-
in-trade was valued at ₹ 10,000. Furniture is to be depreciated by 10% p.a.
Prepare a trading, Profit & loss A/c and a balance sheet as on 31.12.2021.
Solution:
In the books of Imtiaz
Dr. Trading and Profit & Loss Account for the year ended 31.12.21 Cr.
Particulars Amount Amount Particulars Amount Amount
₹ ₹ ₹ ₹
To Purchases 75,000 By Sales 1,00,000
Less: Goods used for By Closing Stock 10,000
personal purpose 1,300
73,700
To Carriage Inwards 700
To Wages 300
To Gross Profit c/d 35,300
1,10,000 1,10,000
To Salaries 6,200 By Gross Profit b/d 35,300
To Discount Allowed 800
To Bad Debts 1,500
To Advertisements 2,200
To Trade Expenses 1,200
To Depr. On Furniture
[10% of 24,000] 2,400
To Net Profit 21,000
[Transferred to capital]
35,300 35,300
Balance Sheet as on 31.12.21
Liabilities Amount Amount Assets Amount Amount
₹ ₹ ₹
₹
Creditors 15,000 Cash in hand [Note 3] 27,400
Loan from Father 5,000 Debtors 21,000
Capital: Opening Capital 45,000 Stock 10,000
+ Further Capital (Gift 3,000 Furniture 24,000
from uncle) Less: Depreciation 2,400 21,600
+ Net Profit 21,000
69,000
– Drawings 9,000 60,000
80,000 80,000
Working Notes:
1. He had no Bank Account. He does not have any opening balance in any account as this is the
first year of his business.
2. Cash received from Debtors during the year

Dr. Debtors Account Cr.
₹ ₹
31.12 To Sales 70,000 31.12 By Cash A/c (Received
[Credit Sales = Total Sales during the year) 46,700
– Cash Sales] (Balancing figure)
(1,00,000 – 30,000) By Bad Debts A/c 1,500
By Discount Allowed 800
By Balance c/d (given) 21,000
70,000 70,000
3. Cash paid during the year to Creditors

Dr. Creditors Account Cr.
₹ ₹
31.12 To Cash A/c 50,000 31.12 By Purchases A/c 65,000
(paid during the year) (Credit Purchases = Total
(Balancing figure) Purchases – Cash Pur.)
To Balance c/d (given) 15,000 (75,000 – 10,000)
65,000 65,000
4. Total Drawings:
₹ ₹
Household Expenses (600 x 12) 7,200
+ Spent for son 500 7,700
+ Goods used for personal use 1,300
9,000
5. Closing Cash Balance
Dr. Cash Account Cr.
₹ ₹
1.1.2021 To Capital A/c 45,000 1.1.2021 By Furniture A/c 24,000
During To Capital A/c (gift from During By Purchase A/c 10,000
2021 uncle invested in business) 3,000 2021 By Carriage Inward A/c 700
To Loan A/c (from Father) 5,000 By Wages A/c 300
To Sales A/c (Cash Sales) 30,000 By Salaries 6,200
To Debtors A/c 6,700 By Trade Expenses A/c 1,200
(Received from Debtors) By Advertisements 2,200
(Note 1) By Creditors A/c 50,000
(Payments) (Note 2)
By Drawings
(600 x 12 + spent for son
Rs. 500] 7,700
By Balance c/d (Bal. Fig) 27,400
1,29,700 1,29,700
5. Single Entry: [B.com Honours 2011, 2012 Supple, 2016 Pass] ****
Mr. X does not maintain regular books of accounts. From his incomplete records, the following information
could be available for the year ended 31.03.2021:
(i) Cash Sales ₹ 9,600
(ii) Total cash collection from Debtors ₹ 15,000
(iii) A summary of the Bank Account for the year ended 31.12.2021:
To Deposits (cash) 23,955 By Balance (Overdraft on 1.4.2020) 2,400
By General expenses 4,755
By Interest & Bank charges 45
By salaries 5,100
By Drawings 1,200
By Creditors 9,000
By Balance on 31.12.2021 1,455
23,955 23,955
Other Balances as on 1.1.2021 were as follows: Stock ₹ 5,400; Debtors ₹ 13,200; Furniture ₹ 600;
Building ₹ 9,000; Creditors ₹ 4,800; Cash in hand ₹ 50.
(iv) He purchased an old Machine at ₹ 600 on 1.1.2021.
(v) Besides the cash balance as above, other balances on 31.12.2021 were; Creditors ₹ 3,300; Stock ₹
6,120 and Debtors ₹ 18,000.
Prepare a Trading and Profit and Loss Account for the year ended 31.03.2021 and the Balance Sheet on that
date after charging depreciation @ 10% p.a. on all fixed assets.
Solution:
In the Books of X
₹ ₹ ₹ ₹
To Opening Stock 5,400 By Sales : Cash 9,600
To Purchases 7,500 Credit 19,800 29,400
To Gross Profit c/d 22,620 By Closing Stock 6,120
35,520 35,520
To Interest & Bank Charges
45
To Salaries to staff By Gross Profit b/d
5,100 22,620
To General Expenses
4,755
To depreciation on:
Furniture [10% of 600] 60
Buildings [10% of 9000] 900
Machinery
[10% of 600 for 3 months] 15
975
To Net Profit
11,745
[Transferred to capital]
22,620 22,620
Balance Sheet as on 31.3.2021
₹ ₹ ₹ ₹
Creditors 3,300 Cash in Hand 95
Capital: Cash at Bank 1,455
Opening : Balance 21,050 Sundry Debtors 18,000
Add: Net Profit 11,745 Stock 6,120
32,795 Furniture 600
Less: Drawings 1,200 31,595 Less: Depreciation 60 540
Machinery 600
Less: Depreciation 15 585
Buildings 9,000
Less: Depreciation 900 8,100
34,895 34,895
Workings:
(i) Balance Sheet as on 1.4.2020
Liabilities ₹ Asset ₹
Bank Overdraft 2,400 Cash 50
Creditors 4,800 Debtors 13,200
Capitals Stock 5,400
[Excess of Assets over Liabilities ] 21,050 Furniture 600
[Balancing figure] Buildings 9,000
28,250 28,250
Dr. (ii) Creditors Account Cr.

To Bank A/c 9,000 By Balance b/f 4,800
To Balance c/f 3,300 By Purchases A/c (Balancing 7,500
Amount)
12,300 12,300
Dr. (iii) Debtors Account Cr.

To Balance b/f 13,200 By Cash A/c (Collections) 15,000
To Sales A/c (Balancing Amount) 19,800 By Balance c/f 18,000
33,000 33,000
Dr. (iv) Cash Account Cr.

To Balance b/f 50 By Bank A/c (deposits out of 23,955
To Debtors A/c 15,000 collections) 600
To Sales (Cash Sales) 9,600 By Machinery A/c
By Balance c/f (Balancing Figure) 95
24,650 24,650
6. Single Entry: [Computation of Credit Pur & Credit Sales]
From the following facts supplied by Rama Bros, who keeps their books on Single Entry system. You are
required to calculate Total Purchases and Total Sales :
01.01.2021 (₹) 31.12.2021 (₹)
Debtors 14,000 12,000
Bills Receivable 20,000 32,000
Further information for the year 2021 are as under :
Cash received from Debtors 1,00,000
Cash paid to Creditors 80,000
Discount Allowed 400
Discount Received 600
Bad Debts 800
Returns Outward 1,800
Bills Payable discharged 1,000
Cash Sales 25,000
Cash Purchases 18,000
[Total Sale ₹ 1,37,600; Total Purchases ₹ 1,11,400]
7. Single Entry: [B.com Honours 2006]****

Sri Bose kept his books under Single Entry System. From the following particulars obtained from his books,
you are required to calculate: (a) Total Sales and (b)Total Purchases
Balances as on 1.4.2020 : ₹
Debtors 56,250
Creditors 43,525
Transactions during the year 2020-21 :
Cash Sales 10,280
Cash paid to Creditors (Including ₹ 2,000 for purchase of office furniture) 26,500
Cash received from Debtors 31,960
Discount earned from suppliers 2,325
Return Inward 2,650
Discount allowed to customers 3,150
Return Outward 2,000
Payment made against B/P 16,000
Cash received against B/R 28,300
Balances as on 31.03.2021:
Debtors 52,450
Creditors 39,000
[Credit Sales : ₹ 62,460 ; Credit Purchase ₹ 52,925 ; Total Sales ₹ 72,740; Total Purchase 71,455 ;
Bills drawn ₹ 25,300 ; Bills accepted ₹ 28,625.]
8. Single Entry [B.com 2012 type, 2013 Supplementary]****
The following balances were extracted from the books of Mr. Y for the year ended 31-12-21:
1.1.21 31.12.21
₹ ₹
Stock 30,000 ?
Debtors 80,000 1,20,000
Creditors 40,000 80,000
i. During the year, he paid to creditors ₹ 1, 20,000 and received ₹ 1, 80,000 from Debtors
ii. Bad debts written off ₹ 10,000
iii. Discount received from creditors ₹ 2,000.
iv. Cash sales are 20% of total sales.
v. Credit purchases are 75% of total purchases.
vi. Rate of Gross Profit – 20% on Sales.
Calculate: (a) Total Sales (b) Total Purchases and (c) Value of stock on 31-12-21
[(a) ₹ 287500; (b) ₹ 2,16,000 (c) ₹ 16,000]
9. Single Entry: [B.com Honours 2014 Pass, 2016 Honours type] [New]****
Ratan Sarkar does not maintain proper books of account. From the following information, prepare Trading
and Profit and Loss Account for the year ended 31st December, 2021 and a balance sheet as on that date:
Assets and Liabilities On 31.12.2020 (₹) On 31.12.2021 (₹)
Debtors 10,000 14,500
Stock 5,500 7,800
Furniture 1,000 1,250
Analyses of the other transactions are:

₹
Cash collected from Debtors 32,500
Cash paid to Creditors 25,000
Salaries 9,000
Rent 900
Office expenses 1,200
Drawings 2,000
Fresh capital introduced 4,000
Cash Sales 1,500
Discount received 400
Return inward 1,000
Return outward 500
Bad debts 250
He had ₹ 4,000 cash at the beginning of the year. Provide depreciation of furniture @ 10% p.a. Additional
of furniture was made on 31st December, 2021.
[Ans: Closing Cash ₹ 650; Credit Sales 38,500; Credit Purchase 25,400; Opening Capital 16,500;
Gross Profit 13,400; Net Profit 2,100; Closing Balance Sheet 24,100]
10. Single Entry: [B.com 2020 General]
Mr. Souvik keeps his books of accounts under single entry system. The following details are obtained
from his books of account.
Furniture Debtors Creditors Cash Stock-in-Trade
31.03.2020 (₹) 50,000 30,000 20,000 84,600 32,000
31.03.2021 (₹) 45,000 ? 24,000 ? 28,000
The transactions during the year :
₹ ₹
Goods purchased for cash 24,000 Received from debtors 1,40,000
Total Sales during the year 2,28,600 Payment to creditors 85,000
[including Cash sales 35,800]
Expenses paid [including salary] 65,000 Cash withdrawn for personal use 4,800
Mr. Souvik wants to maintain Provisions for Bad Debts @ 5% on closing Debtors.
Prepare :
(a) A Trading and Profit and Loss A/c for the year ended 31.03.2021 and
(b) A Balance Sheet as on that date.
11. Single Entry: [B.com 2020, 2014 Honours]

Mr. T. S. Gupta kept no books of accounts for his business. An analysis of his rough Cash Book for the
calender year 2021 shows the following particulars :
Receipts Amount (₹) Payments Amount (₹)
Received from Debtors 80,000 Overdraft (on. 01.01.2021) 5,000
Further Capital introduced 10,000 Paid to Creditors 42,000
Business expenses 12,000
wages paid 17,500
Proprietor’s drawings 5,000
Balance at bank (31.12.2021) 6,500
Cash in hand (31.12.2021) 2,000
90,000 90,000
The following particulars are also available :
31.12.20 31.12.21
₹ ₹
Debtors 60,000 90,000
Creditors 20,000 22,500
Stock in trade 16,000 18,000
Plant and Machinery 30,000 30,000
All his sales and purchase were on credit.
From the above particulars, prepare Trading and Profit & Loss Account for the year ended 31st December,
2021 and a Balance Sheet as on that date. Provide depreciation on plant and machinery @10% p.a. and on
furniture @5% p.a.
12. Single Entry: [B.com 2019 Honours]
Subal keeps his books on single entry method. On 1st January, 2021 his assets and liabilities were as
follows: Capital ₹ 61,000, Sundry Debtors ₹ 20,000, Plant and Machinery ₹ 31,000, Furniture and Fittings ₹
3,000, Stock ₹ 10,000 and Sundry Creditors ₹ 15,000.
The following are the analysis of his Cash Book for the year 2021:
Receipts ₹ Payments ₹
Cash in Hand 12,000 Payment to Creditors 20,000
Receipt from Debtors 15,000 Wages 5,000
Cash Sales 20,000 Sundry Expenses 10,000
Drawings 5,000
Cash in hand 7,000
47,000 47,000
On 31 December, 2021 his assets and liabilities were as follows:
st
Sundry Debtors ₹ 25,000, Sundry Creditors ₹ 10,000, Plant and Machinery ₹ 31,000, Furniture and fittings
₹ 3,000, Stock ₹ 22,000.
You are required to prepare a Trading and Profit & Loss Account for the year ended 31st December, 2021
after providing:
(a) Depreciation on Plant and Machinery @ 5% p.a. and Furniture and Fittings @ 2% p.a.
(b) Provision for Bad and doubtful debts @ 5% on Sundry Debtors.
13. Single Entry: [B.com 2015 Pass] [New]****

Mr. Ghosh, a retailer, does not keep any books of accounts, but operate a business bank account. A
summary of the bank statement for the year ended 31.03.2021 is given below :
₹ ₹
Opening balance 5,280 Cash paid to creditors 74,500
Cash received from debtors 97,000 Salaries 11,000
Closing balance 4,420 Rent 3,600
General expenses 7,000
Advertisement 600
Drawings 10,000
1,06,700 1,06,700
His assets and liabilities on 31st March, 2020 and 2021 were as follows:
31.03.2020 31.03.2021
Fixed assets 20,800 20,800
Stock 10,480 12,600
Debtors 13,000 13,600
Rent prepaid 600 1,200
Outstanding advertisement bill 200 150
Fixed assets should be depreciated at 10%. Prepare the Trading and Profit & Loss A/C of Mr. Ghosh for the
year ended 31 – 03 – 2021 and a Balance Sheet as at that date.
[Ans: Credit Sales 97,600; Credit Purchase 74,700; Opening Capital 40,760; Net Profit 1,390;
Closing Balance Sheet 46,120]
14. Single Entry: [B.com 2018 Hons]
Swati, a small trader, maintains her books under Single Entry system. From the following information you
are asked to prepare Trading Account, Profit & Loss Account and Balance Sheet as on 31st December,
2021
1st January, 2021 31st December,2021
(₹) (₹)
Debtors 20,000 25,200
Creditors 15,000 14,100
Sewing Machine 15,000 14,200
Furniture 12,000 11,800
Stock 4,000 3,000
Bank Summary
₹ ₹
Opening Balance 21,000 Payment to Creditors 42,000
Collection from Debtor 75,200 Bills Payable 2,800
Bills Receivable 5,600 Rent 2,000
Capital 13,000 Wages 2,000
Printing 2,000
Drawings 24,000
Salaries 12,000
Closing Balance 28,000
1,14,800 1,14,800
Additional Information:
She allowed discount to debtors ₹ 2,400 and received discount from creditors for ₹ 3,900. She endorsed bill
receivable of ₹ 1,200 to her creditors.
15. Single Entry: [B.com Honours 2001]**

N started a grocery business on 1st January, 2021 with a Capital of ₹ 10,000. He spent ₹ 1,500 on Furniture
and Fixtures in cash. He maintains his books on single entry.
Following figures are extracted from his books : ₹
Sales (inclusive of cash sales ₹ 8,000) 20,000
Purchases (inclusive of cash purchases ₹ 2,500) 12,000
Bad Debts written off 750
Business Expenses 1,050
Naninadhab used groceries worth ₹ 1,500 and took 13,000 in cash for personal use. On 31st December,
2021, his Sundry Debtors were ₹ 1,250 and Sundry Creditors ₹ 1,500, Stock in hand was ₹ 1,500. Prepare
a Trading and Profit & Loss Account for the year ended on 31st December, 2021 and Balance Sheet as on
the date after writing off 10 % Depreciation on Furniture and Fixtures,
[Gross Profit ₹ 11,000 ;Net Profit ₹ 9,050, Cash ₹ 1,950; Total Balance Sheet Profit ₹ 6,050]
16. Single Entry: [B.com Honours 2011, 2012 Supple, 2016 Pass] ****
A. R. Sharma does not maintain regular books of accounts. From his incomplete records, the following
information could be available for the year ended 31.12.2021:
(i) Cash Sales ₹ 38,400
(ii) Total cash collection from Debtors ₹ 60,000
(iii) A summary of the Bank Account for the year ended 31.12.2021:
To Deposits (cash) 95,820 By Balance (Overdraft on 1.1.2021) 9,600
By General expenses 19,020
By Interest & Bank charges 180
By salaries 20,400
By Drawings 4,800
By Creditors 36,000
By Balance on 31.12.2021 5,820
95,820 95,820
Other Balances as on 1.1.2021 were as follows: Stock ₹ 21,600; Debtors ₹ 52,800; Furniture ₹ 2,400;
Building ₹ 36,000; Creditors ₹ 19,200; Cash in hand ₹ 200.
(iv) He purchased an old Motor Cycle at ₹ 2,400 on 1.10.2021.
(v) Besides the cash balance as above, other balances on 31.12.2021 were; Creditors ₹ 13,200; Stock ₹
24,480 and Debtors ₹ 72,000.
Prepare a Trading and Profit and Loss Account for the year ended 31.12.2021 and the Balance Sheet on that
date after charging depreciation @ 10% p.a. on Buildings, Furniture and Motor cycle.
17. Single Entry: [B.com 2013 Honours]****

From the following information given below, prepare a Trading and Profit & Loss Account for the year
ended 30th June, 2021 and a Balance Sheet as at that date:
Balances on 1.7.20 Balances on 30.6.21
Debtors 16,000 14,800
Creditors for purchases 6,000 4,800
Outstanding Rent 100 60
Cash 1,500 6,500
Stock 15,000 16,000
Plant 10,000 12,000
i. Cash Transactions:
Receipts : Cash Sales ₹ 1,000; Debtors ₹ 71,000
Payments : Purchases of Plant ₹ 2,000
Rent ₹ 1,240
Cash Purchases ₹ 2,000
Payment to Creditors ₹ 31,200
Salaries ₹ 20,000
Wages ₹ 6,000
Electricity ₹ 2,000
ii. Shortage in cash balance is to be treated as drawings.
iii. Bad debts written off ₹ 200.
iv. Depreciation on plant has to be provided at 10%.
[Drawings ₹ 2560; GP ₹ 34,000; Opening capital ₹ 36,400; Net Profit ₹ 9,500; Balance sheet ₹
48,200]
18. Single Entry: [B.com 2017 Hons]
Mr. D, a trader maintains an incomplete record for his business. However, he keeps a detailed record of cash and
bank transactions and provides you the following summary of receipts and payments for the year ended
31.12.2021.
Cash in hand on 1.1.21 3,600 Payment to Creditors 2,30,000
Cash at bank on 1.1.21 62,000 Purchase of Furniture (on 1.9.21) 12,000
Cash Sales 70,000 Salaries 28,000
Capital Introduced 60,000 General Expenses 8,000
Interest received on Investment 5,000 Rent and Rates 15,000
Collection from Debtors 2,20,000 Drawings 36,000
Cash purchases 47,000
Cash in Hand on 31.12.21 1,600
Cash at Bank on 31.12.21 43,000
4,20,600 4,20,600
Particulars of other assets and liabilities are as follows:

1.1.2021 (₹) 31.12.2021 (₹)
Sundry Debtors 1,45,000 1,66,000
Sundry Creditors 2,90,000 2,23,000
Furniture 48,000 ?
Stock 57,000 70,000
Investment in 10% Bond 50,000 50,000
Debtors and Creditors balances on 31.12.2021 have been arrived at after considering discount allowed and
discount received amounting to ₹ 9,000 and ₹ 7,000 respectively. Furniture is to be depreciated @ 10% p.a. and
a provision for doubtful debts is to be created for 3,300.
Prepare a Trading and Profit & Loss Account for the year ended 31st December, 2021 and a Balance Sheet as on
that date.

Chapter 13: Non-trading [20 M]

RECEIPTS AND PAYMENTS ACCOUNT
Receipt and Payment Account
for the period ending on……
Dr. Cr.
To Balance B/D: By Balance B/D (Bank xxx
Overdraft)
Cash xxx By Annual Sports Expenses xxx
Bank xxx xxx By Salaries & Wages xxx
To Subscription: By Rent, Rates & Taxes xxx
For Previous Year xxx By Insurance xxx
For Current Year xxx By Furniture xxx
For Next Year xxx xxx By Sports Equipments xxx
To Entrance Fees xxx By Books & Periodicals xxx
To Donation For Building xxx By Audit Fees xxx
To General Donation xxx By Printing & Stationery xxx
To Life Membership Fees xxx By Honorarium xxx
To Legacy xxx By Bank Charges xxx
To Grant From Govt. xxx By Postage & Telegrams xxx
To Contribution For Annual Dinner xxx By Water & Electricity xxx

To Dividend xxx By Conveyance & Travelling xxx
To Interest xxx By Repairs & Maintenance xxx
To Rent xxx By Sundry Expenses xxx
To Receipt On Annual Sports xxx By 12% Investments xxx
To Sale Of Old Sports Material xxx By Balance C/D:
To Sale Of Old Magazines xxx Cash xxx
To Sundry Receipts xxx Bank xxx xxx
To Balance C/D (Bank Overdraft) xxx
xxx xxx
Note:
(a) It records all the receipts and payments whether they relate to previous, current or following accounting
year.
(b) It does not record non-cash items (e.g. depreciation).
Income and Expenditure Account
The ‘Income & Expenditure Account’ is a final account like Profit & Loss Account, which shows the
classified summary of revenue income, revenue expenses and losses for current accounting period
alongwith surplus (i.e. the excess of income over expenditure) or deficit (i.e. the excess of expenditure over
income) which is transferred to the Capital Fund.
Note:
(a) It records only those incomes, expenses and losses which are of revenue nature.
(b) It records only those incomes, expenses and losses which relate to current accounting year.
(c) It records non-cash items (e.g. depreciation).
Income & Expenditure Account

for the year ending on……
Dr. Cr.
Expenditure ₹ Income ₹
To Salaries & Wages Paid xxx By Subscription Received xxx xxx
Add: Outstanding At The End xxx Add: Outstanding At The End xxx xxx
Less: Prepaid At The End xxx xxx Less Advance At The End xxx xxx
Add: Prepaid In The Beginning xxx Add: Advance In The Beg. xxx xxx
Less: Outstanding In The Beginning xxx Less: Outstanding In The Beg xxx xxx
To Rents, Rates & Taxes xxx By Entrance Fees (Only That Portion Which Is xxx
To Be Treated As Revenue)
To Insurance Premium xxx By General Donations xxx
To Depreciation On Furniture & Sports xxx By Membership Fees (Only That Portion Which xxx
Equipments Is To Be Treated As Revenue)
To Books & Periodicals xxx By Profit From Annual Dinner Contribution xxx xxx
To Audit Fee xxx Less: Expenses xxx xxx
To Printing & Stationery xxx By Profit On Annual Sports (Receipt - Expenses) xxx
To Honorarium xxx By Profit On Sale Of Provisions (Sale + Closing xxx

Stock - Purchases - Opening Stock)
To Bank Charges xxx By Rent Of Club Hall xxx
To Postage & Telegrams xxx By Dividend & Interest xxx
To Water & Electricity xxx By Sundry Receipts xxx
To Conveyance & Travelling xxx By Deficit xxx
( I.E. Excess Of Expenditure Over Income)
To Sundry Expenses xxx
To Surplus xxx
(Excess Of Income Over Expenditure)
xxx xxx
Format of Balance Sheet
Balance Sheet of …. as at……..
Liabilities Rs Assets Rs
Capital Fund: Fixed Assets:
Opening Balance xxx Building
Add: Surplus xxx Opening Balance xxx
(Or Deficit) xxx Add: Additions xxx
Add: Entrance Fees Less: Depreciations xxx xxx
(To The Extent Capitalised) xxx
Add: Life Membership Subscription Furniture
(To The Extent Capitalised) xxx
Add: Amount Of Capital Expenditure Opening Balance xxx
Transferred From A Special Fund
(E.G. Building Fund) xxx xxx
Prize Fund: Add: Additions xxx
Opening Capital xxx Less: Book Value Of Assets Sold xxx
Add: Donation For Prizes xxx Less: Depreciations xxx xxx
Add: Income From Prize Fund Investments xxx Sports Equipments xxx
Less: Expenses xxx xxx Less: Depreciations xxx xxx
Building Fund: Investments:
Add: Donation For Building xxx Prize Fund Investments xxx
Add; Income From Building Fund Investments xxx Building Fund Investments xxx
Less: Transfer To Capital Fund xxx xxx 10% Govt. Securities xxx
Current Liabilities: Fixed Deposits xxx
Subscription Received In Advance xxx Current Assets
Outstanding Expenses xxx Sports Material xxx
Bank Overdraft xxx Outstanding Subscriptions xxx
Creditors xxx Accrued Interest xxx
Accrued Rent xxx
Cash In Hand xxx
Cash At Bank xxx
xxx xxx
Meaning of Accounting Treatment of Some Peculiar Items
Subscription:
Subscription is the major source of revenue income of a not-for-profit entity. Subscriptions are the amounts
paid by the members of such entity to maintain their membership. Subscriptions may be paid periodically
(usually on yearly basis).
Accounting Treatment – where the accrual basis of accounting is used, only that amount of subscription
which relates to current accounting period should be treated as revenue income of that period.
Particular ₹ ₹
A Subscription received during the current years XXX
B Add: (i) Outstanding subscription at the end of current year XXX
(ii) Advance subscription in the beginning of current year XXX XXX
C Less: (i) Outstanding subscription in the beginning of current year XXX
(ii) Advance subscription at the end of current year XXX XXX
Subscription income to be credited to Income & Expenditure Account
D (A + B - C) XXX
Example 1:
Compute the income from subscription for the year 2021 from the following particulars relating to a club:
1.1.2021 (₹) 31.12.2021 (₹)
Outstanding subscription 9,500 7,000
Advance subscription 2,800 5,200
Subscription received during 1,48,900
Solution:
Particular ₹ ₹
A Subscription received 2021 1,48,900
B Add: (i) Outstanding subscription as at 31.12.2021 7,000
(ii) Advance subscription as at 1.1.2021 2,800 9,800
C Less: (i) Outstanding subscription as at 1.1.2021 9,500
D Subscription income for 2021 (A + B - C) 1,44,000
1. Non-trading [B.com 2014 Honours, 2020 Honours]****
From the following particulars relating to RK Charitable Hospital, prepare Income and Expenditure
Account & for the year ended 31st December 2021 & Balance sheet as on 31/12/2021.
To Balance b/d 7,000 By Payments for Medicines 30,000
To Subscriptions 50,000 By Doctor's honorarium 10,000
To Donations 14,500 By Salaries 27,500
To Interest on Investments By Petty Expenses 500
(@ 7% for full one year) 7,000 By Equipment 15,000
To Proceeds from Charity Show 10,000 By Expenses on Charity Show 1,000
By Balance c/d 4,500
88,500 88,500
Additional Information: -
1.1.21 (in ₹ ) 31.12.21 (in ₹ )
Subscription Due 500 1,000
Subscription received in Advance 1,000 500
Stock of Medicine 10,000 15,000
Amount due to Medicine supplier 8,000 12,000
Value of Equipment 21,000 30,000
Value of buildings 40,000 38,000
Solution:
RK Charitable Hospital
Income & Expenditure Account for the year ended 31st December, 2021
Expenditure ₹ Income ₹
To Medicines Consumed (Note iv) 29,000 By Subscriptions (Note ii) 51,000
To honorarium to doctors 10,000 By interest on Investment 7,000
To Salaries 27,500 By charity show proceeds 10,000
To Sundry Expenses 500 By Donations 14,500
To Charity show expenses 1,000
To Depreciation:
On Equipment 6,000
On buildings (40,000 – 38,000) 2,000
To Surplus 6,500
(excess of income over expenditure)
82,500 82,500
Balance Sheet as on 31st December, 2021

Capital fund: 1,69,500 Building 38,000
Add: Surplus 6,500 Equipments 30,000
1,76,000 Stock of Medicines 15,000
Subscriptions received in advance for 2022 500 Investments 1,00,000
Creditors for medicine Subscriptions outstanding for 2021 1,000
12,000 Cash in Hand 4,500
1,88,500 1,88,500
Working Notes:
(i) Balance Sheet as on 1st January 2021
Capital Fund (balancing figure) 1,69,500 Building 40,000
Creditors for medicines 8,000 Equipment 21,000
Subscriptions received in advance 1,000 Stock of Medicines 10,000
Subscriptions Outstanding 500
Investment (Note v) 1,00,000
Cash in hand 7,000
1,78,500 1,78,500
(ii) Computation of Subscriptions Income
Particular ₹ ₹
Subscription received During 2021 50,000
Add: (i) Outstanding subscription as at 31.12.2021 1,000
52,000
Less: (i) Outstanding subscription as at 1.1.2021 500
(ii) Advance subscription as at 31.12.2021 500 1,000
Subscription income for 2021 (A + B - C) 51,000
(iii) Creditors for Medicines Account

? To Cash A/c (payments) 30,000 1.1.2021 By Balance b/d 8,000
To Balance c/d 31.12.2021 By purchase of medicines 34,000
31.12.2021 12,000 Bal. fig.)
42,000 42,000
(iv) Medicines Consumed = Opening Stock ₹ 10,000 + Purchases ₹ 34,000 – Closing Stock ₹ 15,000
= ₹ 29,000
(v) Interest on investment received ₹ 7,000 in 2021 indicates that there was investments at the
beginning of 2021. The rate of interest is 7%. So, the value of investment = 7,000 ÷ 7% = ₹
1,00,000
(vi) Equipment Account

1.1.2021 To Balance b/d 21,000 31.12.2021 By Depreciation (Bal. Figure) 6,000
? To Cash (Purchase) 15,000 31.12.2021 By Balance c/d 30,000
36,000 36,000
2. Non-trading [Compiled by Ravi Bhalotia]*****
The following Receipts and Payment account of recreation club for the year endedMar. 31, 2021.
Recreation Club
Receipts and Payment Account For the year ended Mar. 31, 2021
Receipts Amount Payment Amount
To Balance b/d ₹ 31,000 By Charity Expense ₹ 10,000
To Subscription 1,80,000 By Salaries Expense 2,20,000
To Legacy 40,000 By Printing & stationery 6,000
To Endowment Fund 2,00,000 By Postage 1,000
To Locker Rent 50,000 By Rent Expense 15,000
To Interest on Investment 15,000 By Upkeep of ground 20,000
To Procced from Sports 45,000 By Sports Materials 1,00,000
To Sale of newspapers 5,000 By Internet & telephone 34,000
By Investment in security 150,000
By Balance c/d: 10,000
5,66,000 5,66,000
(i) The assets and liabilities were as follows:
Items Mar.31, 2020 Mar.31, 2021
Land & Building ₹ 5,00,000 ₹ 5,00,000
Furniture and Fittings ₹ 50,000 ₹ 40,000
Outstanding Subscriptions 20,000 ₹ 14,000
Advance Subscriptions ₹ 5,000 ₹ 14,000
Stock of Sport Materials ₹10,000
(ii) Legacies received is to be capitalised.
(iii) Investment in securities was made on May 1, 2021 at 12 % interest per year.
(iv) Stock of sport material is used during the year is ₹ 90,000.
(v) Depreciation is charged on Furniture on Straight line method @ 20% per year.
Prepare Income and Expenditure account and Balance sheet for the year ended March 31, 2021.
Solution:
Recreation Club
Income & Expenditure Account For the year ended March 31, 2021
Expenditure Amount Income Amount
To Salaries Expense 2,20,000 By Subscriptions (W.N1) 1,65,000
To Charity Expense 10,000 By Locker Rent 50,000
To printing & stationary 6,000 By Proceeds from sports 45,000
To Postage Expense 1,000 By Sale of newspapers 5,000
To Ren Expense 15,000 By Int. on Invest. 15,000
To Upkeep of ground 20,000Add: Accrued
To Sports material used 90,000 Interest-(W. N2 ) 1,500 16,500
To Internet & telephone 34,000 By Deficit (Balancing figure) 124,500
To Depreciation on Furniture 10,000 (Excess of expentiture over
Income)
4,06,000 4,06,000
Recreation Club
(₹) (₹)
Capital Fund (W.N3) ₹ 5,96,000 Land $ Building 5,00,000
Add: Legacy ₹ 40,000 Furniture & Fit. 50,000
Less: Deficit ₹ 124,500 5,11,500 Less: Dep. Exp. 10,000 40,000
Endowment Fund 2,00,000 Investment in security 150,000
Advance Subscriptions 14,000 Stock of Sport Materials 10,000
Accrued Interest 1,500
Accrued subscription 14,000
Cash 10,000
7,25,500 7,25,500
Working Notes
W.N 1. Subscriptions to be shown in income and expenditure account
Subscription received in 2021: ₹ 1,80,000
Less: Advance subscription at the end of 2021 (14,000)
Less: Outstanding subscription at the end of 2020 (20,000)
Add: Advance Subscription at the end of 2020 5,000
Add: Outstanding subscription at end for 2021 14,000
Subscription to be shown for the year 2022 ₹1,65,000
W.N 2. Accrued Interest on Investment in securities:

Interest earned on Investment = ₹ 150,000 × 12/100 × 11/12 = ₹16,500 Interest
received on security = ₹15,000 (Given in receipts & payments account)
Accrued/outstanding Interest = ₹16,500 – ₹15,000 = ₹1,500
W.N 3. Computation of Capital Fund

Capital Fund (Bal. Fig.) 5,96,000 Land & Building 5,00,000
Advance Subscription 5,000 Furniture & Fittings 50,000
Outstanding subscription 20,000
Cash in Hand 31,000
6,01,000 6,01,000
W.N 4: Depreciation on Furniture = ₹50,000 × 20% = ₹10,000
W.N 5 :Sport Material Consumed = Opening Stock + Purchase – Closing Stock

= ₹ 0 + ₹1,00,000 - ₹10,000 = ₹ 90,000
3. Non-trading [Compiled by Ravi Bhalotia]*****

From the following particulars relating to RK Charitable Hospital, prepare Income and Expenditure
Account & for the year ended 31st December 2021 & Balance sheet as on 31/12/2021
To Balance b/d 7,130 By Medicines 30,590
To Subscriptions 47,996 By Doctor's honorarium 9,000
To Donations 14,500 By Salaries 27,500
To Interest on Investments By Petty Expenses 461
(@ 7% for full one year) 7,000 By Equipment 15,000
To Proceeds from Charity Show 10,450 By Expenses on Charity Show 750
87,076 87,076
1.1.21 (in ₹ ) 31.12.21 (in ₹ )
Subscription Due 200 240
Subscription received in Advance 64 100
Stock of Medicine 8,810 9,740
Value of Equipment 21,200 31,600
Value of buildings 40,000 38,000
[Surplus ₹ 5979 (assuming donation as revenue receipts, Opening Capital ₹ 177276; Subscription for
2004 ₹ 48,000; Balance sheet ₹ 1,83,355]
4. Non-trading [B .com 2011, 2020 Pass, 2019 Hons]**

A summary of Receipts and Payments of Calcutta Football Club for the year ended 31.12.2021
Cash in hand as on 1.1.21 2,500 Remuneration to coach 6,000
Cash at Bank as on 1.1.21 22,300 Groundman's Salary 2,500
Bank interest 500 Purchase of Equipments 15,500
Entrance fees 5,000 Bar Room Expenses 2,000
Subscriptions 25,000 Ground rent 4,500
Bar Room Receipts 4,000 Night Club Expenses 4,800
Sale of Equipments 800 Printing & Stationery 2,500
Proceeds of Night Club 10,800 Repairs to equipments 4,500
Cash at Bank as on 31.12.21 25,600
Cash in hand as on 31.12.21 3,000
70,900 70,900
1.1.21 31.12.21
Subscription Due 1,500 1,000
Sum Due for Printing & machinery 1,000 800
Estimated Value of Equipment 8,000 17,500
You are required to prepareAn Income & Expenditure Account & Balance Sheet.
[Surplus ₹ 13,000; Opening Capital ₹ 33,300; Closing Balance sheet ₹ 47,100]
5. Non-trading [2013 Supplementary]****
From the following Receipts and Payments A/c Kolkata Cricket Club for the year ended 31.12.2021, you
are required to prepare Income and Expenditure A/c for the year 31.12.2021 and a Balance Sheet
To Balance b/d By Salaries 1,050
- Cash in hand 600 By Rent 1,800
- Cash at Bank 1,700 By Equipments 5,000
To Subscriptions 12,250 By Sports Expenses 2,350
To Entrance Fees 1,500 By Remuneration to coach 2,000
By Sundry Expenses 550
By Printing and Stationery 400
By Balance c/d
- Cash in hand 850
- Cash at bank 2,050
16,050 16,050
The following information are also available:
31.12.20 (₹ ) 31.12.21 (₹ )
Subscriptions received in advance 700 1,350
Outstanding Subscriptions 1,050 1,600
Outstanding Rent 300 150
Salaries paid in advance 600 450
Equipments 9,000 11,500
50% of the entrance fees is to be capitalised.
[Opening Capital Fund ₹ 11,950; Amount of Surplus ₹ 2250; Balance Sheet ₹ 16,450]
6. Non-trading [B..com 2012 Supplementary]**

Prantik Boys Club prepared the following Receipts and Payments Account for the year ended 31st
December, 2021 :
To Balance b/d 7,600 By Sports Equipment 30,000
To Subscription (Purchased on 1.10.2021)
2020 2,000By Postage & Stationary 700
2021 37,000 By Salaries & Wages 5,000
2022 3,000By Upkeep of Ground 1,000
To Admission fees 4,000By Electric Charges 2,300
To Locker Rent 1,000By Tournament Expenses 8,000
To Interest on Govt. Securities 1,200By Balance c/d 8,800
55,800 55,800
The Fixed Assets of the club on 1st January, 2021, included the following : Sports Equipment ₹ 40,000;
Furniture ₹ 6,000, 10% Govt. Securities ₹ 16,000, and Club Ground ₹ 25,000.
Prepare Income and Expenditure Account of Prantik Boys' Club for the year ended 31st December, 2021
and a Balance Sheet as at that date after taking into account the following information :
(a) Subscriptions for 2021 collected in 2020 ₹ 1,500.
(b) Subscriptions for 2021 outstanding ₹ 1,000.
(c) Depreciation to be provided at 15% p.a. on Sports Equipment and at 7.5 % p.a. on Furniture.
[Excess of Income over Expenditure ₹ 21,525; Opening capital Fund ₹ 95,100; Total of Closing
Balance Sheet Rs 1,19,625]
7. Non-trading [2014 Pass]****
Following is the Receipts and Payments Account of a club for the year ended 31st December, 2021:
To Balance b/d 5,200 By Sports Equipments 20,400
To Subscriptions: (Purchased on 1.9.21)
For 2021 34,500 By Salary and Wages 6,000
For 2010 1,500 By Printing and Stationery 1,000
For 2022 2,000 By Electricity Charges 1,500
To Interest on Govt. By Telephone Charges 1,400
Securities @ 8% of cost 800 By Tournament Expenses 12,500
To Entrance Fees 5,000 By Balance c/d 6,200
49,000 49,000
The fixed assets of the club on 01.01.21 included the following:
Sports Equipments ₹ 18,500; Club Ground ₹ 10,000; Furniture ₹ 3,000.
You are required to prepare the Income and Expenditure Account for the year ended 31st December, 2021
and a Balance Sheet as on that date after considering the following:
(a) Subscription for 2021 collected in 2020 ₹ 750.
(b) Subscription for 2021 still to be collected ₹ 500.
(c) Provide depreciation: @ 20% p.a. on Sports Equipment and @ 10 p.a. on Furniture.
(d) 60% of Entrance Fees should be capitalised.
8. Non-trading [B.com 2016 Honours]**

Following is the Receipts and Payments Account of Viveknagar Social Club for the year ended 31st
December, 2021:
Balance as on 1.1.2021 3,560 Salaries 2,450
Subscriptions : Electricity 410
2020 180 Charity 1,680
2021 6,940 General expenses 320
2022 240 Rent and Taxes 450
Donations 2,500 Expenses of annual function 2,300
Sale of Tickets of annual function 2,800 Newspaper etc. 460
Sale of Waste Paper 130 Investments 5,000
Balance as on 31.12.2021 3,280
16,350 16,350
a) Salaries outstanding for the year 2021 are ₹ 150.
b) Rent and Taxes include ₹ 75 for the year 2020.
c) Value of Building ₹ 12,000 as on 1.1.2021 and depreciation @ 5% to be provided.
d) Interest on investment is due for 3 months @ 10% p.a.
e) The club has 360 members and subscription is ₹ 20 per annum.
Prepare an Income & Expenditure a/c for the year ended 31st Dec, 2021 and a Balance Sheet as on that date.
9. Non-trading [B.com 2017 Honours 1st semester]**
The following is the Receipts and Payments Account of Park view club in respect of the year ended 31.3.2021:
Receipts ₹ ₹ Payments ₹
Opening balance 1,02,500 Salaries 2,08,000
Subscription Received Stationery Purchased 40,000
2019-20 4,500 Rent 60,000
2020-21 2,11,000 Telephone Expenses 10,000
2021-22 7,500 2,23,000 investments 1,25,000
Net cash realized from Sundry Expenses 92,500
Sports Meet 1,55,000 Closing Balance 45,000
Income from Investments 1,00,000
5,80,500 5,80,500
(a) There are 450 members each paying an annual subscription at ₹ 500. On 1.4.2020, outstanding
subscription was ₹ 5,000.
(b) There was an Outstanding Telephone bill of R. 3,500 on 31.3.2021
(c) Outstanding Sundry Expenses as on 31.3.2020 totaled ₹ 7,000.
(d) Stock of stationery: on 31.3.2020 – ₹ 5,000 and on 31.3.2021 – ₹ 9,000
(e) On 31.3.2021, Building stood in the books at ₹ 10,00,000 and it was subject to Depreciation at 5% p.a.
(f) Investment on 31.3.2020 stood at ₹ 20,00,000.
(g) On 31.3.2021, income accrued on Investments purchased during the year amounted to ₹ 3,750.
Prepare an Income and Expenditure Account for the year ended 31.3.2021 and a Balance Sheet as on that date.
10. Non-trading [B.com 2018 Honours 1st semester]**

From the following information prepare Income and Expenditure Account of Hugli Club for the year ended
31st December, 2021 and a Balance Sheet as on that date.
Receipt and Payment A/c for the year ended 31.12.2021
Cash in Hand 4,000 Salary 2,000
Cash at Bank 10,000 Repairs 500
Donation 5,000 Furniture 6,000
Subscription 12,000 Misc. Expenses 500
Entrance fees 1,000 Investment 6,000
Interest on Investment 100 Insurance Premium 200
Interest received from Bank 400 Tennis Table 8,000
Sale of old Newspaper 150 Stationeries 150
Sale of Drama tickets 1,050 Drama Expenses 500
Cash in Hand 2,650
Cash at Bank 7,200
a) Subscriptions in arrear for 2021 ₹ 900 and received in advance for 2022 ₹ 350.
b) Insurance Premium due ₹ 40.
c) Miscellaneous expenses prepaid ₹ 90.
d) 50% of the donation to be capitalized.
e) 75% of entrance fees are to be capitalized.
f) 8% interest is accrued on investment for five months.
g) Tennis Table was purchased in 2021 for ₹ 30,000. Only ₹ 22,000 was paid for it till 31st December
2021.
11. Non-trading [B.com 2015 Pass]**

Prepare Income & Expenditure A/c for the year ended 31.12.2021 & Balance Sheet as on 31.12.2021:
Opening Balance Sheet as on 1.1.2021
Capital fund 3,00,000 Building 1,00,000
Outstanding expenses 10,000 Furniture 10,000
Library 50,000
Investments 1,00,000
Outstanding subscription 40,000
Cash in hand 10,000
3,10,000 3,10,000
Cash book during the year was as follows:
To Balance b/d 10,000 By Salaries 7,200
To Subscriptions 1,50,000 By Purchase of books 80,000
To Donations 1,00,000 By Rent and taxes 7,200
To Interest on Investment 1,200 By Outstanding expenses 10,000
To Sale of old furniture 1,000 By Insurance premium 3,000
By Printing and stationery 900
By Purchase of furniture 15,000
By Investment 1,34,000
By Sundry expenses 900
2,62,200 2,62,200
i. Accrued Subscription ₹ 30,000.
ii. Outstanding liabilities for expenses ₹ 15,000
iii. Insurance Premium amounting to ₹ 600 was paid in advance.
iv. Depreciated Building at 5% ; Library books is 10 % and Write off Investment by 5%.
v. Depreciation is to be calculated on the opening balances of assets.
Chapter 14: Final Account

[20 Marks]
Dr. Trading & P/L A/c Account for the year ended..... Cr.
To Opening Stock By Sales less Returns
To Purchases less Returns By Closing Stock
To Direct Expenses : By Gross Loss transferred to P&L A/c ( b/f )
Wages
Freight Inward
Carriage Inward
Custom Duty
Factory Expenses
Royalty
Power and Fuel
To Gross Profit Transferred to P& L A/c (b/f)
xxx xxx
To Gross Loss b/d By Gross Profit b/d
To Salaries By Discount Received
To Rent, Rates and Taxes By Commission Received
To Printing & Stationery By Bank Interest
To Lighting By Interest on Securities
To Insurance By Dividend Received
To Postage & Telegram By Rent from Property Let Out
To Audit fees By Abnormal Gains
To General Expenses By Net Loss transferred to Capital A/c ( b/f )
To Advertisement
To Carriage Outward
To Bad debts
To Provision for bad debts
To Commission
To Bank Charges
To Discount Allowed
To Interest on Loan
To Repairs & Renewals
To Depreciation of Fixed Assets
To Loss on Sale of Assets
To Loss by fire etc.
To Net Profit Tr. to Capital A/c
xxxx xxxx
Balance -Sheet as on 31-12-200X
Capital: Fixed Assets:
Opening Balance Goodwill
Add: Net Profit Land
Less: Net Loss Buildings
Less: Drawings Plant & Machinery
Loan Furniture & Fixtures
Patents and Trade Marks
Current Liabilities : Investments
Income Received in Advance Current Assets
Sundry Creditors Stock in Trade
Outstanding Expenses Accrued Incomes
Bills Payable Prepaid Expenses
Bank Overdraft Sundry Debtors
Bills Receivable
Cash at Bank
Cash in Hand
xxx xxx
The treatment of various items is summarized below in a tabular form for quick revision:
Adjustment If given in the trial Balance If Given in Adjustments
1. Closing Stock Balance Sheet - Asset Side (a) Trading A/c - Credit Side
2. Outstanding Balance Sheet - Liability Side (a) Trading / Profit & Loss A/c Debit
Side,
Expenses Add to the concerned expense.
(b) Balance Sheet - Liability Side
3. Prepaid Expenses Balance Sheet - Asset Side (a) Trading / Profit & Loss A/c Debit
side, Deduct from the concerned
expense.
(b) Balance Sheet - Asset Side.
4. Depreciation Profit & Loss A/c - Debit Side (a) Profit & Loss A/c - Debit Side.
(b) Balance Sheet - Asset Side. Deduct
from Respective Asset.
5. Loss by Fire Profit & Loss A/c - Debit Side (a) Trading A/c - Credit Side.
(b) P &L A/c-Debit Side(Actual Loss, if
any)
(c) Balance Sheet Asset Side(With
insurance Claim admitted by
Insurance Co.)
1. Final Account: [B.com 2006, 2008 Honours]*****
From the following balances extracted from the books of a trader on December 31, 2021, prepare a Trading
and Profit and Loss Account for the year ended on that date and also a Balance Sheet as on same date:
Debit Balance ₹ Credit Balance ₹

Drawings Account 7,100 Capital Account 42,500
Plant and Machinery 9,500 Sales 1,19,060
Stock on 01.01.2021 14,600 Purchase Return 2,910
Purchases 1,03,620 Bank Overdraft 1,200
Sales Return 2,100 Creditors 10,000
General Expenses 2,000 Provision for Doubtful Debts 1,050
Wages 2,400
Rent and Rates 3,200
Bad Debts 1,720
Debtors 30,000
Cash in hand 480
1,76,720 1,76,720
Adjustments:
(a) Provide 10% depreciation on Plant and Machinery.
(b) Provision for Doubtful Debts is to be increased to 5% of Debtors.
(c) A credit sale of ₹ 2,000 has not been recorded in the books.
(d) Plant and Machinery worth ₹ 1,000 purchased during the year (on September 30, 2021) has been
included in Purchases.
(e) Rent paid in advance was ₹ 800.
(f) Stock on 31.12.2021 has been valued at ₹ 17,300. This does not include the value of the Plant and
Machinery bought on 30.09.2021.
(g) Wages includes ₹ 200 for installation of Plant.
Solution: In the books of the trader
₹ ₹ ₹ ₹
To Opening Stock 14,600 By Sales 1,19,060
To Purchases 1,03,620 Add: Credit Sales not 2,000
Less: Purchase of 1,000 recorded
Machine 1,21,060
1,02,620 Less: Sales returns 2,100 1,18,960
Less: Purchase return 2,910 99,710
By Closing Stock 17,300
To Wages 2,400
Less: Paid for installation 200 2,200
of machine
To Profit & Loss A/c 19,750
(Gross Profit b/d)
1,36,260 1,36,260
2,000
To General Expenses By Trading Account
19,750
To Rent & Rates 3,200 (Gross Profit)
Less: Prepaid 800 2,400
To Bad Debts
1,720
To Depreciation on
980
Machinery
To Provision for Doubtful
Debts 1,600
Closing 1,050 550
Less: Opening
12,100
To Capital Account (B/fig)
(Net Profit Transferred)
19,750 19,750
Balance Sheet as on 31st December, 2021
₹ ₹ ₹ ₹
Capital: Plant & Machinery 9,500
Opening Balance 42,500 Add: New Purchase 1,000
Add: Net Profit 12,100 Add: Installation Cost 200
10,700
54,600 Less: Depreciation 980 9,720
Less: Drawings 7,100 Stock 17,300
47,500 Debtors 30,000
Add: Further Debts 2,000
Bank Overdraft 1,200 32,000
Creditors 10,000 Less: Provision for
Doubtful Debts 1,600 30,400
Prepaid Rent 800
Cash 480
58,700 58,700
Working Notes:
1. Credit Sales not recorded Effect
The entry should be - Debtors A/c ……………………..Dr. 2,000 Debtors + 2,000
To Sales A/c 2,000 Sales + 2,000
2. Plant & Machinery Purchased Effect
Rectification entry – Plant & Machinery…………….Dr. 1,000 P & M +1,000
To Purchase A/c 1,000 Purchased (-) 1,000
3. Wages for installation Effect
Rectification entry – Plant & Machinery A/c………….Dr. 200 P & M + 200
To Wages A/c Wages (-) 200
4. Depreciation on Plant & Machinery
On opening value for full 9,500 x 10/100 = Rs. 950
On Addition for 3 months [from Oct to Dec, 21] 1,200 x 10/100 3/12 = Rs. 30
Rs. 980
5. Closing provision for doubtful debts
5% of ₹ 32,000 = 1,600
2. Final Account: *
From the following balances extracted from the books of a trader on March 31, 2021 prepare a Trading and Profit
and Loss Account for the year ended on that date and also a Balance Sheet as on same date:
Particulars Dr. Cr.
₹ ₹
X’s Capital - 10,000
Plant & Machinery 3,600 -
Depreciation on Plant & Machinery 400 -
Repairs to Plant 520 -
Wages 5,400 -
Salaries 2,100 -
Income Tax of Mr. X 100 -
Cash in hand and at Bank 400 -
Land & Building 14,900 -
Depreciation on Building 500 -
Purchases 25,000 -
Purchase Return - 300
Sales - 49,800
Bank Overdraft - 760
Accrued Income 300 -
Salaries Outstanding - 400
Bills Receivable 3,000 -
Provision for bad debts - 1,000
Bills Payable - 1,600
Bad Debts 200 -
Discount on Purchases - 708
Debtors 7,000 -
Creditors - 6,252
Opening Stock 7,400 -
70,820 70,820
Information:
(i) Stock on 31st March, 2021: Cost Price ₹ 6,000; Market Price ₹ 8,000
(ii) Write off further ₹600 for Bad debt and maintain a provision for Bad Debts at 5% on Debtors
(iii) Goods costing ₹ 1000 were sent to customers for ₹ 1,200 on 30th March, 2021 on sale or return
basis. This was recorded as actual sales.
(iv) ₹ 240 paid as rent of the office were debited to landlord account and were included in list of
Debtors
(v) General Manager is to be given commission at 10% of net profit after charging the commission of
the Works Manager and his own.
(vi) Works Manager is to be given commission at 12% of net profit before charging Commission of
General Manager and his own.
Solution:
Mr. X
Dr. Trading and Profit and Loss Account for the year ended 31st March, 2021 Cr.
₹ ₹ ₹ ₹
To Opening Stock 7,400 By Sales 49,800
To Purchases 25,000 Less: Unapproved Sales 1,200 48,600
Less: Return Outward 300 24,700 By Closing Stock:
To Wages 5,400 Physical Stock 6,000
To Profit & Loss Account 18,100 Add: stock lying with
(Gross Profit c/d) customers for approval 1,000 7,000
55,600 55,600
To Salaries 2,100 By Trading Account 18,100

To Repairs to plant 520 (Gross Profit b/d)
To Office Rent (W. Note) 240 To Discount on Purchases 708
To Bad Debts 800 To Provision for Bad
To Depreciation on: Debts: 1,000
Plant & Machinery Opening Provision 248 752
400
Building Less: Closing Provision
500
900 (W. Note)
To Commission to Works 1,800
Manager (W. Note)
To Commission to General 1,200
Manager (W. Note)
To Capital Account 12,000
(N.P. Transferred)
19,560 19,560
Balance Sheet as on 31st March, 1998
₹ ₹ ₹ ₹
Capital Account: Land and Building 14,900
Opening Balance 10,000 Plant and Machinery 3,600
Add: Net Profit 12,000 Stock 7,000
22,000 Sundry Debtors (W. Note) 4,960
Less: Income Tax 100 21,900 Less: Prov. For bad debts @ 5% 248 4,712
Bank Overdraft 760 Bills Receivable 3,000
Bills Payable 1,600 Accrued Income 300
Sundry Creditors 6,252 Cash in hand and at bank 400
Outstanding Liabilities for:
Salaries 400
Works Manager’s Comm. 1,800
General Manager Comm. 1,200 3,400
33,912 33,912
Working Notes:
1. Some items usually found for making adjustments are existing here in the Trial Balance :
(a) Depreciation on Land & Building and on Plant & Machinery already adjusted in the respective
account; hence to be charged to P/L A/c.
(b) Accrued income and outstanding salaries shown in the Balance Sheet only.
2. For goods on Sale or Return recorded as actual sales :

(a) Selling Price of such goods to be deducted from Sales and Trade Debtors
(b) Cost Price of such goods to be added with Closing Stock.
3. Sundry Debtors
Particulars ₹
As per Trial Balance 7,000
(-) Debtors for unapproved sales 1,200
(-) Landlord account considered as Debtors 240
5,560
(-) Further Bad Debts 600
Adjusted Debtors 4,960
4. For office rent debited to Landlord Account and included in list of debtors, the rectification should
be –
Office Rent A/c………………………Dr. (Charged to P/L)
To Sundry Debtors A/c (deducted from Debtors)
5. Calculation of Commissions
Profit before Commission = ₹ 19,560 – ₹ 4,560 = ₹ 15,000
Works Manager’s Commission = 12% of 15,000 = ₹ 1,800
General Manager’s Commission:

(10% of Net Profit after charging Works Manager’s and own commission)
10/110 of [₹ 15,000 – ₹ 1,800] = ₹ 1,200
3. Final Account: [1st Semester 2020 Pass]
The following is the Trial Balance of Mr. Basu as on 31st March, 2021:
Opening Stock 60,000 Sales 3,82,000

Purchases 1,70,000 Purchase Return 3,200
Sales Return 3,000 Discount 800
Carriage on Purchases 2,000 Sundry Creditors 51,000
Wages 30,000 Bills Payable 15,000
Bills Receivable 21,000 Capital 1,30,000
Discount 1,600
Salary 18,800
Insurance 2,400
Rent 3,600
Income Tax 1,800
Cash at Bank 13,400
Furniture 24,000
Plant and Machinery 1,30,000
Bad Debts 1,000
Freight and duty 3,400
Drawings 10,000
5,82,000 5,82,000
The following adjustments are to be made before preparing the final accounts :
(a) A credit sale of ₹ 2,000 has not been recorded in the books.
(b) Goods costing ₹ 1,000 has been taken by the proprietor for his personal use.
(c) Goods worth ₹ 500 distributed as free sample has not been recorded.
(d) Wages includes ₹ 3,000 for the year 2020 and Rent paid is for 9 months’ rent.
(e) Depreciate Plant & Machinery and Furniture at 10% and 5% respectively.
(f) Bad Debts to be written off ₹ 6,000 and a provision @ 5% to be made for Doubtful Debts.
4. Final Account: [1st Semester 2020 Honours]
The following is the Trial Balance of Mr. Roy as on 31st March, 2021:
Plant & Machinery 3,10,000 Capital 4,20,000
Opening Stock 30,000 Sundry Creditors 20,000
Sundry Debtors 40,000 Sales 2,10,000
Wages 10,000 Return Outward 20,000
Salaries 15,000 Provision for Doubtful debt 1,000
Rent (April 2020 to June 2021) 18,000 Interest 4,000
Purchases 1,50,000
Return Inward 10,000
Bad debt 9,000
Insurance 3,000
Office Expenses 5,000
Cash in hand 30,000
Cash at Bank 45,000
6,75,000 6,75,000
Additional information :
(i) Stock on 31st March, 2021 was valued at ₹ 35,000.
(ii) Further bad debt of ₹ 1,000 is to be written off and a provision for doubtful debts @ 5% on
Sundry Debtors is to be maintained.
(iii) Goods costing ₹ 5,000 have been distributed as free sample.
(iv) Purchase of machinery worth ₹ 20,000 on 01.10.2020 has been wrongly included in
Purchases Account. Depreciation @10 % p.a. is to be charged on machinery.
(v) Office expenses outstanding ₹ 500.

Prepare Trading Account, Profit & Loss Account for the year ended on 31.03.2021 and
Balance Sheet of Mr. Roy as on that date.
5. Final Account: [B.Com Honours, 2017]****
The following is the Trial Balance of Mr. H as at 31.3.2021
Drawings 10,000 Capital 1,70,000
Other Equipment 1,10,000 Sales 1,65,000
Purchases 84,000 Returns 4,000
Returns 5,000 Bad Debts recovered 26,450
Bad debts 5,000 Discount Received 1,000
Carriage inward 5,000 Creditors 2,02,000
Carriage outward 7,000 Bills Payable 5,600
Discount allowed 2,000 Bank Overdraft 29,000
Sale commission 4,000 Bank Loan (taken on 1.4.20) 30,000
Rent 4,000
Interest 1,500
Debtors 2,15,000
Bills Receivables 10,000
Investment 50,000
Cash 50,550
6,33,050 6,33,050
(a) Closing Stock at market price as on 31.3.2021 was 61,500. (The cost of such stock was ₹
80,000)
(b) Provide for depreciation on office equipment @ 10% p.a.
(c) Goods costing ₹ 10,000 was destroyed due to fire on 30.3.2021, the insurance company
accepted a claim to the extent of 60% only and paid the claim money only on 10.4.2021.
(d) Of the bill receivables, a bill of ₹ 4,000 is dishonored. No entry has been made in the books
of account.
(e) Write off ₹ 9,000 as bad debt and maintain a provision for bad debt @ 5%.
(f) Manager is entitled to a commission of 5% of net profit before charging his commission.
You are required to prepare a Trading and Profit & Loss Account for the year ended on 31.3.2021 and
a Balance Sheet on that date.
6. Final Account: [B.Com Honours, 1997]****
Prepare Trading Account and Profit and Loss Account for the year ended 31.12.2021 Mr. S and a Balance
Sheet as at that date from the Trial Balance given below after giving effect to the under mentioned
adjustments:
Trial Balance as at 31.12.2021
Debit ₹ Credit ₹
Drawings 3,250 Capital 15,000
Stock (1.1.21) 17,445 Returns Outwards 840
Return Inward 554 Interest on Loan 25
Carriage Inward 1,240 Rent outstanding 130
Deposit with Das Gupta 1,375 Creditors 3,000
Carriage Outward 725 Prov. For Doubtful debts 1,200
Loan to Chatterjee @ 5% p.a. 1,000 Sales 27,914
Rent 820
Purchases 12,970
Debtors 4,000
Advertisement Exp. 954
Bad debts 400
Patents and Pattern 500
Wages 754
Cash 62
Goodwill 1,730
48,109 48,109
Adjustments:
(a) Closing Stock ₹ 18,792
(b) The manager of Mr. S is entitled to a commission of 10% of net profit calculated after charging such
commission.
(c) Increase Bad Debts by ₹ 600. Provision for Doubtful Debts is to be maintained at 10% and Provision for
Discount at 5% on Sundry Debtors.
(d) Stock valued at ₹ 1,500 was destroyed by fire on 25.12.21, but the insurance company admitted a claim
of ₹ 950 only and paid in 7th January, 2022.
(e) ₹ 200 out of Advertisement Expenses are to be carried forward to the next year.
[Ans. Gross Profit ₹ 16,083; Net Profit ₹ 11,510; Manager’s Commission ₹ 1,151; Total of Balance
Sheet ₹ 27,541]
7. Final Account: [B.com 2007 Type,2011 Honours] [New]**
Mr. S. N. Roy started a business on 01.04.2020 with Rs, 10,000 cash, ₹ 5,000 in goods and ₹ 15,000 in
furniture. His Trial Balance as on 31.03.2021 was as follows:
Debit Balances:
Bad Debt ₹ 3,500: Stock-in-Trade ₹ 5,000 ; Furniture ₹ 15,000; Drawings ₹ 3,500; Wages ₹ 1,800;
Purchases ₹ 18,000; Advertisement ₹ 1,600; Debtors ₹ 9,000; Cash ₹ 4,700; Salaries ₹ 2,400; Interest on
Loan Rs, 200; Commission paid ₹ 800: Insurance Premium ₹ 800; Machinery ₹ 30,000.
Credit Balances:
Capital ₹ 30,000; Creditors ₹ 5,000; Bank Loan ₹ 32,400; Commission Received ₹ 200; Sales ₹ 28,700.
(a) Mr. Roy used goods of ₹ 1,000 for personal consumption. The value of remaining stock ₹ 9,000.
(b) Goods valued at ₹ 5,000 were lost by fire for which insurance claim of ₹ 2,000 was to be received.
(c) Depreciate Furniture @ 5% p.a. and Machinery @ 10% p.a. The Machinery was purchased on
01.10.2020.
(d) Interest on Bank Loan was payable @10 % p.a. The loan was taken at the beginning of the year.
(e) A further Bad Debt of ₹ 1,000 to be written off and a provision for doubtful debt is to be provided
@5%.
(f) 1/4th of the Advertisement Expenses is to be carried forward.
(g) Included in Debtors is ₹ 3,000 due from Mr. P, included in creditors ₹ 1,000 due to the same person.
Prepare Trading Account, Profit and Loss Account for the year ended 31.03.2021 and a Balance sheet of
Mr. S. N. Roy as on that date.
[Gross profit ₹ 18,900; Net profit ₹ 560; Balance Sheet total ₹ 65,500]
8. Final Account
Following is the Trial Balance of Shri Saha on 31st December 2021:
Trial Balance

Purchases (adjusted) 85,250 Capital 60,000
Returns inward 8,560 Return Outwards 4,200
Carriage Inwards 4,340 Provision for doubtful debts 1,250
Salaries 10,620 Commission 14,550
Rent and Taxes 4,470 12% bank Loan 20,000
Freight and Duty 3,850
Income tax 3,500
Bad Debts 3,600
Machinery (including ₹ 17,600 37,600
for new machine)
Furniture 15,000
Advertisement 10,150
Closing Stock 65,000
Insurance Premium 2,500
Interest on loan 2,000
Drawings 10,800
Cash in hand 5,020
Cash at Bank 23,500
4,30,000 4,30,000
Prepare a Trading and Profit and Loss Account for the year ended 31st December 2021 and a Balance
Sheet as on that date after taking into account the following information:
a) Goods withdrawn by the proprietor for private use but not accounted for ₹ 1,500.
b) Wages include ₹ 2,400 paid for installation of the new machine on 1st July, 2021.
c) Carry forward the unexpired insurance premium ₹ 500.
d) Write off further bad debts ₹ 5,000 and maintain provision for doubtful debts @ 5% on Debtors.
e) Charge 10 % p.a. as depreciation on machinery and furniture.
9. Final Account
The following Trial Balance has been extracted from the books of Mr. Das as on 31st March, 2021:
Opening Stock 2,400 Capital 46,200
Building 2,10,000 Creditors 25,000
Bad debts 3,500 10% Loan (Taken on 01.10.20) 24,000
Closing stock 24,000 Commission Received 200
Furniture 10,000 Sales 3,28,700
Drawings 4,500 Outstanding Salaries 3,000
Wages 1,800 Provision for Bad Debts 2,100
Purchases (Less Closing Stock) 1,18,000
Advertisement 1,400
Debtors 9,000
Cash 3,200
Interest on Loan 400
Commission Paid 600
Office Equipment 18,000
Miscellaneous Expenses 700
Insurance Premium 800
Salaries 10,000
Patent 7,200
Rent 2,400
4,29,200 4,29,200
Prepare Trading Account and Profit & Loss Account for the year ended 31st March, 2021 and a Balance Sheet
as on date after considering the following:
(a) Furniture costing ₹ 12,000 purchased on 01.10.2021 on credit was recorded as credit purchase of goods.
(b) Mrs. Samanta, Debtor for ₹ 2,000 was declared insolvent, only 40 paise in the rupee was expected to
realize from his estate. Create Provision for Doubtful Debts at 5% and Provision for Discount at 2% on
Debtors.
(c) Patent (acquired on 01.04.2019) having a useful life of ten years, is to be amortised in 10 equal
installments over the years.
(d) Depreciate relevant fixed assets at 10% p.a.
10. Final Account: [B.com 2014 Honours] [New]**
The following Trial Balance was extracted from the books of Mr. S. Sengupta as on 31st December, 2021.
Particulars Debit (₹) Credit (₹)

Capital 3,25,000
Freehold Land and Building 1,17,000
Furniture and Fittings 17,420
Stock in trade (1.1.21) 1,48,200
Electricity 2,314
Drawings 75,400
Purchases 10,21,800
Sales 12,37,600
General Expenses 46,826
Balance at Bank 10,712
Motor Van 3,120
Discount allowed 28,964
Trade Debtors 1,23,500
Trade Creditors 99,450
Rates and Insurance 2,496
Wages and Salaries 64,610
Goodwill 15,600
Provision for Bad Debts (1.1.21) 4,160
16,89,142 16,89,142
Prepare a Trading and Profit and Loss Account for the year ended 31st December, 2021 and the Balance
Sheet as on that date after taking into considering the following information:
(a) The stock in trade on 31st December, 2021 was valued at ₹ 2, 05,400.
(b) Rates and Insurance paid in advance on 31st December, 2021 amounted to ₹ 650.
(c) The Motor Van shown in the Trial Balance was sold on 31.12.2021 for ₹ 1,040 for cash, which Mr.
Sengupta retained for private use. No entry for this transaction was made in the books.
(d) The provision for Doubtful Debts is to be increased to ₹ 5,980.
(e) Provide depreciation on Furniture and Fittings ₹ 1,742.
11. Final Account: [B.com 2015 Honours] [New]**
Form the following Trial Balance of Mr.S.Roy as on 31.3.21. you are required to prepare a Trading and
Profit And Loss Account for the year ended 31.3.2021 and a Balance Sheet as on that date:
Trial Balance as on 31.03.2021
Particular Dr. (₹) Cr. (₹)
Sundry Debtors/Creditors 5,00,000 2,00,000
Wages 1,00,000
Carriage Outward 1,10,000
Cash Discount 20,000
Bad Debt 10,000
Motor Car 2,40,000
Printing & Stationary 70,000
Furniture And Fitting 1,10,000
Advertisement 45,000
Insurance 45,000
Motor Car Expenses 40,000
Salesmen Commission 87,500
Postage And Telephone 57,500
Salaries 1,60,000
Rates And Taxes 25,000
Capital/Drawing 20,000 14,43,000
Purchases/Sales 15,50,000 19,87,500
Stock On 1.4.20 2,50,000
Cash At Bank 60,000
Cash In Hand 10,500
36,30,500 36,30,500
Adjustments:
a. Stock on 31.3.21 was valued at ₹7,25,000
b. A Provision for Doubtful Debts is to be created to the extent of 5% on Sundry debtors
c. Depreciate Furniture and Fittings by 10%, motor car by 20%.
d. Mr. Roy had withdrawn goods worth ₹25,000 during the year for personal use.
e. Debtors include bad debts of ₹25,000
f. ¼ th of motor car expenses and depreciation on motor car should be charged to Mr. Roy’s personal
account for personal use of motor car.
Accounts Theory
[20 Marks]
1. What Is Accounting Information?
Accounting information is the information that arises from business transactions. Once identified, the
information is then classified and recorded, and it eventually finds its way into various reports. For cash-
basis accounting, this is relatively simple. Revenue is recorded in the books when cash is received, and
expenses are recorded when cash is paid out. This method may be simpler, but it is only suited to smaller
businesses with only a few owners or partne₹ However, businesses with more investors and businesses that
have inventory find the accrual basis of accounting necessary. Additionally, publicly traded businesses are
required by law to use accrual-basis accounting. Transactions in accrual accounting are recorded with
respect to the accounting equation, where every transaction has a debit side and a credit side.
2. Users of accounting information:

We can broadly divide the users of accounting information into two groups – internal users and external
use₹ Internal users include managers and owners of the business whereas external users include investors,
creditors of funds, suppliers of goods, government agencies, general public, customers and employees.
Internal users
Internal users use a mix of management and financial accounting information. Some internal users of
accounting information are:
(a) Management
(b) Owners
External users
External users normally use only financial accounting information. Some external users of accounting
information are as follow:
(a) Investors
(b) Lenders
(c) Suppliers
(d) Government agencies
(e) General public
(f) Customers
(g) Employees
3. Basic accounting equation:

The accounting equation is the formula used to capture the effect of the relationship of financial activities
within a business.
The accounting equation is considered to be the foundation of the double-entry accounting system. The
accounting equation shows on a company's balance sheet whereby the total of all the company's assets
equals the sum of the company's liabilities and shareholders' equity.
Based on this double-entry system, the accounting equation ensures that the balance sheet remains
“balanced,” and each entry made on the debit side should have a corresponding entry (or coverage) on the
credit side.
Accounting Equation Formula
Assets= Liabilities+ Owner's Equity
4. Meaning of assets, liabilities, revenue and expenses:

The five account types are: Assets, Liabilities, Equity, Revenue (or Income) and Expenses.
Assets:
Tangible and intangible items that the company owns that have value (e.g. cash, computer systems, patents)
Liabilities:
Money that the company owes to others (e.g. mortgages, vehicle loans)
Revenue or Income:
Money the company earns from its sales of products or services, and interest and dividends earned from
marketable securities
Expenses:
Money the company spends to produce the goods or services that it sells (e.g. office supplies, utilities,
advertising)
5. Entity Concept:
The business entity concept (also known as separate entity and economic entity concept) states that the
transactions related to a business must be recorded separately from those of its owners and any other
business.
Entity concept, in nature, is just reverse of proprietary concept. In this concept enterprise is viewed as a
distinct unit completely separate from its owners and all the accounting activities are centred around the
enterprise instead of its owne₹ Even the proprietor who is the supplier of capital is identified as one of the
creditors of the entity (enterprise). So capital is treated as a liability like other liabilities of the business.
6. Money measurement Concept:

The money measurement concept states that a business should only record an accounting transaction if it
can be expressed in terms of money. This means that the focus of accounting transactions is on quantitative
information, rather than on qualitative information. Thus, a large number of items are never reflected in a
company's accounting records, which means that they never appear in its financial statements. Examples of
items that cannot be recorded as accounting transactions because they cannot be expressed in terms of
money include:
(a) Employee skill level
(b) Employee working conditions
(c) Expected resale value of a patent
(d) Value of an in-house brand
(e) Product durability
(f) The quality of customer support or field service
(g) The efficiency of administrative processes
7. Going concern Concept:

The going concern concept of accounting implies that the business entity will continue its operations in the
future and will not liquidate or be forced to discontinue operations due to any reason. A company is a going
concern if no evidence is available to believe that it will or will have to cease its operations in foreseeable
future.
An example of the application of going concern concept of accounting is the computation of depreciation
on the basis of expected economic life of fixed assets rather than their current market value.
Companies assume that their business will continue for an indefinite period of time and the assets will be
used in the business until fully depreciated. Another example of the going concern assumption is the
prepayment and accrual of expenses. Companies prepay and accrue expenses because they believe that they
will continue operations in future.
8. Cost Concept (OR Historical Cost Concept) :

This accounting concept states that all assets of the firm are entered into the books of account at their purchase
price (cost of acquisition + transport + installation etc). In the subsequent years to, the price remains the same
(minus depreciation charged). The market price of the asset is not taken into consideration.
Example
For example, a business buys a building worth ₹ 1,00,000 in cash. In the accounting records, the value of
the building will be entered at its cost price, i.e. ₹ 1,00,000. After four years, the value of the building goes
up to ₹ 5,00,000. However, the accounting records would continue to show the value of the building at the
cost price of ₹ 1,00,000 less depreciation.
9. Realisation Concept:
According to the realization accounting concept, revenue is only recognized when it is realized. Now revenue is
the cash inflow for a business arising from the sale of goods or services. And we assume this revenue as
realized only when it legally arises to be received. So in simpler terms, the profit earned will be recorded when
it is actually earned.
Explanation
In case of sale of goods, revenue must be recognized when the seller transfers the risks and rewards associated
with the ownership of the goods to the buyer.
In case of the rendering of services, revenue is recognized on the basis of stage of completion of the services
specified in the contract.
10. Accrual Concept:

Accrual concept is the most fundamental principle of accounting which requires recording revenues when they
are earned and not when they are received in cash, and recording expenses when they are incurred and not
when they are paid.
At the end of each reporting period, companies pass adjusting journal entries to record any accruals, for
example accrual of utilities expense, interest expense, accrual of wages and salaries, adjustment of
prepayments, etc.
11. Periodicity Concept:

Each business chooses a specific time period to complete a cycle of the accounting process—for example,
monthly, quarterly, or annually—as per a fiscal or a calendar year.
Periodicity concept is the concept that each accounting period has an economic activity associated with it, and
that the activity can be measured, accounted for, and reported upon.
In accounting, periodicity means that accountants will assume that a company's complex and ongoing activities
can be divided up and reported in annual, quarterly and monthly financial statements.
12. Matching Concept:

The matching concept is an accounting practice whereby firms recognize revenues and their related expenses in
the same accounting period. Firms report "revenues," that is, along with the "expenses" that brought them.
The purpose of the matching concept is to avoid misstating earnings for a period. Reporting revenues for a
period without stating all the expenses that brought them could result in overstated profits.
Note that applying the matching concept requires accrual accounting, by which companies recognize revenues
when they earn them and expenses in the period they incur them. Actual cash flows from these transactions
may occur at other times, even in different periods.
13. Consistency Concept:

In accounting, consistency requires that a company's financial statements follow the same accounting
principles, methods, practices and procedures from one accounting period to the next. This allows the readers
of the financial statements to make meaningful comparisons between years.
Consistency does allow a company to make a change to a more preferred accounting method. However, the
change and its effects must be clearly disclosed for the benefit of the readers of the financial statements.
The Financial Accounting Standards Board refers to consistency as one of the characteristics or qualities that
makes accounting information useful.
Example of Consistency
Let's assume that a U.S. corporation uses the FIFO cost flow assumption for valuing its inventory and
determining its cost of goods sold. Due to the increasing cost of its materials, it concludes that LIFO will better
indicate the company's true profit. In the year of the change from FIFO to LIFO (and in years when
comparisons are presented), the company must disclose the break in consistency.
14. Prudence (conservatism):

Prudence concept (convention, principle) of accounting is also well known as conservatism concept. This
concept defines and emphasizes that “the accountants are cautious people. Preparation of financial statements
need good professional command and exact estimates of future by the accountants”.
Traditionally, accountants do not anticipate profits, however, provide for all losses. Incomes are not accounted
for until they are earned. However, the accountants provide for all likely losses and expenses, when there is a
reasonable possibility that such losses and expenses will occur in future.
Explanation, Use and Application of Prudence Concept:
A typical use and application of prudence concept is to value inventories at lower cost or net realizable value.
In case of reduction in market value then the “anticipated loss” should be provided for but if the price in the
market is higher than cost which is usually the case then ignore the “anticipated profits”.
15. Materiality Concept:

Materiality means that all material facts should be recorded in accounting. Accountants should record important
data and leave out insignificant information. The materiality principle states that an accounting standard can be
ignored if the net impact of doing so has such a small impact on the financial statements that a reader of the
financial statements would not be misled.
Under generally accepted accounting principles (GAAP), you do not have to implement the provisions of an
accounting standard if an item is immaterial.
In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while
relatively small amounts are not material (or immaterial).
16. Full disclosures concept:

The full disclosure concept is an accounting principle that requires management to report all relevant
information about the company’s operations to creditors and investors in the financial statements and footnotes.
In other words, GAAP requires that management tell external users material information about the company
that they can use to base their decisions on.
What Does Full Disclosure Principle Mean?
The purpose of the full disclosure principle is to share relevant and material financial information with the
outside world. Since outsiders don’t know the details of a company’s business deals, contracts, and loans, it’s
difficult to form an opinion of the entity. Relevant information to outsiders is anything that could change an
external user’s decision about the company. This can include transactions that have already occurred as well as
future events contingent on third parties. Any type of information that could sway the judgment of an outsider
should be included in the financial statements in an effort to be transparent.
Example:
Take loan agreements for example. According to the full disclosure principle, management should list the loans
along with terms, maturity dates, current portions, and collateral obligations attached to the loans in the notes of
the financial statements.
17. What do you mean by Accounting Standards?

Accounting Standards (i.e. AS 1~32) are issued/ amended by the Accounting Standards Board of ICAI from
time to time, to establish uniform standards for preparation of financial statements, in accordance with
generally accepted accounting practices (GAAP) in India and for better understanding of the use₹
These standards are mandatory on the dates specified either in the respective document or by notification
issued by the Council of the ICAI.
Accounting Standards (AS) are basic policy documents. Their main aim is to ensure transparency,
reliability, consistency, and comparability of the financial statements. They do so by standardizing
accounting policies and principles of a nation/economy. So the transactions of all companies will be
recorded in a similar manner if they follow these accounting standards.
18. What are the benefits of Accounting Standards?

Accounting Standards are the ruling authority in the world of accounting. It makes sure that the information
provided to potential investors is not misleading in any way. Let us take a look at the benefits of AS.
(a) Attains Uniformity in Accounting
(b) Improves Reliability of Financial Statements
(c) Prevents Frauds and Accounting Manipulations
(d) Assists Auditors
(e) Comparability
(f) Determining Managerial Accountability
19. Discuss the procedure for issuing accounting

standards in India.
In India, the accounting standards are issued by the Accounting Standard Board (ASB) of the
ICAI. The Board adopts the following procedure for formulation of accounting standards:
1. Determination of the areas of accounting standard: Firstly, the ASB determines the broad
areas in which accounting standards need to be formulated, and also the priority in the
selection thereof.
2. Constitution of Study Group: In the process of development of accounting standards, ASB
constitutes a Study Group to consider the specific subject. The motive behind constitution
of this group is to assist the ASB in its activities.
3. Dialogue with various representatives: The ASB, thereafter, hold dialogues with the
representatives of the Government, public sector undertakings, industry and other
organisations for getting their views.
4. Preparation of Exposure Draft: On the basis of the work of the Study Group and the
dialogues with the stakeholders, an exposure draft of the proposed standard is prepared.
5. Issuance for circulation: The exposure draft is thereafter issued for comments by members
of the ICAI and the public at large.
6. Consideration of views and drafting the Standard: The comments received on the
Exposure Draft are taken into consideration, and thereafter the draft of the proposed
standard is finalised by the ASB and submitted to the Council of the ICAI.
7. Modification of proposed Standard: The Council of the ICAI considers the final draft of
the proposed standard, and if found necessary, modify the same in consultation with ASB.
8. Issuance of Accounting Standard: Finally, the Accounting standard gets issued under the
authority of the Council.
20. Write a short Note on IFRS

(a) International Financial Reporting Standards (IFRS) are accounting standards issued by the
International Accounting Standards Board (IASB).These are global accounting standards that
are issued with the intention of ensuring uniformity in accounting across the globe.
(b) These are intended to provide investors and other stake-holders the ability to compare the
financial performance of publicly listed companies.
(c) ‘IFRS’ is the trademark of the International Accounting Standards Committee Foundation.
The Foundation owns the copyright to IFRS in all languages.
(d) IFRSs are now mandated for use by more than 140 countries, including the European Union
and by more than two-thirds of the G20 nations. The G20 and other international
organisations including the World Bank, IMF, Basel Committee etc. have consistently
supported the work of the IASB and its mission of global accounting standards.
(e) The term ‘IFRS’ constitutes in its fold the International Accounting Standards (IAS),
International Financial Reporting Standards (IFRS), SIC Interpretations and IFRIC
Interpretations.
21. Write short notes on: GAAP

The accounting principles that are generally recognised by accountants and represents accepted
accounting practices are called generally accepted accounting principles (GAAP). They are general
guidelines for ensuring fair presentation of financial statements. They make financial statements
relevant, objective, comparable and dependable.
Benefits of GAAP:
Following benefits are derived from GAAP:
(a) Harmonization of Accounting Practices:
(b) Help in Daily Accounting Work:
(c) Quality in Accounting:
(d) Investment Planning:
(e) Deterrence to Window-dressing:
(f) Reduction of Fraud:
(g) Listing of Securities:
(h) Development of International Capital Market:
Disadvantages of GAAP
(a) Rigid Rules:
(b) Non-compatibility:
(c) Difficulty in Interpretation:
(d) Politicization in Standard-setting:
22. Limitations of Historic Cost accounting:

The following are the main limitations of historical accounts:
(a) Utility of accounting records seriously impaired: Financial statements or reports based on
historical cost fail to reflect the effect of such changes in purchasing power on the financial position
and profitability of the firm. Financial statements may be incorrectly interpreted unless adjustments are
made to place the data on the current price level.
(b) Unrealistic profits: Under the historical accounting system, depreciation calculated on the basis of
historical cost of old assets is usually lower than that of those calculated at current value or
replacement value. This results in more profits on paper.
(c) Different bases: In conventional system of accounting fixed assets are shown at the historical costs
whereas operating expenses and incomes are taken at current prices. Thus, different bases adopted are
not desirable for having correct and reliable information about the business.
(d) Return on capital employed misleading: Under historical cost accounting system the profits are
overstated and fixed assets are understated specially when there is increase in the price of the old fixed
assets. Such return on capital employed may lead to misleading decisions.
(e) Difficulty in comparison of profitability of two plants: In case of price level changes,
comparison of profitability of two plants set up at different dates becomes difficult.
23. Write short notes on: Fair value accounting.

During the last few years it has been noticed that the basis of accounting is changing. For a long period of
time, accountants were used to record different assets and liabilities at their historical cost. Although this
method of recording assets and liabilities are meaningful when there is no change in the price level. To
overcome the weakness of historical cost method of recording assets and liabilities, many national and
international accounting standards body have moved towards a fair value approach.
Definition
Fair value is defined in IAS 39 as “The amount for which asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm’s length transaction.”
Features
1. Fair value incorporates market information into the financial statements. The information contained
in the financial statements are useful to investors as all the values of assets and liabilities are close
to ‘current’ values at the Balance Sheet date.
2. It focusses on the fair value of assets and liabilities.
3. Fair value is Balance Sheet based. The result of changes in the carrying values of assets and
liabilities are reflected in the Profit and Loss Statement.
4. Fair value accounting meets the conceptual framework criteria in terms of qualitative characteristics
of accounting information.
24. Discuss how accounting theory is related with

accounting practice.
Accounting Theory:
The term 'Accounting Theory' refers to the generally accepted logical explanation of accounting
practices. That is to say, accounting theory is that branch of accountancy which develops and
inculcates a set of logical principles for the evaluation and development of effective accounting
practices.
Accounting practices:
Accounting practices for having a scientific base must be supported by justifiable actions and
logic. For solving this problem accounting theory has been evolved out. The theoretical framework
of accounting helps formulation of certain logical principles operating in a sequence of events on
the basis of which accounting practices are undertaken, evaluated and improved.
Relation between Accounting theory & Accounting Practive:

Accounting theory and accounting practice are closely related. The relationship may be described
as below:
(a) Accounting practice follows accounting theory.
(b) Accounting theory is a science and accounting practice is the art c application of those
theories. Therefore to master in accounting practice i) well reading of the science is
necessary.
(c) Sometime accounting theory changes first, accounting practice changed consequently. On
the other hand sometime a new theory is conceived or formulated due to change in
accounting practice.
(d) Accounting theory is a standard set by some recognised authority so it does not change
widely from country to country. But accounting practice depends upon the respective
accountant or owner or economic set up.
25. Distinction between Reserve & Provisions**

Provisions Reserves
1. A provision is a charge against profit (a debit 1. A reserve is an appropriation of profit (a debit
in the profit & loss account) in the Profit & Loss Appropriation Account)
2. The creation of provisions has nothing to do 2. The creation of revenue depends on the
with the amount of net profit. In fact, amounts of profits earned by the business.
provisions are created in order to assist in the
calculation of a correct profit.
3. Provisions are created for future liabilities & 3. Reserves are created for safeguarding the
charges or for valuation adjustments of assets. business against unforeseen losses or with a
view to planning for further development of
the business.
4. Provisions are created for some specific 4. Reserves that are created are mostly general,
purpose and are utilized for that particular and/or in a few cases, particular (reserve
purpose. fund).
5. Provisions cannot be distributed as profits 5. Reserves, other than capital reserves, can be
except in cases where the actual liabilities or distributes as profits.
charges fall short of the amount provided for.
7. Provisions may appear in the liabilities side or 7. Reserves compulsorily appear in the liabilities
in the assets side of the balance sheet. side of the Balance Sheet alone.
8. Provisions are not earmarked against any 8. Reserves may be earmarked against a
particular asset. particular asset (reserve fund).
26. Distinction between Capital Expenditure & Revenue

Expenditure**
Capital Expenditure Revenue Expenditure
1. It is outflow of money to acquire fixed assets 1. It is the outflow of money to meet running
of a business or adding to their value. expenses of a business.
2. It is always an external transactions. 2. It may be internal (e.g. depreciation) or
external transaction.
3. It is debited to an asset account. 3. It is debited to an expense account.
4. It is a real account. 4. It is a nominal account.
5. It is incurred for more than one accounting 5. It is incurred for a particular accounting
period. period.
6. It is finds a place in the Balance Sheet. 6. It finds a place in the Trading Account or
Profit and Loss Account.
7. It is of non-recurring nature. 7. It is of recurring nature.
8. All capital expenditures eventually become 8. Revenue expenditures do not generally
revenue expenditures. become capital expenditures.
9. Capital expenditures are not matched against 9. All revenue expenditures are matched against
capital receipts. revenue receipts.
Financial Accounting: Honours 2017

Group A: 5 Question of 5 Marks Each (out of 8): 25 Marks
Question 1 [Unit 1: Introduction]:
(a) What is ‘Accounting Cycle’? Mention the steps involved in an ‘accounting cycle’
(b) What do you mean by cash basis of accounting?
Or
State the name of the accounting concept or convention applied in each of the following cases:
(a) Recording of capital contributed by the owner in a sole proprietorship business a liability.
(b) Valuation of inventories at lower of cost or net realizable value.
(c) Omission of paisa and showing the round figures in financial statements.
(d) Assets are classified into fixed assets and current assets.
(e) Showing outstanding expenses in the Balance Sheet.
Question 2 [Unit-2: Concepts for determination of business]:

(a) Define Revenue.
(b) How would you recognize revenue from the sale of goods?
Question 3 [Unit-3: Accounting theory]:

What do you mean by maintenance of Financial Capital? Why is it important to maintain capital for an
entity?

State the limitations of ‘Historical Cost Accounting’.
Or
State the need for having a global financial reporting standard.
Question 5 [Unit- 5: Sale on Approval]:

M/s Bose Brothers, a trader sends goods to his customers on ‘Sale of Return’ basis. The following
transactions took place during 2021:
₹
25.9.2021 Sent goods to customers on sale or return basis at cost plus 30% 1,50,000
23.10.2021 Goods returned by customers 40,000
18.11.2021 Received letters of approval from customers confirming purchase 71,000
of goods
31.12.2021 Goods with customers awaiting approval (date of return has not yet 39,000
expired)
M/s Bose Brothers records sale or return transactions as ordinary sales.
You are required to pass necessary journal entries in the books of M/s Bose Brothers assuming that
accounting year closes on 31st December, 2021.
Group B: 4 Questions of 10 Marks Each (out of 6): 40 Marks
Question 6 [Depreciation]
Mr. X is engaged in car rental business. On 1.4.2019 he purchased 3 second-hand motor cars at 3,00,000 each
and paid ₹ 60,000 each for overhauling and reconditioning of each of the car purchased, which was completed
on 30.4.2019. these cars were put to use from 1.5.2019.
He writes off depreciation @ 20% p.a. on original cost from the date cars were put to use and close books on
31st December every year.
On 1.10.2021, one car is completely destroyed in a road accident and a sum of ₹ 1,70,000 is received from the
insurance company in settlement of the claim.
On the same day he purchased 3 new cars at ₹ 6,00,000 each and put to use from that date.
Prepare Motor car account from 2019 to 2021 in the books of Mr. Working notes should form part of the answer.
Question 7 [Single Entry Question OR Non-trading]:

Mr. D, a trader maintains an incomplete record for his business. However, he keeps a detailed record of cash and
bank transactions and provides you the following summary of receipts and payments for the year ended
31.12.2021.
Cash in hand on 1.1.21 3,600 Payment to Creditors 2,30,000
Cash at bank on 1.1.21 62,000 Purchase of Furniture (on 1.9.21) 12,000
Cash Sales 70,000 Salaries 28,000
Capital Introduced 60,000 General Expenses 8,000
Interest received on Investment 5,000 Rent and Rates 15,000
Collection from Debtors 2,20,000 Drawings 36,000
Cash purchases 47,000
Cash in Hand on 31.12.21 1,600
Cash at Bank on 31.12.21 43,000
4,20,600 4,20,600
Particulars of other assets and liabilities are as follows:

1.1.2021 (₹) 31.12.2021 (₹)
Sundry Debtors 1,45,000 1,66,000
Sundry Creditors 2,90,000 2,23,000
Furniture 48,000 ?
Stock 57,000 70,000
Investment in 10% Bond 50,000 50,000
Debtors and Creditors balances on 31.12.2021 have been arrived at after considering discount allowed and
discount received amounting to ₹ 9,000 and ₹ 7,000 respectively. Furniture is to be depreciated @ 10% p.a. and
a provision for doubtful debts is to be created for 3,300.
Prepare a Trading and Profit & Loss Account for the year ended 31st December, 2021 and a Balance Sheet as on
that date.
OR
The following is the Receipts and Payments Account of Park view club in respect of the year ended 31.3.2021:
Receipts ₹ ₹ Payments ₹
Opening balance 1,02,500 Salaries 2,08,000
Subscription Received Stationery Purchased 40,000
2019-20 4,500 Rent 60,000
2020-21 2,11,000 Telephone Expenses 10,000
2021-22 7,500 2,23,000 investments 1,25,000
Net cash realized from Sundry Expenses 92,500
Sports Meet 1,55,000 Closing Balance 45,000
Income from Investments 1,00,000
5,80,500 5,80,500
(a) There are 450 members each paying an annual subscription at ₹ 500. On 1.4.2020, outstanding
subscription was ₹ 5,000.
(b) There was an Outstanding Telephone bill of R. 3,500 on 31.3.2021
(c) Outstanding Sundry Expenses as on 31.3.2020 totaled ₹ 7,000.
(d) Stock of stationery: on 31.3.2020 – ₹ 5,000 and on 31.3.2021 – ₹ 9,000
(e) On 31.3.2020, Building stood in the books at ₹ 10,00,000 and it was subject to Depreciation at 5%
p.a.
(f) Investment on 31.3.2020 stood at ₹ 20,00,000.
(g) On 31.3.2020, income accrued on Investments purchased during the year amounted to ₹ 3,750.
Prepare an Income and Expenditure Account for the year ended 31.3.2021 and a Balance Sheet as on that date.
Question 8 [Consignment Or Self Balancing]:

M/s Poddar & Co. of Kolkata deals with ‘Body Oil’ which is sold in one litre plastic bottle. Poddar & Co.
consigned 2,500 bottles of ‘body oil’ costing ₹ 240 per bottle to Sharma & Co. of Jalandhar, to be sold at ₹ 400
per bottle and paid ₹ 50,000 as freight and insurance.
Sharma & Co. took delivery of the remaining goods consigned and paid carriage inward and unloading charges
₹ 32,300. He is entitled to a commission of 10% on sales made by him. Sharma & Co. also incurred other
expenses covered under agreement amounting to ₹ 18,000.
Sharma & Co. reported that 100 bottles were lost due to leakage in the godown (loss due to leakage upto 5% of
goods received by the consignee is considered as normal loss) and 1,700 bottles were sold Sharma & Co. paid a
cheque of 5,50,000 in favour of poddar &Co. You are required to prepare consignment Account in the books of
M/s Poddar & Co.
Note: Working should for part of the answer.
Or
From the following details prepare a General Ledger Adjustment Account in the Creditors Ledger of ABC &
Company:
Credit Purchases 2,80,000 Bills payable accepted 16,000
Cash Purchases 75,000 Bills payable renewed for two more 2,000
month
Bills Receivable drawn 1,10,000 Payment to creditors 2,52,000
Cash Discount Received 5,000 Return Inward 10,500
Bills Payable Paid 6,500 Return Outward 5,000
Bills Receivable Endorsed to Creditor 10,000 Over Payments refunded by supplies 600
Opening Balance of Sundry Debtors 78,000 Endorsed Bills Receivable discounted 4,000
Sundry Creditors 85,000
Question 9 [Insurance claim]:
On 1.1.2021 there was a fire in the godown of M/s ABC & Co. destroying a part of stock. The entity furnished
the following information:
₹
Stock on 1.4.2019 56,000
Purchases during 2019-20 3,80,000
Sales during 2019-20 5,00,000
Stock on 31.3.20 30,000
Sale from 1.4.2020 to 1.1.2021 2,00,000
Stock on 31.3.2020 includes abnormal items costing ₹ 15,000 which was written down by ₹ 6,000. Two-third of
the abnormal items were sold on 30.6.2020 at a loss of ₹ 5,000. This amount is included in sales during the
relevant period. Balance of the abnormal items were valued at cost. Value of goods salvaged ₹ 7,000 and policy
value was ₹ 50,000. Compute the insurance claim to be made by M/s ABC & co.
Group C: 1 Question of 15 Marks:
Question 10 [Final A/c]:
The following is the Trial Balance of Mr. H as at 31.3.2021
Drawings 10,000 Capital 1,70,000
Other Equipment 1,10,000 Sales 1,65,000
Purchases 84,000 Returns 4,000
Returns 5,000 Bad Debts recovered 26,450
Bad debts 5,000 Discount Received 1,000
Carriage inward 5,000 Creditors 2,02,000
Carriage outward 7,000 Bills Payable 5,600
Discount allowed 2,000 Bank Overdraft 29,000
Sale commission 4,000 Bank Loan (taken on 1.4.20) 30,000
Rent 4,000
Interest 1,500
Debtors 2,15,000
Bills Receivables 10,000
Investment 50,000
Cash 50,550
6,33,050 6,33,050
a) Closing Stock at market price as on 31.3.2021 was 61,500. (The cost of such stock was ₹ 80,000)
b) Provide for depreciation on office equipment @ 10% p.a.
c) Goods costing ₹ 10,000 was destroyed due to fire on 30.3.2021, the insurance company accepted a
claim to the extent of 60% only and paid the claim money only on 10.4.2021.
d) Of the bill receivables, a bill of ₹ 4,000 is dishonored. No entry has been made in the books of
account.
e) Write off ₹ 9,000 as bad debt and maintain a provision for bad debt @ 5%.
f) Manager is entitled to a commission of 5% of net profit before charging his commission.
You are required to prepare a Trading and Profit & Loss Account for the year ended on 31.3.2021 and a Balance
Sheet on that date.
Financial Accounting: General 2017

From the following information, ascertain income for the year ended 31.03.21, according to accrual basis of
accounting:
i. Income received in cash for the year ended 31.03.21 ₹ 50,000
ii. Accrued Income as on 31.03.21 ₹ 25,000
iii. Income received in advance during the year ended 31.03.21 ₹ 15,000
iv. Outstanding expenses as on 31.03.21 ₹ 20,000
v. Prepaid expenses as on 31.03.21 ₹ 10,000
Or
Write Short Notes on:
(a) Going Concern Concept
(b) Entity Concept
Question 2 [Depreciation]:
The book value of plant and machinery of a firm shows ₹ 2,50,000 on 1st January, 2021. One of the machinery
which was purchased on 1st January, 2020 at ₹ 20,000 is sold for ₹ 10,000 on 30th June, 2021. In place of this
machine, another new machine was purchased at ₹ 40,000 on 30th September, 2021.
Show Plant & Machinery Account in the ledger for 2021 charging depreciation @ 10% p.a. on diminishing
balance method. (Year ending date 31st December).
Question 3 [Rectification of Errors Or P/B/D]:
Rectify the following error before preparation of Trial Balance
(a) Cash withdrawn by proprietor ₹ 2,000 for personal use was debited to trade expenses A/c.
(b) ₹ 2500 spent on installation of wages was debited to Machinery Account.
(c) ₹ 170 Discount allowed was wrongly credited to Discount A/c and Debited to Creditors Account.
Or
The following information has been extracted from the books of Das Enterprise.
Balance of Provision for Bad debts on 01.01.21 2,500
Bad debts written off during the year 1,800
Sundry Debtors on 31.12.21 34,000
Of the Debtors ₹ 1,000 was bad and hence to be written off. Provision for Bad debts to be made @ 10% on
Debtors.
Question 4 [Capital & Revenue Expenditure OR Inventory]:
State which of the following are Capital Expenditure and which are Revenue Expenditure giving
reasons in each case:
(a) Purchase of Machinery ₹ 50,000
(b) Carriage paid for bringing the machine ₹ 3,000
(c) Wages paid for installation of the machinery ₹ 4,000
(d) Repairing cost for the machinery ₹ 2,000 after installation
(e) Insurance premium paid for machinery ₹ 1,000
Or
A trader prepared his accounts on 31/3/2021. However stock taking was done on 10/04/2021 amounting ₹
40,000. The following transactions took place between 1/4/2021 to 10/04/2021:
a) Sales amounted to ₹ 75,000
b) Purchases during the period ₹ 30,000
c) Purchases Return ₹ 5,000
d) Sales Return ₹ 2,000
e) Rate of Gross profit on sales 20 %.
Determine the value of closing stock as on 31/03/2021.
Question 5 [Sale on Approval]:
A trader sent out goods on approval Basis to customers and included the same in sales account.
On 31.3.2021 the stock in hand amounted to ₹ 1,60,000 and the sundry debtors balance stood on ₹ 3,00,000
which include ₹ 20,000 being invoice value of goods sent on ‘sale of return’ against which no intimation
was received during the year. These goods were sent out at 25% above cost and were sent to Mr. X ₹ 8,000
and Mr. Y ₹ 12,000. Make necessary adjustment entries as on 31/3/2021.

Question 6 [Accounting Theory & Accounting Standard]
What is Financial Accounting Standard? Discuss the procedures for issuing Accounting Standard in India.
What is IFRS?
Or
Write short notes: (a) GAAP (b) Fair Value Accounting
Question 7 [Consignment or Insurance Claim]:

On 1st April, 2020, K of Kolkata sent 200 packets of rice to D of Delhi to be sold on consignment basis.
The cost price of each packet was ₹ 1,000. K incurred ₹ 1,200 for freight and ₹ 800 for insurance premium.
On 31st March, 2021, K received Account sales from D, which showed that he sold 180 packets @ ₹ 1,400
each out of which ₹ 5,000 was bad debt. D paid ₹ 6,000 as clearing charges, ₹ 1,000 for carriage to godown
and ₹ 2,000 for godown rent. D is entitles to get ordinary commission @ 10% and del-credere commission
@ 5% on sale proceeds.
Show consignment Account and D Account in the books of K.
Or
A fire occurred at the Godown of Royja Industries (P) Ltd. on 10.03.2021. The stock of the company was
fully insured against fire. From the following details, compute the amount of insurance claim:
₹
Stock on 1 January, 2020
st
50,000
Stock on 31 December, 2020
st
80,000
Purchases for the year 2020 5,40,000
Sales for the year 2020 6,80,000
Purchase for the period from 01.01.2021 to 10.03.2021 1,80,000
Sales for the period from 01.01.2021 to 10.03.2021 2,40,000
Gross profit rate was uniform and value of stock salvaged ₹ 15,500
Question 8 [Self Balancing]:
From the following particulars, prepare Sales Ledger Adjustment Account in General Ledger and General
Ledger Adjustment Account in Sales Ledger in the books of K. Ray for the year ended 31st December,
2021: ₹
Sales Ledger balances on 01.01.2021 62,620 (Dr.)
Sales Ledger balances on 01.01.2021 620 (Cr.)
Total Sales 1,20,000
Cash Sales 10,000
Bills accepted by Debtor 12,500
Bill received dishonored 500
Cheque received from customers 86,200
Cheque dishonoured 1,200
Return – inward 4,800
Carriage charged to customers 950
Bad debt recovered 600
Transfer from bought Ledger 800
Sales Ledger balances on 31.12.2021 300 (Cr.)
Question 9 [Non-trading]:
The following is the Receipts and Payments Account of a club on 31.12.2021.
To Opening Balance By Books 7,000
In Hand 500 By Salaries 7,000
At Bank 500 By Rent 2,000
To Subscription 15,000 By Newspaper 3,000
To Sale of old newspaper 3,000 By Balance c/d (at Bank) 2,000
To Donation 2,000
21,000 21,000
Other Information:
01.01.21 31.12.21
₹ ₹
Accrued Subscription 800 1100
Pre-received subscription 2500 1500
Outstanding Salary 600 900
Prepaid rent 200 100
Prepare Income and Expenditure Account of the club for the year ended 31st December, 2021.
Following is the Trial Balance of Mr. R. Roy as on 31st December, 2021. You are required to prepare
Trading and Profit and Loss Account for the year ended 31st December, 2021 and a Balance Sheet as on
that date.
Dr. (₹) Cr. (₹)
Capital --- 2,40,000
Plant and Machinery 1,20,000 ---
Furniture 40,000 ---
Stock on 01.01.21 30,000 ---
Debtors and Creditors 80,000 50,000
Drawings 20,000 ---
Purchase and Sales 2,40,000 3,60,000
Bank Overdraft --- 40,000
Wages 30,000 ---
Trade expenses 20,000 ---
Rent 24,000 ---
Salaries 34,000 ---
Bad debt 2,000 ---
Purchase and Sale Return 10,000 6,000
Cash 14,000 ---
Bank 36,000 ---
Provision for Bad debt --- 4,000
7,00,000 7,00,000
(a) Stock on 31.12.21: Cost price ₹ 36,000. Market price ₹ 40,000.
(b) A credit sale of ₹ 10,000 has not been recorded.
(c) Wages paid for installation of machinery included in wages account ₹ 5,000.
(d) Provide depreciation on machinery @ 10% p.a.
(e) Provision for Bad debt to be maintained @ 5% on Debtors.

(a) Mention any two conventions that are followed in accounting.
(b) Shri Sarkar has mentioned his accounts under accrual basis. The profit for the year 2020-21 comes to ₹
88,500. After considering the following information, you are required to determine his profit for the
same period under cash basis:
(i) Office expenses outstanding for the year 2019-20 ₹ 12,500.
(ii) Rent paid in 2020-21 for the year 2021-22 ₹ 13,200
(iii) Interest earned on investment for the year 2020-21, but not yet received ₹ 5,100.
Or
(a) Name two users of Accounting Information. (b) What do you mean by ‘Expense’? (c) Write the
Accounting Equation with an example.
Question 2 [Unit-2: Rectification of Errors]:

The Trial Balance of Mr. Saha did not agrees as on 31.3.2021 and the difference were put to suspense
account and the following mistakes were detected before preparation of final accounts:
(a) Purchases Day Book was over cast by ₹ 2,200.
(b) ₹ 12,000 paid to Sudipta was wrongly debited to Sudipta Account.
(c) ₹ 6,900 paid for replacement of a mother board of a desktop, debited to Repairing Charges Account
as ₹ 900.
You are requires to pass necessary journal entries to rectify the above errors

Briefly discuss the Procedure for issuing accounting standard in India.

What is Accounting theory? State the relation between Accounting Theory and Accounting Practice.
Or
(a) Write short note on GAAP.
(b) Write two reasons behind maintenance of Capital.
Question 5 [Unit- 5: Self Balancing or Sale on Approval]:

From the following information, prepare Sales Ledger Adjustment Account in the Nominal Ledger:
₹
01.04.20 Debtors Ledger Balance (Dr.) 45,000
01.04.21 Debtors Ledger Balance (Cr.) 1,000
31.3.21 Sales 4,10,000
Bad Debts 1,650
Miscellaneous charges debited 175
Return Inward 5,000
Bad debts recovered 450
Bills Received 30,000
Or
On March 01, 2021 Mr. Basu sent goods valuing ₹ 1,50,000 at an invoice price (Cost plus 25%) to few
customers on sale or return basis having two months approval period. He records sale or return transactions
as ordinary sales transaction.
During March, goods having Invoice Price of ₹ 40,000 were returned by a customer and another customer
was willing to accept the goods at a price of ₹ 76,000 which was lower than the Invoice Price by 5%. It was
accepted by Mr. Basu. The other customers could not yet decide anything about the goods sent.
Show the relevant extracts in the final accounts on 31.3.2021, if the balances of the sales Account and Sales
Ledger as on such date were ₹ 15,00,000 and ₹ 7,35,000 respectively.

Question 6 [Depreciation OR P/B/D]
Plant and Machinery Raving value of ₹1,00,000 was bought on 1st January, 2018. On 15th July, 2019 a
new machine was purchased for ₹ 40,000. Installation charges paid for this machine was ₹ 5,000. The
machine (bought on 15th July, 2019) was sold at a profit of ₹ 7000 on 1st September, 2021.
Write up the Plant and Machinery Account for the four years ended 31st December, 2021 providing 10%
p.a. depreciation under Diminishing Balance Method.
Or
Saha Bros. has commenced a bakery business on 01.04.2019. During 2019-20 the firm was unable to
recover a considerable amount from its customer and subsequently at the end of the year; the firm has
decided to create Provision for Bad Debt@ 10 % to cope up with the future bad debt losses. The following
information was further obtained from its records:
₹
Bad debts written-off during the year 46,000
Bad debt to be written off 32,000
Recovery of Bad debts 6,000
You are required to prepare Bad Debt A/c and Provision for Bad Debt A/c for two consecutive years 2019-
20 and 2020-21.

Swati, a small trader, maintains her books under Single Entry system. From the following information you
are asked to prepare Trading Account, Profit & Loss Account and Balance Sheet as on 31st December,
2021
1st January, 2021 31st December,2021
(₹) (₹)
Debtors 20,000 25,200
Creditors 15,000 14,100
Sewing Machine 15,000 14,200
Furniture 12,000 11,800
Stock 4,000 3,000
Bank Summary
₹ ₹
Opening Balance 21,000 Payment to Creditors 42,000
Collection from Debtor 75,200 Bills Payable 2,800
Bills Receivable 5,600 Rent 2,000
Capital 13,000 Wages 2,000
Printing 2,000
Drawings 24,000
Salaries 12,000
Closing Balance 28,000
1,14,800 1,14,800
She allowed discount to debtors ₹ 2,400 and received discount from creditors for ₹ 3,900. She endorsed bill
receivable of ₹ 1,200 to her creditors.
Or
From the following information prepare Income and Expenditure Account of Hugli Club for the year ended
31st December, 2021 and a Balance Sheet as on that date.
a) Subscriptions in arrear for 2021 ₹ 900 and received in advance for 2021 ₹ 350.
b) Insurance Premium due ₹ 40.
c) Miscellaneous expenses prepaid ₹ 90.
d) 50% of the donation to be capitalized.
e) 75% of entrance fees are to be capitalized.
f) 8% interest is accrued on investment for five months.
g) Tennis Table was purchased in 2021 for ₹ 30,000. Only ₹ 22,000 was paid for it till 31st December
2021.
Receipt and Payment A/c for the year ended 31.12.2021
Cash in Hand 4,000 Salary 2,000
Cash at Bank 10,000 Repairs 500
Donation 5,000 Furniture 6,000
Subscription 12,000 Misc. Expenses 500
Entrance fees 1,000 Investment 6,000
Interest on Investment 100 Insurance Premium 200
Interest received from Bank 400 Tennis Table 8,000
Sale of old Newspaper 150 Stationeries 150
Sale of Drama tickets 1,050 Drama Expenses 500
Cash in Hand 2,650
Cash at Bank 7,200
Question 8 [Consignment]:
Ganga consigned 5,000 kg of rice costing ₹ 32 per kg to Yamuna on February 01, 2021 by paying ₹ 5,000
as freight. During transit 200 kg of rice were destroyed by an accident. Yamuna paid clearing charges ₹
6,100, Godown Rent ₹ 300 and Salesman’s salary ₹ 900. Yamuna is entitled to 6% ordinary commission
and 4% Del Credere Commission on sales.
Yamuna reported on June 30 that 4,000 kg were sold at ₹ 1,65,000 and 100 were lost due to some
unavoidable cause. Entire amount due was received except in case of a customer who bought rice for ₹
1,500 could pay only 40% of his amount. Yamuna sent a cheque for final settlement to Ganga along with
the Account Sales.
Show Consignment Account and Yamuna Account in the books of Ganga.
On 09.11.21, the godown of ABC Ltd. Was destroyed by fire. The organization is insured for loss of stock
policy of ₹ 75,000 with an average clause. From the following information, prepare a Statement showing
claim to be lodged with the insurance company.
Stock on 01.04.20 72,000
Wages for the year 20-21 16,000
Purchase for the year 20-21 2,84,000
Sales for the year 20-21 4,06,800
Stock on 31.3.21 64,000
Purchase from 01.04.21 to 09.11.21 1,40,000
Wages from 01.04.21 to 09.11.21 8,000
Sales from 01.04.21 to 09.11.21 1,65,200
An items of stock purchased during 19-20 at a cost of ₹ 20,000 was valued at ₹ 12,000 on 31.3.20. half of
these goods were sold during 20-21 for Rs 6,800 and remaining stock was valued at ₹ 4,000 on to be worth
40% of original cost. Stock valued ₹ 18,000 was salvaged.
The following Trial Balance has been extracted from the books of Mr. Das as on 31st March, 2021:
Opening Stock 2,400 Capital 46,200
Building 2,10,000 Creditors 25,000
Bad debts 3,500 10% Loan (Taken on 01.10.20) 24,000
Closing stock 24,000 Commission Received 200
Furniture 10,000 Sales 3,28,700
Drawings 4,500 Outstanding Salaries 3,000
Wages 1,800 Provision for Bad Debts 2,100
Purchases (Less Closing Stock) 1,18,000
Advertisement 1,400
Debtors 9,000
Cash 3,200
Interest on Loan 400
Commission Paid 600
Office Equipment 18,000
Miscellaneous Expenses 700
Salaries 10,000
Patent 7,200
Rent 2,400
4,29,200 4,29,200
Prepare Trading Account and Profit & Loss Account and a Balance Sheet as on date
(a) Furniture costing ₹ 12,000 purchased on 01.10.2020 on credit was recorded as credit purchase of
goods.
(b) Mrs.. Samanta, Debtor for ₹ 2,000 was declared insolvent, only 40 paise in the rupee was expected to
realize from his estate. Create Provision for Doubtful Debts at 5% and Provision for Discount at 2% on
Debtors.
(c) Patent (acquired on 01.04.2019) having a useful life of ten years, is to be amortised in 10 equal
installments over the years.
(d) Depreciate relevant fixed assets at 10% p.a.

(a) Mention any two users of accounting information.
(b) Using accounting equation, calculate total assets if
(i) Capital ₹ 6,00,000 ;
Or
From the following information, ascertain income for the year ended 31.12.21, according to Cash basis of
accounting:
₹
(a) Income received in cash for the year ended 31.12.21 50,000
(b) Accrued income of 2020, received in 2021 6,000
(c) Income received in advance during 2021 8,000
(d) Accrued income as on 31.12.21 6,000
Question 2 [Inventory]:
Calculate the value of closing stock as on 31.12.21 from the following information:
i. Value of physical stock taken on 06.01.22 (for the year ended 31.12.17) was ₹ 25,600.
ii. Purchased during the period from 01.01.22 to 06.01.22 was ₹ 2,500
iii. Goods sold during the period from 01.01.22 to 06.01.22 was ₹ 3,800
iv. Goods were sold at a profit of 25% on cost.
Question 3 [Depreciation or Rectification of Errors]:

On 01.01.2019 Mr. A Purchased Machinery worth ₹ 1,50,000. On 01.07.2020 Mr. A Purchased another
Machinery worth ₹ 30,00. On 01.01.2021 Machinery Worth ₹ 24,000 purchased on 1.1.2019 was sold for ₹
18,000. Depreciation to be charged @ 10% under Straight line Method. Prepare Machinery Account For
2019, 2020 and 2021. (year ending for this enterprise is 31st December.)
Or
Rectify the following error after preparation of Trial Balance but before preparing Final Accounts by
passing necessary journals entries:
(a) Cash taken by proprietor ₹ 3000, were not recorded at all.
(b) ₹ 5,000 received from Bimal against debts previously written off as bad debts have been credited to
his personal account.
(c) A cheque received from Amal, a debtor, for ₹ 4,000 was directly received by the proprietor who
deposited it into his personal bank account.
Question 4 [P/B/D or Revenue Recognisition]:

The following is the extract from the Trial Balance of Mr. M. Roy as on 31st December 2021.
Dr. Cr.
₹ ₹
Bad debts 8,000 ---
Sundry Debtors 3,00,000
Provision for Bad and Doubtful debts --- 12,000
It is desired to maintain a provision of 5% for Bad and Doubtful Debts.
Prepare Bad debts Account and Provision for Bad and Doubtful Debts Account.
Or
What do you mean by Revenue? How is it recognized it accounts?
Sen Traders sends out its gas containers to dealers on ‘Sale or Return’. All such transactions are, however,
treated as actual sales and are passed through the Day Book. Just before the end of the financial year, 100
gas Containers, which cost them ₹ 900 each, have been sent to a dealer on ‘Sale or Return’ and have been
debited to his account at ₹ 1200 each. Out of this only 20 gas containers are sold at ₹ 1500 each.
Give the necessary adjustment entries in the books of Sen Traders.

Question 6 [Accounting Theory & Accounting Standard]
(a) What is accounting theory?
(b) What are the limitations of Historic cost accounting?
Or
(a) What are the benefits of Financial Accounting Standard?
(b) What are the needs for a global standard?
Question 7 [Consignment or Insurance Claim]:

On 01.04.2021 G & Co. of Kolkata sent 300 packets of a product to D & Co. of Delhi on consignment
basis. The cost of each packet was ₹ 1,500 only.
G & Co. incurred the following expenses on consignment:
₹
Railways freight 1,500
Loading Charges 600
D & Co. incurred the following expenses:
Carriage to godown 400
Godown Rent 1,000
Selling expenses 600
Others 300
D & Co. sold 200 packets of the product at 2,400 per packet. While sending goods to D & Co. of Delhi, 20
packets were damaged in transit and insurance company settled a claim of ₹ 26,500. Commission payable
to D & Co. @ 10% on sales.
Show the following accounts in the books of G & Co.:
(b) D & Co. Account
(c) Loss in transit Account
Or
A fire occurred in the premises of A & Co. on 01.09.2021 but the stock of the company was insured. All the
goods were completely destroyed by fire except goods worth ₹ 50,500 (Salvaged). Determine the amount of
insurance claim on the basis of the following information:
₹
Purchases for the year ended 31.03.2021 3,50,000
Sales for the year ended 31.03.2021 5,50,000
Purchase from 01.04.2021 to 01.09.2021 1,20,000
Sales from 01.04.2021 to 01.09.2021 1,80,000
Stock on 31.03.2020 1,95,000
Stock on 31.03.2021 1,60,000
All the purchases and sales were made evenly throughout the year and gross profit rate remained uniform.
The following details were extracted from the books of Mr. Sen for the period ended 31st December, 2021:
Jan.1, 2021 ₹
Sales ledger Balances 12,400
Dec. 31, 2021
Sales (including Cash Sales ₹ 4,000) 23,000
Cash received from Customers 18,500
Return from Customers 380
Bills endorsed 480
Cheque dishonoured 100
Bills receivable as endorsed, dishonoured 120
Bills receivable discounted 500
Bad debt written off 50
Bad debts previously written off, recovered 60
Sundry Charges debited to customers 20
Prepare the Sales Ledger Adjustment Account in the General Ledger.
Question 9 [Single Entry]:
Mr. T. R. Sen keeps his books on single entry system. His capital on 01.04.20 was ₹ 1,70,000. An abstract
of his Cash transactions for the year ended 31.03.21 was as follows:
To Balance b/d 8,000 By Creditors 35,000
To Collection from Debtors 82,000 By Cash Purchases 18,000
To Cash Sales 18,000 By Wages 7,000
By Salaries 5,000
By Drawings 12,000
By Plant 10,000
By General Expenses 14,000
1,08,000 1,08,000
Following information in relation to Assets and Liabilities are available:
01.04.2020 (₹) 31.03.2021 (₹)
Sundry Creditors 22,000 25,000
Stock 25,000 35,000
Plant 30,000 40,000
Furniture 15,000 15,000
Building 80,000 80,000
Prepare a Trading and Profit and Loss Account for the year ended 31.03.21 and a Balance Sheet as on that
date after providing depreciation @ 10% on Plant, @ 5% on Furniture and Building. Provision for Doubtful
Debt to be created @ 5% on Sundry Debtors.
From the following Trial Balance prepare Trading and Profit & Loss Account for the year ended
31.03.2021 and a Balance Sheet as on that date:
₹ ₹
Plant and Machinery 10,000 Purchases Return 1,240
Stock (01.04.20) 13,750 Discount Received 680
Purchases 1,09,600 Sundry Creditors 15,000
Sales Return 1,800 Provision for Doubtful Debts 1,050
Carriage outward 2,300 Sales 1,30,450
Advertising 1,350
Wages 2,600
Rent taxes 3,000
Bad debts 970
Cash at Bank 2,500
Cash in hand 350
1,88,420 1,88,420
Adjustments:
(a) Depreciation to be charged @ 5% on Plant and Machinery.
(b) Outstanding expenses ₹ 250.
(c) Advance Rent and Taxes paid ₹ 100.
(d) Further bad debts of ₹ 500 to be written off.
(e) Provision for Doubtful Debts to be raised @ 5% on Debtors.
(f) Closing stock 31.03.21 ₹ 19,500.

(a) Mention the names of accounting concept or convention being followed in the following instances:
(i) Unsold stock is valued at lower of cost or net realizable value.
(ii) A business will continue its operation for an indefinite period and will not be dissolved in the
near future.
(b) Using accounting equation, calculate total assets if –
Capital – ₹ 5,00,000
Creditors – ₹ 2,00,000
Revenue during the period – ₹ 5,00,000
Expenses during the period – ₹ 3,00,000.
(c) What do you mean by Revenue?

Or
From the following information, ascertain income for the year ended 31.03.2021 according to accrual
basis of accounting:
₹
(a) Income received in cash for the year ended 31.03.2021 2,00,000
(b) Accrued Income as on 31.03.2021 35,000
(c) Income received in advance during the year ended 31.03.2021 20,000
(d) Outstanding Expenses as on 31.03.2021 40,000
(e) Prepaid Expenses as on 31.03.2021 30,000
Question 2 [Unit-2: Rectification of Errors]:

Rectify the following errors after preparation of Trial Balance but before preparing Final Accounts by
passing necessary Journal Entries:
(a) Goods taken by proprietor of ₹ 5,000 for gift to his son were not recorded at all.
(b) ₹ 5,000 received from Bablu against debts previously written off as bad debts have been
credited to his personal account.
(c) A cheque received from Ashis, a debtor for ₹ 4,000 was directly received by the proprietor
who deposited it into his personal bank account.

State the objectives of issuing Accounting Standards.

(a) Discuss the concept of capital maintenance.
(b) What do you mean by GAAP?
Or
(a) What is fair value accounting?
(b) What is IFRS?
Question 5 [Unit- 5: Self Balancing or Sale on Approval]:
A trader has credited certain items of sales on approval aggregating ₹ 10,000 to sales accounting. Of these,
goods to the value of ₹ 3,000 have been returned and taken in stock at ₹ 1,500 though record of return was
committed in accounts; and in respect of another parcel of ₹ 1,000 (cost being ₹ 500), the period of
approval did not expire on the closing date.
Show adjustment and correcting entries in the books of the trader.
Or
The following details were extracted from the books of ABC Ltd. for the year ended 30.06.2021:
₹
July 1, 2020
Sales Ledger balance total 40,000
July 30, 2021
Sales 90,000
Return from Customers 8,000
Cheque received from Customers 80,000
Cheque Dishonoured 300
Bills accepted by Customers 2,700
Noting charges on the dishonoured bill 10
Interest on Customers overdue account 100
Carriage charged to Customers 200
Cash discount allowed 1,800
Show the General Ledger Adjustment Account as it will appear in the Sales ledger.

Question 6 [Depreciation OR P/B/D]
ABC Ltd. purchased of the following machines:
₹
On 1st January, 2020 40,000
On 1st July, 2020 20,000
On 1st October, 2021 10,000
Depreciation was provided @ 10% p.a. under the diminishing balance method. The machine purchased on
1st July, 2020 was sold on 31st March, 2021 at ₹ 15,000.
Show the Machinery accounts in the books of ABC Ltd. for the year 2020 and 2021 assuming that accounts
are closed on 31st December every year.
Or
On 31st December, 2020 Sundry Debtors and Provisions for Bad debts stood at ₹ 90,000 and ₹ 6,750
respectively. During the year 2021 Bad Debts amounting to ₹ 4,560 were written off. On 30th June, 2021 an
amount of ₹ 580 was received on account of a debt written off as bad last year. The Debtors list on 31st
December, 2021 was verified and it was found that amongst Sundry Debtors amounting to ₹ 65,940, an
amount of ₹ 940 was to be written off as bad. It was decided to maintain the provision for bad debts at the
same percentage as it was on 31st December, 2020. Prepare Provision for Bad debts Accounts.
Subal keeps his books on single entry method. On 1st January, 2021 his assets and liabilities were as
follows: Capital ₹ 61,000, Sundry Debtors ₹ 20,000, Plant and Machinery ₹ 31,000, Furniture and Fittings ₹
3,000, Stock ₹ 10,000 and Sundry Creditors ₹ 15,000.
The following are the analysis of his Cash Book for the year 2021:
Cash in Hand 12,000 Payment to Creditors 20,000
Receipt from Debtors 15,000 Wages 5,000
Cash Sales 20,000 Sundry Expenses 10,000
Drawings 5,000
Cash in hand 7,000
47,000 47,000
On 31 December, 2021 his assets and liabilities were as follows:
st
Sundry Debtors ₹ 25,000, Sundry Creditors ₹ 10,000, Plant and Machinery ₹ 31,000, Furniture and fittings
₹ 3,000, Stock ₹ 22,000.
You are required to prepare a Trading and Profit & Loss Account for the year ended 31st December, 2021
after providing:
(a) Depreciation on Plant and Machinery @ 5% p.a. and Furniture and Fittings @ 2% p.a.
(b) Provision for Bad and doubtful debts @ 5% on Sundry Debtors.
Or
The following is the Receipt and Payments Accounts of Calcutta Football Club for the year ended
31.12.2021:
Cash in hand 2,500 Remuneration to Coach 6,000
Cash at bank 22,300 Ground man’s salary 2,500
Bank Interest 500 Purchase of equipments 15,500
Entrance Fees 5,000 Bar room expenses 2,000
Subscription 25,000 Ground Rent 4,500
Bar room receipts 4,000 Night Club exp. 4,800
Sale of equipments 800 Printing and Stationery 2,500
Proceeds of Night Club 10,800 Repairs to equipments 4,500
Cash at Bank 25,600
Cash in hand 3,000
70,900 70,900
Additional information:
01.01.2021 (₹) 31.12.2021 (₹)
Subscription due 1,500 1,000
Outstanding exp. For Printing & Stationery 1,000 800
Equipments 8,000 17,500
You are required to prepare:
(a) An Income and Expenditure Account for the year ended 31.12.2021
On 7th June, 2021 the godown of a company was destroyed by fire. From the records following particulars
were extracted:
₹
Stock as on 01.01.2020 45,000
Stock as on 31.12.2020 60,000
Purchases less returns as per 31.12.2020 3,00,000
Sales less returns as per 31.12.2020 3,73,000
Purchases less returns from 01.01.2021 to 07.06.2021 1,25,000
Sales less returns from 01.01.2021 to 07.06.2021 1,80,000
Poor selling goods worth ₹ 5,000 were written off while valuing closing stock as on 31.12.2020. The
original cost of goods was ₹ 8,000. A portion of this stock (original cost of which was ₹ 4,000) was sold
during March 2021 at a loss of ₹ 1,000. The balance of this stock is worth the original cost. Value of
salvage goods was ₹ 10,000. Gross profit remained at an uniform rate throughout. Compute the amout of
claim to be lodged.
Shri Das of Kolkata sent on Consignment 1000 bottles of medicine costing ₹ 70 each to Shri Sen of
Burdwan and incurred ₹ 1000 for carriage and ₹ 600 for insurance.
Account sales from Shri Sen revealed the following:
(₹) (₹)
Sale proceeds of 600 bottles 60,000
Less: Carriage to godown 10,500
Rent of godown 500
Insurance 500
45,500
It is also revealed that 100 bottles were destroyed in godown and Shri Sen collected ₹ 6,000 from Insurance
Company. Prepare Consignment Account in the books of Shri Das.
The following is the Trial Balance of Mr. S.K. Sen as on 31st December, 2021:
Debit Balances ₹ Credit Balance ₹
Stock 28,000 Returns 3,200
Returns 4,200 Sales 2,10,000

Purchases 1,75,000 Sundry Creditors 25,500
Freight and Carriage 9,700 Bank Loan @ 6% p.a. 20,000
Rent and Taxes 3,600 Misc. Income 500
Salaries and Wages 15,300 Discounts 1,600

Interest on Bank Loan 1,000
Printing and Advertisement 7,800
Cash at Bank 6,000
Discounts 1,200
Furniture and Fittings 6,000
Insurance 2,800
Cash in hand 2,000
Postage and Telegram 480
Travelling Expenses 320
Machinery 8,000
3,20,800 3,20,800
(i) Included amongst the Debtors is ₹ 4,000 due from R.Das and included among the Creditors ₹ 3,000
due to him.
(ii) Provision for doubtful debts be created @ 10% and provision for discount @ 5% on Debtors.
(iii) Personal purchases amounting ₹ 2,000 had been included in the purchase day book.
(iv) Depreciate furniture & fittings and machinery @ 10% and 15% p.a. respectively.
(v) Interest on bank loan is outstanding for 2 months.
(vi) Stock on 31.12.2021 was ₹ 65,000.
Prepare Trading, Profit & Loss Account & Balance Sheet as on 31.12.2021.

(a) Mention two qualitative characteristics of accounting information.
(b) What is ‘Accounting Cycle’?
(c) Which accounting concept or convention is applicable in the following case?
“Closing stock is valued at lower of cost price or market price”.
Or
Fill in the blanks selecting the correct one out of words given in the bracket:
(a) Business goodwill is ………………(tangible / intangible fixed asset)
(b) Lenders are example of ……………. (external / internal) users of accounting information
(c) Purchase Day Book is a ……………..(Journal / Ledger)
(d) Depreciation is an example of …………………….(Expenses / Losses)
(e) Profit under accrual basis will be ……………..(₹ 10,000 / ₹ 20,000).
Question 2 [Unit-2: Rectification of Errors Or Depreciation]:

What factor should be considered for charging depreciation of Final Accounts:
Or
preparation of Final Accounts:
(a) Purchase of Furniture for ₹ 10,000 passed through Purchase Day Book.
(b) Rent paid ₹ 5,000 to Landlord debited to the personal account of landlord.
(c) Sales Day Book Cast short by ₹ 1,000.
Question 3 [Unit-2: P/B/D Or Capital & Revenue Expenditure]:

Sri Dulal Chatterjee maintains provision for doubtful debt @ 5% and Provision for discount on debtors @
2%. On 01.01.21 he had balances in these accounts ₹ 3,000 and ₹ 1,140 respectively. The following
particulars are available from his trial balances as on 31.12.2021.
₹
Prepare Bad Debt Account and Provision for Bad Debt Account for the year 2021.
Or
Mention which of the following transactions is a capital expenditure and which one is revenue
expenditure:
(a) Purchase of machinery worth ₹ 50,000
(b) Paid customs duty of ₹ 10,000 for importing machinery from foreign country.
(c) Paid office rent for ₹ 5,000
(d) Spent ₹ 30,000 for repairing of building.
(e) Paid ₹ 10,000 as registration fees for registering Patent Right.
Question 4 [Unit- 5: Sale on Approval]:
B.B.S. Electronics sends goods to their customers on Sale or Return basis. The following transactions took
place during 2021:
2021 ₹
Sept. 10 sent goods to customers on Sale or Return basic at cost plus 25% 1,25,000
Oct. 20 goods returned by customers Nov. 25 Received Letters of approval 40,000
from customers
Nov.25 Received Letters of approval from customers 60,000
Dec. 31 Goods with customers neither sold nor returned 20,000
B.B.S. Electronics records sale or return transactions as ordinary sales. You are required to pass the
necessary journal entries in the books of B.B.S. Electronics assuming that accounting year closes on
31.12.2021.
Question 5 [Unit-2: Inventory]:

From the following data, calculate the value of closing inventory on 31st July, 2021 using FIFO method:
2021

Question 6 [Accounting theory]
(a) What do you mean by ‘Generally Accepted accounting principles?
(b) What is ‘Capital Maintenance in accounting?
(c) How Capital is maintained in accounting?
Or
(a) What is financial accounting standard?
(b) What is the procedure of issuing accounting standard in India?
(c) What do you mean by ‘IFRS’?
Question 7 [Consignment or Insurance claim]:

On 25th March, 2021 X & Co. of Kolkata sends 100 saree costing ₹ 1,500 each to Y & Co. of Mumbai to
be sold by the latter on consignment basis. Invoice price of the above saree has been arrived at after adding
33% on cost. X & Co. spends railway freight ₹ 7,500, insurance ₹ 1,000 and loading charges ₹ 500 to send
the consignment. Y & Co. is entitled to a commission of 5% on gross sales. 5 sarees were lost – in –transit
to Mumbai for which a claim of ₹ 7,000 was received from the insurance company. On 31st December,
2021 X & Co. received an account sale from Y & Co. which shows the following:
₹ ₹
Gross Sale proceeds of 80 sarees 1,60,000
Less: Clearing charges 1,900
Godown expenses 3,100
1,47,000
Show the following accounts in the books of X & Co.
(i) Consignment Account
(ii) Y & Co. Account
(iii) Ascertain the quantum of loss in respect of saree lost – in – transit
OR
The godown of U. Ltd. caught fire on 01.02.2021 and business was partially disorganized up to 30.06.2021.
From the books of accounts, the following information was extracted.
₹
(a) Actual turnover from 01.02.21 to 30.06.21 1,50,000
(b) Turnover from 01.02.20 to 30.06.20 4,20,000
(c) Turnover from 01.02.20 to 31.01.21 9,00,000
(d) Net profit for the last financial year 1,40,000
(e) Insured standing charges for the last financial year 1,12,000
(f) Total standing charges for the last financial year 1,28,000
(g) Turnover for the last financial year 8,40,000
Additional information besides above are as follows:
(a) Saving in insured standing charges – ₹ 5,000
(b) Loss of profit policy with an indemnity period of 6 months – ₹ – 2,50,000
(c) There is an upward trend in turnover by 15%.
Compute claim for loss of profit under the policy.

Following information have been extracted from the books of Bose & Co. for the year ended 31.12.2021 –
₹
01.01.21 Opening balance (Dr.) 3,000
(Cr.) 1,20,000
Transaction during the year 2021:
Total Purchase (including credit purchases ₹ 1,80,000) 2,00,000
Return to creditors 4,000
Cash & Cheque paid to creditors 1,75,000
Allowances received 3,000
Bills payable accepted 5,000
Bills payable dishonoured 500
Out of cheque paid to creditors, cheque dishonoured 5,000
Interest charged by creditors 400
Transfer to sales ledger 500
Closing Balance (Dr.) on 31.12.21 1,000
Prepare Creditors Ledger Adjustment Account in General Ledger.
Question 9 Non-trading]:
The following Receipts and Payments Accounts has been prepared for the year ended 31.12.2021 by
Burdwan Cricket Club.
Receipts and Payments account for the year ended 31.12.2021
₹ ₹
To Balance b/d 7,600 By Sports Equipment 20,000
(purchased on 01.09.21)
To Subscription for: 2021 37,000 By Salary and wages 6,000
2020 2,000 By Printing and Stationery 600
2022 2,500 By Electricity Charges 1,000
To Interest of Govt. Securities @ 5% 1,000 By Tournament Expenses 13,000
To Entrance fees 5,000 By Balance c/d 14,500
55,100 55,100
Sports equipment ₹ 35,000, club Ground ₹ 15,000, Furniture ₹ 5,000, Capital Fund ₹ 84,600.
Considering the following information prepare an Income and Expenditure Account for the year ended
31.12.21 and a Balance Sheet as on that date:
(i) Subscription for 2021 outstanding ₹ 1,000
(ii) Depreciation to be provided @ 20% p.a. on sports equipment and @ 5% p.a. on furniture.

From the following Trial Balance and additional information of Adhunika Stores, prepare a Trading and
Profit and Loss Account for the year ended 31.12.21 and a balance sheet as on that date:
Dr. (₹) Cr. (₹)
Purchases 1,44,000 Capital 1,20,000
Machinery 1,44,000 Sales 3,22,000
Wages 18,000 Provision for Doubtful Debts 6,000
Trade Expenses 8,800 Interest received on loan 400
Freight 7,200 Discount received 3,600
Opening Stock 16,000 Creditors 72,000
Rent 6,000 Bad debts recovery 2,400
Sundry Debtors 96,000 Bank interest 3,600
Stationery 6,000 Bills Payable 28,000
Repair and Maintenance 5,000 Miscellaneous Receipts 7,600
Bad debts 3,600
12% Loan to Arun (01.01.21) 20,000
Salary 22,000
Sales return 6,000
Cash at Bank 54,000
Cash in Hand 10,000
5,65,000 5,65,000
Additional information:
(a) Closing Stock values at ₹ 30,000
(b) Goods destroyed by fire ₹ 8,000, insurance claim received ₹ 6,000
(c) Salary for the month of December, 2021 became due.
(d) Depreciate fixed assets by 10% p.a.
(e) Provide 10% as provision for Doubtful debts on Debtors.

Group A:
Answer any 4 Questions (4 x 10 = 40 Marks)
Dr. R. K. Das started his profession on 1st January, 2021 as medical practitioner. His incomes and expenses
for the year 2021 relating to his profession were as under :
Amount (₹)
Fees received in cash 24,000
Fees accrued but not received 6,000
Rent paid for the Chamber 6,000
Outstanding Rent 2,000
Salary paid to Staff 6,000
Salary paid in advance to Staff 1,000
(included in the above)
Miscellaneous expenses paid 200
You are required to compute the net income of Dr. R. K. Das from his profession for the year ended 31.12.
2021 under (a) Cash Basis; (b) Accrual Basis.
ABC Industries depreciates its machines @10% p.a. on straight line basis. On 1st April, 2020 the balance in
purchased for ₹ 50,000. On 31st December, 2020 an old machine having w.d.v of ₹ 80,000 on 01 04.2020
(original cost ₹ 1,20,000) was sold for ₹ 60,000. Show the Machinery Account for the year ended 31st
March, 2021.

(a) What is GAAP?
(b) Explain Fair Value Accounting.
Sri Mehta of Bombay consigns 1,000 cases of goods costing ₹ 100 each to Sri Sundaram of Madras. Sri
Mehta pays the following expenses in connection with the consignment : carriage ₹ 1,000; freight ₹ 3,000
and loading charges ₹ 1,000. Sri Sundaram sells 700 cases at ₹ 140 per case and incur the following
expenses : clearing charges ₹ 850; warehousing and storage ₹ 1,700; and packing and selling expenses ₹
600. It is found that 50 cases have been lost in transit and 100 cases are still in transit. Sri Sundaram is
entitled to a commission of 10% on gross sales.
Draw up Consignment Account and Sri Sundaram Account in the books of Sri Mehta.
A trader sends out goods on approval to some customers and includes the same in the sales account. On
31.12.21, the Sundry Debtors balance (₹ 2,50,000) includes ₹ 14,000 regarding goods sent on approval
against which no intimation was received as on 31.12.21. These goods were sent out at 25% above cost
price and were sent to A – ₹ 8,000 and B – ₹ 6,000. Stock in trade in godown was valued at ₹ 50,000
on 31.12.21. A sent intimation of acceptance on 31.01.22 and B returned the goods on 15.01.22.
Pass adjustment entries on 31.12.21. Show also the entries to be made during January, 22.

From the following information you are required to prepare the Sales Ledger Adjustment Account as on
31.03.21.
(₹ )
Debtors as on 01.03.21 55,842
Transaction during the month were as follows :
Sales (including cash sales ₹ 10,000) 1,08,606
Cash received from Debtors 88,753
Discount allowed to Debtors 480
Acceptances received from Debtors 7,120
Return from Debtors 5,430
Bills receivable from Debtors 1,120
Sundry charges debited to customer 378
Transfer to bought ledger 100
Provision for doubtful debts 2,500
Bill endorsed 100

From the following particulars, prepare a claim for loss of profit under the consequential loss policy :
Date of fire 30.06.21
Period of indemnity 6 months
Sum insured ₹ 80,000
Turnover for the year ended June 30, 2021 ₹ 4,00,000
Net profit for the accounting year ending March 31, 2021 ₹ 25,000
Standing charges for the accounting year ending March 31, 2021 ₹ 57,000
Turnover for the year ending March 31, 2021 ₹ 4,10,000
Saving in standing charges because of fire ₹ 6,000
Increased cost of working during dislocation period ₹ 12,000
Question 8 [Provision for Bad debts]:
Trial Balance as on 31.12.2021 of Mr. R. Sen contains the following items :
Provision for doubtful debts ₹ 15,000
Bad debt ₹ 10,000
Sundry Debtors ₹ 1,40,000
On enquiry it was ascertained that Debtors include :
(i) ₹ 20,000 due from S. Roy and Creditors include ₹ 15,000 due to S. Roy.
(ii) ₹ 8,000 due on account of sale of furniture.
(iii) Bad debts ₹ 8,000.
Prepare Provision for doubtful debt Account and Bad debt Account. Provision for doubtful debts is to
be created at 5% on trade Debtors.
Group B:
Mr. T. S. Gupta kept no books of accounts for his business. An analysis of his rough Cash Book for the
calender year 2021 shows the following particulars :
Receipts Amount Payments Amount
₹ ₹ ₹
Received from Debtors 80,000 Overdraft (on. 01.01.2021) 5,000
Further Capital introduced 10,000 Paid to Creditors 42,000
Business expenses 12,000
wages paid 17,500
Proprietor’s drawings 5,000
Balance at bank (31.12.2021) 6,500
Cash in hand (31.12.2021) 2,000
90,000 90,000
The following particulars are also available :
31.12.20 31.12.21
₹ ₹
Debtors 60,000 90,000
Creditors 20,000 22,500
Stock in trade 16,000 18,000
Plant and Machinery 30,000 30,000
All his sales and purchase were on credit.
From the above particulars, prepare Trading and Profit & Loss Account for the year ended 31st December,
2021 and a Balance Sheet as on that date. Provide depreciation on plant and machinery @10% p.a. and
on furniture @5% p.a.
A summary of receipts and payments of Medical Aid Society for the year ended 31.12.2021 is given
below :
To, Balance (01.01.2021) 7,000 By, Payment for medicines 30,000
To, Subscription 50,000 By, Honorarium to doctor 10,000
To, Donations 14,500 By, Salaries 27,500
To, Interest on Investments 7,000 By, Sundry expenses 500

@7% p.a.
To, Charity show proceeds 10,000 By, Equipment purchased 15,000
By, Charity show expenses 1,000
By, Balance (31.12.2021) 4,500

88,500 88,500
Additional information (in ₹) :
01.01.2021 31.12.2021
Subscriptions due 500 1,000
Subscriptions received in advance 1,000 500
Stock of medicines 10,000 15,000
Amount due to medicine suppliers 8,000 12,000
Value of equipments 21,000 30,000
Value of Buildings 40,000 38,000
You are required to prepare Income and Expenditure Account for the year ended on 31st December,
2021 and the Balance Sheet as on that date.
Question 11 [Final Accounts]:
The following is the Trial Balance of Mr. Roy as on 31st March, 2021:
Plant & Machinery 3,10,000 Capital 4,20,000

Opening Stock 30,000 Sundry Creditors 20,000
Sundry Debtors 40,000 Sales 2,10,000
Wages 10,000 Return Outward 20,000
Salaries 15,000 Provision for Doubtful debt 1,000
Rent (April 2020 to June 2021) 18,000 Interest 4,000
Purchases 1,50,000
Return Inward 10,000
Bad debt 9,000
Insurance 3,000
Cash in hand 30,000
Cash at Bank 45,000
6,75,000 6,75,000
(a) Stock on 31st March, 2021 was valued at ₹ 35,000.
(b) Further bad-debt of ₹ 1,000 is to be written off and a provision for doubtful debts @5% on
Sundry Debtors is to be maintained.
(c) Goods costing ₹ 5,000 have been distributed as free sample.
(d) Purchase of machinery worth ₹ 20,000 on 01.10.2020 has been wrongly included in Purchases
Account. Depreciation @10% p.a. is to be charged on machinery.
(e) Office expenses outstanding ₹ 500.
Prepare Trading Account, Profit & Loss Account for the year ended on 31.03.2021 and Balance Sheet
of Mr. Roy as on that date.
Question 12 [Theory]:
(a) What are the qualitative characteristics of accounting information?
(b) What are the limitations of Historical Cost Accounting?
(c) What is the procedure for issuing accounting standards in India?

Group A:
(a) Define :
(i) Assets
(ii) Liabilities.
(b) Write the Accounting Equation.
(c) The financial year of M/s. A.B. Trading ends on 31 March, 2021 but actual stock is not taken
until 5 April, 2021 when it is ascertained at ₹ 54,000. You find that :
(i) Sales between 1 April and 5 April are ₹ 3,000.
(ii) Purchases between 1 April and 5 April are ₹ 1,400.
(iii) Sales return between 1 April and 5 April are ₹ 200.
(iv) Purchases return between 1 April and 5 April are ₹ 300. All sales are made at 25%
gross profit on cost.
You are required to calculate the value of stock on 31 March, 2021.
A trader purchased a machine on 01.04.2018 at a cost of ₹ 2,00,000 and installed it at a cost of ₹
20,000. The scrap value of the machine was estimated at ₹ 20,000 and its effective life at 5 years. On
01.04.2020 the machine was sold for ₹ 1,20,000 and another machine of the same type was purchased at
a cost of ₹ 1,00,000 on that date. Installation cost of the machine is ₹ 4,000. The scrap value of this machine
was estimated at ₹ 14,000 and its life at 10 years. Show Machinery Account for the years 2018-19,
2019-20 and 2020-21 in the books of the trader.
A & Co. of Kolkata sent goods of the invoice value of ₹ 80,000 on consignment basis to B. & Co. of
Kanpur. Invoice value was made by adding 331/3% on cost. A & Co. paid ₹ 1,800 for Railway Freight, ₹
360 for Carriage and ₹ 1,200 for Insurance for sending the goods. B & Co. sold ½ of the goods at ₹
50,000, incurring a bad debt of ₹ 8,400. B & Co. paid Landing Charges ₹ 600, Godown Rent ₹ 750 and
Selling expenses ₹ 840. B & Co. is entitled to an ordinary commission @5% and a Del Credere
commission @2½% on sales.
Show following accounts in the books of A & Co. –
(b) B & Co. Account.
The following transactions have been extracted from the books of M/S. B. & Co :
₹
Debtors balance on 01.04.2020 (Dr.) 1,00,000
Transactions during the year were :
Sales (including Cash Sales of ₹ 40,000) 2,56,000
Bills Receivable drawn 16,000
Bills Receivable endorsed 5,000
Returns from Debtors 12,000
Bills Receivable as endorsed dishonoured 2,000
Bill Receivable discounted (discount charges ₹ 200) 3,000
Bad Debts written off (after deducting bad debts recovery ₹ 2,000) 4,000
Sundry Charges debited to customers 1,200
Transfer from Creditors Ledger 600
Debtors Balance as on 31.03.2021 (Cr.) 2,000
Prepare a Sales Ledger Adjustment Account for the year ending on 31.03.2021.

On September 1, 2021, the godown of D. & Co. was destroyed by fire and stock of the value of
₹ 60,000 was salvaged. D. & Co. has a fire insurance policy of ₹ 1,50,000. Following information have
been extracted from the books of the company :
₹
Purchases for the year ended 31.03.2021 17,50,000
Sales for the year ended 31.03.2021 27,50,000
Sales from 01.03.2021 to 01.09.2021 10,80,000
Stock on 31 March, 2020 7,50,000
Stock on 31 March, 2021 3,00,000
You may assume that purchases and sales occur evenly over the months for last few years. Rate of Gross
Profit is to be based on the year ended on 31.03.2021.
Calculate the amount of claim to be presented to the Insurance Company in respect of Loss of Stock.
Question 6 [Introduction]:
Mr. Samir Roy, a sole proprietor of a small trading house determines profit under cash basis. The profit for
the year ended March, 31, 2021 was determined at ₹ 2,40,000. He provides the following additional
information for 2020-21.
₹
Credit Sales 41,000
Credit Purchases 24,000
Outstanding expenses 10,000
Income earned but not received 8,400
Rent paid in advance 5,000
Determine profit earned by Mr. Roy under ‘accrual basis’.
Question 5 [Capital & Revenue Expenditure]:

(a) What do you mean by Capital Expenditure and Revenue Expenditure?
(b) Distinguish between Capital Expenditure and Revenue Expenditure.
Question 8 [Rectification of errors]:

preparation of Final Accounts :
(a) Return Inward Book was undercast by ₹ 800.
(b) ₹ 1,000 received from P was debited to the account of Q in the Sales Ledger.
(c) A purchase of ₹ 1,342 had been debited to supplier at ₹ 1,324.
(d) Salary paid ₹ 2,500 wrongly debited as Rent paid.
An amount of ₹ 2,000 withdrawn by the proprietor for his personal use had been debited to travelling
expenses account.
Group B:
The following Receipts and Payments Account of the Tala Football Club for the yearended
31.12.2021 :
01.01.2021 31.12.2021
Cash in hand 5,000 Remuneration to Coach 12,000

Cash at Bank 44,600 Groundman’s Salary 5,000
31.12.2021 Purchase of Equipment 31,000
Bank Interest 1,000 Bar Room Expenses 4,000
Entrance Fees 10,000 Ground Rent 9,000
Subscription 50,000 Night Club Expenses 9,600
Bar Room Receipts 8,000 Printing and Stationery 5,000
Sale of Equipments 1,600 Repairs to equipments 9,000
Proceeds of Night Club 21,600 Cash at Bank 51,200
Cash in hand 6,000
1,41,800 1,41,800
01.01.2021 31.12.2021
(₹ ) (₹ )
Subscription due 3,000 2,000
Amount due for Printing and Stationery 2,000 1,600
Estimated value of Equipments 16,000 34,000
You are required to prepare :

(a) An Income and Expenditure A/c for the year ended 31.12.2021
(a) Briefly discuss the limitations of historical cost accounting.
(b) Mention the usefulness of applying accounting standards.
(c) State the main functions of Accounting Standard Board (ASB).
Mr. Souvik keeps his books of accounts under single entry system. The following details are obtained
from his books of account.
Furniture Debtors Creditors Cash Stock-in-Trade
31.03.2020 (₹) 50,000 30,000 20,000 84,600 32,000
31.03.2021 (₹) 45,000 ? 24,000 ? 28,000
The transactions during the year :
₹ ₹
Goods purchased for cash 24,000 Received from debtors 1,40,000
Total Sales during the year 2,28,600 Payment to creditors 85,000
[including Cash sales 35,800] Cash withdrawn for personal use 4,800
Expenses paid [including salary] 65,000
Mr. Souvik wants to maintain Provisions for Bad Debts @ 5% on closing Debtors.
Prepare :
(a) A Trading and Profit and Loss A/c for the year ended 31.03.2021 and
Question 12 [Final Accounts]:
Following is the trial balance of Mr. X for the year ended 31.12.2021
Purchases 1,70,000 Purchase Return 3,200
Sales Return 3,000 Discount 800
Carriage on Purchases 2,000 Sundry Creditors 51,000
Bills Receivable 21,000 Capital 1,30,000
Discount 1,600
Salary 18,800
Insurance 2,400
Rent 3,600
Income Tax 1,800
Cash at Bank 13,400
Furniture 24,000
Plant and Machinery 1,30,000
Bad Debts 1,000
Freight and duty 3,400
Drawings 10,000
5,82,000 5,82,000
The following adjustments are to be made before preparing the final accounts :
(a) A credit sale of ₹ 2,000 has not been recorded in the books.
(b) Goods costing ₹ 1,000 has been taken by the proprietor for his personal use.
(c) Goods worth ₹ 500 distributed as free sample has not been recorded.
(d) Wages includes ₹ 3,000 for the year 2020 and Rent paid is for 9 months’ rent.
(e) Depreciate Plant & Machinery and Furniture at 10% and 5% respectively.
(f) Bad Debts to be written off ₹ 6,000 and a provision @ 5% to be made for Doubtful Debts.
1st Semester: Hons & Pass


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Financial Accounting: [For B.com 1st Sem All] [21-22]

1. Depreciation (10 Marks) 03 – 11

2. Provision for Bad debts (10 Marks) 12 – 19

3. Insurance claim (10 Marks) 20 – 31

4. Sale on approval (10 Marks) 32 – 36

5. Self Balancing (10 Marks) 37 – 50

6. Consignment (10 Marks) 51 – 60

7. Rectification of errors (10 Marks) 61 – 71

10. Capital & Revenue expenditure 79 – 81

11. Introduction: (5 Marks) 82 – 85

12. Single entry (20 Marks) 86 – 106

13. Non-trading (20 Marks) 107 – 119

14. Final Account (20 Marks) 120 – 136

15. Accounts Theories: (20 Marks) 137– 147

BOOK PRICE: ₹ 150

Financial Accounting 1: (Syllabus): Honours & General

Unit-2: Concepts for determination of business income

Unit-3: Introduction to Accounting Standard & Accounting theory

Unit- 5: Financial statements from Incomplete records and of NPO

Unit- 6: Accounting for special sales transaction

Course fees for complete course

 Discount: 20 % Discount for two subjects or More

Change in Depreciation method

On Purchase of ₹ 6,400 on --- --- 480 (for 9 640

Depreciated value ₹ 5,200

2. Depreciation: (Straight line Method)

Date Particulars ₹ Date Particulars ₹

1.7.2020 To Bank A/c 31.12.2020 By Depreciation A/ c

31.12.2020 By Profit & Loss A/c 5,500

(2) Calculation of loss on sale of Machinery

4,00,000 By Depreciation on Machine 27,000

Machine I (₹) Machine II (₹) Machine III (₹)

Depreciation for 2021 (27,000) (19,000) (20,000)

(ii) Computation of Total Depreciation under 15 % SLM (New Method)

Machine 1 [2017 to 2020] [7,00,000 x 10 % x 4] 2,80,000

Dr. (iii) Machinery Account Cr.

6. Depreciation: [S.L.M Method] [Compiled by Ravi Bhalotia]*

7. Depreciation: [S.L.M Method] [2019 1st sem Pass]*

8. Depreciation: [S.L.M Method] [2017 1st sem Honours]*

10. Depreciation: [C.U. B.Com 2007] [S.L.M Method] *

11. Depreciation: [C.U. B.Com 2012 supplementary] [S.L.M Method] *

12. Depreciation: [S.L.M Method] *

13. Depreciation: [S.L.M Method] [2020 1st sem Hons]*

15. Depreciation: [W.D.V Method] [2018 1st sem Hons]*

16. Depreciation: [W.D.V Method] [Compiled by Ravi Bhalotia]***

17. Depreciation [B.U. B.Com (P)] [W.D.V Method]**

18. Depreciation: [W.D.V Method] [2015 Honours]***

20. Depreciation: [Change of Method] [B.com 2016 H] [SLM to WDV]

21. Depreciation: [Change of Method] [B.com 2012] [WDV to SLM]

22. Depreciation: [Change of Method] [WDV to SLM]

23. Depreciation: [Prov. for Depreciation] [Compiled by Ravi Bhalotia]**

 Discount: 20 % Discount for two subjects or More

Chapter 2: Provision for Bad debts

II. Collection from Debtors:

III. Sales Return (Return Inward)

IV. Mutual Set off

V. Further Bad Debts

VI. Bad debts is adjusted with provision for bad debts

VII. Provision for bad debts to be raised

VIII. Discount allowed is adjusted with provision for Discount

IX. Provision for discount to be raised

X. Bad Debt Recovery