Chapter 15- Financial Statements of Sole Proprietorship

Q.1 Following are the balances extracted from the books of Manish on 31st March, 2019:

₹ ₹

Capital 1,90,000 Cash at Bank 26,000

Drawing 7,000 Salaries 8,000
Plant and 1,20,000 Repairs 1,900
Machinery
Delivery 26,000 Stock on 1st April, 2018 16,000
Vehicle
Sundry 36,000 Rent 4,500
Debtors
Sundry 26,000 Manufacturing Expenses 1,500
Creditors
Purchases 20,000 Bills Payable 23,500
Sales 42,000 Bad Debts 5,000
Wages 8,000 Carriage 1,600

Prepare Trading and Profit and Loss Account and Balance Sheet as at 31st March, 2019 after following
adjustments are made:
(i) Closing Stock was ₹ 16,000.
(ii) Depreciate Plant and Machinery @ 10% and Delivery Vehicle @ 15%.
(iii) Unpaid Rent amounted to ₹ 500.

The solution can be presented as follows

Q.2 Prepare Trading and Profit and Loss Account and Balance Sheet from the following balances, relating
to the year ended 31st March, 2019:

₹ ₹

Capital 1,00,000 Wages 50,000

Creditors 12,000 Bank 10,000
Returns 5,000 Repairs 500
Outward
Sales 1,64,000 Stock on 1st April, 2018 20,000
Bills Payable 5,000 Rent 4,000
Plant and 40,000 Manufacturing Expenses 8,000
Machinery
Sundry 24,000 Trade Expenses 7,000
Debtors
Drawings 10,000 Bad Debts 2,000
Purchases 1,05,000 Carriage 1,500
Returns 3,000 Fuel and Power 1,000
Inward

Additional Information:
(i) Closing Stock was valued at ₹ 14,500.
(ii) Depreciate Plant and Machinery by ₹ 4,000.
(iii) Write off Bad Debts ₹ 5,000.
(iv) ₹ 400 is due for repairs.

The solution can be presented as follows

Q.3 Following Trial Balance has been extracted from the books of Prasad on 31st March, 2019:

Particulars Dr. (₹) Particulars Cr. (₹)

Machinery 4,00,000 Capital 9,00,000

Cash at Bank 1,00,000 Sales 16,00,000
Cash in Hand 50,000 Sundry Creditors 4,50,000
Wages 1,00,000 Interest Received 30,000
Purchases 8,00,000
Stock on 1st 6,00,000
April, 2018
Sundry 4,40,000
Debtors
Bills 2,90,000
Receivable
Rent 45,000
Commission 25,000
General 80,000
Expenses
Salaries 50,000
29,80,000 29,80,000

Additional Information:
(i) Outstanding salaries were ₹ 45,000.
(ii) Depreciate Machinery at 10%.
(iii) Wages outstanding were ₹ 5,000.
(iv) Rent prepaid ₹ 10,000.
(v) Provide for interest on capital @ 5% per annum.
(vi) Stock on 31st March, 2019 ₹ 8,00,000.
Prepare Trading and Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as
at that date.

The solution can be presented as follows

Q.4 From the following Trial Balance of Shradha as on 31st March, 2019, prepare Trading and Profit and
Loss Account and Balance Sheet:

Debit Balances Credit Balances

Heads of Accounts
(₹) (₹)
Capital … 80,000
Drawings 18,000 …
Sales … 1,55,000
Purchases 82,600 …
Stock (1st April, 2018) 42,000 …
Returns Outward … 1,600
Carriage Inwards 1,200 …
Wages 4,000 …
Power 6,000 …
Machinery 50,000 …
Furniture 14,000 …
Rent 22,000 …
Salary 15,000 …
Insurance 3,600 …
8% Bank Loan … 25,000
Debtors 20,600 …
Creditors … 18,900
Cash in Hand 1,500 …
Total 2,80,500 2,80,500
Adjustments:
(i) Closing Stock ₹ 64,000.
(ii) Wages outstanding ₹ 2,400.
(iii) Bad Debts ₹ 600.
(iv) Provision for Doubtful Debts to be 5%.
(v) Rent is paid for 11 months.
(vi) Insurance premium is paid per annum, ended 31st May, 2019.
(vii) Loan from the bank was taken on 1st October, 2018.
(viii) Provide Depreciation on machinery @ 10% and on Furniture @ 5%.

The solution can be presented as follows

Q.5 Trial Balance of a business as at 31st March, 2019 is given below:

Dr. Cr.
Particulars Particulars
(₹) (₹)
Stock on 1st April, 2018 25,000 Sales 2,27,800
Furniture 8,000 Commission 500
Plant and Machinery 1,50,000 Returns Outward 1,000
Debtors 30,000 Creditors 40,000
Wages 12,000 Capital 1,50,000
Salaries 20,000
Bad Debts 1,000
Purchases 1,20,000
Electricity Charges 1,200
Telephone Charges 2,400
General Expenses 3,000
Postage Expenses 1,800
Returns Inward 900
Insurance Premium 1,500
Cash in Hand 2,500
Cash at Bank 40,000
4,19,300 4,19,300

Prepare Trading and Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as
at that date after taking into account the following adjustments:
(i) Closing Stock was valued at ₹ 7,000.
(ii) Outstanding liabilities for wages were ₹ 600 and salaries ₹ 1,400.
(iii) Depreciation is to be provided @ 5% p.a. on fixed assets.
(iv) Included in Plant and Machinery is a machine purchased for ₹ 10,000 on 1st October, 2018.
(v) Insurance premium paid in advance ₹ 200.

The solution can be presented as follows

Q.6 Following are the balances extracted from the books of Narain on 31st March, 2019:

Amount Amount
Particulars Particulars
(₹) (₹)
Narain's Capital 3,00,000 Sales 15,00,000
Narain's Drawings 50,000 Sales Return 20,000
Furniture and Fittings 26,000 Discounts (Dr.) 16,000
Bank Overdraft 42,000 Discounts (Cr.) 20,000
Creditors 1,38,000 Insurance 20,000
Business Premises 2,00,000 General Expenses 40,000
Stock on 1st April, 2018 2,20,000 Salaries 90,000
Debtors 1,80,000 Commission (Dr.) 22,000
Rent from Tenants 10,000 Carriage on Purchases 18,000
Purchases 11,00,000 Bad Debts Written off 8,000

Additional Information:
(i) Closing Stock as on 31st March, 2019 was ₹ 2,00,600, whereas its Net Realisable Value (Market Value)
was ₹ 2,05,000.
(ii) Depreciate: Business Premises by ₹ 3,000 and Furniture and Fittings by ₹ 2,500.
(iii) Make a provision of 5% on debtors for doubtful debts.
(iv) Carry forward ₹ 2,000 for unexpired insurance.
(v) Outstanding salary was ₹ 15,000.
Prepare Trading and Profit and Loss Account for the year and Balance Sheet as at that date.
The solution can be presented as follows

N.B: Closing stock is taken to be at the market value or the book value whichever is less as per the prudence
concept,
Q.7 Following balances are taken from the books of Niranjan. Prepare Trading and Profit and Loss
Account and Balance Sheet for the year ended 31st March, 2019:

Particulars ₹ Particulars ₹

Capital 12,00,000 Drawings 2,10,000

Opening 4,50,000 Plant and Machinery 2,40,000
Stock
Furniture 15,000 Purchases 29,50,000
Sales 43,50,000 Insurances 15,000
Purchases 40,000 Sales Return 70,000
Return
Rent 50,000 Trade Expenses 20,000
Salaries 2,40,000 Wages 4,00,000
Bad Debts 10,000 6% Investments 5,00,000
Sundry 4,00,000 Sundry Creditors 1,90,000
Debtors
Bills Payable 8,000 Cash 1,22,000
Advertisement 60,000 Miscellaneous Income 12,000
Expenses
Patents 48,000

Adjustments:
(i) Closing Stock ₹ 7,50,000.
(ii) Depreciate Machinery by 10% and Furniture by 20%.
(iii) Wages ₹ 50,000 and salaries ₹ 20,000 are outstanding.
(iv) Write off ₹ 50,000 as further Bad Debts and create 5% Provision for Doubtful Debts. Also, create a
reserve for discount on Debtors @ 2%.
(v) Investments were made on 1st July, 2018 and no interest has been received so far.
The solution can be presented as follows
Q.8 From the following Trial Balance of Mahesh, prepare his Final Accounts for the year ended 31st
March, 2019:

Debit Credit Balanc

Heads of Accounts Balances es
(₹) (₹)
Purchases 2,50,000 …
Sales … 5,00,000
Returns Inward 12,000 ...
Returns Outward … 10,000
Carriage 8,000 …
Wages 60,000 …
Miscellaneous 2,000 …
Expenses
Insurance 1,200 …
Repairs 8,000 …
Debtors 1,15,000 …
Creditors … 1,00,000
Printing and 6,000 …
Stationery
Advertisement 15,000 …
Bills Receivable 4,000 …
Bills Payable … 2,000
Opening Stock 30,000 …
Cash in Hand 12,000 …
Interest on Bank 2,800 …
Loan
Machinery 2,80,000 …
Furniture 34,000 …
Drawings 20,000 …
Commission … 1,000
12% Bank Loan … 30,000
Capital … 2,40,000
Rent Received … 5,000
Cash at Bank 28,000 …
Total 8,88,000 8,88,000

Additional Information:
(i) Closing Stock on 31st March, 2019 was ₹ 21,000.
(ii) Rent of ₹ 1,200 has been received in advance.
(iii) Outstanding liability for Miscellaneous expenses ₹ 12,000.
(iv) Commission earned during the year but not received was ₹ 2,100.
(v) Goods costing ₹ 2,000 were taken by the proprietor for his personal use but entry was not passed in
the books of account.

The solution can be presented as follows

Working Notes:

Calculation of Outstanding Interest on Loan

Interest on loan (30,000 × 12%) = 3,600
Less: Interest Paid = 2,800
Interest on Outstanding loan = 3,600 - 2,800
= 800
Q.9 Following balances were extracted from the books of Vijay on 31st March, 2019:

Particulars ₹ Particulars ₹

Capital 2,45,000 Loan 78,800

Drawings 20,000 Sales 6,53,600
General 47,400 Purchases 4,70,000
Expenses
Building 1,10,000 Motor Car 20,000
Machinery 93,400 Provision for Doubtful Debts 9,000
Stock on 1st 1,62,000 Commission (Cr.) 13,200
April, 2018
Insurance 13,150 Car Expenses 18,000
Wages 72,000 Bills Payable 38,500
Debtors 62,800 Cash 800
Creditors 25,000 Bank Overdraft 33,000
Bad Debts 5,500 Charity 1,050

Prepare Trading and Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as
at that date after giving effect to the following adjustments:
(a) Stock as on 31st March, 2019 was valued at ₹ 2,30,000.
(b) Write off further ₹ 1,800 as Bad Debts and maintain the Provision for Doubtful Debts at 5%.
(c) Depreciate Machinery at 10%.
(d) Provide ₹ 7,000 as outstanding interest on loan.

The solution can be presented as follows

Q.10 From the following Trial Balance and other information, prepare Trading and Profit and Loss
Account for the year ended 31st March, 2019 and Balance Sheet as at that date:

Dr. Cr.
Particulars
(₹) (₹)
Sundry Debtors 3,20,000 …
Stock on 1st April, 2018 2,20,000 …
Cash in Hand 350 …
Cash at Bank 15,450 …
Plant and Machinery 1,75,000 …
Sundry Creditors … 1,06,500
General Expenses 10,750 …
Sales … 13,45,00
0
Salaries 22,250 …
Carriage Outwards 4,000 …
Rent 9,000 …
Bills Payable … 75,000
Purchases 11,88,70 …
0
Discounts 11,000 …
Premises 3,45,000 …
Capital on 1st April, … 7,95,000
2018
Total 23,21,50 23,21,50
0 0

Stock on 31st March, 2019 was ₹ 1,24,500. Rent was unpaid to the extent of ₹ 850 and ₹ 1,500 were
outstanding for General Expenses; ₹ 4,000 are to be written off as bad debts out of the above debtors;
and 5% is to be provided for doubtful debts. Depreciate Plant and Machinery by 10% and Premises by 2%.
Manager is entitled to a commission of 5% on net profit after charging his commission.

The solution can be presented as follows

Note: Manager commission will be not payable as firm suffered loss
Q.11 From the following Trial Balance of Shubho, prepare final accounts for the year ended 31st March,
2019 and Balance Sheet as at that date:

Dr.
Cr. Balances
Particulars Balances
(₹)
(₹)
Land and Building 50,000
Purchases (Adjusted) 2,10,000
Stock (31st March, 2019) 45,000
Returns Inward 1,500
Returns Outward 2,500
Wages 45,300
Salaries 39,000
Office Expenses 15,400
Carriage Inwards 1,200
Carriage Outwards 2,000
Discount allowed 750
Discount received 1,200
Bad Debts 1,200
Sales 3,85,000
Capital Account 1,15,000
Chatterji's Loan A/c (taken on 1st Oct., 25,000
2018 @ 18% p.a.
Insurance 1,500
Commission 1,500
Plant and Machinery 50,000
Furniture and Fixtures 20,000
Bills Receivable 20,000
Sundry Debtors 40,000
Sundry Creditors 25,000
Cash at Bank 16,000
Office Equipments 12,000
Bills Payable 12,350
Expenses Payable 3,300
Total 5,70,850 5,70,850

The following adjustments be taken care of:

(i) Depreciate Land and Building @ 6%, Plant and Machinery @ 10%, Office equipments @ 20% and
Furniture and Fixtures @ 15%.
(ii) Calculate Provision for Doubtful Debts at 2% on Sundry Debtors.
(iii) Insurance premium includes ₹ 250 Insurance Premium paid in advance.
(iv) Provide salary to Shubho ₹ 15,000 p.a.
(v) Outstanding Salaries ₹ 11,500.
(vi) 10% of the final profit is to be transferred to General Reserve.
The solution can be presented as follows
Q.12 Following is the Trial Balance as on 31st March, 2019. Prepare Trading and Profit and Loss Account
and Balance Sheet:

Dr. Cr.
Particulars
(₹) (₹)
Stock on 1st April, 2018 8,000
Sales 2,20,000
Purchases 1,26,000
Productive Wages 56,500
Salaries 16,000
Stores Consumed 6,050
Carriage 3,050
Rent 5,200
Insurance 1,320
Machinery 52,000
Building 67,000
Capital Less Drawings 1,45,600
Sundry Debtors 44,000
Sundry Creditors 20,000
Secured Loan 16,000
Furniture 3,350
General Expenses 2,600
Cash in Hand 1,930
Bad Debts 1,020
Bank 6,580
Input CGST 3,000
Input SGST 3,000
Output CGST 2,500
Output SGST 2,500
Total 4,06,600 4,06,600
Stock on 31st March, 2019, ₹ 20,600.
You are to make adjustments in respect of the following:
(a) Depreciate Machinery at 10% p.a.
(b) Make a provision @ 5% for Doubtful Debts.
(c) Provide discount on debtors @ 212/212%.
(d) Rent includes Rent deposit of ₹ 400.
(e) Insurance Prepaid ₹ 120.

The solution can be presented as follows

Q.13 Prepare Trading and Profit and Loss Account for the year ended 31st March, 2019 and Balance
Sheet as at that date from the following Trial Balance:

Dr. Cr.
Particulars
(₹) (₹)
Capital … 1,00,000
Cash 15,000 …
Bank Loan … 20,000
Purchases 1,20,000 …
Sales … 1,50,000
Sales Return 10,000 …
Purchases Return … 20,000
Establishment Expenses 22,000 …
Taxes and Insurance 5,000 ...
Bad Debts 5,000 …
Provision for Doubtful … 7,000
Debts
Debtors 50,000 …
Creditors … 20,000
Commission … 5,000
Deposits 40,000 …
Opening Stock 30,000 …
Drawings 14,000 …
Furniture 6,000 …
Bills Receivable 32,000 …
Bills Payable … 25,000
Input CGST 10,000 ...
Input SGST 10,000 …
Output CGST … 8,000
Output SGST … 8,000
Output IGST … 6,000
Total 3,69,000 3,69,000
Adjustments:
(i) Taxes ₹ 3,000 are outstanding but Insurance ₹ 500 is prepaid.
(ii) Commission ₹ 1,000 received in advance for the next year.
(iii) Interest ₹ 2,100 is to be received on Deposits and Interest on Bank Loan ₹ 3,000 is to be paid.
(iv) Provision for Doubtful Debts to be maintained at ₹ 10,000.
(v) Depreciate Furniture by 10%.
(vi) Stock on 31st March, 2019 is ₹ 45,000.
(vii) A fire occurred on 1st April, 2019 destroying goods costing ₹ 10,000. These goods were purchased
paying CGST and SGST @ 6% each.

The solution can be presented as follows

Working Notes:

(1) Loss of stock by fire has occurred on 1st April, 2019. Hence, it will not affect the Balance Sheet dated 31st
March, 2019.

(2) GST Calculation

CGST Payable/(Receivable)=Output CGST-Input CGST

=8,000-10,000
= 2,000

SGST Payable/(Receivable)=Output SGST-Input SGST

=8,000-10,000
= 2,000

IGST Payable/(Receivable)=Output IGST-Input CGST-Input SGST

=6,000-2,000-2,000
=2,000

GST Payable =Output IGST

=2,000
Q.14 From the following Trial Balance of Ramesh, prepare Trading, Profit and Loss Account for the year
ending 31st March, 2019 and a Balance Sheet as on that date:

Dr. Cr.
Heads of Accounts
(₹) (₹)
Drawings 15,000
Capital 3,50,000
Plant and Machinery 2,05,000
Debtors 50,000
Creditors 28,000
Returns Inward 8,000
Returns Outward 7,000
Discount Allowed 7,000
Discount Received 6,000
Commission 15,000
Interest on Bank Loan 12,000
Furniture 55,000
Provision for Doubtful Debts 13,000
Wages 50,000
Salaries 45,000
Advertisement 15,000
Rent and Taxes 13,000
Purchases 2,60,000
Sales 4,00,000
Stock on 1st April, 2018 70,000
Carriage 5,000
Land and Building 98,000
Cash in Hand 8,000
Cash at Bank 20,000
10% Bank Loan as on 1st April, 2018 1,50,000
Input CGST 9,000
Input SGST 9,000
Output IGST 15,000
Total 9,69,000 9,69,000

Adjustments:
(i) Cost of stock on 31st March, 2019 was ₹ 37,000. However, its market value was ₹ 35,000.
(ii) Wages outstanding were ₹ 6,000 and salaries outstanding were ₹ 5,000 on 31st March, 2019.
(iii) Depreciate Land and Building @ 212/12%, Plant and Machinery @ 10% p.a. and Furniture @ 15% p.a.
(iv) Purchase includes purchase of machinery for ₹ 10,000 on 1st October, 2018.
(v) Debtors include bad debts of ₹ 2,000. Maintain a provision for doubtful debts @ 10% on Debtors.

The solution can be presented as follows