Unit - 4

Accountancy

Q1) What are the basic concepts of accounting?

A1) The basic accounting concept is as follows:

1. Entity concept:

The concept of an entity assumes that its financial statements and other accounting information belong to a particular company that is different from its owner. Therefore, an analysis of business transactions, including costs and revenues, is expressed in terms of changes in the company's financial position.

Similarly, the assets and liabilities devoted to business activities are the assets and liabilities of the entity. The company's transaction is reported, not the company's owner's transaction. Therefore, this concept allows accountants to distinguish between personal and commercial transactions. This concept applies to sole proprietorships, partnerships, businesses, and small businesses. It may also apply to multiple companies, such as when a segment of a company, such as a department, or an interrelated company is merged.

2.     Going Concern Concept:

An entity is considered to be in business unless there is evidence of opposition. Because companies are relatively permanent, financial accounting is designed with the assumption that the business will survive indefinitely in the future.

The Going Concern concept justifies the valuation of assets on a non-clearing basis and requires the use of acquisition costs for many valuations. In addition, fixed and intangible assets are amortized over their useful lives, rather than in shorter periods, in the hope of early liquidation.

This further means that the data transmitted is tentative and that the current statement should disclose adjustments to the statement over the past year revealed by more recent developments.

3.     Money measurement concept:

A unit of exchange and measurement is required to uniformly account for a company's transactions. The common denominator chosen in accounting is the currency unit. Money is the lowest common denominator for measuring the exchangeability of goods and services such as labor, natural resources and capital.

The concept of monetary measurement considers accounting to be a process of measuring and communicating financially measurable company activity. Obviously, the financial statements should show the money spent.

The concept of measuring money means two limitations of accounting. First, accounting is limited to the generation of information expressed in monetary units. It does not record and convey other relevant but non-monetary information. Second, the concept of monetary measurement concerns the limitation of the monetary unit itself as a unit of measurement.

There are concerns about purchasing power, which is the main characteristic of currency units, or the amount of goods and services that money can obtain. Traditionally, financial accounting has addressed this issue by stating that the concept assumes that the purchasing power of a currency unit is stable over the long term or that price changes are not significant. Although still accepted in current financial reporting, the concept of stable monetary units is subject to continuous and permanent criticism.

4.     Accounting period concept:

Financial accounting provides information about a company's economic activity over a specific period of time that is shorter than the company's lifespan. The periods are usually the same length for ease of comparison.

The period is specified in the financial statements. The period is usually 12 months. Quarterly or semi-annual statements may also be issued. These are considered provisional and differ from the annual report. Statements that cover shorter periods of time, such as months or weeks, may also be created for administrative use.

5.     Cost concept:

The concept of cost is that the asset should be recorded at the exchange price, that is, the acquisition cost or the acquisition cost. Acquisition costs are recognized as an appropriate valuation criterion for recognizing the acquisition of all goods and services, costs, expenses and capital.

For accounting purposes, business transactions are usually measured in terms of the particular price or cost at which the transaction occurred. That is, financial accounting measurements are based on exchange prices, where economic resources and obligations are exchanged. Therefore, the quantity of an asset listed during a company's account doesn't indicate what the asset could also be sold for.

The concept of acquisition cost means there's little point in revaluing an asset to reflect its current value, because the company has no plans to sell its asset. Additionally, for practical reasons, accountants like better to report actual costs over market values that are difficult to verify.

6.     Dual aspect concept:

This concept is at the guts of the whole accounting process. Accountants record events that affect the wealth of a specific entity. The question is which aspect of this wealth is vital. Accounting entities are artificial creations, so it's essential to understand who their resources belong to or what purpose they serve.

It's also important to understand what sorts of resources you manage, like cash, buildings, and land. Therefore, the accounting record system was developed to point out two main things: (a) the source of wealth and (b) the shape it takes. Suppose Mr. X decides to line up a business and transfers Rs. 100,000 from his personal checking account to a different business account.

He may record this event as follows:

Obviously, the source of wealth must be numerically adequate to the shape of wealth. S (source) must be adequate to F (form) because they're simply different aspects of an equivalent thing, that is, within the sort of equations.

In addition, transactions or events that affect a company's wealth got to record two aspects so as to take care of equality on each side of the accounting equation.

7.     The concept of accrual accounting:

According to the Financial Accounting Standards Board (USA):

"Accrual accounting is that the financial impact of transactions and other events and situations that affect a corporation on cash, not only during the amount during which it had been received, but also during the amount during which those transactions, events and situations occur. Accrual accounting is paid to the corporate as more (or perhaps less) cash spent on resources and activities, also because the start and end of the method. It's associated with the method of being returned.We recognize that purchases, production, sales, other operations, and other events that affect a company's performance during a period often do not match the receipt or payment of cash for that period. "

Realization and matching concepts are central to accrual accounting. Accrual accounting measures revenue for a period of time as the difference between the revenues recognized during that period and the costs that match those incomes. In accrual accounting, the period revenue is usually not the same as the period cash receipt from the customer, and the period cost is usually not the same as the period cash payment.

8.     Cash Basis Accounting:

In cash-basis accounting, sales are not recorded until the period in which they are received in cash. Similarly, costs are deducted from sales during the period in which the cash payment was made. Therefore, neither realization nor matching concepts apply to cash basis accounting.

In reality, "pure" cash-basis accounting is rare. This is because the pure cash basis approach requires the acquisition of inventory to be treated as a reduction in profit when paying the acquisition cost, not when selling the inventory. Similarly, the cost of acquiring plant and equipment items is treated as a reduction in profit if these long-lived items are paid in cash rather than after they have been used.

Obviously, such a pure cash basis approach would result in a balance sheet and income statement with limited usefulness. Therefore, what is commonly referred to as cash-basis accounting is actually a mixture of cash-basis for some items (especially cost of goods sold and period costs) and accrual-based for others (especially product costs and long-term assets). This mix is   sometimes referred to as modified cash-basis accounting to distinguish it from the pure cash-basis method.

Cash-basis accounting is most often seen in small businesses that do not have large inventories because they provide services. Examples include restaurants, hairdressers, hairdressers, and income tax filing companies.

Most of these establishments do not provide credit to their customers, so cash-basis profits may not differ dramatically from accrual income. Nevertheless, cash basis accounting is not permitted by GAAP for any type of entity.

9.     Conservatism concept:

This trait can be considered a reactive version of the Minimax management philosophy. That is, it minimizes the potential for maximum loss.

The concept of accounting conservatism suggests that accounting should be cautious and cautious until the opposite evidence emerges, where and when uncertainty and risk exposure are legitimate. Accounting conservatism does not mean intentionally underestimating income and assets. It applies only to situations where there is reasonable doubt. For example, inventories are valued at the lower end of cost or market value.

In its application to the income statement, conservatism encourages recognition of all losses incurred or may occur, but does not recognize profits until they are actually realized. Early depreciation of intangible assets and restrictions on recording asset valuations have also been motivated, at least to some extent, by conservatism. Not recognizing revenue until the sale is made is another sign of conservatism.

10. Matching concept:

The concept of matching in financial accounting is the process of matching (associating) performance or revenue (measured at the selling price of goods and services offered) with labour or expense (measured at the cost of goods and services used) over a specific period of time. Is. Targets for which income has been determined.

This concept emphasizes which item of expense in a particular accounting period is expense. That is, expenses are reported as expenses for the accounting period in which revenue related to those expenses is reported. For example, if the sales of some products are reported as revenue for one year, the costs for those products are reported as expenses for the same year.

The concept of matching only needs to be met after the accountant has completed the concept of realization. First measure the revenue according to the concept of realization, then associate the costs with these revenues. Cost matches revenue, but not the other way around.

Therefore, the reconciliation process requires significant cost allocation in acquisition cost accounting. Past (history) costs are investigated and steps are taken to assign a cost element that is considered to have expired service potential or to match it with the associated revenue.

The remaining component of the cost, which is considered to have continued potential for future services, is carried over to the past balance sheet and is called an asset. Therefore, the balance sheet is just a report of unallocated past costs waiting for the estimated future service potential to expire before it matches the appropriate revenue.

11. Realization or Cognitive concept:

The concept of realization or recognition indicates the amount of revenue that should be recognized from a particular sale. Realization rules help accountants determine if revenues or expenses have been incurred. This allows accountants to measure, record, and report on financial reports.

Realization refers to the inflow of cash or cash charges (accounts receivable, accounts receivable, etc.) resulting from the sale of goods or services. Therefore, if the customer purchases Rs. If you pay 500 worth of goods in cash at a grocery store, the store will realize Rs. 500 from the sale.

If the clothing store sells Rs suits. 3,000, if the buyer agrees to pay within 30 days, the store will realize Rs. From sale to 3,000 (accounts receivable) (conservative concept), provided the buyer has a good credit record and the payment is reasonably secure.

The concept of realization states that the amount perceived as revenue is reasonably certain to be realized, that is, reasonably certain to be paid by the customer. Of course, there is room for difference in judgment as to whether or not it is "reasonably certain."

However, this concept explicitly acknowledges that the perceived revenue amount is lower than the selling price of the goods and services sold. The obvious situation is the discounted sale of goods at a price lower than the normal selling price. In such cases, the revenue will be recorded at a lower price rather than the normal price.

12. Consistency concept:

In this concept, once an organization has decided on one method, it should be used for all subsequent transactions and events of the same nature unless there is a good reason to change it. Frequent changes in accounting methods make it difficult to compare financial statements for one period with financial statements for another period.

Consistent use of accounting methods and procedures over the long term checks income statement and balance sheet distortions, and possible operations on these statements. Consistency is needed to help external users compare the financial statements of a particular company over time and make sound economic decisions.

13. Materiality concept:

The law has a doctrine called de minimis non curat lex. This means that the court does not consider trivial issues. Similarly, accountants do not attempt to record events that are not so important that the task of recording them is not justified by the usefulness of the results.

The concept of materiality means that transactions and events that have a non-significant or non-significant impact must not be recorded and reported in the financial statements. Recording of non-essential events is claimed to be unjustifiable in terms of their low usefulness to subsequent users.

For example, conceptually, a brand-new paper pad is an asset of an entity. Each time someone writes on the pad's page, some of this asset is exhausted and retained earnings are reduced accordingly. Theoretically, it is possible to see how many partially used pads the company owns at the end of the accounting period and display this amount as an asset.

However, the cost of such efforts is clearly unreasonable, and accountants are not willing to do this. The accountant took a simpler action, albeit inaccurate, that the asset was exhausted (expenditure) when the pad was purchased or when the pad was issued to the user from the consumable inventory. Treat as.

Unfortunately, there is no consensus on what it means to be important and the exact line that distinguishes between important and non-important events. Decisions depend on judgment and common sense. The accounting creator is meant to interpret what is important and what is not.

Perhaps the importance of an event or transaction can be determined in terms of financial position, performance, changes in an organization's financial position, and its impact on user evaluations or decisions.

14. Full disclosure concept:

The concept of full disclosure requires companies to provide all relevant information to external users for the purpose of sound economic decisions. This concept means that information that is substantive or of interest to the average investor is not omitted or hidden from a company's financial statements.

Q2) Define Accounting standards with its features.

A2) Meaning of accounting standards:

Accounting standards are written statements consisting of rules and guidelines issued by accounting institutions for the preparation of unified and consistent financial statements and other disclosures that affect different users of accounting information. Is.

Accounting standards set the conditions for accounting policies and practices with codes, guidelines, and adjustments that facilitate the interpretation of items contained in financial statements and even their handling in the books.

Nature of accounting standards:

Based on the discussion above, accounting standards can be said to be guides, dictators, service providers, and harmonizers in the field of accounting processes.

(I) Useful as a guide to accountants:

Accounting standards serve accountants as a guide to the accounting process. They provide the basis for the account to be prepared. For example, they provide a way to value inventory.

(II) Act as a dictator:

Accounting standards act as a dictator in the field of accounting. In some areas, like dictators, accountants have no choice but to choose practices other than those listed in accounting standards. For example, the cash flow statement must be prepared in the format specified by accounting standards.

(III) Act as a service provider:

Accounting standards constitute the scope of accounting by defining specific terms, presenting accounting issues, specifying standards, and explaining numerous disclosures and implementation dates. Therefore, accounting standards are descriptive in nature and act as a service provider.

(IV) Functions as a harmonizer.

There is no bias in accounting standards and there is uniformity in accounting methods. They remove the effects of various accounting practices and policies. Accounting standards often develop and provide solutions to specific accounting problems. Therefore, whenever there is a contradiction in the accounting problem, it is clear that the accounting standard acts as a harmonizer and facilitates the accountant's solution.

Q3) Define Double entry system

A3) Double entry system of accounting deals with two aspects of every business transaction. In other words, every transaction has two effects. For ex, a person buys a cold drink from a store and in return pays the money to shopkeeper for the cold drink. This transaction has two effects in terms of both buyer and seller. Buyer cash balance will decrease by the cost of purchase on the other hand he will acquire a cold drink. Seller will have one drink short but his cash balance will increase.

Accounting attempts to record both effect of transaction in the financial statement.  This refers to double entry concept. Under this every transaction involves two parties, one party gives the benefit and other party receives it. It is also called dual entity of transaction.

Accounting records the two affects which are known as Debit (Dr) and Credit (Cr). Accounting system is based on the duality principal that for every Debit entry, there will always be an equal Credit entry.

Debit entries are ones that account for the following effects:

1. Increase in assets
2. Increase in expense
3. Decrease in liability
4. Decrease in equity
5. Decrease in income

Credit entries are ones that account for the following effects:

1. Decrease in assets
2. Decrease in expense
3. Increase in liability
4. Increase in equity
5. Increase in income

Accounting equation recorded in double entry are

Assets – Liabilities = Capital

Any increase in expense (Dr) will be offset by a decrease in assets (Cr) or increase in liability or equity (Cr) and vice-versa. The accounting equation will still be in equilibrium

Q4) Give examples with characteristics of Double Entry System.

A4) Examples of Double Entry System.

1. Purchase of machine by cash

Machine account debited (increase in assets)

Cash account credited (decrease in assets)

2.     Payment of utility bills

Utility expenses account debited (increase in expenses)

Cash account credited (decrease in assets)

3.     Receipt of bank loans

Cash account credited (increase in assets)

Bank loan account credited (increase in liability)

Characteristic of double entry system

1. Two parties – every business transaction involves two parties – debit and credit. According to the duality principal that for every Debit entry, there will always be an equal Credit entry.
2. Giver and receiver – every transaction must have giver and receiver. For ex, purchase a car, the buyer purchases a car from seller in return of cash – hence the buyer is the receiver and seller are the giver. When the seller receives the cash for the purchase made by buyer – the seller is the receiver of cash and buyer is the giver.
3. Exchange of equal amount – the amount of money of a transaction the party gives is equal to the amount the party receives.
4. Separate entity - the business enterprise and its owner are two separate independent entities. Thus, the business and personal transaction of its owner are separate.
5. Dual aspects – every transaction has two aspects – debit and credit. Debit is on the left side of account ledger and credit is on the right side of account ledger.
6. Result – under double entry system, total of debit is equal to total of credit.
7. Complete accounting system: Double entry system is a scientific and complete accounting system.

Q5) Explain the classification of Accounts.

A5) The classification can be explained as follows.

I. Personal Account: An account related to an individual. Personal accounts include:

i. Natural person: An account related to an individual.

Ii. Artificial person: An account associated with an individual or a group of businesses or institutions. For example, HMT Ltd., Indian Overseas Bank, life assurance Corporation of India, Cosmopolitan club.

Iii. Representative: An account that represents a particular individual or group of individuals. For example, unpaid payroll accounts, prepaid insurance accounts, and so on.

A business concern may be to maintain business relationships with all of the above personal accounts in order to purchase, sell, rent, or rent goods from them. Therefore, they are either debtors or creditors.

The capital and drawing accounts of the individual owner are also personal accounts.

II. Non-personal accounts: All accounts that are not personal accounts. This can be further divided into two types. Real and nominal accounts.

i. Actual account: Assets owned by business parties and accounts related to the assets. Real accounts include tangible and intangible accounts. For example, land, buildings, goodwill, purchases, etc.

Ii. Nominal Accounts: These accounts have no existence, form, or shape. They are related to income and expenses, and profits and losses of business concerns. For example, payroll accounts, dividend accounts, and so on.

Q6) What are the golden rules of Accounting?

A6) Golden Rules of Accounting

Q7) Define Accounting cycle and explain its phases.

A7) When complete sequence of accounting procedure is done which happens frequently and repeated in same directions during an accounting period, the same is called an accounting cycle.

Steps/Phases of Accounting Cycle

The steps or phases of accounting cycle can be developed as under:

(a)    Recording of Transaction: As soon as a transaction happens it is at first recorded in subsidiary book.

(b)   Journal: The transactions are recorded in Journal chronologically.

(c)    Ledger: All journals are posted into ledger chronologically and in a classified manner.

(d)   Trial Balance: After taking all the ledger account’s closing balances, a Trial Balance is prepared at the end of the period for the preparations of financial statements.

(e)    Adjustment Entries: All the adjustments entries are to be recorded properly and adjusted accordingly before preparing financial statements.

(f)      Adjusted Trial Balance: An adjusted Trail Balance may also be prepared.

(g)   Closing Entries: All the nominal accounts are to be closed by the transferring to Trading Account and Profit and Loss Account.

Financial Statements: Financial statement can now be easily prepared which will exhibit the true financial position and operating results.

Q8) What do you mean by journals?

A8) Original entry book

The book in which the transaction is recorded for the first time from the source document is called the Books of Original Entry or Prime Entry. The journal is one of the original entry books in which transactions were originally recorded in chronological order (daily) according to the principle of double-entry bookkeeping.

Journal 

The journal is a dated record of all transactions, including debited and credited account details and the amount of each transaction.

Proforma of a Journal

Description:

1. Date: The date of the transaction is entered in the first column. The year and month are written only once until they change. The date and month order must be strictly maintained.

2. Details: Each transaction affects two accounts, one of which is debited and the other of which is credited. The name of the account to be debited is first written in the immediate vicinity of the row of details column, Dr. Is also written at the end of a particular column. On the second line, the name of the credited account begins with the word "To", a few spaces away from the margins of the detail column to distinguish it from a debit account.

3. Narration: After each entry, a brief description of the transaction and the required details are displayed in a detail column in parentheses called narration. The words "For" or "Being" are used before you start writing the narration. Currently, you don't have to use the word "For" or "Being".

4. Ledger Folio (L.F): All entries in the journal are later posted to the ledger account. The ledger page numbers or folio numbers posted from the journal are recorded in the L.F column of the journal. Until such time, this column remains blank.

5. Debit Amount: This column contains the amount of the account to be debited.

6. Credit Amount: This column will contain the amount of the account to be credited.

Q9) What are the benefits of ledger?

A9) Utility

A utility ledger may be a principal or main ledger that contains all accounts to which transactions recorded within the original entry's books are transferred. Ledgers also are referred to as "final entry books" or "secondary entry books" because transactions are eventually incorporated into the ledger. The benefits of the ledger are:

i. Complete information at a glance:

All transactions associated with your account are collected in one place in your ledger. By watching the balance of that account, you'll see at a look the collective effect of all such transactions.

Ii. Arithmetic Accuracy

With the assistance of your ledger balance, you'll prepare an attempt balance to understand the arithmetic accuracy of your account.

Iii. Business Performance

Makes it easy to make a final accounting to know business performance and therefore the financial position of the business.

Iv. Accounting Information

Data provided by various ledger accounts is summarized, analyzed, and interpreted to get various accounting information.

Description

1. Each ledger account is split into two parts. The left side is named the accounting and therefore the right side is named the credit. The words "Dr." and "Cr." Are wont to describe debits and credits.
2. The name of your account are often found at the highest (center) of your account.
3. The date of the transaction is recorded within the date column.
4. The word "destination" is employed before the account that appears on the accounting of the account within the detail column. Similarly, the word "By" is employed before the account that appears on the accounting of the account within the detail column.
5. The names of the opposite accounts suffering from the transaction are written to either the accounting or the accounting of the detail column.
6. The pagination of the journal or auxiliary workbook to which that specific entry is transferred is entered within the Journal Folio (J.F) column.
7. The quantity related to this account are going to be entered within the Amount column. The method of transferring entries recorded during a posting journal or auxiliary book to every account opened within the ledger is named posting.

In other words, posting means grouping all transactions associated with a specific account in one place. All journals must be posted to different accounts in your ledger because postings assist you understand internet impact of various transactions over a specific period on a specific account.

Q10) How does trial balance work?

A10) The trial balance is the statement of all debits and credits. Business man prepares trial balance at the end of the reporting period regularly to ensure that the entries are mathematically correct in the books of account. The total of trial balance should be equal. In case the debit and credit does not match it means there is an error. For example, the accountant may have recorded an account or classified a transaction incorrectly.

Preparation of trial balance

1. Before starting the trial balance all the ledger accounts should be closed. The ledger balance is provided by the difference between the sum of all the debit entries and the sum of all the credit entries
2. Prepare trial balance worksheet. The column headers should be for the account number, account name and the corresponding columns for debit and credit balances.
3. Every ledger account is transferred to the trial balance worksheet. The account name and number along with the account balance in the appropriate debit or credit column
4. Add up the debit and credit column. In an error free trial balance, the total should be same. Trial balance are closed when the total is same
5. Accountants have to locate and rectify the errors, if there is a difference,

Q11) Draw the Performa of Trial Balance.

A11) A trial balance looks like

All the account title is the closing balance of ledger account

Q12) Write note on Dual Aspect of Accounting.

A12) This concept is at the guts of the whole accounting process. Accountants record events that affect the wealth of a specific entity. The question is which aspect of this wealth is vital. Accounting entities are artificial creations, so it's essential to understand who their resources belong to or what purpose they serve.

It's also important to understand what sorts of resources you manage, like cash, buildings, and land. Therefore, the accounting record system was developed to point out two main things: (a) the source of wealth and (b) the shape it takes. Suppose Mr. X decides to line up a business and transfers Rs. 100,000 from his personal checking account to a different business account.

He may record this event as follows:

Obviously, the source of wealth must be numerically adequate to the shape of wealth. S (source) must be adequate to F (form) because they're simply different aspects of an equivalent thing, that is, within the sort of equations.

In addition, transactions or events that affect a company's wealth got to record two aspects so as to take care of equality on each side of the accounting equation.

Q13) Draw the format of Trading A/C.

A13)

Q14) What is a Balance sheet?

A14) A balance sheet (also known as a financial statement) is a financial statement that shows the Assets, Liabilities and ownership interests of a business at a specific date. The main purpose of drawing up a balance sheet is to disclose the financial status of the enterprise at a certain date. The balance sheet can be prepared at any time, but it is prepared mainly at the end of the accounting period.

Most of the information about Assets, Liabilities and owner's equity items is taken from the company's adjusted trial balance. Retained earnings are the part of the owner's equity section which is provided by the retained earnings statement.
 

Section of the balance sheet

To be widely considered about the balance sheet of the division part of assets part of liabilities main capital. For each department:

Assets section

In the balance sheet, assets with similar characteristics are grouped. The mainly adopted approach is to divide assets into current and non-current assets. Liquid assets include cash and all assets that can be converted into cash or expected to be consumed in a short period of time–usually one year. Examples of current assets include cash, cash equivalents, accounts receivable, prepayment costs or prepayment, short-term investments and inventories.

All assets that aren't listed as current assets are grouped as non-current assets. A common feature of such assets is that they continue to provide profit for a long time-usually more than one year. Examples of such assets include long-term investments, equipment, plants and machinery, land and buildings, and intangible assets.

Debt Division

A debt is an obligation to a party other than the owner of the business. They are grouped as current and long-term liabilities in the balance sheet. Current liabilities are obligations that are expected to be met within a one-year period by using current assets of the business or by providing goods or services.

Owner's equity division

The owner's interest is the obligation of the business to its owner. The term owner's equity is mainly used in the balance sheet of a business in the form of a sole proprietor and partnership. In the balance sheet of the company the term “ownership interest “is often replaced by the term "shareholder interest".

When the balance sheet is created, the liabilities section appears first, and the owner's equity section appears later.

Q15) What is the purpose of preparing Final Accounts?

A15) The final account is the account prepared by the Joint Stock Company at the end of the fiscal year. The purpose of creating a final account is to provide a clear picture of the financial situation of the organization to its management, owners or other users of such accounting information.

Final account preparation involves preparing a set of accounts and statements at the end of the fiscal year.

1. Trading and profit and loss accounts
2. Balance sheet
3. Profit and loss appropriation account
4. Purpose of Final Account preparation

The final account is prepared for the following purposes:

1. To determine the profit and loss incurred by the company within a certain financial period
2. To determine the financial status of the company
3. To serve as a source of information to inform users of accounting information (owners, creditors, investors and other stakeholders) about the solvency of the company.  

Trading account

The results of the purchase and sale of goods are known as the trading account. This sheet is provided to show the difference between the sales price and the cost price. It is prepared to show the trading results of the business i.e.  The total profit or total loss maintained by the business. It records the direct costs of the business company.

J.R.According to Batlibboi,

The trading account shows the results of buying and selling goods. When we prepare this account, the general establishment costs are not taken into account and only the transaction of goods is included."

Profit and loss accounts

This account is prepared to check the net profit/loss and fiscal year expenses of the business during the fiscal year. It records the indirect expenses of the business company like rent, salary, and advertising expenses. Profit and loss a/C includes expenses and losses and gains and losses incurred in business other than the production of goods and services.

Balance sheet

The balance statement shows the financial status of the business at a specific date. The financial status of a business is discovered by aggregating its assets and liabilities on a specific date. The excess of assets over liabilities represents the capital sunk into the business and reflects the financial health of the enterprise.

Now it is known as a statement of the financial status of the company.

What all expenses come under the head of trading A/C?

Trade and manufacturing operating companies deal with the sale and purchase of goods. Therefore, only the manufacturing and trading entities prepare the trading account. Service providers do not prepare for this.

Advantages of preparing a trading account format

1. It is a very important statement from the point of view of the cost of goods. By preparing a trading account, an entity may take a decision to continue or discontinue a particular product, which helps to obtain maximum profit or reduce losses.
2. With the help of a trading account, the sales tax authority can, in accordance with the sales tax declaration filed by the business,. It also helps the excise duty authorities to assess the excise duty of a business enterprise.
3. The management, having in mind the market competition, determines the price of the product with the help of a trading account.                                              

Items in trading account format

The trading account contains the following details:

1. Details of raw materials, semi-finished goods and finished products, opening stock.
2. Close inventory details of raw materials, semi-finished products, and finished products.
3. Total purchase of goods less purchase return.
4. Total sales of goods less sales return.
5. All direct costs associated with the purchase or sale or manufacture of goods.    

Item of income (Cr.Side)

• Less sales return than total sales of goods
• Close the stock of the product.
• Expenditure item (Doctor) side

Item of expenditure (Dr.Side)

1. Opening stock
2. Total purchase of goods less purchase return
3. All the direct cost like carriage interior & freight cost, rent, electricity and power cost, wages for godown or factory, packing cost, etc. for workers and supervisors.

Notes

      The trial count will not be displayed on the close. But, firstly, we need to show the amount of closing shares on the income side of the trading account, and secondly, on the balance sheet under current assets.

      We value closing inventory at either lower cost or market price.

      On the day of preparation of the trading account, we value the physically available closed shares.

      However, the trading account can also be prepared in horizontal form, but the content remains the same.

Trading Account Format

Q16) Draw the format of P/LA/C.

A16) All companies generally prepare profit and loss accounts/statements at the end of the year to gain visibility of income, revenue, expenses, and losses incurred in a certain range of periods. It is important to prepare a profit and loss statement because this information helps organizations make the right business decisions, such as where to cut costs, from where the business can generate more profit, and which parts of the business are suffering from losses.

• Profit and loss accounts / statements
• Types of profit and loss
• Gross profit/gross loss
• Profit / loss

Trading account is prepared to check gross profit/loss while profit and loss account is created to check profit and loss/net loss.

Profit and loss accounts are made to check the annual profit or loss of a business. This account only shows overhead. All items of income and expenses, whether cash or non-cash, are considered in this account.

Only revenue or expenses related to the current period are debited or credited to the profit and loss account. The profit and loss account starts with gross profit on the credit side and, if there is a total loss, appears on the debit side. Items not displayed in the profit and loss account format

Drawing: the drawing is not the company's expense. Therefore, we debit it to capital a/c, and not to profit and loss a/c.

Income tax: for a company, income tax is an expense, but for a sole proprietor, it is his personal expense. Therefore, we debit it to the capital A/C.

Discounts: as we know, discounts are of two types–trade discounts and cash discounts. We deduct the trade discount from the amount charged and therefore do not show it in the account books. On the other hand, if the customer pays the amount on a certain date, a cash discount will be possible. We view cash discounts in account books. Therefore, we debit it to the profit and loss account.

Bad debt: it is because of the customer and the amount he does not pay it. We debit this amount to profit and loss a/c in the event that preparations have already been made for a bet that is worse than it is initially written off from it. When bad loans are recovered, it is again. Now it is not credited to the account of the party, but recovered account should be credited to the bad debt and is written on the credit side of the profit and loss account

Profit and Loss Account Format

Q17) Explain any six types of adjustment in final Account.

A17) Types of adjustment entry for the final account

1. Closing stocks:

The value of the closing stock is checked at the end of the fiscal year, so it is displayed as an adjustment. It must be credited to the transaction a/c and displayed on the asset side of b/S.

The adjustment entry is:

Closing stock a/c ------ Dr.

To trade A / c

DR                                  Trading account and balance sheet                                  CR

Balance sheet

2.     Unpaid expenses:

These are expenses incurred in the fiscal year, but no payments have been made. Any unpaid or unpaid expenses will be added to such expense a/c in P&L a/c and will be displayed as current liability in b/S.

For example, monthly rent in May 2002 Rs. 1,000 remains unpaid. A calendar year is an accounting year.

Adjusting entries:

Rent account Dr. Rs.1000

To Outstanding Rent a/c Rs. 1,000

Dr                                                  Profit and loss accounts                                            Cr

Balance sheet

3.     Prepaid Expenses

These are the costs paid, but part of the amount paid extends to the next year. It is also called" expiring expenses". The prepaid amount paid should be deducted from such expenses and displayed as current assets in the B/S.

For example, Rs premium a total of 2,400 people were paid on July 1, 2002. A calendar year is an accounting year. The annual premium is paid for 1 month, so the 6-month premium concerns half of the current year and the other half the following year.

Hence Rs. 1,200 must be treated as an upfront payment, deducted from the premium paid and displayed as an asset on b/S.

Adjusting entries:

Prepaid insurance a / c Dr Rs. 1, 200

To Premium A / c              Rs. 1, 200

Profit and Loss Account

Balance Sheet

4.     Accrued income:

It is an income that has already been earned [i.e. the service has already been rendered], but no money has been received. For example, interest on investments accrued Rs. 1,200.

Interest in the current year is due to the end of the year. That amount can actually be received in the next year. Currently, it represents income, which has become accounts receivable or accrued. Therefore, P&L is credited to a/c, IS accounts receivable and appears as an asset in b/S.

Adjusting entries:

Accrued interest a / c Dr. Rs. 1,200

To be interested in a / c Rs. 1,200

Profit and Loss Account

Balance Sheet

5.     Income received in advance:

These are the income received during the current year, but part of the amount received is related to the following year. Such amounts must be deducted from the total amount received in P & L A / C and displayed on the debt side of B / S, which represents the amount that the business is obliged to return.

For example, business concerns have received a three-year apprenticeship premium equivalent to Rs.6, 000. Rs in this amount.2, 000 IE, 1/3 of Rs.6, 000 is for the current year and must be credited to P&L a/c as income. And balance Rs. As business is obliged to return 4, 000 represents responsibility.

Adjusting entries:

Apprentice premium A / c Dr Rs. 4000

To Apprentice premium received in advance Rs. 4000

Profit and Loss Account

Balance Sheet

6.     Depreciation of assets:

Depreciation implies a decrease or decrease in the value of an asset due to its constant use. It may also occur due to wear and tear, the passage of time and obsolescence. It's a loss to business.

It is usually calculated at a certain percentage to the value of the asset, and so the amount obtained is shown first on the debit side of the P & L A/C, and then subtracted from the original value of the asset of B/s.

For example, a business has furniture worth Rs. At the end of the year 50, 000 it is depreciated by 5%.

Adjusting entries:

Depreciation A / c Dr Rs. 2,500

To Furniture A / c to Rs. 2,500

[5% Rs 50,000 = 2,500]

Profit and Loss Account

Balance Sheet

Q18) Show the adjustments of Bad Debts in Final A/C.

A18) Debt represents money from the debtor [i.e., the uncollected portion of the credit sale]. When a debt becomes irretrievable, it becomes a bad debt and is treated as a loss. The amount of non-performing loans is debited to P&L a/c and deducted from the various debtors of B/S.

For example, a trader's ledger balance on sundry debtors shows Rs with 20,000. 1,000 are estimated to be unrecoverable.

Adjusting entries:

Bad debts a / c Dr Rs. 1,000

To Sundry debtor a / c to Rs. 1,000

a)     Provision for bad and doubtful debt:

Every business has a lot of trading through margin trading. This gives rise to a significant amount of book debts or debtors. But 100% of these debts are rarely recovered.

Therefore, it would be necessary to bring down the balance of the debtor to it true position. The usual practice is to calculate such a bad debt at a certain rate, based on the past experience of the debtor. It is called reserves or reserves for doubtful debts.

However, the allowance for bad loans and bad debt is calculated on good debt, that is, after deducting previously unadjusted bad loans.

For example:

At the end of the year the sundries debtors of traders stood in the Rs.21, 000. It is estimated to be Rs. 1,000 is written off as bad loans and a 5% allowance is created for bad debt.

Adjusting entries:

Bad Debts a/c Dr. Rs. 1,000

To Sundry Debtors a/c Rs. 1,000

To Profit and Loss a/c Dr. Rs. 2,000

To Bad Debts a/c Rs. 1,000

To Provision for Doubtful Debts 1,000

Profit and Loss Account

If there is an old provision for doubtful debts, it should be adjusted [deducted] against the new provision.

Balance Sheet

b)    Provision for discounts to debtors:

Cash discounts are allowed to debtors to prompt quick payments. After providing bad loans and bad debts, the debtor's balance represents the debt from a healthy party.

They may pay their dues on time and try to take advantage of the acceptable cash discounts themselves. Therefore, this discount should be expected and offered. It is, therefore, the usual practice in business is to offer debtors discounts at a certain percentage on good debt.

For example:

Suppose a trader has various debtors equivalent to rs.20, 000 and he estimates that a provision for a discount of 5% is desirable, after a provision of 2% for bad debts. Then about healthy debt, i e a provision of 19,000 at 2% has been made as a reserve for debtors ' discounts.

Adjusting entries:

Profit and Loss a/c Dr. Rs.380

To Reserve for Discount on Debtors a/c Rs.380

Profit and Loss Account

Balance Sheet

Q19) How are books maintained in electronic mode?

A19) Maintenance of books in electronic mode

The second note to Section 128 of the CA, 2013, allows the company to store such account books or other relevant papers in electronic mode in a prescribed manner Rule 3 of the company (account) rules stipulates the way accounts are held in electronic mode in 2014.

According to the rules:

1. Account books and other related books and papers maintained in electronic mode will remain accessible in India for further reference.
2. The account books and other related books and papers contained in sub-rule(1) shall be fully retained in the form originally generated, transmitted or received, or in a form that accurately presents the information generated, transmitted or received, and the information contained in the electronic records shall be complete and unaltered.
3. The information received from the branch must be kept in a manner that does not change and indicates the information received from the branch
4. Information in electronic records of documents may be displayed in an easy-to-read format.
5. If an appropriate system exists as the Audit Committee for the storage, retrieval, display or printing of electronic records, or as the board of Directors deems appropriate, such records shall be disposed of or unavailable unless permitted by law.
6. The company must be faithful with the registrar on an annual basis at the time of submission of financial statements:

(a) Name of the service provider;

(B) Internet Protocol address service provider;

(C) Location of the service provider, if applicable）

In 1956, there was no specific provision for the maintenance of electronic mode books. However, in the Registrar of the enterprise there were provisions for the submission of electronic records containing financial statements in electronic mode. Section 610E provided that all provisions of the Information Technology Act 2000 on electronic records, including the manner and form in which electronic records are filed, apply or relate to electronic records under Section 610B, unless they are inconsistent with this law.

Q20) Define Form and content of financial statements

A20) Form and content of financial statements

Section 129 of the CA (1), 2013 requires that the financial statements of the Company shall be

1. a true and fair understanding of the company's situation;
2. Obeying with the rules of accounting standards notified under Section 133;
3. a form or form provided to a company of a different class or class of Schedule III;

This subsection shall not apply to insurance companies or banking companies or companies engaged in generating or supplying electricity, or to any other class of companies whose forms of financial statements are specified in or under the law governing such class of companies.

Section subsection(5)129 further provides that, if the company's financial statements do not comply with the accounting standards set out in Subsection (1), without compromising the subsection-

In Paragraph (1), the Company shall disclose any deviations from financial statements, accounting standards, the reasons for such deviations, and any financial impact arising from such deviations.

Subsection (6) Section 129 prohibits the class from complying with the requirements of any of the rules made in this section or on its basis if the central government believes it is necessary to grant such exemptions in the public interest, on its own or by notice, for applications by the class or class of companies. Such exemption may be unconditionally or subject to the conditions specified in the notice.

A similar provision was in CA, 1956. Section 211 (1) all the company's balance sheets shall be true and fair to the company's situation at the end of the fiscal year, and in accordance with the provisions of this section, shall be in the form set forth in part I of Schedule VI, or in any form in which circumstances close to it are permitted, or in any other form that may be approved by the central government in general or in particular cases. If you do not agree to the terms of this agreement, you will be bound by the terms of this agreement.  And in the preparation of the balance sheet must have, as far as possible, in the general instructions for the preparation of the balance sheet under the heading "notes" at the end of that part. :

Subsection (2) all profit and loss accounts of the Company shall give a true and fair view of the company's profit and loss for the fiscal year and, as mentioned above, shall be included in Part II of Schedule VI.

Nothing contained in this sub sections (1) and (2)does not apply to insurance companies or banking companies or companies engaged in generating or supplying electricity, or to companies of any other class whose forms of balance sheet and profit and loss accounts are set forth in the laws governing such classes of companies.

Subsection (3) the central government authorized to exempt any class of companies that comply with any of the requirements of Schedule VI, if it is deemed necessary to grant an exemption for the public interest, unconditionally or in accordance with the conditions specified in the notice by the Official Gazette.

Subsection (3A) mandated that all of the company's profit and loss accounts and balance sheets comply with accounting standards, and that if the company's profit and loss accounts and balance sheets do not comply with accounting standards, the company would disclose in its profit and loss accounts and balance sheets any deviations from accounting standards, the reasons for such deviations and any financial effects resulting from such deviations.

Subsection (4) the central government, with the consent of the board of Directors of the company, has authorized, by order, any of the requirements of this law to change in relation to the company in relation to the matters listed on the balance sheet or profit and loss account of the company for the purpose of adapting to the situation of the company.

Accounting standards

Section 129, 2013 of the CA requires that financial statements comply with accounting standards notified under Section 133 and Section 133 stipulates that the central government may prescribe accounting standards or an addendum to it, recommended by the Association of CPAs of India, after consultation with and consideration of recommendations made by the National Financial Reporting body.

Article 7 of the Company (Accounting Standards) Regulation (2014) stipulates that, as a transition provision, the accounting standards under the Company Act 1956 (i.e., the Company (Accounting Standards) Regulation, 2006) shall be considered as accounting standards until established by the central government under Article 133.

Similar provisions were provided in subsections of sections (3A), (3B) and (3C) 211, 1956 of CA.         

Q21) What is the Format of financial statements?

A21) Format of financial statements

Section 129, 2013 of the CA requires that financial statements must be in a form or form that is provided to companies of different classes or classes of Schedule III.

Subsection (6) Section 129 prohibits the class from complying with the requirements of any of the rules made in this section or on its basis if the central government believes it is necessary to grant such exemptions in the public interest, on its own or by notice, for applications by the class or class of companies. Such exemption may be unconditionally or subject to the conditions specified in the notice.

Schedule III to the CA, 2013 provides that the disclosure requirements set out in this schedule are not replaced, in addition to the disclosure requirements set out in the accounting standards set out in the Companies Act, 2013. The additional disclosures specified in the accounting standard shall be made by a note to the account or an additional statement unless it is required to be disclosed on the surface of the financial statements. Similarly, all other disclosures required by the Companies Act shall be described in the account notes in addition to the requirements set out in this schedule. Such provisions were also found in Section 211 of the Companies Act and in Schedule VI, 1956.

However, Schedule III of the Companies Act 2013 also includes general instructions for the preparation of consolidated financial statements, and where the preparation of consolidated financial statements, i.e., consolidated balance sheets and consolidated income statements, is required, the Company shall comply with the requirements of this schedule that apply to the company in the preparation of the balance sheet and income statement. The consolidated financial statements shall also disclose information in accordance with the requirements set forth in the applicable accounting standards. It is also necessary to disclose certain additional information in the consolidated financial statements.

Section of Section(3)of the CA Section 129,2013 in addition to the financial statements it is provided on the basis of subsection(2)if the company has one or more subsidiaries, another statement containing in such a form that the salient features of the financial statements of its subsidiaries or subsidiaries may be prescribed. The central government may provide consolidation of the company's accounts by the prescribed method. Subsection description stipulates that for the purposes of this subsection, the word "Subsidiary" shall include quasi-company and joint venture.

Sub section (4)Section 129 applies to the preparation, adoption and audit of the financial statements of the holding company the provisions of this law stipulate that mutatis mutandis shall apply to the consolidated financial statements described in Subsection (3).

Rule 5, 2014 of the company (accounting) rules shall be in the form of a statement containing prominent features of the financial statements of subsidiaries or subsidiaries, affiliates or companies and joint ventures or ventures of the company under the first provision of Paragraph 3 of paragraph 129 of the Aoc-1.

Rule 6 stipulates the method of consolidation of accounting; it requires that the consolidation of the financial statements of the company must be carried out in accordance with the provisions of Schedule III of the law and the applicable accounting standards.

In 1956, there was no such provision in CA, which mandated the compulsory consolidation of financial statements by companies with subsidiaries.

However, Section 212 required a balance sheet of the holding company that contains certain matters relating to its subsidiaries and a sheet of the holding company for attachment to the balance sheet of the holding company

a)     copy of the subsidiary's balance sheet,

b)    Another set  of the profit and loss account,

c)     a copy of the board's report,

d)    a copy of the auditor's report and

e)     A statement of the interests of the holding company to the subsidiaries specified in Sub section(3).

However, subsection (2) (A), where it had subsidiaries, affiliates and joint ventures, was required to produce the balance sheet, income statement, auditor report and director report of the subsidiary in accordance with the requirements of CA, 2013. What is worth mentioning here is that CA, 2013 includes the definitions of "subsidiary" and "affiliate".

Q22) How to prepare financial statements?

A22) The preparation of monetary statements involves the method of aggregating accounting information into a uniform financial set. The completed financial statements are distributed to management, lenders, creditors and investors who use them to assess the performance, liquidity, and cash flow of the business.

Step 1: confirm receipt of vendor invoices

Compare and receive logs payable to all suppliers that may be charged. Comparing Accounts for expenses on invoices that have not been received.

Step 2: confirm the issue of customer invoices

Compare the shipment log to accounts receivable to ensure that all customer invoices have been issued. Issue an invoice that has not yet been prepared.

Step 3: generate unpaid wages

Accrues expenses for wages earned at the end of the reporting period, but not yet paid.

Step 4: calculate depreciation

To calculate depreciation and amortization for all fixed assets in accounting records.

Step 5: value stock

Perform a field inventory count to close, or use an alternative method to estimate the closing inventory balance. Use this information to derive the cost of the goods sold and record their amounts in accounting records.

Step 6: adjust your bank account

Perform bank adjustments, create journal entries, and record all the adjustments required to match accounting records to bank statements.

Step 7: post the account balance

Post all sub ledger balances to the general ledger.

Step 8: verify your account

Review the balance table account and use journal entries to adjust the account balance to match the corresponding details.

Step 9: check your finances

Print preliminary versions of financial statements and check them for errors. Repeat until all errors are corrected.

Step 10: generating income tax

Based on the corrected income statement, you will accrue income tax expenses.

Step 11: close the account

Close all sub ledgers for that period and open during the next reporting period.

Step I2: issue financial statements

Print the final version of the financial statement. Based on this information, write a footnote that accompanies the statement. Finally, prepare a cover letter explaining the key points of the financial statements. This information is then assembled into packets and distributed to a standard list of recipients.

Financial statements are the way companies tell their stories. Thanks to GAAP, there are four basic financial statements that everyone needs to prepare.

Q23) What are the Basic accounting assumptions?

A23) Basic accounting assumptions

Certain assumptions are utilized in the preparation of monetary statements. They are usually not particularly indicated because they are supposed to be abided. Disclosure is only necessary if they are not followed.

The following are generally accepted as basic accounting assumptions:

Ongoing concern

Organizations are usually considered to be of continuous concern, that is, to be in continuous operation in the near future. It is assumed that the organization has no intention, no need to stop operations or scale down.

Consistency

It is assumed that the accounting policy follows consistently from one period to another. Frequent changes are not expected.

Axial

Revenues and expenses are recorded when they are earned or incurred in the relevant period (not when money is received or paid).

Nature of accounting policy

Accounting policy refers to the method of applying these principles adopted by the organization in the preparation of accounting principles and financial statements.

There is no single list of accounting policies that apply in all situations. The different circumstances in which the organization operates make alternative accounting principles acceptable. The choice of the right accounting principles calls for a greater degree of judgment by the management of the organization.

The various standards of the Association of Certified Public Accountants of India, combined with the efforts of the government and other regulatory bodies, reduce the number of acceptable alternatives in recent years, especially in the case of legal entities, the continued efforts in this regard in the future may further reduce the number, but the availability of alternative accounting principles is not likely to be completely eliminated, with the different situations faced by the organization in mind.

Q24) From the following ledger balance presented by Sen. On 31st March, 2016 prepare a trading account:

Other information:

1. Closing value of stock for 31st March, 2016. 20,000
2. Unpaid wages reached Rs. 4,000
3. Gas and fuel were paid in advance for Rs. 1,000

A24)

Trading account for the year ended 31st March, 2016

Dr                                                                                                                             Cr

Q25). From the following details presented by Thilak for the year 31st March, 2017, we will prepare a profit and loss account.

Adjustment:

1. The unpaid salary reached Rs. 4,000
2. The rent was paid for 11 months
3. Interest expense reached Rs but was not received. 2,000.
4. Prepaid insurance has reached Rs. 2,000
5. Depreciating buildings by 10%
6. Further bad debts reached Rs. Over 3,000 of 5%、
7. The fee received in advance reached Rs. 2,000

A25)

Profit and Loss Account for the year ended 31st March, 2017

Dr.                                                                                                                                       Cr.

Working notes:

Debtors: 40,000

Less: further bad loans: 2,000: 38,000

Allowance for bad and bad debt of 5%: 38,000x5 % =Rs. 1,900

Q26) As of 31st December, 2017, from the balance below, prepare a profit and loss account.

Adjustment:

1. Rent accrued, but not yet received Rs. 500
2. Fire insurance premiums are prepaid in the range of Rs. 1,500
3. Offer the manager's Commission at 10% of the profit before meeting such a commission.

A26)

Dr.                          Trading and P/L Ac                                                                                   Cr.

Profit and Loss Account for the year ended 31st December, 2017

Dr.                                                                                                                                         Cr.

Working notes:

Manager’s Commission= Net profit before charging commission x Rate of Commission/100

Net profit = 55,500 – (18,000 + 12,000 + 8,000 + 2,500 + 5,000) = Rs. 10,000

Manager’s commission = 10,000x 10/100 = 1,000

Q27) Prepare a trading and profit and loss account from the following balances obtained from Siva books:

Adjustment:

1. Closing value of the stock on 31st December, 2016 Rs 4,500
2. The manager is entitled to receive a commission@5% of the net profit after providing such a commission.

A27)

Dr. Trading and Profit and Loss Account for the year 31st December, 2016 Cr.

Working Note:

Commission = Net profit before charging commissions x Rate of commissions/(100+ Rate of commissions) x 100

Net profit = 14,000 – (3,500 + 1,000+1,200+1,800+1,700+600) = Rs 4,200

Manager’s commission = 4,200 x 5/105 = Rs 200

Q28) From the following details, we have prepared Madhu's balance sheet and finished 31st March, 2018. During the final account creation, the following adjustments were made:

1. Unpaid debt: salary Rs. 10,000; pay Rupees. 20,000; interest on bank overdraft Rs. Bank loan Rs 3,000 and interest. 6,000
2. Provide interest on capital@10%p.a.
3. Bad debts reached Rs. Make provisions for bad debts of 10,000 and @10% to sundry debtors.
4. Closing stock reached Rs. 1,20,000
5. Provide depreciation on car @10%p.a.
6. Net profit for the year reached Rs. 96,000 after considering all the above adjustments.

A28)

In the book of Madhu

Balance Sheet as on 31st March, 2018

Q29) The following balance was extracted from Thomas's book as of 31st March, 2018 additional information:

1. Close the stock by Rs. 9,000
2. Provide depreciation@10% on machinery
3. Interest accrued on the investment Rs. 2,000

Prepare a trading account, a profit and loss account and a balance sheet.

A29)

In the book of Thomas

Dr. Trading and Profit  and Loss Account for the year ended 31st March, 2018 Cr.

Balance Sheet as on 31st March, 2018

Q30) Below is a balance extracted from Nagarajan's book as of 31st March, 2016.

After adjusting for the following, we will prepare trading and profit and loss accounts for the year ending 31st March, 2016 and balance sheet as of that date:

1. Fees received Rs in advance. 400
2. Ads paid Rs in advance. 150
3. Unpaid wages Rs. 200
4. Stock at the end was Rs. 2,100

A30)

In the book of Nagrajan

Dr. Trading and Profit and Loss Account for the year ended 31st March, 2016 Cr.

Q31) Consider the following balance extracted from Jain's book, as of 31st December, 2016. Prepare the final account.

Adjustment

1. Unpaid salaries for January, 2016 amounted to Rs. 600
2. Furniture depreciate by 10% p.a.
3. 5% p.a on interest on capital
4. Stock for 31st December, 2016 Rs 14,000

A31)

In the book of Jain

Dr. Trading and profit and Loss Account for the year ended 31st Dec,2016 Cr.

Balance Sheet as on 31st December, 2016

Q32) Edward's books include: We will prepare his trading and profit and loss a/c for the year to 31st December, 2016 and ended the balance sheet for the day.

Adjustment:

1. The closing price of stock was Rs. 1, 30,000 on 31th December, 2016.
2. Create a 5% allowance for bad debt and bad debt to sundries debtor
3. Create a provision at 2% for debtors discount
4. Interest on the loan is postponed for 9 months.

A32)

In the books of Edward

Dr. Trading and Profit and Loss Account for the year ended 31st Dec, 2016 Cr.

Balance Sheet as on 31st December, 2016