preparation of profit and loss account,balance sheet

1. SMART BOOK
ACCOUNTANCY 1
SMART BOOK SMART BOOK SMART BOOK INTERMEDIATE - FIRST YEAR
ACCOUNTANCY
SMART BOOK
UNIT –I CONCEPT OF BUSINESS
1) From the following Trial Balance of Mr. Johnson, prepare the
Trading, Profit and Loss Account and Balance Sheet for the year
ended 31-3-2014:
Dr Trial Balance as on 31-3-2014 Cr
Particulars Amount
Rs.
Particulars Amount
Rs.
Cash in hand
Cash at Bank
Purchases
Sales Returns
Wages
Salaries
Advertisement
Insurance
Furniture
Opening Stock
Machinery
Debtors
Carriage Inwards
Carriage outwards
Rent & Taxes
Drawings
Bills Receivable
6,000
12,500
78500
2000
8,000
12,500
3,000
1,100
12,000
40,000
35,000
23,000
1,000
1,500
2,500
4,800
9,000
2,52,400
Sales
Capital
Purchase Returns
Interest
Creditors
Bills Payable
Discount
1,32,000
95,000
1,000
900
10,000
11,500
2,000
2,52,400

2. SMART BOOK
ACCOUNTANCY 2
Adjustments:
1) Value of Stock as on 31-3-2014 is Rs. 37000.
2) Outstanding Wages Rs. 1,200; Salaries Rs. 2,900
3) Prepaid Insurance Rs. 450
4) Depreciate Furniture by 5%; Machinery by 10%
5) Write off Bad debts Rs. 2,000 and provide Bad debts reserve 5%.
Ans: Trading and Profit & Loss A/c of Mr. Johnson
Dr for the year ending 31-03-2014 Cr
Particulars Amount
Rs.
Amount
Rs.
Particulars Amount
Rs.
Amount
Rs.
To Opening Stock
To Purchases
Less : Returns
To Wages
Add : Outstanding
To Carriage In-
wards
To Gross Profit
To Salaries
Add : Outstanding
To Insurance
Less : Prepaid
To Advertisement
To Carriage Out-
wards
To Rent, taxes
To Bad debts
To Bad Debts Re-
serve
To Dep. On Furni-
ture
To Dep. On Ma-
chinery
To Net profit
78,500
1,000
8,000
1,200
12,500
2,900
1,100
450
40,000
77500
9,200
1,000
39,300
1,67,000
15,400
650
3,000
1,500
2,500
2,000
1150
600
3,500
11,900
42,200
By Sales
Less : Re-
turns
By Closing
Stock
By Gross
Profit
By Interest
By Discount
1,32,000
2,000 1,30,000
37,000
1,67,000
39,300
900
2,000
42,200

3. SMART BOOK
ACCOUNTANCY 3
Balance Sheet of Johnson as on 31-03-2014
Tutors Desk
 Opening stock will come in the Debit Side of Trading Account.
 Purchases will come in the Debit Side of Trading Account and
purchase returns should be deducted from it.
 Wages come in the Debit Side of Trading Account by adding
outstanding wages.
 Carriage inwards comes in the Debit Side of Trading Account.
 Sales will come in the Credit Side of Trading Account.
 Closing stock will come in the Credit Side of Trading Account.
 The Credit Total of Trading Account (MINUS) Debit total of trading
account is Gross profit.
Liabilities Amount
Rs.
Amount
Rs.
Assets Amount
Rs.
Amount
Rs.
Creditors
Bills Payable
Outstanding
Wages
Outstanding
salary
Capital
Add : Net
Profit
Less : Draw-
ings
95000
11900
106900
4800
10,000
11,500
1,200
2,900
102,100
1,27,700
Cash in hand
Cash at bank
Closing Stock
Debtors
Less : Bad
Debts
Less : Reserve
Furniture
Less : Depre-
ciation
Machinery
Less : Depre-
ciation
Prepaid Insur-
ance
Bills Receiv-
able
23,000
2,000
21,000
1150
12,000
600
35,000
3,500
6,000
12,500
37,000
19,850
11,400
31,500
450
9,000
1,27,700

4. SMART BOOK
ACCOUNTANCY 4
 Salaries will come in the Debit Side of profit and Loss Account and
outstanding salaries will be added to it.
 Insurance will come in the Debit Side of profit and Loss Account and
prepaid Insurance will be deducted from it.
 Advertisement will come in the Debit Side of profit and Loss
Account.
 Carriage outwards will come in the Debit Side of profit and Loss
Account.
 Rent, taxes will come in the Debit Side of profit and Loss Account.
 Bad Debts will come in the Debit side of profit and Loss Account.
 Bad Debts Reserve will come in the Debit Side of profit and Loss
Account.
 Depreciation on Furniture and Depreciation on machinery will come
in the Debit Side of profit and Loss Account.
 Interest Received comes in the Credit Side of profit and Loss
Account .
 Discount Received comes in the Credit Side of profit and Loss
Account.
 The Total credit of profit and Loss Account (MINUS) Total Debit of
profit and Loss Account is Net profit.
 Creditors will come in the liabilities side of Balance Sheet.
 Bill payable will come in the liabilities side of Balance Sheet.
 Outstanding wages will come in the liabilities side of Balance Sheet.
 Outstanding salary will come in the liabilities side of Balance Sheet.
 Capital will come in the liabilities side of Balance sheet. And Net
profit should be added to capital.
 Drawings should be deducted from capital
 Cash in hand will come in the Assets side of Balance sheet.
 Cash at Bank will come in the Assets side of Balance sheet.
 Closing stock will come in the Assets side of Balance sheet.
 Debtors will come in the Assets side of Balance sheet and Bad Debt
and Reserve for Bad Debts will be deducted from Debtors.
 Furniture will come in the Assets side of Balance Sheet and
depreciation on Furniture will be deducted from it.
 Machinery will come in the Assets side of Balance sheet and
depreciation on machinery will be deducted from it.

5. SMART BOOK
ACCOUNTANCY 5
2) From the following Trial Balance of Mr. kiran, prepare
the Trading, Profit and Loss account for the year ended
31.12.2013.
Dr Trial Balance as on 31.12.2013 Cr
Adjustments:
1.Closing Stock Rs. 56950
2.Depreciate Machinery by 10%, Patents by 15%
3.Outstanding Salaries Rs. 2400
4.Prepaid Insurance Rs. 320
5.Create 5% reserve for Bad Debts on Debtors.
Particulars
Amount
Rs. Particulars
Amount
Rs.
Cash balance
Bank balance
Purchases
Return Inward
Wages
Fuel
Carriage Outward
Carriage Inward
Opening Stock
Buildings
Machinery
Patents
Salaries
General expenses
Insurance
Drawing
Debtors
12000
42255
1,67,165
1,600
35,830
6000
2650
3150
43500
75,000
30,000
10,500
25,000
3,000
1600
22650
23000
504900
Sales
Return Outward
Creditors
Capital
3,15,000
2,900
12,000
175,000
504900

6. SMART BOOK
ACCOUNTANCY 6
Ans.
Trading and Profit & Loss A/c of Mr Kiran
Dr for the year ending 31-12-2013 Cr
Particulars Amount
Rs.
Amount
Rs.
Particulars Amount
Rs.
Amount
Rs.
To Opening Stock
To Purchases
Less : Returns
To Wages
To Fuel
To Carriage
Inward
To Gross Profit
To Salaries
Add : Out-
standing
To General
Expenses
To Insurance
Less : Prepaid
To Carriage Out-
wards
To Dep. On
Machinery
To Dep. On
Patents
To Bad Debts
Reserve
To Net Profit
167165
2,900
25,000
2,400
1600
320
43,500
1,64,265
35,830
6,000
3,150
1,17,605
3,70,350
27,400
3,000
1280
2,650
3,000
1,575
1150
77550
117605
By Sales
Less : Re-
turns
By Closing
Stock
By Gross
Profit
315000
1600 313400
56950
3,70,350
1,17605
117605

7. SMART BOOK
ACCOUNTANCY 7
Balance Sheet of Mr. kiran as on 31-12-2013
 Opening stock will come in the Debit Side of Trading Account.
 Purchases will come in the Debit Side of Trading Account and
purchase returns should be deducted from it.
 Wages come in the Debit Side of Trading Account.
 Carriage inwards comes in the Debit Side of Trading Account.
 Fuel comes in the Debit Side of Trading Account.
 Sales will come in the Credit Side of Trading Account
 Closing stock will come in the Credit Side of Trading Account
 The Credit Total of Trading Account (MINUS) Debit total of Trading
Account is Gross profit.
Liabilities Amount
Rs.
Amount
Rs.
Assets Amount
Rs.
Amount
Rs.
Outstanding
Salaries
Creditors
Capital
Add :
Net Profit
Less : Draw-
ings
175,000
77,550
2,52,550
22650
2,400
12,000
229900
2,44,300
Prepaid In-
surance
Cash
Balance
Bank
Balance
Closing
Stock
Debtors
Less : Bad
Debts
Machinery
Less :
Depreciation
Patents
Less :
Depreciation
Buildings
23,000
1150
30,000
3,000
10,500
1,575
320
12000
42255
56950
21,850
27,000
8,925
75,000
2,44,300
Tutors Desk

8. SMART BOOK
ACCOUNTANCY 8
 Salaries will come in the Debit Side of profit and Loss Account and
outstanding salaries will be added to it
 Insurance will come in the Debit Side of profit and Loss Account and
prepaid Insurance will be deducted from it
 General expenses will come in the debit side of profit and loss
account.
 Carriage outwards will come in the Debit Side of profit and Loss
account.
 Bad Debts Reserve will come in the Debit Side of profit and Loss
account.
 Depreciation on patents and Depreciation on machinery will come in
the Debit Side of profit and Loss Account.
 The Total credit of profit and Loss Account (MINUS) Total Debit of
profit and Loss Account is Net profit.
 Creditors will come in the liabilities side of Balance Sheet.
 Outstanding salary will come in the liabilities side of Balance Sheet.
 Capital will come in the liabilities side of Balance sheet. And Net
profit should be added to capital.
 Drawings should be deducted from capital.
 Cash balance will come in the Assets side of Balance sheet.
 Bank balance will come in the Assets side of Balance sheet.
 Closing stock will come in the Assets side of Balance sheet.
 Debtors will come in the Assets side of Balance sheet and Reserve
for Bad Debts will be deducted from Debtors.
 Patents will come in the Assets side of Balance Sheet and
Depreciation on patents will be deducted from it.
 Machinery will come in the Assets side of Balance sheet and
Depreciation on machinery will be deducted from it.
 Prepaid insurance will come in the Assets side of Balance Sheet.
Building will come in the assets of the balance sheet.

9. SMART BOOK
ACCOUNTANCY 9
3) From the following Trial Balance of Mr. Manohar, prepare the
Trading, Profit & Loss account and Balance Sheet for the year
ended 31.12.2010.
Dr Trial Balance as on 31.12.2010 Cr
Adjustments:
1) Outstanding Wages Rs. 3,100 and Outstanding Salaries Rs. 2,225
2) Prepaid Insurance Rs. 125
3) Create 5% reserve for Bad Debts on Debtors
4) Depreciate Furniture by Rs. 500 and Machinery by Rs. 1300
5) Closing Stock Rs. 24,500
Particulars Amount
Rs.
Particulars Amount
Rs.
Salaries
Purchases
Wages
Carriage on Purchases
Office Expenses
Commission
Debtors
Furniture
Machinery
Insurance
Bills Receivable
Cash balance
Bank balance
9,800
21,600
12000
1300
850
500
15,000
5,000
13,000
500
2,300
23000
42,750
1,47,600
Sales
Creditors
Capital
Bills Payable
87,000
12,000
45,000
3,600
1,47,600

10. SMART BOOK
ACCOUNTANCY 10
Ans.
Trading and Profit & Loss A/c of Mr. Manohar
for the year ended 31-12-2010
Dr Cr
Particulars Amount
Rs.
Amount
Rs.
Particulars Amount
Rs.
Amount
Rs.
To Purchases
To Wages
Add : Out-
standing
To Carriage on
Purchases
To Gross Profit
To Salaries
Add : Out-
standing
To Office Ex-
penses
To Commission
To Insurance
Less : Prepaid
To Reserve for
Bad Debts
To Dep. On
Furniture
To Dep. On
Machinery
To Net Profit
(Transferred to
Capital A/c)
12,000
3,100
9,800
2,225
500
125
21,600
15100
1,300
73,500
1,11,500
12,025
850
500
375
750
500
1300
57200
73,500
By Sales
By Closing
Stock
By Gross
Profit
87,000
24,500
1,11500
73,500
73,500

11. SMART BOOK
ACCOUNTANCY 11
Balance Sheet of Mr. Manohar as on 31-12-2010
 Purchases will come in the Debit Side of Trading Account.
 Wages come in the Debit Side of Trading Account by adding
outstanding wages. Carriage on purchases is also known as
carriage inward, it comes in the debit side of trading account.
 Sales will come in the Credit Side of Trading Account.
 Closing stock will come in the Credit Side of Trading Account
 The Credit Total of Trading Account (MINUS) Debit total of trad-
ing account is Gross profit.
 Salaries will come in the Debit Side of profit and Loss Account and
outstanding salaries will be added to it.
 Insurance will come in the Debit Side of profit and Loss Account
and prepaid Insurance will be deducted from it.
 Office Expenses will come in the Debit Side of profit and Loss
Account.
Liabilities
Amount
Rs.
Amount
Rs. Assets
Amount
Rs.
Amount
Rs.
Capital
Add : Net
Profit
Creditors
Bills Payable
Outstanding
Wages
Outstanding
Salaries
45,000
57,200 102200
12,000
3,600
3,100
2225
123125
Cash in hand
Cash at bank
Bills Receiv-
able
Machinery
Less : Depre-
ciation
Furniture
Less : Depre-
cation
Debtors
Less: Re-
serves for Bad
debts
Closing Stock
Prepaid Insur-
ance
13,000
1300
5,000
500
15,000
750
23,000
42,750
2,300
11,700
4500
14,250
24,500
125
123125
Tutors Desk

12. SMART BOOK
ACCOUNTANCY 12
 Commission will come in the Debit Side of profit and loss.
 Bad Debts Reserve will come in the Debit Side of profit and Loss
Account.
 Depreciation on Furniture and Depreciation on machinery will come
in the Debit Side of profit and Loss Account.
 The Total credit of profit and Loss Account (MINUS) Total Debit of
profit and Loss Account is Net profit.
 Creditors will come in the liabilities side of Balance Sheet.
 Bill payable will come in the liabilities side of Balance Sheet.
 Outstanding wages will come in the liabilities side of Balance Sheet.
 Outstanding salary will come in the liabilities side of Balance Sheet.
 Capital will come in the liabilities side of Balance sheet. And Net
profit should be added to capital.
 Cash in hand will come in the Assets side of Balance sheet.
 Cash at Bank will come in the Assets side of Balance sheet.
 Closing stock will come in the Assets side of Balance sheet.
 Debtors will come in the Assets side of Balance sheet and reserve for
Bad Debts will be deducted from Debtors.
 Furniture will come in the Assets side of Balance Sheet and
depreciation on Furniture will be deducted from it.
 Machinery will come in the Assets side of Balance sheet and
depreciation on machinery will be deducted from it.
 Prepaid insurance will come in the Assets side of Balance Sheet.
 Bills Receivable will come in the Assets side of Balance Sheet.

13. SMART BOOK
ACCOUNTANCY 13
4) From the following particulars, prepare Trading, Profit & Loss
Account and balance Sheet for the year ended 31-03-2013
Dr Cr
Adjustments:
1) Closing Stock Rs. 84,800
2) Interest on Capital 6%, is to be provided
3) Write off Rs. 3,800 as Bad Debts and provide 5% Reserve for
Doubtful Debts.
4) Outstanding Wages Rs. 2,600
Particulars Amount
Rs.
Particulars Amount
Rs.
Cash
Factory Insurance
Audit Charges
Goodwill
Wages
Debtors
Opening Stock
Machinery
Purchases
Carriage Inwards
Salaries
Office Rent
bank
Rent paid in advance
98,200
4250
3,500
30,000
8500
40,000
28500
56400
126500
2,000
32,500
8,000
100000
1000
539350
43,000
14,500
1,78000
16500
273000
3,000
7850
3,500
539350
Creditors
Bills Payable
Capital
Commission
received
Sales
Return Out-
wards
Interest
received
Outstanding
Salaries

14. SMART BOOK
ACCOUNTANCY 14
By Sales
By Closing
Stock
By Gross
Profit
By Commis-
sion Re-
ceived
By Interest
Received
Ans.
Trading and Profit & Loss A/c for the year ended
Dr 31-03-2013 Cr
Particulars
Amount
Rs.
Amount
Rs. Particulars
Amount
Rs.
Amount
Rs.
To Opening
Stock
To Purchases
Less: Returns
To Carriage In-
wards
To Factory In-
surance
To Wages
Add: Out-
standing
To Gross Profit
To Audit
Charges
To Salaries
To Office Rent
To Interest on
Capital
To Bad Debts
To Bad Debts
Reserve
To Net Profit
126500
3,000
8,500
2,600
28,500
123500
2000
4250
11,100
188,450
3,57,800
3,500
32,500
8,000
10,680
3,800
1,810
152,510
212,800
2,73,000
84,800
3,57,800
188,450
16,500
7,850
212,800

15. SMART BOOK
ACCOUNTANCY 15
Balance Sheet as on 31-03-2013
 Opening stock will come in the Debit Side of Trading Account.
 Purchases will come in the Debit Side of Trading Account and
purchase returns should be deducted from it.
 Wages come in the Debit Side of Trading Account by adding
outstanding wages.
 Carriage inwards comes in the Debit Side of Trading Account.
 Factory insurance comes in the Debit Side of Trading Account.
 Sales will come in the Credit Side of Trading Account.
 Closing stock will come in the Credit Side of Trading Account
 The Credit Total of Trading Account (MINUS) Debit total of Trading
account is Gross profit.
Liabilities
Amount
Rs.
Amount
Rs. Assets
Amount
Rs.
Amount
Rs.
Outstanding
Salaries
Outstanding
Wages
Creditors
Bills Payable
Capital
Add:
Interest
Add:
Net Profit
178,000
10,680
188680
152,510
3,500
2,600
43,000
14,500
341190
404790
Cash
Machinery
Debtors
Less: Bad
Debts
Less:
Reserve
Closing Stock
Goodwill
Bank
Rent paid in
advance
40,000
3,800
36,200
1,810
98,200
56,400
34,390
84,800
30,000
100000
1,000
404790
Tutors Desk

16. SMART BOOK
ACCOUNTANCY 16
 Salaries will come in the Debit Side of profit and Loss Account.
 Audit charges will come in the Debit Side of profit and Loss Account.
 Office rent will come in the Debit Side of profit and Loss Account.
 Interest on capital will come in the Debit Side of profit and Loss
Account.
 Bad Debts will come in the Debit side of profit and Loss Account.
 Bad Debts Reserve will come in the Debit Side of profit and Loss
Account.
 Interest Received comes in the Credit Side of profit and Loss
Account .
 Discount Received comes in the Credit Side of profit and Loss
Account
 The Total credit of profit and Loss Account (MINUS) Total Debit of
profit and Loss Account is Net profit.
 Creditors will come in the liabilities side of Balance Sheet.
 Bill payable will come in the liabilities side of Balance Sheet.
 Outstanding wages will come in the liabilities side of Balance Sheet.
 Outstanding salary will come in the liabilities side of Balance Sheet.
 Capital will come in the liabilities side of Balance sheet. And Net
profit should be added to capital.
 Interest on capital should be added to capital.
 Cash will come in the Assets side of Balance sheet.
 Closing stock will come in the Assets side of Balance sheet.
 Debtors will come in the Assets side of Balance sheet and Bad Debt
and Reserve for Bad Debts will be deducted from Debtors.
 Machinery will come in the Assets side of Balance sheet.
 Good will come in the Assets side of Balance Sheet.
 Bank will come in the Assets side of Balance Sheet
 Rent paid in advance will come in the Asset side of Balance sheet.

17. SMART BOOK
ACCOUNTANCY 17
5) The following is the Trial Balance of Ms. swapna. Prepare
Trading and Profit & Loss account for the year ending 31-12-
2011 and Balance Sheet as on that date.
Ans:
Trial Balance
Adjustments:
1) Closing Stock as on 31.12.2011 Rs. 86700
2) Rent Accrued Rs. 500
3) Outstanding Wages Rs.1200, Salaries Rs. 2650
4) Depreciation on Buildings 5%, Furniture 10%
5) Bad Debts Rs. 7125, Provision for Bad Debts 5% maintained
Particulars
Debit
Rs.
Credit
Rs.
Purchases, Sales
Returns
Capital
Drawings
Advertisement
Salaries
Carriage Inwards
Custom Duties
Wages
Buildings
Furniture
Rent
Discount
Debtors, Creditors
Bank Loan
165000
4250
4,000
6,000
19800
1,000
1500
3,800
195,000
60,000
1350
138000
599700
315000
5000
138000
1200
1685
16000
122815
599700

18. SMART BOOK
ACCOUNTANCY 18
Ans.
Trading and Profit & Loss A/c of Ms. swapna as on 31-12-2011
Dr cr
Particulars
Amount
Rs.
Amount
Rs. Particulars
Amount
Rs.
Amount
Rs.
To Purchase a/c
Less: Returns
To Carriage
Inwards
To Custom
Duties
To Wages
Add: Out-
standing
To Gross Profit
To Salaries
Add:
Outstanding
To Advertise-
ment
To Discount
To Dep. On
Building
To Dep. On
Furniture
To Bad Debts
To Bad Debts
Reserve
(1,38,000 –
7125 =
130875)
5
(130875 X 100
= 6544)
To Net Profit
165,000
5,000
3,800
1200
19800
2650
160,000
1,000
1500
5000
229950
397450
22450
6,000
1350
9750
6000
7125
6544
174116
233335
By Sales
Less: Returns
By Closing
Stock
By Gross Profit
By Rent
Add: Accrued
By Discount
310750
86700
397450
229950
1,700
1685
233335
315,000
4,250
1200
500

19. SMART BOOK
ACCOUNTANCY 19
Balance sheet of Ms. Swapna as on 31-12-2011
 Purchases will come in the Debit Side of Trading Account and
purchase returns should be deducted from it.
 Wages come in the Debit Side of Trading Account by adding
outstanding wages.
 Carriage inwards comes in the Debit Side of Trading Account.
 Custom Duty comes in the Debit Side of Trading Account.
 Sales will come in the Credit Side of Trading Account.
 Closing stock will come in the Credit Side of Trading Account.
 The Credit Total of Trading Account (MINUS) Debit total of Trading
Account is Gross profit.
 Salaries will come in the Debit Side of profit and Loss Account and
outstanding salaries will be added to it.
Liabilities
Amount
Rs.
Amount
Rs. Assets
Amount
Rs.
Amount
Rs.
Outstanding
Wages
Outstanding
salaries
Creditors
Bank Loan
Capital
Add: Net
Profit
Less:
Drawings
138000
174116
312116
4000
1200
2650
16000
122815
308116
450781
Closing
Stock
Debtors
Less: Bad
Debts
Less:
Reserve
Furniture
Less:
Depreciation
Buildings
Less:
Depreciation
Accrued
Rent
138000
7125
130875
6544
60000
6000
195000
9750
86700
124331
54000
185250
500
450781
Tutors Desk

20. SMART BOOK
ACCOUNTANCY 20
 Advertisement will come in the Debit Side of profit and Loss Account.
 Discount will come in the Debit Side of profit and Loss Account.
 Bad Debts will come in the Debit side of profit and Loss Account.
 Bad Debts Reserve will come in the Debit Side of profit and Loss
account.
 Depreciation on Furniture and Depreciation on building will come in
the Debit Side of profit and Loss Account.
 Discount Received comes in the Credit Side of profit and Loss
account.
 Rent Received comes in the Credit Side of profit and Loss Account
and it will added by Accrued Rent.
 The Total credit of profit and Loss Account (MINUS) Total Debit of
profit and Loss Account is Net profit.
 Creditors will come in the liabilities side of Balance Sheet.
 Bank loan will come in the liabilities side of Balance Sheet.
 Outstanding wages will come in the liabilities side of Balance Sheet.
 Outstanding salary will come in the liabilities side of Balance Sheet.
 Capital will come in the liabilities side of Balance sheet. And Net
profit should be added to capital.
 Drawings should be deducted from capital
 Closing stock will come in the Assets side of Balance sheet.
 Debtors will come in the Assets side of Balance sheet and Bad Debt
and Reserve for Bad Debts will be deducted from Debtors.
 Furniture will come in the Assets side of Balance Sheet and
 Depreciation on Furniture will be deducted from it.
 Building will come in the Assets side of Balance sheet and
depreciation on machinery will be deducted from it.
 Accrued rent will come in the Assets side of Balance Sheet.