Final account is prepared by every business organization at the end of accounting period. It contents Trading A/c, Profit and Loss A/c and Balance Sheet.
Final Accounts Problem and Solution
final-accounts-problem-and-solution-with-adjustments-closing-stock-outstanding-prepaid-p6
Preparation of Final Accounts
Final accounts are also known as financial statements.
These statements are prepared to know about operating results and overall financial position to the company.
Joint Stock Company needs to prepare its final account at the end of every financial year.
Generally, final accounts of a manufacturing company involve the following statements:
(1) Manufacturing account
(2) Trading account
(3) Profit and loss account
(4) Profit and loss appropriation account
(5) Balance sheet
According to Company Act, annual financial statement should be prepared by the board of directors of a public limited company every year at least thirty (30) days prior to the holding of its annual general meeting.
In the case of private limited company, within the six months of the expiry of its financial year.
According to company act, financial statement involves the following statements:
(a) Balance sheet as at the last date of the accounting or financial year.
(b) Profit and loss account of the accounting or financial year.
(c) Description of cash flow of the accounting or financial year.
Meaning of Final Accounts
Final account is prepared by every business organization at the end of accounting period.
Trading account is prepared to determine gross profit or gross loss of the company.
Profit and loss account is prepared to find out net profit or net loss of the business activities of the company.
Balance sheet is prepared to find out financial position of the organization.
Adjustment entry |
Journal entry |
Effects on |
|
Closing stock |
Closing stock account |
Dr |
Show in credit side of trading account |
|
To Trading account |
|
Show in assets side of B/S |
Outstanding expenses |
Related expenses account |
Dr |
Added with related expenses in trading/P&L A/c |
|
To O/s related expenses A/c |
|
Show in liabilities side of B/S |
Prepaid expenses |
Prepaid expenses account |
Dr |
Deducted from related expenses in trading/P&L A/c |
|
To Related prepaid exp A/c |
|
Show in assets side of B/S |
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Accounting Equation |
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Basic Journal Entries in Nepali |
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Basic Journal Entries |
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Journal Entry and Ledger |
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Ledger |
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Subsidiary Book |
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Cash Book |
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Trial Balance & Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Final Accounts: Class 11 |
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Adjustment in Final Accounts |
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Capital and Revenue |
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Single Entry System |
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Non-Trading Concern |
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Government Accounting |
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Goswara Voucher (Journal Voucher) |
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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 6A
Itex Traders has following trial balance on 31st December 2021:
Particulars |
Debit $ |
Credit $ |
Drawings and capital |
30,000 |
300,000 |
Machinery |
75,000 |
|
Motor bike |
125,000 |
|
Stock (1 Jan) |
60,000 |
|
Equipment |
36,000 |
|
Bills receivable/payable |
60,000 |
40,000 |
Cash in hand |
12,300 |
|
Wages |
150,000 |
|
Salaries |
96,000 |
|
Purchase and sales |
350,000 |
647,600 |
Debtors and creditors |
55,000 |
25,000 |
Return |
10,000 |
15,000 |
Office expenses |
12,000 |
|
Carriage inward |
16,300 |
|
Carriage outward |
25,000 |
|
Bad debts |
10,000 |
|
Discount allowed/received |
3,000 |
8,000 |
Sundry income |
− |
10,000 |
General reserve |
|
20,000 |
Bank overdraft |
|
60,000 |
Total |
11,25,600 |
11,25,600 |
Additional information:
(a) Closing stock valued $80,000.
(b) Prepaid salary $6,000.
(c) Outstanding office expenses $14,000.
Required: (1) Trading account; (2) Profit and loss account; (3) Balance sheet
[Answer: GP = $156,300; Net loss = $20,300; BS = $449,300]
SOLUTION:
Trading Account
Itex Traders
As on 31st December 2021
Particulars |
|
Amount |
Particulars |
|
Amount |
To Opening stock |
|
60,000 |
By Sales |
647,000 |
|
To Purchase |
350,000 |
|
Less: Return |
(10,000) |
637,600 |
Less: Return |
(15,000) |
335,000 |
By Closing stock |
|
80,000 |
To Wages |
|
150,000 |
|
|
|
To Carriage inward |
|
16,300 |
|
|
|
To Gross profit |
|
156,300 |
|
|
|
|
|
717,600 |
|
|
717,600 |
Profit and Loss Account
Particulars |
|
Amount |
Particulars |
|
Amount |
To Salary |
96,000 |
|
By Gross profit |
|
156,300 |
Less: Prepaid |
+6,000 |
90,000 |
By Discount received |
|
8,000 |
To Office expenses |
12,000 |
|
By Sundry income |
|
10,000 |
Add: Outstanding |
+14,000 |
26,000 |
|
|
|
To Carriage outward |
|
25,000 |
|
|
|
To Bad debts |
|
10,000 |
|
|
|
To Discount allowed |
|
3,000 |
|
|
|
To Net profit |
|
20,300 |
|
|
|
|
|
174,300 |
|
|
174,300 |
Balance Sheet
Itex Traders
As on 31st December 2021
Liabilities + capital +profit |
|
Amount |
Assets |
|
Amount |
Capital |
300,000 |
|
Cash in hand |
|
− |
Add: Net profit |
20,000 |
|
Cash at bank |
|
12,300 |
Less: Drawings |
(30,000) |
|
Machinery |
|
75,000 |
Bills payable |
|
290,300 |
Motor bike |
|
125,000 |
Creditors |
|
40,000 |
Equipment |
|
36,000 |
General reserve |
|
25,000 |
Bills receivable |
|
60,000 |
Bank overdraft |
|
20,000 |
Debtors |
|
55,000 |
Outstanding office exp. |
|
60,000 |
Prepaid salary |
|
6,000 |
|
|
14,000 |
Closing stock |
|
80,000 |
|
|
449,300 |
|
|
449,300 |
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Problems and Answers of Final Accounts |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 6A
RS Trading House has following trial balance on 31st December 2021:
Particulars |
Debit $ |
Credit $ |
Drawings and capital |
20,000 |
200,000 |
Machinery |
50,000 |
− |
Motor bike |
75,000 |
− |
Stock (Inventory, 1 Jan) |
40,000 |
− |
Equipment |
24,000 |
− |
Bills receivable/payable |
40,000 |
20,000 |
Cash at bank |
8,200 |
− |
Wages |
100,000 |
− |
Salaries |
64,000 |
− |
Purchase and sales |
213,500 |
400,000 |
Debtors and creditors |
35,000 |
15,000 |
Return |
9,000 |
5,000 |
Office expenses |
6,000 |
− |
Carriage inward |
6,300 |
− |
Bad debts |
5,000 |
− |
Discount allowed/received |
4,000 |
10,000 |
Sundry income |
− |
30,000 |
General reserve |
− |
20,000 |
Total |
700,000 |
700,000 |
Additional information:
(a) Closing stock valued $52,000.
(b) Outstanding salary $26,000.
(c) Prepaid wages $4,000.
Required: (1) Trading account; (2) Profit and loss account; (3) Balance sheet
[Answer: Gross profit = $92,200; Net loss = $27,200; Balance sheet = $288,200]
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