Final Accounts: Problem and Solution with Adjustments

Published on: September 26, 2020

Problem and Solution of Final Accounts with Adjustments

Every business firm prepares final accounts at the end of accounting year; here are the final accounts problem and solution with adjustments.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 10

The trial balance of Honey Company Ltd as on 31^st March 2020 is given below:

Additional information:

a. Value of closing stock Rs 245,000

b. Appreciate land and building by 5%,

c. Depreciate equipment 20% and motorbike Rs 4,000

d. Provision for bad debts to be maintained at 5%

e. Transfer Rs 40,000 to general reserve and assets replacement fund Rs 48,250.

f. Board of directors proposed 10% dividend on paid up capital.

g. Wages outstanding Rs 5,000

h. Monthly godown rend is Rs 4,500.

i. Advance insurance expired by Rs 6,750.

j. Entire advance commission earned.

Required: (1) Trading and profit and loss account; (2) Profit and loss appropriation account; (3) Balance sheet

[Answer: GP = Rs 361,000; NP = Rs 165,500;

Surplus = Rs 152,000; BS = Rs 11,77,000]

SOLUTION:

Trading Account

Honey Company Ltd
for the year ended 31^st March 2020

Profit and Loss Account

Particulars		Amount	Particulars		Amount
To Salaries		85,500	By Gross profit b/d		3,61,000
To Discount		5,000	By Appreciation on land		22,500
To Sundry expenses		30,000	By Interest on Investment	Nil
To Interest on debenture	12,000		Add: Accrued interest	+12,000	12,000
Add: O/s interest	Nil	12,000	Advance commission earned		6,500
To Rent and rates	45,000
Add: O/s rent	+9,000	54,000
To Depreciate on:
Equipment	34,000
Motorbike	+4,000	38,000
To Bad debts	Nil
Add: New Bad debts	+2,500	2,500
To Prepaid insurance expired		6,750
To Net profit c/d		1,68,250
		4,02,000			4,02,000

Profit and Loss Appropriation (Retained Earnings) Account
For the year ended 31^st March 2020

Particulars	Amount	Particulars	Amount
To General reserve	40,000	By Balance b/d	70,000
To Proposed dividend on equity shares	50,000	By Net profit b/d	168,250
To Assets replacement fund	48,250
To Surplus	100,000
	238,250		238,250

Balance Sheet

Honey Company Ltd
for the year ended 31^st March 20XX

#####

PROBLEM AND ANSWERS

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 10A

The trial balance of BSB Company Ltd is given to below on 31^st December 2019:

Particulars	Amount Dr	Particulars	Amount Cr
Salaries	1,50,000	Gross profit	3,80,000
Sundry debtors	40,000	5% Debentures	1,00,000
Prepaid rent	20,000	Advance income	5,000
Plant and machinery	3,00,000	Discount received	3,000
Land	2,00,000	Sundry creditors	32,000
Building	3,00,000	Short term loan	50,000
Furniture	50,000	Provision for doubtful debts	2,000
Tax paid of last year	20,000	General reserve	10,000
Investment in shares	30,000	P&L appropriation account	2,00,000
Cash at bank	12,000	*Paid up capital:*	.
Discount allowed	7,000	10,000 equity shares @ Rs 50	5,00,000
Carriage on sales	10,000
General expenses	5,000
Insurance	7,000
Selling and distribution	8,000
Interest on debenture	2,500
Sundry expenses	20,500
Preliminary expenses	5,000
Goodwill	40,000
Closing stock	50,000
Bad debts	5,000
	12,82,000		12,82,000