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.

PROBLEM AND SOLUTION FINAL ACCOUNTS

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

PROBLEM: 11

Authorized capital of the Max Company Ltd is Rs 10,00,000 divided into 6,000 equity shares of Rs 100 each and 4,000; 6% preference shares of Rs 100 each. Other information is on 31^st December 2019:

Name of ledgers	Amount	Name of ledgers	Amount
Paid up capital 5,000 shares @ Rs 100	5,00,000	Calls in arrears	5,000
10% Debenture	2,00,000	Sundry creditors	50,000
Bills payable	20,000	Land and building	2,90,000
Plant and machinery	2,00,000	Furniture	1,50,000
Investment in government bonds	35,000	Sundry debtors	60,000
Cash at bank	93,000	Sales	5,80,000
Stock on 1^st January	150,000	Sales return	5,000
Wages	50,000	Carriage inwards	5,000
Office salaries	60,000	Rent, rates and taxes	15,000
Bad debts	1,000	Provision for bad debts	1,000
Sundry expenses	5,000	Carriage outward	1,000
Audit fees	6,000	Debenture interest	10,000
Employee bonus	10,000	bad debts recovered	5,000
Discount and commission earned	10,000	Purchase	2,50,000
Advance internet expenses	5,000	Net profit last year	50,000
Discount on issue of debentures	10,000

Additional information:

a.	Provide 10% depreciation on plant and machinery and furniture
b.	A fire broke out in the factory and destroyed material worth of Rs 10,000 but the insurance company accepted claim of Rs 5,000
c.	Outstanding office salaries amounted to Rs 5,000
d.	Provide 5% reserve for doubtful debts
e.	The directors decided to transfer Rs 20,000 and Rs 15,000 on reserve fund and assets replacement fund respectively.
f.	Stock was valued at Rs 55,000
g.	Provision for pension fund Rs 20,000

Required: (1) Trading account; (2) Profit and loss account; (3) Profit and loss appropriation account; (4) Balance sheet

[Answer: Gross profit = Rs 185,000; Net profit = Rs 11,000;

Surplus = Rs 30,000; Balance sheet = Rs 865,000;

SOLUTION

Trading Account

Max Company Ltd
As on 31 December 2019

Particulars		Amount	Particulars		Amount
To Stock		1,50,000	By Sales	580,000
To Purchase	250,000		Less: Sales return	(5,000)	5,75,000
Less: Loss by fire	(10,000)	2,40,000	By Closing stock		55,000
To Wages		50,000
To Carriage inwards		5,000
To Gross Profit c/d		1,85,000
		6,30,000			6,30,000

Profit and Loss Account

Max Company Ltd
As on 31 December 2019

Particulars		Amount	Particulars	Amount
To Office salaries	60,000		By Gross profit b/d	185,000
Add: O/s	+ 5,000	65,000	By Discount and comm.	10,000
To Bad debts	1,000		By Provision for bad debts	1,000
Add: New BD	Nil
Add: RBD	+ 3,000	4,000	By Bad debts recovered	5,000
To Sundry expenses		5,000
To Audit fees		6,000
To Employee bonus		10,000
To Rent, rates and taxes		15,000
To Carriage outward		1,000
To Carriage outward
To Debenture interest	10,000
Add: O/s interest	+10,000	20,000
To Depn on:
Plant and machinery	20,000
Furniture	+15,000	35,000
To Provision for pension fund		20,000
To Loss by fire (10,000 – 5,000)		5,000
To Net profit		15,000
		2,01,000		201,000

Profit and Loss Appropriation Account
As on 31 December 2019

Particulars	Amount	Particulars	Amount
To Reserve fund	20,000	By Net profit last year	50,000
To Assets replacement fund	15,000	By Net profit	15,000
To Surplus	30,000
	65,000		65,000

Balance Sheet

Max Company Ltd
As on 31 December 2019

Liabilities + capital +profit		Amount	Assets		Amount
Authorized capital			Goodwill		Nil
6,000 equity shares @ Rs 100		600,000	Fixed assets
4,000; 6% P. shares @ Rs 100		400,000	Land and building		290,000
Issued and paid up capital			Plant and machinery	200,000
3,000 Eq. shares @ Rs 100	300,000		Less: Depn	(20,000)	180,000
Less: calls in arrears	(5,000)	295,000	Furniture	150,000
2,000; 6% P. shares @ Rs 100		200,000	Less: Depn	(15,000)	135,000
Reserve, fund and surplus			Investment
Reserve fund		20,000	Investment in Govt. bond		35,000
Assets replacement fund		15,000
Surplus		30,000	Current assets
			Sundry debtors	60,000
Secured and unsecured loan			Less: Bad debts	Nil
10% Debentures	200,000			60,000
Add: O/s interest	10,000		Less: RBD	(3,000)	57,000
			Cash at bank		93,000
Current liabilities		210,000	Closing stock		55,000
Sundry creditors			Insurance claim receivable		5,000
Bills payable		50,000	Loans and Advance
O/s salary		20,000	Advance internet expenses		5,000
		5,000	Miscellaneous Expenses
Provisions			Discount on issue of debentures		10,000
Provision for pension fund		20,000
		865,000			865,000

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Share (Accounting for Share)	http://tiny.cc/889jkz
Share in Nepali	http://tiny.cc/k99jkz
Debentures	http://tiny.cc/yeakkz
Final Account: Class 12	http://tiny.cc/e89jkz
Final Account in Nepali	http://tiny.cc/w89jkz
Work Sheet	http://tiny.cc/579jkz
Ratio Analysis (Accounting Ratio)	http://tiny.cc/4fakkz
Fund Flow Statement	http://tiny.cc/wiakkz
Cash Flow Statement	http://tiny.cc/8gakkz
Theory Accounting Xii	http://tiny.cc/nfakkz
Theory: Cost Accounting	http://tiny.cc/tfakkz
Cost Accounting	http://tiny.cc/p29jkz
LIFO−FIFO	http://tiny.cc/dgakkz
Cost Sheet, Unit Costing	http://tiny.cc/w49jkz
Cost Reconciliation Statement	http://tiny.cc/829jkz

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PROBLEM AND ANSWERS

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

PROBLEM: 11A

The authorized capital of Everest Company Ltd is Rs 10,00,000 divided into 6,000 equity shares @ Rs 100 and 4,000; 7% preference shares @ Rs 100. 50% of both shares were issued. The trial balance at the end of December 2019 is as under:

Particulars	Amount Dr	Particulars	Amount Cr
Building	4,50,000	Reserve for doubtful debts	2,000
Plant and machinery	1,40,000	Reserve fund	13,000
Account receivable	10,000	Accumulated net profit	15,000
Cash at bank	25,000	Account payable	20,000
Beginning inventory	10,000	Share capital @ Rs 100	3,00,000
Material purchase	4,30,000	7% Preference shares @ Rs 100	2,00,000
Wages	30,000	Sales	7,00,000
Fuel and power	5,000
Carriage on material purchase	2,000
Sundry expenses	8,000
Salaries and benefits	1,30,000
Bad debts	2,000
Employee bonus	8,000
	12,50,000		12,50,000