Generally, ledger accounts are prepared when additional information is provided to find out hidden account and amount.
Ledger accounts have impact either in profit and loss adjustment account or in funds flow statement or in both the statements.
On the basis of given information, the provision for taxation can be treated as current liabilities or non-current liabilities.
When provision for taxation is given in balance sheet and no additional information is in adjustment, provision for taxation is treated as current liability.
It is shown in schedule change in working capital.
If provision for taxation is given in both balance sheet and additional information, ledger account is prepared.
Provision for Tax Account
Particulars |
Amount |
Particulars |
Amount |
To Tax paid (bank) |
xxxx |
By Beginning balance |
xxxx |
To Ending balance |
xxxx |
By P&L adjustment account |
xxxx |
|
xxxx |
|
xxxx |
When provision for taxation is given in both balance sheet and additional information
EXAMPLE: 4A
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
Provision for taxation |
45,000 |
80,000 |
|
|
|
|
|
|
|
|
|
Additional adjustment
The provision for taxation for the year Rs 75,000
Required: Tax paid for the year 2020
[Answer: Tax paid = Rs 75,000]
SOLUTION:
Particulars |
Amount |
Particulars |
Amount |
To Tax paid (b/f) |
40,000* |
By Opening balance |
45,000 |
To Closing balance |
80,000 |
By Provision for the year |
75,000# |
|
120,000 |
|
120,000 |
Explain:
Provision for tax is liabilities; therefore, all liabilities have credit opening balance.
Rs 40,000* tax paid is outflow; it is shown in outflow side of fund flow statement.
Rs 75,000# provision for tax is non-operating expenses; it is debited in profit and loss adjustment account.
When provision for taxation is given in both balance sheet and additional information
EXAMPLE: 4B
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
Provision for taxation |
50,000 |
80,000 |
|
|
|
|
|
|
|
|
|
Additional adjustment
(a) Tax paid for the year is Rs 30,000.
Required: Provision tax for the year 2020
[Answer: P&L adjustment = Rs 60,000]
SOLUTION:
Particulars |
Amount |
Particulars |
Amount |
To Tax paid |
30,000* |
By Opening balance |
50,000 |
To Closing balance |
80,000 |
By P&L adjustment account (b/f) |
60,000# |
|
110,000 |
|
110,000 |
Explain:
Provision for tax is liabilities; all liabilities have credit opening balance.
Rs 30,000* tax paid is outflow; it is shown in outflow side of fund flow statement.
Rs 60,000# provision for tax is non-operating expenses; it is debited in profit and loss adjustment account.
When provision for taxation is not given in balance sheet but is given in additional information
EXAMPLE: 4C
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
Provision for taxation |
Nil |
Nil |
|
|
|
|
|
|
|
|
|
Additional adjustment
Tax paid for the year is Rs 75,000
Required: Show tax paid
[Answer: Tax paid = Rs 75,000]
SOLUTION:
There is not provision for tax in balance sheet; therefore, no need to prepare working note or ledger.
Tax paid Rs 75,000 is given in additional information; it affects two aspects.
Therefore, it is debited in profit and loss adjustment account and is shown in outflow of fund flow statement.
Profit and Loss Adjustment Account
Particulars |
Amount |
Particulars |
Amount |
To Tax paid |
75,000 |
|
|
|
|
|
|
Fund Flow Statement
Inflow or sources |
Amount |
Outflow or uses |
Amount |
|
|
Tax paid |
75,000 |
|
|
|
|
#####
Click on link for YouTube videos |
|
Accounting for Share |
|
Share in Nepali |
|
Debentures |
|
Final Accounts: Class 12 |
|
Final Accounts in Nepali |
|
Work Sheet |
|
Ratio Analysis (Accounting Ratio) |
|
Fund Flow Statement |
|
Cash Flow Statement |
|
Theory Accounting Xii |
|
Theory: Cost Accounting |
|
Cost Accounting |
|
LIFO−FIFO |
|
Cost Sheet, Unit Costing |
|
Cost Reconciliation Statement |
#####
On the basis of given information, proposed dividend can be treated as current liabilities or non-current liabilities.
When proposed dividend is given in balance sheet and no additional information is in adjustment, proposed dividend is treated as current liability.
It is shown in schedule change in working capital.
If proposed dividend is given in both balance sheet and additional information, ledger account is prepared.
Particulars |
Amount |
Particulars |
Amount |
To Dividend paid (bank) |
xxxx |
By Opening balance |
xxxx |
To Closing balance |
xxxx |
By P&L adjustment account |
xxxx |
|
xxxx |
|
xxxx |
Or
Particulars |
Amount |
Particulars |
Amount |
To Dividend paid |
xxxx |
By Opening balance |
xxxx |
To Closing balance |
xxxx |
By P&L adjustment account |
xxxx |
|
xxxx |
|
xxxx |
When proposed dividend is given in both balance sheet and additional information
EXAMPLE: 4D
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2014 |
2015 |
Proposed dividend |
75,000 |
100,000 |
|
|
|
|
|
|
|
|
|
Additional adjustment
The proposed dividend for the year Rs 55,000
Required: Dividend paid
[Answer: Dividend paid = Rs 30,000]
SOLUTION:
Particulars |
Amount |
Particulars |
Amount |
To Dividend paid (b/f) |
30,000* |
By Opening balance |
75,000 |
To Closing balance |
100,000 |
By P&L adjustment account |
55,000# |
|
130,000 |
|
130,000 |
Explain:
Proposed dividend is liabilities; therefore, all liabilities have credit opening balance.
Rs 30,000* dividend paid is outflow; therefore, it is shown in outflow side of fund flow statement.
Rs 55,000# proposed dividend is non-operating expenses.
Therefore, it is debited in profit and loss adjustment account.
Profit and Loss Adjustment Account
Particulars |
Amount |
Particulars |
Amount |
To Proposed dividend |
55,000# |
|
|
|
|
|
|
Fund Flow Statement
Inflow or sources |
Amount |
Outflow or uses |
Amount |
|
|
Dividend paid |
30,000* |
|
|
|
|
When proposed dividend is given in both balance sheet and additional information
EXAMPLE: 4E
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
Proposed dividend |
90,000 |
140,000 |
|
|
|
|
|
|
|
|
|
Additional adjustment
Dividend paid for the year is Rs 80,000.
Required: Proposed dividend for the year 2020
[Answer: P&L adjustment = Rs 130,000]
SOLUTION:
Proposed Dividend Account
Particulars |
Amount |
Particulars |
Amount |
To Dividend paid |
80,000* |
By Opening balance |
90,000 |
To Closing balance |
140,000 |
By P&L adjustment A/c (b/f) |
130,000# |
|
220,000 |
|
220,000 |
Explain:
Proposed dividend is liabilities; all liabilities have credit opening balance.
Rs 80,000* dividend paid is outflow; it is shown in outflow side of fund flow statement.
Rs130,000# proposed dividend is non-operating expenses; it is debited in P&L adjustment account.
Profit and Loss Adjustment Account
Particulars |
Amount |
Particulars |
Amount |
To Proposed dividend |
130,000# |
|
|
|
|
|
|
Fund Flow Statement
Inflow or sources |
Amount |
Outflow or uses |
Amount |
|
|
Dividend paid |
80,000* |
|
|
|
|
When proposed dividend is not given in balance sheet but dividend paid or interim dividend paid is given in additional information
EXAMPLE: 4F
Extracted Balance Sheet
Liabilities |
2014 |
2015 |
Assets |
2014 |
2015 |
Proposed dividend |
Nil |
Nil |
|
|
|
Additional adjustment
Dividend paid for the year is Rs 90,000
Required: Dividend paid
[Answer: Dividend paid = Rs 80,000]
SOLUTION:
Dividend paid Rs 90,000 is given in additional information. It affects two aspects.
Therefore, it is debited in profit and loss adjustment account and is shown in outflow of fund flow statement.
Profit and Loss Adjustment Account
Particulars |
Amount |
Particulars |
Amount |
To Dividend paid |
90,000 |
|
|
|
|
|
|
Fund flow statement
Inflow or sources |
Amount |
Outflow or uses |
Amount |
|
|
Dividend paid |
90,000 |
|
|
|
|
###########
Click on link for YouTube videos: |
|
Accounting Equation |
|
Basic Journal Entries in Nepali |
|
Basic Journal Entries |
|
Journal Entry and Ledger |
|
Ledger |
|
Subsidiary Book |
|
Cash Book |
|
Trial Balance & Adjusted Trial Balance |
|
Bank Reconciliation Statement (BRS) |
|
Depreciation |
|
Final Accounts: Class 11 |
|
Adjustment in Final Accounts |
|
Capital and Revenue |
|
Single Entry System |
|
Non-Trading Concern |
|
Government Accounting |
|
Goswara Voucher (Journal Voucher) |
###########
Depreciation is treated as the diminishing value of fixed assets.
It is charged at the end of every accounting period.
There are two method of charging depreciation on fixed assets:
(a) Simple depreciation
(b) Accumulated depreciation
(a) Simple depreciation
In simple depreciation, amount of depreciation is treated in debit side of profit and loss account and credited to related asset account.
EXAMPLE: 4G
The extracted balance sheet of XYZ Company is given available:
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
|
|
Plant and machinery |
150,000 |
250,000 |
|
|
|
|
|
|
Additional adjustment
Depreciation on plant and machinery for the year is Rs 30,000
Required: Machinery account
[Answer: Purchase = Rs 130,000]
SOLUTION:
Plant and Machinery Account
Particulars |
Amount |
Particulars |
Amount |
To Opening balance |
150,000 |
By Depreciation |
30,000* |
To Purchase (b/f) |
130,000# |
By Closing balance |
250,000 |
|
280,000 |
|
280,000 |
Explain:
Plant and machinery is assets; all assets have debit opening balance.
Rs 30,000* depreciation is debited in P&L adjustment account.
Rs 130,000# plant purchase is cash outflow; it is shown in outflow side of fund flow statement.
Profit and Loss Adjustment Account
Particulars |
Amount |
Particulars |
Amount |
To Depreciation |
30,000* |
|
|
|
|
|
|
Fund Flow Statement
Inflow or sources |
Amount |
Outflow or uses |
Amount |
|
|
Purchase of plant and mach. |
130,000# |
|
|
|
|
In accumulated depreciation, the amount of deprecation is debited to profit and loss account but it does not deducted from fixed assets.
It is cumulated in separate account known as accumulated depreciation account.
It is shown either on liability side of balance sheet or deducted from concerned asset on assets side of balance sheet.
It is known by different names such as provision for depreciation, depreciation reserve account etc.
Accumulated Depreciation Account
Particulars |
Amount |
Particulars |
Amount |
To Depreciation on sales |
xxxx |
By Opening balance |
xxxx |
To Closing balance |
xxxx |
By P&L adjustment account |
xxxx |
|
|
(depreciation for the year) |
|
|
xxxx |
|
xxxx |
Again,
Accumulated depreciation |
= |
Original cost – Book salvage value |
Loss |
= |
Book salvage value – Cash salvage value |
Profit |
= |
Cash salvage value – Book salvage value |
Fixed Account (P&L, L&B, Furniture)
Particulars |
Amount |
Particulars |
Amount |
To Opening balance |
xxxx |
By Bank/sold |
xxxx |
To Profit and loss (profit) |
xxxx |
By Depreciation (P&L adjustment) |
xxxx |
To Bank/Purchase |
xxxx |
By Profit and loss (loss) |
xxxx |
|
|
By Closing balance |
xxxx |
|
xxxx |
|
xxxx |
Keep in Mind (KIM)
Assets have always debit opening balance or To balance b/d |
Liabilities have always credit opening balance or By balance b/d |
When depreciation for the year is given in additional information
EXAMPLE: 4H
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
|
|
Plant and machinery |
150,000 |
300,000 |
|
|
|
Accumulate depreciation |
(15,000) |
(30,000) |
|
|
|
|
|
|
Additional adjustment
Depreciation on plant and machinery for the year 2015 is Rs 30,000
Required: Accumulated depreciation account and machinery account
[Answer: Depn on sold = Rs 15,000; Purchase = Rs 165,000]
SOLUTION:
Particulars |
Amount |
Particulars |
Amount |
To Deprecation on sold (b/f) |
15,000* |
By Opening balance |
15,000 |
To Closing balance |
30,000 |
By Depn for year (P&L Adjustmrnt) |
30,000$ |
|
45,000 |
|
45,000 |
Plant and Machinery Account
Particulars |
Amount |
Particulars |
Amount |
To Opening balance |
150,000 |
By Depreciation on sold |
15,000* |
To Purchase (b/f) |
165,000# |
By Closing balance |
300,000 |
|
315,000 |
|
315,000 |
Explain:
No entry for opening balance and closing balance of accumulated depreciation and plant and machinery.
Accumulated depreciation is part of liabilities; all liabilities have credit opening balance.
Rs 30,000$ depreciation is debited in P&L adjustment account.
Rs 165,000# plant purchase is cash outflow; it is shown in outflow side of fund flow statement.
Profit and Loss Adjustment Account
Particulars |
Amount |
Particulars |
Amount |
To Depreciation |
30,000$ |
|
|
|
|
|
|
Fund Flow Statement
Inflow or sources |
Amount |
Outflow or uses |
Amount |
|
|
Purchase of plant and machinery |
165,000# |
|
|
|
|
When depreciation of sold part of assets is given in additional information
EXAMPLE: 4I
Extracted Balance Sheet
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
|
|
Plant and machinery |
150,000 |
250,000 |
|
|
|
Accumulate depreciation |
(15,000) |
(25,000) |
|
|
|
|
|
|
Additional adjustment:
A machine costing Rs 50,000 with accumulated depreciation Rs 5,000 is sold for Rs 30,000.
Required: (1) Accumulated depreciation account; (2) Plant and machinery account;
(3) Effect on fund flow statement
[Answer: Depn on sold = Rs 5,000; Purchase = Rs 150,000]
SOLUTION:
Given and working note:
Accumulated depn |
= |
Original cost – Book salvage value |
5,000 |
= |
50,000 – Book salvage value |
Book salvage value |
= |
45,000 |
Again,
Loss = Book salvage value − Cash salvage value = 45,000 – 30,000 = 15,000
Keep in Mind (KIM)
When cash salvage value (bank or sold) is more than book salvage value, there is profit. It is capitalized profit. |
When book salvage value is more than cash salvage value (bank or sold), there is loss. It is capitalized loss. |
Accumulated Depreciation Account
Particulars |
Amount |
Particulars |
Amount |
To Deprecation on sold |
5,000* |
By Opening balance |
15,000 |
To Closing balance |
25,000 |
By Depreciation for year (b/f) |
15,000$ |
|
30,000 |
|
30,000 |
Plant and Machinery Account
Particulars |
Amount |
Particulars |
Amount |
To Opening balance |
150,000 |
By Bank (CSV or sales value) |
30,000 |
To Profit and loss (profit) |
Nil |
By Depreciation on sold |
5,000* |
To Bank/Purchase (b/f) |
150,000 |
By Profit and loss (loss) |
15,000 |
|
|
By Closing balance |
250,000 |
|
300,000 |
|
300,000 |
Profit and Loss Adjustment Account
Particulars |
Amount |
Particulars |
Amount |
To Depreciation for the year |
15,000$ |
|
|
To Loss on sales of machine |
15,000 |
|
|
|
|
|
|
Fund Flow Statement
Inflow or sources |
Amount |
Outflow or uses |
Amount |
Sales of machinery |
30,000 |
Purchase of machinery |
150,000 |
|
|
|
|
Investment is part of non-current assets.
It is treated like fixed assets.
There may be profit or loss on sales of investment.
All the procedures are like fixed assets except depreciation. It does not have depreciation.
Investment Assets
Particulars |
Amount |
Particulars |
Amount |
To Opening balance |
xxxx |
By Bank/sold |
xxxx |
To Profit and loss (profit) |
xxxx |
By Profit and loss (loss) |
xxxx |
To Bank/Purchase |
xxxx |
By Closing balance |
xxxx |
|
xxxx |
|
xxxx |
Keep in Mind (KIM)
Assets have always debit opening balance or To balance b/d |
Liabilities have always credit opening balance or By balance b/d |
EXAMPLE: 4J
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
|
|
Investment |
150,000 |
100,000 |
Additional adjustment
Investment has sold at a profit of Rs 5,000
Required: Investment account
[Answer: investment sold = Rs 55,000]
SOLUTION:
Particulars |
Amount |
Particulars |
Amount |
To Opening balance |
150,000 |
By Bank (sold, b/f) |
55,000 |
To Profit and loss (profit) |
5,000 |
By Closing balance |
100,000 |
|
155,000 |
|
155,000 |
Dividend is provided to shareholder only when company earns net profit.
Dividend may be paid to shareholders either in cash or bonus shares.
When dividend is provided in bonus share, it is known as stock dividend.
Dividend paid in cash is shown in outflow or uses side of funds flow statement.
Stock dividend is added to the value of share capital.
EXAMPLE: 4K
Extracted Balance Sheet
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
Share capital |
10,00,000 |
15,00,000 |
|
|
|
Profit and loss account |
1,50,000 |
2,00,000 |
|
|
|
Additional adjustment:
The BOD decided to pay cash dividend Rs 50,000 and declared stock dividend Rs 150,000.
Required: (1) Profit and loss account; (2) Share capital account
[Answer: Net profit = Rs 250,000;
Issue of share for cash = Rs 350,000]
SOLUTION:
Profit and Loss Account
Particulars |
Amount |
Particulars |
Amount |
To Cash dividend paid |
50,000 |
By Opening balance |
1,50,000 |
To Stock dividend |
1,50,000 |
By Net profit (b/f) |
2,50,000 |
To Closing balance |
2,00,000 |
|
|
|
4,00,000 |
|
4,00,000 |
Share Capital Account
Particulars |
Amount |
Particulars |
Amount |
To Closing balance |
15,00,000 |
By Opening balance |
10,00,000 |
|
|
By Stock dividend |
1,50,000 |
|
|
By Issue of share for cash (b/f) |
3,50,000 |
|
15,00,000 |
|
1,500,000 |
Keep in Mind (KIM)
Stock dividend is the bonus share given to the shareholders; so it increases the value of share capital and credited to share capital account. |
Cash dividend is the outflow of fund. |
Therefore, it is shown on uses side of funds flow statement. |
#####
PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4A
Extracted balance sheet of MK Traders is given below ($/₹/Rs):
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
Provision for tax |
Rs 50,000 |
Rs 90,000 |
|
|
|
Proposed dividend |
Rs 40,000 |
Rs 70,000 |
|
|
|
|
|
|
|
|
|
Additional information:
Provision for tax Rs 60,000.
Dividend paid Rs 20,000.
Required: (1) Provision for tax account; (2) Proposed dividend account
[Answer: Tax paid = Rs 20,000; Proposed dividend = Rs 50,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4B
Extracted balance sheet of MK Traders is given below ($/₹/Rs):
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
Provision for tax |
Rs 80,000 |
Rs 90,000 |
|
|
|
Proposed dividend |
Rs 50,000 |
Rs 70,000 |
|
|
|
|
|
|
|
|
|
Additional information:
Tax paid for the year Rs 60,000.
Proposed dividend for the year Rs 40,000.
Required: (a) Provision for tax account; (b) Proposed dividend account
[Answer: Tax provision= Rs 70,000; Dividend paid = Rs 20,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4C
Extracted balance sheet of GT Company Ltd is given below ($/₹/Rs):
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
|
|
Plant and machinery |
200,000 |
170,000 |
|
|
|
|
|
|
Additional information:
Depreciation on plant and machinery Rs 5,000
Required: Plant and machinery account
[Answer: Sales of P&M = Rs 25,000
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4D
Extracted balance sheet of GT Company (P) Ltd is given below ($/₹/Rs):
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
|
|
Plant and machinery |
400,000 |
475,000 |
|
|
|
|
|
|
Additional information:
a. A part plant costing Rs 80,000 with accumulated depreciation of Rs 10,000 was sold for Rs 60,000.
b. Depreciation for the period is Rs 30,000
Required: Plant and machinery account
[Answer: Purchase of P&M = Rs 1,55,000
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4E
Extracted balance sheet of MK Traders is given below ($/₹/Rs):
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
|
|
Plant and machinery |
3,00,000 |
3,75,000 |
|
|
|
Accumulated depreciation |
(30,000) |
(37,500) |
|
|
|
|
|
|
Additional information:
A part plant costing Rs 25,000 with accumulated depreciation of Rs 7,500 was sold for Rs 22,500.
Required: (a) Accumulated depreciation; (b) Plant and machinery account
[Answer: Depn on sales = Rs 15,000; Purchase of P&M = Rs 1,17,500]
***** #EPOnlineStudy *****
Thank you for investing your time.
Please comment on article.
You can help us by sharing this post at your social media platform.
Jay Google, Jay YouTube, Jay Social Media
जय गूगल, जय युट्युब, जय सोशल मिडिया
Comment box closed