FINANCIAL STATEMENTS

From the following Trail Balance and Supplementary data, prepare Income

Statement and Balance Sheet as on 31″ December 2004.

                                                       Rs.                                                      Rs.

Capital 35,000 Taxes and Insurance 28,000
Drawing 11,000 Discount (Dr.) 300
Merchandise Inv.(1.1.04) 30,000 Bank Interest (mark-up) 215
Purchases 75,000 Bad debts expenses 400
Purchases Returns 1,300 Buildings 6,000
Sales 125,000 Allow for bad debts 550
Sales Returns 2,000 Machinery & Plant 10,000
General Trade Expenses 3,675 Fixtures and Fittings 2,450
Wages 3,500 Accounts receivable 46,000
Salaries 5,600 Accounts Payable 30,000
Traveling Expenses 660 Cash in Hand 1,030
Advertisement Expenses 420 Bank Overdraft 10,000

 
Supplementary Data for Adjustments:

  1. Merchandise Inventory as on December 31, 2004 was Rs. 45,000
  2. There were accrued liabilities in respect of taxes Rs., 250 and wages

Rs.200

  1. Insurance was paid in advance to the extant of Rs. 150
  2. Write off Rs. 400 as bad debts and create 5% for allowances for bad

debts.

  1. Depreciation of fixed assets is to be provided on the following rates: Building 2 1/2 (1/0 Machinery and plant 7 1/2 % and fixtures and fittings at

10%

Answer:           Gross profit oti Sales Rs. 59,900             Net Income Rs. 42,450

Balance Sheet Rs. 106,900

8.           The Following balances are taken from the ledger of khan & Chaudhry at
the end of the year December 31″ 2005 and the data for adjustments are

given below:

Rs.                                                     Rs.

Cash                                                      4,650 Drawing Khan                            2,400

Accounts Receivable                                2,500 Drawings Chaudhry                       900

Accounts Payable                                    12,800 Purchases                                  67,000

Capital Khan                                            10,000 Purchases Discount                      2,300

Capital Chaudhry                                     7,350 Purchase returns &                        1,650

Interest Expenses                                        500 Sales                                          65,000

General Expenses                                    12,600 Sales Salaries                               8,000

Interest Income                                             150 Stores Supplies                              600

Notes Receivable                                       1,600 Stores Furniture                           3,700

Notes payable                                          • 6,000 Taxes                                            600

Data for adjustments for the year ended December 31ss, 2005.

1.         Inventories: Merchandise, Rs. 23,600, Stores Supplies Rs. 280

2.         Depreciation on stores furniture 10% per annum addition to stores

furniture was made on march 1, costing Rs. 900

3.         Accrued advertising Rs. 65

4.         Taxes paid in advance Rs.100

5.         Accrued Taxes Rs. 215

6.         Accrued interest on Notes payable Rs.75

7.         Accrued interest on notes receivable Rs.105

8.         5 % of the Accounts Receivable are expected to prove uncollectible.

Khan and Chaudhry divide profits and losses equally. Instruction:

  1. Prepare an Income Statement and a Balance Sheet.
  2. Prepare necessary adjusting entries.

Answers:         Net Income Rs. 3,050               Balance Sheet Rs. 36,055

9.         Following are the balance extracted out the ledger of a Trader. You are
required to prepare Income Statement and Balance Sheet as on 3lst December 2006 after taking into Account the following adjustments, in statement form.

Dr.

Rs.

Cr.

Rs.

Merchandise Beginning

15,000

Capital

48,000

Purchases

32,000

Accounts payable

4,000

Carriage  9

700

Sales

57,000

Railway Freight

1,000

Purchases Return

200

Salaries

1,500

Discount

800

Stationery

1,000

Bank overdraft (Running)
Insurance

500

Finance

6,000

Bad Debts

150

Commission

300

Discount

350

Bad Debts Allowance

200

Cash

2,500

Accounts Receivable

2,100

Furniture

1,200

Building

45,000

Fixture

3,000

Interest

1,200

Rates and Taxes

800

Sales Return

500

Cash at Bank

5,000

Drawings

3.000

116500

116,500

Adjustments:

  1. Merchandise inventory as on 31′ December 2006 was Rs. 7,000
  2. Salary amounting to Rs. 300 was outstanding
  3. Rates and Taxes were prepaid as to Rs.200
  4. Depreciation of building and fixture was to be provided @ 2 1/2%
  5. Create a Reserve for bad debts @ 5% on Accounts Receivable.

Answer:         Gross profit Rs.1500 Net Income Rs,9,395
Balance Sheet Rs.64,695.

10.      The following balances have been extracted from the books of a traders
Prepare Income Statement and Balance Sheet taking into view the following adjustments.

(a)             Closing inventory was valued at Rs. 200 on 31st march, 2007

(b)             Unearned commission was Rs. 500

(c)             Accrued fee income Rs. 100

(d)             Accrued salaries Rs. 400

(e)             Depreciation charged on machinery Rs. 100 and furniture Rs. 50

Uncollectible expenses Rs. 50

Rs.

Rs.

Cash in hand Cash at bank Accounts receivables FurnitureMachineryLand 4,500 3,700 2,500 2,700 4,000 5,000
Accounts payable

1,000

Notes payable

2,000

Accumulated depreciated (M)

500

Allowance for uncollectible

100

Bank loan

2,000

Capital

18,000

Purchases

2,500

Sales.returns

100

Advertising

1,200

Salaries

500

Sales

2,100

Revenue from fees

1,200

Purchase return

500

Commission received

800

Total

28,200

28,200

Answer:

Gross profit Rs.200        Net loss Rs,500Balauce Sheet Rs. 23,240.

 

11.                                       Trial Balance

Dr.

Rs.

Cr.

Rs.

Purchases

55,000

Sales

98,000

Sales returns

1,100

Purchases returns

7,000

Freight

300

Discount on Purchases

500

Wages

1,700

Capital

33,800

Salaries

3,300

Commission

3,500

Rent

2,600

Interest

2,200

Building

25,000

Accounts Payable

17,000

Merchandise Inv(1-1-2008)

5,000

Bank Loan

5,000

Machinery

35,000

Accounts Receivable

9,000

Furniture

8,000

Cash

21,000

Total

1,67,000

Total

1,67,000

The above trial balance was extracted from the books of Hassan Enterprises on Dec. 31,2008

Required:               Prepare the financial statements keeping into consideration the
following adjustments:

  1. Merchandise inventory on Dec. 31, 2008 was Rs. 9,000
  2. Prepaid Rent Rs. 700
  3. Salaries payable Rs. 1,700
  4. Unearned commission_ Rs. 500
  5. Accrued interest Rs. 1,300
  6. Depreciate building at the rate of 5% p.a.

12.          From the following trial balance of a dry cleaning shop prepare financial

 

                    statement for the Year ending 30th June, 2009

Cash

4,500

Accumulated depreciation.
Unexpired insurance

• 2,200

(equipment)

.8,000

Prepaid advertising

1,000

Unearned revenue from
Land

75,000

Rent

7,500

Equipment

24,000

Capital

80,000

Drawings

5,000

Revenue from fees

42,500

Advertising expenses

5,500

Salaries expenses

10,300

Electric and water expenses

6,400

 

 

Repair and maintenance

expenses                                      8,600

Miscellaneous expenses                 5,500

Adjustments:

(a)    Rs. 300 of prepaid advertising expired during the month

(b)    Rs. 200 is accrued interest on notes payable.

(c)    Rs. 300 of insurance expired during the period

(d)    Rs. 800 of salaries is unpaid.

(e)    Rs. 2,000 of depreciation expenses for the period.

(f)     Rs. 3,500 of unearned commission earned during the period.

148,000

Total                                              148,000 Total

13.        The following balance appear in the books of Hassan & Co. on

Dec. 31, 2008.

Rs.

Rs.

Investments

17,844

Building

1,40,000

Furniture

3,280

Plant & Machinery

24,000

Cash in hand

1,976

Cash at bank

29,068

Accounts receivables

31,200

Notes receivables

11,688

Purchases

1,71,044

Inventory (beginning)

30,080

Accounts payable

37,704

Notes payable

13,860

Capital

1,84,000

Sales

2,43,700

Sales returns

570

Transportation in

2,582

Transpiration out

1,600

Establishment

4,270

Insurance

1,566

Uncollectible

1,226

Audit fee

800

Trade expenses

7,900

Salesmen salaries

650

Discount

1,240

Interest income

680

Allowances for uncollectible.

2,640

Total

4,82,584

4,82,584

 

 

Adjustments:

(a)                Ending inventories valued Rs. 32,000

(b)                Salaries Rs. 780; Trade Expenses Rs. 300 are payable.

(c)                Insurance paid in advance Rs. 230

(d)                Accrued interest Rs. 470

(e)                Rent accrued on a flat let Rs. 550

(0         Depreciate furniture & machinery at 10%.

(g)                Increase allowances for uncollectibles by 5% of Accounts Receivable.

(h)                A note receivable for Rs. 5,000 was not due till January 1998.

Required:         Financial Statements.14.        From the following Trial Balance extracted from the books of UsmanTraders for the year ended 31st June 2009. Prepare the Income Statement and Balance Sheet.
Rs.

Rs.

Capital

Unearned commission Accrued Rent Sundry creditors Bank overdraft Sundry debtors

40,000

2,00,000 10,000 5,000 10,000 25,000

Building

1,00,000

Office supplies

5,000

Prepaid insurance

1,800

Accrued Interest

1,200

Provision for bad debts

1,000

Provision for depreciation building

10,000

Loan from HBL (1-1-2009) @ 10%

1,00,000

Salaries

15,000

Dividend

5,000

Advertisement

5,000

Machinery

2,45,000

Cost of goods sold

2,00,000

Sales

3,00,000

Cash in hand.

53,000

Total

6,66,000

6,66,000

 

From the following additional information you are required to record the adjusting journal entries and show how these adjustments; will effect the financial statement.

  1. Three-fourth of the unearned commission in related to the next period.
  2. Rent paid Rs. 2,500
  3. Supplies on hand Rs. 1,500
  4. Insurance expense for the period Rs. 1,000
  5. Interest received during the period Rs. 600
  6. Half yearly interest on loan is outstanding
  7. A outstanding salaries Rs. 5,000. Prepaid advertisement Rs. 1,000
  8. Accrued dividend Rs. 500
  9. Write off Rs. 600 as bad debts and raise a provision for bad debts equal to 5% of the sundry debtors.
  10. 10.              Allow interest on capital @ 5% p.a.

 

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