Final Accounts
Journal Accounts Problems:
Problem 1: Journalize the following transactions in
the books of Suresh.
2017 July 1 Suresh commenced business with Rs.
5000/-
July 5 Deposited into bank Rs.4,000/-
July 6 Purchased goods worth Rs.10,000/- from
kamal
Solution:
JOURNALISATION
Date Particulars L.F Amount Amount
Rs. Rs.
2017 Cash account Dr 5,000
July 1 To Suresh’s Capital A/c 5,000
(Being the business commenced)
July 5 Bank Account Dr. 4,000
To Cash 4,000
(Being the cash deposited into
Bank)
July 6 Goods(purchase)A/c Dr. 10,000
To Kamal’s A/C 10,000
(Being the goods purchased from
Kamal on credit )
19,000
Total: 19,000
LEDGER
Ledger is a book that contains several accounts.
Eg: Sales Accounts, Purchases Account etc.
Dr. Cash Account Cr.
Date Particulars F Amount Date Particulars F Amount
Rs. Rs.
2017 2017
July 1 To Suresh A/c 5,000 July 5 By Bank A/C 4,000
By Balance B/fd 1,000
5,000 5,000
TRIAL BALANCE
Trial Balance is a statement containing debit and
credit balances of various accounts taken out from
Ledger books as on a particular date. It is prepared
to ensure that there are no arithmetic errors in the
books of accounts.
Preparation of Trial Balance:
For preparing Trial Balance, we have to segregate
the accounts to put in Debit side and Credit side
respectively.
Accounts showing in Debit Balance:
Debtors accounts
Asset accounts such as Plant, Furniture etc.
Expenses accounts such as rent paid etc.
Losses accounts – goods destroyed in fire etc.
Purchases account
Sales Returns account
Drawings account.
Accounts showing in Credit Balance:
Creditors Account
Liabilities account
Incomes account
Gains account
Profits account
Loan account
Bank Overdraft account
Sales account
Purchase Returns account
Provisions accounts such as Provision for
doubtful debts, discount on creditors etc.
Reserves & Funds accounts such as General
Reserve, Workers compensation Fund etc.
FORMAT OF TRADING ACCOUNT
Trading Account is prepared to know the gross profit or gross loss during the
accounting period. Trading account considers only expenses and receipts at
the factory.
Trading Account of ------------- for the period ending on ----------
Particulars Rs. Particulars Rs.
To Opening Stock Xxxx By Sales xxx
Less: Returns xxx
To Purchases xxx ------ Xxxx
Less: Returns xxx
------ Xxxx By Closing Stock Xxxx
To Direct expenses Xxxx By Abnormal loss of stock Xxxx
To Local Taxes Xxxx By Gross loss transferred Xxxx
To Import Duty Xxxx To P&L Account
To Wages Xxxx
To Coal, Gas & Water Xxxx
To Manufacturing expenses Xxxx
To Carriage Inwards Xxxx
To Freight inwards Xxxx
To Gross Profit transferred to
P&L account Xxxx
______
Xxxx Xxxx
FORMAT OF PROFIT & LOSS A/C
Profit and Loss account shows net profit or net loss for the end of a given
period. Profit and loss account considers only revenue expenditure such as
those incurred in
Maintaining the Capital asset
Running business from time to time
Selling and distributing the goods of the business
Profit and Loss Account for the period ending ----------
Dr. Cr.
Particulars Rs. Particulars Rs.
To Loss B/d Xxxx By Gross Profit b/d Xxxx
To Salaries Xxxx By interest earned xxxx
To Rent, Rates & Taxes Xxxx By commission received Xxxx
To Fire Insurance Premium Xxxx By Rent received xxxx
To Repairs and Maintainance Xxxx By Profit on sales of fixed asset Xxxx
To depreciation Xxxx By Income from Investments Xxxx
To audit fees Xxxx By Sale of Scrap Xxxx
To Bank Charges Xxxx By Miscellaneous incomes Xxxx
To Legal charges Xxxx By Net loss transferred xxxx
To Miscellaneous expenses Xxxx To Capital Account
To Discount allowed Xxxx
To carriage outwards Xxxx
To Freight Outwards Xxxx
To Commission to Sales man Xxxx
To Travelling expenses xxxx
To Entertainment expenses Xxxx
To Sales Promotion expenditure Xxxx
To advertising and publicity Xxxx
To Bad debts Xxxx
To packing expenses Xxxx
To interest on loan Xxxx
To loss by theft Xxxx
To loss by fire Xxxx
To Net profit transferred to Xxxx
Capital account ______
---------- Xxxx
Xxxx ----------
FORMAT OF BALANCE SHEET
All the personal and real accounts are recorded in the Balance Sheet. A Balance
Sheet may, therefore be defined as a statement which sets out the assets and
liabilities of a business firm and which serves to ascertain the financial position
of the same on any particular date.
Balance Sheet of -------- as on ----------
Dr. Cr.
Liabilities Rs. Assets Rs.
Current Liabilities Current Assets
Bank Overdraft Xxx Cash in hand Xxx
Bills payable Xxx Cash in Bank Xxx
Outstanding expenses Xxx Bills receivable Xxx
Sundry Creditors Xxx Sundry Debtors Xxx
Income received in advance Xxx Prepaid expenses Xxx
Accured Income Xxx
Long – term Liabilities Closing Stock Xxx
Loans Xxx
Capital: Investments
Opening Balance xxx Fixed Assets
Add: Net Profit xxx Furniture & Fixtures Xxx
Less: Net Loss xxx Plant and Machinery Xxx
Less: Drawings xxx Building Xxx
Land Xxx
Good Will Xxx
Xxx ------
Xxx xxx
How to post Adjustments:
All adjustments will have 2 effects –
- One in Trading, P&L account
- And another in Balance Sheet
1) Closing Stock -
a) Trading Account Credit Side
b) Balance Sheet (Asset Side)
2) Depreciation –
a) P&L a/c Debit side
b) Balance Sheet (Asset Side)
3) Depreciation @10% - Furniture value Rs.2,00,000
10% value is 20,000
a) P&L debit side as Depreciation on furniture – 20,000
b) In Balance Sheet – Asset Side – deduct 20,000 from
furniture value of 2,00,000. Put the remaining amount.
4) Outstanding Salaries Rs.200/- -
a) Add to salaries in P&L account debit side.
b) In balance Sheet – Liabilities side
5) Prepaid Rent and taxes Rs.200
Prepaid means already paid, so deduct from rent and
taxes. If rent is 2000/-, then deduct 200 from 2000 and
put the remaining amount (1800) – P&L account debit
side.
---In balance sheet show it in Assets as prepaid rent – 200
6) Provision for Bad Debts Reserve:
a) If provision for Bad Debts is 5% - deduct from debtors.
– Show it in debit side of P&L account.
b) In Balance Sheet deduct this provision for Bad Debts
from Debtors in the Assets Side.
