The document provides the trial balance, adjustments, and final accounting statements for a company as of December 31, 1996. Key details include closing stock of Rs. 3,250, depreciation calculated for various assets, outstanding salaries and taxes, prepaid insurance, and adjusting sales commission and bad debt provisions. The adjustments are applied and financial statements are presented, including the trading account showing a gross profit of Rs. 9,890, and profit and loss account reporting a net profit of Rs. 1,980 for the year.

1. Final a/cs Problem 7
1

2. 2
Trial Balance as on 31 12 1996
Particulars Dr Particulars Cr
Freehold Premises 640Capital 12500
Building 7500
Interest 118S Creditors 2500
Opening Stock 3460Sales 15450
Purchases 5475Provn - Bad Debts 200
Taxes & Insurance 1250Bank O/ D 2850
Cash 650Purchase Rtn 125
Sundry Debtors 3800Commission 375
Sales Return 200
Advertising 450
General Expenses 782
Salaries 3300
Motor Vehicles 6250
Bad Debts 125
34000 34000

3. 3
Adjustments :
• Closing Stock Rs 3250
• Depreciation - Building 5 %, Furniture 10%, Motor Vehicles
20%
• Bank O/D interest due Rs 85
• Outstanding – Salaries Rs 300. Taxes Rs 120
• Prepaid – Insurance Rs 100
• One third of Commission received is for the work to be done
next year.
• Write of Rs 100 as Bad Debts and provision to be made on
S Drs is @ 5%
• Purchases include Rs 200 towards purchase of Furniture.
Bought onn 01 01 1996

4. 4
Difficult Adjustments explained
Taxes & Insurance Rs 1250
In this regard there are two items
Insurance Prepaid Rs 100
Taxes Outstanding Rs 120
So, Outstanding should be added & Prepaid to be deducted
1250 + 120 = 1370 – 100 = 1270 (Profit & Loss a/c amount)

5. 5
Difficult Adjustments explained
Commission Received (Income) = 375
1/3 rd is for next year work.
So this year income 375 – 125 = Rs 250
To be shown in the Credit Side of P / L a/c

6. 6
Difficult Adjustments explained
Bad Debts – as per Trial Balance Rs 125
Additional Bad Debt (Adjustment) Rs 100
Total in P / L a/c Rs 225
But the trick is in Provision @ 5%
Let us go to the next slide

7. 7
Difficult Adjustments explained
But the trick is in Provision @ 5%
S Debtors as per TB Rs 3800
Out of this new Bad Debt 100
So, S Debtors 3700
5 % on this is 185
But the Provision in TB is Rs 200.
We require only Rs 185. Normally the New Provision will be MORE THAN THE
OLD. But here, it is LESS. Excess is Rs 15/-
So, the excess will be shown in the Credit Side
of P / L a/c

8. 8
Difficult Adjustments explained
Purchases as per TB is Rs 5475.
Out of this Furniture wrongle added Rs 200 (-)
So, Purchases Rs 5275
There is NO Furniture in TB.
So, Furniture Rs 200 to be brought to B/S, fresh.
Depreciation @ 10% Rs 20 to be provided in P / L a/c

9. 9
Trial Balance in Revised Format
Opening Stock 3460Sales 15450
Purchases 5475Purchase Return 125
Sales Return 200
Interest 118Commission Received 375
Advertising 450Interest
Bad Debts 125Provision for Bad Debt 200
Taxes & Insurance 1250
General Expenses 782
Salaries 3300
Building 7500Capital 12500
Cash 650S Creditors 2500
Motor Vehicle 6250Bank O/D 2850
Sundry Debtors 3800
Freehold Premises 640
34000 34000

10. 10
Trading a/c
To Opening Stock 3460By Sales 15450
To Purchases 5475 (-) Return 200 15250
(-) Return 125 Closing Stock 3250
(-) Furniture 200 5150
To Gross Profit 9890
18500 18500

11. 11
P / L a/c
To Salaries 3300 By Gross Profit 9890
(+) Outstanding 300 3600
To Interest 118 By Commission
(+) Outstanding 85 203Received 375
To Insurance & Taxes 1250 (-) Received in
(+) Outstanding 120 Advance 125 250
(-) Prepaid 100 1270
To Provn - Bad Debts
New 185
Old 200 0By Provn - Bad Debt 15
Depreciation
Building 5% 375
Furniture 10% 20
Motor Van 20% 1250 1645
To Bad Debts 125
(+) Additional amount 100 225
To Advertising 450
To General Expenses 782
To Net Profit 1980
10155 10155

12. 12
Balance Sheet
Liabilities Assets
Capital 12500 Motor Van 6250
(+) Net profit 1980 14480(-) Depreciation 1250 5000
Freehold Premises 640
Building 7500
Creditors 2500(-) Depreciation 375 7125
Bank O/ D 2850
Interest Accrued 85 2935Furniture 200
(-) Depreciation 20 180
Salaries Outstanding 300 Closing Stock 3250
Taxes Outstanding 120 420Cash 650
Commn in Advance 125Bank
Debtors 3800
(-) Addl Bad Debt 100
(-) Fresh Provision 185 3515
Insurance Prepaid 100
20460 20460