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11th Standard Accountancy - Final Accounts of Sole Proprietors - II Three Marks Questions

Published on: 09/10/2019

Final Accounts of Sole Proprietors - II

Download Tamil Nadu 11th Standard Accountancy question papers, model tests, one-mark questions, important questions, and public exam papers in PDF format. Free study materials and answer keys for TN State Board students.

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Questions:

Generic 3

10 x 3 = 30

The following are the extracts from the trial balance.

Particulars	Debit Rs.	Credit Rs.
Sundry Creditors		30,000
Discount received		1,000

You are required to show how these items will appear in the profit and loss account and balance sheet.

Explain the accounting treatment of bad debts, provision for doubtful debts and provision for discount on debtors.

Give the adjusting entries for interest on capital and interest on drawings.

Explain how closing stock is treated in final accounts.

What is meant by provision for doubtful debts? Why is it created?

What is the need for preparing final accounts?

Sundry debtors as per trial balance Rs. 26,000
Bad debts as per trial balance Rs. 1,000
Adjustment: Additional bad debts amounted to Rs. 2,500
Give adjusting entry and show how these appear in the final accounts on 31^st March, 2016

Sundry debtors as per trial balance as on 31^st March, 2016 is Rs. 10,000.
Adjustment: Write off bad debts amounting to Rs. 300.
Give adjusting entry and show how these appear in the final accounts as on 31^st March, 2016.

Pass adjusting entries for the following on 31st March, 2018.
(i) Charge interest on drawings at Rs. 50
(ii) Write off bad debts by Rs. 500
(iii) Depreciate furniture by Rs. 1,000

10.

Show necessary entries to adjust the following on 31st December, 2017.
(i) Outstanding salaries Rs. 1,200
(ii) Outstanding rent Rs. 300
(iii) Prepaid insurance premium Rs. 450
(iv) Interest on investments accrued Rs. 400
(v) Bad debts written off Rs. 200

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Answers Key:

Generic 3

10 x 3 = 30

Dr Profit and loss account Cr
Particulars	Amount Rs	Amount Rs	Particulars	Amount Rs	Amount Rs
			By Discount received A/c		1,000

Dr Profit and loss account Cr
Liabilities	Amount Rs	Amount Rs	Assets	Amount Rs	Amount Rs
Sundry creditors		30,000

Bad debts
(i) Debts which cannot be recovered or become irrecoverable are called bad debts.
(ii) It is a loss for the business and should be adjusted against profit
Provision for doubtful debts:
In addition to the actual bad debts, a business unit may estimated at the end of the accounting period that certain debts are doubtful, i.e., the amount to be received from debtors mayor may not be received.
Provision for discount on debtors:
(i) Cash discount is allowed by the suppliers to customers for prompt settlement of cash.
(ii) A provision created on sundry debtors for allowing such discount is called provision for discount on debtors.

**Interest on capital**
Particulars		Debit Rs	Credit Rs
Iriterest on capital A/c	Dr	xxxxxx
To Capital A/c			xxxxxx
(Interest on capital due)

**Interest on drawings**
Particulars		Debit Rs	Credit Rs
capital A/c	Dr	xxxxxx
To Interest on drawings A/c			xxxxxx
(Interest on drawings)

(i) The unsold goods in stock at the end of the accounting period is termed as closing stock. The stock is valued at cost price or not realisable value whichever is lower.
(ii) The valuation principle is based on the convention of conservatism.

**Adjusting Entry**
Particulars		Debit Rs	Credit Rs
Closing Stock A/c	Dr	xxxxxx
To Trading A/c			xxxxxx
(Closing Stock brought into Account)

Value of Closing Stock will appear :
(a) On the credit side of trading account and
(b) On the assets side of balance sheet.

(i) Provision for bad and doubtful debts refers to amount set aside as a charge against profit to meet any loss arising due to bad debt in future. At the end of the accounting period, there may be certain debts which are doubtful, i.e, the amount to be received from debtors mayor may not be received.
(ii) Since the amount of loss is impossible to ascertain until it is proved bad, doubtful debts are charged against profit and loss account in the form of provision.
(iii) A provision for doubtful debts is created and is charged to profit and loss account. When bad debts occur, it is transferred to provision for doubtful debts account and not to profit and loss account.

The need for preparing final accounts are stated below :
(i) To ascertain the true profit or loss of the business.
(ii) To determine the true financial position of the business.
(iii) To make a record of the transactions earlier omitted in the books.
(iv) To rectify the errors committed in the books.
(v) To complete the incomplete transactions.

Adjusting entry
Date	Particulars	Debit Rs	Credit Rs
2016	Bad debst A/c Dr.	2,500
March 31	To Sundry debtors A/c		2,500
	(Bad debts written off)

Dr. Proft loss account for the year ended 31st March, 2016 Cr.

Particulars	Rs	Rs	Particulars	Rs	Rs
To Bad debts	1,000
Add: Additional bad debts	2,500	3,500

Balance Sheet as on 31st March, 2016
Assets	Rs	RS
Sundry debtors	26,000
Less: Additional
Bad debts	2,500	23,500

Adjusting entry
Date	Particulars	Debit Rs	Credit Rs
2016	Bad debts A/c Dr.	300
March 31	To Sundry debtors A/c		300
	(Bad debts written off)

Dr. Profit and loss account for the year ended 31^st March, 2016 Cr.

Particulars	Rs	Rs	Particulars	Rs	Rs
To Bad debts		300

Balance Sheet as on 31^st March, 2016
Liabilities	Rs	Rs	Liabilities	Rs	Rs
			Sundry debtors	10,000
			Less: Bad debts	300	9,700

Adjusting entry
Date	Particulars	Debit Rs	Credit Rs
2018	Capital A/c Dr.	50
March 31	To Interest on drawings A/c		50
	(Interest on drawings provided)
March 31	Bad debts A/c Dr .	500
	To Sundry debtors A/c		500
	(Bad debts written off)
March 31	Depreciation A/c Dr.	1,000
	To Furniture A/c		1,000
	(Depreciation provided on furniture)

10.

Date	Particulars	Debit Rs	Credit Rs
2017	Salaries A/c Dr.	1,200
Dec. 31	To Outstanding salaries A/c		1,200
	(Salaries outstanding provided)
Dec. 31	Rent A/c Dr.	300
	To Outstanding rent A/c		300
	(Provided for rent outstanding)
Dec. 31	Prepaid insurance premium A/c Dr.	450
	To Insurance premium A/c		450
	(Insurance prepaid)
Dec. 31	Accrued Interest on investment A/c Dr.	400
	To Interest on investment A/c		400
	(Provided for interest accrued)
Dec. 31	Bad debts A/c Dr.	200
	To Sundry debtors A/c		200
	(Bad debts written off)