NCERT Solutions for Class 11 Accountancy Chapter 9 Financial Statements

NCERT Solutions for Class 11 Accountancy Chapter 9 Financial Statements – 1

NCERT Solutions are a reliable reference material for students who need help with solving the practise questions given at the end of Class 11 Accountancy Chapter 9 Financial Statements 1. Extramarks provides NCERT Solutions for Class 11 Accountancy Chapter 9 to aid students in finding the right answers and scoring high marks in exams.

Class 11 Accountancy NCERT Solutions Chapter 9 Financial Statements 1

NCERT Accountancy Class 11 Solutions

The NCERT solutions are prepared by subject experts, who have years of experience in their respective fields. The solutions are written in a simple and comprehensive manner while ensuring that they provide accurate information to the students. Additionally, NCERT Accountancy Class 11 Chapter 9 Solutions are prepared as per guidelines by the CBSE.

What are financial statements? What are the objectives of financial statements?

Financial statement depicts information related to accounting and finance. It is one of the crucial chapters for any accounting student. The statements are used for communication with external shareholders by a company’s administration. Also, it concerns many other people who are involved in the business, including stakeholders, investors, creditors, tax authorities, etc.

Financial statements need to incorporate various reports that include:

Income sheet
Balance sheet
Profit and loss statement
Statement of cash flow

Few Objectives of Financial Statements

Decision-making ability: It’s crucial to have decision-making ability, especially in the business field. Hence, the financial statement is one thing that mainly helps the organisation wherever they need to make necessary decisions or employ strategies.

Recording: Indeed, regularly recording and summarising various business transactions is the primary objective of financial statements. For every business, keeping track of financial transactions is necessary.

Planning: Making plans before setting up anything in business is vital. If you prepare financial statements, you would genuinely get help determining various financial situations. Also, these methods would help you take necessary actions that would be helpful for business growth.

Accountability: Using Financial Statements, one could create credibility in the business that would greatly help determine an organisation’s performance over the years.

What is a balance sheet? What are the features of a balance sheet?

Many might confuse a balance sheet with a profit and loss account, which is not true. Fortunately, it is such a statement that entirely comprises books with various business and personal account balances. One prepares a balance sheet to maintain an organisation’s liabilities and capital assets properly.

Interestingly, the primary purpose behind preparing these sheets is to depict such a financial situation that’s fair and accurate for an organisation. Each business needs to prepare a balance sheet on a specific date, especially when the accounting year ends. Now, let us look at the simple definition of a balance sheet, which is given as follows:

“A balance sheet keeps records of the business owner’s assets, liabilities, and capital on a particular date. No doubt, the balance sheet is certainly a statement that discloses aggregations, including aggregate assets, aggregate liabilities, and aggregate equity”.

There are certain features of a balance sheet that are crucial to know, which are as follows:

One can’t prepare the balance sheet for an entire period, but it’s only possible for a specific date.
It is crucial to balance both liabilities and assets, and both of these must be equivalent to balance the sheet.
Indeed, the balance sheet is made to depict the financial situation of a company or business.
The balance sheet is not an account but a mere statement.
You won’t get any credit or debit option from this particular statement.
You don’t have to use “to” or “by” before the names of an account.

How do our experts help improve your knowledge-base?

Undoubtedly, Extramarks is the best choice if you’re looking for NCERT Solutions of Class 11 Financial Statements 1. Our subject matter experts design and develop these solutions meticulously as they have years of experience in their respective fields. Since the answers are elaborated and explained with apt examples or pictures, they help students in understanding the related concept in a better way. Also, by referring to solutions, students get a better idea of how to attempt a question in an exam and score better marks.

Solved Example

Q1. Which of the following is not an annual financial statement?

Profit and loss account
Balance sheet
Statement of cash flow
Depreciation account

A1. Depreciation account is not an annual financial statement. However, it forms a part of the final accounts.

Q.1 What are the objectives of preparing financial statements?

Ans.

The basic objective of preparing financial statements is:

To present a true and fair view of the financial performance of the business.
To present a true and fair view of the financial position of the business.

Q.2 What is the purpose of preparing trading and profit and loss account?

Ans.

Trading and profit and loss account is prepared to determine the profit earned or loss sustained by the business enterprise during the accounting period. It is basically a summary of revenues and expenses of the business and calculates the net figure termed as profit and loss.

Q.3 Explain the concept of cost of goods sold?

Ans.

Cost of goods sold includes the costs that are included in creating the products that a company sells.

Costs of goods sold = Purchases + Direct Expenses – Closing Stock.

Q.4 What is a balance sheet? What are its characteristics?

Ans.

Balance Sheet may be defined as “A statement which sets out the assets and liabilities of a firm or an institution as at a particular date.”

Characteristics of Balance Sheet:

It is prepared at a particular date and not for a particular period.
It is prepared after the preparation of profit and loss account.
It shows financial position of a business as a going concern.
Balance sheet is not an account but only a statement of assets and liabilities. On the left hand side, the liabilities of business are shown whereas on the right hand side assets of the business appear.
Total of assets side must be equal to the total of liabilities side.

Q.5 Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure:

Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
Registration fees paid at the time of purchase of a building.
Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
Depreciation charged on a plant.
The expenditure incurred in erecting a platform on which a machine will be fixed.
Advertising expenditure, the benefits of which will last for four years.

Ans.

Distinction between Capital and Revenue expenditure:

Basis	Capital Expenditure	Revenue Expenditure
Purpose	It is incurred for acquisition of fixed assets for use in business.	It is incurred for running of business.
Capacity	Increases earning capacity of business.	Incurred for earning profits.
Period	Its benefit extends to more than one year.	Its benefit is exhausted within the year.
Debited	It is debited to Assets account.	It is debited to Expenses account
Depiction	It is shown in the Balance sheet.	It is shown in the Trading or Profit and Loss account.

a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable: Capital Expenditure

b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order: Capital Expenditure

c) Registration fees paid at the time of purchase of a building: Capital Expenditure

d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years: Capital Expenditure

e) Depreciation charged on a plant: Revenue Expenditure

f) The expenditure incurred in erecting a platform on which a machine will be fixed: Capital expenditure

g) Advertising expenditure, the benefits of which will last for four years: Deferred Revenue expenditure

Q.6 What is an operating profit?

Ans.

Operating profit is the profit earned through the normal operations and activities of the business. It is the excess of operating revenue over operating expenses.

Operating profit = Net profit + Non-Operating Expenses – Non Operating Incomes

Q.7 What are financial statements? What information do they provide?

Ans.

Financial statements are the statements prepared at the end of the accounting period to show financial performance during the accounting period and financial position of the business as on date. A complete set of financial statements includes Balance Sheet, Profit and Loss Account and schedules and notes forming part of Balance Sheet and Profit and Loss Account.

Financial statements are the end-product of the accounting function, drawn from the Trial Balance, they are prepared to know:

The profit earned or loss incurred from the business operations during an accounting period. It is known from the Profit and Loss Account. Few enterprises also prepare Trading Account in addition to the Profit and Loss Account.

The financial position, by preparing Balance Sheet.

Objective and Importance:

(a) Profit and Loss Account:

Determine Gross Profit or Gross Loss.
Determine Net Profit or Net Loss.
Comparison with the Previous Year’s Profit.
Details of Indirect Expenses.
Maintaining Reserves.
Calculation of Ratios.

(b) Balance Sheet:

Ascertaining financial position.
Comparison with previous year.
Analysis of individual items.
Calculating Ratios.

Q.8 What are closing entries? Give four examples of closing entries.

Ans.

The preparation of trading and profit and loss account requires that the balances of accounts of all concerned items are transferred to it for its compilation.

Opening stock account, purchases account, Wages account, Carriage inwards account and direct expenses account are closed by transferring to the debit side of the trading and profit and loss account.

This is done by recording the following entry:

Trading A/c	Dr.
To Opening Stock A/c
To Purchases A/c
To Wages A/c
To Carriage Inwards A/c
To Direct expenses A/c

The purchases return or return outwards are closed by transferring its balance to the purchases account.

Purchases Return A/c	Dr.
To Purchases A/c

The sales return or return inwards account is closed transferring its balance to the sales account as:

Sales A/c	Dr.
To Sales return A/c

The sales account is closed by transferring its balance to the credit side of the trading and profit and loss account by recording the following entry:

Sales A/c	Dr.
To Trading A/c

Items of expenses, losses are closed by recording the following entries:

Profit & Loss A/c	Dr.
To Expenses A/c
To Losses A/c

Items of Incomes, gains etc., are closed by recording the following entry:

Incomes A/c	Dr.
Gains A/c	Dr.
To Profit & Loss A/c

Q.9 Discuss the need of preparing a balance sheet.

Ans.

The Balance sheet is a statement prepared for showing the financial position of the business summarizing its assets and liabilities at a given date.

It is prepared at the end of accounting period after trading and profit and loss account have been prepared.

All the account of assets, liabilities and capital are shown in the balance sheet. Accounts of capital and liabilities are shown on the left hand side known as liabilities and the other debit balances are shown on the right hand side known as assets.

Need of Preparing Balance Sheet:

Balance Sheet is prepared with a view to measure true financial position of a business at a particular point of time. It is a method to show the financial position of a business in a systematic and standard form.

Format of Balance Sheet:

Liabilities	₹	Assets	₹
Capital		Furniture
Add: Profit		Cash
Long-term loan		Bank
Short-term Loan		Goodwill
Sundry creditors		Sundry debtors
Bills Payable		Land & Building
Bank overdraft		Closing stock
	XXX		XXX

Q.10 What is meant by grouping and Marshaling of assets and liabilities? Explain the ways in which a balance sheet may be marshaled.

Ans.

Grouping and Marshalling:

In a balance sheet, the assets and liabilities are arranged either in the order of liquidity or performance.

Assets and liabilities should be shown in a certain order in the Balance Sheet. Therefore, they should be arranged in certain groups and in a particular order. This is called Grouping and Marshalling of the Balance Sheet.

Grouping means putting items of a similar nature under a common accounting head. The arrangement of assets and liabilities in a particular order in the Balance Sheet is called Marshalling.

Assets and Liabilities are shown in the Balance sheet either in order of liquidity or in order of permanence.

In order of Liquidity:

Liquidity means the facility with which the assets may be converted into cash; those assets which take more time to convert into cash are written last. Liabilities are to be shown first as short-term liabilities and then as long term liabilities and last of all as capital.

Liabilities	₹	Assets	₹
Bills Payable		Cash in hand
Sundry Creditors		Cash at Bank
Bank overdraft		Bills Receivable
Loans		Debtors
Capital		Closing stock
Opening balance		Investment
Add: Net profit		Furniture
Less: Drawings		Plant & machinery
		Goodwill
	XXXX		XXXX

In Order of Permanence:

Assets, which are to be used permanently in the business and are not meant to be sold, are written first. Assets which are most liquid such as cash in hand are written last. Liabilities may also be shown according to their performance arrangement. In this method, capital is shown first then long-term liabilities and short-term liabilities.

Liabilities	₹	Assets	₹
Capital		Goodwill
Opening Balance		Land & Building
Add: Net profit		Plant and Machinery
Less: Drawings		Furniture
Loans		Investment
Bank Overdraft		Closing stock
Sundry creditors		Debtors
Bills Payable		Bills Receivable
		Cash at Bank
		Cash in hand
	XXXX		XXXX

Q.11 From the following balances taken from the books of Simmi and Vimmi Ltd. for the year ending March 31, 2017. Calculate the gross profit.

Particulars	₹
Closing stock	2,50,000
Net sales during the year	40,00,000
Net purchases during the year	15,00,000
Opening stock	15,00,000
Direct expenses	80,000

Ans.

Trading Account As on 31^st March 2017
Particulars	₹	Particulars	₹
To Opening Stock	15,00,000	By Net Sales	40,00,000
To Purchases	15,00,000	By Closing Stock	2,50,000
To Direct Expenses	80,000
To Gross profit (b/f)	11,70,000
	42,50,000		42,50,000

For computing the gross profit from the above information, it would be appropriate to prepare the Trading Account as all the above information are related with Trading account only.

Q.12 From the following balances extracted from the books of M/s Ahuja and Nanda. Calculate the amount of:

Cost of goods available for sale.
Cost of goods sold during the year.
Gross profit.

Particulars	₹
Opening stock	25,000
Credit purchases	7,50,000
Cash purchases	3,00,000
Credit sales	12,00,000
Cash sales	4,00,000
Wages	1,00,000
Salaries	1,40,000
Closing stock	30,000
Sales return	50,000
Purchases return	10,000

Ans.

$\begin{array}{l} (a) \\ Cost of goods available for sales which means total goods produced \\ during the year . \\ Cost of production: \\ = Opening stock + Purchases + Wages – Purchases Return \\ = ₹25,000 + (₹7,50,000 + ₹3,00,000) + ₹1,00,000 – ₹10,000 \\ = ₹11,65,000 \end{array}$ $\begin{array}{l} Cost of Goods sold: \\ = Cost of Production – Closing Stock \\ = ₹11,65,000 – ₹30,000 \\ = ₹11,35,000 \end{array}$

(c) For computing gross profit, preparation of Trading account would be appropriate:

Trading Account
Particulars		₹	Particulars		₹
To Opening Stock		25,000	By Sales	16,00,000
To Purchases	10,50,000		(-) Sales Return	50,000	15,50,000
(-)Purchase Return	10,000	10,40,000	By Closing Stock		30,000
To Wages		1,00,000
To Gross Profit		4,15,000
		15,80,000			15,80,000

Q.13 Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv & Sons for the year ended March 31, 2017.

Particulars	₹
Opening stock	50,000
Net sales	11,00,000
Net purchases	6,00,000
Direct expenses	60,000
Administration expenses	45,000
Selling and distribution expenses	65,000
Loss due to fire	20,000
Closing stock	70,000

Ans.

Computation of Gross Profit:

Trading Account
Particulars	₹	Particulars	₹
To Opening Stock	50,000	By Sales	11,00,000
To purchases	6,00,000	By Closing Stock	70,000
To Direct Expenses	60,000
To Gross Profit (b/f)	4,60,000
	11,70,000		11,70,000

Operating profit:

= Gross profit – (Operating Expenses + Operating Income)

= ₹4,60,000 – (₹45,000 + ₹65,000)

= ₹3,50,000

Q.14 Operating profit earned by M/s Arora & Sachdeva in 2016-17 was ₹17,00,000. Its non-operating incomes were ₹1,50,000 and non-operating expenses were ₹3,75,000. Calculate the amount of net profit earned by the firm.

Ans.

Operating profit:

= Net profit + Non operating expenses – Non operating Income

Hence, Net profit:

= Operating profit + Non operating income – Non operating expenditure

Operating profit (given) = ₹17,00,000

Non Operating income = ₹1,50,000

Non Operating expenses = ₹3,75,000

Hence, Net profit =

= ₹17,00,000 + ₹1,50,000 – ₹3,75,000

= ₹14,75,000

Q.15 The following are the extracts from the Trial balance of M/s Bhola & Sons as on March 31, 2017:

Particulars	Dr. ₹	Cr. ₹
Opening stock	2,00,000
Purchases	8,10,000
Sales		10,10,000
	10,10,000	10,10,000

Closing stock as on date was valued at ₹3,00,000.

You are required to record the necessary journal entries and show how the above items will appear in the trading and profit and loss account and balance sheet of M/s Bhola & Sons.

Ans.

In the Books of Bhola & Sons Journal Entries
Date	Particulars		L.F	Dr. (₹)	Cr. (₹)
2017
Mar 31	Trading A/c	Dr.		10,10,000
	To Opening Stock A/c				2,00,000
	To Purchases A/c				8,10,000
	(Being balance of stock account and purchase account transferred to Trading account)
Mar 31	Sales A/c	Dr.		10,10,000
	Closing Stock A/c	Dr.		3,00,000
	To Trading A/c				13,10,000
	(Being balance from Sales account and Closing stock account transferred to Trading account)
Mar 31	Trading A/c	Dr.		3,00,000
	To Profit & Loss A/c (GP)				3,00,000
	(Being gross profit transferred to Profit and Loss Account)

Trading and Profit & Loss Account As on 31^st March 2017
Particulars	₹	Particulars	₹
To Opening Stock	2,00,000	By Sales	10,10,000
To purchases	8,10,000	By Closing Stock	3,00,000
To Gross Profit (b/f)	3,00,000
	13,10,000		13,10,000

Balance Sheet
Liabilities	₹	Assets	₹
		Closing Stock	3,00,000

Q.16 Prepare trading and profit and loss account and balance sheet as on March 31, 2017:

Account Title	Dr. ₹	Account Title	Cr. ₹
Machinery	27,000	Capital	60,000
Sundry debtors	21,600	Bills payable	2,800
Drawings	2,700	Sundry creditors	1,400
Purchases	58,500	Sales	73,500
Wages	15,000
Sundry expenses	600
Rent & taxes	1,350
Carriage inwards	450
Bank	4,500
Opening stock	6,000

Closing stock as on March 31, 2017: ₹22,400

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars	₹	Particulars	₹
To Opening Stock	6,000	By Sales	73,500
To Purchases	58,500	By Closing Stock	22,400
To Wages	15,000
To Carriage Inward	450
To Gross Profit (c/d)	15,950
	95,900		95,900
To Sundry Expenses	600	By Gross Profit b/d	15,950
To Rent & Taxes	1,350
To Net Profit	14,000
	15,950		15,950

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	60,000		Machinery	27,000
(+) Net profit	14,000		Sundry Debtors	21,600
	74,000		Bank	4,500
(-) Drawings	2,700	71,300	Closing Stock	22,400
Bills Payable		2,800
Sundry Creditors		1,400
		75,500		75,500

Q.17 The following trial balance is extracted from the books of M/s Ram on March 31, 2017. You are required to prepare trading and profit and loss account and the balance sheet as on date:

Account Title	Dr. ₹	Account Title	Cr. ₹
Debtors	12,000	Apprenticeship premium	5,000
Purchases	50,000	Loan	10,000
Coal, gas & water	6,000	Bank overdraft	1,000
Factory wages	11,000	Sales	80,000
Salaries	9,000	Creditors	13,000
Rent	4,000	Capital	20,000
Discount	3,000
Advertisement	500
Drawings	1,000
Loan	6,000
Petty cash	500
Sales return	1,000
Machinery	5,000
Land & Building	10,000
Income tax	100
Furniture	9,900

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars	₹	Particulars		₹
To Opening Stock		By Sales	80,000
To Purchases	50,000	(-) Sales Return	1,000	79,000
To Coal & Water	6,000
To Factory Wages	11,000
To Gross Profit (c/d)	12,000
	79,000			79,000
To Salaries	9,000	By Gross Profit b/d		12,000
To Rent	4,000	By Apprenticeship Premium		5,000
To Discount	3,000
To Advertisement	500
To Net Profit	500
	17,000			17,000

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	20,000		Machinery	5,000
(+) Net profit	500		Land & Building	10,000
	20,500		Furniture	9,900
(-) Drawings	1,000		Loan & Advances	6,000
(-) Income tax	100	19,400	Debtors	12,000
Creditors		13,000	Petty Cash	500
Loan		10,000
Bank Overdraft		1,000
		43,400		43,400

Q.18 The following is the trial balance of Manju Chawla on March 31, 2017. You are required to prepare trading and profit and loss account and a balance sheet as on date:

Account Title	Dr. ₹	Cr. ₹
Opening stock	10,000
Purchases & Sales	40,000	80,000
Returns	200	600
Productive wages	6,000
Dock & Clearing charges	4,000
Donation & Charity	600
Delivery van expenses	6,000
Lighting	500
Tax collected		1,000
Bad debts	600
Misc. incomes		6,000
Rent from tenants		2,000
Royalty	4,000
Capital		40,000
Drawings	2,000
Debtors & Creditors	60,000	7,000
Cash	3,000
Investment	6,000
Patents	4,000
Land & Machinery	43,000

Closing stock: ₹2,000.

Ans.

There is a difference of ₹700 in debit side of trial balance consider debtors for ₹6,000.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars		₹	Particulars		₹
To Opening Stock		10,000	By Sales	80,000
To Purchases	40,000		(-) Sales Return	200	79,800
(-) Purchases Return	600	39,400	By Closing Stock		2,000
To Productive Wages		6,000
To Dock & Clearing charges		4,000
To Royalty		4,000
To Gross Profit c/d		18,400
		81,800			81,800
To Donation & Charity		600	By Gross Profit b/d		18,400
To Delivery Van Expenses		6,000	By Rent from Tenants		2,000
To Lighting		500	By Miscellaneous Incomes		6,000
To Bad Debts		600
To Net Profit		18,700
		26,400			26,400

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	40,000		Investment	6,000
(+) Net profit	18,700		Patents	4,000
	58,700		Land & machinery	43,000
(-) Drawings	2,000	56,700	Cash	3,000
Creditors		7,000	Debtors	6,000
Tax Collected		1,000	Suspense Account	700
			Closing Stock	2,000
		64,700		64,700

Q.19 The following is the trial balance of Mr. Deepak as on March 31, 2017. You are required to prepare trading account, profit and loss account and a balance sheet as on date:

Account Title	Dr. ₹	Account Title	Cr. ₹
Drawings	36,000	Capital	2,50,000
Insurance	3,000	Bills payable	3,600
General expenses	29,000	Creditors	50,000
Rent and taxes	14,400	Discount received	10,400
Lighting (factory)	2,800	Purchases return	8,000
Travelling expenses	7,400	Sales	4,40,000
Cash in hand	12,600
Bills receivable	5,000
Sundry debtors	1,04,000
Furniture	16,000
Plant & Machinery	1,80,000
Opening stock	40,000
Purchases	1,60,000
Sales return	6,000
Carriage inwards	7,200
Carriage outwards	1,600
Wages	84,000
Salaries	53,000

Closing stock: ₹35,000.

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars		₹	Particulars		₹
To Opening Stock		40,000	By Sales	4,40,000
To Purchases	1,60,000		(-) Sales Return	6,000	4,34,000
(-) Purchase return	8,000	1,52,000	By Closing Stock		35,000
To Lighting Factory		2,800
To Carriage Inward		7,200
To Wages		84,000
To Gross Profit c/d		1,83,000
		4,69,000			4,69,000
To Insurance		3,000	By Gross Profit b/d		1,83,000
To General expenses		29,000	By Discount Received		10,400
To Rent & Taxes		14,400
To Travelling Expenses		7,400
To Carriage Outward		1,600
To Salaries		53,000
To Net Profit		85,000
		1,93,400			1,93,400

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	2,50,000		Cash in Hand	12,600
(+) Net profit	85,000		Bills Receivable	5,000
	3,35,000		Sundry Debtors	1,04,000
(-) Drawings	36,000	2,99,000	Furniture	16,000
Bills Payable		3,600	Plant & machinery	1,80,000
Creditors		50,000	Closing Stock	35,000
		3,52,600		3,52,600

Q.20 Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2017.

Account Title	Dr. ₹	Cr. ₹
Purchases & sales	3,52,000	5,60,000
Return inwards & Return outwards	9,600	12,000
Carriage inwards	7,000
Carriage outwards	3,360
Fuel & Power	24,800
Opening stock	57,600
Bad debts	9,950
Debtors & Creditors	1,31,200	48,000
Capital		3,48,000
Investment	32,000
Interest on investment		3,200
Loan		16,000
Repairs	2,400
General expenses	17,000
Wages & Salaries	28,800
Land & Buildings	2,88,000
Cash in hand	32,000
Miscellaneous receipts		160
Tax collected		8,350

Closing stock: ₹30,000.

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars		₹	Particulars		₹
To Opening Stock		57,600	By Sales	5,60,000
To Purchases	3,52,000		(-) Return Inwards	9,600	5,50,400
(-) Return Outwards	12,000	3,40,000	By Closing Stock		30,000
To Carriage Inward		7,000
To Fuel & Power		24,800
To Wages & salaries		28,800
To Gross Profit c/d		1,22,200
		5,80,400			5,80,400
To Carriage outward		3,360	By Gross Profit b/d		1,22,200
To Bad Debts		9,950	By Interest on Investment		3,200
To Repair		2,400	By Miscellaneous Receipts		160
To General Expenses		17,000
To Net profit		92,850
		1,25,560			1,25,560

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	3,48,000		Debtors	1,31,200
(+) Net profit	92,850	4,40,850	Investment	32,000
Loan		16,000	Land & Buildings	2,88,000
Creditors		48,000	Cash in Hand	32,000
Tax Collected		8,350	Closing stock	30,000
		5,13,200		5,13,200

Q.21 From the following trial balance of Mr. A. Lal.

Prepare trading, profit and loss account and balance sheet as on March 31, 2017:

Account Title	Dr. ₹	Cr. ₹
Stock as on April 01, 2016	16,000
Purchases & Sales	67,600	1,12,000
Returns inwards & outwards	4,600	3,200
Carriage inwards	1,400
General expenses	2,400
Bad debts	600
Discount received		1,400
Bank overdraft		10,000
Interest on bank overdraft	600
Commission received		1,800
Insurance & taxes	4,000
Scooter expenses	200
Salaries	8,800
Cash in hand	4,000
Scooter	8,000
Furniture	5,200
Building	65,000
Debtors & Creditors	6,000	16,000
Capital		50,000

Closing stock: ₹15,000.

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars		₹	Particulars		₹
To Opening Stock		16,000	By Sales	1,12,000
To Purchases	67,600		(-) Return Inwards	4,600	1,07,400
(-) Return Outwards	3,200	64,400	By Closing Stock		15,000
To Carriage Inward		1,400
To Gross profit c/d		40,600
		1,22,400			1,22,400
To General Expenses		2,400	By Gross Profit b/d		40,600
To Bad Debts		600	By Discount Received		1,400
To Interest on Bank overdraft		600	By Commission Received		1,800
To Insurance and Taxes		4,000
To Scooter Expenses		200
To Salaries		8,800
To Net Profit		27,200
		43,800			43,800

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	50,000		Cash in Hand	4,000
(+) Net profit	27,200	77,200	Scooter	8,000
Creditors		16,000	Furniture	5,200
Bank Overdraft		10,000	Buildings	65,000
			Debtors	6,000
			Closing Stock	15,000
		1,03,200		1,03,200

Q.22 Prepare trading and profit and loss account and balance sheet of M/s Royal Traders from the following balances as on March 31, 2017:

Debit balances	Dr. ₹	Credit balances	Cr. ₹
Stock	20,000	Sales	2,45,000
Cash	5,000	Creditors	10,000
Bank	10,000	Bills payable	4,000
Carriage on purchases	1,500	Capital	2,00,000
Purchases	1,90,000
Drawings	9,000
Wages	55,000
Machinery	1,00,000
Debtors	27,000
Postage	300
Sundry expenses	1,700
Rent	4,500
Furniture	35,000

Closing stock: ₹8,000.

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars	₹	Particulars	₹
To Opening Stock	20,000	By Sales	2,45,000
To Purchase	1,90,000	By Closing Stock	8,000
To Carriage on Purchase	1,500	By Gross Loss c/d	13,500
To Wages	55,000
	2,66,500		2,66,500
To Gross Loss b/d	13,500	By Net Loss	20,000
To Postage	300
To Sundry Expenses	1,700
To Rent	4,500
	20,000		20,000

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	2,00,000		Cash	5,000
(-) Net Loss	20,000		Bank	10,000
	1,80,000		Machinery	1,00,000
(-) Drawings	9,000	1,71,000	Debtors	27,000
Creditors		10,000	Furniture	35,000
Bills Payable		4,000	Closing Stock	8,000
		1,85,000		1,85,000

Q.23 Prepare trading and profit and loss account from the following particulars of M/s Neema Traders as on March 31, 2017:

Account Title	Dr. ₹	Account Title	Cr. ₹
Buildings	23,000	Sales	1,80,000
Plant	16,930	Loan	8,000
Carriage inwards	1,000	Bills payable	2,520
Wages	3,300	Bank overdraft	4,720
Purchases	1,64,000	Creditors	8,000
Sales return	1,820	Capital	2,36,000
Opening stock	9,000	Purchases return	1,910
Machinery	2,10,940
Insurance	1,610
Interest	1,100
Bad debts	250
Postage	300
Discount	1,000
Salaries	3,000
Debtors	3,900

Stock on March 31, 2017: ₹16,000.

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars		₹	Particulars		₹
To Opening Stock		9,000	By Sales	1,80,000
To Purchase	1,64,000		(-) Sales Return	1,820	1,78,180
(-) Purchase Return	1,910	1,62,090	By Closing Stock		16,000
To Carriage Inwards		1,000
To Wages		3,300
To Gross Profit c/d (Gross Profit)		18,790
		1,94,180			1,94,180
To Salaries		3,000	By Gross Profit b/d		18,790
To Insurance		1,610
To Interest		1,100
To Bad Debts		250
To Postage		300
To Discount		1,000
To Net profit		11,530
		18,790			18,790

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	2,36,000		Buildings	23,000
(+) Net profit	11,530	2,47,530	Plant	16,930
Creditors		8,000	Machinery	2,10,940
Loan		8,000	Debtors	3,900
Bills payable		2,520	Closing Stock	16,000
Bank Overdraft		4,720
		2,70,770		2,70,770

Note: As per the solution, the gross profit is ₹18,790, whereas as per the textbook is ₹17,850.

As per the solution, the net profit is ₹11,530, whereas as per the textbook is ₹10,590.

As per the solution, the total of balance sheet is ₹2,70,770, whereas as per the textbook is ₹2,69,830.

Q.24 From the following balances of M/s Nilu Sarees as on March 31, 2017. Prepare trading and profit and loss account and balance sheet as on date.

Account Title	Dr. ₹	Account Title	Cr. ₹
Opening stock	10,000	Sales	2,28,000
Purchases	78,000	Capital	70,000
Carriage inwards	2,500	Interest	7,000
Salaries	30,000	Commission	8,000
Commission	10,000	Creditors	28,000
Wages	11,000	Bills Payable	2,370
Rent & taxes	2,800
Repairs	5,000
Telephone expenses	1,400
Legal charges	1,500
Sundry expenses	2,500
Cash in hand	12,000
Debtors	30,000
Machinery	60,000
Investments	90,000
Drawings	18,000

Closing stock as on March 31, 2017: ₹22,000

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars	₹	Particulars	₹
To Opening Stock	10,000	By Sales	2,28,000
To Purchase	78,000	By Closing Stock	22,000
To Carriage Inward	2,500
To Wages	11,000
To Gross Profit c/d	1,48,500
	2,50,000		2,50,000
To Salaries	30,000	By Gross Profit b/d	1,48,500
To Commission	10,000	By Interest	7,000
To Rent & Taxes	2,800	By Commission	8,000
To Repair	5,000
To Telephone Expenses	1,400
To legal Charges	1,500
To Sundry Expenses	2,500
To Net Profit (b/f)	1,10,300
	1,63,500		1,63,500

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	70,000		Machinery	60,000
(+) Net Profit	1,10,300		Investment	90,000
	1,80,300		Debtors	30,000
(-) Drawings	18,000	1,62,300	Cash in Hand	12,000
Creditors		28,000	Closing stock	22,000
Bills payable		2,370
Suspense		21,330
		2,14,000		2,14,000

Note:

Total of debit side of Trail Balance is ₹3,64,700 and total of credit side of Trial Balance is ₹3,43,370. The difference in credit side is ₹21,330.

Difference in credit side of Trial Balance ₹21,330 will be treated as Liabilities and posted in Liabilities side of Balance Sheet.

As per the solution, the gross profit is ₹1,48,500, whereas as per the textbook is ₹1,56,500.

Q.25 Prepare trading and profit and loss account of M/s Sports Equipments for the year ended March 31, 2017 and balance sheet as on that date:

Account Title	Dr. ₹	Cr. ₹
Opening stock	50,000
Purchases & Sales	3,50,000	4,21,000
Sales returns	5,000
Capital		3,00,000
Commission		4,000
Creditors		1,00,000
Bank Overdraft		28,000
Cash in hand	32,000
Furniture	1,28,000
Debtors	1,40,000
Plants	60,000
Carriage on purchases	12,000
Wages	8,000
Rent	15,000
Bad debts	7,000
Drawings	24,000
Stationery	6,000
Travelling expenses	2,000
Insurance	7,000
Discount	5,000
Office expenses	2,000

Closing stock as on March 31, 2017: ₹2,500.

Ans.

Trading and Profit & Loss Account As on 31^st March 2017
Particulars	₹	Particulars		₹
To Opening stock	50,000	By Sales	4,21,000
To Purchase	3,50,000	(-) Sales return	5,000	4,16,000
To Carriage on purchase	12,000	By Closing Stock		2,500
To Wages	8,000	By Gross Loss c/d		1,500
	4,20,000			4,20,000
To Gross Loss b/d	1,500	By Commission		4,000
To Rent	15,000	By Net Loss		41,500
To Bad Debts	7,000
To Stationery	6,000
To Travelling expenses	2,000
To Insurance	7,000
To Discount	5,000
To office Expenses	2,000
	45,500			45,500

Balance Sheet As on 31^st March 2017
Liabilities		₹	Assets	₹
Capital	3,00,000		Cash in Hand	32,000
(-) Net Loss	41,500		Furniture	1,28,000
	2,58,500		Debtors	1,40,000
(-) Drawings	24,000	2,34,500	Plants	60,000
Creditors		1,00,000	Closing Stock	2,500
Bank Overdraft		28,000
		3,62,500		3,62,500

Q.26 Give the Performa of income statement and balance sheet in vertical form.

Ans.

Format of Income Statement
Dr.	Profit and Oss Account for the year ended……			Cr.
Particulars		₹	Particulars		₹
To Gross Loss transferred from Trading A/c*			By Gross Profit transferred to Trading A/c*
To Indirect Expenses:			By Incomes:
To Salaries			By Rent Received
To Rent			By Discount Received
To Postage and Courier			By Commission Earned
To Telephone Expenses			By Interest Received
To Insurance Premium			By Bad Debts Recovered
To Depreciation			By Income from Investment
To Conveyance			By Net Loss transferred to Capital A/c**
To Loss by Fire
To Discount Allowed
To Bad Debts
To Net Profit transferred to Capital A/c**

*Either of the two will appear

**Either of the two will appear

Format of Balance Sheet
Liabilities	₹	Assets	₹
Bills Payable		Cash in hand
Sundry Creditors		Cash at Bank
Bank Overdraft		Bills Receivables
Loans		Debtors
Capital		Closing Stock
Opening Balance		Investment
Add: Net Profit		Furniture
Less: Drawings		Plant & Machinery
		Goodwill
	xxx		xxx

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FAQs (Frequently Asked Questions)

Students must read the NCERT textbook thoroughly and attempt the practice questions given at the end of the chapter. Students can refer to Extramarks to get accurate answers to these questions.

Operating profit is the measure of the profit a company makes from its underlying business functions. In short, it is an overall accounting metric. The operating profit rules out the tax calculation while not considering the deduction in interest. The income statement as a total amount is usually the operating profit of a company. An operating profit may not be equal to the cash flow of a company, but gives an idea of the profit-making potential of a company prior to the accounting of expenses.

Operating profit = Net profit + Non-operating expenses – Non-operating incomes

NCERT Solutions Class 11 Accountancy Chapter 9