DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : N.Sambaiah
Designation : Head of the section
Branch : DCCP
Institute : Suvr and SR GPW,
Ethamukkala.
Year : I year
Subject : Accountancy-I
Subject Code : CCP102
Topic : Final Accounts
Duration : 50 minutes
Sub Topic :preparation of final accounts
with adjustment.
Teaching Aids :PPT, Animations

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Objectives
On completion of the period, student would
be able to:

 Prepare final accounts with adjustments.

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Recap:
In the last class you learnt doing final
A/c with adjustments.

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Assignment -1
Prepare Trading account, Profit and Loss account
and Balance Sheet of Rao & Rao Brothers, Vizag
for the year ending 31-12-07 from Trial Balance
given below.
Particulars Debit Credit
Rs. Ps Rs. Ps.
Opening stock 75,500
Purchases 2,70,000
Sales returns 6,000
Coal 8,000
Wages 85,000
Motive power 6,000
Salaries 54,000
Discount 3,500
Carriage 2,500

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Assignment -1 continued…

Office rent 6,000

Repairs 4,000
Bills receivable 1,50,000
Buildings 4,00,000
Furniture 60,000
Sundry debtors 1,90,000
Travel expenses 9,000
Drawings 75,000
Machinery 3,00,000
Motor car 4,00,000
Insurance 6,000
Cash at bank 1,50,000
Samples 1,500
Cash at hand 8,000
Capital 12,00,000

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Assignment -1 continued….

Sundry creditors 1,80,000

Bills payable 2,10,000
Reserve for doubtful debtors 3,000
Commission 8,000
Overdraft 1,00,000
Interest 6,000
Sales 5,50,000
Purchase returns 13,000
--------------- -------------
22,70,000 22,70,000
--------------- --------------

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Assignment -1 continued…
Other information:
2. Closing stock Rs.85,000
3. Provide depreciation on building and furniture @ 10%.
4. Provide depreciation on Machinery and Motor car @ 5%.
5. Write of bad debts of 5,000.
6. Provide reserve 5% for doubtful debtors.
7. Outstanding wages and salaries 4,000 and 6,000
respectively.
8. Prepaid insurance Rs. 2000.
9. Commission received in advance Rs. 1000.
10. Interest to be received Rs. 3000.

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Assignment -1 continued…

10. Write the necessary journal entries for the

above adjustments before preparing final
accounts.

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Final Accounts – Solution -2
In the Books of Rao & Rao Brothers, Vizag
Journal entries for adjustments
Date particulars Debit Credit
LF Rs. Rs.
Ps Ps
31-3-08 Stock account Dr
To Profit and Loss 85,000 85,000
account
(Being closing stock taken
in to account)

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do- Depreciation account Dr 81,000
To Machinery account
To Motor car account 15,000
To Building account 20,000
To Furniture account 40,000
(Being depreciation on 6,000
machinery, motor car.
Buildings and furniture)

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Final accounts – solution -2.(contd)

31-3-08 Bad debts account Dr 5,000 5,000

Sundry debtors account
(Being bad debts on debtors)
-do- Profit and Loss account Dr 6,250 6,250
Reserve for doubtful debts
(Being reserve raised for
-Do- doubtful debts)
Salaries account Dr 6,000 10,000
Wages account Dr 4,000
To Outstanding expenses
account
(Being salaries and wages
outstanding)
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Final accounts – solution -2.(contd)

31-3-08 Prepaid expenses account Dr 2000

Insurance account 2000
(Being prepaid Insurance)
-do- Commission Received account Dr 1000
To Income received in advance 1000
(Being income received in
advance)
-do- Income earned but not received
account Dr 3000 3000
To Interest account
(Being interest to be received )

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 Final accounts – solution -2.contd
Rao & Rao Brothers, Vizag
Trading account for the period ending 31-3-08
Dr Cr
Particulars amount Particulars Amount
Rs. Ps Rs. Ps
To Opening stock account 75,500 By Sales
To Purchases a/c. 2,70,000 5,50,000 5,44,000
Less: returns 13,000 2,57,000 Less: returns 6,000 85,000
To Coal account 8,000 By Closing stock
To Wages account 85,000
Add: outstand. 4,000 89,000
To Motive power account 6,000
To Carriage account 2,500
To Trade expenses account 9,000
To Gross profit (transferred to 1,82,000
------------- -------------
profit and loss account) 6,29,000 6,29,000
---------------- -------------

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 Final accounts – solution -2.contd
Rao & Rao Brothers, Vizag
P & L Account for the period ending 31-3-08
Dr Cr
Particulars amount Particulars Amount
Rs. Ps Rs. Ps

To Salary account 54000 By Gross Profit 1,82,000

Add: outstanding 6000 60,000 By Interest received a/c 6000
To Discount account 3,500 Add: to be received 3000 9,000
To Office rent account 6,000 By Commission a/c 8000
To Repairs account 4,000 Less: Advance 1000 7,000
To Insurance account 6000
Less: prepaid 2000 4,000
To Samples 1,500
To Bad debts 5,000
To Reserve on debtors(9250-3000) 6,250
To Depreciation account
Building 40,000
Furniture 6,000
Machinery 15,000
Motor Car 20,000 81,000 ..
Contd..

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 Final accounts – solution -2.contd
Rao & Rao Brothers, Vizag
P & L account for the period ending 31-3-08
Dr Cr

Particulars amount Rs. Particulars Amount

Ps Rs. Ps
To Net profit 26,750

--------------- ------------
1,98,000 1,98,000
-------------- -------------

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 Final accounts – solution -2.contd
Rao & Rao Brothers, Vizag
Balance sheet as on 31-3-08
Liabilities Amount Assets Amount
Rs. Ps Rs. Ps.
Capital 12,00,000 Bills Receivable 1,50,000
Add: net profit 26,750 Buildings 4,00,000
12,26,750 Less: depreciation 40,000 3,60,000
Less: Drawings 75,000 11,51,750 Furniture 60,000
Sundry creditors 1,80,000 Less: Depreciation 6,000 54,000
Machinery 3,00,000
Bills payable 2,10,000
Less: depreciation 15,000
Overdraft 1,00,000 2,85,000
Motor car 4,00,000
Outstanding expenses
Less: depreciation 20,000
Wages 4000 3,80,000
Sundry debtors 1,90,000
Salary 6000 10,000
Less: bad debts 5,000
Income received in advance 1,85,000
Commission 1,000 Less: Reserve 9,250
1,75,750

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Final accounts – solution -2.contd
Rao & Rao Brothers, Vizag
Balance sheet as on 31-3-08

Liabilities Amount Assets Amount

Rs. Ps Rs. Ps.

Cash at bank 1,50,000

Cash in hand 8,000
Closing stock 85,000
Prepaid expenses
Insurance 2,000
not Income earned but
received:
Interest 3,000
------------------ --------------
16,52,750 16,52,750
---------------- ---------------

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Summary:
 JEs for adjustments in trading A/c and profit and loss A/c
enable to record outstanding incomes or expenses for
current year only.
 This helps to know exact net profit / loss.

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Quiz:
1.Final A/cs means____.
a) Trading, profit and loss A/c and Balance
sheet
b) Adjustments only
c) Opening entries only
d) Closing entries only

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Assignment -3
Prepare Trading account, Profit and Loss account and Balance
Sheet from the following Trial Balance of Krishna and
Company, Bombay as on 31-3-08.Also, write journal entries for
adjustments.

particulars Debit Credit

Rs Ps Rs. Ps
Creditors 70,000
Bills payable 36,000
Legal charges 1,950
General expenses 15,500
Cash at Bank 41,500
Buildings 85,000
Capital 3,20,000
Bank loan at 10% 90,000
Purchase returns 15,500
Provision for doubtful debts 2,400
contd.

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Assignment -3 continued…
Cash in hand 1,200
Discount 17,500
Salaries 73,600
Discount 14,800
Bills receivable 12,800
Purchases 2,35,400
Stock on 31-3-07 1,23,000
Trade debtors 1,24,500
Carriage inwards 4,600
Sales returns 37,600
Bad debts 5,400
Rates & taxes 24,300
Plant & machinery 95,000
sales 3,50,150
------------- ------------
8,98,850 8,98,850

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Assignment -3 continued….
Adjustments:
1. Stock on 31-3-08 1,58,200
2. Create provision for doubtful debts @ 5%.
3.Written off bad debts Rs. 4,500.
4. Interest on bank loan is payable for the entire year.

Note:
8. Discount in credit column is discount received.
9. Discount in debit column is discount allowed.

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