Class 11 Accountancy Chapter-10 Revision Notes
Class 11 Accountancy Chapter-10 Revision Notes
Class 11 Accountancy Chapter-10 Revision Notes
Class 11 Accountancy
Chapter 10 - Financial Statements Part- 2
2. Outstanding expenses: These are those unpaid expenses that the businesses
haven’t paid in the present accounting period and are due. The adjustment entry
passed is:
The outstanding expenses are added to a particular expense head in the Trading
and Profit and Loss account and are shown in the liabilities side of the Balance
Sheet.
3. Prepaid expenses: These are those expenses that are paid in advance by the
businesses that have not been due. The benefits of these expenses are not
The prepaid expenses are subtracted from the particular expense head in the
Trading and Profit and Loss A/c and are shown on the asset side of the balance
sheet.
4. Accrued income: These are those incomes that are accrued but not yet
received. The adjustment entry passed is:
The accrued income is added to the concerned income head in the Trading and
Profit and Loss account and is shown in the asset side of the Balance Sheet.
The income received in advance is deducted from the respective income head
in the Trading and Profit and Loss Account and is shown in the liabilities side
of the balance sheet.
6. Depreciation: Depreciation is the decline in the book value of the fixed asset
because of regular wear and tear and passage of time. The adjustment entry
that is passed is:
It is debited to the Profit and Loss Account and in the balance sheet the asset is
shown at cost minus depreciation.
7. Bad debts: This is that amount that can not be recovered from debtors. This is
regarded as loss and the adjustment entry passed is:
It is shown as an expense on the debit side of the Trading and Profit and Loss
Account and in the balance sheet debtors are shown at book value less bad
debts.
The provision for doubtful debts are shown as an expense In the debit side of
the trading and profit and loss account and in the balance sheet the amount of
debtors are shown at book value less provision for doubtful debts.
This provision is an expense and is shown on the debit side of the trading and
profit and loss account and in the balance sheet the debtors amount is reduced
by the amount of provision for discount on debtors.
10. Manager’s commission: This is that commission which the manager gets on
the net profit of the company. This percentage of commission can be in the
form of either percentage before charging such commission or after charging
such commission. And in case nothing is mentioned in the question it is
assumed that commission is paid before charging such commission.
In case of commission charged on profit before charging such commission.
11. Interest on capital: It is the interest that is paid on the capital of the
proprietor. This interest is payable on the capital that was at the beginning of
the accounting year. And in case of any additional capital brought in by the
proprietor the interest is charged from the date it is brought. The adjustment
entry that is passed is:
Illustration:1
From the following information prepare Trading and Profit and Loss Account
and Balance Sheet for the year ended 31st March, 2021.
Account Amount Account Amount
Capital 7,20,000 Salaries 1,20,000
Machinery 1,40,000 General Expenses 40,000
Sales 16,40,000 Rent 1,00,000
Purchases 8,00,000 Purchases Return 10,000
Sales Return 20,000 Debtors 6,00,000
Opening Stock 2,00,000 Cash 80,000
Drawings 80,000 Carriage Outwards 40,000
Wages 2,00,000 Advertising 40,000
Carriage Inwards 10,000 Creditors 1,00,000
Adjustments:
1. Closing Stock was valued at Rs. 4,00,000.
2. Outstanding salaries amounting to be Rs. 20,000
3. Rent includes prepaid rent of Rs. 30,000.
4. Bad debts amount to Rs. 50,000.
Ans: Trading and Profit and Loss Account
for the year ended 31st March, 2021
Particulars Amount Particulars Amount
Opening Stock 2,00,000 Closing Stock 4,00,000
Add: Purchases 8,00,000 Sales 16,40,000
Less: Purchase (10,000) 7,90,000 Less: Sales 16,20,000
Returns (20,000)
Wages 2,00,000 Return
20,20,000 20,20,000
Salaries 1,20,000 Gross Profit b/d 8,20,000
Add:Outstanding (20,000) 1,40,000
Salary
General Expenses 40,000
Rent 1,00,000
Less: Prepaid Rent 70,000
(30,000) 40,000
Carriage outwards 40,000
Advertising 50,000
Bad Debts 4,40,000
Net Profit (transferred to 8,20,000 8,20,000
Capital account)
Balance Sheet
as on 31st March, 2021
Liabilities Amount Assets Amount
Capital 7,20,000 Fixed Assets:
Less: Drawings Machinery 1,40,000
(80,000) 10,80,000 Current Assets:
Add: Net Profit Debtors (600000- 5,50,000
4,40,000 50000) 80,000
1,00,000 Cash 4,00,000
Current Liabilities 20,000 Closing Stock 30,000
Creditor Prepaid rent
Outstanding Salary