Chapter # 4 Final Account

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ADVANCED FINANCIAL ACCOUNTING
B.COM 2
Chapter # 4
Company Final Account
Rooh Ullah Khan (M.Com)

0333- 87 86 389
Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

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Name
Trading and profit and Loss Account
For the period ended….
Particulars Rs. Particulars Rs.
Opening stock Sales
Purchases Less: Sales return
Less: Purchases return Closing stock
Wages
Carriage
Freight
Transportation
Custom duty
Octori duty
Clearing charges
Factory expenses
Manufacturing expenses
Coal, gas and water
Dock charges
Rent Rent received

Interest Interest received
Commission Commission received
Discount allowed Discount received
Salaries Dividend received
Advertising Gain on sale of investment
Printing and stationary Gain on sale of asset
Postage and telegram Interest on investment
Depreciation Provision for bad debts
Amortization Bad debts recovered
Bad debts
Trade expenses
General expenses
Interest on loan
Interest on debentures
Interest on overdraft
Interest on mortgage
Loss on sale of investment
Loss on sales of asset
Audit expenses
Auditor’s remuneration
Director remuneration
Manager’s commission

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Profit & Loss Appropriation Account

Interim Dividend Last year profit
Transfer to General Reserve Current year profit
Tr. to Div. Equalization Reserve Excess provision not required
Tr. to Debenture Redemption Reserve
Proposed Dividend
Final Dividend
Provision for taxation
Name
Balance Sheet
Liabilities Rs. Assets Rs.
Authorized Capital Fixed Assets
Land
Issued, subscribed & Building
Paid Up capital Machinery
Furniture
Reserve Motor vehicles
General Reserve Freehold property
Profit & Loss App. A/c Leasehold property
Share Premium Goodwill
Copy right
Long Term Liabilities Patent
Debentures Trade mark
Loan Long Term Investment
Mortgage Loan Investment
Current Liabilities Deferred cost

Sundry creditors Preliminary expenses
Accounts Payable Discount on shares
Bills Payable Discount on debentures
Outstanding expenses Technical know how
Unearned income
Provision for taxation Current Assets
Final dividend Cash
Proposed Dividend Bank
Sundry Debtors /A/R
Book Debts
Closing stock
Investment (Short term)
Marketable securities
Prepaid expenses
Outstanding income

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Adjustments and their effects
Adj # Adjustment T & P & L A/c Balance Sheet Appropriation

A/c
1 Proposed / Final Dividend C/L Dr. side
2 Provision for tax C/L Dr. Side
3 Transfer to Reserve Reserve Dr. Side
4 Outstanding expenses + Related expenses C/L
5 Outstanding Income + Related income C/A
6 Prepaid Expenses - Related Expenses C/A
7 Unearned Income - Related income C/L
8 Depreciation Expense - Fixed Assets
9 Drawings - Purchases - Capital
10 Interest on Capital Expense + Capital
11 Interest on Drawings Income - Capital
12 Reserve for discount on debtors Expense - Debtors
13 Reserve for discount on Income - Creditors
creditors
14 New Bad Debts + Old bad debts - Debtors
15 New Provision for Bad Debts + Old bad debts - Debtors
16 Unrecorded sales + Sales / G.P + Debtors
Outstanding
Accrued, Payable, Unpaid, Arrear, Owing, Due
Prepaid
Unexpired, Paid in advance, Unused
Unearned
Received in advance

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EXERCISES
4. Hamza Industries Ltd. was registered with a nominal capital of Rs. 500,000 divided
into 50,000 shares of Rs. 10 each.
Prepare Trading and Profit and Loss Account and Balance Sheet as on 31st December
2010.
Plant and machinery 147,500 Bad debts 1,000
Auditors Remuneration 6,250 Legal charges 500
Purchases 105,000 Good will 30,000
Sales 207,500 Freehold property 90,000
Insurance 4,000 Share capital 200,000
Sales return 7,500 Debentures 100,000
Purchases return 5,000 Bills receivable 28,750
Salaries 17,000 Debentures interest 6,000
Cash in hand 3,500 Preliminary expenses 4,500
Cash at bank 7,500 Profit and loss A/C (Cr.) 15,000
Furniture 23,500
Sundry creditors 127,500
Sundry debtors 102,500
Manufacturing wages 37,500
Printing and stationary 2,500
Stock on 1-1-2010 30,000
(1) Depreciation plant and machinery by 10 percent and furniture by 5

percent.
(2) Write off 1/3rd of preliminary expenses.
(3) Provide a final dividend of 5%
(4) Transfer Rs. 4,000 to General Reserve
(5) Make a provision for income tax to the extent of Rs. 10,000
(6) Closing stock on 31st December 2002 was valued Rs. 50,000
Hamza Industry Ltd.

Trading & Profit & Loss Account
For the year ended 31st Dec. 2010

Opening Stock 30,000 Sales 207,500
Purchases 105,000 Less: Return & Allow. 7,500 200,000
Less: Return & Allow. 5,000 100,000 Closing Stock 50,000
Manufacturing Wages 37,500
Gross Profit c/d 82,500
250,000 250,000
Auditors Remuneration 6,250 Gross Profit b/d 82,500
Insurance 4,000
Salaries 17,000
Printing & Stationary 2,500
Bad Debts 1,000

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Legal Charges 500

Debenture Interest 6,000
Write off Preliminary expenses 1,500
(4,500 ×1/3)
Depreciation on
Plant & Machinery (147,500×10%) 14,750
Furniture (23,500×5%) 1,175
Net Profit 27,825
82,500 82,500

Transfer to Gen. Reserve 4,000 Last Year Profit 15,000
Provision for taxation 10,000 Current Year profit 27,825
Final Dividend 10000
Balance c/d 18,825
42,825 42,825
Hamza Industry
Balance Sheet
As on 31st Dec. 2010

- Plant & Machinery 147,500
Issued, Subscribed & Less: Depreciation 14,750 132,750
Paid up capital Furniture 23,500
Shares Capital 200,000 Less: Depreciation 1175 22,325
Reserve Goodwill 30,000
Profit & Loss Appropriation 18,825 Freehold Property 90,000
General Reserve 4,000 Deferred Cost
Long Term Liabilities Preliminary Expenses 4,500
Debenture 100,000 Less: Write off 1500 3,000
Current Liabilities Current Assets
Sundry Creditors 127,500 Cash in hand 3,500
Provision for taxation 10,000 Cash at bank 7,500
Final Dividend 10,000 Sundry Debtors 102,500
Closing Stock 50,000
Bills Receivable 28,750
470,325 470,325

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5. Chand & Co. Ltd. with an authorized capital of Rs. 500,000 divided into 50,000 shares of
Rs. 10 each. On 31st December, 2010 25,000 shares were fully called and paid up. The
following are the balances taken from the ledger of the company at 31st December 2010.
Rs. Rs.
Stock 50,000 Printing and stationary 2,400
Sales 425,000 Advertisement 3,800
Purchases 300,000 Postage, telephones etc. 10,500
Wages 70,000 Debtors 38,700
Discount allowed 4,200 Creditors 30,000
Discount received 3,150 Plant and machinery 80,500
Insurance up to 30th June, 2011 6,720 Furniture 17,000
Salaries 18,500 Cash at bank 139,800
Rent 6,000 General reserve 25,000
General Expenses 8,950 Loan from managing director 15,700
Profit & loss Ac (Cr.) 6,220 Bad debts 3,200
Additional information:
(i) Closing stock Rs. 100,000
(ii) Depreciation to be charged on plant and machinery at the rate of 15% p.a. and
furniture at the rate of 10% p.a.
(iii) Outstanding expenses
Wages Rs, 5,200, Salaries Rs, 1,200 and Rent Rs. 600
(iv) Write off Rs. 300 as further bad debts and provide for bad and doubtful debts at 2 per
cent on debtors.
(v) Credit sales amounting to Rs. 600 were left unrecorded in the books of account.
(vi) Dividend at 5% on paid up share capital to be provided.
Required: Prepare trading and profit & loss account for the year ended 31st December 2010
and also a balance sheet as at that date.
Chand & Co. Ltd

Trading & Profit & Loss A/c
For the period ended 31st Dec. 2010

Purchases 300,000 Add: Unrecorded Sales 600 425,600
Wages 70,000 Closing stock 100,000
Add: Outstanding 5,200 75,200
Gross profit c/d 100,400
525,600 525,600
Discount allowed 4,200 Gross profit b/d 100,400
Insurance 6720 Discount received 3150
Less: Prepaid 3360 3360
Salaries 18500
Rent 6,000
Add: Outstanding 600 6,600
General expenses 8950
Printing & Stationary 2,400

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Advertisement 3800
Postage, telephone etc. 10500
Depreciaiton on
Plant & Machinery 12,075
Furniture 1700
Old Bad Dabts 3,200
New Bad Debts 300
New Provision 780 4,280
Net Profit 25,985
103,550 103,550
New Provision for Bad Debts

= (Sundry Debtors + Unrecorded Sales – Provision for discount on debtors – New
Bad Debts) × %
= (Rs. 38,700 + 600 – 0 – 300) × 2% = 780

Proposed Dividend 12,500 Last year profit 6,220
Balance c/d 19705 Current year profit 25,985
32,205 32,205
Chand & Co. Ltd

Balance Sheet
As on 31st Dec. 201
Liabilities Rs Assets Rs.

50,000 shares @ Rs. 10 each 500,000 Plant & Machinery 80500
Issued, Subscribed and Less: Depreciation 12075 68425
paid up capital Furniture 17000
25,000 shares @ Rs. 10 each 250,000 Less: Depreciation 1700 15300
Reserve Current Assets
General Reserve 25,000 Closing Stock 100,000
Profit & Loss App 19705 Debtors 38700
Current Liabilities Add: Unrecorded sales 600
Creditors 35200 39300
Loan from managing director 15700 Less: New Bad Debts 300
Outstanding wages 5,200 Less: New Provision 780 38220
outstanding salaries 1,200 Prepaid insurance 3360
outstanidng rent 600 cash at bank 139800
propsoed dividend 12,500
365,105 365105

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6. The trial balance of Sunshine Company Ltd as at 31st December, 2010 given below
Debit balance Rs Credit balance Rs

Management expenses 85,000 Gross Profit 553,500
Rent and Taxes 15,000 Profit and Loss a/c 50,900
Director Fee 23,000 Bank Loan secured 450,000
Insurance 8,750 Unclaimed Dividend 22,500
Closing Stock 400,000 Depreciation a/c 612,500
Furniture & fixtures 58,500 Miscellaneous Receipt 10,000
Land & Building 475,000 Outstanding expenses 20,000
Motor car 522,500 Bills Payables 20,000
Plan & Machinery 350,000 Share Capital a/c 500,000
Sundry Debtors 290,000 Sundry Creditors 140,500
Cash in Hand 8,250 General Reserves 100,000
Cash in bank 68,350
Repairs to Motor 8,000
Good Will 50,000
Preliminary Expenses 15,000
Bill Receivable 30,000
Salaries 41,500
Prepaid expenses 10,000
Bad debts 6,500
General charges 7,550
Repairs to machinery 7,000
2,479,900 2,479,900
Adjustments
1. The depreciation written off up to on 31st December,2010 was as follow
Land & Building Rs. 175, 000
Plant 200,000
Furniture 37,500
Motor Car 200,000
No depreciation is to be provided for the year 2011
2. The directors transfer Rs. 30,000 to General Reserve and provision for taxation is Rs.
75,000
3. Proposed dividend 10% on equity share capital
4. Credit sales of Rs. 10,000 was unrecorded in the books of accounts
5. Authorized and issued capital is Rs. 500,000 of Rs 100 each
Prepare:
1. Trading and profit and loss account
2. Profit and loss appropriation account
3. Balance sheet

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Profit & Loss Account

Management Expenses 85,000 Gross Profit 553,500
Rent & Rates 15,000 Add: Unrecorded Sales 10,000 563,500
Director Fee 23,000 Miscellaneous Receipts 10,000
Insurance 8,750
Repairs to Motor 8,000
Salaries 41,500
Bad Debts 6,500
General Charges 7,550
Repairs to Machinery 7,000
Net Profit 371,200
573,500 573,500

Transfer to Gen. Reserve 30,000 Last Year Profit 50,900
Provision for taxation 75,000 Current Year Profit 371,200
Proposed Dividend 50,000
Balance c/d 267,100
422,100 422,100
Balance Sheet
Authrized Capital Fixed Assets
5,000 Shares @ Rs. Furniture & Fixture 58,500
100 each 500,000 Less: Depreciation 37,500 21,000
Issued, Subscribed Land & Building 475,000
& Paid up Capital Less: Depreciation 175,000 300,000
5,000 Shares @ Rs. Motor Car 522,500
100 each 500,000 Less: Depreciation 200,000 322,500
Reserve Plant & Machinery 350,000
General Reserve 130,000 Less: Depreciation 200,000 150,000
(100,000+30,000) Goodwill 50,000
Profit & Loss Appropriation 267,100 Deferred Cost
Long Term Liabilities Preliminary Expenses 15,000
Bank Loan Secured 450,000 Current Assets
Current Liabilities Cash in hand 8,250
Sundry Creditors 140,500 Cash in bank 68,350
Bills Payable 20,000 Bills Receivable 30,000
Outstanding Expenses 20,000 Prepaid expenses 10,000
Unclaimed Dividend 22,500 Closing Stock 400,000
Provision for Taxation 75,000 Sundry Debtors 290,000
Proposed Dividend 50,000 Add: Unrecorded sales 10,000 300,000
1,675,100 1,675,100

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7. The management of Murtaza Ltd. asks you to prepare profit and Loss Account and Balance
sheet with data given as on 30th June 2010.
Debit Balances Rs. Credit Balances Rs.

Investment at Cost 4,000 Bank overdraft 175
Land and Building (Original 6% Debentures 10,000
cost Rs. 15,000) 9,000 Share Premium 500
Stock (30-06-2010) 6,000 Sundry Creditors 2,000
Furniture Dividend Equalization Reserve
(Original cost Rs. 1,500) 900 Debenture Redemption Reserve 1,000
Plant and Machinery Interest Received
(Original cost Rs. 25,000) 16,000 Gross Profit 500
Postage and Telegram 400 Profit and Loss A/c 200
Telephone charges 60 Provision for Taxation 9,250
Advance income Tax 500 Share Capital 1,375
Interest on Debentures 300 3,250
Rent, Rates 200 17,500
Cash in hand 1,400
Sundry Debtors 5,500
Advertisement 700
Director’s Remuneration 450
Discount 40
Insurance upto 31-10-2010 225
Repairs 75
Adjustment
The following data take into account:
1. Depreciation is to provided:
a) Plant and Machinery at 10% reducing Balance method
b) Land & Building at 5% on reducing Balance method
c) Furniture at 10% on straight Line method
2. The directors transfer Rs. 500 to dividend equalization reserve and Debenture
redemption reserve each.
3. The market value of investment is Rs. 3,750
4. Equity share dividend @ 8% on share capital.
5.
Murtaza Ltd.
For the period ended 30th June 2010

Postage & Telegram 400 Gross Profit 9,250
Telephone Charges 60 Interest received 200
Interest on debenture 300
Add: Outstanding 300 600
Rent & Rates 200
Advertisement 700
Director's Remuneration 450
Discount 40
Insurance 225
Less: Prepaid (225 × 4/12)75 150
Repairs 75
Depreciaion on

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Plant & Machinery

(16,000 × 10%) 1,600
Land & Building
(9,000 × 5%) 450
Furniture
(1,500 × 10%) 150
Reserve for Investment
(4,000 - 3,750) 250
Net profit 4,325
9,450 9,450
Profit & Loss Appropriation A/c

Transfer to Dividend Last Year Profit 1,375
equalization Reserve 500 Current Year Profit 4,325
Transfer to Debenture
Redemption Reserve 500
Final Dividend 1,400
(17,500 × 8%)
Balance c/d 3,300
5,700 5,700
Balance Sheet
-
Land & Building 15,000
Issued, Subscribed Less: Depreciation 6,450 8,550
& Paid up Capital Furniture 1,500
Share Capital 17,500 Less: Depreciation 750 750
Dividend Equalization Reserve 1,500 Less: Depreciation 10,600 14,400
(1000+500) Deferred Cost
Debenture Redemption Preliminary Expenses
Reserve (500+500) 1,000 Current Assets
Share Premium 500 Cash in hand 1,400
Profit & Loss Appropriation 3,300 Sundry Debtors 5,500
Long Term Liabilities Investment 4,000
6% Debenture 10,000 Less: Reserve 250 3,750
Current Liabilities Closing Stock 6,000
Sundry Creditors 2,000 Advance Income Tax 500
Bank Overdraft 175 Prepaid insurance 75
Provision for Taxation 3,250
Outstanding Interest 300
40,925 40,925

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Working
Land & Building Plant & Machinery Furniture

Cost Price 15,000 25,000 1,500
Book Value 9,000 16,000 900
Last year Depreciation 6,000 9,000 600
Add: Current Year Dep. 450 1,600 150
Total Depreciation 6,450 10,600 750
Interest On Debenture
Total Interest (10,000 ×6%) 600
Less: Interest paid 300
Outstanding 300
8. From the following trial balance of Kaleem Manufacturing company prepare Trading and
profit and Loss Account relating to 2010 and the Balance Sheet as at 31st December 2010.

Stock (1-1-2010) 37,500 Preliminary Expenses 3,000
Purchases 82,500 Furniture 15,000
Freehold property 108,000 Share premium 3,750
Plant and Machinery 128,250 Sundry creditors 4,875
Cash at Bank 22,500 Debenture redemption reserve 3,375
Cash in hand 600 Discount received 1,200
Fuel and power 1,125 Interim dividend 6,750
Wages and salaries 19,500 Debenture interest paid 4,500
Insurance 3,075 Issued, subscribed and paid up capital 112,500
Director fee 3,000 General reserve 7,500
Custom duty and clearing charges 2,625 Dividend on investment 500
Repairs 1,800 Tax deducted at source 60
Sundry Debtors 29,250 Uncollectable 750
Sales 180,000 Carriage outward 440
profit and Loss A/c (Cr.) 13,125
Provision for uncollectable 900
6% Debentures 150,000
Investment in shares 7,500
Additional information:
(i) Kaleem Manufacturing was incorporated with an authorized capital of Rs. 225,000
divided into shares of Rs. 10 each
(ii) Wages and salaries include Rs. 1,000 paid as wages for installation of machinery
(iii) Provide Depreciation on:
Plant and Machinery @ 10%
Furniture @ 5%
(iv) The directors recommended the following:
a) Write off preliminary expenses
b) Transfer Rs. 9,000 to General Reserve
c) Proposed final dividend 10% on equity share capital
d) Rs. 18,750 is appropriated for taxation provision
(v) Create a reserve for uncollectable @ 5% on debtors
(vi) Closing Stock was valued at Rs. 55,000

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Kalam Manufacturing Company


Purchases 82,500 Closing Stock 55,000
Fuel & Power 1,125
Wages & Salaries 19,500
Less: Wrongly included 1,000 18,500
Custom duty & Clearing charges 2,625
235,000 235,000
Insurance 3,075 Gross Profit b/d 92,750
Director Fee 3,000 Provision for uncollectible 900
Repairs 1,800 Discount received 1,200
Debenture interest paid 4,500 Dividend on investment 500
Written off preliminary
expenses 3,000
uncollectible 750
Add: Provision for uncollectible 1,463
Carriage outward 440
Depreciation on
Plant & Machinery (129,250×10%) 12,925
Furniture 750
Net Profit 59,147
95,350 95,350

Interim Dividend 6,750 Last Year Profit 13,125
Transfer to General Reserve 9,000 Current Year Profit 59,147
Provision for taxation 18,750
Balance c/d 26,522
72,272 72,272
Balance Sheet

22,500 Shares @ Rs. 10 each 225,000 Freehold Property 108,000
Issued, Subscribed Plant & Machinery 129,250
11,250 shares @ Rs. 10 each 112,500 Furniture 15,000

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Reserve Less: Depreciation 750 14,250

General Reserve (7,500+9,000) 16500 Current Assets
Debenture Redemption Cash in hand 600
Reserve 3,375 Cash at bank 22,500
Share Premium 3,750 Investment 7,500
Profit & Loss Appropriation 26,522 Sundry Debtors 29,250
Long Term Liabilities Less: Provision 1,463 27,787
6% Debenture 150,000 Tax deducted at source 60
Sundry Creditors 4,875
Outstanding Interest 4,500
352,022 352,022
Total Interest (150,000 ×6%) 9,000
Less: Interest paid 4,500
9. The following Trial Balance relates to Zee Company Ltd. as on 31st March 2010
Debit Balances Rs. Credit Balances Rs.

Sundry Debtors 90,000 Share capital
Plant 40,500 (1,500 shares of 100 each) 150,000
Furniture 6,000 Profit and loss A/c (31/3/9) 8,000
Closing stock as at 31/3/10 76,500 Gross profit 96,225
Rent and Taxes 12,000 General Reserve 2,500
Salaries 23,500 Sundry Creditors 16,500
Office expenses 16,250 Liabilities for expenses 4,775
Discount 1,750 Discount 1,000
Advance Income Tax 13,500 7% Debenture (1-1-10) 20,000
Cash in hand 3,750
Compensation to employee 3,250
Interim dividend 6,000
Preliminary expenses 2,000
Unexpired payments 4,000
The following additional information is available
1) Office expenses include Rs. 2,250 as audit fee and R. 250 as audit expenses.
2) Charge depreciation on plant and furniture @ 10%
3) Outstanding expenses: Salaries Rs. 1,500
Interest on debentures
4) Directors desire the following
(i) Rs. 4,000 Transfer to General Reserve
(ii) Provision for Taxation to be made up to Rs. 7,500
(iii) Write off 50% of preliminary exp.
(iv) Rs. 5 per share as final dividend
5) The authorized capital of company consists of 2,500 shares of Rs. 100 each.

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ZEE Company Ltd

For the year ended 31st March 2010

Rent & Rates 12,000 Gross Profit 96,225
Salaries 23,500 Discount 1,000
office expenses 16,250
Less: Audit fee 2,250
Less: Audit expense 250 13,750
Audit fee 2,250
Audit expenses 250
Discount 1,750
Compensation to employee 3,250
Interest on debenture
350
(20,000 × 7/100 × 3/12))
Depreciation on
Plant
(40,500 × 10%) 4,050
Furniture
(6,000 × 10%) 600
Preliminary expenses written
1,000
off
Net profit 32,975
97,225 97,225

Interim dividend 6,000 Last Year Profit 8,000
Transfer to Gen. Reserve 4,000 Current Year Profit 32,975
Final Dividend (1,500 × 5) 7,500
Balance c/d 15,975
40,975 40,975
Balance Sheet
2,500 shares @ Rs. 100 each 250,000 Plant 40,500
1,500 shares @ Rs. 100 each 150,000 Less: Depreciation 600 5,400
Reserve Deferred Cost
General Reserve 6,500 Preliminary Expenses (2,000 - 1,000) 1,000

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(2,500+4,000) Current Assets

Profit & Loss Appropriation 15,975 Cash in hand 3,750
Long Term Liabilities Sundry Debtors 90,000
7% Debenture 20,000 Unexpired payment 4,000
Sundry Creditors 16,500 Advance Income Tax 13,500
Liabilities for expenses 4,775
Outstanding Salaries 1,500
230,600 230,600
10. The following is the Trial Balance of Star Limited Company for the year ending
December 31, 2010.
Particulars Debit Credit

Rs. Rs.
Salaries & Wages 34,050
Carriage outward 5,800
Interim Dividend 12,000
Equity share capital 175,000
Balance from Trading Account 88,275
Technical know how 9,000
Closing stock 141,500
Furniture 35,000
Profit & Loss A/c 37,125
Freehold property 100,000
Share premium account 20,000
Cash in hand 7,500
Debtors 57,500
General Reserve 14,000
Debenture interest 2,250
Creditors 25,200
Bill payable 6,000
Transfer to general reserve 5,000
415,600 415,600
Adjustments:
(i) Star Company has an authorized capital of Rs. 300,000 divided into ordinary share of
Rs. 10 each. The company has issued 17,500 shares which are fully paid.
(ii) Depreciation is to be provided @ 10% on furniture and property
(iii) Credit sales of Rs. 1,725 were left unrecorded
(iv) Create provision for bad and doubtful debts @ 4% on debtors
(v) The directors proposed the following:
(a) Rs. 15,000 Transfer to Taxation Reserve
(b) 5% proposed dividend
Required: Prepare profit & Loss account for the year ended 31st December 2010 and balance
sheet as that date.

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Star Company Ltd.

31st Dec. 2010

Salaries & Wages 34,050 Gross Profit 88,275
Carriage outward 5,800 Add: Unrecorded sales 1,725 90,000
Debenture interest
Add: Outstanding 4,500
Provision for doubtful debt 2,369
Depreciation on
Furniture
(35,000 × 10%) 3,500
Property
(100,000 × 10%) 10,000
Net profit 29,781

90,000 90,000
New Provision
(Sundry Debtor + Unrecorded Sales - Provision for discount on debtor - New Bad Debts) ×
4%
= (57,500 + 1,725) × 4% 2,369

Transfer to Gen. Reserve 5,000 Current Year Profit 29,781
Transfer to Taxation Res. 15,000
Balance c/d 26,156
66,906 66,906
Balance Sheet
30,000 Shares @ Rs. 10
300,000 Freehold property 100,000
each
Share Capital 175,000 Less: Depreciation 3,500 31,500
Reserve Deferred Cost
Share premium 20,000 Technical Know how 9,000
General Reserve 14,000 Current Assets
Profit & Loss Appropriation 26,156 Cash in hand 7,500
Long Term Liabilities Sundry Debtors 57,500

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Add: Unrecorded
9% Debenture 50,000 1,725
Sales
Current Liabilities 59,225
Sundry Creditors 25,200 Less: New Provision 2,369 56,856
Bills payable 6,000 Bill Receivable 6,000
Proposed Dividend 8,750 Closing Stock 141,500
Outstanding interest 2,250
342,356 342,356
Total Interest (50,000 ×9%) 4,500
11. Saleem Auto Part Company has authorized capital of Rs. 250,000 divided into 25,000
shares of Rs. 10 each, of which 20,000 shares had been issued and fully paid. The following
Trial Balance is extracted on 31st December 2002.
Stock on Jan. 1, 2010 46,604

Returns 3,170 2,463
Sundry Manufacturing expenses 9,810
9% Bank Loan 12,500
Office salaries & expenses 17,250
Director’s remuneration 6,615
Free hold premises 49,000
Furniture 3,750
Cash in hand 620
Profit & Loss Account 9,660
Investment 12,000
Debtors 26,350
Share Capital 100,000
Purchases & Sales 179,553 292,375
Creditors 15,555
Carriage 1,225
Clearing charges 6,250
Interest on Bank Loan 563
Auditor fee 5,810
Preliminary expenses 4,500
Plant & machinery 37,100
Cash at bank 4,883
Advance income tax paid 17,500
432,553 432,553
Adjustments
1. On 31st December 2002 closing stock valued at Rs. 32,120
2. Outstanding wages Rs. 690 while office salaries Rs. 750 are still payable.
3. Depreciation on plant and machinery is to be provided @ 15% and on furniture is to
be 10%.
4. Market value of investment on 31-12-2002 is Rs. 12,500
5. Directors Recommended the followings:

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(a) Provision for Income Tax @ 30% of net profit

(b) Dividend @ 15% to the shareholders on paid up capital.
(c) Transfer to General reserve Rs. 5,000.
Required: Prepare trading and profit and loss account for the year ended 31st Dec. 2002 and
balance sheet at that date.
Saleem Auto Parts Company

For the year ended Dec. 31, 2010
Purchases 179,552 Less: Return 3,170 289,205
Less: Return 2,463 177,089 Closing Stock 32,120
Sundry Manuf. Exp 9,810
Add: Outstand. Wages 690 10,500
Carriage 1,225
Clearing charges 6,250
321,325 321,325
Director's remuneration 6,615 Gross Profit b/d 79,656
office salaries 17,250
Audit fee 5,810
Interest on Bank Loan 563
Depreciation on
Plant & Machinery 5,565
Furniture 375
Net Profit 42,165
79,656 79,656

Provision for taxation 12,650 Last Year Profit 9,660
General Reserve 5,000 Current Year Profit 42,165
Proposed Divided 15,000
Balance c/d 19,175
51,825 51,825
Interest On Bank Loan

Total Interest (12,500 ×9%) 1,125
Less: Interest paid 563

P a g e | 20
Luqman Auto Parts Company

Balance Sheet
50,000 Shares @ Rs. 10 each 250,000 Plant & Machinery 37,100
20,000 shares @ Rs. 10 each 100,000 Less: Depreciation 375 3,375
Reserve - Freehold Premises 49,000
Profit & Loss Appropriation 19,176 Deferred Cost
General Reserve 5,000 Preliminary Expenses 4,500
Long Term Liabilities Current Assets
9% Bank Loan 12,500 Investment 12,000
Current Liabilities Sundry Debtors 26,350
Outstanding Wages 690 Closing Stock 32,120
Outstanding Officer salaries 750 Advance Income Tax 17,500
Outstanding interest on loan 562 Cash in hand 4,883
Sundry Creditor 15,555 Cash at bank 620
1,881,883 181,883

P a g e | 21
12. The following is the Trial Balance of Ehsan Manufacturing Limited as 31st December
2010.
Particulars Debit Credit Particulars Debit Credit

Rs. Rs. Rs. Rs.
Share capital of Rs. 100 1,200,000 Income tax for previous
each 25,000 year not provided for 22,000
Share premium Advance payment of tax 80,000
Motor vehicles 350,000 Stocks 393,000
Commission 4,000 Long term loan 480,000
Establishment charges 202,000 Investment in Marketable
Interest on investment 9,000 securities 200,000
Depreciation 60,000 2,726,000 2,726,000
Auditor fee 24,000
Profit and Loss A/c 30,000
General Reserve 100,000
Interest on loan 48,000
Building 700,000
Land 200,000
Furniture 20,000
Gross profit 845,400
Rates and Taxes 32,000
Discount 6,000 5,000
Sundry debtors & 70,000 31,600
creditor 255,000
Cash at bank 60,000
Interim Dividend
The following additional information is also available:
(a) Depreciation has been provided for as follows:

Building Rs. 15,000
Furniture Rs. 10,000
Motor Vehicles Rs. 35,000
(b) Market value of investment as on 31-12-10 is Rs. 192,000
(c) Income tax is to be provided @ 25%
(d) Directors have recommended a dividend of Rs. 10 per equity share as final dividend
(e) Interest accrued on investment Rs. 3,000
You are required to prepare Profit and Loss A/c and Balance Sheet.

P a g e | 22
Ehsan Manufacturing Limited

For the Period ended 31st Dec. 2010

Commission 4,000 Gross profit 844,800
Establishment charges 202,000 Interest on investment 9,000
Rates and Taxes 32,000 Add: Accrued 3,000 12,000
Audit fee 24,000 Discount preceived 5,000
Discount allowed 6,000
Interest on loan 48,000
Reserve for investment
(200,000 – 192,000) 8,000
Depreciation on
Building 15,000
Furniture 10,000
Motor Vehicles 35,000
Net profit 478,400
862,400 862,400

Interim Dividend 60,000 Last year profit 478,400
Provision for tax last year 22,000 Current Profit 30,000
Provision for tax 119,600
Propsed dividend 120,000
Balance c/d 186,800
508,400 508,400
Ehsan Manufacturing Limited

Balance Sheet

- Building 700,000
Issued, subscribed and paid Land 200,000
up capital Furniture 20,000
12,000 shares @ Rs. 100 each Motor Vehicles 350,000
Reserve 1200,000 Current Assets
General Reserve Investment
Share premium 100,000 Less: Reserve 192,000
Profit & Loss Appropriation 25,000 Advance payment of tax 80,000
Long term liabilities 186,800 Stocks 393,000
Loan Sundry debtors 70,000
Current Liabilities 480,000 Cash at bank 255,000
Provision for tax Accrued interest on investment 3,000
Sundry Creditor 120,000
31,600
22,63,000 22,63,000

P a g e | 23
13. From the following balances which appeared as on 31st December 2010 in the book of the
Arif Ltd. prepare the profit & loss account for the year ended 31st December 2010 and its
Balance Sheet as on that date.
Particular Rs Particular Rs
Authorized and issued capital 1,125,000 Sundry creditors 862,500
Share premium account 30,000 Cash in hand & bank 125,250
General reserve 101,250 Interest on debenture 11,250
Dividend equalization reserve 82,500 5% investment at cost 600,000
6%debenture 375,000 Plant & machinery (Cost 600,000) 393,750
Director fee 11,625 Tax deducted at source 7,875
Insurance (1-4-10 to 31-3-11) 12,750 Interest on investment (gross) 30,000
Stock (31-12-2010) 637,500
Motor truck (cost 112,125) 63,375
Furniture (cost Rs.75,000) 60,000
Land & building (cost 675,000) 375,000
Debtor 937,500
Profit and loss account 225,000
Advance tax 112,500
Balance from trading account 657,375
Interim dividend paid on (15-07-10) 67,500
Salaries 75,000
Adjustments
1. Depreciation schedule for year 2010 shows following results:
 Depreciation @10% on fixed installment method on land & building and on
Plant & machinery was wrongly charged to trading account
 Depreciation on motor truck Rs. 15,000
 Depreciation on furniture @ 5% on original cost.
2. Annual general meeting’s recommendation.
 Transfer Rs.60,000 to dividend equalization fund
 Transfer Rs 150,000 to provision for taxation
 Payment of final dividend of Rs.15 per share of 100 each
3. Investment market value is Rs. 581,625
Working
Motor Truck Furniture Land & Building Plant & Machinery

Cost Price 112,125 75,000 675,000 600,000
Less: Book Value 63,375 60,000 375,000 393,750
Last year Depreciation 48,750 15,000 300,000 206,250
Add: Current Year Dep. 15,000 3,750 - -
Total Depreciation 63,750 18,750 300,000 206,250

P a g e | 24
Arif Ltd.

Director fee 11,625 Gross Profit 659,625
Interest on debenture 11,250 Depreciation on land
Add: Outstanding 11,250 22,500 Building 67,500
Salaries 75,000 Depreciation on Plant & mach. 60,000 787,125
Insurance 12,750 Interest on investment 30,000
Less: Prepaid (12,750 × 3/12) 3,188 9,562
Depreciation on
Land & Building (675,000 ×10%) 67,500
Plant & Machinery (600,000 × 10%) 60,000
Motor Truck 15,000
Furniture (75,000×5%) 3,750
Net profit 552,188
817,125 817,125
Total Interest (375,000 ×6%) 22,500

Dividend Equalization
reserve 60,000 Current Year Profit 552,188
Balance c/d 330,938
777,188 777,188
Arif Ltd.
Balance Sheet

11,250 shares @ Rs. 100 each 11,25,000 Motor Truck 112,125
& Paid up Capital Land & Building 675,000
11,250 shares @ Rs. 100 each 11,25,000 Less: Depreciation 300,000 375,000
Share premium 30,000 Less: Depreciation 206,250 393,750

P a g e | 25
General Reserve 101,250 Furniture 75,000

Dividend Equalization Reserve 142,500 Less: Depreciation 18,750 56,250
(110,000+80,000) Long Term Investment
Profit & Loss Appropriation 330,938 Investment 600,000
6% Debentures 375,000 Sundry Debtors 937,500
Current Liabilities Advance Tax 112,500
Sundry Creditors 862,500 Tax deducted at source 7,875
Outstanding interest 11,250 Unexpired insurance 3,188
Provision for taxation 150,000 Closing Stock 637,500
Proposed Dividend 168,750 Cash in hand & bank 125,250
32,97,188 32,97,188
14. The Trial Balance of Makangi Company Ltd. as at 30th June 2010 is given below:

Rs. Rs.
Repairs & Maintenance 10,500
Advertisement 63,000
Cost of goods sold 2,100,000
Insurance 20,825
Sales 2,765,000
Advances 42,000
Investment (Short term) 210,000
Sundry Expenses 21,700
Interest on debenture 14,175
Share premium 122,500
Equity share capital of Rs. 100 each 2,450,000
Bank overdraft 70,000
Income from investment 14,000
Establishment 121,800
Sundry creditor 175,000
Freehold Land 1,400,000
Building 525,000
Machinery 1,050,000
Furniture 140,000
Stock (30-6-2010) 280,000
Provision for doubtful debts 14,000
Accumulated Depreciation
On Machinery 210,000
On Building 35,000
On Furniture 28,000
Cash in hand 35,000
6,384,000 6.384,000

P a g e | 26
Adjustments:
1. Depreciation is to be charged on written down value method:
Building 5% furniture 10%
Machinery 10%
2. The provision for doubtful debts is to be brought up to 5% on debtors
3. Provision for taxation of Rs. 70,000 is necessary
4. The market value of the investment is Rs. 199,500
5. Proposed dividend of Rs. 5 per share
6. Establishment includes Rs. 12,600 paid to manager who is entitled to commission @
5% of net profit; subject to a minimum of Rs. 16,800
(i) Prepare Trading & Profit & Loss Account
(ii) Profit & Loss Appropriation Account
(iii) Balance sheet
Making Company
Trading & Profit and Loss Account
For the Period ended 30th June 2010

Cost of goods sold 2,100,000 Sales 2,765,000
2,765,000 2,765,000
Repair and Maintenance 10,500 Gross Profit b/d 665,000
Advertisement 63,000 Income from investment 14,000
Sundry expenses 21,700 Provision for doubt debts 14,000
Insurance 20,825
Provision for doubtful debts
(350,000 × 5%) 17,500
Interest on debenture 14,175
Establishment 121,800
Less: Manager Com. 12,600 109,200
Depreciation on
Machinery 84,000
Building 24,500
Furniture 11,200
Reserve for investment 10,500
Manager commission 12,600
Net Profit 274,925
693,000 693,000
Manager Commission
= Net Profit × 5%
= (Income – Expenses) × 5%
= (693,000 – 401,275) × 5% = 15,111
Outstanding Manager Commission

= Total Commission – Commission paid
= 16,800 – 12,600 = 4,200

P a g e | 27
Working
Machinery Building Furniture

Cost Price 1,050,000 525,000 140,000
Less: Accumulated Depreciation 210,000 35,000 28,000
Book Value 840,000 490,000 112,000
Rate of depreciation × 10% × 5% × 10%
Current year Dep. 84,000 24,500 11,200
Last Year Dep. 210,000 35,000 28,000
Total Depreciation 294,000 59,500 39,200

Provision for taxation 70,000 Last year Profit 28,000
Proposed Dividend 122,500 Current Year profit 274,925
Balance c/d 110,425
302,925 302,925
Making Company Ltd

Balance Sheet
As on 30th June 2010
Authorized Capital - Fixed Assets
Freehold Land 1,400,000
Issued, subscribed and paid- Building 525,000
up capital Less: Depreciation 59,500 465,500
24,500 shares @ Rs. 100 2,450,000 Machinery 10,50,000
Reserve Less: Depreciation 294,000 756,000
Share premium 122,500 Furniture 140,000
Profit & Loss Appropriation 110,425 Less: Depreciation 39,200 100,800
6% Debentures 472,500 Investment 210,000
Current Liabilities Less: Reserve 10,500 199,500
Bank overdraft 70,000 Advances 42,000
Sundry creditors 175,000 Sundry Debtors 350,000
Provision for tax 70,000 Less: Provision 17,500 332,500
Proposed Dividend 122,500 Closing Stock 280,000
Outstanding interest 14,175 Cash in hand 35,000
Outstanding manager com. 4,200
3,611,300 3,611,300

P a g e | 28
15. The following data is related to Sara Sundus Company for the year 31st December 2010
Debit Balance Rs. Credit Balance Rs.

Building 140,000 Issued, subscribed & Paid
Purchases 400,722 up capital (60,000 shares of
Manufacturing expenses 162,240 Rs. 10 each) 480,000
Establishment expenses 29,451 General reserve 200,000
General charges 24,862 Unclaimed dividend 5,221
Machinery 160,000 Trade creditors 29,486
Motor vehicles 76,000 Sales 787,158
Furniture 12,000 Depreciation reserve 56,800
Opening stock 137,646 Interest on investment 6,835
Books debts 118,704 Profit & Loss A/c 1st Jan.
Investments 231,160 2010 13,478
Cash 57,792 Staff provident fund 30,000
Director’s fee 14,400
Interim Dividend 36,000
Repairs & Renewals 8,000
16,08,978 16,08,978
Adjustment:
(i) The Stock on 31st December 2010 was valued at Rs. 118,944 (Market value at Rs.
119,200)
(ii) Provided Rs. 16,000 for depreciation on fixed assets, Rs. 5,200 for Manager
Commission and Rs. 1500 for company’s contribution toward provident fund.
(iii) Interest accrued on investment amount to Rs. 2,200
(iv) A provision of Rs. 24,000 is necessary for taxation
(v) Directors propose a final dividend of Rs. 36,000
(vi) Claim of Rs. 4,000 for workman compensation is disputed
(vii) Credit sales of Rs. 1,280 left unrecorded
Required: Prepare Trading and Profit and Loss A/c and Balance Sheet.
Sundus Company

Purchases 400,722 Add: Unrecorded sales 1,280 788,438
Manufacturing Expenses 162,240 Closing Stock 118,944
907,382 907,382
Establishment Expense 29,451 Gross Profit b/d 206,773
General Charges 24,862 Interest on investment 6,835
Director Fee 14,400 Add: Accrued 2,200 9,035
Depreciation 16,000
Manager's Commission 5,200
Repair & Renewals 8,000
Staff Provident Fund 1,200
Net Profit 116,695
215,808 215,808

P a g e | 29

Interim Dividend 36,000 Last Year Profit 13,478
Balance c/d 34,173
130,172 130,172
Sundus Company
Balance Sheet
- Building 140,000
Issued, Subscribed Furniture 12,000
& Paid up Capital Machinery 160,000
60,000 Shares @ Rs. 10 each 480,000 Motor Vehicles 76,000
Reserve 388,000
General Reserve 200,000 Less: Depreciation 72,800 315,200
Profit & Loss Appropriation 34,172 Long Term Investment
Current Liabilities Investment 231,160
Trade Creditors 29,486 Current Assets
Unclaimed Dividend 5,221 Cash 57,792
Outstanding Commission 5,200 Book Debts 118,704
Staff provident Fund 30,000 Add: Unrecorded sales 1,280 119,984
Add: Further 1,200 31,200 Closing Stock 118,944
Accrued interest on
Provision for taxation 24,000 investment 2,200
845,280 845,280
16. The following balances are taken from the books of Alpha Ltd. for the year ending 31st
December 2010.
Debit Balance Rs. Credit Balance Rs.

Stock (1-1-2010) 100,000 Share Capital 400,000
Purchases 120,400 Profit & Loss A/c 43,550
Wages 24,650 General Reserve 50,000
Fuel and Power 14,700 Dividend Equalization Reserve
Salaries 41,000 Sundry Creditors 22,500
Insurance 6,000 Outstanding Expenses 52,500
Audit fee 8,000 Provision for doubtful debts 13,400
Repair & Renewal 3,500 Provision for taxation 2,150
Manager’s Commission 6,000 Unclaimed dividend 22,500
Rent & Rates 13,000 Misc. receipts 5,000
Depreciation 42,500 Sales 12,500
Land & Building 250,000 Purchase return 395,000
Machinery 114,250 900
Motor Vehicle 110,000
Furniture 52,500

P a g e | 30

Prepaid Expenses 4,000
Cash at bank 12,000
Cash in hand 6,875
Income tax paid 20,000
10,20,000 10,20,000
Adjustments
1. Closing stock Rs. 27,500

2. Sales include Rs. 11,000 goods on sale or return (cost price Rs. 5,000)
3. Make a provision of 5% on debtors for bad and doubtful debts after writing off Rs.
2,125 as bad debts.
4. Provide Rs. 17,500 for further taxation while tax liability for last year was Rs. 26,500
5. Directors recommended dividend @ 9% on share capital.
6. Manager is entitled to a commission of 15% on net profit before charging his
commission subject to minimum of Rs. 6,000.
Required
Prepare trading and profit and loss account for the year ended 31st December, 2010
and a balance sheet as at that date.
Alpha Ltd. Company

Trading & Profit and Loss Account
Opening stock 100,000 Sales 395,000
Purchases 120,400 Less: Sale or return 11,000 384,000
Less: Return 900 119,500
Wages 24,650 Closing stock (27,500+5,000) 32,500
Fuel & Power 14,700
416,500 416,500
Salaries 41,000 Gross Profit b/d 157,650
Insurance 6,000 Misc. receipts 12,500
Audit fee 8,000 Old provision 2,150
Repair & Renewal 3,500
Advertisement 13,000
Depreciation 42,500
New Provision 2,875
Add: New Bad Debts 2,125 5,000
Manager’s commission 6,000
Add: Accrued 1,995 7,995
Net profit 45,305
172,300 172,300

Provision for tax last year Last year profit 43,550
(26,500 – 22,500) 4,000 Current year profit 45,305
Provision for tax 17,500
Proposed dividend 36,000
Balance c/d 31,355
88,855 88,855

P a g e | 31
Alpha Ltd. Company

Balance sheet
Authorized capital Fixed Assets
60,000 shares of Rs. 10 each 600,000 Land & Building 250,000
Issued, subscribed and paid Machinery & Equipment 114,250
up capital Motor Vehicle 110,000
40,000 shares of Rs. 10 each 400,000 Furniture 52,500
Reserve Current Assets
General reserve 50,000 Closing Stock 32,500
Dividend equalization reserve Sundry Debtors 70,625
Profit & Loss Appropriation 22,500 Less: Sales or return 11,000
Current liabilities 31,355 Less: New provision 2,875
Sundry creditors Less: New Bad debts 2,125 54,625
Outstanding expenses 52,500 Prepaid expenses 4,000
Tax payable 13,400 Cash at bank 12,000
(26,500 – 20,000) Cash in hand 6,875
Unclaimed Dividend 6,500
Outstanding Manager 5,000
Commission
36,000
636,750 636,750
New Provision for Doubtful Debts

= (Debtors + Unrecorded sales + B/R Dishonored – sales or return – Provision for discount on
debtors – New Bad debts) × 5%
= (70,625 + 0 – 11,000 – 0 – 2,125) × 5% = 2,875
Manager Commission
= Net Profit × 15/100
= (Income – Expenses) × 15/100
= (172,300 – 119,000) × 15/100 = 7,995
Manager Commission Accrued = 7,995 – 6,000 = 1,995

P a g e | 32
17. Pakistan Limited was registered with nominal capital of Rs. 10,00,000 divided into
100,000 shares of Rs. 10 each. The directors of the Company ask you to prepare trading and
profit and loss account and balance sheet as on 30th June 2011:

Plant and Machinery 206,500 Sales 290,500
Auditor’s remuneration 8,750 Purchases Return 7,000
Purchases 147,000 Sundry Creditors 178,500
Insurance 5,600 Share Capital 294,000
Sales return 10,500 6% Debentures 140,000
Salaries 23,800 Profit & Loss A/c (Cr.) 21,000
Cash in hand 4,900
Cash at bank 10,500
Furniture 32,900
Manufacturing Wages 52,500
Printing and Stationary 3,500
Stock on 01-07-2010 42,000
Bad debts 1,400
Legal charges 700
Patents 42,000
Freehold Property 126,000
Preliminary Expenses 14,700
931,000 931,000
Other Details:
1. Write off plant & Machinery and patents by 10% and furniture by 5%
2. Closing stock on 30th June, 2011 was valued Rs. 70,000
3. Bills receivable include a dishonoured bill of Rs. 19,250 and make a provision for
doubtful debts at 5%
4. Write off 1/3rd of preliminary expenses
5. The directors have recommended:
a) Provide final dividend 5% on paid up capital including interim dividend
already declared on 25th Feb. 2011
b) Transfer Rs. 5,600 to General Reserve and make a provision for income tax
to extent of Rs. 14,000.
6. An analysis of JS Traders A/c reveals that goods costing Rs. 42,000 were sent to him
under consignment agreement. All the goods were sold (except 1/4th which were
valued at cost) Rs. 70,000 against which a cheque of Rs. 28,000 was received.
Commission at the rate of 10% is payable to JS Traders.

P a g e | 33
Pakistan Limited
Trading and Profit & Loss Account
For the year ended 30th June 2011

Opening stock 42,000 Sales 290,500
Purchases 147,000 Less: Sales or return 10,500 280,000
Less: Return 7,000 Closing stock 70,000
Less: Goods sent on
Consignment 42,000 98,000
Manufacturing wages 52,500
350,000 350,000
Depreciation on 20,650 Gross profit b/d 157,500
Plant & machinery 4,200 Profit on consignment 31,500
Patents 1,645
Furniture 8,750
Auditor’s Remuneration 5,600
Insurance 23,800
Salaries 3,500
Printing and stationary 700
Legal charges 8,400
Preliminary expenses
(14,700 × 1/3) 1,400
Bad Debts 1,400
Add: New Provision 8,138 9,538
Net profit 97,318
189,000 189,000
New Provision
= (Sundry debtors + unrecorded sales + B/R Dishonoured – Sales on return base – Provision
for discount on debtors – New bad debts) × %
= (143,500 + 19,250) × 5% = 8,138
Profit & Loss Appropriation A/c

Interim dividend 5,600 Last year profit 21,000
Final dividend 9,100 Current year profit 97,318
General reserve 5,600
Provision for income tax 14,000
Balance c/d 84,018
118,318 118,318

P a g e | 34
Pakistan Limited
Balance Sheet
As on 30th June. 2011

Authorized capital Fixed assets
70,000 shares @ Rs. 10 each 700,000 Plant & Machinery 206,500
Issued, subscribed and paid Less: Depreciation 20,650 185,850
up capital Patents 42,000
29,400 shares @ Rs. 10 each 294,000 Less: Amortization 4,200 37,800
Reserve Furniture 32,900
General reserve 5,600 Less: Depreciation 1,645 31,255
Profit & Loss Appropriation 84,018 Freehold property 126,000
Long term liabilities Deferred cost
6% Debentures 140,000 Preliminary expenses 14,700
Current liabilities Less: Write off 4,900 9,800
Sundry creditors 178,500 Current assets
Final dividend 9,100 Cash in hand 32,900
Provision for taxation 14,000 (4,900 + 28,000)
Cash at bank 10,500
Add: B/R Dish. 19,250
162,750
Less: New Provision 8,138 154,612
Less: Dishonored 19,250 21,000
Closing stock 70,000
Add: Consignment
Stock 10,500 80,500
JS Traders (Receivable) 35,000
725,218 725,218
Consignment Account
Goods sent on consignment 42,000 JS Traders (Sales) 70,000
JS Traders (Commission) 7,000 Consignment stock 10,500
Profit on consignment 31,500
92,000 92,000
JS Traders Account
Particular Rs. Particulars Rs.
Consignment A/c 70,000 Cash A/c 28,000
Consignment A/c 7,000
Balance c/d 35,000
70,000 70,000

P a g e | 35
18. The following Balances were extracted from the Books of Islam & Saleem Ltd. for the
year ending 31st March 2010.
Particulars Rs.
Gross Profit 375,000
Stock (31-3-2010) 122500
Franchise 25,000
Building (Accumulated Depreciation 75,000) 225,000
Furniture (Accumulated Depreciation 3,750) 3,750
Motor Truck 150,000
Cash at Bank 10,000
Share capital 250,000
6% Mortgage Debentures 65,000
Discount on issue of Debenture 3,000
Salaries 75,000
Director fee 7,600
Management expenses 86,250
Interest on Debentures 3,900
Commission Received 6,250
Profit & Loss A/c (Cr.) 8,250
Purchase ledger balance 22,500
Sales ledger balance 90,000
Prepare profit and loss Account of the company for the year ending 31st March 2010, and
Balance sheet as at that date. The following adjustments are relevant for the purpose of
preparation of final Account.
1. Provide 10% depreciation on Furniture: Building & Motor Truck on original cost.
2. Amortize Franchise over a period of 10 years.
3. Motor Truck Account represents 3 Trucks of Rs. 25,000 each (original cost Rs.
50,000 each) and a new Truck purchased on 1st September 2009 for Rs. 75,000.
4. Closing stock at 31st March 2010 costing Rs. 122,500 charged to Trading A/c while
market value of Stock is Rs. 115,000
5. Directors desire the following
a) Provision for taxation to be made up to Rs. 125,000
b) Rs. 50,000 transfer to General Reserve
c) Proposed dividend @ 20% on share capital

P a g e | 36
19. The following Balances have been extracted from Sunshine Company Ltd. as on
December 31, 2009
Rs. Rs.
Salaries 41,250
Carriage 1,900
Sundry debtors and creditors 57,500 45,000
Authorized and issued & paid up capital (of Rs. 10 each) 250,000
Stock on (1-1-2009) 50,000
Provision of taxation 35,500
Purchases 412,500
Packing charges 675
Rent 8,500
Director’s remuneration 11,000
B/R & B/P 39,485 37,500
Advance Tax 16,000
5% Mortgage Debentures 60,000
Free hold property 265,000
Debenture Interest paid 1,500
Investment in 5% Govt. Bonds 25,000
Interest received 1,250
Sales 525,000
Equipment 90,000
Bank overdraft 50,000
Interest on Bank Overdraft 3,750
Cash in hand 10,000
Income Tax paid 29,000
Postage 690
10,81,750 10,81,750
Prepare Trading & Profit & Loss A/c for the year ended 31st December 2009 and Balance
Sheet as on that date:
1. Closing Stock was valued at Rs. 120,000
2. During the year equipment with zero Book Value was sold for Rs. 10,000 and the
amount was included in sale.
3. Charge Depreciation on Equipment @ 10%
4. Director suggest the following:
(i) Transfer Rs. 12,500 to Dividend Equalization Reserve
(ii) Director recommend Rs. 2.5 per share as final dividend
(iii) Transfer Rs. 15,000 to General Reserve.
(iv) Provision for taxation for 2009-10 Rs. 25,000

P a g e | 37
Sunshine Company Ltd.

Cost of goods sold 800,000 Sales 1,050,000
1,050,000 1,050,000
Salaries 82,500 Gross Profit b/d 250,000
Packing Charges 1,350 Interest received 2,500
Rent 17,000
Director's remuneration 22,000
Interest on bank overdraft 7,500
Postage 1,380
Depreciation on
Equipment (180,000×10%) 18,000
Net Profit 96,770
252,500 252,500
Profit & Loss Appropriation

Transfer to Dividend eq.
Reserve 25,000
Final Divided (50,000 × 2.5) 125,000
Balance c/d 15,770
251,770 251,770

P a g e | 38
Sunshine Company Ltd.

Balance Sheet
50,000 Shares @ Rs. 10 each 500,000 Freehold Property 530,000
Issued, Subscribed Equipment 180,000
50,000 Shares @ Rs. 10 each 500,000
Reserve
Dividend Eq. Reserve 25,000
Profit & Loss Appropriation 15,770 Long Term Investment
Long Term Liabilities 5% Investment in Govt. Bonds 50,000
5% Mortgage Debenture 120,000 Current Assets
Current Liabilities Cash in hand 20,000
Sundry Creditors 90,000 Sundry Debtors 115,000
B/P 75,000 Closing Stock 186,800
Outstanding interest 3,000 B/R 78,970
Bank Overdraft 100,000 Advance Tax 32,000
provision for taxation 121,000
(50,000+71,000)
1,174,770 1,174,770

Chapter # 4 Final Account

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ADVANCED FINANCIAL ACCOUNTING

Rooh Ullah Khan (M.Com)

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Rent Rent received

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Profit & Loss Appropriation Account

Particulars Rs. Particulars Rs.

Current Liabilities Deferred cost

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Adjustments and their effects

Adj # Adjustment T & P & L A/c Balance Sheet Appropriation

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

(1) Depreciation plant and machinery by 10 percent and furniture by 5

Hamza Industry Ltd.

Particulars Rs. Particulars Rs.

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Legal Charges 500

Profit & Loss Appropriation Account

Particulars Rs. Particulars Rs.

Liabilities Rs. Assets Rs.

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Chand & Co. Ltd

Particulars Rs. Particulars Rs.

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

New Provision for Bad Debts

Profit & Loss Appropriation Account

Particulars Rs. Particulars Rs.

Chand & Co. Ltd

Liabilities Rs Assets Rs.

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Debit balance Rs Credit balance Rs

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Profit & Loss Account

Profit & Loss Appropriation Account

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Debit Balances Rs. Credit Balances Rs.

Particulars Rs. Particulars Rs.

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Plant & Machinery

Profit & Loss Appropriation A/c

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Land & Building Plant & Machinery Furniture

Particulars Rs. Particulars Rs.

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Kalam Manufacturing Company

Particulars Rs. Particulars Rs.

Profit & Loss Appropriation Account

Particulars Rs. Particulars Rs.

Liabilities Rs. Assets Rs.

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

Reserve Less: Depreciation 750 14,250

Debit Balances Rs. Credit Balances Rs.

The following additional information is available

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389

ZEE Company Ltd

Particulars Rs. Particulars Rs.

Profit & Loss Appropriation Account

Rooh Ullah Khan (M.Com) Lecturer: The Standard College 0333-8786389