CA FOUNDATION – ACCOUNTANCY

INDEX

Sr. No Topic Page No.

1. Accounting Process
Part I – Books of Accounts and Trial Balance 1–3
Part II – Rectification of Errors
2. Bank Reconciliation Statement 4–5
3. Inventories 6–7
4. Depreciation 8–9
5. Accounting for Special Transaction
Part I – Bills of Exchange 10 – 14
Part II – Sales or Return 15
Part III – Consignment 16 – 19
6. Final Accounts of Sole Traders 20 – 25
7. Partnership Accounts 26 – 30
8. Final Accounts of Not for Profit Organisations 31 – 35
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
ACCOUNTING PROCESS
Ans.1 Rectified Journal Entries
Transaction Particulars Debit `)
Credit (`
`)
(`
(1) Suspense A/c Dr. 10,000
To A's A/c 10,000
(Being rectification of amount received
from A wrongly debited to his account)
(2) Suspense A/c Dr. 40,000
To Purchase A/c 20,000
To Purchase Return A/c 20,000
(Being rectification of purchase return
wrongly posted to purchase A/c)
(3) Suspense A/c Dr. 16,000
To Discount A/c 16,000
(Being rectification of discount received
wrongly debited to Discount A/c)
(4) Motor Car Repairs A/c Dr. 9,060
To Motor Car A/c 7,060
To Suspense A/c 2,000
(Being rectification motor car repairs of
` 9060 wrongly debited to motor car A/c
as 7060)
(5) B's A/c Dr. 40,000
To A's A/c 40,000
(Being rectification of amount paid to B
wrongly debited to A)
Suspense A/c
Particulars ` Particulars `
To A's A/c 1,00,000 By Difference in trial 1,54,000
To Purchase A/c 20,000 Balance (Bal. fig.)
To Purchase Return A/c 20,000 By Motor Car Repairs A/c 2,000
To Discount A/c 16,000
1,56,000 1,56,000

Ans.2 Rectified Journal Entries

Transaction Particulars `)
Debit (` `)
Credit (`
(1) Purchase A/c Dr. 15,000
Sales A/c Dr. 15,000
To Ravi's A/c 30,000
(Being rectification of purchases wrongly
entered to sales book)
(2) Bills Receivable A/c Dr. 25,000
Bills Payable A/c Dr. 25,000
To Arun A/c 50,000
(Being rectification of Bills Receivable
wrongly recorded in bills Payable Book)
(3) Prepaid Rent A/c Dr. 3,500
To Suspense A/c 3,500
(Being rectification of omission of prepaid
rent a/c to be brought forward)
(4) Customer A/c Dr. 4,000
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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
To Purchase A/c 2,000
To Purchase Return A/c 2,000
(Being rectification of purchase return
wrongly entered in Purchase Book)
(5) Bills Payable A/c Dr. 25,000
To Harish A/c 25,000
(Being rectification of Bills Payable A/c
wrongly debited to Harish's A/c)
(6) Repairs A/c Dr. 2,5000
Radio A/c Dr. 45,000
To Purchase A/c 46,000
To Janki A/c 1,500
(Being rectification of the amount wrongly
entered in purchase book as 46000)
Suspense A/c
Particulars ` Particulars `
To Balance b/d 1,000 By Prepaid Rent A/c 3,500
to Balance c/d 2,500
3,500 3,500

Ans.3 Rectified Journal Entries

Transaction Particulars Debit `)
Credit (`
`)
(`
(1) Suspense A/c Dr. 420
To Purchase Return A/c 420
(Being rectification of omission amount
not posted to Return Outward Book)
(2) Sales A/c Dr. 350
Purchase A/c Dr. 350
To Suspense A/c 700
(Being rectification of purchase amount
entered in the sales book)
(3) Z's A/c Dr. 680
To Suspense A/c 680
(Being rectification of wrong amount and
wrong side of account)
(4) Sales A/c Dr. 4,500
Suspense A/c Dr. 900
To Furniture A/c 5,400
(Being rectification of wrongly entered
amount)
(5) Drawings A/c Dr. 500
To Purchases A/c 500
(Being recording of the omission of
goods taken by proprietor)
Suspense A/c
Particulars ` Particulars `
To Difference in trial Balance 60 By Sales A/c 350
To Purchase Return A/c 420 By Purchase A/c 350
To Furniture A/c 900 By Z’s A/c 350
1,380 1,380

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.4 Rectified Journal Entries
Transaction Particulars Debit `)
Credit (`
`)
(`
(1) Suspense A/c Dr. 180
To P & L Adjustment A/c 180
(Being rectification of under-valuation of
Sales Book)
(2) P & L Adjustment A/c Dr. 2,400
To Customer A/c 2,400
(Being rectification of Person expenses
wrongly debited to Expenses)
(3) Drawings A/c Dr. 250
To P & L Adjustment A/c 250
(Being rectification of Person
expenses wrongly debited to Expenses)
(4) P & L Adjustment A/c Dr. 2,750
To Suspense A/c 2,750
(Being rectification of Sales
undervalued by ` 2740)
(5) Suspense A/c Dr. 100
To P & L Adjustment A/c 100
(Being rectification of discount a
wrongly debited to Discount A/c)
(6) P & L Adjustment A/c Dr. 136
To Suspense A/c 36
To Creditors A/c 100
(Being rectification of undervalue
Purchase Book and wrong posting
suppliers A/c as ` 51)

Ans. 5 In the books of Rajesh Rectification entries

Date Particulars L.F. Dr. (`) Cr. (`)
1. Purchase A/c Dr. 1,080
Sales A/c Dr. 1,080
To Suspense A/c 2,160
(Being purchase was recorded by mistake in
sales day book)
2. Salary a/c (25.200 + 2,520) Dr. 27,720
To Suspense A/c 27,720
(Being total of salary a/c Bal. of ` 25.200 written
as 2,520 on the wrong side.)
3. Interest on Overdraft A/c Dr. 1,300
To. Suspense A/c 1,300
(Being posting of entry to the ledger omitted)
31,180 31,180
Dr. Suspense a/c Cr.

To Bal. b/d 31,180 By Purchase 1,080

By Sales 1,080
By Salary 27,720
By Interest on overdraft 1,300
31,180 31,180

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
BANK RECONCILIATION STATEMENT
Ans.1 As on 30th June, 1996 Adjusted Cash Book
Particulars ` Particulars `
To Balance b/d 44,500 By Insurance Premium A/c 2,700
To Dividend A/c 4,000 By Error in totalling A/c 50
To Rent A/c 6,000 By Bank Charges A/c 50
To Bill Receivable A/c 5,900 By Bills Payable A/c 2,000
By Balance A/c 55,600
60,400 60,400
Bank Reconciliation Statement
`
Adjusted balance as per Cash Book (Cr.) 55,600
Add: Cheques issued but not presented for payment till 30th
June, 1996 60,000
1,15,600
Less: Cheque paid into bank for collection but not collected till 50,000
30th June, 1996
Balance as per Pass Book 65,600

Ans.2 Bank Reconciliation Statement as on 31st March, 1997

Particulars +Items ` -Items `
Overdraft as per Cash Book 7,640
Add: Cheques deposited but not credited by the bank 10,000
Interest debited by the bank but not recorded in the cash
book 1,000
Bank Charges not recorded in the cash book 340
Less: Interest on securities collected by the bank but not
recorded in cash book 1,080
Credit transfer not recorded in the cash book 200
Dividend collected by the bank directly but not recorded in
the cash book 1,000
Cheques issued but bot presented for payment 37,400
Balance as per Bank Statement (bal. fig) 20,700
39,680 39,680

Ans.3 Bank Reconciliation Statement (As on 30th September, 2003)

+Items ` -Items `
Bank (Credit) Balance as per Pass Book 10,000
Add: (1) Cheques received but not deposited in
Bank 1,200
(2) Insurance premium paid directly by bank 600
(3) Cheque received but entered twice in the 1,000
cash book
(4) Bills discounted dishonoured but not
recorded in the cash book 5,200
Less:(1) Cheques deposited but not entered in 500
cash book
(2) Bank charges entered twice in cash book 20
(3) Cheque issued but not presented for
payment 500
Balance (Dr) as per Cash Book (bal. fig.) 16,980
18,000 18,000
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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.4 Bank Reconciliation Statement (As on 30th September, 2005)
Particulars +Items ` -Items `
1. Overdraft as per Bank Pass-Book 21,494
2. Cheque deposited but not yet entered in Cash
Book 700
3. Under cast of debit side of the Bank coloum 100
4. Cheque deposited ` 5,000 but entire in Pass
Book as ` 4,996 4
5 Cheque dishonoured but not recorded in Cash
Book 530
6. Bills collected by bank but not recorded in Cash-
Book 3,500
7. Bank Charges recorded twice in Cash-Book 25
8. Bills dishonoured but not yet recorded in Cash
Book 8,015
9. Cheque deposited but not yet Collected by Bank 2,320
10. Cheque issued but not yet presented for payment 1,250
11. Over draft as per Cash-Book 16,200
27,069 27,069

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
INVENTORIES
Ans.1 Statement of Valuation of Physical as on 31st March 1996
Particulars ` `
Particulars 25,000
Value of stock as on 9th April, 1996
Add: Cost of sales
Sales made between 31.3.1996 and 9.4.1996 1,720
Less: Gross profit @ 25% on sales 430 1,290
26,290
Less: Purchases actually received
Purchases from 1.4.1996 to 9.4.1996 120
Less: Goods not received up to 9.4.1996 50 70
26,290
Less: Purchases during March, 199 received
on 4.4.1996 100
Value of Physical stock as on 31.3.1996 26,120

Ans.2 Statements of Valuation of stock as on 31st March 1997

Particulars ` `
Value of stock as on 9th April, 1996 70,000
Add: Purchases during the period from 3,46,000
1.4.1996 to 31.3.1997
Add: Manufacturing expenses 70,000
4,86,000
Less: Cost of sales during the period Sales 5,22,000
Less: Gross Profit 1,03,200 4,18,800
Value of closing stock 67,200

Working Notes :
Calculation of Gross Profit:
Gross Profit on normal sales
(5,22,000 - 16,000) x 20/100 1,01,200
Gross profit on the abnormal sales
16,000 - (20,000 - 6,000) 2,000
1,03,200

Ans.3 Valuation of Stock as on 31st March 2002

` `
th
1. Stock to godown on 15 April 50,000
2. Add:(a) Cost of goods sold after 31st March till stock
taking 32,000
(` 41,000 - ` 1,000) x 80/100]
(b) Cost of stock with customer on approval
[(` 10,000- ` 4,000) x 80/100] 4,800 36,800
3. Less:(a) Cost of goods purchased after 31st 86,800
March till stock taking is made 5,034
(b) Stock belonging to consignors
(` 8,000 x 30/100) 2,400 7,434
4. Stock as on March 31, (at cost) 76,366

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.4 Valuation of Stock as on 31st March, 2004
Particulars ` `
Opening Stock 14,250
Add: Written off last year 1,750 16,000
Add: Purchases 76,250
Add: Manufacturing Expenses 15,000
Cost of production 1,07,250
Less: Cost of Goods sold:
Sales 1,24,500
Less: Abnormal Sales 4,500
1,20,000
Less: Gross Profit @ 20% on sales 24,000
96,000
Add: Cost of Abnormal Sales 5,000
1,01,000 1,01,000
Value of Closing Stock 6,250
Statements ` `
Gross Profit 24,000
Less : Loss on Sale of Goods 500
Administrative Expenses 3,000
Selling Expenses 6,050
Financial Charges 2,150 11,700
Profit for the year 2004 12,300

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
DEPRECIATION
Ans.1 Books of Ramlal Machinery a/c
1987 - 88
1.4 To Balance b/d 15,000 1.1 By Bank A/c 2,000
1.10 To Bank a/c 10,000 1.1 By Depreciation 225
1.1 By P & L a/c (Loss) 775
31.3 By Depreciation 1,700
(12,000 + 500)
31.3 By Balance c/d 20,300
25,000 25,000
WN1 P/L on sale
s1.4.87 WDV 3,000
(-) Dep. (9m) 225
1.1.88 WDV 2775
(-) Sales value 2000
Loss 775

Ans. 2 Books of Hindustan Petrol Machinery A/c

1981 – 82
1.7 To Cash / Bank a/c 60,000 31.3 By Depreciation 5500
1.1 To Cash / Bank a/c 40,000 (4,500 + 1,000)
31.3 By Bal. c/d 94,500
10,00,00 10,00,00
1982 – 83
1.4 To Bal. b/d 94,500 31.3 By Depreciation 11,000
1.10 To Cash / Bank A/c 20,000 (6,000 + 4,000 + 1,000)
31.3 By Bal. c/d 1,03,500
1,14,500 1,14,500
1983 – 84
1.4 To Bal. b/d 1,03,500 1.4 By Cash / B/c 76,000
1.4 To P & L a/c 59,500 31.3 By Depreciation 10,000
(4,000 + 4,000 + 2,000)
31.3 By Bal. c/d 77,000
16,300 16,300
1984 – 85
1.4 To Bal. b/d 77,000

WN1 P/L on Sale

1.7.81 O.C. (60,000 x 1ൗ3) 20,000
(-) Dep. far 81 – 82 (9m) 1,500
1.4.82 WDV 18,500
(-) Dep. for 82 – 83 2,000
1.4.83 WDV 16,500
(-) Sale Value 76,000
Profit 59,500

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY

Ans. 3 Books of _______ Machinery A/c

1981 – 82
1.4 To Bal. b/d 72,000 1.10 By Cash / Bank 6,000
1.10 To P & L a/c (Profit) 204 1.10 By Depreciation 385
1.1 To Cash / Bank 20,000 1.10 By P & L A/c 1,310
1.10 By Cash / Bank 13,200
1.10 By Depreciation 684
31.3 By Depreciation 5,563
31.3 By Bal. c/d 65,062
92,205 92,204
WN1 P / L on sale
1.10.1978 O.C. 10,000
(-) Dep. for 1978 – 79 (6m) 500
1.4.79 WDV 9500
(-) Dep. for 1979 – 80 950
1.4.80 WDV 8,550
(-) Dep. for 1980 – 81 855
1.4.81 WDV 7,695
(-) Dep. for 1981 – 82 (6m) 385
1.10.81 WDV 7,310
(-) Sale value 6,000
Loss 1,310

WN2 P / L on sale
1.10.79 O.C. 16,000
(-) Dep for 1979 – 80 (6m) 800
1.4.80 WDV 15,200
(-) Dep. for 1980 – 81 1,520
1.4.81 WDV 13,680
(-) Dep. for 1981 – 82 (6m) 684
1.10.81 WDV 12,996
(-) Sale value 13,200
Profit 204

WN3 Dep. for 1981 – 82

Old Mach (72,000 – 7,695 – 13,680) x 10% = 5063
New Mach (20,000 x 10% x 3ൗ12) = 500
5,563

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Bills of Exchange
Ans.1 Journal Entries in the Books of Mr. David
Date Particulars Amount Amount
(Dr.) ` (Cr.) `
1995 Bills Receivable (No. 1) A/c Dr. 6,000
Jan.1 Bills Receivable (No.2) A/c Dr. 10,000
To Mr. Thomas' A/c 16,000
(Being drawing of bills Receivable No. 1 due
for maturity on 4.3.95 and bills
receivable No. 2 due for maturity on 4.4.95)
March 4 Mr. Thomas' A/c Dr. 6,000
To Bills Receivable (No.1) A/c 6,000
(Being the reversal entry for bill No. 1 on
agreed renewal)
March 4 Bills Receivable (No.3) A/c Dr. 6,180
To Interest A/c 180
To Mr. Thomas' A/c 6,000
(Being the drawing of bill of 3 due for
maturity on.7.5.199 @ 18% p.a. in lieu of
acceptance of Mr. Thomas)
March 20 Bank A/c Dr. 9,900
Discount A/c Dr. 100
To Bills Receivable (No.3) A/c 10,000
(Being the amount received from official
assignee of Mr. Thomas @ 50 Paisa , per
rupee against dishonoured bill)
May 7 Mr. Thomas A/c Dr. 6,180
To Bills Receivable (No 6,180
(Being the amount due from on dishonour of
acceptance of presentation on the due
date).
May 7 Mr. Thomas A/c Dr. 3,090
To Bill Receivable (No.3) A/c 3,090
(Being the amount due from on dishonour of
acceptance of presentation on the due
date.)
May 7 Bad Debts A/c Dr. 3,090
To Mr. Thomas A/c 3,090
(Being the balance 50% debt in Mr. Thomas
A/c arising out of dishonoured bill written as
bad).

Ans.2 Books of Shubham Journal Entries

Date Particulars Amount Amount
(Dr.) ` (Cr.) `
1998 Bills Receivable A/c Dr. 45,000
June 1 To Rajendra A/c 45,000
(Being Acceptance received from Rajendra
for Mutual accommodation)
June 1 Bank A/c Dr. 44,100
Discount A/c Dr. 900
To Bills Receivable A/c 45,000

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
(Being Bill discounted)
June 1 Rajendra Dr. 15,000
To Bank A/c 14,700
To Discount A/c 300
(Being one – third of proceeds remitted
Rajendra).
Sept. 4 Rajendra Dr. 63,000
To Bills Payable A/c 63,000
(Being Acceptance given to Rajendra on
failure of remittance of the amount due)
Sept. 4 Bank A/c Dr. 11,100
Discount A/c Dr. 900
To Rajendra 12,000
(Being receipt of Amount from Rajendra and
discount amount credited to him.)
Dec. 7 Bills Payable A/c Dr. 63,000
To Rajendra 63,000
(Beings Acceptance to Rajendra
dishonoured on insolvency.)
Dec. 7 Rajendra Dr. 42,000
To Bank A/c 16,800
To Deficiency A/c 25,200
(Being Amount paid @ 40% and balance
credited to Deficiency A/c on failure of
payment)

Books of Rajendra Journal Entries

Date Particulars Amount Amount
(Dr.) ` (Cr.) `
1998 Shubham Dr. 45,000
June 1 To Bills Payable A/c 45,000
(Being Acceptance given for the bill)
June 1 Bank A/c Dr. 14,700
Discount A/c Dr. 300
To Shubham 15,000
(Being one third of the proceeds of bill after
discounting received from shubham)
Sept. 4 Bill Receivable A/c Dr. 63,000
To Shubham 63,000
(Being Acceptance received from Shubham
to cover the amount due from him)
Sept. 4 Bank A/c Dr. 61,650
Discount A/c Dr. 1,350
To Bills Receivable A/c 63,000
(Being Shubham's Acceptance discounted)
Sept. 4 Bills Payable A/c Dr. 45,000
To Bank A/c 45,000
(Being own acceptance due on the due met)
Sept. 4 Shubham Dr. 12,000
To Bank A/c 11,100
To Discount A/c 900
(Being Amount remitted to Shubham, after
getting the bill discounted)

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Dec. 7 Shubham Dr. 63,000
To Bank A/c 63,000
(Being Shubham's Acceptance dishonoured
on insolvency)
Dec. 7 Bank A/c Dr. 16,800
Bad Debts A/c Dr. 25,200
To Shubham 42,000
(Beings Amount and bad debts written off in
respect of amount due from Shubham)
Working Note:
Calculation of discount to be borne by Mr. Shubham
` 15,000 paid to Rajendra out of bill of ` 45,000 as such ` (45,000 – 15,000) = 30,000
due to Rajendra and ` 11,100 further received from Rajendra. Therefore 30,000 + 11,100
= ` 41,100 are shared by Shubham, out of total ` 61,650. In this proportion, discount is
also related to shubham.
Discount shared by Shubham.

,
,
= x (63,000 – 61,650) = x 1,350 = ` 900.
, ,

Ans. 3 Books of H
Date Particulars Amount Amount
(Dr.) ` (Cr.) `
1.7.99 G's A/c Dr. 80,000
To Bills Payable A/c 80,000
(Being Acceptance of bill drawn by G)
1.9.99 J's A/c Dr. 90,000
To Sales A/c 90,000
(Being Sales made to J)
1.9.99 Bills Receivable A/c Dr. 80,000
Banks A/c Dr. 9,000
Discount A/c Dr. 1,000
To J's A/c 90,000
(Being Acceptance received from J's
endorsement of bill received from G and `
9,000 received in full settlement of the
amount due)
1.9.99 Bills Payable A/c Dr. 80,000
To Bills Receivable A/c 80,000
(Beings Own acceptance received from Ji's
Endorsement cancelled)
1.10.99 Purchase A/c Dr. 1,00,000
To G's A/c 1,00,000
(Being purchase made from G)
G's A/c Dr. 20,000
To Bank A/c 20,000
(Being Amount paid to G after adjustment of
` 80,000 for accommodation extended to
him)

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans. 4 Book of X Journal Entries
Date Particulars Amount Amount
(Dr.) ` (Cr.) `
2001 Bills Receivable A/c Dr. 4,000
April 1 To Y 4,000
(Being acceptance on bill received)
April 1 Bank A/c Dr. 3,920
Discount A/c Dr. 80
To Bills Receivable A/c 4,000
(Being Bill discounted @ 6% p.a.]
April 1 Y'sA/c Dr. 2,000
To Bank A/c 1,960
To Discount A/c 40
(Being half of the proceeds sent)
April 4 Y's Dr. 7,000
To Bills Payable A/c 7,000
(Being acceptance given on a New Bill)
April 4 Bank A/c Dr. 1,300
Discount A/c Dr. 200
To Y 1,500
(Being amount received from Y)
Aug. 4 Bills Payable A/c Dr. 7,000
To Y 7,000
(Beings bill dishonoured due to insolvency)
Aug. 4 Y Dr. 3,500
To Bank A/c 875
To Deficiency A/c 2,625
(Beings the amount of 25 paisa in a rupee
paid to Y)
Working Notes :
Y’s Account
Date Particulars F.N. Amt. Date Particulars F.N. Amt.
2001 2001
April 1 To Bank A/c 1,960 April 1 By B/R 4,000
April 1 To Discount A/c 40 April 4 By Bank A/c 1,300
April 4 To Bill payable A/c 7,00 April 4 By Discount 200
Aug. 4 To Bank 875 Aug. 4 By B/PA/c 7,000
Aug. 4 To Deficiency A/c 2,625
12,500 12,500

Ans. 5 In the book of Anil Journal Entries

Date Particulars L.F. Amount Amount
(Dr.) ` (Cr.) `
2003 Bills Receivable A/c Dr. 9,000
5 April To Sanjay's A/c 9,000
(Being acceptance received for material
accommodation)
5 April Bank A/c Dr. 8,820
Discount A/c Dr. 180
To Bills Receivable A/c 9,000
(Being discounting of bills)
5 April Sanjay's A/c Dr. 3,000
To Bank A/c 2,940

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
To Discount A/c 60
(Being 1/3 proceeds of the bill transfer to the
Sanjay's A/c)
8 July Sanjay's A/c Dr. 12,600
To Bills Payable A/c 12,600
(Being acceptance of bill given)
8 July Bank A/c Dr. 2,220
, , 
Discount A/c   ,  x 270 Dr. 180
2,400
To Sanjay's A/c
(Being amount received from Sanjay against
2nd bills)
11 Oct Bills Payable A/c Dr. 12,600
To Sanjay's A/c 12,600
(Being dishonour of bill due insolvency)
11 Oct Sanjay's A/c Dr. 8,400
To Bank A/c 4,200
To Deficiency A/c 4,200
(Being @ 50% of (` 6,000 + 2,400) paid to
Sanjay)

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Sale or Return
Ans.1 Journal Entries in the books of Mr. A.
(i) Mr. B’s (Debtor) A/c Dr. 20,000
To Sales A/c 20,000
(Being goods are approved by Mr. B)
(ii) Mr. B’s (Debtor) A/c Dr. 20,000
To Sales 20,000
(Being goods are sold)
Sale Return A/c Dr. 20,000
To Mr. B’s A/c 20,000
(Being goods are rejected by the customer)
(iii) Mr. B’s A/c Dr. 20,000
To Sales 20,000
(Being goods are sold)
Sales Return A/c Dr. 10,000
To Mr. B’s A/c 10,000
(Being half of goods rejected by the
customer)

Ans.2 In the books of ‘X’

Goods on Sales or Return, Sold and Retuned Day Books
Date Party to whom L.F. Amount Date Sold Returned
(2002 goods sent `)
(` (2002) `)
(` `)
(`
Dec. 10 M/S ABC Co. 10,000 Dec. 25 10,000 -
Dec. 12 M/S DEF Co. 15,000 Dec. 16 - 15,000
Dec. 15 M/S GHI Co. 12,000 Dec. 20 10,000 2,000
Dec. 20 M/S DEF Co. 16,000 Dec. 24 16,000 -
Dec. 25 M/S ABC Co. 11,000 Dec. 28 11,000 -
Dec. 30 M/S GHI Co. 13,000 - - -
77,000 47,000 17,000

Goods on Sales or Return Total Account

Date Particulars Amount Date Particulars Amount
(2002) `)
(` (2002) `)
(`
To Returns 17,000 Dec. 31 By goods sent on
To Sales 47,000 Sales or Return 77,000
To Balance c/d 13,000
77,000 77,000

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Consignment
Ans.1 Consignment Account
Dr. Cr.
Date Particulars `)
Amt. (` Date Particulars `)
Amt. (`
1997 1997
Jan 15 To Goods Sent on March 4 By Y A/c (Sales) 21,00,000
Consignment A/c 25,00,000 April 10 By Y A/c (Sales) 10,80,000
Jan 15 To Bank A/c 7,000 April 30 By Stock on Consignment
Jan 30 To Y A/c (Clearance expenses) 4,500 A/c (2) 2,51,150
March 4 To Y A/c (Selling Expenses) 75,000
April 10 To Y A/c (Selling Expenses) 37,500
April 30 To Y A/c (Commission) (1) 1,63,500
April 30 To Net Profit 6,43,650
34,31,150 34,31,150
Dr. Y (Bombay) Account Cr.
Date Particulars ` Date Particulars `
1997 1997
March 4 To Consignment A/c 21,00,000 Jan 30 By Consignment A/c 4,500
April 10 To Consignment A/c 10,80,000 March 4 By Consignment A/c 75,000
April 1 By Consignment A/c 37,500
April 30 By Consignment A/c (1) 1,63,500
April 30 By Bank A/c 28,99,500
31,80,000 31,80,000
Working Notes :
1. Computation of Commission
Let Total Commission be x
x = 225x500 + 1/4[(21,00,000 + 10,80,000 – x – (12,500 x 225)]
x = 1,12,500 + 1/4[31,80,000 – x – 28,12,500]



x = 1,12,500 + 91,875 - ;x+ = 1,12,500 + 91,875
 

= 2,04,375

Total Commission = ` 1,63,500

Ans.2 Books of A
Consignment a/c
To GSOC (10,000 x 20) 2,00,000 By Abnormal Loss
To Cash / Blc. (Exp.) 50,000 Goods (250 x 20) 5,000
To B’s A/c 10,000
50,000
Expenses  1250
Octroi & Custom 5000 250
9 2,25,000
Unload (9750 x 0.20) 1,450 By B (Sales = 7,500 x 30) 55,200
Carriage IW 200 By Carriage Stock
Godown Rent 6,000
Office & Adm. 12,355
Selling & Disk 8,000 33,505
To B (Comm.) 10,125
To P & L A/c ( Profit) - By P & L a/c (Loss) 71800
2,86,450 2,86,450

B’s A/c
To Consignment 22,25,000 By Consignment 33,505
By Consignment 10125

By Bank 1,81,370
2,25,000 2,25,000
WN1 - CL – Stock (2050 units)
,,,,
= x 20,50 = 55,200
,
: 16 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.3 D's Account
Dr. Cr.
Date Particulars `)
Amt. (` Date Particulars `)
Amt. (`
1998 1998
Feb. 1 To Bill Payable A/c 6,40,000 Mar. 31 By Bank A/c 7,62,600
(80% of ` 8.00.000) (820 cycles x ` 930)
Mar. 31 To Cash A/c 12,500
Mar. 31 To Commission A/c 70,520
Mar. 31 To Bank A/c 39,580
7,62,600 7,62,600
Dr. Bills Payable Account Cr.
Date Particulars Amt. (` `) Date Particulars `)
Amt. (`
1998 1998
March 4 To Bank A/c 6,40,000 Feb. 1 By D’s A/c 6,40,000
6,40,000 6,40,000
Value of Closing Stock with ‘A’
`
160 cycles at ` 640 (cost price including freight) 1,02,400
20 Cycles shop-soiled at 50 % of the ` 640 i.e. ` 320 each 6,400
Value of closing stock with A 1,08,800

Ans.4
Dr. Consignment Account Cr.
Particulars `)
Amt. (` Particulars `)
Amt. (`
To Goods sent on Consignment By Consignee’s A/c 8,88,000
A/c (800 x ` 900) each 7,20,000 (sales 740 x 100 x ` 12)
To Cash A/c 80,000 By Cash A/c 570
(Expenses: 800x ` 100) By Consignment Stock 61,950
To Consignee's A/c By Profit & Loss A/c 430
Recurring Expenses 22,500
Non-Recurring Expenses 39,950
Commission @ 2% on Sale of
` 8.88,000 17,760
Del-credere Commission (1%
on ` 8,88.000) 8,880
To Profit and loss A/c 61,860
9,50,950 9,50,950
Working Notes :
(1) Valuation of Abnormal Loss
Particulars `
Cost pf packet lost during transit 900
Add: Expenses incurred by Y 100

1,000
Less: Insurance claim received 570
Value of Abnormal Loss 430
(2) Cost of Stock at the end
Particulars `
59 packets @ ` 900 per packet 53,100
Add: Expenses incurred by Y (59 x ` 100) 5,900
Add : Proportionate expenses incurred by the

Consignee  x ` 39,950 2,950

Value of closing stock 61,950

: 17 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.5 In the books of A Consignment Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
` `
2004 2004
Feb. 18 To Goods sent on consignment Mar. 15 By B’s account (Sales) 96,000
account 1,00,000 (600 x ` 160)
Feb. 18 To cash Account (Expenses) 1,500 May 20 By B’s account (Sales) 51,000
To B’s account (300 x ` 170)
(Clearance charges) 3,000 June 30 By Consignment Stock 10,450
June 30 To B’s account (W.N. – 2)
(Selling expenses) i.e. (900 x 18,000
` 20) 24,900
Commission 10,050
June 30 (W.N. – 1)
To Profit and loss account
1,57,450 1,57,450

B’s Account
Date Particulars Amount Date Particulars Amount
` `
2004 2004 By Consignment account
Mar. 15 To Consignment account 96,000 Feb. 18 (Clearance charges) 3,000
May 20 (Sales) June 30 By Consignment account
To Consignment account 51,000 June 30 (Selling expenses, & 18,000
(Sales) Commission) 24,900
By Cash account 1,01,100
1,47,000 1,47,000
Working Notes :
1. Computation of total commission :
Let total commission paid/payable be X.

X = 900 x ` 25 +  [(` 96,000 + ` 51,000) - x - (900 x ` 125)]

X = ` 22,500 + [` 1,47,000 – x - ` 1,12,500]

X = ` 22,500 +  [` 34,500 – x]; 4x = ` 90,000 + ` 34,000 – x
4x + x = ` 90,000 + ` 34,500
5x = ` 1,24,500
X = ` 24,900
2. Computation of value of the stock : `
100 DVD players @ ` 100 each 10,000
.,  
Add: Proportionate expenses of A ,
150
.,  
Proportionate expenses paid by B ,
300
10,450
Ans.6
Dr. In the books of Consignment A/c Cr.
Particulars ` Particulars `
To Goods sent to Consignee By S A/c
A/c (5,000 x ` 20) 1,00,000 (Sales) (3,750 kg. x ` 30) 1,12,500
To Bank By Cash A/c (Insurance paid) 2,250
Freight & insurance 25,000 By Abnormal Loss A/c 875
To S A/c By Stock on Consignment 25,658
Godown Rent 10,000 By P & L a/c (loss) 5,342
Wages 1,000
Printing & Stationary 5,000
Commission (1,12,500 x 5%) 5,625
1,46,625 1,46,625
: 18 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Dr. S A/c Cr.
Particulars ` Particulars `
To Consignment (3750 x ` 30) 1,12,500 By Bills Receivable 50,000
By Consignment
Godown Rent
Wages 1,000
Printing & Stationery 5,000
Commission 5,625
By Bank A/c 40,8750
1,12,500 1,12,500
(i) Calculation of Closing Stock:
Particular Kg.
Goods Sent 5,000
( ) Destroyed in transit (125)
(-) Sold by 'S' (3750)
(-) Lost due to leakage (125)
Closing Stock 1,000 Kg.
(ii) Calculation of Value of Closing Stock:
Total Cost 1,25,000
(-) Abnormal loss (3125)
12,1875
(+) Consignee's exp. NIL
(Note) 1,21,575
Units remaining Cost
4,750 12,1875
1,000 25,658
Note on Consignee expenses: It is assumed that expenses paid by consignee are
selling expenses in nature & hence are not included in closing stock.

: 19 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Final Accounts of Sole Traders
Ans.1 Trading and Profit and Loss Account of Mr. Rishabh
(For the year ended 31st March, 1998)
Particulars Amount Particulars Amount
`)
(` `)
(`
To Opening Stock 21,300 By Sales 1,40,000
To Purchases (1) 84,000 Less : Returns Inward 5,000 1,35,000
Less: Returns Outward 4,000 80,000 By Loss of Stock by Fire 10,000
To Carriage 10,000 By Closing Stock 27,300
To Gross Profit c/d 61,000
1,72,300 1,72,300
To Sundry Expenses 600 By Gross Profit b/d 61,000
To Printing and stationery 500 By Provisions for Discount on
To Insurance Exp. 1,000 Debtors (380 – 342) 38
Less: Prepaid 200 800 By Provision for Discount on
To Salaries and Wages 18,500 Creditors 360
To Trade Expenses 800 By Profit of Textile Department 10,000
To Loss by fire (4) 4,00
To Interest on loan 1,350
To Prov. for D/D
(New) 900
Add: Bad Debts 400
Add: Further Bad Debts 400
1,700
Less : Old Provision 1,000 700
To Depreciation
Land & Building 1,800
Plant & Machinery 4,000
Furniture 250 6,050
To Net Profit 38,098
71,398 71,398
Balance Sheet As on 31st March, 1999
Liabilities Amount Assets Amount
Capital Account 1,00,000 Land and Buildings 90,000
Add: Net Profit 38,098 Less: Depreciation 1,800 88,200
1,38,098 Plant & Machinery 20,000
Less: Drawings 14,000 1,24,098 Less: Depreciation 4,000 16,00
Loan from Gajanand 30,000 Furniture 5,000
Interest Accrued 1,350 Less: Depreciation 250 4,750
Creditors 18,000 Stock:
Less: Provision for Discount 360 17,640 General Goods 27,300
Textile Goods 8,000 35,300
Debtors (less bad debts) 18,000
Less: Provision for Bad and
Doubtful Debts. 900
17,100
Less: Provision for Discount 342 16,758
Insurance Claim 6,000
Prepaid Insurance 200
Cash at Bank 4,600
Cash in Hand 1,280
1,73,088 1,73,088
Working Notes:
`
(1) Purchases 80,000
Add: Unrecorded Goods 6,000
86,000
Less: Drawings 2,000
84,000

: 20 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
(2) Creditors 12,000
Add: For unrecorded Purchases 6,000
18,000
Provision for discount creditors (2%) of 18,000 = ` 360
(3) Loss by fire 10,000
Less: Insurance claim 6,000
Amount charged to profit and loss Account 4,000

Ans. 2 Trading and Profit and Loss Account of Mr. K

for the year ended 31st March, 2000
Particulars Amount Particulars Amount
`)
(` `)
(`
To Opening Stock 75,000 By Sales 23,10,000
To Purchases 15,95,000 Less: Sales of
Less: Transfer 45,000 15,50,000 Investment 1,10,000 22,00,000
To Freight 25,000 By Closing Stock 2,25,000
Less: Transfer to
Machinery A/c 5,000 20,000
To Wages 66,000
Add: Outstanding 6,000 72,000
To Gross Profit c/d 7,08,000
24,25,000 24,25,000
To Salaries 1,40,000 By Gross Profit b/d 7,08,000
To Miscellaneous Expenses. 30,000 By Interest on investments 12,000
To Printing and Stationary 18,000 By Discounts 15,000
To Postage, Telegrams, telephones 12,000 By Profit of sales of invest. 10,000
To Commission on Sales 45,000
Add: Outstanding 10,000 55,000
To Insurance 24,000
Less: Prepaid 8,000 16,000
To Provisions for D/D
(New provision)
Bad Debts 15,000
Add: Written off 10,000
Add: Prov. 12,000
37,000
Less: Old Prov. 8,000 29,000
To Depreciation: 7,500
Building Machinery 52,500
Furniture 4,000 64,000
To Net Profit 3,81,000
7,45,000 7,45,000

Balance Sheet of Mr. K as at 31st March, 2000

Liabilities Amount Assets Amount
Capital 8,00,000 Building 3,00,000
Add: Profit 3,81,000 Less: Depreciation 750 2,92,500
11,81,000 Machinery 5,00,000
Less: Drawings 60,000 11,21,000 Add: New 50,000
Creditors 3,00,000 5,50,000
Outstanding Expenses Less: Depreciation 52,500 4,97,500
Wages Outstanding 6,000 Furniture 40,000
Commission Outstanding 10,000 Less: Depreciation 4,000 36,000
Debtors 2,50,000
Less: Bad Debts 10,000
2,40,000
Less: Provision for D/D 12,000 2,28,000
Prepaid Insurance 8,000
Stock 2,25,000
Cash ad Bank 1,50,000
14,37,000 14,37,000

: 21 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.3 Trading and Profit & Loss Account
(for the year ended 31st March, 2003)
Particulars Amount Particulars Amount
To Open. Stock 5,50,000 By Sales 29,35,000
Less: Stationery 1,800 5,48,200 By Closing Stock (8,00,000 – 800) 7,99,200
To Purchase 19,25,000
To Wages & Salaries 1,25,000
To Carriage Inward 40,000
To Gross Profit 10,96,000
37,34,200 37,34,200
To Insurance 35,000 By Gross Profit b/d 10,96,000
To Commission Paid 40,000 By Discount 2,000
To Interest 35,000 by Outstanding Commission 40,000
To Trade Expenses 12,000
(34,500 - 22.500)
To Rent & Taxes 1,27,500
To Stationery 21,500
To Loss on sale of Furniture 1,700
To Dep. on Furniture 6,000
To Provision for Bad debts 75,400
To Net Profit c/f 7,83,900
11,38,000 11,38,000
st
Balance Sheet (as on 31 March, 2003)
Liabilities Amount Assets Amount
Capital 8,95,000 Furniture 42,300
Add: Net Profit 7,83,900 Debtors 15,00,000
Less. Drawings 2,000 16,76,900 Add: Dishonoured 8,000
Bills Payable 1,85,00 Less: Prov. for D/D 75,400 14,32,600
Creditors Bills Receivable 2,25,000
(9,32.500 - 3,000) 9,29,500 Less: Dishonoured 8,000 2,17,00
Creditors for stationery 3,000 Cash & Bank 4,22,500
Due to consignor 1,20,000 Closing Stock 7,99,200
Stock for Stationary 800
29,14,000 29,14,400
Working Notes :
Furniture Account
Particulars Amount Particulars Amount
To Balance b/d 60,000 By Cash 10,000
By Depreciation 1,300
By Loss 1,700
By Depreciation 4,700
By Balance c/d 42,300
60,000 60,000

Stock of Stationery
Particulars Amount Particulars Amount
To Balance b/d 1,800 By Drawings 2,000
To Trade Expenses 22,500 By Profit & Loss A/c 21,500
(Transfer entry) By Balance c/d 800
24,300 24,300

Consignor’s Account
Particulars Amount Particulars Amount
To Cash 8,00,000 By Balance b/d 4,00,000
To Charges 80,000 By Sales 6,40,000
To Commission 40,000
To Balance c/d 1,20,000
10,40,000 10,40,000

: 22 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.4 Trading and Profit & Loss Account
(For the year ended 31st March, 2004)
Particulars Amount Particulars Amount
`)
(` `)
(`
To Opening Stock 5,00,000 By Sales 41,50,000
To Purchases 31,00,000 Less Returns 55,000
Less: Returns 45,000 40,95,000
30,55,000 Less Goods sent on
Less Furniture 1,00,000 approval 1,50,000 39,45,000
29,55,000 By Goods sent on Approval 1,00,000
Less: Drawings 50,000 29,05,000 By Closing Stock 1,45,000
To Carnage Inward 10,000
To Wages 50,000
To Gross Profit c/d 7,25,000
41,90,000 41,90,000
To Salaries 95,000 By Gross Profit b/d 7,25,000
To Rates & Taxes 50,000 By Discount received 75,000
To Postage & Telegram 1,05,000 By Net Loss transferred to Capital 5,02,300
To Insurance 90,000 A/c
To Printing & Stationery 95,500
To Advertisement 1,70,000
To Discount allowed 50,000
To General Expenses 95,700
To Carriage Outward 22,000
To Bad debts 50,000
To Provision for Doubtful Debts 40,000
To Salesman Commission 78,000
Add: Outstanding 3,16,500
To Depreciation on:
Furniture 65,000
Motor Car 9,600 74,600
13,02,300 13,02,300

Balance Sheet of Mr. Neel (As on 31st March, 2004)

Liabilities Amount Assets Amount
`)
(` `)
(`
Capital 22,59,200 Furniture 5,50,000
Less: Drawings 45,000 Add: Purchased 1,00,000
Less: Goods With-drawn 50,000 6,50,000
Less: Dep. 65,000 5,85,00
Motor Car 48,000
21,64,200 Less: Dep. 9,600 38,400
Less: Net Loss 5,02,300 16,61,900 Stock in hand 1,45,000
Sundry Creditors 4,00,000 Goods sent on Approval
Outstanding Salesman's Commission 3,16,500 Sundry Debtors 10,00,000 1,00,000
Less: Goods sent on
Approval 1,50,000
8,50,000
Less: Bad Debts. 50,000
8,00,000
Less: Provision for Doubtful
Debts 40,000 7,50,000
Cash in Hand 2,50,000
Cash at Bank 5,00,000
23,78,400 23,78,400

: 23 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.5 In the books of Shri Shivam
Trading Profit & Loss A/c
(For the year ended 31.3.05)
Particulars Amount Particulars Amount
To Opening Stock 40,000 By Sales 2,64,000
To Purchases 1,70,000 (-) Sale or Return basis (1200) 2,62,800
To Wages 29,000 By Goods given as free 2,000
To Carriage Inward 400 sample
To Gross Profit 56,400 By Closing Stock
— Given 30,000
— With Costumer 1,000 31,000
2,95,800 2,95,800
To Depreciation By Gross Profit 56,400
Furniture’s & Fixtures 800 By Discount 1,200
Plant & Machinery 12,400 13,200
To Loss By Fire 2,000
To Patent Written-Off 4,000
To Salaries 14,800
To Bad Debts 800
(+) Additional 200 1,000
To Prov. For Doubtful Debts 950
To Prov. For Discount 360
To Postage & Fax 3,000
To Rent, Rates & Taxes 7,200
To Interest on Loan
Paid 300
(+) Outstanding 300 600
To Insurance 1,600
To Travailing Exp. 1,000
To Sundry Exp. 600
To Advertisement (Goods
gives As Sample) 2,000
To Net Profit Transfer to
Capital A/c 5,290
59,600 59,600
Balance sheet (as on 31.3.2005)
Liabilities `)
Amt. (` Assets `)
Amt. (`
Capital Furniture & Fittings 8,000
Op. Balance 1,60,000 (-) Depreciation 800 7,200
(-) Drawings (24,000) Plant & Mach. (Note – 1) 62,000
(+)NP 5,290 1,41,290 (-) Depr. 12,400 49,600
Patent 40,000
(-) Written – off (4,000) 36,000
Land 28,350
Creditor for Plant & 3,000 Stock. 31,000
Mach. [Note-] Debtor [Note-2] 19,000
Loan from shyam 20,000 (-) Prov. for D/D (950)
(+) Interest 300 20,300 (-) Prov. for discount (360) 17,690
Sundry Creditors 24,000 Cash in hand 13,250
Bank Overdraft 15,000 Cash at Bank 20,500
2,03,590 2,03,590
Working Notes:
(1) Computation of plant & Machinery
Balance given 60,000
(+) New Machinery (1.4.04) 4,000
(-) Machinery Sold. (2,000)
62,000
(2) Computation of Debtor 20,400
Balance (200)
(-) Bad Debts (1,200)
(-) Sale or return 19,000

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans.6 In the books of Ganguli Trading and Profit & Loss Account
for the year ended 31-3-2016
` ` ` `
To Opening stock 12,15,500 2,34,000 By Sales 14,48,000
To Purchases (10,000) Less: Returns (58,000) 13,90,000
Less: Transfer to furniture A/c 12,05,500 By Closing stock 3,93,000
(29,000) 11,76,500
Less: Returns 93,000
To Carriage inwards 2,79,500
To Gross profit c/d 17,83,000 17,83,000
46,500 By Gross profit b/d 2,79,500
To Salaries To Rent 28,500 By Interest 17,250
To Advertisement 56,000 By Discount received 14,950
To Printing & stationery 17,000
To Interest 7,500
To Discount allowed 37,700
To General expenses 19,600
To Travelling expenses 11,650
To Fire insurance premium 3,000
To Postage & telegrams 4,350
To Provision for doubtful 4,750
debts (W.N.I)
To Depreciation on furniture 1,150
To Audit fees 3,500
To Capital A/c (Net profit 70,500
transferred)
3,11,700 3,11,700
Balance Sheet as on 31 – 3 – 2016
Liabilities ` ` Assets ` `
Capital account: Furniture 9,000
Balance on 1-4-15 5,40,500 Additions during the year 10,000
Add: Net profit 70,500 19,000
6,11,000 Less: Depreciation (1,150) 17,850
Less: Drawings (50,000) 5,61,000 Investments 25,000
Loan from Dena Bank 1,00,000 Deposits 1,50,000
Ltd. Insurance accrued 3,000 Interest accrued on 10,000
on bank loan (W.N.2) investment & deposits
(W.N.3)
Sundry creditors 64,000 Stock in trade 3,93,000
Sundry debtors 95,000
Less: Provision (4,750) 90,250
Cash with Traders Bank Ltd. 40,000
Cash in hand 1,900
7,28,000 7,28,000
Working Notes:
1. Calculation of provision for doubtful debts: `
Sundry debtors as per trial balance 1,20,000
Less: Sales returns not recorded (15,000)
1,05,000
Less: Cancellation against sundry creditors (10,000)
Adjusted balance of sundry debtors 95,000
Provision for doubtful debts @ 5% 4,750
2. Accrued interest on bank loan:
Annual interest @12% 6,000
Less: Interest paid to Dena bank (3,000)
Accrued interest 3,000
3. Interest accrued on investments and deposits:
Annual interest on investments @ 5% 1,250
Annual interest on deposits @ 10% 15,000
16,250
Less: Interest received on investments and deposits (6,250)
Accrued interest 10,000
: 25 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Partnership Accounts
Ans.1 1. Calculation of Profit / Loss for the year ended
31.3.2014 31.3.2015 31.3.2016
Profit /(Loss) for the year 20,000 (80,000) 1,05,000
Add/ (Less) : Abnormal items (40,000) 1,10,000 (25,000)
Net Profit / (Loss) (20,000) 30,000 80,000
ሺଶ଴,଴଴଴ሻାଷ଴,଴଴଴ା଼଴,଴଴଴
Average Profit = = ` 30,000
ଷ
Two years’ purchase of average profits = 30,000 x 2 - ` 60,000
Good will to be brought in by Guru = ` 60,000 x 40% = ` 24,000
Goodwill brought in by Guru shared (at the profit sacrificing ratio) by :
`
Gopal (` 24,000 x 5/8) 15,000
Govind (` 24,000 x 3/8) 9,000
24,000

2. Journal Entries
Date Particulars Dr. ` Cr. `
1.4.2016 Bank A/c Dr. 1,24,000
To Guru's capital A/c 1,24,000
(Amount of capital and goodwill brought in by Guru)
1.4.2016 Guru's capital A/c Dr. 24,000
To Gopal's capital A/c 15,000
To Govind's capital A/c 9,000
(Amount of goodwill brought in by Guru credited to
capital accounts of the old partners in the profit
sacrificing ratio 5:3)
1.4.2016 Revaluation A/c Dr. 70,000
To Investment A/c 50,000
To Current assets A/c 20,000
(Writing down the value of investments to nil and
current assets from ` 2,00,000 to ` 1,80,000 on the
occasion of admission of Guru)
1.4.2016 Fixed assets A/c Dr. 1,00,000
To Revaluation A/c 1,00,000
(Writing up the value of fixed assets from ` 3,00,000 to
` 4,00,000 on the occasion of admission of Guru)
1.4.2016 Revaluation A/c Dr. 30,000
To Guru's capital A/c 18,000
To Govind s capital A/c 12,000
(Net revaluation profit credited to the capital accounts of
the old partner in the old profit sharing ratio of 60:40)

3. Revaluation Account
Particulars ` Particulars `
To Investments A/c 50,000 By Fixed assets A/c 1,00,000
To Current assets A/c 20,000
To Partner's capital A/c:
(Profit on revaluation)
Gopal (60%) 18,000
Govind (40%) 12,000
1,00,000 1,00,000

: 26 :
J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
4. Partner’s Capital Accounts :
Gopal’s Capital Accounts
Particulars ` Particulars `
By Balance c/d 1,53,000 By Balance b/d 1,20,000
By Bank A/c 15,000
By Revaluation A/c 18,000
1,53,000 1,53,000
Govind’s Capital Accounts
Particulars ` Particulars `
By Balance c/d 1,01,000 By Balance b/d 80,000
By Bank A/c 9,000
By Revaluation A/c 12,000
1,01,000 1,01,000
Guru’s Capital Account
Particulars ` Particulars `
To Balance c/d 1,00,000 By Bank b/d 1,00,000
1,00,000 1,00,000
Balance Sheet (after admission of Guru) as on 1.4.2016
Liabilities ` Assets `
Capital accounts: Fixed assets 4,00,000
Gopal 1,53,000 Current assets 3,04,000
Govind 1,01,000 (including bank balance of
Guru 1,00,000 3,54,000 ` 1,24,000)
Long term loan 2,00,000 Loans & advances 1,00,000
Current liabilities 2,50,000
8,04,000 8,04,000

Working Notes:
1. Calculation of profit sacrificing ratio
Profit sacrificed by Gopal = 60% - 35% = 25%
Profit sacrificed by Govind = 40% - 25% = 15%
Sacrificing ratio = 25%: 15% or 5:3
2. Bank balance after admission of Guru:

Bank Account
Particulars ` Particulars `
To Guru’s capital A/c 1,24,000 By Balance c/d 1,24,000
1,24,000 1,24,000

Ans.2 Revaluation Account

2016 ` 2016 `
April 1 To Provision for bad and 550 April 1 By Inventory in trade 2,500
doubtful debts
To Furniture and fittings 650 By Land and Building 5,000
To Capital A/cs:
(Profit on revaluation
transferred)
Dalai 2,520
Banerji 2,520
Mallick 1,260 6,300
7,500 7,500

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Partner’s Capital Accounts
Particulars Dalal Banerji Mallick Mistri Particulars Dalal Banerji Mallick Mistri
` ` ` ` ` ` ` `
To Dalal 1,000 By Balance b/d 12,000 12,000 5,000 -
To Banerji 1,000 By General Reserve 2,600 2,600 1,300
To Balance c/d 19,120 18,120 7,560 3,000 By Cash - - - 5,000
By Mistri 1,000 1,000 - -
By Outstanding Liabilities 1,000 - -
By Revaluation A/c 2,520 2,520 1,260 -
19,120 18,120 7,560 5,000 19,120 18,120 7,560 5,000
Working Notes :
Calculation of sacrificing ratio
Particulars New share Old share Sacrifice Gain
Dalal 5 2 ଵ
- ଵହ
15 5
Banerji 5 2 ଵ
- ଵହ
15 5
Mallick 3 1 No gain No Loss -
15 5
Mistri 2 2
15 15
ଵ
Sacrifice by Mr. Dalai and Mr. Banerji = ` 15,000 x = ` 1,000 each
ଵହ
Balance Sheet of M/s. Dalai, Banerji, Mallick and Mistri as on 1 -4-2016
Liabilities ` ` Assets ` `
Trade payables 12,850 Land and Buildings 30,000
Outstanding Liabilities 500 Furniture 5,850
Capital Accounts of Partners: Inventory of goods 14,250
Mr. Dalai 19,120 Trade receivables 5,500
Mr. Banerji 18,120 Less: Provisions (550) 4,950
Mr. Mallick 7,560 Cash in hand 140
Mr. Mistri 3,000 47,800 Cash at Bank 5,960
61,150 61,150

Ans.3 Revaluation Account

` `
To Machinery A/c 40,000 By Land and Buildings A/c 60,000
To Closing Stock A/c 20,000 By Sundry Creditors A/c 10,000
To Provision for Bad Debts A/c 10,000 By Cash and Bank A/c - joint life 60,000
To Partners' Capital A/c’s: policy surrendered
Ram 30,000
Rahul 20,000
Rohit 10,000 60,000
1,30,000 1,30,000

Partner’s Capital Account’s

Rahul ` Rohit ` Rahul ` Rohit `
31.03.2016 To Ram's Capital A/c 30,000 60,000 31.3.2016 By Balance b/d 2,00,000 1,00,000
To Balance c/d 3,00,000 3,00,000 By Revaluation A/c 20,000 10,000
By Cash & bank A/c 1,10,000 2,50,000
– cash brought
in by Rahul and
Rohit
3,30,000 3,60,000 3,30,000 3,60,000
1.4.2016 By Balance b/d 3,30,000 3,60,000

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ram’s loan Account
` `
31.3.2016 To Balance c/d 2,10,000 31.3.2016 By Ram’s Capital A/c 2,10,000

2,10,000 2,10,000
1.4.2016 By Balance b/d 2,10,000

Cash and bank Account

` `
31.3.2016 To Balance b/d 1,00,000 31.3.2016 By Ram’s Capital A/c 2,10,000
To Balance b/d 60,000 By Balance c/d 3,10,000
To Revaluation A/c – joint
life policy surrendered
To Rahul's Capital A/c 1,10,000
To Rohit's Capital A/c 2,50,000
5,20,000 5,20,000
1.4.2016 To Balance b/d 3,10,000

M/s Rahul & Rohit Balance Sheet as on 1.4.2016

Liabilities ` ` Assets ` `
Capital accounts: Land and buildings 2,60,000
Rahul 3,00,000 Machinery 1,60,000
Rohit 3,00,000 6,00,000 Closing stock 80,000
Ram's loan account 2,10,000 Sundry debtors 2,00,000
Sundry creditors 1,90,000 Less: Provision for bad debts (10,000) 1,90,000
Cash and bank balances 3,10,000
10,00,000 10,00,000
Working Notes:
1. Gaining ratio of existing partners:
Rahul 1/2-1/3=1/6
Rohit 1/2-1/6=2/6
2. Total goodwill of firm is ` 1,80,000
Ram's share (1/2 x ` 1,80,000) = ` 90,000
Ram's share of goodwill is to be borne by Rahul and Rohit in their gaining ratios i.e.
Rahul = 1/3 x ` 90,000 = ` 30,000
Rohit = 2/3 x ` 90,000 = ` 60,000

3. Ram’s Capital Account

` `
31.3.2016 To Cash and Bank A/c 2,10,000 31.3.2016 By Balance b/d 3,00,000
To Ram's Loan A/c - 2,10,000 By Revaluation A/c 30,000
Transfer By Rahul's Capital 30,000
A/c - Goodwill
By Rohit's Capital A/c – 60,000
Goodwill
4,20,000 4,20,000

Ans. 4 Journal Entries

` `
1. A's Capital account Dr. 21,000
B's Capital account Dr. 14,000
C's Capital account Dr. 7,000
To Profit and loss adjustment account 42,000
(Profit written back for making adjustments)
2. Profit and loss adjustment account Dr. 6,000
To B's Capital account 6,000
(Bonus credited to B's capital account)
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 J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
3. Profit and loss adjustment account! Dr. 36,000
To A's Capital account 12,000
To B's Capital account 18,000
To C's Capital account 6,000
(Distribution of profits in the new ratio)
4. Goodwill account (56,000 - 40,000) Dr. 16,000
Fixtures account Dr. 9,800
To Provision for bad debts account 1,800
To A's Capital account 8,000
To B's Capital account 12,000
To C's Capital account 4,000
(Revaluation of assets on A's retirement)
5. B's capital account Dr. 44,700
C's capital account Dr. 14,900
To Goodwill account 56,000
To Provision for bad debts account 3,600
(Written off goodwill and raising provision for bad debts)
6. A's capital account Dr. 1,49,000
To B's Capital account 1,49,000
(Amount payable to A paid by B)
Partner’s Capital Accounts
A` B` C` A` B` C`
To P & L adjustment A/c 21,000 14,000 7,000 By Balance b/d 1,50,000 1,00,000 50,000
To Goodwill and provision - 44,700 14,900 By P & L adjustment account - 6,000 -
for bad debts A/c
To B's Capital A/c 1,49,000 - - By P & L adjustment account 12,000 18,000 6,000
To Cash A/c - 1,300 - By Goodwill and fixtures A/c 8,000 12,000 4,000
To Balance c/d - 2,25,000 75,000 By A's capital A/c - 1,49,000 -
By Cash A/c 36,900
1,70,000 2,85,000 96,900 1,70,000 2,85,000 96,900
Cash Account
` `
To Balance b/d 10,000 By B's capital A/c 1,300
To C's capital A/c 36,900 By Balance b/d 45,600
46,900 46,900
Balance Sheet of B and C as on 31st March, 2016(after retirement of A)
Liabilities ` Assets ` `
Capital accounts: Fixtures 39,800
B 2,25,000 Stock 1,70,000
C 75,000 3,00,000 Sundry debtors 90,000
Sundry creditors 40,000 Less: Provision for bad debts (5,400) 84,600
Cash 45,600
3,40,000 3,40,000
Working Notes:
Calculation of goodwill :
1. Average of last five year’s profit
Years ended on Profit `
31.3.2012 15,000
31.3.2013 23,000
31.3.2014 25,000
31.3.2015 35,000
31.3.2016 42,000
1,40,000
2. Goodwill at two year’s purchase
` 28,000 x 2 = ` 56,000

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Final Accounts of Note for Profit Organisations
Ans.1 Balance Sheet As on 31.12.2015
Liabilities ` Assets `
Capital Fund 42,200 Cash / Bank 2500
Building 15,000
Books 10,000
Furniture 4,000
Investments 10,000
O/s Advt. Exp. 50 O/s Subscription 600
O/s Salary 100 O/s Interest 100
O/s Rent 150
42,350 42,350

Balance Sheet As on 31.12.2016

Liabilities ` Assets `
Capital Fund 42,200 Books 11,000
(+) Surplus 5,000 Cash / Bank 7,350
Building 14,250
Furniture 4,000
Special Fund 300 Investments 10,00
O/s Salary 1,400 O/s Subscription 500
O/s Tent Hire 200 O/s Rent 2,000

Ans.2 Republic College Income and Expenditure

Account for the year ending 31st March, 2016
Expenditure ` ` Income ` `
To Salaries: By Tuitions & other fee 8,80,000
Teaching 8,50,000 By Govt. Grants 5,00,000
Research 1,20,000
To Material & Supplies By Income from Investments 1,85,000
Consumed: By Hostel room Rent 1,75,000
Teaching 50,000 By Mess Receipts 2,00,000
Research 1,50,000 By Profit-Stores Sales 75,000
To Repairs & Maintenance 1,12,000 By Seminar and
Conferences
To Sports & Games Income 4,80,000
Expenses:
Cash 50,000 By Less : Expenses (4,50,000) 30,000
Materials 25,000 75,000 By Consultancy charges :
To Students Welfare Income
Expenses: 1,28,000
Cash Less : Expenses 1,00,000
Materials 38,000 1,13,000 By Donations (28,000) 50,000
To Misc. Expenses 75,000 65,000
To Scholarships 80,000
To Depreciation:
Building 80,000
Plant & Equipment 85,000
Furniture 60,000
Motor Vehicle 36,000
To Excess of Income over
Expenditure 3,19,000
21,95,000 21,95,000

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Republic College Balance Sheet as on 31st March, 2016
Liabilities ` ` Assets ` `
Fixed Assets:
Capital Fund Land 1,00,000
Opening balance 16,06,000 Building Cost 16,00,000
Add: Excess of Income Less: Depreciation (5,60,000) 10,40,000
over Expenditure 3,19,000 19,25,000 Equipment Cost 8,50,000
Other Funds Less: Depreciation 5,95,000 2,55,000
Research Fund 8,00,000 Furniture & Fittings:
Building Fund 25,00,000 Cost 6,00,000
Less: Depreciation (3,96,000) 2,04,000
Current Liabilities : Motor Vehicles
Outstanding Expenses 2,25,000
Provident Fund 5,10,000 Cost : 1,80,000
Security Deposit 1,50,000 Less: Depreciation (36,000) 1,44,000
Library 3,60,000
Investments:
Capital Fund Investments 18,50,000
Research Fund Investment 8,00,000
P.F. Investment 5,10,000
Stock (stores)
Material & Supplies 1,25,000
Tuition fees receivable 80,000
Cash in hand & at Bank
6,42,000
61,10,000 61,10,000

Working notes:
` `
(1) Material & Supplies - Closing Stock
Opening Stock Purchases 3,00,000
8,00,000
11,00,000
Less : Cost of Material & Supplies 6,75,000
Consumed 3,00,000 (9,75,000)
Balance 1,25,000
(2) Provisions for Depreciation
Building
Plant & Furniture
Equipment & Fitting
` ` `
Opening Balance 4,80,000 5,10,000 3,36,000
Addition 80,000 85,000 60,000
Closing Balance 5,60,000 5,95,000 3,96,000
Note: Expense related to income earned like consultancy charges, conference
expenses are shown as net of income.

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
Ans. 3 Income and Expenditure Account of Lion Club
for the year ended 31st March, 2016
Expenditure ` Income `
To Salaries 1,28,000 By Subscription 1,94,750
To Printing and stationary 70,000 By Entrance donation 90,000
To Postage 40,000 By Interest 60,000
To Telephone and telex 52,000 By Miscellaneous income 9,000
To Repairs and maintenance 48,000 By Profit from operations 92,000
To Glass and table linen 12,000 By Excess of expenditure over income
To Crockery and cutlery 14,000 (deficit) transferred to capital fund 30,250
To Garden upkeep 8,000
To Membership fees 4,000
To Insurance 6,000
To Electricity charges 43,000
To Loss on sale of assets 2,000
To Depreciation 49,000
4,76,000 4,76,000

Balance Sheet of Lion Club as on 31st March, 2016

Liabilities ` Assets `
Capital Fund 10,89,600 Fixed assets 4,41,000
Gratuity fund 1,50,000 Stock 2,10,000
Sundry creditors 92,000 Investments 5,00,000
Subscription received in advance 18,000 Subscription outstanding 7,000
Entrance donation refundable 20,000 Interest accrued 2,000
Outstanding expenses 23,000 Bank 2,24,600
Cash 8,000
13,92,600 13,92,600

Working Notes:
1. Opening Balance Sheet
Balance Sheet of Lion Club as on 1st April, 2015
Liabilities ` Assets `
Sundry creditors 1,12,000 Fixed assets 5,00,000
Subscription received in advance 15,000 Stock 3,80,000
Entrance donation received in advance 1,00,00 Investments 5,00,000
Gratuity fund 1,50,000 Subscription outstanding 12,000
Capital fund (balance figure) 10,29,850 Prepaid expenses 1,000
Cash 10,000
Bank 3,850
14,06,850 14,06,850

2. Subscription
`
Subscription received during the year 2,02,750
Add: Outstanding subscription on 31.3.2016 7,000
2,09,750
Add: Received in advance as on 1.4.2015 15,000
2,24,750
Less: Outstanding subscription as on 1.4.2015 (12,000)
2,12,750
Less: Received in advance as on 31.3.2016 (18,000)
1,94,750

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
3. Entrance donation
`
Entrance donation received during the year 1,00,000
Add: Received in advance as on 1.4.2015 1,00,000
2,00,000
Less: Entrance donation in respect of ineligible member (20,000)
1,80,000
Less: 50% capitalized (90,000)
Taken to income and expenditure account 90,000
4. Loss on sale of asset
`
Cost of asset sold 10,000
Less: Sale proceeds (80,000)
Loss on sale of asset 2,000
5. Depreciation
`
Fixed asset as per trial balance 5,00,000
Less: Cost of asset sold (10,000)
4,90,000
Depreciation on ` 4,90,000 @ 10% 49,000
6. Salaries
`
Salary paid during the year 1,20,000
Add: Outstanding as on 31.3.2016 8,000
1,28,000
7. Electricity charges
`
Electricity charges paid during the year 28,000
Add: Outstanding as on 31.3.2016 15,000
43,000
8. Interest
`
Interest on 12% Government securities investment (` 5,00,000 @ 12% p.a.) 60,000
Less: Interest received during the year (58,000)
Interest accrued 2,000
Interest credited to Income and Expenditure Account 60,000
9. Profit from operations
`
Cost of goods sold:
Opening stock 3,80,000
Add: Purchases 15,00,000
18,80,000
Less: Closing stock (2,10,000)
Cost of goods sold (A) 16,70,000
Receipts from operations:
Receipts from coffee room 10,70,000
Receipts from soft drinks 5,10,000
Receipts from swimming pool 80,000
Receipts from tennis court 1,02,000
Total receipts (B) 17,62,000
Profits from operations (B-A) 92,000

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J. K. SHAH CLASSES CA FOUNDATION – ACCOUNTANCY
10. Insurance
`
Insurance paid during the year 5,000
Add: Prepaid insurance as on 1.4.2015 1,000
6,000
11. Sundry creditors
`
Opening balance as on 1.4.2015 1,12,000
Add: Purchases made during the year 15,00,000
16,12,000
Less: Payments made during the year (15,20,000)
Closing balance as on 31.3.2016 92,000
12. Outstanding expenses
`
Outstanding salaries 8,000
Outstanding electricity charges 15,000
Outstanding expenses 23,000
13. Fixed assets
`
Fixed assets as on 1.4.2015 5,00,000
Less: Cost of assets sold (10,000)
4,90,000
Less: Depreciation (49,000)
Fixed assets as on 31.3.2016 4,41,000
14. Capital fund
`
Capital fund as on 1.4.2015 10,29,850
Add: Entrance donation capitalised 90,000
11,19,850
Less: Excess of expenditure over income (30,250)
Balance as on 31.3.2016 10,89,600

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