NCERT Solutions for Class 11 Accountancy Financial Accounting Part-2 Chapter 1

Financial Statements - I Class 11

Chapter 1 Financial Statements - I Exercise Solutions

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Short answers : Solutions of Questions on Page Number : 364

Q1 :  

What are the objectives of preparing financial statements?


Answer :

The following are the objectives of preparing financial statements.

1. To ascertain profit earned or loss incurred by a business during an accounting period. This is estimated by preparing Trading and Profit and Loss Account.

2. To ascertain the true financial position of a business. This is reflected by the Balance Sheet.

3. To enable comparison of current year's performance with that of the previous year's, i.e., intra-firm comparisons. Also, to compare own performance with that of the other firms in the same industry, i.e., inter-firm comparisons.

4. To assess the solvency and credit worthiness of the business

5. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business

6. To provide vital information to facilitate various users of accounting information in decision making process.

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Q2 :  

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


Answer :

The purposes of preparing Trading Account are:

1. To calculate gross profit earned or gross loss incurred during an accounting period

2. To estimate the cost of goods sold

3. To record direct expenses (i.e., expenses incurred on the purchases and manufacturing of goods)

4. To measure the adequacy and reasonability of direct expenses incurred by comparing purchases with direct expenses incurred

5. To compare the realised efficiency and performance with the desired or proposed targets

The purposes of preparing Profit and Loss Account are:

1. To calculate net profit or net loss

2. To ascertain net profit ratio and to compare this year's net profit ratio with that of the desired and proposed target in order to assess the efficiency and effectiveness

3. To measure the adequacy and reasonability of indirect expenses incurred by ascertaining ratio between indirect expenses and net profit

4. To compare current year's actual performance with desired and planned performance

5. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business

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Q3 :  

Explain the concept of cost of goods sold?


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Q4 :  

What is a balance sheet? What are its characteristics?


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Q5 :  

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

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

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

(c) Registration fees paid at the time of purchase of a building

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

(e) Depreciation charged on a plant.

(f) The expenditure incurred in erecting a platform on which a machine will be fixed.

(g) Advertising expenditure, the benefits of which will last for four years.


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Q6 :  

What is an operating profit?


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<< Previous Chapter 8 : Bills of Exchange Next Chapter 2 : Financial Statements >>

Long answers : Solutions of Questions on Page Number : 364

Q1 :  

What are financial statements? What information do they provide?


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Q2 :  

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


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Q3 :  

Discuss the need of preparing a balance sheet.


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Q4 :  

What is meant by Grouping and Marshalling of assets and liabilities? Explain the ways in which a balance sheet may be marshalled.


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<< Previous Chapter 8 : Bills of Exchange Next Chapter 2 : Financial Statements >>

Numerical questions : Solutions of Questions on Page Number : 364

Q1 :  

From the following balances taken from the books of Simmi and Vimmi Ltd.

for the year ending March 31, 2003, calculate the gross profit.

 

Rs

Closing stock

2,50,000

Net sales during the year

40,00,000

Net purchases during the year

15,00,000

Opening stock

15,00,000

Direct expenses

80,000

 


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Q2 :  

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

(a)

Cost of goods available for sale

(b)

Cost of goods sold during the year

(c)

Gross Profit

 

 

Rs

Opening stock

25,000

Credit purchases

7,50,000

Cash purchases

3,00,000

Credit sales

12,00,000

Cash sales

4,00,000

Wages

1,00,000

Salaries

1,40,000

Closing stock

30,000

Sales return

50,000

Purchases return

10,000

 

 


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Q3 :  

Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv and Sons for the year ended March 31, 2005.

 

Rs

Opening stock

50,000

Net sales

11,00,000

Net purchases

6,00,000

Direct expenses

60,000

Administration expenses

45,000

Selling and distribution expenses

65,000

Loss due to fire

20,000

Closing stock

70,000

 

 


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Q4 :  

Operating profit earned by M/s Arora and Sachdeva in 2005-06 was Rs 17,00,000. Its non-operating incomes were Rs 1,50,000 and non-operating expenses were Rs 3,75,000. Calculate the amount of net profit earned by the firm.

 

 


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Q5 :  

The following are the extracts from the trial balance of M/s Bhola and Sons as on March 31, 2005

Account title

Debit

Rs

Credit

Rs

Opening Stock

2,00,000

 

Purchases

8,10,000

 

Sales

 

10,10,000

 

10,10,000

10,10,000

 

 

 

 

(Only relevant items)

Closing Stock as on date was valued at Rs 3,00,000.

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

 

 


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Q6 :  

Prepare trading and profit and loss account and balance sheet, as on March 31, 2005 :

Account Title

Amount

Rs

Account Title

Amount

Rs

Machinery

27,000

Capital

60,000

Sundry debtors

21,600

Bills payable

2,800

Drawings

2,700

Sundry creditors

1,400

Purchases

58,500

Sales

73,500

Wages

15,000

 

 

Sundry expenses

600

 

 

Rent and taxes

1,350

 

 

Carriage inwards

450

 

 

Bank

4,500

 

 

Openings stock

6,000

 

 

 

Closing stock, as on March 31, 2005 Rs 22,400

 

 


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Q7 :  

The following trial balance is extracted from the books of M/s Ram on March 31, 2005. You are required to prepare trading and profit and loss account and the balance sheet as on date:

 

Account title

Amount

Rs

Account title

Amount Rs

Debtors

12,000

Apprenticeship premium

5,000

Purchases

50,000

Loan

10,000

Coal, gas and water

6,000

Bank overdraft

1,000

Factory wages

11,000

Sales

80,000

Salaries

9,000

Creditors

13,000

Rent

4,000

Capital

20,000

Discount

3,000

 

 

Advertisement

500

 

 

Drawings

1,000

 

 

Loan

6,000

 

 

Petty cash

500

 

 

Sales return

1,000

 

 

Machinery

5,000

 

 

Land and building

10,000

 

 

Income tax

100

 

 

Furniture

9,900

 

 

 

 


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Q8 :  

The following is the trial balance of Manju Chawla on March 31, 2005. You are required to prepare trading and profit and loss account and a balance sheet as on date:

Account title

Debit Amount Rs

Credit Amount Rs

Opening stock

10,000

 

Purchases and sales

40,000

80,000

Returns

200

600

Productive wages

6,000

 

Dock and Clearing charges

4,000

 

Donation and charity

600

 

Delivery van expenses

6,000

 

Lighting

500

 

Sales tax collected

 

1,000

Bad debts 600

 

 

Misc. incomes

 

6,000

Rent from tenants

 

2,000

Royalty

4,000

 

Capital

 

40,000

Drawings

2,000

 

Debtors and Creditors

6,000

7,000

Cash

3,000

 

Investment

6,000

 

Patents

4,000

 

Land and Machinery

43,000

 

 

Closing stock Rs 2,000.

 

 


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Q9 :  

The following is the trial balance of Mr. Deepak as on March 31, 2005. You are required to prepare trading account, profit and loss account and a balance sheet as on date:

 

Account title

Debit Amount Rs

Account title

Credit Amount Rs

Drawings

36,000

Capital

2,50,000

Insurance

3,000

Bills payable

3,600

General expenses

29,000

Creditors

50,000

Rent and taxes

14,400

Discount received

10,400

Lighting (factory)

2,800

Purchases return

8,000

Travelling expenses

7,400

Sales

4,40,000

Cash in hand

12,600

 

 

Bills receivable

5,000

 

 

Sundry debtors

1,04,000

 

 

Furniture

16,000

 

 

Plant and Machinery

1,80,000

 

 

Opening stock

40,000

 

 

Purchases

1,60,000

 

 

Sales return

6,000

 

 

Carriage inwards

7,200

 

 

Carriage outwards

1,600

 

 

Wages

84,000

 

 

Salaries

53,000

 

 

 

Closing stock Rs 35,000.

 

 


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Q10 :  

Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2005.

 

Account Title

Debit Amount Rs

Credit Amount Rs

Purchases and Sales

3,52,000

5,60,000

Return inwards and Return outwards

9,600

12,000

Carriage inwards

7,000

 

Carriage outwards

3,360

 

Fuel and power

24,800

 

Opening stock

57,600

 

Bad debts

9,950

 

Debtors and Creditors

1,31,200

48,000

Capital

 

3,48,000

Investment

32,000

 

Interest on investment

 

3,200

Loan

 

16,000

Repairs

2,400

 

General expenses

17,000

 

Wages and salaries

28,800

 

Land and buildings

2,88,000

 

Cash in hand

32,000

 

Miscellaneous receipts

 

160

Sales tax collected

 

8,350

 

Closing stock Rs 30,000.

 

 


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Q11 :  

From the following trial balance of Mr. A. Lal, prepare trading, profit and loss account and balance sheet as on March 31, 2005.

 

Account Title

Debit Amount Rs

Credit Amount Rs

Stock as on April 01, 2005

16,000

 

Purchases and Sales

67,600

1,12,000

Returns inwards and outwards

4,600

3,200

Carriage inwards

1,400

 

General expenses

2,400

 

Bad debts

600

 

Discount received

 

1,400

Bank over draft

 

10,000

Interest on bank overdraft

600

 

Commission received

 

1,800

Insurance and taxes

4,000

 

Scooter expenses

200

 

Salaries

8,800

 

Cash in hand

4,000

 

Scooter

8,000

 

Furniture

5,200

 

Building

65,000

 

Debtors and Creditors

6,000

16,000

Capital

 

50,000

 

Closing stock Rs 15,000.

 

 


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Q12 :  

Prepare trading and profit and loss account and balance sheet of M/s Royal Traders from the following balances as on March 31, 2005.

 

Debit balances

Amount Rs

Credit balances

Amount Rs

Stock

20,000

Sales

2,45,000

Cash

5,000

Creditors

10,000

Bank

10,000

Bills payable

4,000

Carriage on purchases

1,500

Capital

2,00,000

Purchases

1,90,000

 

 

Drawings

9,000

 

 

Wages

55,000

 

 

Machinery

1,00,000

 

 

Debtors

27,000

 

 

Postage

300

 

 

Sundry expenses

1,700

 

 

Rent

4,500

 

 

Furniture

35,000

 

 

 

Closing stock Rs 8,000

 

 


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Q13 :  

Prepare trading and profit and loss account from the following particulars of M/s Neema Traders as on March 31, 2005.

Account Title

Debit Account Rs

Account Title

Credit Amount Rs

Buildings

23,000

Sales

1,80,000

Plant

16,930

Loan

8,000

Carriage inwards

1,000

Bills payable

2,520

Wages

3,300

Bank overdraft

4,720

Purchases

1,64,000

Creditors

8,000

Sales return

1,820

Capital

2,36,000

Opening stock

9,000

Purchases return

1,910

Machinery

2,10,940

 

 

Insurance

1,610

 

 

Interest

1,100

 

 

Bad debts

250

 

 

Postage

300

 

 

Discount

1,000

 

 

Salaries

3,000

 

 

Debtors

3,900

 

 

 

Stock on March 31, 2005 Rs 16,000.

 

 


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Q14 :  

From the following balances of M/s Nilu Sarees as on March 31, 2005. Prepare trading and profit and loss account and balance sheet as on date.

 

Account Title

Debit Account Rs

Account Title

Credit Amount Rs

Opening stock

10,000

Sales

2,28,000

Purchases

78,000

Capital

70,000

Carriage inwards

2,500

Interest

7,000

Salaries

30,000

Commission

8,000

Commission

10,000

Creditors

28,000

Wages

11,000

Bills payable

2,370

Rent and taxes

2,800

 

 

Repairs

5,000

 

 

Telephone expenses

1,400

 

 

Legal charges

1,500

 

 

Sundry expenses

2,500

 

 

cash in hand

12,000

 

 

Debtors

30,000

 

 

Machinery

60,000

 

 

Investments

90,000

 

 

Drawings

18,000

 

 

 

Closing stock, as on March 31, 2005 Rs 22,000.

 

 


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Q15 :  

Prepare trading and profit and loss account of M/s Sports Equipments for the year ended March 31, 2006 and balance sheet as on that date:

 

Account Title

Debit Amount Rs

Credit Amount Rs

Opening stock

50,000

 

Purchases and sales

3,50,000

4,21,000

Sales returns

5,000

 

Capital

 

3,00,000

Commission

 

4,000

Creditors

 

1,00,000

Bank overdraft

 

28,000

Cash in hand

32,000

 

Furniture

1,28,000

 

Debtors

1,40,000

 

Plants

60,000

 

Carriage on purchases

12,000

 

Wages

8,000

 

Rent

15,000

 

Bad debts

7,000

 

Drawings

24,000

 

Stationery

6,000

 

Travelling expenses

2,000

 

Insurance

7,000

 

Discount

5,000

 

Office expenses

2,000

 

 

Closing stock as on March 31, 2006 Rs 2,500

 

 


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