Class | Subject | Book | Chapter | Session | Questions covered |
|---|---|---|---|---|---|
XI | Accountancy | Financial Accounting II (NCERT) | 1 – Financial Statements - I | 2026-27 | 27 of 27 |
Chapter at a glance
Idea | Key point |
|---|---|
Financial statements | Trading and Profit & Loss Account (income statement) and Balance Sheet (position statement) |
Capital vs revenue | Capital expenditure gives long-term benefit (asset); revenue expenditure benefits the current year (expense) |
Trading account | Opening stock + net purchases + direct expenses vs net sales + closing stock → gross profit/loss |
Cost of goods sold | Opening stock + purchases + direct expenses – closing stock |
Profit and loss account | Gross profit + other incomes – indirect expenses → net profit/loss |
Operating profit | Net profit + non-operating expenses – non-operating incomes |
Balance sheet | Assets = Liabilities + Capital; grouped and marshalled (liquidity or permanence order) |
Closing entries | Transfer nominal accounts to trading/P&L; closing stock, net profit and drawings entries |
Classification used: carriage inwards, wages, fuel, coal-gas-water, factory lighting, dock and clearing charges and royalty on production are direct expenses (trading account); selling, administrative and financial expenses go to the P&L account.
Test Your Understanding
Question TYU – I
I. State True or False: (i) Gross profit is total revenue. (ii) In trading and profit and loss account, opening stock appears on the debit side because it forms the part of the cost of sales for the current accounting year. (iii) Rent, rates and taxes is an example of direct expenses. (iv) If the total of the credit side of the profit and loss account is more than the total of the debit side, the difference is the net profit.
II. Match the items given under ‘A’ with the correct items under ‘B’: (i) Closing stock is credited to; (ii) Accuracy of book of account is tested by; (iii) On returning the goods to seller, the buyer sends; (iv) The financial position is determined by; (v) On receiving the returned goods from the buyer, the seller sends — (a) Trial balance (b) Trading account (c) Credit note (d) Balance sheet (e) Debit note
Answer
I. (i) F — gross profit is net sales less cost of goods sold, not total revenue (ii) T (iii) F — rent, rates and taxes are indirect expenses (iv) T
(The textbook key marks (i) True; by definition gross profit is the excess of sales over cost of goods sold.)
II. (i) – (b) Trading account; (ii) – (a) Trial balance; (iii) – (e) Debit note; (iv) – (d) Balance sheet; (v) – (c) Credit note
Question TYU – II
Choose the correct option:
1. The financial statements consist of: (i) Trial balance (ii) Profit and loss account (iii) Balance sheet (iv) (i) & (iii) (v) (ii) & (iii)
2. Choose the correct chronological order of ascertainment of the following profits from the profit and loss account: (i) Operating Profit, Net Profit, Gross Profit (ii) Operating Profit, Gross Profit, Net Profit (iii) Gross Profit, Operating Profit, Net Profit (iv) Gross Profit, Net Profit, Operating Profit
3. While calculating operating profit, the following are not taken into account: (i) Normal transactions (ii) Abnormal items (iii) Expenses of a purely financial nature (iv) (ii) & (iii) (v) (i) & (iii)
4. Which of the following is correct: (i) Operating Profit = Operating profit – Non-operating expenses – Non-operating incomes (ii) Operating profit = Net profit + Non-operating Expenses + Non-operating incomes (iii) Operating profit = Net profit + Non-operating Expenses – Non-operating incomes (iv) Operating profit = Net profit – Non-operating Expenses + Non-operating incomes
Answer
Questions for Practice – Short Answers
Question SA – Q1
What are the objectives of preparing financial statements?
Answer
- To ascertain the profit or loss of the business for the period.
- To show the financial position (assets, liabilities, capital) on a date.
- To provide information for decision-making by owners, managers, lenders, investors and government.
- To help in comparing performance over years and with other firms.
- To meet legal and tax requirements and assess solvency.
Question SA – Q2
What is the purpose of preparing trading and profit and loss account?
Answer
The trading account shows the result of buying and selling — the gross profit or loss — by comparing net sales and closing stock with opening stock, net purchases and direct expenses.
The profit and loss account starts with gross profit, adds other incomes and deducts all indirect (office, selling, financial) expenses and losses to find the net profit or loss, which is transferred to capital. Together they show how efficiently the business operated during the year.
Question SA – Q3
Explain the concept of cost of goods sold?
Answer
Cost of goods sold (COGS) is the cost of the goods actually sold during the year:
It includes all costs incurred in bringing goods to a saleable condition. Gross profit = Net sales – COGS.
Question SA – Q4
What is a balance sheet. What are its characteristics?
Answer
A balance sheet is a statement showing the assets, liabilities and capital of a business on a particular date.
Characteristics
- Prepared on a particular date, not for a period.
- Shows financial position.
- Total of assets always equals total of liabilities and capital.
- Prepared after the trading and P&L account.
- Items are grouped and marshalled in liquidity or permanence order.
- It is a statement, not an account.
Question SA – 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.
Answer
Basis | Capital expenditure | Revenue expenditure |
|---|---|---|
Benefit | Long term (more than a year) | Current year only |
Purpose | Acquire or improve fixed assets, increase earning capacity | Maintain earning capacity / day-to-day running |
Nature | Non-recurring | Recurring |
Treatment | Shown as asset in the balance sheet | Charged to trading / P&L account |
Item | Type | Reason |
|---|---|---|
(a) Repairs/whitewashing of old building to make it usable | Capital | Part of cost of making the asset usable |
(b) Extra exit in cinema hall (government order) | Capital | Necessary to continue using the asset; long-term benefit |
(c) Registration fees on purchase of building | Capital | Part of cost of acquisition |
(d) Maintenance of tea garden that will yield after four years | Capital (until it starts producing) | Expenditure to bring the asset to productive state |
(e) Depreciation on plant | Revenue | Charge against current year’s profit |
(f) Platform for fixing a machine | Capital | Part of installation cost of machine |
(g) Advertising with benefit over four years | Deferred revenue expenditure | Revenue in nature but benefit spread over years; written off over four years |
Question SA – Q6
What is an operating profit?
Answer
Operating profit is the profit earned from the normal operating activities of the business. It excludes non-operating incomes (e.g. interest and dividend received, profit on sale of assets) and non-operating expenses (e.g. interest on loans, loss by fire, loss on sale of assets).
or Gross profit – operating expenses (office, administration, selling and distribution).
Questions for Practice – Long Answers
Question LA – Q1
What are financial statements? What information do they provide.
Answer
Financial statements are the end products of the accounting process, prepared at the end of the accounting period from the trial balance. They comprise the Trading and Profit & Loss Account (income statement) and the Balance Sheet (position statement); companies also prepare a cash flow statement and notes.
Information provided
- Gross profit or loss from trading and the cost of goods sold.
- Net profit or loss after all expenses and incomes, and the operating profit.
- Financial position — assets owned and liabilities owed on the balance sheet date.
- Capital invested by the owner and its changes (profit, drawings).
- Solvency and liquidity — ability to pay short- and long-term debts.
- Basis for comparison, planning, borrowing and tax assessment.
Question LA – Q2
What are closing entries? Give four examples of closing entries.
Answer
Closing entries are journal entries passed at the end of the accounting period to close the nominal accounts (expenses, losses, incomes, gains) by transferring their balances to the trading and profit and loss account, and to record closing stock, net profit and drawings in the capital account.
Examples
- Trading A/c Dr. To Opening Stock A/c, To Purchases A/c, To Wages A/c, To Carriage Inwards A/c.
- Sales A/c Dr. To Trading A/c.
- Closing Stock A/c Dr. To Trading A/c.
- Profit and Loss A/c Dr. To Salaries A/c, To Rent A/c, To Depreciation A/c.
- Profit and Loss A/c Dr. To Capital A/c (net profit).
- Capital A/c Dr. To Drawings A/c.
Question LA – Q3
Discuss the need of preparing a balance sheet.
Answer
- Financial position: shows what the business owns and owes on a date.
- Solvency and liquidity: comparing current assets with current liabilities shows ability to pay debts.
- Capital employed: shows the owner’s interest and its changes.
- Arithmetical check: confirms that assets equal liabilities plus capital.
- Borrowing: banks and creditors use it to decide on loans and credit.
- Comparison and planning: balance sheets of different years show growth and help in planning.
- Legal and tax requirements: companies must prepare it; tax authorities need it.
Question LA – Q4
What is meant by Grouping and Marshalling of assets and liabilities. Explain the ways in which a balance sheet may be marshalled.
Answer
Grouping means putting together items of a similar nature under a common heading — for example, cash in hand and cash at bank under “cash and cash equivalents”; debtors less provision under “trade receivables”; land, building and machinery under “fixed assets”.
Marshalling means arranging the grouped items in a particular order in the balance sheet.
Ways of marshalling
- Order of liquidity — assets in order of ease of conversion into cash (cash first, goodwill last); liabilities in order of urgency of payment (current liabilities first, capital last). Used by sole traders and partnerships.
- Order of permanence — reverse of liquidity: fixed assets first and cash last; capital and long-term liabilities first and current liabilities last. Used by companies (Schedule III format).
Questions for Practice – Numerical Questions
Question Num – Q1
From the following balances taken from the books of Simmi and Vimmi Ltd. for the year ending March 31, 2026, calculate the gross profit: 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.
Answer
Gross profit = ₹ 11,70,000
Question Num – 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. 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.
Answer
Net purchases = 7,50,000 + 3,00,000 – 10,000 = ₹ 10,40,000. Net sales = 12,00,000 + 4,00,000 – 50,000 = ₹ 15,50,000. Salaries are indirect and do not enter the cost of goods.
Item | Working | ₹ |
|---|---|---|
(a) Cost of goods available for sale | 25,000 + 10,40,000 + 1,00,000 | 11,65,000 |
(b) Cost of goods sold | 11,65,000 – 30,000 | 11,35,000 |
(c) Gross profit | 15,50,000 – 11,35,000 | 4,15,000 |
- ₹ 11,65,000 (b) ₹ 11,35,000 (c) ₹ 4,15,000
Question Num – 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 & Sons for the year ended March 31, 2026: 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.
Answer
Loss due to fire is abnormal (non-operating) and is not deducted for operating profit.
Gross profit ₹ 4,60,000; Operating profit ₹ 3,50,000
Question Num – Q4
Operating profit earned by M/s Arora & Sachdeva in 2025-26 was ₹ 17,00,000. Its non-operating incomes were ₹ 1,50,000 and non-operating expenses were ₹ 3,75,000. Calculate the amount of net profit earned by the firm.
Answer
Net profit = ₹ 14,75,000
Question Num – Q5
The following are the extracts from the trial balance of M/s Bhola & Sons as on March 31, 2026: Opening stock ₹ 2,00,000 (Dr.); Purchases ₹ 8,10,000 (Dr.); Sales ₹ 10,10,000 (Cr.). Closing Stock as on date was valued at ₹ 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 & Sons.
Answer
Journal (closing entries)
Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
2026 Mar 31 | Trading A/c …Dr. | 10,10,000 | ||
To Opening Stock A/c | 2,00,000 | |||
To Purchases A/c | 8,10,000 | |||
(Opening stock and purchases transferred) | ||||
Mar 31 | Sales A/c …Dr. | 10,10,000 | ||
To Trading A/c | 10,10,000 | |||
(Sales transferred) | ||||
Mar 31 | Closing Stock A/c …Dr. | 3,00,000 | ||
To Trading A/c | 3,00,000 | |||
(Closing stock recorded) | ||||
Mar 31 | Trading A/c …Dr. | 3,00,000 | ||
To Profit and Loss A/c | 3,00,000 | |||
(Gross profit transferred) | ||||
Total | 26,20,000 | 26,20,000 |
Trading Account for the year ended March 31, 2026
Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
To Opening stock | 2,00,000 | By Sales | 10,10,000 |
To Purchases | 8,10,000 | By Closing stock | 3,00,000 |
To Gross profit c/d (to P&L) | 3,00,000 | ||
13,10,000 | 13,10,000 |
In the Profit and Loss Account the gross profit of ₹ 3,00,000 appears on the credit side. In the Balance Sheet the closing stock of ₹ 3,00,000 appears on the assets side (under current assets).
Gross profit ₹ 3,00,000; closing stock ₹ 3,00,000 shown as a current asset
Question Num – Q6
Prepare trading and profit and loss account and balance sheet as on March 31, 2026:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
Machinery | 27,000 | |
Sundry debtors | 21,600 | |
Drawings | 2,700 | |
Purchases | 58,500 | |
Wages | 15,000 | |
Sundry expenses | 600 | |
Rent & taxes | 1,350 | |
Carriage inwards | 450 | |
Bank | 4,500 | |
Opening stock | 6,000 | |
Capital | 60,000 | |
Bills payable | 2,800 | |
Sundry creditors | 1,400 | |
Sales | 73,500 |
Closing stock ₹ 22,400.
Answer
Trading Account of the trader for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 6,000 | By Sales | 73,500 | ||
To Purchases | 58,500 | By Closing stock | 22,400 | ||
To Wages | 15,000 | ||||
To Carriage inwards | 450 | ||||
Gross profit c/d | 15,950 | ||||
95,900 | 95,900 |
Profit and Loss Account of the trader for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Sundry expenses | 600 | Gross profit b/d | 15,950 | ||
To Rent & taxes | 1,350 | ||||
Net profit (transferred to capital) | 14,000 | ||||
15,950 | 15,950 |
Balance Sheet of the trader as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 60,000 | Machinery | 27,000 | ||
Add: Net profit | 14,000 | Sundry debtors | 21,600 | ||
Less: Drawings | (2,700) | 71,300 | Closing stock | 22,400 | |
Bills payable | 2,800 | Bank | 4,500 | ||
Sundry creditors | 1,400 | ||||
75,500 | 75,500 |
Gross profit ₹ 15,950; Net profit ₹ 14,000; Balance sheet total ₹ 75,500
Question Num – Q7
The following trial balance is extracted from the books of M/s Ram on March 31, 2026. You are required to prepare trading and profit and loss account and the balance sheet as on date:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
Debtors | 12,000 | |
Purchases | 50,000 | |
Coal, gas and water | 6,000 | |
Factory wages | 11,000 | |
Salaries | 9,000 | |
Rent | 4,000 | |
Discount | 3,000 | |
Advertisement | 500 | |
Drawings | 1,000 | |
Loan (given) | 6,000 | |
Petty cash | 500 | |
Sales return | 1,000 | |
Machinery | 5,000 | |
Land and building | 10,000 | |
Income tax | 100 | |
Furniture | 9,900 | |
Apprenticeship premium | 5,000 | |
Loan (taken) | 10,000 | |
Bank overdraft | 1,000 | |
Sales | 80,000 | |
Creditors | 13,000 | |
Capital | 20,000 |
Closing stock ₹ 0.
Answer
No stock figures are given. The loan on the debit side is an advance given (asset); the loan on the credit side is a loan taken. Income tax of a sole trader is his personal expense and is deducted from capital like drawings.
Trading Account of M/s Ram for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Purchases | 50,000 | By Sales | 80,000 | ||
To Coal, gas and water | 6,000 | Less: Sales return | (1,000) | 79,000 | |
To Factory wages | 11,000 | ||||
Gross profit c/d | 12,000 | ||||
79,000 | 79,000 |
Profit and Loss Account of M/s Ram for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Salaries | 9,000 | Gross profit b/d | 12,000 | ||
To Rent | 4,000 | By Apprenticeship premium | 5,000 | ||
To Discount | 3,000 | ||||
To Advertisement | 500 | ||||
Net profit (transferred to capital) | 500 | ||||
17,000 | 17,000 |
Balance Sheet of M/s Ram as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 20,000 | Debtors | 12,000 | ||
Add: Net profit | 500 | Loan (advance given) | 6,000 | ||
Less: Drawings | (1,000) | Petty cash | 500 | ||
Less: Income tax | (100) | 19,400 | Machinery | 5,000 | |
Loan | 10,000 | Land and building | 10,000 | ||
Bank overdraft | 1,000 | Furniture | 9,900 | ||
Creditors | 13,000 | ||||
43,400 | 43,400 |
Gross profit ₹ 12,000; Net profit ₹ 500; Balance sheet total ₹ 43,400
Question Num – Q8
The following is the trial balance of Manju Chawla on March 31, 2026. You are required to prepare trading and profit and loss account and a balance sheet as on date:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
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 | 6,700 | 7,000 |
Cash | 3,000 | |
Investment | 6,000 | |
Patents | 4,000 | |
Land and Machinery | 43,000 |
Closing stock ₹ 2,000.
Answer
Debtors are taken as ₹ 6,700 (printed “6,0000”); only this figure makes the trial balance agree. Royalty (on production) is a direct expense. Sales tax collected is a liability.
Trading Account of Manju Chawla for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 10,000 | By Sales | 80,000 | ||
To Purchases | 40,000 | Less: Returns | (200) | 79,800 | |
Less: Returns | (600) | 39,400 | By Closing stock | 2,000 | |
To Productive wages | 6,000 | ||||
To Dock and clearing charges | 4,000 | ||||
To Royalty | 4,000 | ||||
Gross profit c/d | 18,400 | ||||
81,800 | 81,800 |
Profit and Loss Account of Manju Chawla for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Donation and charity | 600 | Gross profit b/d | 18,400 | ||
To Delivery van expenses | 6,000 | By Misc. incomes | 6,000 | ||
To Lighting | 500 | By Rent from tenants | 2,000 | ||
To Bad debts | 600 | ||||
Net profit (transferred to capital) | 18,700 | ||||
26,400 | 26,400 |
Balance Sheet of Manju Chawla as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 40,000 | Debtors | 6,700 | ||
Add: Net profit | 18,700 | Cash | 3,000 | ||
Less: Drawings | (2,000) | 56,700 | Investment | 6,000 | |
Creditors | 7,000 | Patents | 4,000 | ||
Sales tax collected | 1,000 | Land and machinery | 43,000 | ||
Closing stock | 2,000 | ||||
64,700 | 64,700 |
Gross profit ₹ 18,400; Net profit ₹ 18,700; Balance sheet total ₹ 64,700
Question Num – Q9
The following is the trial balance of Mr. Deepak as on March 31, 2026. You are required to prepare trading account, profit and loss account and a balance sheet as on date:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
Drawings | 36,000 | |
Insurance | 3,000 | |
General expenses | 29,000 | |
Rent and taxes | 14,400 | |
Lighting (factory) | 2,800 | |
Travelling expenses | 7,400 | |
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 | |
Capital | 2,50,000 | |
Bills payable | 3,600 | |
Creditors | 50,000 | |
Discount received | 10,400 | |
Purchases return | 8,000 | |
Sales | 4,40,000 |
Closing stock ₹ 35,000.
Answer
Trading Account of Mr. Deepak for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 40,000 | By Sales | 4,40,000 | ||
To Purchases | 1,60,000 | Less: Sales return | (6,000) | 4,34,000 | |
Less: Purchases return | (8,000) | 1,52,000 | By Closing stock | 35,000 | |
To Lighting (factory) | 2,800 | ||||
To Carriage inwards | 7,200 | ||||
To Wages | 84,000 | ||||
Gross profit c/d | 1,83,000 | ||||
4,69,000 | 4,69,000 |
Profit and Loss Account of Mr. Deepak for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Insurance | 3,000 | Gross profit b/d | 1,83,000 | ||
To General expenses | 29,000 | By Discount received | 10,400 | ||
To Rent and taxes | 14,400 | ||||
To Travelling expenses | 7,400 | ||||
To Carriage outwards | 1,600 | ||||
To Salaries | 53,000 | ||||
Net profit (transferred to capital) | 85,000 | ||||
1,93,400 | 1,93,400 |
Balance Sheet of Mr. Deepak as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 2,50,000 | Cash in hand | 12,600 | ||
Add: Net profit | 85,000 | Bills receivable | 5,000 | ||
Less: Drawings | (36,000) | 2,99,000 | Sundry debtors | 1,04,000 | |
Bills payable | 3,600 | Closing stock | 35,000 | ||
Creditors | 50,000 | Furniture | 16,000 | ||
Plant and machinery | 1,80,000 | ||||
3,52,600 | 3,52,600 |
Gross profit ₹ 1,83,000; Net profit ₹ 85,000; Balance sheet total ₹ 3,52,600
Question Num – Q10
Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2026:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
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 ₹ 30,000.
Answer
Wages and salaries are taken as a direct (trading) expense, as in the textbook answer.
Trading Account of the trader for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 57,600 | By Sales | 5,60,000 | ||
To Purchases | 3,52,000 | Less: Return inwards | (9,600) | 5,50,400 | |
Less: Return outwards | (12,000) | 3,40,000 | By Closing stock | 30,000 | |
To Carriage inwards | 7,000 | ||||
To Fuel and power | 24,800 | ||||
To Wages and salaries | 28,800 | ||||
Gross profit c/d | 1,22,200 | ||||
5,80,400 | 5,80,400 |
Profit and Loss Account of the trader for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Carriage outwards | 3,360 | Gross profit b/d | 1,22,200 | ||
To Bad debts | 9,950 | By Interest on investment | 3,200 | ||
To Repairs | 2,400 | By Miscellaneous receipts | 160 | ||
To General expenses | 17,000 | ||||
Net profit (transferred to capital) | 92,850 | ||||
1,25,560 | 1,25,560 |
Balance Sheet of the trader as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 3,48,000 | Debtors | 1,31,200 | ||
Add: Net profit | 92,850 | 4,40,850 | Cash in hand | 32,000 | |
Creditors | 48,000 | Closing stock | 30,000 | ||
Loan | 16,000 | Investment | 32,000 | ||
Sales tax collected | 8,350 | Land and buildings | 2,88,000 | ||
5,13,200 | 5,13,200 |
Gross profit ₹ 1,22,200; Net profit ₹ 92,850; Balance sheet total ₹ 5,13,200
Question Num – Q11
From the following trial balance of Mr. A. Lal, prepare trading, profit and loss account and balance sheet as on March 31, 2026:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
Opening stock | 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 overdraft | 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 ₹ 15,000.
Answer
Trading Account of Mr. A. Lal for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 16,000 | By Sales | 1,12,000 | ||
To Purchases | 67,600 | Less: Returns inwards | (4,600) | 1,07,400 | |
Less: Returns outwards | (3,200) | 64,400 | By Closing stock | 15,000 | |
To Carriage inwards | 1,400 | ||||
Gross profit c/d | 40,600 | ||||
1,22,400 | 1,22,400 |
Profit and Loss Account of Mr. A. Lal for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To General expenses | 2,400 | Gross profit b/d | 40,600 | ||
To Bad debts | 600 | By Discount received | 1,400 | ||
To Interest on bank overdraft | 600 | By Commission received | 1,800 | ||
To Insurance and taxes | 4,000 | ||||
To Scooter expenses | 200 | ||||
To Salaries | 8,800 | ||||
Net profit (transferred to capital) | 27,200 | ||||
43,800 | 43,800 |
Balance Sheet of Mr. A. Lal as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 50,000 | Cash in hand | 4,000 | ||
Add: Net profit | 27,200 | 77,200 | Debtors | 6,000 | |
Bank overdraft | 10,000 | Closing stock | 15,000 | ||
Creditors | 16,000 | Scooter | 8,000 | ||
Furniture | 5,200 | ||||
Building | 65,000 | ||||
1,03,200 | 1,03,200 |
Gross profit ₹ 40,600; Net profit ₹ 27,200; Balance sheet total ₹ 1,03,200
Question Num – Q12
Prepare trading and profit and loss account and balance sheet of M/s Royal Traders from the following balances as on March 31, 2026:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
Stock | 20,000 | |
Cash | 5,000 | |
Bank | 10,000 | |
Carriage on purchases | 1,500 | |
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 | |
Sales | 2,45,000 | |
Creditors | 10,000 | |
Bills payable | 4,000 | |
Capital | 2,00,000 |
Closing stock ₹ 8,000.
Answer
Trading Account of M/s Royal Traders for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 20,000 | By Sales | 2,45,000 | ||
To Purchases | 1,90,000 | By Closing stock | 8,000 | ||
To Carriage on purchases | 1,500 | Gross loss c/d | 13,500 | ||
To Wages | 55,000 | ||||
2,66,500 | 2,66,500 |
Profit and Loss Account of M/s Royal Traders for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Gross loss b/d | 13,500 | Net loss (transferred to capital) | 20,000 | ||
To Postage | 300 | ||||
To Sundry expenses | 1,700 | ||||
To Rent | 4,500 | ||||
20,000 | 20,000 |
Balance Sheet of M/s Royal Traders as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 2,00,000 | Cash | 5,000 | ||
Less: Net loss | (20,000) | Bank | 10,000 | ||
Less: Drawings | (9,000) | 1,71,000 | Debtors | 27,000 | |
Creditors | 10,000 | Closing stock | 8,000 | ||
Bills payable | 4,000 | Machinery | 1,00,000 | ||
Furniture | 35,000 | ||||
1,85,000 | 1,85,000 |
Gross loss ₹ 13,500; Net loss ₹ 20,000; Balance sheet total ₹ 1,85,000
Question Num – Q13
Prepare trading and profit and loss account and balance sheet from the following particulars of M/s Neema Traders as on March 31, 2026:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
Buildings | 23,000 | |
Plant | 16,930 | |
Carriage inwards | 1,000 | |
Wages | 3,300 | |
Purchases | 1,64,000 | |
Sales return | 1,820 | |
Opening stock | 9,000 | |
Machinery | 2,10,940 | |
Insurance | 1,610 | |
Interest | 1,100 | |
Bad debts | 250 | |
Postage | 300 | |
Discount | 1,000 | |
Salaries | 3,000 | |
Debtors | 3,900 | |
Sales | 1,80,000 | |
Loan | 8,000 | |
Bills payable | 2,520 | |
Bank overdraft | 4,720 | |
Creditors | 8,000 | |
Capital | 2,36,000 | |
Purchases return | 1,910 |
Closing stock ₹ 16,000.
Answer
Trading Account of M/s Neema Traders for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 9,000 | By Sales | 1,80,000 | ||
To Purchases | 1,64,000 | Less: Sales return | (1,820) | 1,78,180 | |
Less: Purchases return | (1,910) | 1,62,090 | By Closing stock | 16,000 | |
To Carriage inwards | 1,000 | ||||
To Wages | 3,300 | ||||
Gross profit c/d | 18,790 | ||||
1,94,180 | 1,94,180 |
Profit and Loss Account of M/s Neema Traders for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Insurance | 1,610 | Gross profit b/d | 18,790 | ||
To Interest | 1,100 | ||||
To Bad debts | 250 | ||||
To Postage | 300 | ||||
To Discount | 1,000 | ||||
To Salaries | 3,000 | ||||
Net profit (transferred to capital) | 11,530 | ||||
18,790 | 18,790 |
Balance Sheet of M/s Neema Traders as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 2,36,000 | Debtors | 3,900 | ||
Add: Net profit | 11,530 | 2,47,530 | Closing stock | 16,000 | |
Loan | 8,000 | Buildings | 23,000 | ||
Bills payable | 2,520 | Plant | 16,930 | ||
Bank overdraft | 4,720 | Machinery | 2,10,940 | ||
Creditors | 8,000 | ||||
2,70,770 | 2,70,770 |
Gross profit ₹ 18,790; Net profit ₹ 11,530; Balance sheet total ₹ 2,70,770
Note: The trial balance agrees (₹ 4,41,150 on each side), and on these figures gross profit is ₹ 18,790, net profit ₹ 11,530 and the balance sheet total ₹ 2,70,770. The textbook answers are each ₹ 940 lower, which the given data does not support.
Question Num – Q14
From the following balances of M/s Nilu Sarees as on March 31, 2026, prepare trading and profit and loss account and balance sheet as on date:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
Opening stock | 10,000 | |
Purchases | 78,000 | |
Carriage inwards | 2,500 | |
Salaries | 30,000 | |
Commission (paid) | 10,000 | |
Wages | 11,000 | |
Rent & 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 | |
Sales | 2,28,000 | |
Capital | 70,000 | |
Interest | 7,000 | |
Commission (received) | 8,000 | |
Creditors | 28,000 | |
Bills payable | 2,370 |
Closing stock ₹ 22,000.
Answer
The given balances do not agree: debits total ₹ 3,64,700 and credits ₹ 3,43,370. The difference of ₹ 21,330 is placed in a Suspense Account (shown with liabilities) so that the balance sheet can be completed.
Trading Account of M/s Nilu Sarees for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 10,000 | By Sales | 2,28,000 | ||
To Purchases | 78,000 | By Closing stock | 22,000 | ||
To Carriage inwards | 2,500 | ||||
To Wages | 11,000 | ||||
Gross profit c/d | 1,48,500 | ||||
2,50,000 | 2,50,000 |
Profit and Loss Account of M/s Nilu Sarees for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Salaries | 30,000 | Gross profit b/d | 1,48,500 | ||
To Commission | 10,000 | By Interest | 7,000 | ||
To Rent & taxes | 2,800 | By Commission | 8,000 | ||
To Repairs | 5,000 | ||||
To Telephone expenses | 1,400 | ||||
To Legal charges | 1,500 | ||||
To Sundry expenses | 2,500 | ||||
Net profit (transferred to capital) | 1,10,300 | ||||
1,63,500 | 1,63,500 |
Balance Sheet of M/s Nilu Sarees as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 70,000 | Cash in hand | 12,000 | ||
Add: Net profit | 1,10,300 | Debtors | 30,000 | ||
Less: Drawings | (18,000) | 1,62,300 | Closing stock | 22,000 | |
Creditors | 28,000 | Machinery | 60,000 | ||
Bills payable | 2,370 | Investments | 90,000 | ||
Suspense account (difference in trial balance) | 21,330 | ||||
2,14,000 | 2,14,000 |
Gross profit ₹ 1,48,500; Net profit ₹ 1,10,300; Balance sheet total ₹ 2,14,000
Note: The net profit of ₹ 1,10,300 and the balance sheet total of ₹ 2,14,000 agree with the textbook. The textbook’s gross profit of ₹ 1,56,500 is a misprint; the trading account gives ₹ 1,48,500.
Question Num – Q15
Prepare trading and profit and loss account of M/s Sports Equipments for the year ended March 31, 2026 and balance sheet as on that date:
Account title | Dr. (₹) | Cr. (₹) |
|---|---|---|
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 ₹ 2,500.
Answer
Trading Account of M/s Sports Equipments for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
To Opening stock | 50,000 | By Sales | 4,21,000 | ||
To Purchases | 3,50,000 | Less: Sales returns | (5,000) | 4,16,000 | |
To Carriage on purchases | 12,000 | By Closing stock | 2,500 | ||
To Wages | 8,000 | Gross loss c/d | 1,500 | ||
4,20,000 | 4,20,000 |
Profit and Loss Account of M/s Sports Equipments for the year ended March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Gross loss b/d | 1,500 | By Commission | 4,000 | ||
To Rent | 15,000 | Net loss (transferred to capital) | 41,500 | ||
To Bad debts | 7,000 | ||||
To Stationery | 6,000 | ||||
To Travelling expenses | 2,000 | ||||
To Insurance | 7,000 | ||||
To Discount | 5,000 | ||||
To Office expenses | 2,000 | ||||
45,500 | 45,500 |
Balance Sheet of M/s Sports Equipments as at March 31, 2026
Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
|---|---|---|---|---|---|
Liabilities | Assets | ||||
Capital | 3,00,000 | Cash in hand | 32,000 | ||
Less: Net loss | (41,500) | Debtors | 1,40,000 | ||
Less: Drawings | (24,000) | 2,34,500 | Closing stock | 2,500 | |
Creditors | 1,00,000 | Furniture | 1,28,000 | ||
Bank overdraft | 28,000 | Plants | 60,000 | ||
3,62,500 | 3,62,500 |
Gross loss ₹ 1,500; Net loss ₹ 41,500; Balance sheet total ₹ 3,62,500
Topic checklist
- Objectives and users of financial statements
- Capital vs revenue expenditure and receipts
- Trading account, cost of goods sold, gross profit
- Profit and loss account, operating profit, net profit
- Balance sheet: grouping and marshalling
- Closing and opening entries