Financial Accounting & Reporting MBA102

MODULE – 4

Final Accounts of Companies: Preparation of final accounts of companies in vertical form as

per Companies Act of 2013 (Problems of Final Accounts with adjustments), Window dressing.
Case Study problem on Final Accounts of Company. (Theory and Problems).
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Final Accounts
 Final accounts provide a brief view of the financial standing & profitability of the
business operations to the owners of the business, management & other
stakeholders.
 The parliament passed the Companies Act, 2013which was subsequently ratified by
the President of India on 29th August, 2013.
 Final accounts of companies should prepare vertical form as per Companies Act of
2013. According to that should prepare 2 statements
I. Schedule III part II – Income statement of profit & loss account
II. Schedule III part I – Balance Sheet

Format of Profit & Loss Statement

SL
Particulars Amount
No.
1 Revenue from Operations ***
2 Other Income ***
3 Total Revenue (1+2) ****
4 Expenses
Cost of Material Consumed ***
Purchase of stock-in trade ***
Changes in inventory of finished goods ***
Goods/WIP & stock in trade ***
Employee benefits ***
Expenses ***
Finance costs ***
Depreciation & amortization expenses ***
Other expenses ***
Total Expenses ****
5 Profit Before Tax (PBT) (3-4) ****
6 Tax ***
7 Profit After Tax (PAT) (5-7) ***

SUJATHA S.L 1
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102

Format of Balance Sheet

SL
Particulars Amount
No.
I Equity & Liability
(i) Shareholder’s fund ***
a) Share Capital ***
b) Reserves & surplus ***
c) Money received against share warrants ***
(ii) Share application money pending allotment ***
(iii) Non-Current Liabilities
a) Long-term borrowings ***
b) Deferred tax liabilities (Net) ***
c) Other long-term liabilities ***
d) Long-term provisions ***
(iv) Current Liabilities
a) Creditors
b) Bills Payable ***
c) Short-term loan ***
d) Short term provisions ***
e) Outstanding Expenses ***
f) Outstanding Income ***
g) Overdraft ***
Total Equity & Liability (I) ****
II Assets
(i) Non-Current Assets
a) Fixed Assets ***
 Tangible Assets ***
 Intangible Assets ***
 Capital work-in progress ***
 Tangible Assets under Development ***
b) Long-Term Investment ***
c) Deferred Tax Assets ***
d) Other non-current assets ***
(ii) Current Assets
a) Debtors ***
b) Inventories ***
c) Trade receivables ***
d) Short-term Investment ***
e) Cash in hand ***
f) Cash at bank ***
g) Outstanding incomes ***
h) Prepaid expenses ***
Total Assets (II) ****

SUJATHA S.L 2
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102

Problems
1. From the following ledger balances extracted from the books of ABC Company,
prepare final accounts for the year ending 31st March, 2023.
Particulars Debit (₹) Particulars Credit (₹)
Purchases 3,20,000 Capital 4,20,000
Drawings 50,000 Sales 6,85,000
Returns 25,000 Discount 20,000
Opening stock 1,40,000 Creditors 80,000
Salary 87,000 Bills Payable 97,000
Wages 30,000 Returns 15,000
Rent 45,000
Bad debts 10,000
Discount 13,000
Debtors 2,10,000
Cash 50,000
Bank 90,000
Insurance 15,000
Trade expenses 29,000
Printing 10,000
Furniture 43,000
Machinery 1,50,000
Total 13,17,000 Total 13,17,000
Adjustments:
1. The closing stock was valued ₹60,000
2. Rent was prepaid to the extent of ₹9,000
3. Outstanding wages was ₹10,000 & outstanding salary ₹25,000
4. Create provision for doubtful debts at 5% on sundry debtors
5. Depreciation machinery at 15% & furniture at 10%.

SUJATHA S.L 3
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102

2. From the following ledger balances extracted from the books of M/s Akshay
Traders, prepare final accounts for the year ending 31st March, 2024.
Particulars Debit (₹) Credit (₹)
Purchases/Sales 2,00,000 6,00,000
Capital/Drawings 24,000 3,50,000
Computer 50,000 ---
Patent 75,000 ---
Trade Mark 40,000 ---
Cash at bank 2,50,000 ---
Cash in hand 80,000 ---
Stock on 1/4/2023 60,000 ---
Discount Received --- 25,000
Reserved Fund --- 15,000
Bills Receivables/ Bills Payables 1,90,000 1,10,000
Freight inwards 25,000 ---
Sales Tax 30,000 ---
Octroi 20,000 ---
Debtors/Creditors 1,15,000 2,40,000
Investment 40,000 ---
Commission --- 10,000
Computer repair expenses 5,000 ---
Office expenses 8,000 ---
Dividend --- 1,000
Provision for doubtful debts --- 2,500
Bad debts 1,000 ---
Insurance Premium 5,000 ---
Entertainment Expenses 2,000 ---
Wages 30,000 ---
Salaries 55,000 ---
Rent 60,000 ---
Returns 10,000 15,000
Miscellaneous incomes --- 6,500
Total 13,75,000 13,75,000
Adjustments: -
1. The closing stock of goods found to be ₹75,000
2. Rent paid in advance ₹10,000
3. Salary outstanding ₹25,000
4. Dividend earned but not received ₹800
5. Provide depreciation on computer at 5% & write-off patent @ 10%
6. Create provision for doubtful debts @ 2%

SUJATHA S.L 4
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102
3. Form the following Trail balance, prepare statement of profit & loss & Balance Sheet
as on 31st Mach, 2020
Particulars Debit (₹) Credit (₹)
Capital --- 5,00,000
Land & Building 2,00,000 ---
Furniture & Fixtures 40,000 ---
Plant & Machinery 1,50,000 ---
Investments 30,000 ---
Purchases/Sales 1,60,000 3,85,000
Returns 15,000 10,000
Sundry debtors/creditors 90,000 75,000
General expenses 12,000 ---
Cash in hand 25,000 ---
Cash at bank 40,000 ---
Rent paid 96,000 ---
Commission 4,000 ---
Rent, rates & taxes 5,000 ---
Bad debts 7,000 ---
Insurance 20,000 ---
Discount 18,000 20,000
Provision for doubtful debts 5,000
Opening Stock 83,000 ---
Total 9,95,000 9,95,000
Adjustments: -
(i) Outstanding expenses: commission ₹2,000, Rent ₹16,000
(ii) Insurance Prepaid ₹15,000
(iii) Create provision for doubtful debts at 5% on debtors
(iv) Stock on 31st March, 2024 is ₹40,000
(v) Interest on investments at 5% p.a. due but not received
(vi) Depreciate Plant & Machinery by 15%, Furniture & Fixtures by 5% & Land &
Building by 10%
(vii) Provide interest on capital at 7% p.a.

SUJATHA S.L 5
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102

4. From the following Trail balance of M/S Gajanan Traders, prepare statement of profit &
loss & Balance Sheet as on 31st Mach, 2021 after considering the adjustments
Particulars Debit (₹) Particulars Credit (₹)
Drawings
50,000 Capital 3,00,000
(01/10/2020)
Purchases 2,95,000 Revenue from operation 6,75,000
Return inwards 25,000 Discount 18,000
Inventory 1,00,000 Creditors 30,000
Salary 35,000 Bills Payable 47,000
Wages 20,000
Rent 40,000
Bad debts 15,000
Discount 10,000
Debtors 2,10,000
Cash 55,000
Bank 85,000
Insurance 18,000
Trade expenses 22,000
Printing 17,000
Furniture 23,000
Machinery 50,000
Total 10,70,000 Total 10,70,000
Adjustments: -
1. Closing inventory was valued at ₹25,000
2. Insurance was prepaid to the extent of ₹5,000
3. Outstanding salary ₹15,000 & outstanding wages ₹10,000
4. Maintain provision for doubtful debts at 5% on sundry debtors
5. Provide interest on capital at 8% p.a.
6. Depreciation is provided at 15% on machinery & 10% on furniture
7. Provide for discount on creditors at 2%.

SUJATHA S.L 6
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102

5. From the following Trail balance of Tata Trading Company Ltd., prepare the financial
statements for the year ending 31st March, 2021 in vertical format as per Companies Act,
2013
Particulars Debit (₹) Credit (₹)
Sale of goods --- 5,50,000
Office rent 50,000 ---
Opening in inventories 35,000 ---
Purchase of goods 1,70,000 ---
Furniture 1,85,000 ---
Trade Payables --- 85,000
Plant & Machinery 1,00,000 ---
Trade Receivables 1,60,000 ---
Equity Share Capital (40,000 shares of ₹10 each) --- 4,00,000
10% debentures --- 1,00,000
Interest on debentures 10,000 ---
Fixed Deposit 70,000 ---
Staff welfare expenses 12,000 ---
Surplus (opening balance) --- 10,000
Cash in hand & bank 63,000 ---
Building 90,000 ---
Rate & taxes 25,000 ---
Salaries 55,000 ---
Goodwill 1,25,000 ---
General reserves --- 5,000
Total 11,50,000 11,50,000
Adjustments: -
1. Closing inventories ₹45,000
2. Create provision for taxation at 30%
3. Transfer to general reserve ₹5,000
4. Director proposed dividend of 10%
5. Provide depreciation on Plant & Machinery at 10% & building at 5%.

SUJATHA S.L 7
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102

6. From the following ledger balances, prepare statement of profit & loss & Balance Sheet
as on 31st Mach, 2024 after considering the adjustments
Particulars Debit (₹) Particulars Credit (₹)
Drawings 70,000 Capital 5,00,000
Good will 70,000 Bills Payable 85,000
Land & building 1,50,000 Sundry Creditors 1,75,000
Plant & machinery 1,20,000 Purchase Return 15,000
Loose tools 55,000 Sales Revenue 5,25,000
Bills receivables 1,30,000
st
Stock on 1 April, 2023 10,000
Purchases 1,25,000
Wages 40,000
Carriage Outwards 12,000
Carriage inwards 17,000
Coal 25,000
Salary 40,000
Rent, rates & taxes 19,000
Discount 14,000
Cash at bank 1,20,000
Cash in hand 60,000
Sundry debtors 1,05,000
Repairs 15,000
Printing & Stationery 7,500
Bad debts 2,000
Advertisement 4,500
Sales returns 4,000
Furniture 40,000
General Expenses 20,000
Excise duty 25,000
Total 13,00,000 Total 13,00,000
Adjustments: -
1. Closing inventory was valued at ₹75,000
2. Depreciate plant & machinery, tools & furniture by 15% & land & building by 10%
3. Outstanding wages ₹10,000
4. Advertisement prepaid to the extent ₹1,800
5. Provide 5% on debtors against bad debts.

SUJATHA S.L 8
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102

7. From the following ledger balances, prepare statement of profit & loss & Balance Sheet
as on 31st Mach, 2022.
Particulars Debit (₹) Particulars Credit (₹)
Drawings 25,000 Capital 4,25,000
Debtors 1,90,000 Bills Payable 1,10,000
Bills receivables 1,50,000 Sundry Creditors 80,000
Plant & machinery 1,40,000 Revenue from operation 3,70,000
Loose tools 22,000 Discount 13,200
Investments 50,000 Interest on investment 14,500
Stock on 1/4/2021 55,000 Interest on bank deposits 15,000
Cash 78,000 Stock 50,000
Purchases 1,60,000
Wages 35,000
Returns 18,000
Salary 47,000
Rent, rates & taxes 7,000
Printing & stationery 8,700
Discount 12,500
Bad debts 2,500
Stock 50,000
Miscellaneous expenses 12,000
Excise duty 15,000
Total 10,77,700 Total 10,77,700
Adjustments: -
1. Goods worth ₹8,000 are used as loose tools
2. Goods worth ₹7,000 are sold on cash without profit & hence not recorded in the books
3. Goods worth ₹15,000 purchased on credit is not recorded in the books
4. Wages includes ₹4,000 incurred for purchase of loose tools
5. ₹2,500 is incurred for installation of machinery but not recorded in the books
6. Depreciate loose tools at 20% & machinery at 10%
7. Create provision for bad debts at 5% & provision for discount on debtors at 2%
8. Create a provision for discount on creditors at 2%

SUJATHA S.L 9
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102
8. From the following trail balance prepare financial statements of National Trading
Company Ltd. in vertical format for the accounting period 31st March 2022.
Particulars Debit Credit
Share capital (Equity share of ₹10 each) --- 9,00,000
General reserve --- 50,000
P & L a/c --- 2,24,100
10% Debentures --- 3,00,000
Interest on debentures 30,000 ---
Trade payables --- 97,000
Unclaimed dividend --- 8,000
Provision for employee benefit (short-term) --- 47,500
Building 4,28,000 ---
Furniture 1,00,000 ---
Plant & Machinery 5,58,000 ---
Trade receivables 2,54,300 ---
Provision for bad & doubtful debts --- 12,000
Bad debts 12,000 ---
Cash & Bank balance 85,000 ---
Purchases 2,72,250 ---
Sale of goods --- 6,35,000
Salaries & wages 1,25,000 ---
Contribution to PF 53,000 ---
Rent expenses 25,550 ---
Power & fuel 78,500 ---
Advertisement 36,400 ---
Administration expenses 95,600 ---
Stock 1,20,000 ---
Total 22,73,500 22,73,500
Adjustments:
i. Closing Inventories ₹1,25,300.
ii. Outstanding salary ₹10,000
iii. Write off further bad debts of ₹12,000 & maintain provision for doubtful
debts @ 12%
iv. Provide depreciation on machinery @ 10% & building @ 5%.
v. Prepaid rent ₹1,500.

SUJATHA S.L 10
Assistant Professor – MBA
Bangalore Institute of Technology
Financial Accounting & Reporting MBA102
9. From the following trail balance of M/s Karnataka Industries Ltd., prepare statement
of profit & loss & Balance sheet for the financial year ending 31 st March 2024 after
considering the adjustments:

Particulars Debit (₹) Particulars Credit (₹)

Drawings 20,000Share Capital 8,00,000
Premises 9,00,000Sales Revenue 15,00,000
Machinery 2,80,000Reserve fund 2,80,000
Furniture 1,25,000P&L A/c 2,45,000
Purchases 9,00,000Sundry Creditors 1,90,000
Wages 1,75,0008% debentures 5,00,000
Salaries 1,25,000Bills Payable 1,40,000
Reserve for doubtful
Interim Dividend 50,000 8,000
debts
Goodwill 2,50,000
Sundry Debtors 4,50,000
Bills receivables 2,20,000
Bad debts 15,000
Debenture Interest (upto
18,000
30/09/2023)
Stock on 1/4/2023 1,35,000
Total 36,63,000 Total 36,63,000
Adjustments:
1. The stock on 31st March 204 was valued at ₹3,50,000.
2. Depreciate machinery & furniture by 10%
3. Maintain reserve for bad & doubtful debts at 5%
4. The directors proposed a final dividend at 20%
5. Interest on debentures is unpaid for 6 months
6. Transfer 10% of profit to reserve fund.

SUJATHA S.L 11
Assistant Professor – MBA
Bangalore Institute of Technology