Notes on Final Accounts & Journal& Ledger Problem

EXAMPLE PROBLEMS ON JOURNAL POSTING

1. From the following transactions of Neelima, prepare journals.: 2009 Jan. 1 Co Commence !usiness with cash # ". $urchase goos for cash %. $ai for salaries 9. &ol goos for cash 12. $urchase goos from latha 1%. $urchase goos from she(har from us 2%. Recei)e cash from she(har 2'. $ai rent +1. $ai salaries

&ol:

JOURNAL OF NEELIMA

ate

2009 Jan 1

#

Rs. 2",000 10,000 ",000 ',000 2,"00 ",000 *,000 "00 2,"00

"

%

9

12

1%

2%

2'

$articulars

-.F

e!it Rs

Cash ac r. /o capital capita l ac eing !usiness starte with cash

2",000

$urchase ac /o cash ac 3oos purchase for cash

r.

10,000

&alaries ac /o cash ac salaries pai for cash

r.

Cash ac /o sales ac goos sol for cash

r.

Creit Rs.

2",000

10,000

",000 ",000

',000 ',000

$urchases ac r. /o -atha ac   goos purchase form latha on creit

2,"00

&e(har ac r  /o sales ac  3oos sol to se(har on creit

",000

Cash ac /o &e(har ac  cash recei)e from se(har

r.

*,000

Rent ac

r.

2,"00

",000

*,000

"00 1

/o cash ac Rent pai for cash +1

"00

&alaries ac  /o cash ac salaries pai for cash

r.

2,"00 2,"00

TOTAL

62,500

62,500

EXAPLES ON LEDGER POSTING TYPES OF FORMS OF LEDGER ACCOUNTS

/here are two t4pes of leger accounts. /hese are 1. &tanar form 2. &elf 5 alancing form Standard !r" ! #$d%$r A&&!'nt() &tanar form of leger accounts consists of two sies. /he left sie column is calle e!it an the right sie column is calle as Creit. 6n this stanar for of  leger accounts, the amount of e!it writes in e!it column an the amount of  creit in creit column. 6f !oth amounts are not e7ualle, the accounts are not  !alance. 8e write off eact amount of e!it an creit. Standard F!r" ! L$d%$r A&&!'nt)

/o unerstan clearl4 as to how to write the accounts in leger, the stanar form of an account is gi)en !elow with two separate transactions: Dat$

Part*&'#ar(

200" ec. 1 Cash ;C

J+R

A"!'nt

Dat$

Part*&'#ar(

200" ec. 1 $urchases ;C

1,200

J+R A"!'nt

2,000

S$#  Ba#an&*n% !r" ! #$d%$r A&&!'nt() /he &elf 5 alancing form of leger ;ccounts, the ifference !etween two sies of an account nee to !e !alance. /he !alance is written on the lesser sie to ma(e the two sies e7ual. /he process of e7ualiC

1+

DIFFERENCE B ETEEN TRADING ? PROFIT AND LOSS ACCOUNT

Trad*n% A&&!'nt

Pr!*t ? #!(( A&&!'nt

1. It is the first stage of final 2. +.

*. ".

accounts. It shows the gross result (gross profit or gross loss) of the business. All direct expenses (expenses connected with purchase or production of goods) are considered in it. It does not start with the balance of any account. Its balance (G.P or G.L) is transferred to profit and loss account.

1. It is the second stage of the final 2. +.

*. ".

accounts. It shows the net results (net profit or net loss) of the business. All expenses connected with sales and administration (indirect expenses) of business are considered. It always starts with the balance of a trading account (gross profit or gross loss). Its balance (N.P or N.L) is transferred to capital account in balance sheet.

BALANCE S1EET

; !alance sheet is a statement of the total assets an lia!ilities of an organisation at a particular ate D usuall4 the last ate of an accounting perio. /his statement is prepare from real an personal accounts left after nominal the nominal accounts are transferre to /raing an $rofit an -oss ;ccount. alance sheet is a &tatement an not an ;ccount. 6t oes not ha)e e!it an Creit sie. 6t is i)ie into two sies. i.e. -eft han sie an the right 5 han sie. /he left han sie is calle the lia!ilities an right han sie is calle ;ssets.

; properl4 rawn up !alance sheet gi)es information relating to 1. Nature an )alue of assets. 2. /he nature an etent of lia!ilities +. 8hether the firm is sol)ent *. 8hether the firm is o)er traing 

Ad=anta%$() 4 comparing past !alance sheets with the present !alance sheet, the growth or ecline of the !usiness assets, loans an net worth can !e etermine.  /he !alance sheet is use to calculate ratios, such as the current ratio, aci test ratio, le)erage ratio. /hese ratios are use to e)aluate the financial  performance of the !usiness.  /he owner ma4 nee to negotiate a longDterm loan on the !asis of nonDcurrent asset )alues.

1*

T1E PROFORMA OF BALANCE S1EET LIABILITIES

AMOUNT

F*7$d L*a.*#*t*$() Capital C'rr$nt L*a.*#*t*$()

AMOUNT

L*@'*d A(($t() Cash in han Cash in !an(  F#!at*n% A(($t() &unr4 e!tors 6n)estments ills Recei)a!le &toc( in /rae $repai Bpenses F*7$d A(($t() @achiner4 uiling Furniture ? Fitures @otor Car  F*&t*t*!'( A(($t() ;)ertisement @isc.Bpenses $rofit ? -oss ;c Intan%*.#$ A(($t() 3oowill $atents Cop4right

ills $a4a!le &unr4 creitors an( o)erraft L!n% t$r" L*a.*#*t*$()

-oans from an(  e!entures

TOTAL

ASSET

XXXX

TOTAL

XXXX

N!t$) :+ 8hile preparing the !alance sheet Net profit is ae to Capital an Net loss is eucte from Capital 2. rawings are eucte from Capital.

D*$r$n&$ .$t/$$n r!*t and #!(( a&&!'nt and Ba#an&$ (-$$t

BALANCE S1EET

PROFIT ? LOSS ACCOUNT

1.alance sheet is the statement of ;sset an -ia!ilities

1.$rofit an loss is an account

2. $rofit an loss account iscloses profits 2. alance sheet iscloses the financial earne or losses suffere uring an  position of the !usiness on a particular  accounting perio. ate. +. $rofit an loss account prepare for the +. alance sheet is prepare as at the last accounting perio ening a4 of accounting perio 1"

*. ;ccounts which are transferre to *. ;ccounts which are transferre to the  !alance sheet o not lose their ientit4  profit loss account are close an cease to an !ecome the opening !alance for net eist.  perio.

EXAMPLE PROBLEM ON FINAL ACCOUNTS ;justment relating to loss on fire an estro4e goos Pr!.#$") Form the following particulars prepare Final ;ccounts as on +1D0+D2009. Part*&'#ar(

A"!'nt

Part*&'#ar(

A"!'nt

$urchases &ales Returns Carriage 6nwars &alaries Rent ? 6nsurance e!tors ills pa4a!le $lant ? @achiner4 Furniture Cash at an(  Epening &toc(  a e!ts 8ages ;)ertisement

0,000   1,000 "00  1,"00  1,"00  +%,000  ",000  "0,000  9,000  20,000  20,000  ",000  1,100 "00

&ales Capital $urchase Returns Creitors Commission iscount Recei)e

1,00,000   '0,000   2,000   2",000   2,000   2,100

/otal

2,1%,100

/otal

2,1%,100

Ad'(t"$nt() 1. Closing &toc( Rs. 10,000. 2. Create "K Reser)es for ou!tful e!ts +. Eut staning &alaries Rs 200 *. epreciation L 10K on @achiner4 an "K on Furniture. ". Fire accient estro4e goos worth Rs "000 an 6nsurance compan4 agree to $a4 Rs *000 S!#'t*!n) /raing an $rofit an loss account as on +1D0+D2009 r Cr Part*&'#ar( A"!'nt Part*&'#ar( A"!'nt

/o Epening stoc(  /o $urchases 0,000 -ess: returns 2,000 /o Carriage 6nwars

20,000

4 &ales -ess: returns

1,00,000 1,000

 99,000

4 closing stoc( ;: estro4e

10,000 ",000

  1",000

%',000 "00

1%

 /o 8ages /o 3ross profit c

  1,100   2*,*00 1,1*,000

/o salaries 1"00 ;: out staning 200 /o Rent /o a e!ts ",000 ;: ou!t full 1',00  L " on e!tors /o ;)ertisement /o ep. En @achine /o ep. En Furniture /o -oss on fire not co)ere  !4 6nsurance "000D*000 /o Net profit c

 1,00  1,"00

 

stoc( 1,1*,000

4 3ross profit ! 4 commission 4 iscount

 2*,*00   2,000   2,100

  %,'00 "00   ",000 *"0   1,000   11,""0   2',""0

2',""0

N!t$) 1. &toc( estro4e is ae to closing stoc( !ecause this stoc( is wastage for traing  perio !ut the en the closing stoc( is ;sset to net 4ear. BALANCE S1EET AS ON ;:0;200 L*a.*#*t*$(

Capital ;: Net profit

'0,000 11,""0

ills $a4a!le Creitors Eut staning salaries

T!ta#

A"!'nt

91,""0

A(($t(

Cash at an(  $lant -ess: ep

  ",000 2",000 200

Furniture -ess: ep

:,2:,50

Closing stoc( 6nsurance Claim e!tors -ess: ou!tful T!ta#

A"!'nt

20,000 "0,000 ",000

*",000

9,000 *"0

 ',""0 10,000   *,000

+%,000 1,'00

+*,200 :,2:,50

N!t$) For calculating total e!tors we euct the ou!tful e!tors from total e!tors. ere we can consier the !a e!ts !ecause these e!ts are their !eginning of the 4ear.

1