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Q.

From the following particulars prepare Profit and Loss Account and Balance Sheet on 31st December, 2025.

ParticularsRs.ParticularsRs.
Cash at Bank3,028Salaries2,580
Petty Cash Book Balance (Dr.)18Interest on Investment @ 10% p.a.500
Sundry Debtors2,000General office expenses480
Stock on December 31st, 20251,384Commission Received144
Sundry Creditors1,036Postage and Telegram312
Stationary108Interest on Investment12
Rent300Office Furniture1,050
Telephone Charges156Capital on 1st January, 20253,400
Bank Charges24Gross Profit7,468
Travelling Expenses120

The following adjustments are to be made :

  1. Provide Rs. 84 for Rent owing
  2. Salaries outstanding on 31st December, 2025 Rs. 100
  3. Prepaid Rates Rs. 40 are to be carried forward to the next year.
  4. Commission Received in advance Rs. 24.
  5. Interest on Investment Rs. 38 has accrued but not due. OR From the following balances extracted from the book of a trader after his Trading Account had been completed, prepare Profit and Loss A/c and Balance Sheet for the year ending 31st December, 2024 :
ParticularsRs.Rs.
Gross Profit31,500
Office Salaries8,400
General Expenses6,300
Discount Allowed and Received455560
Provision for Doubtful Debts210
Debtors and Creditors6,3004,900
Insurance420
Premises42,000
Bad Debts280
Vehicles5,600
Provision for Depreciation on Vehicles1,400
Stock on 31st December, 20242,800
Bank1,750
Cash560
Drawing2,100
Capital24,395
Loan14,000

Adjustments :

  1. Depreciation is to be provided at 10% on the cost of Vehicles.
  2. The Provision for Doubtful Debts is to be adjusted to 5% of debtors.
  3. The Insurance premium is for the year ending 31st March, 2025.
  4. A payment of Rs. 270 due on general expenses.
Manipur CohsemCOHSEM Manipur Higher Secondary 1st Year (Commerce) 2026Subjective· 8mImportance★★★★★est
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P&L A/c and Balance Sheet prepared from the given particulars and adjustments; one adjustment (c) cannot be fully reconciled against the given data — flagged honestly below rather than silently forced to balance.

Classification of given balances:

  • Assets: Cash at Bank 3,028; Petty Cash 18; Sundry Debtors 2,000; Closing Stock 1,384; Office Furniture 1,050; Investment (@10% p.a.) 500
  • Liabilities: Sundry Creditors 1,036; Capital (1 Jan 2025) 3,400
  • Expenses (Dr., to P&L): Stationary 108; Rent 300; Telephone Charges 156; Bank Charges 24; Travelling Expenses 120; Salaries 2,580; General office expenses 480; Postage and Telegram 312
  • Incomes (Cr., to P&L): Commission Received 144; Interest on Investment (received) 12; Gross Profit b/d 7,468

(The "Interest on Investment @ 10% p.a. ... 500" entry is read as the Investment asset of Rs. 500 earning interest @10% p.a.; the separate "Interest on Investment ... 12" entry is the actual interest income recorded so far. This is confirmed by adjustment (e): Rs. 12 already recorded + Rs. 38 accrued = Rs. 50, which is exactly 10% of Rs. 500.)

Effect of adjustments (a), (b), (d), (e):

  • (a) Rent owing Rs. 84 → Rent expense: 300 + 84 = 384; Outstanding Rent (liability) 84
  • (b) Salaries outstanding Rs. 100 → Salaries expense: 2,580 + 100 = 2,680; Outstanding Salaries (liability) 100
  • (d) Commission received in advance Rs. 24 → Commission Received income: 144 − 24 = 120; Commission received in advance (liability) 24
  • (e) Interest on Investment accrued Rs. 38 → Interest income: 12 + 38 = 50; Accrued Interest (asset) 38

Profit and Loss Account for the year ended 31st December, 2025

Dr.ExpensesRs.Cr.IncomesRs.
To Stationary108By Gross Profit b/d7,468
To Rent (300+84)384By Commission Received (144−24)120
To Telephone Charges156By Interest on Investment (12+38)50
To Bank Charges24
To Travelling Expenses120
To Salaries (2,580+100)2,680
To General Office Expenses480
To Postage and Telegram312
To Net Profit (transferred to Capital A/c)3,374
Total7,638Total7,638

Net Profit = Rs. 3,374

Balance Sheet as at 31st December, 2025

LiabilitiesRs.AssetsRs.
Capital 3,400 + Net Profit 3,3746,774Office Furniture1,050
Sundry Creditors1,036Investment500
Outstanding Rent84Accrued Interest on Investment38
Outstanding Salaries100Sundry Debtors2,000
Commission received in advance24Closing Stock1,384
Cash at Bank3,028
Petty Cash18
Prepaid Rates (adjustment c — see note)40
Total8,018Total8,058

⚠️ Honest flag on adjustment (c): the particulars list given in this paper (checked carefully, including the full "Particulars/Rs." table across both pages) contains no "Rates" expense account anywhere — only Stationary, Rent, Telephone Charges, Bank Charges, Travelling Expenses, Salaries, General office expenses and Postage and Telegram are listed as expenses. Adjustment (c), "Prepaid Rates Rs. 40 are to be carried forward to the next year," therefore cannot be matched to any specific expense figure actually given, so it has not been netted off against any expense above (doing so against an unrelated account, e.g. Stationary or General office expenses, would be a fabrication, not a correction). This is why the Balance Sheet above totals Rs. 8,058 on the assets side against Rs. 8,018 on the liabilities side — a Rs. 40 difference exactly equal to the unresolved "Prepaid Rates" item. If, as a reasonable convention, this Rs. 40 is instead treated purely as a reduction of a general/unspecified expense (increasing Net Profit to Rs. 3,414), the Balance Sheet would balance exactly at Rs. 8,058 = Rs. 8,058. Both the literal figures (as directly computed from the given data) and this balancing alternative are shown so the gap is transparent rather than silently hidden.

OR

Classification of given balances:

  • Assets: Premises 42,000; Vehicles 5,600 (less Provision for Depreciation 1,400 b/f); Sundry Debtors 6,300 (less Provision for Doubtful Debts 210 b/f); Stock 2,800; Bank 1,750; Cash 560
  • Liabilities: Sundry Creditors 4,900; Capital 24,395; Loan 14,000
  • Expenses (Dr., to P&L): Office Salaries 8,400; General Expenses 6,300; Discount Allowed 455; Insurance 420; Bad Debts 280
  • Incomes (Cr., to P&L): Gross Profit 31,500; Discount Received 560
  • Drawings 2,100 (deducted from Capital)

Effect of adjustments:

  • (a) Depreciation @10% on cost of Vehicles = 10% × 5,600 = Rs. 560 …
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