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Question 18 of 18
Q.

Classify the following receipts into capital and revenue.

(i) Sale proceeds of goods ₹75,000 (ii) Loan borrowed from bank ₹2,50,000 (iii) Sale of investment ₹1,20,000.

(iv) Commission received ₹31,000 (v) ₹1,400 wages paid in connection with the erection of new machinery.

OR

Following are the ledger balances of Devi as on 31st December, 2016.

Debit balance₹Credit balance₹
Purchases25,000Goodwill40,000
Salaries11,790Sundry debtors20,900
Drawings4,500Furniture51,000
Opening Stock6,230General expenses3,230
Capital20,000Commission received2,730
Sales78,500Loan44,000
Carriage inwards21,500Cash at bank3,100
Bad debts600Provision for bad debts2,300

Prepare trading and profit and loss account for the year ended 31st December, 2016 and balance sheet as on that date.

  1. Stock on 31st December, 2016 ₹6,500.
  2. Write off bad debts ₹600.
  3. Make a provision for bad debts @ 5%.
  4. Provide for discount on debtors @ 2%.
Puducherry TnboardTamil Nadu HSC First Year (DGE) Commerce Board 2026Subjective· 5mImportance★★★★★
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(a) Revenue receipts: sale of goods, commission received. Capital receipts: bank loan, sale of investment. Item (v) is capital expenditure, not a receipt (flagged). (b) OR — Devi's final accounts give GP ₹32,270 and NP ₹19,679.30, but the printed (swapped-column) trial balance does not tally, so the balance sheet is short by ₹40,320.

(a) Classification of Receipts

ItemClassificationReason
(i) Sale proceeds of goods ₹75,000Revenue receiptArises from normal trading of goods
(ii) Loan borrowed from bank ₹2,50,000Capital receiptCreates a liability; not earned income
(iii) Sale of investment ₹1,20,000Capital receiptProceeds from selling a non-trading asset
(iv) Commission received ₹31,000Revenue receiptRecurring income from operations
(v) ₹1,400 wages paid on erection of new machineryNot a receiptIt is a payment — capital expenditure added to machinery

[!NOTE]

Honest flag: item (v) is listed under "receipts" in the paper but it is actually a payment/expenditure, not a receipt. Being wages incurred to install a fixed asset, it is capital expenditure (capitalised to the machinery), not a capital or revenue receipt.

(b) OR — Final Accounts of Devi for the year ended 31st December 2016

[!NOTE]

Column-swap flag: this district paper prints Capital (₹20,000) and Sales (₹78,500) under the Debit column and Goodwill, Sundry debtors, Furniture, General expenses and Cash at bank under the Credit column. These are solved by each account's true nature (Capital and Sales are credits; Goodwill, debtors, furniture, general expenses and bank are debits). With the amounts exactly as printed the trial balance does NOT tally — true debits ₹1,87,850 vs true credits ₹1,47,530, short ₹40,320 on the credit side — so the balance sheet below is short on the liabilities side by the same ₹40,320. The most likely cause is an understated/mis-printed Capital (a capital near ₹60,320 would make the books agree). No figure has been altered or invented.

Adjustments: (a) closing stock ₹6,500; (b) further bad debts ₹600; (c) new provision for bad debts @5%; (d) provision for discount on debtors @2%.

Debtors ₹20,900 − ₹600 = ₹20,300. New provision @5% = ₹1,015. Discount on debtors @2% of (20,300 − 1,015 = 19,285) = ₹385.70.

Trading and Profit & Loss Account for the year ended 31.12.2016

Particulars₹Particulars₹
To Opening stock6,230By Sales78,500
To Purchases25,000By Closing stock6,500
To Carriage inwards21,500
To Gross profit c/d32,270
Total85,000Total85,000
To Salaries11,790By Gross profit b/d32,270
To General expenses3,230By Commission received2,730
To Bad debts600By Old provision for bad debts2,300
To Further bad debts600
To New provision for bad debts1,015
To Provision for discount on debtors385.70
To Net profit (to Capital)19,679.30

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