Q.The following balances were received from the Books of Prayag Electronics on 31st March, 2021:
Stock Rs. 60,000, Sales Rs. 4,25,000, Wages Rs. 50,000, Purchases Rs. 2,10,000, Salaries Rs. 25,000, Sundry Creditors Rs. 35,000, Bad Debts Rs. 3,000, Cash Rs. 2,000, Insurance and General Expenses Rs. 7,500, Profit and Loss Account (Credit) Rs. 13,500, Debtors Rs. 50,000, Share Capital Rs. 1,00,000, Machine and Plant Rs. 1,00,000, Reserve Rs. 30,000, Building Rs. 50,000, Rent Rs. 6,000, Investment Rs. 30,000, Interim dividend Rs. 10,000.
Adjustments: i) Prepare provisions for Bad Debts on debtors @ 5%. ii) Charge depreciation on machinery @ 10%. iii) The value of stock on 31st March, 2021 was Rs. 75,000. iv) Make provision of Rs. 10,000 for reserve and Rs. 15,000 for dividend. On the basis of the above particulars and adjustments, prepare Profit and Loss Account and Profit and Loss Appropriation Account. (7+3)

Gross profit is the difference between net sales and the cost of goods sold; operating and net profit come only after further expenses. Hence the answer is (B) Gross profit.

For the BSEB Inter / Bihar Class-12 Accountancy syllabus, the profit measures build up in stages:

• Gross Profit = Net Sales - Cost of Goods Sold.
• Operating Profit = Gross Profit - Operating (office, selling, distribution) Expenses + Operating Income. …

Any interest the company pays on its borrowings is classified under "Finance Costs" in the Statement of Profit and Loss.

Explanation

Schedule III (Part II) requires the Statement of Profit and Loss to show expenses under specific sub-headings, one of which is Finance Costs — covering interest expense on borrowings (term loans, bank loans, debentures, etc.), other borrowing costs, and applicable exchange differences treated as an adjustment to interest cost.

…

"Other Income" captures only non-operating gains that are incidental to the main business — regular sales, whether on credit or in cash, are always Revenue from Operations, never Other Income.

Step-by-step classification

Interest expense is a financial expense, so option (d) is correct.

In this GSEB Class-12 Commerce financial-statements topic, financial (finance) costs are the costs of raising and using borrowed funds - mainly interest on loans/debentures. Factory expenses, administrative e …

A negative change in stock is deducted from cost of goods sold.

In this GSEB Class-12 Commerce financial-statements topic, 'Changes in inventories' = Opening stock - Closing stock. When this figure is negative, it means the closing stock is greater than the opening stock (stock has increased during the year). Since more goods remain unsold, the cost of goods actually sold is lower, so the negative change is *deducted …

The income statement shows profitability - option (a).

The income statement (Statement of Profit and Loss) matches the revenues of the period against its expenses and arrives at the net profit or loss; it therefore conveys how profitable the company is. The statement of financial position (Balance Sheet) shows the posi …

Answer: It increases the net profit.

Accrued (outstanding) income is income that has been earned during the year though not yet received in cash. Being an income earned, it is added while computing profit, so an increase in accrue …

A dividend paid in the middle of the year is an interim dividend - option (c).

An interim dividend is declared and paid by the Board of Directors during the financial year, out of estimated profits, before the annual accounts are finalised and the final dividend is declared at the AGM. A preference di …

A dividend declared in the middle of the year is an interim dividend — option (d).

A final dividend is declared by shareholders at the annual general meeting after the year's accounts are finalised. When the Board of Directors declares and pays a dividend during the year, out of estimated profits, it is called an interim dividend. An unclaimed …