Chapter One

Accounting & costing for managers

Theory questions

1. Explain the concepts and conventions of accounting.

2. What is the nature and scope of accounting?
3. Write short notes on
a. Journal
b. Ledger
c. Difference Between Financial Accounting & Management Accounting
d. Balance Sheet
e. Accounting Equation
f. Users Of Financial Accounting
g. Final Accounts
h. Gross Profit
i. Net Profit

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Exercise - problems

1. From the following trail balance prepare the manufacturing account, trading and profit
and loss account for the year ending 31st March, 2007 and the balance sheet as on that
date
Particulars Debit (Rs.) Credit (Rs.)
Stock on 1.4.2006
Raw materials 2000
Work-in-progress 5000
Finished goods 10000
Manufacturing wages 10000
Purchasing of raw material 30000
Factory rent 5000
Carriage of raw materials 3000
Salary of works manager 2000
Office rent 2000
Printing and stationary 1000
Bad debts 1000
Sales 60000
Land and buildings 30000
Plant and machinery 20000
Depreciation on plant 2000
Sundry debtors 5000
Sundry creditors 30000
Cash in hand 5000
Capital 43,000
Total 1,33,000

Closing stocks on 31st March ,2007 were as follows : Rs.5000 Raw Materials, Rs. 4000
Work –In-Progress And Rs.10,000 Finished Goods .

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2. From the following trail balance prepare the trading and profit and loss account for the
year ending 31st March, 2007 and the balance sheet as on that date

Trail Balance as on 31st March,2007

Particulars Debit (Rs.) Credit (Rs.)

Salaries 6000
Purchases 26000
Trade expense 1000
wages 7800
carriage 400
Office expense 500
Commsiion 600
Bad debts 1200
Debtors 30000
Furniture 3000
Machinery 10000
Insurance 400
Bills receivable 2000
Opening stock 7000
Cash in hand 500
Cash in bank 3600
Capital 25000
Sales 47000
discount 200
Creditors 21000
Bills payable 6800
100000 100000

Adjustments:
1. Closing stock Rs.11,000
2. Outstanding wages Rs.2,000
3. Repaid insurance Rs.50
4. Provide Bad Debts Reserve at 5 %
5. Depreciation on machinery and furniture by 5 %

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3. From the following trail balance prepare the manufacturing account, trading and profit
and loss account for the year ending 31st March, 2007 and the balance sheet as on that
date :

Particulars Debit (Rs.) Credit (Rs.)

Capital Account 41000
Drawing account 6100
Loan account 4000
Sundry creditors 45000
Cash in hand 250
Cash at bank 4000
Sundry creditors 40500
Patents 2000
Plant and machinery 20000
Land & buildings 26000
Purchases of raw material 35000
Raw materials as on 1.4.2005 3500
Work –in-progress as on 1.4.2005 2000
Finished stock as on 1.4.2005 18000
Carriage inwards 1,100
wages 27000
Salary of works manger 5600
Factory expenses 3400
Factory rent and taxes 2500
Royalties (Paid on sales) 1200
Sales (less Returns) 123400
Advertising 3000
Office rent and insurance 4800
Printing and stationary 1000
Office expense 5800
Carriage inwards 600
Discounts 1400 2100
Bad debts 750
215500 215500

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The stock on 31st March,2006 was as follows:
Rs.4000 raw materials, Rs.4500 work-in-progress and Rs.28000 finished foods

4. From the following trail balance and additional information, you are required to
prepare final accounts

Trial Balance As on 31st December,2006

Particulars Debit (Rs.) Credit (Rs.)
Capital 20000
Sundry debtors 5400
drawings 1800
Machinery 7000
Sundry creditors 2800
wages 10000
purchases 19000
Opening stock 4000
Bank balance 3000
Carriage charges 300
Salaries 400
Rent and taxes 900
Sales 29000 5
51800 51800
Additional information
• Closing stock Rs.1,200
• Outstanding rent and taxes Rs.100
• Charge deprecation on machinery at 10%
• Wages prepaid Rs.400

Particulars Debit (Rs.) Credit (Rs.)

Capital 25,000
Loans 5,000
Sales 35,000
Creditors 4,000
5. From the Bills payable 5,000
following trail Purchase returns 2,000
balance and Dividends received 3,000
additional Plant and machinery 13,000
information, you Buildings 17,000
are required to Debtors 9,650
prepare final purchases 18,000
accounts Discount allowed 1,200
Trial Balance As wages 7,000
on 31st
salaries 3,000
December,2008
Traveling expenses 750
Freight outwards 200
insurance 300
Commission paid 100
Cash in hand 100
Bank 1,600
repairs 500
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Interest on loans 600
Opening inventory 6,000
79,000 79,000
Additional data
• Closing stock Rs.8000
• Deprecation on plant and machinery at 15 % and 10% on buildings
• Provision for doubtful debts Rs.500
• Insurance prepaid Rs.50
• Outstanding rent Rs.100

6. From the following trail balance and additional information, you are required to
prepare final accounts

Trial Balance As on 31st March 2008

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 Particulars Debit (Rs.) Credit (Rs.)
Sales 3,00,000
Plant and machinery 1,20,000
Rent rates & taxes 20,000
Sales returns 30,000
Freight outward 4,000
Accounts receivable 70,000
Opening inventory 1,20,000
Purchases 2,30,000
Discount paid 5,000
Interest on bank loan 70,000
Cash in hand 5,000
Purchase returns 10,000
- Bank loan 1,50,000
Capital 1,18,500
Accounts payable 40,000
Bills payable 26,000
Legal charges 500
General expenses 8,000
Cash at bank 20,000

7,07,500 7,07,500

Adjustments
• Provision for bad and doubtful receivables @ 5 % on accounts receivable
• Interest on bank loan outstandingTs.7,000
• Closing inventory as on 31.12.2008 Rs.1,20,000

7. From the following trail balance and additional information, you are required to
prepare final accounts

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 Trial Balance As on 31st March 2008
Particulars Debit (Rs.) Particulars Credit (Rs.)
Cash on hand 1,500 Sales 2,50,000
Cash at bank 3,000 Returns outwards 2,000
Purchases 1,10,000 Capital 56,000
Returns inwards 1,500 Accounts payable 30,000
Wages 20,000
Power & fuel 8,000
Carriage outwards 6,000
Carriage inwards 5,000
Opening inventory 6,000
Land 10,000
Buildings 80,000
Machinery 30,000
Patents 15,000
Salaries 12,000
Sundry expense 6,000
Insurance 1,000
Drawings 8,000
Accounts receivable 15,000
3,38,000 3,38,000

Adjustments
• Closing stock Rs.20,000
• Provision of bad and doubtful debts at 5% on debtors
• Outstanding salaries Rs.5000 outstanding wages Rs.3000
• Deprecation on all fixed assets expect on land.

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8. From the following trail balance and additional information, you are required to
prepare final accounts of Kamal Enterprises

Trial Balance As on 31st March 2008

Particulars Debit (Rs.) Particulars Credit (Rs.)
Cash in hand 500 Sales 1,50,300
Cash at bank 1,200 Purchase returns 5,000
Office furniture 6,000 Accounts payable 12,000
Accounts receivables 15,000 Bills payable 8,000
Commissions 1,200 Discount received 1,000
Bills receivable 3,500 Commission received 2,000
power & fuel 6,000 Rent received 3,500
Plant & machinery 24,000 Capital 27,000
Office expenses 2,000
Carriage inwards 1,200
Carriage out wards 3,500
Rent, rates & taxes 1,700
Lease hold premises 25,000
Wages 30,000
Salaries 7,000
Opening inventory 12,000
Sales returns 2,000
Purchases 60,000
Drawings 7,000
2,08,800 2,08,800

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Adjustments
• Closing inventory Rs.18,000
• Depreciate Plant & machinery at 10 %
• Salaries outstanding Rs.1,000 &, power & fuel outstanding Rs.2,000
• Discount earned but not received Rs.100commson due but nor received Rs.200
• Rent receive in advance includes Rs.500

9. The Following is the trial balance of Rajan Jewelers as on 31/03/2008

Trial Balance As on 31st March 2008

Particulars Debit (Rs.) Particulars Credit (Rs.)
Opening inventory 72000 Capital 5,00,000
Purchases 2,25,000 Sales 3,50,000
Furniture 15,000 Purchase returns 1,800
Motor car 30,000 Creditors 56,000
Buildings 4,25,800 Commission 7,500
Debtors 50,000
Advertisement 22,000
Repairs & Maintenance 13,000
General expenses 16,000
Insurance 7,000
Cah in hand 3,500
Cash at bank 6,000
Salaries 30,000
9,15,300 9,15,300

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Adjustments:
• Closing inventory Rs.80,000
• Interest on capital at 6 %
• Prepaid advertisements Rs.2000
• Out standing salaries
• Deprecation on buildings at 5 % furniture and motor car at 10 %

10. The Following is the trial balance of XYZ Ltd. as on 31/03/2008

Particulars Debit (Rs.) Credit (Rs.)
Trial Balance As Capital 20,000
on 31st March Sundry debtors 5,400
2008 Drawings 1,800
Machinery 7,000
Sundry creditors 2,800
wages 10,000
Purchases 19,.000
Opening stock 4,000
Bank Balance 3,000
Carriage Charges 300
Salaries 400
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Rent & taxes 900
Sales 29,000
51,800 51,000
Adjustments:
• Closing stock Rs.1,200
• Outstanding rent & taxes Rs.100
• Changes in deprecation on machinery at 10%
• Wages Prepaid rs.4000

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