Financial Statements -I Sole Proprietorship - Test Papers

 CBSE Test Paper 01

Ch-9 Financial Statements-I Sole Proprietorship

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1. What is primary objective of financial statements?

2. What is the operating profit?

3. What is meant by marshalling of assets and liabilities?

4. What do we come to know by preparing a trading account?

5. Calculate gross profit when total purchases during the year are Rs. 8,00,000; returns outward Rs. 20,000; direct expenses Rs. 60,000 and 2/3rd of the goods are sold for Rs. 6,10,000.

6. Calculate Closing Stock from the following details:

   	Rs.		Rs.
   Opening Stock	20,000	Purchases	70,000
   Cash Sales	60,000	Credit sales	40,000

   Rate of Gross Profit on cost 3313%.$33\frac{1}{3}\mathrm{\%}.$

7. From the following information, prepare trading account for the year ended 31st March, 2013 Cash purchases Rs. 4,50,000; credit purchases Rs. 27,00,000; returns inward Rs. 60,000; cash sales Rs. 4,80,000; credit sales Rs. 33,00,000; returns outward Rs. 30,000; freight inwards Rs. 9,000; carriage inwards Rs. 9,000; wages and salaries Rs. 12,000; opening stock Rs. 4,50,000; closing stock Rs. 2,64,000 but its market value is Rs.2,52,000.

8. From the following information, prepare the trading account for the year ended 31st March, 2013

   	Amt (Rs.)		Amt (Rs.)
   Opening Stock	3,00,000	Wages	6,000
   Purchases	8,40,000	Freight	10,800
   Closing stock	2,40,000	Carriage inwards	3,000

   The percentage of gross profit on sales is 20%.

9. From the following information, prepare the Profit and Loss A/c for the year ended 31st March 2018

   	Rs.
   Gross Profit	1,20,000
   Rent	5,000
   Salary	35,000
   Commission paid	19,000
   Interest on Loan	5,000
   Advertisement	8,000
   Interest  received	8,000
   Discount received	6,000
   Printing and stationery	4,000
   Legal charges	10,000
   Bad debts	2,000
   Loss by fire	6,000
   Depreciation	4,000

10. Following is the trial balance of Kartik Makkar as on 31st March, 2013

    Name of Account	Debit Amount (Rs.)	Name of Account	Credit Amount (Rs.)
    Stock on 1 st April, 2009	20,000	Discount Received	1,500
    Purchases	1,16,000	Return outwards	5,200
    Wages	4,000	Sales	1,97,300
    Returns inwards	7,040	Bills payable	6,000
    Carriage on purchases	4,720	Sundry creditors	11,200
    Carriage on sales	1,420	Creditors for rent	1,000
    Office salaries	9,600	Capital	80,000
    Duty on imported goods	5,400	Loan from Raj	20,000
    Rent and taxes	4,800	Commission	2,400
    Cash	2,200
    Bank balance	15,640
    Bad debts	1,200
    Discount allowed	1,280
    Land and building	40,000
    Scooter	13,200
    Scooter repairs	1,700
    Bills receivable	7,000
    Commission	3,600
    Sundry Debtors	50,800
    Interest on Raj's Loan	3,000
    Drawings	12,000
    	3,24,600 ======		3,24,600 ======

    Prepare a trading and profit and loss account for the year ended on 31st March, 2013 and the balance sheet as at that date. The stock on 31st March, 2010 was Rs. 44,000.

CBSE Test Paper 01
Ch-9 Financial Statements-I Sole Proprietorship

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Answer

1. The primary objective of financial statements is to analyze the financial position of the business by comparing them and drawing out the suitable measures to overcome the shortcomings.

2. Operating profit means the excess of operating revenue over operating expenses. It is obtained by subtracting operating expenses and adding operating incomes to the Gross profit.

3. Marshalling is the arrangement of assets and liabilities in particular order in the balance sheet in order to make the balance sheet more scientific and comprehensive for study by the users.
   There are two ways of marshalling:

   1. Marshalling as per Order of liquidity
   2. Marshalling as per Order of permanence

4. By preparing the trading account, we come to know the ‘gross profit’ earned or ‘gross loss’ sustained by the firm during the manufacturing or production process.

5. Cost of Goods Sold = Total Purchases - Returns Outward + Direct Expenses = 8,40,000.

   1. goods sold (2/3)for Rs. 6,10,000.
   2. Cost of 2/3rd goods = 8,40,000 × 2/3 = Rs. 5,60,000.
   3. Gross profit = Goods Sold - Cost of Goods Sold = 6,10,000 - 5,60,000 = Rs. 50,000.

6. Total Sales = Cash Sales + Credit Sales
                      = Rs.[60,000 + 40,000] = Rs.1,00,000
   Let cost of sales = x
   Gross Profit = 3313% of x=x×13=x3$33\frac{1}{3}\mathrm{\%}\text{ of }x=x\times \frac{1}{3}=\frac{x}{3}$
   So, Sales = Cost + Gross Profit
                    x + (x3)$\left(\frac{x}{3}\right)$ = 1,00,000
                   4(x3)$\left(\frac{x}{3}\right)$ = 1,00,000
   x = 1,00,000 ×$\times$(3/4)

   cost of goods sold = Rs.75,000
   Now Cost of goods sold = Opening Stock + Purchase - Closing Stock
   So, [20,000 + 70,000 - Closing Stock] = Rs.75,000
   Closing Stock = (20,000 + 70,000) - 75,000 = Rs. 15,000
   Goods remaining unsold at the end of the year is called closing stock.

7. Trading Account
   for the year ended 31st March, 2013

   Dr					Cr
   Particulars		Amt (₹)	Particulars		Amt (₹)
   To Opening Stock		4,50,000	By Sales
   To Purchases:			Cash Sales	4,80,000
   Cash Purchases	4,50,000		Credit Sales	33,00,000
   Add :Credit Purchases	27,00,000			37,80,000
   	31,50,000		Less : Returns Inward	(60,000)	37,20,000
   Less :Returns Outward	(30,0000	31,20,000	By Closing Stock( note 1)		2,52,000
   To Freight Inwards		9,000
   To Carriage Inwards		9,000
   To Wages and Salaries		12,000
   To Gross Profit Transferred to Profit and Loss A/c		3,72,000
   		39,72,000			39,72,000

   Note :

   1. Closing Stock will be shown in the books at market price or book value price, whichever is less. 

8. Working Notes :

   i. Calculation of Cost of goods sold: 

   	₹
   Opening Stock	3,00,000
   Add: Purchases	8,40,000
   Wages	6,000
   Freight	10,800
   Carriage Inwards	3,000
   	11,59,800
   Less: Closing Stock	2,40,000
   Cost of Sales or Cost of Goods sold	9,19,800

   ii. Calculation of Sales :

   Let us assume that sales = ₹100,

   then, gross profit would be = ₹20 (20% of sales)
   Therefore, cost of sales would be = Sales - Gross Profit = 100 - 20 = ₹80.
   When cost of sales is ₹80, then sales would be  = ₹100.
   When cost of sales is ₹1, then sales would be =100/80.
   When cost of sales is ₹9,19,800, then sales would be =10080×9,19,800$=\frac{100}{80}\times 9,19,800$ = ₹11,49,750.

   Trading Account
   for the year ended 31st March, 2013

   Dr.			Cr
   Particulars	Amt (₹)	Particulars	Amt (₹)
   To Opening Stock	3,00,000	By Sales	11,49,750
   To Purchases	8,40,000	By Closing Stock	2,40,000
   To Wages	6,000
   To Freight	10,800
   To Carriage Inwards	3,000
   To Gross Profit c/d	2,29,950
   	13,89,750		13,89,750

9. PROFIT AND LOSS ACCOUNT
   for the year ended 31st March, 2018

   Particulars	Rs.	Particulars	Rs.
   To Rent	5,000	By Gross Profit b/d	1,20,000
   To Salary	35,000	By Interest received	8,000
   To Commission	19,000	By Discount received	6,000
   To Interest on Loan	5,000
   To Advertisement	8,000
   To Printing and Stationery	4,000
   To Legal charges	10,000
   To Bad debts	2,000
   To Loss by fire	6,000
   To Depreciation	4,000
   To Net Profit c/d (Bal. fig.)	36,000
   Total	1,34,000	Total	1,34,000

   Profit & Loss account is prepared on the last day of the accounting year in order to determine the net result of the business. Only indirect expense and indirect revenue are shown in it.

10. Trading and Profit & Loss Account
    for the year ended March 31, 2010

    Particulars	Amount (Rs)	Particulars	Amount (Rs)
    To Opening Stock	20,000	By Sales  (1,97,300)
    To Purchase  (1,16,000)		Less Returns (7,040)	1,90,260
    Less Returns  (5,200)	1,10,800	By Closing Stock	44,000
    To wages	4,000
    To carriage	4,720
    To Gross Profit c/d	94,740
    	234260 ========		234260 ========
    To Duty on Imported Goods	5,400	By Gross Profit b/d	94,740
    To Carriage on Sales	1,420	By Commission	2,400
    To Office Salaries	9,600	By Discount Received	1,500
    To Rent & Taxes	4,800
    To Bad Debts	1,200
    To Discount Allowed	1,280
    To Scooter Repairs	1,700
    To Commission	3,600
    To Interest on Loan	3,000
    To Net Profit	66,640
    	98,640 =======		98,640 ========

    Balance Sheet
    As On March 31, 2010 

    Liabilities	Amount (Rs)	Assets	Amount (Rs)
    Capital (80,000)		Cash	2,200
    Add Net Profit (66,640)		Bank	15,640
    Less Drawings (12,000)	1,34,640	Land and building	40,000
    Bills Payable	6,000	Scooter	13,200
    Creditors	11,200	Bills Receivables	7,000
    Creditors for rent	1,000	Debtors	50,800
    Loan from Raj	20,000	Closing Stock	44,000
    	1,72,840 =========		1,72,840 =======

    Gross Profit -This is calculated in the Trading Account and is the excess of sales over the cost of goods sold during the period. Net Profit -This is calculated in the Profit and Loss Account and is what remains after all other costs used up in the period have been deducted from the Gross Profit.