ACCOUNTING FOR MANAGEMENT

What is Accounting?

Accounting is the business language used by business community( Traders or

manufacturer)to communicate the operating results( Profit or Losses ) and Financial
position( Solvency) to various interested parties like owner, shareholders, suppliers,
creditors, banker,

Define Accounting

“Accounting is the art of recording, classifying, Summarizing, in a significant

manner and in terms of money transactions and events which are of a financial
character and interpreting the results there of”.

What are the objectives of accounting?

The objectives of accounting are:

a) To ascertain the operating results of the enterprise

b) To reveal the financial position of the business and

c) To enable control over operation as well as the resources of the business.

What is an accounting cycle?

Accounting cycle includes:

1) Recording of financial transaction

2) Classification of transaction
3) Summarising
4) Finalisation of accounts
The business transaction must be recorded in journal or subsidiary books
then transferred to appropriate accounts in the ledger. Then it will be transferred
to the trial balance, finally it will be posted to appropriate place in the trading
profit and loss account and balance sheet and carrying forward to the next year.

What is accounting process?

Accounting process includes:

a)Recording of financial transaction

 b)Classification of transaction

c)Summarising

d)Finalisation of accounts

The business transaction must be recorded in journal or subsidiary books

then transferred to appropriate accounts in the ledger. Then it will be transferred to
the trial balance, finally it will be posted to appropriate place in the trading profit and
loss account and balance sheet

Who are the users of accounting information?

Users of accounting information are:

1. Owners
2. Management
3. creditors
4. Regulatory Agencies
5. Government
6. Potential Investors
7. Employees etc

Give the classification of Accounts.

In order to understand the rules of double entry system, it is essential to know

which classes of accounts are affected by a particular transaction. For this purpose,
all accounts are broadly classified into two classes: 1) Personal accounts and
impersonal accounts. Impersonal accounts are further divided into 1) real and
2)nominal accounts

Personal accounts- Natural person's accounts, artificial persons and representative

personal accounts

Real or property accounts - relating to assets or possessions

Nominal accounts - relating to business expenses and losses & income and gain.
State the Golden rules of Accounting.

The golden rule in Accountancy states that every debit has a corresponding
credit

And vice versa. The rules in the double entry system for this purpose is, all accounts
are broadly classified into two classes: 1) Personal accounts and impersonal accounts.
Impersonal accounts are further divided into 1) real and 2)nominal accounts

Personal accounts- Natural person's accounts, artificial persons and representative

personal accounts

Real or property accounts - relating to assets or possessions

Nominal accounts - relating to business expenses and losses & income and gain.

What is an Accounting equation?

Every financial transaction involves a two-fold aspect a) Receiving benefit and

b) Giving benefit. The giving aspect is termed as credit and receiving aspect is
termed as debit. This tells us that for every debit there is an equivalent credit. Based
on this an accounting equation was derived by American accountants, the equation is

Assets = liabilities + capital

What is Management Accounting ?

Accounting for Management

Accounting for Business Management/ Resource Management

Accounting for Managerial Decision making

It refers to the use of Accounting Information by the management internally to

perform various managerial functions like policy making, decision making,
planning/Budgeting, controlling

What is Cost accounting?

Cost accounting is a accounting system that are designed to help management in

decision making for ascertaining cost of production and cost of goods sold and for
fixing price, & to control cost and to maintain the cost
What is journal ?

Journal is a book of original entry. All the transaction recorded first in journal /
subsidiary books called as original entry / Book of Subsidiary record . It focus on
transaction and recorded chronologically.

What is ledger ?

A ledger is a book in which various accounts are opened. It is a principal book in

which all accounts (real, personal and nominal accounts) are kept It is a book of final
entry transaction recorded in journal are posted to ledger accounts.

 It focus on accounts

 It is a record containing all the individual accounts of business.

What is Trial Balance ?

It is a statement, Which contains debit balance and credit balance of all the accounts
in ledger, prepared on a particular date to test the arithmetical accuracy of the
accounting.

What is Trading Account ?

The account which is prepared to determine the gross profit or gross loss of a
business concern is called trading account.
What is Profit and loss account ?
Profit & Loss Account is part of final accounts, prepared by a business firm to know
the net profit of the business activities during a particular period. profit and loss
account shows net earnings of the business firm. In profit and loss account all indirect
expenses and indirect incomes are shown.

What is Balance Sheet?

A Balance Sheet is a statement of the financial position of a business which states

the assets, liabilities, and owners' equity at a particular point in time. In other words,
the balance sheet illustrates your business's net worth.
What are the Method of Accounting?

 Single entry system of Accounting (incomplete system of accounting).

 Double entry system of Accounting (complete system of accounting

What is financial statement?

Financial statement is the output of the accounting, prepared at the end of the year, it
is called as final accounting, it is consisting of

 Trading and Profit & loss a/c or income statement

 Profit &loss appropriation account or retained earnings statement or surplus
statement
 Balance sheet or position statement
 Statement of changes in financial position
 Cash flow statement
 Fund flow statement

Explain the concept of accounting rules with suitable illustrations.

ACCOUNTING CONCEPTS

[Link] Entity Concept:For accounting purpose the “business” is treated as a

separate entity from the proprietor(s). business and its owner should be treated
separately

[Link] Aspect Concept:As per this concept, every business transaction has a dual
affect. For every credit, a corresponding debit is made. The recording of a transaction
is complete only with this dual aspect. For example, if Ram starts business with cash
Rs. 1,00,000/- there are two aspects of the transaction: “Asset Account” and “Capital
Account”. The business gets asset (cash) of Rs. 1,00,000/- and on the other hand the
business owes Rs. 1,00,000/- to Ram.

[Link] Business Concept It is assumed that the business concern will continue for
a fairly long time,
[Link] Period Concept:Accounting is a continuous process. Every
businessman wants to know the result/profit of his investment and efforts at frequent
intervals. Accountants choose some period to measure theProfit/ [Link] which
businessman follow one accounting period starts from April ends with March

[Link] Measurement Concept:- As per this concept, only those transactions,

which can be measured in terms of money are recorded. Events or transactions which
cannot be expressed in terms of money are not recorded in the books of accounts
[Link] Concept:- In this concept, all exp. Matched with the revenue of that
period should only be taken into consideration.
[Link] concept: The fixed assets of a business are recorded on the basis of their
original cost in the first year of accounting. Subsequently, these assets are recorded
minus depreciation. No rise or fall in market price is taken into account. The concept
applies only to fixed assets.

[Link] Concept all accounting must be based on objective evidence. In other

words, the transactions recorded should be supported by verifiable documents. Only
than auditors can verify information record as true or otherwise. The evidence should
not be biased.. These documents include invoices, contract, correspondence,
vouchers, bills, passbooks, cheque

[Link] concept: According to this concept, profit is recognised only when it is

earned. revenue is considered as earned on the date when it is realised

[Link] concept. Revenues are recognized when it is earned rather than when it
is received, and expenses are recognized when it is incurred rather than when it is
paid
Accounting Conventions

[Link] of Disclosure:

accounting statements should be honestly prepared and all significant information

should be disclosed therein. That is, while making accountancy records, care should
be taken to disclose all material information. Here the emphasis is only on material
information and not on immaterial information.

[Link] of Consistency:

Rules and practices of accounting should be continuously observed and applied.

Comparisons are possible only if a consistent policy of accounting is followed.

[Link] of Conservatism:

“Anticipate no profit and provide for all possible losses” is the essence of this
convention.

This is a convention of caution or playing safe

examples
 The value of an asset should not be overestimated.
 (b) The value of a liability should not be underestimated.
 (c) The profit should not be overestimated.
 (d) The loss should not be underestimated.

[Link] of Materiality:

It refers to the relative importance of an item or event. some of the unimportant items
are either left out or included with other items. Materiality means that all material
facts should be recorded in accounting. Accountants should record important data and
leave out insignificant information.
Accounting Rules

What are the Three Types of Accounts?

There are mainly three types of accounts in accounting: Real, Personal and Nominal accounts,
personal accounts are classified into three subcategories: Artificial, Natural, and Representative.

Real Account

What comes in Debit

What goes on Credit

Personal Account

Debit the Receiver

Credit the Giver

Nominal Account

Expenses and Loss are Debit

Incomes and Gains are Credit

Real Accounts

All assets of a firm, which are tangible or intangible, fall under the category “Real Accounts“.

Tangible real accounts are related to things that can be touched and felt physically. Few examples
of tangible real accounts are building, machinery, stock, land, etc.

Intangible real accounts are related to things that can’t be touched and felt physically. Few
examples of such real accounts are goodwill, patents, trademarks, etc.

Golden rule for real accounts

Debit what comes in

Credit what goes out

The elements or accounts which represent tangible aspects.

 Cash a/c - representing cash which is tangible.

 Goods/Stock a/c - representing Stock which is tangible.
 Furniture a/c - representing Furniture which is tangible.
Tangible

 Perceptible by the senses especially the sense of touch

 having physical substance and intrinsic monetary value
 palpable
 real
 touchable

Personal Accounts

Personal Accounts. These accounts are related to individuals, firms, companies, etc. A few
examples of personal accounts include debtors, creditors, banks, outstanding/prepaid accounts,
accounts of credit customers, accounts of goods suppliers, capital, drawings, etc

These accounts are related to individuals, firms, companies, etc. A few examples of personal
accounts include debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit
customers, accounts of goods suppliers, capital, drawings, etc.

Natural personal accounts: This type of personal accounts is the simplest to understand out of all
and includes all of God’s creations who have the ability to deal, who, in most cases, are people.
E.g. Kumar’s A/C, Adam’s A/C, etc.

Artificial personal accounts: Personal accounts which are created artificially by law, such as
corporate bodies and institutions, are called Artificial personal accounts. E.g. Pvt Ltd companies,
LLCs, LLPs, clubs, schools, etc.

Representative personal accounts: Accounts which represent a certain person or a group directly
or indirectly. E.g. Let’s say that wages are paid in advance to an employee – a wage prepaid
account will be opened in the books of accounts. This wages prepaid account is a representative
personal account indirectly linked to the person.

Golden rule for personal accounts

Debit the receiver

Credit the giver

 Mrs. Vimla a/c - representing Mrs. Vimla a person.

 M/s Bharat & Co a/c - representing M/s Bharat & Co, an organisation.
 Capital a/c - representing the owner of the business, a person or organisation.
 Bank a/c - representing Bank, an organisation.
Nominal Accounts

Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts. The
dictionary meaning of the word “nominal” is “existing in name only” and the meaning remains
absolutely true in accounting sense too, because nominal accounts do not really exist in physical
form, but behind every nominal account money is involved. E.g. Purchase A/C, Salary A/C, Sales
A/C, Commission received A/C, etc.

The final result of all nominal accounts is either profit or loss which is then transferred to the capital
account.

Golden rule for nominal accounts

Debit all expenses & losses

Credit all incomes & gains

The elements or accounts which represent expenses, losses, incomes, gains.

 Salaries a/c - representing expenditure on account of salaries, an expense.

 Interest received a/c - representing income on account of interest, an income.
 Loss on sale of Asset a/c - representing the loss incurred on sale of assets, a loss.

We do not come across such accounts till a later stage of our learning. For now, please,
assume that such accounts exist.

 Profit on sale of Asset a/c - representing the profit made on sale of assets, a gain.

We do not come across such accounts till a later stage of our learning. For now, please,
assume that such accounts exist.

Problems( Journal entries)

Mr A starts a business regarding which we have the following data:

Introduces Capital in cash Rs 50,000

Purchases (Cash) Rs 20,000
Purchases (Credit) from Mr B Rs 25,000
Freight charges paid in cash Rs 1,000
Goods sold to Mr C on credit Rs 15,000
Cash Sale Rs 30,000
Purchased computer Rs 10,000
Commission Income Rs 8,000

Journal entries for above items would be done as -

[Link]. Journal Entries Classification Rule

Cash A/c Dr. 50,000 Real A/c Debit what comes in;
1
To Capital A/c 50,000 Personal A/c Credit the giver(Owner)
Goods Purchase A/c Dr. 20,000 Real A/c Debit what comes in;
2
To cash A/c 20,000 Real A/c Credit what goes out
Goods Purchase A/c Dr. 25,000 Real A/c Debit what comes in;
3
To B A/c 25,000 Personal A/c Credit the giver
Freight A/c Dr. 1,000 Nominal A/c Debit all expenses
4
To cash A/c 1,000 Real A/c Credit what goes out
C A/c Dr. 15,000 Personal A/c Debit the receiver
5
To Sale A/c 15,000 Real Account Credit what goes out
Cash A/c Dr. 30,000 Real A/c Debit what comes in;
6
To Sale A/c 30,000 Real A/c Credit what goes out
Computer A/c Dr. 10,000 Real A/c Debit what comes in;
7
To cash A/c 10,000 Real A/c Credit what goes out
Cash A/c Dr. 8,000 Real A/c Debit what comes in;
8
To commission A/c 8,000 Nominal A/c Credit all incomes

Journalize the following transactions and post them in to ledger account:

[Link]. Transactions Amount

1 Commenced business and introduced cash 400,000.00
2 Goods purchased for cash 50,000.00
3 Goods purchased from [Link] 135,000.00
4 Freight charges paid on purchases 1,500.00
5 Computer purchased-cash 35,000.00
6 Freight charges paid on purchases of computer 500.00
7 Sale made to [Link] 200,000.00
8 Rent paid 12,000.00
9 Salary paid 15,000.00
10 Cash received from [Link] 150,000.00
11 Cash deposited in bank 75,000.00
12 Office Expenses paid 25,000.00

Journal Entries

Amount
[Link]. Particulars L.F.
Debit Credit

Cash A/c Dr.

1 To Capital A/c ** 4,00,000 4,00,000

(Being capital introduced)

Purchase A/c Dr.

2 To Cash A/c ** 5,00,000 5,00,000

(Being cash purchase made)

Purchase A/c Dr.

3 To Abdhul A/c ** 135,000 1,35,000

(Being goods purchase from Abdhul)

Inward Freight Charges A/c Dr.

4 To Cash A/c ** 1,500 1,500

(Being freight charges Paid)

Computer A/c Dr.

5 To Cash A/c ** 35,000 35,000

(Being computer purchased on cash)

 Computer A/c Dr.

6 To Cash A/c ** 500 500

(Being freight charges on computer paid)

Ram A/c Dr.

7 To Sale A/c ** 2,00,000 2,00,000

(Being sold to Mr. Ram)

Rent A/c Dr.

8 To Cash A/c ** 12,000 12,000

(Being rent paid )

Salary A/c Dr.

9 To Cash A/c ** 15,000 15,000

(Being salary paid)

Cash A/c Dr.

10 To Ram A/c ** 1,50,000 1,50,000

(Being cash Received from Mr. Ram)

Bank A/c Dr.

11 To Cash A/c ** 75,000 75,000

(Being cash deposited in Bank)

 Office Expenses A/c Dr.

12 To Cash A/c ** 25,000 25,000

(Being office expenses paid)

Final account Format( Financial statement)

 1. The following trial balance is extracted from the books of XYZ Co. for the year ended 31 st
December, 1996. Prepare the Trading & Profit and Loss Account and the Balance sheet on
that date.

Particulars Debit (Rs.) Credit (Rs.)

Furniture 640 -

Motor vehicle 6,250 -

Buildings 7,500 -

Capital - 12,500

Bad debts 125 -

Interest received - 200

Sundry debtors 3,800 -

 Sundry creditors - 2,500

Opening stock 3,460 -

Purchases / sales 5,475 15,450

Bank O/D - 2,850

Advertising 450 -

Cash 650 -

Insurance 750 -

Salaries 3,500 -

Machinery 900 -

Additional information:

(a) Closing stock Rs. 5,000

(b) Insurance prepaid Rs. 150
(c) Write off Bad debts Rs. 1,000
(d) Depreciate machinery by 10%
(e) Salary outstanding Rs. 1,500.

Solution.

Trading and Profit & Loss A/C

Particulars Rs. Particulars Rs.

To opening stock 3,460 By sales 15,450
To purchase 5,475 By closing stock 5,000
To Gross profit c/d 11,515
20,450 20,450

To bad debts 1,000 By Gross profit b/d 11,515

(+) B/D written off 125 1,125 By interest received 200
To advertising 450
To insurance 750
(-) prepaid insurance 150 600
To salaries 3,500
(+) outstanding salary 1,500 5,000
To machinery depreciation 90
To Net Profit c/d 4,450
11,715 11,715

Balance sheet.

LIABILITIES Rs. ASSETS Rs.

Capital 12,500 Furniture 640

(+) Net profit 4,450 16,950 Motor vehicle 6,250
Creditors 2,500 buildings 7,500
Bank O/D 2,850 Debtors 3,800
Outstanding salary 1,500 (-) bad debts written off 1,000 2,800
Machinery 900
(-) depreciation 90 810
Prepaid insurance 150
Cash 650
Closing stock 5,000

23,800 23,800

2. From the following trial balance of sunshine & Co., prepare trading and profit and loss account and
balance sheet.

Sunshine and Co. trial balance as on 31-12-1995

Particulars Rs. Particulars Rs.

Plant & Machinery 13,000 Capital 25,000

Building 17,000 Loans 5,000
Receivables 9,650 Sales 35,000
Purchases 18,000 Accounts payable 3,000
 Discount allowed 1,200 Bills payable 4,000
Wages 7,000 Purchase returns 5,000
Salaries 3,000 Dividends received 2,000
Trade expenses 750
Freight 200
Insurance 300
Commission paid 100
Bank 1,600
Repairs 500
Interest on Loan 600
Opening stock 6,000
Suspense 100

79,000 79,000

Additional data:

(a) Closing inventory Rs. 8,000

(b) Depreciation on Plant & Machinery @ 15% and 10% on buildings.
(c) Provision for doubtful receivables Rs, 500
(d) Insurance prepaid Rs. 50
(e) Outstanding rent Rs. 100
Solution.

Trading & Profit and Loss A/C

Particulars Rs. Particulars Rs.

To opening stock 6,000 By sales 35,000

To purchase 18,000 By closing stock 8,000
(-) purchase returns 5,000 13,000
To wages 7,000
To freight 200
To Gross profit c/d 16,800
43,000 43,000
To discount 1,200 By Gross Profit b/d 16,800
To salaries 3,ooo By dividend received 2,000
To trade expenses 750
To insurance 300
(-) prepaid insurance 50 250
To commission 100
To repairs 500
To interest on loan 600
To outstanding rent 100
To provision for dbtfl receivables 500
To P&M depreciation 1,950
To Building depreciation 1,700
To Net Profit c/d 8,150
18,800 18,800
 Balance sheet.

Liabilities Rs. Assets Rs.

Capital 25,000 Plant & Machinery 13,000
(+) Net profit 8,150 33,150 (-) depreciation 1,950 11,050
Accounts payable 3,000 Buildings 17,000
Bills payable 4,000 (-) depreciation 1,700 15,300
Outstanding rent 100 Receivables 9,650
Loans 5,000 (-) provision for doubtful 500 9,150
Bank 1,600
Prepaid insurance 50
Suspense 100
Closing stock 8,000

45,250 45,250

prepare Trading, profit loss A/c and balance sheet from the following Trail balance of Mr. [Link]

Debit balance Credit balance

Sundry debtors 92000 Madan s capital 70000

Plant & machinery 20000 Purchase Returns 2600

Interest 430 Sales 250000

Rent rates Taxes & insurance 5600 Sundry creditors 60000

Conveyance charges 1320 Bank O/D 20000

Wages 7000

Sales Return 5400

Purchases 150000

Opening stock 60000

Madan Drawings 22000

Trade Expenses 1350

 Salaries 11200

Advertising 840

Discounts 600

Bad debts 800

Business premises 12000

Furniture & Fixtures 10000

Cash in hand 2060

402600 402600

Adjustments:

[Link] on hand on 31-12-2016 Rs 90000

[Link] Depreciation on premises at 2.5% . plant & Machinery at 7.5 And furniture at 10%

[Link] off Rs 800 as further bad debts

[Link] for Doubtful debts @ 5% on Sundry debtors

[Link] rent was Rs.500 And outstanding wages Rs 400

Prepaid insurance Rs.300 and prepaid salaries Rs 700

Trading, profit loss A/c for the year ending 31-12-2016

To Opening stock 60000 By Sales 250000

To Purchases 150000 Sales Return 5400 244600

Purchase Returns 2600 147400 By Closing stock 90000

To Wages 7000

Add Wages O/S 400 7400

To G/P c/d 119800

334600 334600
To Trade exp 1350 By G/P b/d 119800

To salaries 11200

Less; prepaid 700 10500

To Conveyance charges 1320

To Advertising 840

To Rent rates Taxes & 5600

insurance

Add. O/s 500

6100

Less; prepaid 300 5800

To discounts 600

To Interest 430

To bad debts 800

[Link] bad debts 800

Add: New provisions for 4560 6160

bad debts

To depreciation :

premises 300

Plant & Machinery 1500

Furniture & fixtures 1000 2800

To net profit transferred to 90000

capital A/c

119800 119800

Balance sheet as on 31-12-2016

Liabilities Assets
Sundry creditors 60000 Cash in hand 2060

Bank O/D 20000 Sundry debtors 92000

Outstanding Less. Bad debts 800

Rent 500 91200

Wages 400 900 [Link] for BD 4560 86460

Capital 70000 Stock 90000

Less; drawings 22000 Prepaid Insurance 300

48000 Salaries 700 1000

Add. Net profit 90000 138000 Plant & machinery 20000

Less dep 1500 18500

Business premises 12000

Less :dep 300 11700

Furniture & fixtures 10000

Less: Dep 1000 9000

218900 218900

PROBLEM NO 2:

Prepare trading , P&L and balance sheet

PARTICULARS Rs. PARTICULARS Rs.

Drawings 10000 Capital 30000

Purchases 30000 Purchase return 1000

Sales return 5000 Sales 60000

Carriage in 2000 Wages outstanding 2000

Carriage out 3000 Rent received 1000

Depreciation on 4000 Reserve for 1000

plant doubtful debts

Plant account Interest (cr)

20000 5000
Salaries & wages Sundry creditors
3000 6000
Bad debts loans
2000 38000
Premises
20000
Interest
5000
Stock 1.4.95
25000
Sundry debtors
15000

144000 144000

Adjustments:

Closing stock : 40000 (includes samples worth Rs.2000).Fire destroyed stock worth
Rs.5000 for which insurance company has accepted full claim.

Provide for bad debts @ 10% , discount on debtors @ 5% and on creditors @ 10%.

Depreciate buildings @ 15% p.a

Rent outstanding Rs.1000

Provide interest on drawings @ 10% and on capital @ 10%

Trading and P&L for the year ended 31st march 1996
 PARTICULARS Rs. PARTICULARS Rs.

To opening stock 25000 By sales 60000

To purchases 30000 Less: returns 5000 55000

Less: purchase 1000

return By closing stock 38000

Less: samples 2000 27000 By stock destroyed 5000

by fire
To carriage inwards 2000

To gross profit c/d 44000

98000 98000

By gross profit b/d

To salaries & wages 3000 44000
By rent received
To rent outstanding 1000 1000
By interest
To carriage outward 3000 5000
By provision for
discount on
To bad debts 2000 creditors

Add: new By interest on 600

drawings
provision 1500

Less: existing 1000

Provision 1000 2500

To provision for
discount on debtors
675
To interest

To depreciation

Plant 4000

Buildings 3000 7000

To interest on capital 3000

To net profit 26425

51600 51600

Balance sheet as on 31-3-1996

LIABILITIES Rs. ASSETS Rs.

Sundry Debtors 15000

creditors 6000 Less:

Less: Provisions for

Provisions for bad debts 1500

discount 600 5400

Loans 38000 Less:

Wages outstanding 2000 prov for

Rent outstanding 1000 discount on

debtors 675 12825

 Capital 30000

Add: Closing stock 38000

Net profit 26425 Samples in stock 2000

Add: Insurance claims 5000

Interest on Plant 20000

Capital 3000

Premises 20000

Less: Less:

Interest on Depreciation 3000 17000

Drawings 1000

Less:

Drawings 10000 48425

94825 94825

19 The following is the trail balance as on 31st December 1992 extracted from the books of Mr.
Ramesh, Prepare trading , P&L and balance sheet

PARTICULARS DEBIT (Rs) CREDIT (Rs)

Freehold land 35000

Mortgage loan 20000

Plant and machinery 45500

Loose tools 5600

Bills payable 3400

 Book debts 18200

Sales 121500

Cash at bank 11000

Opening stock 10500

Insurance 300

Bad debts 560

Sundry creditors 15600

Bills receivables 5400

Purchases 50000

Cash on hand 640

Rent,Rates etc 1300

Interest 250

Wages 10700

Trade expenses 150

Salaries 1560

Repairs to plant 875

Carriage inwards 350

Discount 290 175

Ramesh’s capital 40000

Drawings 2500

TOTAL 200675 200675

Adjustments :Provision for doubtful debts 5% on book debts , Interest on capital 5% , Unexpired
insurance premium Rs.90 , Rent outstanding Rs.300 , Loose tools revalued at Rs.4500 , Closing
stock Rs.30000