Chapter: Income Statement
• Adjusting entries
1
Example: 4.1
The following are some of the year ended balances of Shobha Co.
Particulars 2012 2011
Unbilled Revenue 2,100 1,800
Int. Receivable 570 680
Unearned revenue 1,100 1,600
Prepaid Rent 5,900 7,900
Salaries payable 1,200 850
Int. payable 730 810
The Statement of Cash flows for 2012 has the following information.
Fees Received 21,710
Int. Received 2,030
Rent Paid 11,600
Salaries paid 6,820
Int. paid 1,840
Compute the following for 2012:
1. Fee Revenue
2. Interest Income
3. Rent Expense
4. Salaries Expense
5. Interest Expense
1. Fees Revenue = Fees Received + Change in unbilled revenue –
change in unearned revenue
= Rs.21,710 + Rs.300 – (-Rs.500)
= Rs.22,510
4
2. Interest Income = Interest Received + Change in Int. receivable
= Rs.2,030 – Rs.110
= Rs.1,920
5
3. Rent expenses = Rent paid - change in prepaid rent
= Rs.11,600 - (-Rs.2,000)
= Rs.13,600
6
4. Salaries expenses = salaries paid + change in salaries payable
= Rs.6820 + Rs. 350
= 7170
7
5. Interest expense = Interest Paid + Change in interest payable
= Rs. 1840 + ( - Rs. 80)
= Rs. 1760
8
Example: 4.12
• Leisure Centre Ltd. Was set up on July 1,20xx. Its Trial Balance on July 31,20xx is as
follow.
Particulars Dr Rs. Cr Rs.
Swimming Pool 12,000
Tennis Court 9,600
Supplies 3,280
Trade Receivables 2,910
Cash 940
Prepaid Insurance 1,200
Share Capital 15,000
Trade Payables 1,290
Unearned Revenue 2,100
Dividends 800
Revenue from services 15,540
Salaries 2,910
Telephone 290
TOTAL 33,930 33,930
• Additional Information:
1. The swimming pool has an estimated life of 5 years and the tennis
court has an estimated life of 8 years. Neither has any scrap value.
2. The inventory of supplies on July 31 is Rs.1,190.
3. Subscription revenue of Rs.1,200 is due from members who have
been admitted on a provisional basis.
4. Unearned subscription includes an amount of Rs.300 for July.
5. Staff salaries for the last week totaling Rs.1,290 have not been paid.
6. The local electricity co. sent a bill for Rs.280 for July after the close of
the month’s transactions.
7. Insurance Premium of Rs.1,200 was paid on a one-year policy
effective from July 1.
• Required:
Prepare adjusting entries and post them to T-accounts.
Trial Balance, Balance Sheet and Statement of Profit.
2013, July Particulars Dr Rs. Cr Rs.
31
1. Depreciation Expenses 300
Accumulated Depreciation, swimming pool 200
Accumulated Depreciation, Tennis Court 100
2. Supplies Expenses 2,090
Supplies 2,090
3. Unbilled Revenue 1,200
Revenue from services 1,200
4. Unearned Revenue 300
Revenue from services 300
5. Salaries Expense 1,290
Salaries Payable 1,290
6. Electricity Exp. 280
Electricity Exp. Payable 280
7. Insurance Exp. 100
Prepaid Exp. 100
Swimming Pool
Balance B/d 12,000
Accumulated Depreciation Swimming Pool
By Dep. 200
Tennis Court
Balance B/d 9,000
Accumulated Depreciation Tennis Court
By Dep. 100
Supplies
Balance B/d 3,280 Supply Exp. 2,090
Balance c/d 1,190
Electricity Exp. Payables
Ele. Exp. 280
Trade Receivables
Balance B/d 2,910
Cash
Balance B/d 940
Prepaid Insurance
Balance B/d 1,200 Insurance Exp. 100
Balance C/d 1,000
Trade Payables
Balance B/d 1,290
Unbilled Revenue
Revenue from services 1,200
Unearned Revenue
Balance B/d 2,100
Salaries Payables
Salary exp. 1,290
Share Capital
Balance B/d 15,000
Dividend
Balance B/d 800
Revenue from services
Balance B/d 15,540
Unbilled Revenue 1,200
Salaries Expense
Balance B/d 2,910
Salaries Payable 1,290
Supplies Exp.
supplies 2,090
Telephone Exp.
Balance B/d 290
Depreciation Exp.
Dep. Of SP 200
Dep. Of TC 100
Electricity Exp.
Electricity Exp. Payable 280
Insurance Exp.
Prepaid Insurance 100
• Trial Balance
Particulars Debit Credit
Swimming Pool 12,000
Accumulated Dep. On Swimming Pool 200
Tennis Court 9,600
Accumulated Dep. On Tennis Court 100
Supplies 1,190
Trade Receivables 2,910
Cash 940
Prepaid Insurance 1,100
Unbilled Revenue 1,200
Trade Payables 1,290
Electricity Exp. 280
Unearned Revenue 1,800
Salaries Payable 1,290
Share Capital 15,000
Dividend 800
Revenue from service 17,040
Continue….
Particulars Debit Credit
Salaries Exp. 4,200
Supplies Exp. 2,090
Telephone Exp. 290
Depreciation Exp:
Swimming Pool 200
Tennis Court 100
Electricity Exp. 280
Insurance Exp. 100
TOTAL 37,000 37,000
Statement of Profit & Loss for the year ended 31st July, 20xx
Revenues
Revenue from Services 16,740
16,740
Expenses:
Employee benefit Exp. 4,200
Depreciation Exp. 300
Other Exp. 2,760
Total Expenses 7,260
Profit for the year 9,480
Balance Sheet as on 31, July 20xx
Particulars Amount (Rs.)
ASSETS
Non-current Assets
Property, Plant & Equipment (WN-1) 21,300
Current Assets
Supplies 1,190
Financial Assets
Trade Receivables 2,910
Cash & Cash Equivalents 940
Unbilled Revenue 1,200
Prepaid Insurance 1,100
28,640
Balance Sheet as on 31, July 20xx
Particulars Amount (Rs.)
Equity & Laibilities
Equity
Equity Share Capital 15,000
Retained earnings 9,480
D/o (800)
23,680
LIABILITIES
Current Liabilities
Financial Liabilities
Trade Payables 2,860
Unearned Revenue 2,100
28,640
