II. Very Short Answer Questions

Question 1.
Write a note on trading account.
Answer:
Trading refers to buying and selling of goods with the intention of making profit. The trading account is a nominal account which shows the result of buying and selling of goods for an accounting period. Trading account is prepared to find out the difference between the revenue from sales and cost of goods sold.

Question 2.
What are wasting assets?
Answer:
These are the assets which get exhausted gradually in the process of excavation. Examples: mines and quarry.

Question 3.
What are fixed assets?
Answer:
Fixed assets are those assets which are acquired or constructed for continued use in the business and last for many years such as land and building, plant and machinery, motor vehicles, furniture, etc.


Question 4.
What is meant by purchases returns?
Answer:
Goods purchased which are returned to suppliers are termed as purchases returns or returns outward.

Question 5.
Name any two direct expenses and indirect expenses.
Answer:
Direct expenses:

  • Carriage inwards or freight inwards
  • Wages Indirect expenses:

Indirect expenses:

  • Office and administrative expenses
  • Selling and distribution expenses

Question 6.
Mention any two differences between trial balance and balance sheet.
Answer:

S.No.BasisTrial BalanceBalance Sheet
1.NatureTrial balance is a list of ledger balances on a particular date.Balance sheet is a statement showing the position of assets and liabilities on a particular date.
2.PurposeTrial balance is prepared to check the arithmetical accuracy of the accounting entries made.Balance sheet is prepared to ascertain the financial position of a business.

Question 7.
What are the objectives of preparing trading account?
Answer:

  1. Provides information about gross profit or gross loss.
  2. Provides an opportunity to safeguard against possible losses.

III. Short Answer Questions

Question 1.
What are final accounts? What are its constituents?
Answer:
Businessmen want to know the profitability and the financial position of the business. These can be ascertained by preparing the final accounts or financial statements. The final accounts or financial statements include the following:

  1. Income statement or trading and profit and loss account; and
  2. Position statement or Balance sheet.

Question 3.
What is meant by gross profit and net profit?
Answer:

  1. If the amount of sales exceeds the cost of goods sold, the difference is gross profit.
    Sales – Cost of goods sold = Gross profit.
  2. If the total of the credit side of the profit and loss account exceeds the debit side, the difference is termed as net profit.

Question 4.
“Balance sheet is not an account” – Explain.
Answer:
A balance sheet is a part of the final accounts. However, the balance sheet is a statement and not an account. It has no debit or credit sides and as such the words ‘To’ and ‘By’ are not used before the names of the accounts shown therein.

Question 6.
What is meant by grouping and marshalling of assets and liabilities?
Answer:
1. The term ‘grouping’ means showing the items of similar nature under a common heading. For example, the amount due from various customers will be shown under the head‘sundry debtors’.

2. ‘Marshalling’ is the arrangement of various assets and liabilities in a proper order. Marshalling can be made in one of the following two ways:

  • In the order of liquidity
  • In the order of permanence
IV. Exercises
1. Prepare trading account in the books of Mr. Sanjay for the year ended 31st December 2017:

Answer:
Trading account of Mr. Sanjay for the year ended 31st December, 2017
Samacheer Kalvi 11th Accountancy Solutions Chapter 12 Final Accounts of Sole Proprietors – I

2. From the following balances taken from the books of Saravanan, calculate gross profit for the year ended December 31, 2017
Answer:
Trading account of Saravanan for the year ended 31st December, 2017
Samacheer Kalvi 11th Accountancy Solutions Chapter 12 Final Accounts of Sole Proprietors – I

3. From the following details for the year ended 31st March, 2018, prepare trading account
Answer:
Trading account for the year ended 31st March, 2018
Samacheer Kalvi 11th Accountancy Solutions Chapter 12 Final Accounts of Sole Proprietors – I

4. From the following balances taken from the books of Victor, prepare trading account for the year ended December 31, 2017:
Answer:
Trading Account of Victor for the year ended 31st December, 2017
Samacheer Kalvi 11th Accountancy Solutions Chapter 12 Final Accounts of Sole Proprietors – I
Hint : Closing stock will not appear in trading account because of adjusted purchases have been given.

5. Compute cost of goods sold from the following information:
Answer:
Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock
= 10,000 + 80,000 + 7,000 – 15,000
= ₹ 82,000
Note: Indirect expenses do not form part of cost of goods sold.

6. Find out the amount of sales from the following information:
Answer:
Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock
= 30,000 + 2,00,000 + 0 – 20,000
= ₹ 2,10,000
Samacheer Kalvi 11th Accountancy Solutions Chapter 12 Final Accounts of Sole Proprietors – I
Therefore, percentage of gross profit on cost of goods sold is
3070 x 100 = 42.85% (42.857142 ……….)
Gross profit = 42.85% on 2,10,000 i.e., 42.85100 x 2,10,000 = ₹ 90,000
Sales = Cost of goods sold + Gross Profit
= 2,10,000 + 90,000 (Fractions to be rounded)
= ₹ 3,00,000

10. From the following particulars, prepare balance sheet in the books of Bragathish as on 31st December, 2017:
Answer:
Balance Sheet of Bragathish as on 31st December, 2017
Samacheer Kalvi 11th Accountancy Solutions Chapter 12 Final Accounts of Sole Proprietors – I