II. Very Short Answer Questions

Question 1.
What are adjusting entries?
Answer:
Adjustment entries are the journal entries made at the end of the accounting period to account for items which are omitted in trial balance and to make adjustments for outstanding and prepaid expenses and revenues accrued and received in advance.

Question 2.
What is outstanding expense?
Answer:
Expenses which have been incurred in the accounting period but not paid till the end of the accounting period are called outstanding expenses.

Question 3.
What is prepaid expense?
Answer:
Prepaid expenses refer to any expense or portion of expense paid in the current accounting year but the benefit or services of which will be received in the next accounting period. They are also called as unexpired expenses.


Question 4.
What are accrued incomes?
Answer:
Accrued income is an income or portion of income which has been earned during the current accounting year but not received till the end of that accounting year.

III. Short Answer Questions

Question 1.
What is the need for preparing final accounts?
Answer:

  1. To record omissions in trial balance such as closing stock, interest on captial, interest on drawings, etc.
  2. To bring into account outstanding and prepaid expenses.
  3. To bring into account income accrued and received in advance.
  4. To create reserves and provisions.

IV. Exercises

Question 1.
Pass adjusting entries for the following:
(a) The closing stock was valued at ₹ 5,000
(b) Outstanding salaries ₹ 150
(c) Insurance prepaid ₹ 450
(d) ₹ 20,000 was received in advance for commission.
(e) Accrued interest on investments is ₹ 1,000.
Answer:
Adjusting Entries



9. Prepare trading account of Archana for the year ending 31st December, 2016 from the following information.
Adjustments: (a) Closing stock ` 1,00,000 (b) Wages outstanding ` 12,000 (c) Freight inwards paid in advance ` 5,000

Answer:
Trading A/c of Archana for the year ended 31.12.2016
Samacheer Kalvi 11th Accountancy Solutions Chapter 13 Final Accounts of Sole Proprietors – II

10. Prepare profit and loss account of Manoj for the year ending on 31st March, 2016
Adjustments:
(a) Salary outstanding ₹ 400
(b) Rent paid in advance ₹ 50
(c) Commission receivable ₹ 100
Answer:
Profit and Loss A/c of Manoj for the year ended 31.03.2016




11. From the trial balance of Sumathi and the adjustments prepare the trading and profit and loss account for the year ended 31st March, 2016, and a balance sheet as on that date.
Adjustments
(a) Six months interest on loan is outstanding.
(b) Two months rent is due from tenant, the monthly rent being ₹ 25.
(c) Salary for the month of March 2016, ₹ 75 is unpaid.
(d) Stock in hand on March 31, 2016 was valued at ₹ 1,030.
Answer:
Trading and Profit & Loss A/c of Sumathi
for the year ended 31st March, 2016
Samacheer Kalvi 11th Accountancy Solutions Chapter 13 Final Accounts of Sole Proprietors – II
Balance Sheet of Sumathi as on 31.03.2016