Problem # 1:

Prepare Adjustment Entries, Adjusted Trial Balance and three Informal Financial Statements excluding cash flow statement.

 

financial statements problems and solution

 

Adjustments

  • Inventory on 31st, December 2015 was valued at Rs. 68,000.
  • Depreciation Machinery by 10 % and Amortization of Patents by 20 %.
  • Unexpired Insurance at the end financial year was Rs. 2,000.
  • Wages includes Rs. 7,000 paid as advance to employees (Prepaid Wages Debit).

Solution # 1 Adjustment Entries



adjusting entries

 

Solution # 2 Adjusted Trial Balance

 

adjusted trial balance

 

Solution # 3 Three Financial Statements (Informal) 



  

statement of owner equity

 

income statement

 

balance sheet

 

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References

Ramchandran, N., & Kakani, R. K. (2007). Financial Accounting for Management. (2nd, Ed.) New Delhi: Tata McGraw Hill.

Sehgal, A., & Sehgal, D. (n.d.). Advanced Accountancy (Vol. I & II). New Delhi: Taxmann Publication Pvt. Ltd.

Shukla, M. C., Grewal, T. S., & Gupta, S. C. (2008). Advanced Accountancy (Vol. I & II). New Delhi: S Chand & Co.

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2012). Accounting Principles (10th ed.). Hoboken: John Wiley & Sons, Inc.

Williams, M., & Bettner, H. (1999). Accounting (The basic for business decisions). (11th, Ed.) USA: Irwin McGraw- Hill.

 

7 Comments

  1. sana ullah

    some time we see Acc.dep. marcahniry add in capital
    and some time deprication machainery is less in Assets side??????????????????????????????????????????

    Reply
    • Saiju Hentry

      acc. dep. is an expense. they mentioned 10 and 20% on current year. so expense will affect on income statement and value decrease in asset side.
      here they doing indirectly, they never reducing from asset side and adding on liability side. thats effect same, but will make confuse us.

      Reply
  2. Fekede Getachew

    Is good

    Reply
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  4. Yaurun

    Aren’t COGS = Opening inventory + New Purchase – Closing inventory?
    Why the opening inventory is not included in the income statement?

    Reply
    • Saiju Hentry

      yes me also wonder abt that. may be they consider that way is classical.
      here they donot add opening stock as well as closing stock. may be they want to show their boss big profit than actual.
      but boss cheated by them. its vanishing on balance sheet..

      Reply
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