Financial Statement Problems and Solutions

Financial Statement Unsolved Problems PDF Download

Problem # 1:

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


financial statements problems and solution



  • 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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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.



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

    • 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.

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

    • 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..

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