# 11th | chapter:18 | Financial Statements of Sole Proprietorship | Question No. 1 to 4 | Ts grewal Solution 2022-2023

#### Question 1:

State whether the following expenses are capital or revenue in nature:
(i) Expenses on whitewashing and painting of a building purchased to make it ready for use.
(ii)
` 10,000 spent on constructing platform for a new machine.
(iii) Repair expenses of
`25,000 incurred for whitewashing of factory building.
(iv) Insurance premium paid as renewal premium.
(v) Purchased a new car.

(vi) Excise duty paid on purchase of new machine.
(vii) Wages paid to install a machine.

(viii) Repairs carried out on existing car.
(ix) Office block of building repainted for
`50,000.
(x) Paid telephone bill
`2,500.

#### Answer:

(1) Capital Expenditure: Paid to make an asset ready to use

(2) Capital Expenditure: Paid to make an asset ready to use

(3) Revenue Expenditure: Made for the maintenance of asset

(4) Revenue Expenditure: Part of normal operating cost

(5) Capital Expenditure: Used in business for a number of years

(6) Capital Expenditure: Paid for the acquisition of new asset
(7) Capital Expenditure: Paid to make the asset ready to use
(8) Revenue Expenditure: Paid for the running and maintenance of car
(9) Revenue Expenditure: Paid for the maintenance of Building
(10) Revenue Expenditure: Part of normal operating cost

#### Question 2:

From the following information, determine Gross Profit for the year ended 31st March, 2022:

 ` ` Opening Stock (1st April, 2018) 25,000 Goods purchased during the year 1,40,000 Freight and Packing 10,000 Closing Stock (31st March, 2022) 30,000 Sales 1,90,000 Packing Expenses on Sales 6,000

#### Answer:

 Gross Profit = Sales + Closing Stock – (Opening Stock + Freight and Packing + Goods Purchased) = 1,90,000 + 30,000 – (25,000 + 10,000 + 1,40,000) = 2,20,000 – 1,75,000 =  `45,000

Alternatively,

 Trading Account for the year ended March 31, 2022 Dr. Cr. Particulars ( `) Particulars ( `) Opening Stock 25,000 Sales 1,90,000 Purchases 1,40,000 Closing Stock 30,000 Freight and Packing 10,000 Gross Profit (Balancing Figure) 45,000 2,20,000 2,20,000

Note: Packing Expenses (Rs 6,000) on Sales is an Indirect Expense, therefore it is not considered to compute the amount of Gross Profit.

Question 3:

Prepare Trading Account from the transactions givne below:

 ` ` Opening Stock 23,000 Purchases Return 2,400 Purchases 29,000 Closing Stock 47,700 Sales Return 500 Carriage Inwards 100 Sales 25,400 Depreciation 2,000

Also pass the Journal entries.

#### Answer:

 Trading Account Dr. Cr. Particulars (Rs) Particulars (Rs) Opening Stock 23,000 Sales 25,400 Purchases 29,000 Less: Sales Return (500) 24,900 Less: Purchases Return (2,400) 26,600 Closing Stock 47,700 Carriage Inwards 100 Gross Profit (Balancing Figure) 22,900 72,600 72,600

Note: Depreciation is an Indirect Expense, therefore it is not shown in the Trading Account.

 Journal Date Particulars L.F. Debit  (Rs) Credit  (Rs) Trading A/c Dr. 52,600 To Opening Stock A/c 23,000 To Purchases A/c 29,000 To Carriage Inwards A/c 100 To Sales Return A/c 500 (Transfer of balances to the debit side of Trading A/c) Sales A/c Dr. 25,400 Purchase Return A/c Dr. 2,400 To Trading A/c 27,800 (Transfer of balances to the credit side of Trading A/c) Closing Stock A/c Dr. 47,700 To Trading A/c 47,700 (Recording of Closing Stock) Trading A/c Dr. 22,900 To Profit & Loss A/c 22,900 (Transfer of gross profit to the Profit & Loss A/c)

#### Question 4:

Calculate Closing Stock from the following details:

 ` ` Opening Stock 20,000 Purchases 70,000 Cash Sales 60,000 Credit Sales 40,000 Rate of Gross Profit on Cost 331/3%

#### Answer:

Calculation of amount of Closing StockGross Profit=331/3% on cost =1/3rd on cost

Gross Profit on sales =14th on salesAnd, Sales = Cash Sales + Credit Sales

= 60,000+40,000 = Rs 1,00,000

So, Gross Profit =1,00,000×14

=Rs 25,000

Cost of Goods Sold=Sales−Gross Profit

=1,00,000−25,000=Rs 75,000

Cost of Goods Sold=Opening Stock+Purchases+Direct Expenses−Closing Stock

75,000=20,000+70,000+0−Closing StockClosing Stock

=Rs 15,000

Class : 11th | Ts Grewal solution 2022-2023

Chapter 18: Financial Statements of Sole Proprietorship

Click below for More solutions

Question no. 1 to 4

Question no. 5 to 8

Question no. 9 to 12

Question no. 13 to 16

Question no. 17 to 20

Question no. 21 to 25