FOFA-Final Accounts PDF

MEANING OF FINANCIAL STATEMENTS 1. Basically, Financial Statements are organised summaries of detailed information about the financial position and performance of an enterprise. 2. Traditionally, the term Financial Statements is used to denote only two basic statements which are as under: (a) Ba...

MEANING OF FINANCIAL STATEMENTS 1. Basically, Financial Statements are organised summaries of detailed information about the financial position and performance of an enterprise. 2. Traditionally, the term Financial Statements is used to denote only two basic statements which are as under: (a) Balance Sheet (or Position Statement) which shows the financial position of an enterprise at a particular point of time, (b) Trading and Profit and Loss Account or Income Statement which shows the financial performance of an enterprise during an accounting period 3. Nowadays, in addition to the aforesaid two basic financial statements, a Cash Flow Statement and Value-Added Statement are also prepared in practice. TRADING ACCOUNT After preparing a tallied trial balance at the end of an accounting period, the next step is to prepare Trading Account. MEANING OF TRADING ACCOUNT Trading account is one of the financial statements which shows the result of buying and selling of goods and/or services during an accounting period. PURPOSE OF TRADING ACCOUNT Trading account is prepared to know the Gross Profit or Gross Loss during the accounting period. The basis for the preparation of this account is the matching of Selling Prices of Goods and Services with the Cost of Goods sold and Services rendered. Note: Gross Profit = Operating Revenues – Direct Operating Expenses CONTENTS OF TRADING ACCOUNT ITEMS TO BE SHOWN ON THE DEBIT SIDE OF TRADING ACCOUNT 1. Opening Stock refers to the Closing Stock of unsold goods at the end of previous accounting period which has been brought forward in the current accounting period. 2. Purchases refer to those goods which have been bought for resale. Purchases include cash as well as credit purchases. The following items are shown by way of deduction from the amount of total purchases: (i) Purchases Returns or Return Outwards (i.e., Goods returned to suppliers) (ii) Goods withdrawn by the proprietor for his personal use. (iii) Goods distributed by way of free samples. (iv) Goods given as charity. Page 1 of 16 (v) Goods destroyed by Fire, Flood, Earthquake or other abnormal factors. 3. Direct expenses refer to all those expenses which are incurred from the stage of purchase till the stage of making the Goods in saleable condition. Such expenses include the following expenses: (i) Freight Inwards (ii) Import Duty (iii) Octroi (iv) Carriage Inwards and Cartage Inwards (v) Wages. ITEMS TO BE SHOWN ON THE CREDIT SIDE OF TRADING ACCOUNT 1. Sales refer to the Sales of those Goods and Services in which the enterprise deals. Sales include cash as well as credit sales. 2. Sales Returns or Returns Inwards (i.e., Goods returned by customers) are shown by way of deduction from the amount of credit Sales. 3. Closing Stock refers to the Stock of unsold goods at the end of the current accounting period. According to Prudence Principle, Stock is valued at cost or Net Realisable Value (NRV) whichever is lower. For example, if Cost of Closing Stock is 50,000 but its market value is 40,000, Closing Stock will be taken at 40,000. HOW TO CLOSE TRADING ACCOUNT The Trading Account is closed by transferring its balance to the Profit and Loss Account by passing the following entry: Nature of the Balance in Trading Account Accounting Entry to be passed (a) In case of Gross Profit (i.e., when the Trading A/c Dr. credit side exceeds the debit side) To Profit & Loss A/c (b) In case of Gross Loss (i.e., when the Profit & Loss A/c Dr. debit side exceeds the credit side) To Trading A/c Page 2 of 16  A GENERAL FORMAT OF A TRADING ACCOUNT TRADING ACCOUNT OF.... Dr. for the period ending on.. Cr. Particulars ₹ Particulars ₹ To Opening Sck xxx Sales xxx Purchases xxx Less: Return Inwards xxx xxx Less: Returns outwards xxx xxx Closing Stock Less: Abnormal Loss xxx *Gross Loss transferred to xxx Less: Goods for personal use P&L A/c xxx xxx Less: Goods distributed asxxx Free Samples Less: Goods distributed for Charity xxx Direct Expenses Wages and Salaries xxx Freight Inward xxx Carriage Inward xxx Cartage Inward xxx *Gross Profit transferred P & L A/c xxx xxx xxx xxx *Either Gross Profit or Gross Loss shall appear. Page 3 of 16 Example-1 From the following information, prepare the Trading Account for the year ending on 31st March 2018: Opening Stock 1,50,000, Cash Sales 60,000, Credit Sales 12,00,000, Returns Outwards 10,000, Wages & Salaries 4,000, Carriage Inward 2,000, Freight Inward 3,000, Cartage Inward 1,000, Cash Purchases 50,000, Credit Purchases 10,00,000, Returns Inward 20,000, Cost of Closing Stock 90,000 but its market value is 84,000. TRADING ACCOUNT Dr. for the year ending 31st March, 2018 Cr. Particulars ₹ Particulars ₹ Opening Stock 1,50,000 Sales Purchases: Cash Sales 60,000 Cash Purchases 50,000 Credit Sales 12,00,000 Credit Purchases 10,00,000 Total Sales 12,60,000 Total Purchases 10,50,000 Less: Return Inward 20,000 12,40,000 Less: Return Outwards 10,000 10,40,000 Closing Stock 84,000 Freight Inward 3,000 (valued at Cost or Net Realizable Carriage Inward 2,000 Value whichever is lower) Cartage Inward 1,000 Wages & Salaries 4,000 Gross Profit t/f to P & L A/c 1,24,000 13,24,000 13,24,000 Example-2 From the following information, prepare the Trading Account for the year ending on 31st March 2018. Adjusted Purchases 11,06,000, Sales 12,40,000, Closing Stock 84,000, Freight and Cartage Inwards 6,000, Wages 4,000, Freight & Cartage Outwards 3,000. TRADING ACCOUNT Dr. for the year ending 31st March, 201 Cr. Particulars ₹ Particulars ₹ Adjusted Purchases 11,06,000 Sales 12,40,000 Freight and Cartage Inwards 6,000 Wages 4,000 Gross Profit t/f to P & L A/c 1,24,000 12,40,000 12,40,000 Notes: 1. Adjusted Purchases = Net Purchases + Opening Stock – Closing Stock 2. Closing Stock has not been shown on the credit of Trading Account since it has already beenadjusted while calculating adjusted purchases. 3. Freight & Cartage Outwards are indirect expenses and hence not debited to Trading Account. Page 4 of 16 Example-3 From the following information, prepare the Trading Account for the year ending on 31st March 2018. Cost of Goods Sold 11,16,000, Sales 12,40,000, Closing Stock 84,000. SOLUTION TRADING ACCOUNT Dr. for the year ending 31st March, 2018 Cr. Particulars ₹ Particulars ₹ Cost of Goods Sold 11,16,000 Sales 12,40,000 Gross Profit b/f to P & L A/c 1,24,000 12,40,000 12,40,000 Notes: 1. Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses – Closing Stock 2. Closing Stock has not been shown on the credit of Trading Account since it has already been adjusted while calculating Cost of Goods sold. PROFIT AND LOSS ACCOUNT After preparing a Trading Account, the next step is to prepare Profit & Loss Account. MEANING OF PROFIT & LOSS ACCOUNT The Profit and Loss account is one of the financial statements. It shows the financial performance of an enterprise during an accounting period. PURPOSE OF PROFIT & LOSS ACCOUNT The Profit and Loss Account is prepared to ascertain the Net Profit earned or Net Loss incurred by an enterprise during an accounting period. Notes: 1. Net Profit = All Revenues (whether Operating or Non-Operating) – Expenses & Losses (whether Operating or Non-Operating). 2. Operating Profit = Operating Revenues – Operating Expenses & Losses. It arises as a result of carrying out operating activities. 3. Operating activities are the principal revenue producing activities of the enterprise and other activities that are not investing or financial activities. For example – Sales and purchases of buildings by builders and property dealers are operating activities. Granting loans to third parties by them are investing activities. Taking loans from third parties by them are financing activities. Page 5 of 16  CONTENTS OF PROFIT & LOSS ACCOUNT Items to be shown on the debit side ofProfit & Items to be shown on the credit side ofProfit & Loss Account Loss Account 1. Discount Allowed 1. Discount Received 2. Commission Allowed 2. Commission Earned 3. Loss on Sale of Short-term Marketable 3. Profit on Sale of Short-term Marketable Securities Securities 4. Loss on Sale of Fixed Assets 4. Profit on Sale of Fixed Assets 5. Interest paid on Loans & Advances taken 5. Interest received on Loans & Advancesgiven 6. Rent paid 6. Rent earned from Investment in Immovable Properties 7. Royalty paid for using Copyrights of Books,Mines 7. Royalty Income from Copyrights of Books,Mines etc. etc. 8. Loss of Stock due to fire, flood, earthquakeetc. 8. Interest on Short-term Marketable Securities 9. Loss of Fixed Assets due to fire, flood,earthquake 9. Interest earned from Investment in etc. Debentures, Bonds 10. Dividend received from Investment in Shares HOW TO PREPARE PROFIT & LOSS ACCOUNT The preparation of the Profit and Loss Account requires (a) to bring down the Gross Profit/Gross Loss and (b) to pass the necessary entries to transfer the balances of accounts of all the concerned items to the Profit and Loss Account. The entries required for such transfer are called closing entries since such entries will close the accounts of all the concerned items. HOW TO CLOSE PROFIT & LOSS ACCOUNT The Profit and loss account is closed by transferring its balance to the capital account of the proprietor (in case of a proprietorship concern) or of the partners (in case of a partnership firm) by passing the following entry: (a) In case of Net Profit (i.e., when the creditside Profit & Loss A/c Dr. exceeds the debit side) To Capital A/c (b) In case of Net Loss (i.e., when the debit Capital A/c Dr. side exceeds the credit side) To Profit & Loss A/c Page 6 of 16  A GENERAL FORMAT OF A PROFIT & LOSS ACCOUNT PROFIT AND LOSS ACCOUNT OF... Dr. for the period ending on... Cr. Particulars ` Particulars ` Gross Loss b/d xxx Gross Profit b/d xxx Salaries & Wages xxx Discount received xxx Rent, Rates & Taxes xxx Commission earned xxx Fire Insurance Premium xxx Interest on Short term Repairs & Maintenance xxx Marketable securities xxx Depreciation xxx Profit on Sale of Short term Audit Fees xxx Marketable Securities xxx Bank Charges xxx Operating Loss c/d xxx Legal Charges xxx Miscellaneous Expenses xxx Carriage Outward xxx Freight Outward xxx Commission Salesmen xxx Travelling Expenses xxx Entertainment Expenses xxx Sales Promotion Expenses xxx Advertising and Publicity xxx Bad Debts xxx Packing Expenses xxx Operating Profit c/d xxx xxx xxx Operating Loss b/d xxx Operating Profit b/d xxx Interest on Loan xxx Rent earned xxx Loss on Sale of Fixed Assets xxx Interest earned xxx Net Profit transferred Profit on sale of fixed assets xxx Capital Account xxx Income from investments xxx Dividend Received xxx *Net Loss transferred to Capital Account xxx xxx xxx *Either Net Profit or Net Loss shall appear. Page 7 of 16 Example -1 From the following information, prepare the Profit & Loss Account showing Operating Profit separately in the account itself of a Trader for the year ending on 31st March, 2018: Particulars ₹ Particulars ₹ Gross Profit 5,00,000 Commission Allowed 5,000 Salaries & Wages 10,000 Commission Received 17,000 Wages & Salaries 1,000 Interest on loan 3,000 Carriage Inwards 2,000 Interest Received 4,000 Carriage Outwards 5,000 Rent Paid 4,000 Freight Inward 3,000 General Expenses 1,000 Freight Outward 5,000 Rent Received 5,000 Discount Allowed 1,000 Brokerage Allowed 3,000 Discount Received 2,000 Loss on Sale of Fixed Assets 7,000 Dividend Received 3,000 Profit on Sale of Fixed Assets 5,000 PROFIT & LOSS ACCOUNT Dr. for the year ending 31st March, 2018 Cr. Particulars ₹ Particulars ₹ Salaries & Wages 10,000 Gross Profit 5,00,000 Carriage Outwards 5,000 Discount Received 2,000 Freight Outwards 5,000 Commission Received 17,000 Discount Allowed 1,000 Commission Allowed 5,000 Rent Paid 4,000 General Expenses 1,000 Brokerage Allowed 3,000 Operating Profit c/d 4,85,000 5,19,000 5,19,000 Interest on Loan 3,000 Operating Profit b/d 4,85,000 Loss on Sale of Fixed Asset 7,000 Interest Received 4,000 Net Profit t/f Capital A/c 4,92,000 Rent Received 5,000 Dividend Received 3,000 Profit on Sale of Fixed Assets 5,000 5,02,000 5,02,000 Page 8 of 16 From the following information, prepare the Profit & Loss Account for the year ending on March 31,2018: Particulars ₹ Particulars ₹ Gross Profit 62,000 Salaries and Wages 20,000 Discount received 1,000 Discount allowed 2,000 Interest on loan paid 2,500 Interest received 3,000 Commission received 2,000 Commission to Salesmen 1,500 Rent, Rates & Taxes paid 4,000 Rent received 1,000 Fire Insurance Premium 3,600 Carriage Outward 1,000 Freight outward 500 Repairs and Maintenance 600 Printing & Stationery 600 Traveling Expenses 1,600 Entertainment Expenses 1,200 Water and Electricity 1,200 Postage & Telegram 500 Advertising and Publicity 4,000 Sales Promotion Expenses 400 Telephone Expenses 1,000 Bad Debts 1,000 Packing Expenses 500 Audit Fees 2,000 Bank Charges 400 Depreciation on Furniture: Legal Charges 1,000 – Sales office 1,000 Miscellaneous Expenses 1,000 – Administrative office 2,000 Loss on sale of Fixed Assets 500 Miscellaneous Incomes 2,000 Loss by theft 5,000 Profit on sale of Fixed Assets 8,500 Dividend received on Shares 300 Loss by Fire 1,000 Income from Investments 200 Loss by Embezzlement 1,000 Page 9 of 16  PROFIT AND LOSS ACCOUNT Dr. for the year ending 31st March, 2018 Cr. Particulars ₹ Particulars ₹ Salaries & Wages 20,000 Gross Profit b/d 62,000 Rent, Rates & Taxes 4,000 Discount earned 1,000 Fire Insurance premium 3,600 Interest earned 3,000 Repairs & Maintenance 600 Commission earned 2,000 Printing & Stationery 600 Rent earned 1,000 Water & Electricity 1,200 Profit on Sale of Fixed Assets 8,500 Postage & Telegrams 500 Income from investments 200 Telephone Expenses 1,000 Miscellaneous Incomes 2,000 Depreciation on Furniture 3,000 Dividend on Shares 300 Audit Fees 2,000 Bank Charges 400 Legal Charges 1,000 Miscellaneous Expenses 1,000 Discount Allowed 2,000 Carriage Outward 1,000 Freight Outward 500 Commission to Salesmen 1,500 Travelling Expenses 1,600 Entertainment Expenses 1,200 Sales Promotion Expenses 400 Advertising & Publicity 4,000 Bad Debts 1,000 Packing Expenses 500 Interest on Loan 2,500 Loss on sale of Fixed Assets 500 Loss by Fire 1,000 Loss by Theft 5,000 Loss by Embezzlement 1,000 Net Profit transferred Capital A/c 17,400 80,000 80,000 Page 10 of 16  BALANCE SHEET [OR POSITION STATEMENT] After preparing the Profit & Loss Account, the next step is to prepare a Balance Sheet. MEANING OF BALANCE SHEET A Balance Sheet is one of the financial statements. A Balance Sheet is a Statement of Financial Position of an enterprise at a given date which shows its Assets, External Liabilities, Capital and Reserves and Surplus. It is called a Balance Sheet because it is a sheet of balances of those ledger accounts (i.e., Personal Accounts, Real Accounts, Fictitious Assets Accounts not yet w/o) which are never closed. CHARACTERISTICS OF A BALANCE SHEET 1. A Balance Sheet is only a statement and not an account. It has no debit side or credit side. The headings of the two sides are ‘Assets' and ‘Liabilities'. 2. A Balance Sheet is prepared at a particular point of time and not for a particular period. The information contained in a Balance Sheet is true only at that particular point of time at which it is prepared. 3. A Balance Sheet is a summary of balances of those ledger accounts which have not been closed by transfer to the Trading and Profit and Loss Account 4. A Balance Sheet shows the nature and value of assets and the nature and the amount of liabilities at a given date. PURPOSE OF BALANCE SHEET 1. To ascertain the Nature and Value of Assets of a business. 2. To ascertain the Nature and Amount of Liabilities of a business. 3. To find out the Financial Solvency of an enterprise. An enterprise is considered to be a solvent if its Assets exceed its External Liabilities. WHEN IS BALANCE SHEET PREPARED Balance Sheet is prepared after the preparation of Profit & Loss Account. SIDES OF BALANCE SHEET 1. In India the right-hand side of a Horizontal Balance Sheet is called the ‘Assets' side and the left- hand side is called the ‘Liabilities' side. 2. In some of the other countries (for example Australia), The right-hand side of a Balance Sheet is called the ‘Liabilities' side and the left-hand side is called the ‘Assets' side. Page 11 of 16 NATURE OF ACCOUNTS SHOWN IN THE BALANCE SHEET 1. The debit balances of those ledger accounts (i.e., Personal Accounts, Real Accounts, Fictitious Assets Accounts) which still remain open even after the preparation of the Trading and Profit and Loss Account, are shown on the ‘Assets' side of the Balance Sheet. 2. The credit balances of those ledgers accounts (i.e., Personal Accounts) which still remain open after the preparation of the Trading and Profit & Loss Account are shown on the ‘Liabilities' side of the Balance Sheet. ITEMS TO BE SHOWN ON THE ASSETS SIDE OF A BALANCE SHEET 1. Fixed Assets: Fixed Assets refer to those assets which are held for the purposes of producing or providing Goods or Services and those which are not held for resale in the normal course of business. Fixed Assets may be classified as follows: (i) A Tangible Asset is an identifiable non-monetary asset, with physical substance, which is held for use in the production or supply of goods or services, or for rental to others, or for administrative purposes. For example, Land & Building, Plant & Machinery, Furniture & Fixtures. (ii) An Intangible Asset is an identifiable non-monetary asset, without physical substance, which is held for use in the production or supply of goods or services, or for rental to others, or for administrative purposes. For example, Goodwill, Patents, Trade Marks. Note: Fixed assets are usually valued at Cost less Depreciation. 2. Investments are assets held by an enterprise for earning income by way of Dividends, Interest, and rentals, for Capital Appreciation, or for other benefits to the investing enterprise. For example, Investment in Shares, Investment in Debentures & Bonds, Investment in Immovable Properties. 3. Current Assets — Current assets are those assets which are held — (i) in the form of cash, (ii) for their conversion into cash, either within the Operating Cycle Period or within the 12 Months Period from the date of Balance Sheet and (iii) for their consumption in the production of goods or rendering of services in the normal course of business. ITEMS TO BE SHOWN ON THE LIABILITIES SIDE OF A BALANCE SHEET 1. Long term Liability — Long term Liability refers to that liability which is expected to be settled after 12 months from the date of a Balance Sheet e.g., Loan from a financial institution, Debentures. 2. Current Liability — Current Liability refers to that liability which is expected to be settled normally within 12 months from the date of Balance Sheet. e.g., Bills Payables, Trade Creditors, Outstanding Expenses, Bank Overdraft, Instalments of Loan and Deposits payable within 12 months from the date of Balance Sheet. Page 12 of 16 3. Capital — Capital is the excess of Assets over External liabilities. It refers to the amount invested in an enterprise by the proprietor (in case of a proprietorship concern) or partners (in case of a partnership concern), which is increased by the amount of profit earned and is decreased by the losses incurred and the amount withdrawn (whether in the form of cash or kind). Note: Drawings Account (which records the amount withdrawn by the proprietor whether in the form of cash or kind) is closed by transferring its balance to the debit side of the Capital Account. Usually, it is shown by way of deduction from the amount of capital in the Balance Sheet. TUTORIAL NOTE A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. CONTINGENT ASSET MEANING OF CONTINGENT ASSET A Contingent Asset is a possible asset that arises from past events the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. EXAMPLE OF CONTINGENT ASSET Suppose the firm has filed a suit for some property now in the possession of someone else. If the suit is decided in the firm's favour, the firm will get the property; at the moment it is a contingent asset. Similar would be the position for a patent applied for arising out of the firm's own research effort. Contingent liability in respect of contract for capital expenditure already entered into will give rise to an asset on payment; at present it is only a contingent asset. CONTINGENT LIABILITY MEANING OF CONTINGENT LIABILITY A Contingent Liability is a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise TWO CHARACTERISTICS OF CONTINGENT LIABILITY Contingent liabilities have two characteristics: (i) Uncertainty as to whether the amount will be payable at all; (ii) Uncertainty about the amount involved. DISCLOSURE OF CONTINGENT LIABILITY It is disclosed by way of a note to the balance sheet, unless there is a probability that a loss will materialize and its reasonable estimate can be made. In that event, it is no more a contingent liability and a specific provision should be made therefor. Page 13 of 16 EXAMPLES OF CONTINGENT LIABILITIES 1. Bills of exchange discounted but not yet matured; 2. Claim against the company not acknowledged as Debt e.g. suit for damages against the company which it is defending. 3. Arrears of dividends on cumulative preference shares; 4. Uncalled Liability on Partly paid shares held as investments. 5. Estimated amount of contracts remaining to be executed on capital account & not provided for 6. Guarantees given by the company to companies under the same management; and 7. Gratuities payable to staff on retirement or death. ORDER OF LIQUIDITY 1. The assets are arranged in the order of their liquidity, i.e., the most liquid asset (e.g., Cash- in- hand), is shown first. The least liquid asset (e.g., Goodwill) is shown last. The least liquid asset does not mean an asset which cannot be encashed. 2. The liabilities are arranged in the order of their urgency of payment, i.e., the most urgent payment to be made (e.g., Short-term Creditors), is shown first. The least urgent payment to be made (e.g., Long-term Creditors) is shown last. 3. Usually, the Banking and Financial Companies, Sole Proprietorship and the partnership Concerns prepare their Balance Sheets in the order of liquidity. A GENERAL FORMAT OF A BALANCE SHEET IN ORDER OF LIQUIDITY BALANCE SHEET OF....... AS AT........ Liabilities ` Assets ` Current Liabilities: Current Assets: Bank Overdraft xxx Cash-in-hand xxx Bills Payable xxx Cash at bank xxx Outstanding Expenses xxx Bills Receivable xxx Sundry Creditors xxx Sundry Debtors xxx Income received-in-advance xxx Prepaid Expenses xxx Accrued income xxx Long-term Liabilities: Closing Stock xxx Loan xxx Investments: xxx Capital: Fixed Assets: Opening balance xxx Furniture and Fixture xxx Add: Net Profit Plant and Machinery xxx (Less: Net Loss) xxx Building xxx xxx Land xxx Less: Drawing xxx xxx Goodwill xxx xxx xxx Page 14 of 16 ORDER OF PERMANENCE This order is exactly reverse of the liquidity order. 1. The assets are arranged in the order of their permanence i.e., the least liquid asset (e.g., Goodwill) is shown first and the most liquid asset (e.g., Cash-in-hand) is shown last. 2. The least urgent payment to be made (e.g., Owners) is shown first and the most urgent payment to be made (e.g., Short-term Creditors) is shown last. 3. The company as defined under the Companies Act, 1956 is required to prepare the Balance Sheet in order of permanence. From the following information, prepare a Balance Sheet of Mr X as at 31 March, 2018 (a) In order ofliquidity, and (b) In order of permanence. Particulars ₹ Particulars ₹ Plant and Machinery 1,00,000 Furniture and fixtures 20,000 Prepaid Expenses 1,000 Accrued Income 2,000 Income received in advance 2,000 Outstanding Expenses 1,000 Bills Payable 3,000 Bills Receivables 2,000 Sundry Debtors 1,00,000 Sundry Creditors 99,000 Bank Overdraft 10,000 Investments in Shares of X Ltd. 10,000 Long-term Loan from bank 1,00,000 Closing Stock 85,000 Capital 2,00,000 Building 1,00,000 Land 10,000 Goodwill 10,000 Drawings 10,000 Net Profit 60,000 Cash-in-hand 5,000 Cash at bank 19,000 Income Tax Paid 1,000 (a) In order of Liquidity BALANCE SHEET OF MR X AS AT 31 MARCH, 2018 Liabilities ₹ Assets ₹ Current Liabilities: Current Assets: Bank Overdraft 10,000 Cash in hand 5,000 Bills Payable 3,000 Cash at bank 19,000 Outstanding Expenses 1,000 Bills receivable 2,000 Sundry Creditors 99,000 Sundry debtors 1,00,000 Income received in advance 2,000 Prepaid Expenses 1,000 Long-term Liabilities Accrued Income 2,000 Loan 1,00,000 Closing Stock 85,000 Capital: Investments: Opening Balance 2,00,000 Shares of X Ltd. 10,000 Add: Net Profit 60,000 Fixed Assets: 2,60,000 Furniture & Fixtures 20,000 Less: Drawings 10,000 Plant & Machinery 1,00,000 Less: Income Tax 1,000 2,49,000 Building 1,00,000 Land 10,000 Goodwill 10,000 4,64,000 4,64,000 Page 15 of 16 (a) In order of Permanence BALANCE SHEET OF MR X AS AT 31 MARCH, 2018 Liabilities ₹ Assets ₹ Capital: Fixed Assets: Opening Balance 2,00,000 Goodwill 10,000 Add: Net Profit 60,000 Land 10,000 2,60,000 Building 1,00,000 Less: Drawings 10,000 Plant and machinery 1,00,000 Less: Income Tax 1,000 2,49,000 Furniture and fixtures 20,000 Long-term Liabilities: Investments: Long-term Loan 1,00,000 Shares of X Ltd. 10,000 Current Liabilities: Current Assets: Income received-in-advance 2,000 Closing Stock 85,000 Sundry Creditors 99,000 Accrued Income 2,000 Outstanding Expenses 1,000 Prepaid Expenses 1,000 Bills Payable 3,000 Sundry Debtors 1,00,000 Bank Overdraft 10,000 Bills receivable 2,000 Cash at bank 19,000 Cash in hand 5,000 4,64,000 4,64,000 Page 16 of 16