Example 1 Mr.Narayan and Mr.

Nandan , after working for more than ten years in a software

company started their own software company under the name Infosys Technologies Private
Limited. Both contributed Rs.1,00,000 each towards equity share capital. Company started its
activities in April, 2022 and both started looking after the business as Directors of the company.

Company executed agreement with a owner of premises and taken on rental basis an office and
paid rent of Rs.14,000. Company also paid Rs.30,000 as deposit for the premises. Investment in
servers and computers of Rs.80,000. Salary paid to staff during the year ( up to February ) was
Rs.42,000. During the year company deposited Rs.50,000 with Canara Bank as short term deposit
with interest rate @ 6%.

During the year company completed three orders and booked sales of Rs.1,50,000 and received
payment from customers. At the end of the year on 31 st March, 2023, Accountant informed them

1. Rent paid Rs.14,000 includes Rs.5,000 for the next year.

2. Interest accrued on deposits but not received is Rs.3,000
3. Salary of Rs.10,000 for the month of March is not yet paid
4. On 31st March, one customer has paid Rs.12,000 as advance against his work order.
5. Depreciation of Rs.20,000 is to be charged on computers.
6. Corporate Tax @25% paid on profits.

Prepare Profit & Loss Account and Balance sheet of the company for the year 22-23.
Question No.2 Following is the Balance sheet of Agri Tech Limited as on 31 st
March, 2022 ( Rs.in Lacs )
Tangible Fixed Assets 210
Less: Depreciation 60 150
Intangible Assets 15
Less: Amortization 5 10
Non Current Investments( Investment in 65
Subsidiary)
Current Assets
Stock of Raw Material 32
Trade Receivables 35
Short Term Investment 21
Cash at Bank 42
Total Assets 355
Equity Capital of Rs.10 each 80
Reserves & Surplus 140
Non Current Liabilities
10% Debentures 90
Current Liabilities
Trade Payables 45
Total Capital & Liabilities 355
In the year 22-23 Company received Rs.35 lacs from customers of last year
( Trade Receivables) and paid Rs.45 Lacs to the suppliers of last year ( Trade
Payables ).
During the year 22-23, Company has achieved Sales of Rs.340 Lacs out of which
company has not yet received Rs.45 Lacs from customers.
Purchase of Raw Material Rs.172 Lacs out of which Rs.30 Lacs are not yet paid to
the suppliers, Employee Cost paid Rs.16 Lacs and other operating expenses paid
Rs.116 Lacs. Interest paid on Debentures Rs.9 Lacs.
During the year, Company has sold its entire investment in subsidiary for Rs.46
Lacs. At the end of the year, Company issued 1 Lac equity shares of Rs.10 each to
its employees and collected Rs.10 lacs in Bank.
On 31st March, 2023 Raw material remaining in stores is Rs.22 Lacs, Depreciation
charged is Rs.15 Lacs and amortization of Intangible assets is Rs. 5 lacs. Prepare
Profit & Loss Account for the year 2022-23 and Balance Sheet as on 31st March,
2023.
Example 3
Neha Electronics Limited started its manufacturing activities in electronic goods in
April, 2022. Company issued 2 Lac Equity shares of the face value of Rs.10 each at
Rs.25 per share and received Rs.50 Lacs in its bank account. Company has also
issued 5,000 Convertible 10% Preference shares of Rs.100 each and received Rs.5
Lacs in its Bank account.
Company has purchased Tangible Fixed Assets of Rs.35 Lacs and Software of Rs.2
Lacs. Company purchased raw material of Rs.19 Lacs out of which amount not yet
paid to the suppliers is Rs.3 Lacs, Purchase of stock in trade Rs.2 Lacs , Employee
Benefit Expenses Rs.4 Lacs and other operating expenses Rs.9 Lacs ( amount not
yet paid Rs.1 Lac ).
Company has achieved sales of Rs.50 Lacs out of which amount of Rs.6 Lac is not
yet received from customers.
At the end of the year raw material remaining in stores is of Rs.1 Lac, Depreciation
is charged at 5% and software amortized at 25%.
At the end of the year, based on past data available , a provision at 2% is made
against warranty and provision of Rs.2 Lac is made against Trade Receivables.
Company purchased brand “ Bijali” by paying Rs.5 Lacs. Company has started
construction of another factory building and till 31st March, 2023, company has
spend Rs.7 Lacs on construction.
Prepare Profit & Loss Account for the year 2022-23 and Balance Sheet as on 31st
March,2023 assuming that provision for tax is made at 25%
Example 4 Following is the Balance sheet of Finotex Engineering Limited as on 31st March,
2022 ( Rs.in lacs )
Tangible Fixed Assets 100
Less: Depreciation 20 80
Intangible Assets 20
Less: Amortization 5 15
Non Current Investments 40
Current Assets
Stock of Raw Material 20
Stock of WIP 5
Stock of FG 10
Trade Receivables 35
Cash at Bank 12
Total Assets 217
Equity Capital of Rs.10 each 50
Reserves & Surplus 90
Non Current Liabilities
10% Debentures 40
Current Liabilities
Trade Payables 37
Total Capital & Liabilities 217

In the year 22-23 Company received Rs.35 lacs from customers of last year ( Trade Receivables)
and paid Rs.37 Lacs to the suppliers of last year ( Trade Payables ).
During the year 22-23, Company has achieved Sales of Rs.100 Lacs out of which company has
not yet received Rs.30 Lacs from customers.
Purchase of Raw Material Rs.60 Lacs out of which Rs.12 Lacs are not yet paid to the suppliers,
Employee Cost paid Rs.6 Lacs and other operating expenses paid Rs.10 Lacs. Interest paid on
Debentures Rs.4 Lacs.
On 31st March, 2023 Raw material remaining in stores is Rs.17 Lacs, WIP Rs.7 Lacs and Finished
goods Rs.11 Lacs. Depreciation charged is Rs.10 Lacs and amortization of Intangible assets is Rs.
5 lacs. Prepare Profit & Loss Account for the year 2022-23 and Balance Sheet as on 31st March,
2023 assuming corporate tax paid at 25%.
Example 5 Following Trial Balance is not matching. Rectify Trial Balance and
Prepare Profit & Loss Account for the year 2021-22 and Balance Sheet as on 31st
March, 2022
Particulars Debit Credit
Equity Share Capital 5,00,000
Opening Stock of Raw Material 60,000
Land 5,00,000
Buildings 3,00,000
Reserves & Surplus ( Credit ) 7,00,000
Furniture 1,00,000
Vehicle 1,00,000
Loan from Bank 3,00,000
Interest paid on Bank Loan 30,000
Sales 11,00,000
Purchase of Raw Material 6,00,000
Employee Benefit Expenses 1,20,000
Other Operating expenses 2,20,000
Trade Receivables 3,00,000
Trade Payables 1,10,000
Cash at Bank ( Debit ) 1,30,000
Investments 2,50,000
Total 30,10,000 24,10,000
Other Information
1. Depreciation is to be charged on Fixed Assets @ 5%
2. Raw Material lying in stores at the end of the year Rs.35,000
3. Provision for Tax is to be made at 25%
Example 6 Following Trial Balance is not matching. Rectify Trial Balance and
Prepare Profit & Loss Account for the year 2020-21 and Balance Sheet as on 31st
March, 2021
Particulars Debit Credit
Equity Share Capital 10,00,000
Opening Stock of Raw 1,00,000
Material
Land 9,00,000
Buildings 6,00,000
Reserves & Surplus ( 15,00,000
Credit )
Furniture 2,00,000
Vehicle 1,00,000
Loan from Bank 5,00,000
Interest paid on Bank 50,000
Loan
Sales 22,00,000
Purchase of Raw 12,00,000
Material
Employee Benefit 2,50,000
Expenses
Other Operating 4,00,000
expenses
Trade Receivables 6,00,000
Trade Payables 2,00,000
Cash at Bank ( Debit ) 3,50,000
Investments 6,50,000
Total 55,00,000 53,00,000
Other Information
1. Depreciation is to be charged on Fixed Assets @ 5%
2. Raw Material lying in stores at the end of the year Rs.80,000
3. Provision for Tax is to be made at 25%
Example No.7 From the following Trial Balance of Anjali Food Products Ltd for its first year as on 31st
March, March, 2020, Prepare Profit & Loss Account and Balance Sheet ( Rs.in Lacs )

Particulars Debit Credit

Opening stock of Raw material 10.00
Opening stock of WIP 6.00
Opening stock of FG 9.00
Purchase of Raw Material 112.00
Equity Share Capital 60.00
Loan from IDBI Bank 40.00
Employee Benefit Expenses 22.00
Power & Fuel 8.00
Repairs & Maintenance 4.00
Sub contracting charges 10.00
Telephone & Broadband 1.00
Travelling Expenses 3.10
Sales 207.00
Rent paid 12.00
Investments 25.00
Interest received 5.10
Interest paid on Bank Loan 4.00
Trade Receivables 30.00
Trade Payables 21.00
PPE ( Tangible Fixed Assets) 50.00
Cash at Bank 20.00
Software 7.00
Total 333.10 333.10
Other Information

1.On 31st March, 2020 Closing stock of Raw Material Rs.12.00 Lacs, WIP Rs.4.00 Lacs and FG Rs.8.00 Lacs

2. Depreciation is to be charged on PPE at 5% and amortization of software by 20% .

3. Provision for warranty is to be made of Rs.10 Lacs

4. Provision for Tax is to be made at 25%