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Financial Statements With Adjustments

Author : Palak Khanna

Updated On : May 20, 2023


Financial Statements with Adjustments is one of the important topics in unit 3 of class 11th Accountancy syllabus. This unit holds 25% of the overall weightage in the question paper.

In order to understand the chapter in-depth and know what type of questions can be asked, we have explained completely about this chapter in this post. Read the complete post to know the previous year's questions asked, important concepts, and more.

What is Adjustment in Financial Statement?

Every company prepares a Profit & Loss Account and Trading account (also known as an income statement) and Balance Sheet statement(position statement) every financial year. The income statement indicates the net profit and loss status of a company, whereas, the balance sheet indicates the financial position of the business.

All these statements are provided according to the trial balance record. During the preparation of these accounts, we come across a few accounts or transactions are Omitted from the record book, or Sometimes have been recorded wrongly in the book or Sometimes entered only one part of the transactions.

Entries passed for such financial transactions are known as adjustment entries.

Previous Year Questions from Financial Statements With Adjustments

Here are few questions asked in the previous year's board exams. You can try answering these questions and check the answers from the PDF provided below. 

Also, ensure to solve more and more 11th Accountancy Question Papers for enhancing preparation levels. 

1. On which side of the balance sheet are prepaid expenses shown?

2. Following information is given in trial balance

Bad debt Rs 3,000
Provision for bad debts Rs 3,500
Debtors Rs 40,000

Additional information
It is desired to make a provision for doubtful debts @ of 10% on debtors. The amount debited to the profit and loss account is.

3. Is a provision for discounts on debtors made before making provision for doubtful debts?

4. While Preparing final accounts, what treatment is made of prepaid expenses?

5. Extract of Trial Balance as of 31st March, 2013

Name of Accounts Debit Balance(Rs) Credit Balance(Rs)
Wages Paid 66,000
Salary Paid 16,500

Additional Information
Wages Rs 6,000 and salary Rs 1,500 are outstanding. Pass an adjusting entry and show how will this appear in final accounts.

6. Why is it necessary to record the adjusting entries in the preparation of final accounts?

7. Extract of Trial Balance as on 31st March, 2013

Name of Accounts Debit Balance(Rs) Credit Balance(Rs)
Bad Debts 1,600
Provision for doubtful Debts(1st April, 2012) 5,000
Debtors 1,60,000

Additional Information
Create a provision for doubtful debts @ 5% on debtors.

Pass necessary adjustment entries and show how will it appear in the financial statements of company.

8. From the following balances obtained from the accounts of Mr. Ranjeet, Prepare the Trading and Profit & Loss Account:

Particulars Rs. Particulars Rs.
Stock on April 01, 2012 8,000 Bad debts 1,200
Purchases for the year 22,000 Rent 1,200
Sales for the year 42,000 Discount (Dr.) 600
Wages 2,500 Commission paid 1,100
Salaries & Wages 3,500 Sales Expenses 600
Advertisement 1,000 Repairs 600

Closing stock on March 31, 2013, is Rs. 4,500.

Check: Class 11 Accountancy Sample Papers 

9. From the following balances, prepare the final accounts of M/s Mangal & Sons for the year ended 31st March 2018 :

Opening Stock 12,500
B/R 2,000
Sales 70,000
Purchases 37,500
Creditors 20,000
Salaries 3,850
Insurance 200
Debtors 32,500
Carriage 1,450
Commission 750
Interest 900
Printing 250
B/P 3,150
Returns in 1,300
Returns out 500
Bank 5,250
Rent and Taxes 1,300
Furniture 1,000
Capital 7,100

Closing Stock on 31-3-2018 Rs.15,000

10. Suresh started buisness on 1st April, 2013 with a capital of Rs 30,000. The following trial balance was drawn up from his books at the end of the year.

Check: Class 11 Accountancy Syllabus PDF Download 

Name of Accounts Amt(Rs) Name of Accounts Amt(Rs)
Drawings 4,500 Capital 40,000
Plant and fixtures 8,000 Sales 1,60,000
Purchases 1,16,000 Creditors 12,000
Carriage inward 2,000 Bills payable 9,000
Wages 8,000 - -
Return inward 4,000 - -
Salaries 10,000 - -
Printing 800 - -
Advertisement 1,200 - -
Trade Charges 600 - -
Rent 1,400 - -
Debtors 25,000 - -
Bills Receivable 5,000 - -
Investments 15,000 - -
Discount 500 - -
Cash at bank 16,000 - -
Cash in hand 3,000 - -
2,21,000 2,21,000

Check: Financial Accounts Problems for Class 11

The value of stock as at 31st March, 2014 was Rs 26,000. You are required to prepare his trading and profit and loss account for the year ended 31st March, 2014 and a balance sheet as on the date after taking the following facts into account.

  • Interest on capital is to be provided at 6% per annum.
  • An additional capital of Rs 10,000 was introduced by Suresh on 1st October, 2013.
  • Plant and fixtures are to be depreciated by 10% per annum.
  • Salaries outstanding on 31st March, 2014 amounted to Rs 500.
  • Accrued interest on investment amounted to Rs 750.
  • Rs 500 are bad debts and provision for doubtful debts is to be created at 5% on the balance of debtors.

Download Financial Statements with Adjustments Solutions


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