Financial Statements With Adjustments for CBSE Class 11

Overview: Dive into a comprehensive look at financial statements with adjustments for Class 11 CBSE, practice with previous year's questions and ace this chapter in your CBSE Class 11 Accountancy exam.

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

This post explains this chapter thoroughly to help you understand it and the types of questions that can be asked. Continue reading for previous year's questions, important concepts, and more.

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What is Adjustment in Financial Statement for Class 11 CBSE?

Every financial year, every company prepares a Profit and loss account, Trading account (an income statement), and Balance Sheet statement (position statement).

The income statement indicates a company's net profit and loss status, whereas the balance sheet suggests the business's financial position. All these statements are provided according to the trial balance record.

While preparing these accounts, we encounter a few accounts or transactions that are Omitted from the record book, sometimes recorded wrongly, or entered only one part of the transactions.

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

Why is Adjustments Required in Financial Statements

Accurate financial statements are crucial for businesses to make informed decisions. However, transactions often occur over different accounting periods, necessitating adjustments to ensure financial reports reflect the business's true financial performance and position.

These adjustments are made to account for items such as:

• Timing differences: Expenses incurred or revenue earned in one period but recorded in another (prepaid expenses, accrued income, outstanding expenses).
• Asset valuation: Depreciation of fixed assets and inventory valuation (closing stock).
• Potential losses: Bad debts and provisions for doubtful debts and discounts.
• Other considerations include the manager's commission and interest in capital.

Check Out: Class 11 Accountancy Syllabus PDF Download

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Previous Year Questions from Financial Statements With Adjustments

Here are a few questions asked in the previous year's board exams. 

Also, it is important to solve more and more 11th Accountancy Question Papers to enhance preparation levels. 

Q1. On which side of the balance sheet are prepaid expenses shown?

Q2. The following information is given in the trial balance

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

It is desired that a 10% provision be made for doubtful debts on debtors. What is the amount debited to the profit and loss account?

Q3. Is a provision for discounts on debtors made before making a provision for doubtful debts?

Q4. While Preparing final accounts, what treatment is made of prepaid expenses?

Q5. Give journal entries for the following adjustments listed below:

(a) Outstanding salary was ₹ 3,500.

(b) Rent unpaid for one month was ₹ 6,000 per annum.

(c) Insurance prepaid for a quarter was ₹ 16,000 per annum.

(d) Purchase of furniture costing ₹ 7,000 was entered in the purchases book.

Q6. Why is it necessary to record the adjusting entries to prepare final accounts?

The following balances have been taken from M/s Runway Shine Ltd.'s trial balance. Prepare a trading and P&L account and a balance sheet as of March 31, 2017.

Account Title	Amount ₹	Account Title	Amount ₹
Purchases	1,50,000	Sales	2,50,000
Opening stock	50,000	Return outwards	4,500
Return inwards	2,000	Interest received	3,500
Carriage inwards	4,500	Discount received	400
Cash in hand	77,800	Creditors	1,25,000
Cash at bank	60,800	Bill payable	6,040
Wages	2,400	Capital	1,00,000
Printing and Stationery	4,500	-	-
Discount	400	-	-
Bad debts	1,500	-	-
Insurance	2,500	-	-
Investment	32,000	-	-
Debtors	53,000	-	-
Bills receivable	20,000	-	-
Postage and Telegraph	400	-	-
Commission	200	-	-
Interest	1,000	-	-
Repair	440	-	-
Lighting Charges	500	-	-
Telephone charges	100	-	-
Carriage outward	400	-	-
Motor car	25,000	-	-
-	4,89,440	-	4,89,440

Adjustments to be made -

1. Further bad debts ₹ 1,000. Discount debtors ₹ 500 and make a provision on debtors @ 5%.
2. Interest received on investment @ 5%.
3. Wages and interest outstanding ₹ 100 and ₹ 200, respectively.
4. Depreciation charged on motor car @ 5% p.a.
5. Closing Stock ₹ 32,500

Q8. 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 Out: Class 11 Accountancy Sample Papers 

Q9. From the following balances, prepare the final accounts of M/s Mangal & Sons for the year ended 31st March 2018 :

Particulars	Rs.
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

Q10. Suresh started business on 1 April 2013 with a capital of Rs 30,000. At the end of the year, the following trial balance was drawn up from his books.

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

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

• Interest on capital is to be provided at 6% per annum.
• Suresh introduced an additional capital of Rs 10,000 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 a provision for doubtful debts will be created at 5% of the debtors' balance.

Check Out: Financial Accounts Problems for Class 11

Practice Mock Tests to Help You Ace CBSE Class 11th Accountancy Paper

Benefits of Solving Financial Statements Class 11 Questions

Chapter 10 of Financial Statements 2 is crucial for Class 11 Accountancy. Students need optimum practice for solving questions as this chapter incorporates most of the theories studied in previous chapters.

Here are a few benefits of solving Important Questions for Class 11 Accountancy Chapter 10 -

• The questions are created considering the latest CBSE guidelines and syllabus so that they are relevant for current examinations.
• Students can revise the entire chapter when they practise Chapter 10 Class 11 Accountancy Important Questions as they cover questions from the whole chapter.
• Expert-answered solutions will help students understand the concepts well and prepare for the examinations.
• The Important Questions Class 11 Accountancy Chapter 10 can help students practise numerical questions and gain confidence to achieve higher grades in examinations.

Key Takeaways

• Regular practice with financial statements for class 11's previous year's questions enhances comprehension of accounting principles and their application.
• It can help you tackle diverse questions and develop analytical and logical reasoning abilities. Consistent practice reduces calculation errors and improves precision.
• Regular problem-solving builds speed and efficiency in exam conditions. Consistent practice leads to higher scores and confidence.