Read and download NCERT Class 11 Accountancy Financial Statements II in NCERT book for Class 11 Accountancy. You can download latest NCERT eBooks chapter wise in PDF format free from Studiestoday.com. This Accountancy textbook for Class 11 is designed by NCERT and is very useful for students. Please also refer to the NCERT solutions for Class 11 Accountancy to understand the answers of the exercise questions given at the end of this chapter
NCERT Book for Class 11 Accountancy Chapter 10 Financial Statements II
Class 11 Accountancy students should refer to the following NCERT Book Chapter 10 Financial Statements II in Class 11. This NCERT Book for Class 11 Accountancy will be very useful for exams and help you to score good marks
Chapter 10 Financial Statements II NCERT Book Class 11
Financial Statements - II
Need for Adjustments
According to accrual concept of accounting, the profit or loss for an accounting year is not based on the revenues realised in cash and the expenses paid in cash during that year because there may be some receipts of incomes and payments of expenses during the current year which may partially relate to the previous year or to the next year. Also, there may be some incomes and expenses relating to the current year that are still to be brought into books of account. So, unless such items duly adjusted, the final accounts will not reflect the true and fair view of the state of affairs of the business.
Let us take an example of an amount of Rs. 1,000 paid on July 01, 2005 towards insurance premium. You understand that any general insurance premium paid usually covers a period of 12 months. Suppose the accounting year ends on March 31, 2006, it would mean that one fourth of the insurance premium is paid on July 01, 2005 relate to the next accounting year 2006-07. Therefore, while preparing the financial statements for 2005-06, the expense on insurance premium that should be debited to the profit and loss account is Rs. 900 (Rs. 1,200 – Rs. 300).
Let us take another example. The salaries for the month of March, 2005 were paid on April 07, 2005. This means that the salaries account of 2004-05 does not include the salaries for the month of March 2005. Such unpaid salaries is termed as salaries outstanding which have to be brought into books of account and is debited to profit and loss account along with the salaries already paid for the month of April, 2004 up to Feburary, 2005.
Similarly, adjustments may also become necessary in respect of certain incomes received in advance or those which have accrued but are still to be received. Apart from these, there are certain items which are not recorded on day-to-day basis such as depreciation on fixed assets, interest on capital, etc. These are adjusted at the time of preparing financial statements. The purpose of making various adjustments is to ensure that the final accounts reveal the true profit or loss and the true financial position of the business. The items which usually need adjustments are :
1. Closing stock
2. Outstanding/expenses
3. Prepaid/Unexpired expenses
4. Accrued income
5. Income received in advance
6. Depreciation
7. Bad debts
8. Provision for doubtful debts
9. Provision for discount on debtors
10. Manager’s commission
11. Interest on capital
It may be noted that when we prepare the financial statements, we are provided with the trial balance and some other additional information in respect of the adjustments to be made. All adjustments are reflected in the final accounts at two places to complete the double entry.
Closing Stock
As already discussed in chapter 9, the closing stock represents the cost of unsold goods lying in the stores at the end of the accounting period. The adjustment with regard to the closing stock is done by (i) by crediting it to the trading and profit and loss account, and (ii) by showing it on the asset side of the balance sheet.
The closing stock of the year becomes the opening stock of the next year and is reflected in the trial balance of the next year.
Outstanding Expenses
It is quite common for a business enterprise to have some unpaid expenses in the normal course of business operations at the end of an accounting year. Such items usually are wages, salaries, interest on loan, etc. When expenses of an accounting period remain unpaid at the end of an accounting period, they are termed as outstanding expenses. As they relate to the earning of revenue during the current accounting year, it is logical that they should be duly charged against revenue for computation of the correct amount of profit or loss.
Questions for Practice
Short Answers
1. Why is it necessary to record the adjusting entries in the preparation of final accounts?
2. What is meant by closing stock? Show its treatment in final accounts?
3. State the meaning of:
(a) Outstanding expenses
(b) Prepaid expenses
(c) Income received in advance
(d) Accrued income
4. Give the Performa of income statement and balance in vertical form.
5. Why is it necessary to create a provision for doubtful debts at the time of preparation of final accounts?
6. What adjusting entries would you record for the following :
(a) Depreciation
(b) Discount on debtors
(c) Interest on capital
(d) Manager’s commission
7. What is meant by provision for discount on debtors?
8. Give the journal entries for the following adjustments :
(a) Outstanding salary Rs. 3,500.
(b) Rent unpaid for one month at Rs. 6,000 per annum.
(c) Insurance prepaid for a quarter at Rs. 16,000 per annum.
(d) Purchase of furniture costing Rs. 7,000 entered in the purchases book.
Long Answers
1. What are adjusting entries? Why are they necessary for preparing final accounts?
2. What is meant by provision for doubtful debts? How are the relevant accounts prepared and what journal entries are recorded in final accounts? How is the amount for provision for doubtful debts calculated?
3. Show the treatment of prepaid expenses depreciation, closing stock at the time of preparation of final accounts when:
(a) When given inside the trial balance?
(b) When given outside the trial balance?
Please refer to attached file for NCERT Class 11 Accountancy - Financial Statements II
CBSE Class 11 Accounting Introduction to Accounting |
NCERT Class 11 Accountancy Introduction to Accounting |
NCERT Class 11 Accountancy Theory Base of Accounting |
NCERT Class 11 Accountancy Recording of Transaction I |
NCERT Class 11 Accountancy Recording of Transactions II |
NCERT Class 11 Accountancy Bank Reconciliation Statement |
NCERT Class 11 Accountancy Trail Balance and Rectification of Errors |
NCERT Class 11 Accountancy Depreciation Provision and Reserves |
NCERT Class 11 Accountancy Bill of Exchange |
NCERT Class 11 Accountancy Financial Statements I |
NCERT Class 11 Accountancy Financial Statements II |
NCERT Class 11 Accountancy Accounts from Incomplete Records |
NCERT Class 11 Accountancy Applications of Computers in Accounting |
NCERT Class 11 Accountancy Computerised Accounting System |
NCERT Class 11 Accountancy Structuring Database for Accounting |
NCERT Class 11 Accountancy Accounting System Using Database Management System |
NCERT Book Class 11 Accountancy Chapter 10 Financial Statements II
The above NCERT Books for Class 11 Accountancy Chapter 10 Financial Statements II have been published by NCERT for latest academic session. The textbook by NCERT for Chapter 10 Financial Statements II Accountancy Class 11 is being used by various schools and almost all education boards in India. Teachers have always recommended students to refer to Chapter 10 Financial Statements II NCERT etextbooks as the exams for Class 11 Accountancy are always asked as per the syllabus defined in these ebooks. These Class 11 Chapter 10 Financial Statements II book for Accountancy also includes collection of question. Along with Accountancy Class 11 NCERT Book in Pdf for Chapter 10 Financial Statements II we have provided all NCERT Books in English Medium for Class 11 which will be really helpful for students who have opted for english language as a medium. Class 11 students will need their books in English so we have provided them here for all subjects in Class 11.
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