Class 11 Accountancy Chapter 9 Financial Statements 1 NCERT solutions

Class 11 financial statement 1 NCERT solutions are collated here by experienced  educators for students struggling with solving problems of financial statements. The solutions cover important concepts and help students to grasp them tightly. 

Students can easily view the availed resources by scrolling below and use them for consistent practice and revision. These solutions are laid in a structured manner for better understanding and clarity. Exercises of both short and long answer type questions are solved and explained in detail. 

NCERT Solutions for Class 11 Chapter 9 Financial Statements 1

Short Answers for Class 11 Financial Statement 1 NCERT Solutions

Question 1: What are the objectives of preparing financial statements?

Financial statements are prepared with the following objectives:

• Determine the financial position of a business.
• Ascertain the financial performance of the business.
• Measure the changes in the financial position of a business.
• Compare the financial performance of business both intra and inter-firm wise.

Question 2: What is the purpose of preparing the trading and profit and loss accounts?

Trading Account:

• Determine the gross profit or loss in a financial year or period.
• Determine the ratio of gross profit to sales.
• Determine the ratio of direct expense to sales.

Profit and Loss Account:

• Determine net profit or loss incurred by the business.
• Comply with statutory requirements such as the Company Act or Partnership Act.

Question 3: Explain the concept of the cost of goods sold.

Cost of Goods Sold (COGS) refers to the costs incurred in the production of goods that are sold by the company. It can be calculated as follows:

No goods left out:

COGS = Purchases + Direct Expenses

Presence of closing stock:

COGS = Purchases + Direct Expenses – Closing Stock

Presence of opening stock:

COGS = Opening Stock + Purchases + Direct Expenses – Closing Stock

Question 4: What is a balance sheet? What are its characteristics?

A balance sheet is a statement prepared to determine the assets and liabilities of a business on a particular date. Its characteristics include:

• Reflects the financial position of a business.
• Dependent on other statements, such as trading and P&L account.
• Prepared at the end of an accounting period.
• The balance of both sides should tally.

Question 5: Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure:

Basis of Difference | Capital Expenditure | Revenue Expenditure

• Meaning: Expenditure for acquiring or improving an asset. | Expenses for running daily business activities.
• Term: Long-term, spans many accounting periods. | Short-term, limited to an accounting period.
• Benefits: Benefits across many accounting periods. | Benefits only in the current year.
• Nature: Non-recurring. | Recurring.
• Shown in: Income statement and balance sheet. | Income statement.

(a) Capital expenditure
(b) Revenue expenditure
(c) Capital expenditure
(d) Capital expenditure
(e) Revenue expenditure
(f) Capital expenditure
(g) Deferred revenue expenditure

Question 6: What is an operating profit?

Operating profit, also known as EBIT, measures the profits a company generates from its core business functions, excluding interest and tax deductions. It is calculated as:

Operating Profit = Net Profit + Non-operating Expenses – Non-operating Incomes

Long Answers for Class 11 Financial Statement 1 NCERT Solutions

Question 7: What are financial statements? What information do they provide?

Financial statements contain financial information about a business that satisfies the information requirements of internal and external users. They represent a true and fair view of the business’s financial position and performance. The main financial statements include:

• Trading Account: Reflects gross profit or loss.
• Profit and Loss Account: Reflects net profit or loss.
• Balance Sheet: Reflects the financial position in terms of assets and liabilities.

Users of Financial Statements:

• Current Owners: Assess profits and the financial position.
• Government: Ensures stakeholders’ rights are protected.
• Prospective Owners: Evaluate past performance and future potential.

Question 8: What are closing entries? Give four examples of closing entries.

Closing entries are journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts. Examples include:

• Purchases Return to Purchases Account:Purchases Return A/c Dr.
  To Purchases A/c
• Sales Return to Sales Account:Sales A/c Dr.
  To Sales Return A/c
• Purchases to Trading Account:Trading A/c Dr.
  To Purchases A/c
• Sales to Trading Account:Sales A/c Dr.
  To Trading A/c

Question 9: Discuss the need to prepare a balance sheet.

A balance sheet is essential for:

• Showing the financial position of a business.
• Detailing the assets and liabilities.
• Serving as a source of information for internal and external users.
• Acting as a reference for balances to be carried forward.
• Indicating the liquidity of the firm.
• Aiding management in planning and controlling business operations.

Question 10: What is meant by grouping and marshalling of assets and liabilities? Explain the ways in which a balance sheet may be marshalled.

• Grouping: Placing similar assets and liabilities under a common heading (e.g., different types of creditors).
• Marshalling: Arranging assets and liabilities in order of liquidity or permanence.

Order of Liquidity: Assets are listed by how quickly they can be converted into cash (e.g., cash, bank, debtors).

Order of Permanence: Assets are listed by their longevity or importance (e.g., capital, long-term loan, creditors).

Numerical Answers for Class 11 Financial Statement 1 NCERT Solutions

Question 11: Calculate the gross profit from the following balances taken from the books of Simmi and Vimmi Ltd. for the year ending March 31, 2017.

• Closing Stock: ₹2,50,000
• Net Sales during the year: ₹40,00,000
• Net Purchases during the year: ₹15,00,000
• Opening Stock: ₹15,00,000
• Direct Expenses: ₹80,000

Trading Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	15,00,000	Net Sales	40,00,000
Net Purchases	15,00,000	Closing Stock	2,50,000
Direct Expenses	80,000
Gross Profit	11,70,000
Total	42,50,000	Total	42,50,000

Gross Profit: ₹11,70,000

Question 12: From the following balances extracted from the books of M/s Ahuja and Nanda, calculate the amount of:

• Opening Stock: ₹25,000
• Credit Purchases: ₹7,50,000
• Cash Purchases: ₹3,00,000
• Credit Sales: ₹12,00,000
• Cash Sales: ₹4,00,000
• Wages: ₹1,00,000
• Salaries: ₹1,40,000
• Closing Stock: ₹30,000
• Sales Return: ₹50,000
• Purchases Return: ₹10,000

(a) Cost of Goods Available for Sale:

Cost of Goods Available = Opening Stock + Net Purchases + Wages
= 25,000 + 10,40,000 + 1,00,000 = ₹11,65,000

(b) Cost of Goods Sold:

Cost of Goods Sold = Opening Stock + Net Purchases + Wages – Closing Stock
= 25,000 + 10,40,000 + 1,00,000 – 30,000 = ₹11,35,000

(c) Gross Profit:

Gross Profit = Net Sales – Cost of Goods Sold
= ₹15,50,000 – ₹11,35,000 = ₹4,15,000

Trading Account

Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	25,000	Sales	16,00,000
Purchases	10,40,000	Less: Sales Return	(50,000)
Wages	1,00,000
Gross Profit	4,15,000	Closing Stock	30,000
Total	15,80,000	Total	15,80,000

Gross Profit: ₹4,15,000

Question 13: Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv and Sons for the year ended March 31, 2017.

• Opening Stock: ₹50,000
• Net Sales: ₹11,00,000
• Net Purchases: ₹6,00,000
• Direct Expenses: ₹60,000
• Administration Expenses: ₹45,000
• Selling and Distribution Expenses: ₹65,000
• Loss due to Fire: ₹20,000
• Closing Stock: ₹70,000

Trading Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	50,000	Net Sales	11,00,000
Net Purchases	6,00,000	Closing Stock	70,000
Direct Expenses	60,000
Gross Profit	4,60,000
Total	11,70,000	Total	11,70,000

Operating Profit:

Operating Profit = Sales – (Opening Stock + Net Purchases + Direct Expenses + Administration Expenses + Selling and Distribution Expenses) + Closing Stock
= 11,00,000 – (50,000 + 6,00,000 + 60,000 + 45,000 + 65,000) + 70,000 = ₹3,50,000

Question 14: Operating profit earned by M/s Arora and Sachdeva in 2016-17 was ₹17,00,000. Its non-operating incomes were ₹1,50,000 and non-operating expenses were ₹3,75,000. Calculate the amount of net profit earned by the firm.

Net Profit = Operating Profit + Non-operating Income – Non-operating Expenses
= 17,00,000 + 1,50,000 – 3,75,000 = ₹14,75,000

Therefore, the net profit earned by M/S Arora and Sachdeva in 2016–17 is ₹14,75,000.

Question 15: The following are the extracts from the trial balance of M/s Bhola and Sons as on March 31, 2017. You are required to record the necessary journal entries and show how the above items will appear in the trading and profit and loss account and balance sheet of M/s Bhola and Sons.

• Opening Stock: ₹2,00,000
• Purchases: ₹8,10,000
• Sales: ₹10,10,000
• Closing Stock: ₹3,00,000

Journal Entries

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
March 31, 2017	Trading A/c Dr.		10,10,000
	To Opening Stock A/c			2,00,000
	To Purchases A/c			8,10,000
	(Balances transferred to Trading Account)
March 31, 2017	Sales A/c Dr.		10,10,000
	Closing Stock A/c		3,00,000
	To Trading A/c			13,10,000
	(Balances transferred to Trading Account)
March 31, 2017	Trading A/c Dr.		3,00,000
	To Profit and Loss (Gross Profit) A/c			3,00,000
	(Gross Profit transferred to P&L Account)

Trading Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	2,00,000	Sales	10,10,000
Purchases	8,10,000	Closing Stock	3,00,000
Gross Profit	3,00,000
Total	13,10,000	Total	13,10,000

Balance Sheet as on March 31, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
		Closing Stock	3,00,000
Total	–	Total	3,00,000

Question 16: Prepare trading and profit and loss account and balance sheet as on March 31, 2017.

• Machinery: ₹27,000
• Sundry debtors: ₹21,600
• Drawings: ₹2,700
• Purchases: ₹58,500
• Wages: ₹15,000
• Sundry expenses: ₹600
• Rent and taxes: ₹1,350
• Carriage inwards: ₹450
• Bank: ₹4,500
• Opening stock: ₹6,000
• Closing stock: ₹22,400

Trading Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	6,000	Sales	73,500
Purchases	58,500	Closing Stock	22,400
Wages	15,000
Carriage Inwards	450
Gross Profit	15,950
Total	95,900	Total	95,900

Profit and Loss Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Sundry Expenses	600	Trading (Gross Profit)	15,950
Rent and Taxes	1,350
Net Profit	14,000
Total	15,950	Total	15,950

Balance Sheet as on March 31, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital	60,000	Machinery	27,000
Add: Net Profit	14,000	Bank	4,500
Less: Drawings	(2,700)	Closing Stock	22,400
Total	71,300	Sundry Debtors	21,600
Sundry Creditors	1,400
Bills Payable	2,800
Total	75,500	Total	75,500

Question 17: The following trial balance was extracted from the books of M/s Ram on March 31, 2017. You are required to prepare trading and profit and loss account and the balance sheet as on date.

• Debtors: ₹12,000
• Purchases: ₹50,000
• Coal, gas, and water: ₹6,000
• Factory wages: ₹11,000
• Salaries: ₹9,000
• Rent: ₹4,000
• Discount: ₹3,000
• Advertisement: ₹500
• Drawings: ₹1,000
• Loan: ₹6,000
• Petty cash: ₹500
• Sales return: ₹1,000
• Machinery: ₹5,000
• Land and building: ₹10,000
• Income tax: ₹100
• Furniture: ₹9,900

Trading Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Purchases	50,000	Sales	79,000
Coal, Gas and Water	6,000
Factory Wages	11,000
Gross Profit	12,000
Total	79,000	Total	79,000

Profit and Loss Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Salaries	9,000	Trading (Gross Profit)	12,000
Rent	4,000	Apprenticeship Premium	5,000
Discount	3,000
Advertisement	500
Net Profit	500
Total	17,000	Total	17,000

Balance Sheet as on March 31, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital	20,000	Machinery	5,000
Add: Net Profit	500	Land and Building	10,000
Less: Drawings	(1,000)	Furniture	9,900
Less: Income Tax	(100)	Debtors	12,000
Total	19,400	Petty Cash	500
Loan	10,000
Creditors	13,000
Bank Overdraft	1,000
Total	43,400	Total	43,400

Question 18: The following is the trial balance of Manju Chawla on March 31, 2017. You are required to prepare a trading and profit and loss account and a balance sheet as on date.

• Opening Stock: ₹10,000
• Purchases: ₹40,000
• Productive Wages: ₹6,000
• Dock and Clearing Charges: ₹4,000
• Donation and Charity: ₹600
• Delivery Van Expenses: ₹6,000
• Lighting: ₹500
• Sales Tax Collected: ₹1,000
• Bad Debts: ₹600
• Misc. Incomes: ₹6,000
• Rent from Tenants: ₹2,000
• Royalty: ₹4,000
• Capital: ₹40,000
• Drawings: ₹2,000
• Debtors: ₹6,000
• Cash: ₹3,000
• Investment: ₹6,000
• Patents: ₹4,000
• Land and Machinery: ₹43,000

Trading Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	10,000	Sales	79,800
Purchases	39,400	Closing Stock	2,000
Productive Wages	6,000
Dock and Clearing Charges	4,000
Royalty	4,000
Gross Profit	18,400
Total	81,800	Total	81,800

Profit and Loss Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Donation and Charity	600	Trading (Gross Profit)	18,400
Delivery Van Expenses	6,000	Misc. Incomes	6,000
Lighting	500	Rent from Tenants	2,000
Bad Debts	600
Net Profit	18,700
Total	26,400	Total	26,400

Balance Sheet as on March 31, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital	40,000	Patents	4,000
Add: Net Profit	18,700	Land and Machinery	43,000
Less: Drawings	(2,000)	Investment	6,000
Total	56,700	Debtors	6,000
Sales Tax Collected	1,000	Cash	3,000
Creditors	7,000	Closing Stock	2,000
Total	64,700	Total	64,700

Question 19: The following is the Trial Balance of Mr. Deepak as on March 31, 2017. You are required to prepare the trading account, profit and loss account, and balance sheet as on date.

• Drawings: ₹36,000
• Insurance: ₹3,000
• General Expenses: ₹29,000
• Rent and Taxes: ₹14,400
• Lighting (Factory): ₹2,800
• Travelling Expenses: ₹7,400
• Cash in Hand: ₹12,600
• Bills Receivable: ₹5,000
• Sundry Debtors: ₹1,04,000
• Furniture: ₹16,000
• Plant and Machinery: ₹1,80,000
• Opening Stock: ₹40,000
• Purchases: ₹1,60,000
• Sales Return: ₹6,000
• Carriage Inwards: ₹7,200
• Carriage Outwards: ₹1,600
• Wages: ₹84,000
• Salaries: ₹53,000

Trading Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	40,000	Sales	4,34,000
Purchases	1,52,000	Closing Stock	35,000
Lighting (Factory)	2,800
Carriage Inwards	7,200
Wages	84,000
Gross Profit	1,83,000
Total	4,69,000	Total	4,69,000

Profit and Loss Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Insurance	3,000	Trading (Gross Profit)	1,83,000
General Expenses	29,000	Discount Received	10,400
Rent and Taxes	14,400
Travelling Expenses	7,400
Carriage Outwards	1,600
Salaries	53,000
Net Profit	85,000
Total	1,93,400	Total	1,93,400

Balance Sheet as on March 31, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital	2,50,000	Plant and Machinery	1,80,000
Add: Net Profit	85,000	Furniture	16,000
Less: Drawings	(36,000)	Sundry Debtors	1,04,000
Total	2,99,000	Closing Stock	35,000
Creditors	50,000	Bills Receivable	5,000
Bills Payable	3,600	Cash in Hand	12,600
Total	3,52,600	Total	3,52,600

Question 20: Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2017.

• Purchases and Sales: ₹3,52,000 and ₹5,60,000
• Return Inwards and Return Outwards: ₹9,600 and ₹12,000
• Carriage Inwards: ₹7,000
• Carriage Outwards: ₹3,360
• Fuel and Power: ₹24,800
• Opening Stock: ₹57,600
• Bad Debts: ₹9,950
• Debtors and Creditors: ₹1,31,200 and ₹48,000
• Capital: ₹3,48,000
• Investment: ₹32,000
• Interest on Investment: ₹3,200
• Loan: ₹16,000
• Repairs: ₹2,400
• General Expenses: ₹17,000
• Wages and Salaries: ₹28,800
• Land and Buildings: ₹2,88,000
• Cash in Hand: ₹32,000
• Miscellaneous Receipts: ₹160
• Sales Tax Collected: ₹8,350

Trading Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	57,600	Sales	5,50,400
Purchases	3,40,000	Closing Stock	30,000
Carriage Inwards	7,000
Fuel and Power	24,800
Wages and Salaries	28,800
Gross Profit	1,22,200
Total	5,80,400	Total	5,80,400

Profit and Loss Account as on March 31, 2017

Particulars	Amount (₹)	Particulars	Amount (₹)
Carriage Outwards	3,360	Trading (Gross Profit)	1,22,200
Bad Debts	9,950	Interest on Investment	3,200
Repairs	2,400	Miscellaneous Receipts	160
General Expenses	17,000
Net Profit	92,850
Total	1,25,560	Total	1,25,560

Balance Sheet as on March 31, 2017

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital	3,48,000	Land and Building	2,88,000
Add: Net Profit	92,850	Investment	32,000
Total	4,40,850	Debtors	1,31,200
Loan	16,000	Closing Stock	30,000
Creditors	48,000	Cash in Hand	32,000
Sales Tax Collected	8,350
Total	5,13,200	Total	5,13,200

This complete set includes all the questions and answers formatted as per your request. Let me know if you need any further adjustments!