A Bank reconciliation is a process that explains the difference between the bank balance shown in an organisation’s bank statement, as supplied by the bank, and the corresponding amount shown in the organization’s own accounting records at a particular point in time.

Such differences may occur, for example, because a cheque or a list of cheques issued by the organization has not been presented to the bank, a banking transaction, such as a credit received, or a charge made by the bank, has not yet been recorded in the organisation’s books, or either the bank or the organization itself has made an error.

Here cheques issued for payment Rs. 400 was wrongly credited by Bank as Rs. 900. If the balance as
pr cash book is the starting point then in the bank reconciliation statement cash balance will be added by 400 + 900 = Rs. 1,300

For rectifiction, Ajit needs to be debited by Rs. 500 with corresponding credit to Bad debts
recovered.

The provision for doubtful debts is identical to the allowance for doubtful accounts. The provision is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. The provision is used under accrual basis accounting, so that an expense is recognized for probable bad debts

An increase in provision for bad debts is recorded as follows DEBIT the difference (new provision minus old one) to Income Statement × CREDIT provision for bad debts
Here opening Provision for Bad Debts is Rs. 1,250

Closing Provision for Bad Debts = 5% on (trade receivables – bad debts) = 5% on 10,000 = 500

Opening provision less bad debts = 1,250 – 300 = 950

Decrease in provision for bad debts = 950 – 500 = 450

Provision for bad debts credited to Profit and Loss A/c will be Rs. 450.

Under WDV method, depreciation is charged at a fixed rate every year, on the reducing balance. A
certain percentage is applied to the previous year’s book value, to arrive at the current year’s depreciation/book value, which show a declining balance, weighted for earlier years, and lower and lower for later years, as the asset grows older.

Here Depreciation on motor car, whose cost is Rs. 58,000 with an accumulated depreciation reserve of Rs.11,600, at 20% p.a. on diminishing balance will be = 20% of (58,000 – 11,600) = Rs. 9,280

The balance sheet equation is that total assets equals liabilities plus owner’s equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner’s money (owner’s or shareholders’ equity).

Thus total of balance sheet will be equal to total of all assets or total of liabilities plus owner’s equity.

Total assets = cash in hand + prepaid expenses + cash at bank + inventories + investments + bills
receivables = 1,24,000 + 2,000 + 2,90,000 + 16,000 + 2,000 + 80,000 = Rs. 5,14,000

Gross profit is a company’s revenue minus its cost of goods sold. Gross profit is a company’s residual profit after selling a product or service and deducting the cost associated with its production and sale.

Cost of goods sold is the direct costs attributable to the production or purchase of the goods sold by a company. It excludes indirect expenses such as distribution costs and sales force cost.

Cost of goods sold in the above case = 70,800

Profit = sales – cost of goods sold = 1,30,200 – 70,800 = Rs. 59,400