Class 11 Accountancy - BIHAR
Financial Statements - II
Financial Statements - II (with adjustments) for Class 11 Accountancy under the Bihar School Examination Board (BSEB) builds upon the basic preparation of Trading, Profit and Loss Account, and Balance Sheet. This chapter introduces crucial year-end adjustments such as closing stock, outstanding expenses, prepaid expenses, accrued income, depreciation, and provision for doubtful debts. Mastering these adjustments is vital for board exams as comprehensive 8-mark numerical problems invariably test a student's ability to incorporate these items correctly into the final accounts to reflect the true and fair financial position of a business.
Start Learning FreeKey Concepts
Outstanding Expenses
Expenses that relate to the current accounting period but remain unpaid at the end of the year; they are added to the respective expense in the P&L Account and shown as a liability on the Balance Sheet.
Prepaid Expenses
Expenses paid in advance for a future accounting period; they are deducted from the respective expense in the P&L Account and shown as a current asset on the Balance Sheet.
Accrued Income
Income that has been earned during the current accounting period but not yet received in cash; it is added to the respective income in the P&L Account and shown as an asset on the Balance Sheet.
Depreciation
The permanent and gradual decrease in the value of fixed assets due to wear and tear or obsolescence; it is debited to the P&L Account and deducted from the asset value in the Balance Sheet.
Provision for Doubtful Debts
An estimated amount kept aside for potential bad debts arising from current year credit sales; it is debited to the P&L Account and deducted from Sundry Debtors in the Balance Sheet.
Important Formulas
Board Exam Info
In the Bihar Board (BSEB) Class 11 Accountancy examinations, Financial Statements with adjustments is a high-scoring and mandatory chapter. It typically carries around 8 to 12 marks. Exams generally feature one long-answer numerical question requiring the preparation of Trading and Profit & Loss Account and Balance Sheet with 4 to 6 adjustments, along with short-answer theoretical questions regarding the treatment of specific adjustments.
Frequently Asked Questions
Why is closing stock given outside the trial balance treated twice?
Items given outside the trial balance have not yet been recorded in the books of accounts, so to follow the dual-aspect principle, they must be recorded in two different places (usually once in the Trading/P&L Account and once in the Balance Sheet).
What is the difference between a provision and a reserve?
A provision is created against a known liability or depreciation whose exact amount is uncertain (like provision for doubtful debts), whereas a reserve is created out of profits to strengthen the financial position of the business for unknown future contingencies.
How do we treat Income Received in Advance in final accounts?
Income received in advance is deducted from the respective income item on the credit side of the Profit and Loss Account because it belongs to the next accounting period, and it is shown as a current liability on the liabilities side of the Balance Sheet.
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