Class 11 DK Goel Solutions Chapter 21 - Financial Statements
FAQs on DK Goel Class 11 Accountancy Solutions: Chapter 21 Overview
1. What specific topics are covered in the DK Goel Class 11 Accountancy Solutions for Chapter 21, Financial Statements?
The solutions for DK Goel Class 11, Chapter 21 primarily focus on the preparation of Financial Statements for a sole proprietorship. The key topics include the step-by-step method for creating:
The Trading Account to determine Gross Profit or Gross Loss.
The Profit and Loss Account to ascertain the Net Profit or Net Loss.
The Balance Sheet to show the financial position of the business on a specific date.
These solutions are based on a trial balance without any end-of-the-year adjustments.
2. How do you correctly prepare the Trading Account using the DK Goel Chapter 21 solutions?
To prepare the Trading Account correctly, you must follow these steps as demonstrated in the solutions:
Begin by posting the Opening Stock, Net Purchases (Purchases less Purchase Returns), and all Direct Expenses (like wages, carriage inwards, and freight) on the debit side.
On the credit side, post the Net Sales (Sales less Sales Returns) and the Closing Stock.
The final balancing figure represents either the Gross Profit (if the credit side is greater) or the Gross Loss (if the debit side is greater), which is then transferred to the Profit and Loss Account.
3. What is the correct method for preparing the Profit and Loss Account as per the solutions for DK Goel Chapter 21?
The correct method for preparing the Profit and Loss (P&L) Account starts with the result from the Trading Account. The steps are:
Transfer the Gross Profit to the credit side or the Gross Loss to the debit side of the P&L Account.
Debit all indirect expenses, such as salaries, rent, printing & stationery, and advertising.
Credit all indirect incomes, like commission received, rent received, or discount received.
The final balancing figure is the Net Profit (transferred to Capital A/c in the Balance Sheet) or Net Loss.
4. Why is it crucial to correctly group and marshal assets and liabilities in the Balance Sheet when solving problems from DK Goel Chapter 21?
Correctly grouping and marshalling assets and liabilities is crucial because it ensures the Balance Sheet is presented in a clear, logical, and standardised format. This is important for two main reasons:
Readability and Analysis: It helps stakeholders like investors and creditors easily analyse the financial health and liquidity of the business. Marshalling (e.g., in order of liquidity or permanence) provides an instant overview of current vs. long-term obligations and assets.
Arithmetical Accuracy: Proper grouping ensures that the fundamental accounting equation (Assets = Liabilities + Capital) is correctly represented, confirming the arithmetical accuracy of the entire accounting process for the year.
5. What is the difference between Capital and Revenue Expenditure, and why is this distinction critical when preparing Financial Statements for Chapter 21?
The distinction between Capital and Revenue Expenditure is critical because it directly impacts the calculated profit and the financial position. Here's the difference:
Capital Expenditure: This is an expense incurred to acquire or improve a fixed asset, providing benefits for more than one accounting period (e.g., buying machinery). It is shown on the asset side of the Balance Sheet.
Revenue Expenditure: This is a routine expense incurred in the daily operations of a business, with its benefit consumed within the current accounting period (e.g., paying salaries). It is shown on the debit side of the Trading and P&L Account.
If you misclassify a revenue expense as capital, your profit will be overstated; if you misclassify a capital expense as revenue, your profit will be understated. This leads to an incorrect assessment of business performance.
6. Do the solutions for DK Goel Chapter 21 include problems with adjustments?
No. The solutions provided for DK Goel's Chapter 21, 'Financial Statements', focus exclusively on preparing the Trading Account, P&L Account, and Balance Sheet from a given trial balance without any adjustments. The concepts and problems related to adjustments like outstanding expenses, prepaid expenses, depreciation, etc., are covered in the next chapter, 'Financial Statements with Adjustments'.
7. How does the result of the Trading Account flow into the Profit and Loss Account, and then to the Balance Sheet, in the solutions for Chapter 21?
The financial statements are interconnected, and the results flow in a specific sequence:
The final result of the Trading Account, which is the Gross Profit or Gross Loss, is the first item transferred to the Profit and Loss Account to begin the calculation of net profit.
The final result of the Profit and Loss Account, the Net Profit or Net Loss, is then transferred to the Balance Sheet.
In the Balance Sheet, the Net Profit is added to the Opening Capital, while a Net Loss is subtracted from it. This final figure represents the owner's closing equity.
8. How can using the step-by-step DK Goel solutions for Chapter 21 improve my score in the final exams?
Using these solutions for exam preparation helps by:
Reinforcing Correct Formats: It helps you master the prescribed formats for the Trading Account, P&L Account, and Balance Sheet as per the CBSE 2025-26 syllabus.
Clarifying Item Placement: You learn precisely where each item from the trial balance (e.g., carriage inwards vs. carriage outwards) should be placed, which is a common area for errors.
Building Speed and Accuracy: Practising with the solved problems builds confidence and improves the speed and accuracy required to complete the lengthy financial statement questions within the exam's time limit.
