Class 11 Accountancy NCERT Solutions Chapter 8 Financial Statements 1
Vedantu provides easy to understand NCERT Solutions for Class 11 Accountancy Chapter 8. Our faculty have solved and explained all the questions given in the chapter, as per the CBSE guidelines, in the NCERT Solutions Class 11 Accountancy Chapter 8. The solutions to the questions are provided here in a PDF format to simplify the learning experience. Students can download the NCERT Solutions for Class 11 Accountancy Chapter 8 PDF from Vedantu for free. Referring to these NCERT Solutions will help them revise the chapter properly and secure good marks in the examinations.
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FAQs on NCERT Solutions for Class 11 Accountancy Chapter 8 Financial Statements 1
1. Where can I find accurate, step-by-step NCERT Solutions for Class 11 Accountancy Chapter 8, 'Financial Statements 1'?
You can access reliable and detailed NCERT Solutions for Class 11 Accountancy Chapter 8 right here. These solutions are prepared by subject matter experts and are fully updated for the CBSE 2025-26 syllabus. Each solution provides a clear, step-by-step breakdown of how to solve the theoretical and practical problems in the textbook.
2. What is the correct format for preparing a Trading Account as per the NCERT solutions for Class 11 Accountancy Chapter 8?
The NCERT solutions demonstrate that a Trading Account is prepared to find the Gross Profit or Gross Loss. The format is a 'T' shape with two sides: Debit (Dr.) and Credit (Cr.).
- Debit Side: Includes Opening Stock, Net Purchases (Purchases - Purchase Returns), and all Direct Expenses (e.g., Wages, Carriage Inwards, Freight).
- Credit Side: Includes Net Sales (Sales - Sales Returns) and Closing Stock.
The balancing figure on the debit side is Gross Profit, which is then transferred to the Profit & Loss Account.
3. How do the NCERT Solutions for Chapter 8 explain the calculation of Operating Profit?
The solutions explain Operating Profit as the profit earned through the normal operating activities of a business. It is calculated before accounting for non-operating incomes and expenses. The formula demonstrated is:
Operating Profit = Gross Profit - Operating Expenses (like office salaries, rent, advertising) + Operating Incomes.
Alternatively, it can be calculated from Net Profit:
Operating Profit = Net Profit + Non-Operating Expenses (e.g., Loss on sale of asset) - Non-Operating Incomes (e.g., Interest received).
4. How do the NCERT Solutions differentiate between Direct and Indirect Expenses for the Trading and Profit & Loss Account?
The solutions make a clear distinction based on where the expense is incurred:
- Direct Expenses: These are expenses directly related to the purchase of goods or bringing them to a saleable condition. They are debited to the Trading Account. Examples include wages, freight, carriage inwards, and factory expenses.
- Indirect Expenses: These are expenses related to the overall business administration, selling, and distribution. They are not directly tied to production or purchase. These are debited to the Profit & Loss Account. Examples include salaries, rent, printing & stationery, and advertising.
5. What key items are included in the Profit and Loss Account according to the solved examples in NCERT Chapter 8?
The Profit and Loss (P&L) Account starts with the Gross Profit (or Gross Loss) transferred from the Trading Account. As per the NCERT solutions, it includes:
- On the Debit side (all Indirect Expenses): Salaries, Rent, Rates & Taxes, Printing & Stationery, Postage, Insurance, Advertising, Bad Debts, and Depreciation.
- On the Credit side (all Indirect Incomes): Gross Profit b/d, Commission Received, Discount Received, and Rent Received.
The final balancing figure represents the Net Profit or Net Loss for the accounting period.
6. Why are 'Drawings' deducted from 'Capital' in the Balance Sheet instead of being shown as an expense in the Profit & Loss Account?
This is based on the Business Entity Concept. Drawings represent the owner's personal use of business funds or goods. They are not an expense incurred to earn revenue for the business. Instead, they are considered a reduction of the owner's investment (equity) in the business. Therefore, drawings are correctly treated by deducting them from the Capital account on the Liabilities side of the Balance Sheet.
7. Why is Closing Stock valued at 'cost or market price, whichever is lower' in the financial statements, as per the principle of conservatism?
The NCERT solutions adhere to the Principle of Conservatism (or Prudence). This accounting principle states that businesses should anticipate potential future losses but not potential future profits.
- Valuing stock at cost prevents overstating profits if the market price is higher.
- Valuing stock at a lower market price (net realisable value) ensures that any potential loss from a fall in value is recognised immediately.
This method provides a more cautious and realistic view of the business's financial health.
8. What is the proper structure of a Balance Sheet for a sole proprietorship as demonstrated in the NCERT solutions for Chapter 8?
The NCERT solutions for Chapter 8 present the Balance Sheet with two sides: Liabilities on the left and Assets on the right. The structure is as follows:
- Liabilities Side: Lists all amounts the business owes. It includes items like Creditors, Bills Payable, Bank Overdraft, and the owner's Capital (adjusted for Net Profit/Loss and Drawings).
- Assets Side: Lists all resources the business owns. It is usually marshalled in order of liquidity or permanence, including items like Cash in Hand, Bank, Debtors, Closing Stock (Current Assets), and Furniture, Machinery, Buildings (Fixed Assets).
The totals of both sides must always be equal.
9. What is the fundamental difference between the objectives of a Trading Account and a Profit & Loss Account as explained in this chapter's solutions?
The primary difference lies in the type of profitability they measure:
- The Trading Account's objective is to determine the Gross Profit or Gross Loss. This figure shows the profitability of the core trading activities—buying and selling goods—before considering any operational or administrative expenses.
- The Profit & Loss Account's objective is to determine the Net Profit or Net Loss. This provides a picture of the overall profitability of the business after accounting for all indirect operating and non-operating expenses and incomes.
10. How should I approach solving the practical problems for Chapter 8 using the NCERT Solutions to ensure I understand the concepts?
For effective learning, follow this step-by-step approach demonstrated in the solutions:
- First, carefully read the trial balance and identify all items.
- Separate the items into those belonging to the Trading Account, Profit & Loss Account, and Balance Sheet.
- Prepare the Trading Account to calculate Gross Profit/Loss.
- Transfer the Gross Profit/Loss to the P&L Account and prepare it to find the Net Profit/Loss.
- Finally, prepare the Balance Sheet. Adjust the Capital account with the Net Profit/Loss and Drawings. Ensure the Assets and Liabilities sides are equal.
Following this methodical process, as shown in the solved examples, helps prevent errors.
