Match List – I with List – II.

Choose the correct answer from the options given below :

A-II, B-III, C-IV, D-I

The correct answer is option 1- A-II, B-III, C-IV, D-I.

* Bad debts- Debit side of profit and loss account. Bad debts refer to the amount that the firm has not been able to realise from its debtors. It is regarded as a loss and is termed as bad debt and recorded on the debit side of profit and loss account which reduces the profit of the business.

* Closing stock- Credit side of trading account. The closing stock represents the cost of unsold goods lying in the stores at the end of the accounting period. The adjustment with regard to the closing stock is done by (i) by crediting it to the trading and profit and loss account, and (ii) by showing it on the asset side of the balance sheet. 

* Interest on capital- Addition to existing capital. Sometimes, the proprietor may like to know the profit made by the business after providing for interest on capital. In such a situation, interest is calculated at a given rate of interest on capital as at the beginning of the accounting year. If however, any additional capital is brought during the year, the interest may also be computed on such amount from the date on which it was brought into the business. Such interest is treated as expense for the business. In the final accounts, it is shown as an expense on the debit side of the profit and loss account and added to capital in the balance sheet. 

* Drawings- Deduct from capital. Drawings are deducted from capital as it is withdrawn by the owner for personal use which reduces the capital invested by him in the business.