Question

An unexperienced accountant prepared the following trial balance of Bang Vikas Ltd., for the year ending 31.12.2005. The cash in hand on 31.12.2005 was Rs 750.

Details	Rs	Details	Rs
Depreciation on machinery	33,000	Authorised Capital: 60,000 shares of Rs 10 each	6,00,000
Calls in Arrear	7,500	Subscribed Capital	4,00,000
Land and Buildings	3,00,000	6% Debentures	3,00,000
Machinery	2,97,000	Profit and Loss Account (Cr.)	13,625
Interim dividend paid	37,500	Sundry Debtors	87,000
Stock on 1-1-2005	75,000	Sales	4,15,000
Sundry Creditors	40,000	Sinking Fund	75,000
Bills Payable	38,000	Preliminary Expenses	5,000
Furniture	7,200
Bank Balance	39,900
Purchases	1,85,000
Provision for Bad Debts	4,375
Investments	75,000
Salary and Wages	99,300
Repairs	4,300
Fuel	2,500
Rates and Taxes	1,800
Travelling Expenses	2,000
Discounts	6,400
Director’s Fees	5,700
Bad Debts	2,100
Debenture interest	9,000
Carriage	1,800
Freight	8,900
Sundry Expenses	2,350
Public Deposits	10,000
	12,95,625		12,95,625

After locating the mistakes and making the following adjustments prepare trading and profit and loss account and balance sheet in the prescribed form.

Adjustments: (i) Stock on 31.12.2005 Rs 95,000 and (ii) Write-off preliminary expenses.

Answer 1

Bang Vikas Ltd Profit and Loss Account for the year ended December 31, 2005
Dr.				Cr.
Expenses/Losses			Amount Rs		Revenues/Gains			Amount Rs
Opening Stock			75,000		Sales			4,15,000
Purchases			1,85,000		Closing Stock			95,000
Fuel			2,500
Carriage			1,800
Freight			8,900
Gross Profit c/d			2,36,800
			5,10,000					5,10,000
Salary and Wages			99,300		Gross Profit b/d			2,36,800
Repairs			4,300
Rates and Taxes			1,800
Travelling Expenses			2,000
Discounts			6,400
Director’s Fee			5,700
Bad Debts			2,100
Debenture Interest		9,000
	Add: Outstanding	9,000	18,000
Sundry Expenses			2,350
Depreciation on Machinery			33,000
Preliminary Expenses written off			5,000
Net Profit c/d			56,850
			2,36,800					2,36,800
Interim Dividend Paid			37,500		Balance b/d			13,625
Balance c/d			32,975		Net Profit of the Current year			56,850
			70,475					70,475

Balance Sheet as on December 31, 2005
Liabilities			Amount Rs	Assets			Amount Rs
Share Capital				Fixed Assets
Authorised Capital: 60,000 shares of 10 each					Land and Buildings		3,00,000
			6,00,000		Machinery	3,30,000
					Less: Depreciation	33,000	2,97,000
Issued and Subscribed:					Furniture		7,200
4,000 shares of Rs 10 each				Investments
	Fully Called up	4,00,000			Investments		75,000
	Less: Calls in Arrear	(7,500)	3,92,500
Reserve and Surplus				Current Assets, Loan and Advances
	Sinking Fund		75,000	Current Assets:
	Profit and Loss		32,975		Sundry Debtors	87,000
Secured Loans					Less: Provision for Bad debt	4,375	82,625
6% Debentures			3,00,000		Stock		95,000
Unsecured Loans					Bank Balance		39,900
	Public Deposits		10,000		Suspense A/c (Difference of the Trial Balance)		750
Current Liabilities and Provisions
A. Current Liabilities
	Sundry Creditors		40,000
	Bills Payable		38,000
	Outstanding Debenture Interest		9,000
B. Provisions
			8,97,475				8,97,475

Working Notes:

Rectified Trial Balance
Particulars	L.F.	Debit Amount Rs	Credit Amount Rs
Subscribed Capital			4,00,000
6% Debentures			3,00,000
Profit and Loss (Cr.)			13,625
Sales			4,15,000
Sinking Fund			75,000
Depreciation on Machinery		33,000
Sundry Creditors			40,000
Bills Payable			38,000
Provision for bad debts			4,375
Preliminary Expenses		5,000
Sundry Debtors		87,000
Call in Arrear		7,500
Land and Building		3,00,000
Machinery		2,97,000
Interim Dividend Paid		37,500
Stock on 1-1-2005		75,000
Furniture		7,200
Bank Balance		39,900
Purchases		1,85,000
Investments		75,000
Salary and Wages		99,300
Repairs		4,300
Fuel		2,500
Rates and Tax		1,800
Travelling Expenses		2,000
Discounts		6,400
Director’s Fees		5,700
Bad debts		2,100
Debenture Interest		9,000
Carriage		1,800
Freight		8,900
Sundry Expenses		2,350
Public Deposit			10,000
Total		12,95,250	12,96,000
Difference of the Trial balance		750
		12,96,000	12,96,000