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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.

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Solution

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


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Q.

From the following receipts and payments and information given below, Prepare Income and Expenditure Account and opening Balance Sheet of Adult Literacy Organisation as on December 31, 2006.

Receipt and Payment Account for the year ending as on December 31, 2006

Receipts

Amount Rs

Payments

Amount Rs

Balance b/d

General Expenses

3,200

Cash in hand

4,000

News paper

1,850

Cash at Bank

15,550

Electricity

3,000

Subscriptions

Fixed deposit with bank

(on 31.06.2006) @ 10% p.a.

18,000

2005

1,200

2006

26,500

Books

7,000

2007

500

28,200

Salary

3,600

Sale of old newspapers

1,250

Rent

6,500

Govt. grant

12,000

Postage charges

300

Sale of old furniture (book value Rs5000)

3,700

Furniture (purchased)

10,500

Interest received on FD

450

Balance c/d

Cash in Hand

3,000

Cash at Bank

8,200

65,150

65,150

Information:

(i) Subscription outstanding as on 31.12.2005 Rs 2,000 and on December 31, 2006 Rs 1,500.

(ii) On December 31, 2006 Salary outstanding Rs 600, and one month Rent paid in advance.

(iii) On Jan. 01, 2005 organisation owned Furniture Rs 12,000, Books Rs 5,000.

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