Question

C maintains his books according to Single Entry System. Following figures were available from the books for the six months ended 31^st December 2017:

Particulars	1st July, 2017 (₹)	31st Dec. 2017 (₹)
Plant and Machinery	1,50,000	1,40,000
Debtors	65,000	60,000
Cash and Bank Balances	25,000	31,000
Stock	40,000	45,000
Creditors	9,000	10,000

Adjustments:

(a) He had withdrawn ₹ 200 in the beginning of every month for household purposes.

(b) Depreciation on Plant and Machinery @ 10% p.a.

(c) Further Bad Debts ₹ 5,000 and Provision for Doubtful Debts to be created @ 2%.

(d) During the period, salaries have been prepaid by ₹ 500 while wages outstanding were ₹ 1,000.

(e) Interest on drawings to be reckoned @ 6% p.a.

You are required to prepare the Statement of Profit or Loss for the half year ended 31^st December, 2017, followed by Revised Statement of Affairs as on that date.

Answer 1

Statement of Affairs as on July 01,2017
Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	9,000	Cash and Bank balances	25,000
Capital (Balancing Figure)	2,71,000	Debtors	65,000
		Stock	40,000
		Plant and Machinery	1,50,000
	2,80,000		2,80,000

Statement of Affairs as on December 31,2017
Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	10,000	Cash and Bank balances	31,000
Outstanding Wages	1,000	Debtors	60,000
Capital (Balancing Figure)	2,65,500	Stock	45,000
		Prepaid Salary	500
		Plant and Machinery	1,40,000
	2,76,500		2,76,500

Statement of Profit or Loss for the half year ended December 31,2017
Particulars		Amount (₹)
Capital at the end of the year		2,65,500
	Add: Drawings made during the year	1,200
Adjusted capital at the end of the year		2,66,700
	Less: Capital in the beginning of the year	2,71,000
Gross Loss (Profit before Adjustment)		4,300
Less: Interest on Drawings		21
Add: Depreciation on Plant and Machinery		7,000
Bad Debts		5,000
Provision for Doubtful Debts		1,100
Net Loss (Profit After Adjustment)		17,379

Statement of Affairs (After adjustments) as on December 31, 2017
Liabilities		Amount (₹)	Assets		Amount (₹)
Creditors		10,000	Cash and Bank balances		31,000
Outstanding Wages		1,000	Debtors	60,000
Capital	2,71,000		Less: Bad Debts	5,000
Less: Net Loss	17,379			55,000
Less: Drawings	1,200		Less: Provision for D.D.	1,100	53,900
Less: Interest on Drawings	21	2,52,400	Plant and Machinery	1,40,000
			Less: Depreciation	7,000	1,33,000
			Stock		45,000
			Prepaid Salary		500
		2,63,400			2,63,400

Statement of Affairs (After adjustments) as on December 31, 2017
Liabilities		Amount (₹)	Assets		Amount (₹)
Creditors		10,000	Cash and Bank balances		31,000
Outstanding Wages		1,000	Debtors	60,000
Capital	2,71,000		Less: Bad Debts	5,000
Less: Net Loss	17,379			55,000
Less: Drawings	1,200		Less: Provision for D.D.	1,100	53,900
Less: Interest on Drawings	21	2,52,400	Plant and Machinery	1,40,000
			Less: Depreciation	7,000	1,33,000
			Stock		45,000
			Prepaid Salary		500
		2,63,400			2,63,400

Working Notes:

WN1: Depreciation on plant and machinery would be charged for six months only i.e., Rs 7,000 $\left(\frac{1,40,000\times 10\times 6}{100\times 12}\right)$

WN2: Amount of Provision for Doubtful Debts would be Rs 1,100 $(\frac{2}{100}\times (60,000-5,000))$

WN3:

Calculation of Amount of Interest on Drawings:

Date	Amount	Months	Product
Jul. 01	200	6	1,200
Aug. 01	200	5	1,000
Sep. 01	200	4	800
Oct. 01	200	3	600
Nov. 01	200	2	400
Dec. 01	200	1	200
Total			4,200

Interest on Drawings $=\frac{4,200\times 6\times 1}{100\times 12}=\text{Rs 21}$