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Question

Chaman maintains his books according to Single Entry System. Following figures were available from the books for the six months ended 31st December 2018:

1st July, 2018
(₹)

31st December, 2018
(₹)

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(a) He had withdrawn ₹ 200 in the beginning of every month for household purposes.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 31st December, 2018, followed by Revised Statement of Affairs as on that date.

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Solution

Statement of Affairs

as on July 01,2018

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 31,2018

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 31,2018

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, 2018

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 (1,40,000×10×6100×12)

WN2: Amount of Provision for Doubtful Debts would be Rs 1,100 (2100×(60,0005,000))

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 =4,200×6×1100×12=Rs 21


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