Question

Dinker and Ravinder were partners sharing profits and losses in the ratio of 2:1. The following balances were extracted from the books of account, for the year ended December 31, 2005.

$\begin{array}{ccc}\text{Account Name}& \text{Amt. (Dr)}& \text{Amt. (Cr)}\\ \text{Capital}& & \\ \text{Dinker}& & 2,35,000\\ \text{Ravinder}& & 1,63,000\\ \text{Drawings}& & \\ \text{Dinker}& 6,000& \\ \text{Ravinder}& 5,000& \\ \text{Opening Stock}& 35,100& \\ \text{Purchase and Sales}& 2,85,000& 3,75,800\end{array}$

$\begin{array}{ccc}\text{Account Name}& \text{Amt. (Dr)}& \text{Amt. (Cr)}\\ \text{Carriage Inward}& 2,200& \\ \text{Returns}& 3,000& 2,200\\ \text{Stationery}& 1,200& \\ \text{Wages}& 12,500& \\ \text{Bills Receivables and Bills}& 45,000& 32,000\\ \text{Payables}& & \\ \text{Discount}& 900& 400\\ \text{Salaries}& 12,000& \\ \text{Rent and Taxes}& 18,000& \\ \text{Insurance Premium}& 2,400& \\ \text{Postage}& 300& \\ \text{Sundry Expenses}& 1,100& \\ \text{Commission}& & 3,200\\ \text{Debtors and Creditors}& 95,000& 40,000\\ \text{Building}& 1,20,000& \\ \text{Plant and Machinery}& 80,000& \\ \text{Investments}& 1,00,000& \\ \text{Furniture and Fixture}& 26,000& \\ \text{Bad Debts}& 2,000& \\ \text{Bad Debts Provision}& & 4,600\\ \text{Loan}& & 35,000\\ \text{Legal Expenses}& 200& \\ \text{Audit Fee}& 1,800& \\ \text{Cash in Hand}& 13,500& \\ \text{Cash at Bank}& 23,000& \\ & \overline{\underset{–}{8,91,200}}& \overline{\underset{–}{8,91,200}}\end{array}$

Prepare final accounts for the year ended December 31, 2005, with following adjustment

(a) Stock on December 31, 2005 was Rs 42,500.

(b) A Provision is to be made for bad debts at 5% on debtors.

(c) Rent outstanding was Rs 1,600.

(d) Wages outstanding were Rs 1,200.

(e) Interest on capital to be allowed on capital @ 4% per annum and interest on drawings to be on charged @6% per annum.

(f) Dinker and Ravinder are entitled to a Salary of Rs 2,000 per annum.

(g) Ravinder is entitled to a commission Rs 1,500.

(h) Depreciation is to be charged on Building @ 4%, Plant and Machinery, 6%, and furniture and fixture, 5%.

(i) Outstanding interest on loan amounted to Rs 350.

Answer 1

Trading Account

$\begin{array}{cccccccccccccc}\text{Dr}& & & & & & \text{For the year ending 31 December, 2005}& & & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Opening Stock}& & 35,100& \text{Sales}& 3,75,800& \\ \text{Purchase}& 2,85,000& & \text{(-) Sales Return}& \underset{–}{(3,000)}& 3,72,800\\ \text{(-) Purchase}& & & \text{Closig Stock}& & 42,500\\ \text{Return}& \underset{–}{(2,200)}& 2,82,800& & & \\ \text{Carriage Inwards}& & 2,200& & & \\ \text{Wages}& 12,500& & & & \\ \text{(+) Outstanding}& \underset{–}{1,200}& 13,700& & & \\ \text{Gross Profit c/d}& & 81,500& & & \\ & & \overline{\underset{–}{4,15,300}}& & & \overline{\underset{–}{4,15,300}}\end{array}$

Profit and Loss Account

$\begin{array}{cccccccccccccc}\text{Dr}& & & & & & \text{For the year ending 31 December, 2005}& & & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Stationery}& & 1,200& \text{Gross Profit b/d}& & 81,500\\ \text{Discount Allowed}& & 900& \text{Discount Received}& & 400\\ \text{Salaries}& & 12,000& \text{Commission}& & 3,200\\ \text{Rent and Taxes}& 18,000& & & & \\ \text{(+) Outstanding}& \underset{–}{1,600}& 19,600& & & \\ \text{Insurance Premium}& & 2,400& & & \\ \text{Postage}& & 300& & & \\ \text{Sundry Expenses}& & 1,100& & & \\ \text{Depreciation on}& & & & & \\ \text{Building}& 4,800& & & & \\ \text{Plant and Machinery}& 4,800& & & & \\ \text{Fixtures and Fittings}& \underset{–}{1,300}& 10,900& & & \\ \text{Provision for Bad Debts}& 4,750& & & & \\ \text{(+) Bad Debt}& \underset{–}{2,000}& & & & \\ & 6,750& & & & \\ \text{(-) Old Provision for Bad}& & & & & \\ \text{Debt}& \underset{–}{(4,600)}& 2,150& & & \\ \text{Legal Expenses}& & 200& & & \\ \text{Audit Fee}& & 1,800& & & \\ \text{Outstanding Interest on Loan}& & 350& & & \\ \text{Profit and Loss}& & 32,200& & & \\ \text{Appropriation A/c}& & & & & \\ & & \overline{\underset{–}{\underset{–}{85,100}}}& & & \overline{\underset{–}{\underset{–}{85,100}}}\end{array}$

Profit and Loss Appropriation Account

$\begin{array}{cccccccccccccccccc}\text{Dr}& & & & & & & & \text{For the year ending 31 December, 2005}& & & & & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Interest on Capital}& & & \text{Net Profit}& & 32,200\\ \text{Dinker}& 9,400& & \text{Interest on Drawings}& & \\ \text{Ravinder}& \underset{–}{6,520}& 15,920& \text{Dinker}& 180& \\ & & & \text{Ravinder}& \underset{–}{150}& 330\\ \text{Partner's Salaries}& & & \text{(Calculated for average 6 Months)}& & \\ \text{Dinker}& 2,000& & & & \\ \text{Ravinder}& \underset{–}{2,000}& 4,000& & & \\ \text{Commission (Ravinder)}& & 1,500& & & \\ \text{Dinker's Capital A/c}& 7,407& & & & \\ \text{Ravinder's Capital A/c}& \underset{–}{3,703}& 11,110& & & \\ & & \overline{\underset{–}{32,530}}& & & \overline{\underset{–}{32,530}}\end{array}$

Partners' Capital Account

$\begin{array}{cccccccccccccc}\text{Dr}& & & & & & \text{For the year ending 31 December, 2005}& & & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& \text{Dinker}& \text{Ravinder}& \text{Particulars}& \text{Dinker}& \text{Ravinder}\\ \text{Drawings}& 6,000& 5,000& \text{Balance b/d}& 2,35,000& 1,63,000\\ \text{Interest on}& & 150& \text{Interest on}& & \\ \text{Drawings}& 180& & \text{Capital}& 9,400& 6,520\\ \text{Balance c/d}& 2,47,627& 1,71,573& \text{Partner's Salaries}& 2,000& 2,000\\ & & & \text{Profit and Loss}& & \\ & & & \text{Appropriation}& 7,407& 3,703\\ & & & \text{Commission}& & 1,500\\ & \overline{\underset{–}{\underset{–}{2,53,807}}}& \overline{\underset{–}{\underset{–}{1,76,723}}}& & \overline{\underset{–}{\underset{–}{2,53,807}}}& \overline{\underset{–}{\underset{–}{1,76,723}}}\end{array}$

Balance Sheet

As on 31 December, 2005

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Assets}& & \text{Amt. (Rs)}\\ \text{Bills Payable}& & 32,000& \text{Bills Receivables}& & 45,000\\ \text{Creditors}& & 40,000& \text{Debtors}& 95,000& \\ \text{Loan}& 35,000& & (-)5\%\text{Provision for}& & \\ \text{(+) Outstanding}& & & \text{Bad Debts}& (4,750)& 90,250\\ \text{Interest}& \underset{–}{350}& 35,350& & \underset{–}{}& \\ \text{Rent Outstanding}& & 1,600& \text{Building}& 120,000& \\ \text{Wages outstanding}& & 1,200& (-)4\%\text{Depreciation}& \underset{–}{(4,800)}& 1,15,200\\ \text{Capital}& & & \text{Plant and Machinery}& 80,000& \\ \text{Dinker}& 2,47,627& & (-)6\%\text{Depreciation}& (4,800)& 75200\\ \text{Ravinder}& \underset{–}{1,71,573}& 419,200& \text{Investments}& & 1,00,000\\ & & & \text{Furniture and Fixtures}& 26,000& \\ & & & (-)5\%\text{Depreciation}& \underset{–}{(1,300)}& 24,700\\ & & & \text{Cash in Hand}& & 13,500\\ & & & \text{Cash at Bank}& & 23,000\\ & & & \text{Closing Stock}& & 42,500\\ & & \underset{–}{\underset{–}{\overline{5,29,350}}}& & & \underset{–}{\underset{–}{\overline{5,29,350}}}\end{array}$