Question

Following balances are taken from the books of Niranjan. Prepare Trading and Profit and Loss Account and Balance Sheet for the year ended 31st March, 2019:

Particulars	₹	Particulars	₹
Capital	12,00,000	Drawings	2,10,000
Opening Stock	4,50,000	Plant and Machinery	2,40,000
Furniture	15,000	Purchases	29,50,000
Sales	43,50,000	Insurances	15,000
Purchases Return	40,000	Sales Return	70,000
Rent	50,000	Trade Expenses	20,000
Salaries	2,40,000	Wages	4,00,000
Bad Debts	10,000	6% Investments	5,00,000
Sundry Debtors	4,00,000	Sundry Creditors	1,90,000
Bills Payable	8,000	Cash	1,22,000
Advertisement Expenses	60,000	Miscellaneous Income	12,000
Patents	48,000

Adjustments:
(i) Closing Stock ₹ 7,50,000.
(ii) Depreciate Machinery by 10% and Furniture by 20%.
(iii) Wages ₹ 50,000 and salaries ₹ 20,000 are outstanding.
(iv) Write off ₹ 50,000 as further Bad Debts and create 5% Provision for Doubtful Debts. Also, create a reserve for discount on Debtors @ 2%.
(v) Investments were made on 1st July, 2018 and no interest has been received so far.

Answer 1

Financial statements of Mr. Niranjan
Trading Account for the year ended March 31, 2019
Dr.					Cr.
Particulars		Amount (₹)	Particulars		Amount (₹)
Opening Stock		4,50,000	Sales	43,50,000
Purchases	29,50,000		Less: Sales Return	(70,000)	42,80,000
Less: Purchases Return	(40,000)	29,10,000	Closing Stock		7,50,000
Wages	4,00,000
Add: Outstanding wages	50,000	4,50,000
Gross Profit (Balancing Figure)		12,20,000
		50,30,000			50,30,000

Profit and Loss Account for the year ended March 31, 2019
Dr.						Cr.
Particulars			Amount (₹)	Particulars	Amount (₹)
Rent			50,000	Gross Profit	12,20,000
Salaries		2,40,000
Add: Outstanding Salaries		20,000	2,60,000
Bad Debts		10,000		Interest Accrued on Investment
Add: Further Bad Debts		50,000		(5,00,000 × 6% × 9/12)	22,500
Add: Provision for Doubtful Debts		17,500	77,500	Miscellaneous Receipts	12,000
Advertisement expenses			60,000
Provision for discount on debtors			6,650
Insurances			15,000
Trade Expenses			20,000
Depreciation on:
Machinery		24,000
Furniture		3000	27,000
Net Profit (Balancing Figure)			7,38,350
			12,54,500		12,54,500

Balance Sheet as on March 31, 2019
Liabilities		Amount (₹)	Assets		Amount (₹)
Capital	12,00,000		Fixed Assets
Less: Drawings	(2,10,000)		Patents		48,000
Add: Net Profit	7,38,350	17,28,350	Plant and Machinery	2,40,000
Current Liabilities			Less: 10% Depreciation	(24,000)	2,16,000
Sundry Creditors		1,90,000	Furniture	15,000
Wages Outstanding		50,000	Less: 20% Depreciation	(3,000)	12,000
Salaries Outstanding		20,000	6% Investment	5,00,000
Bills Payable		8000	Add: Accrued Interest	22,500	5,22,500
			Current Assets
			Closing Stock		7,50,000
			Debtors	4,00,000
			Less: Further Bad Debts	(50,000)
			Less: Provision for Doubtful Debts	(17,500)
				3,32,500
			Less: Provision for Discount	(6,650)	3,25,850
			Cash		1,22,000
		19,96,350			19,96,350