Question

Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss account and a balance sheet as on December 31, 2011.

$\begin{array}{cccc}\text{Account Title}& \text{Amt.(Rs)}& \text{Account Title}& \text{Amt.(Rs)}\\ \text{Opening Stock}& 2,26,000& \text{Sales}& 6,80,000\\ \text{Purchase}& 4,40,000& \text{Return Outwards}& 15,000\\ \text{Drawings}& 75,000& \text{Creditors}& 50,000\\ \text{Buildings}& 1,00,000& \text{Bills Payable}& 63,700\\ \text{Motor van}& 30,000& \text{Interest Received}& 20,000\\ \text{Freight Inwards}& 3,400& \text{Capital}& 3,50,000\\ \text{Sales Return}& 10,000& & \\ \text{Trade Expenses}& 3,300& & \\ \text{Heat and Power}& 8,000& & \\ \text{Salary and Wages}& 5,000& & \\ \text{Legal Expenses}& 3,000& & \\ \text{Postage and Telegram}& 1,000& & \\ \text{Bad Debts}& 6,500& & \\ \text{Cash in Hand}& 79,000& & \\ \text{Cash at Bank}& 98,000& & \\ \text{Sundry Debtors}& 25,000& & \\ \text{Investments}& 40,000& & \\ \text{Insurance}& 3,500& & \\ \text{Machinery}& 22,000& & \\ & \overline{\underset{–}{\underset{–}{11,78,700}}}& & \overline{\underset{–}{\underset{–}{11,78,700}}}\end{array}$

The following additional information is available

1. Stock on December 31, 2011 was Rs. 30,000.

2. Depreciation is to be charged on building @ 5% and motor van @ 10%

3. Provision for doubtful debts is to be maintained @ 5% on Sundry Debtors.

4. Unexpired insurance was Rs. 600.

5. The Manager is entitled to a commission @ 5% on net profit after charging such commissioion.

Answer 1

$\begin{array}{ccc}& \text{Trading and Profit and Loss Account}& \\ \text{Dr.}& \text{as on 31st December, 2011}& \text{Cr.}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt.(Rs)}& \text{Particulars}& & \text{Amt.(Rs)}\\ \text{Opening stock}& & 2,26,000& \text{Sales}& 6,80,000& \\ \text{Purchase}& 4,40,000& & \text{(-)Return}& & \\ \text{(-)Return}& & & \text{Inwards}& \underset{–}{10,000}& 6,70,000\\ \text{Outwards}& \underset{–}{15,000}& 4,25,000& \text{Closing Stock}& & 30,000\\ \text{Freight Inwards}& & 3,400& & & \\ \text{Heat and Power}& & 8,000& & & \\ \text{Gross Profit}& & 37,600& & & \\ & & \overline{\underset{–}{\underset{–}{7,00,000}}}& & & \overline{\underset{–}{\underset{–}{7,00,000}}}\\ \text{Salary and Wages}& & 5,000& \text{Gross Profit b/d}& & 37,600\\ \text{Trade Expenses}& & 3,300& \text{Interest Received}& & 20,000\\ \text{Legal Expenses}& & 3,000& & & \\ \text{Postage and Telegram}& & 1,000& & & \\ \text{Bad Debts}& 6,500& & & & \\ \text{(+)Provision}& \underset{–}{1,250}& 7,750& & & \\ \text{Insurance}& 3,500& & & & \\ \text{(-)Prepaid}& \underset{–}{600}& 2,900& & & \\ \text{Depreciation on Building}& & 5,000& & & \\ \text{Depreciation on Motor Van}& & 3,000& & & \\ \text{Manager's Commission}& & & & & \\ [26,650\times \frac{5}{105}]& & 1,269& & & \\ \text{Net Profit}& & 25,381& & & \\ & & \overline{\underset{–}{\underset{–}{57,600}}}& & & \overline{\underset{–}{\underset{–}{57,600}}}\end{array}$

Balance Sheet

$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt. (Rs.)}& \text{Assets}& & \text{Amt. (Rs.)}\\ \text{Capital}& 3,50,000& & \text{Machinery}& & 22,000\\ \text{(+) Net Profit}& \underset{–}{25,381}& & \text{Investments}& & 40,000\\ & 3,75,381& & \text{Buildings}& 1,00,000& \\ \text{(-)Drawings}& \underset{–}{75,000}& 3,00,381& \text{(-) Depreciation}& \underset{–}{5,000}& 95,000\\ \text{Creditors}& & 50,000& \text{Motor Van}& 30,000& \\ \text{Bills Payable}& & 63,700& \text{(-) Depreciation}& & \\ \text{Manager's Commission}& & & @10\%& \underset{–}{3,000}& 27,000\\ \text{Outstanding}& & 1,269& \text{Cash in Hand}& & 79,000\\ & & & \text{Cash at Bank}& & 98,000\\ & & & \text{Sundry Debtors}& 25,000& \\ & & & \text{(-) Provision for}& & \\ & & & \text{Bad Debts}& \underset{–}{1,250}& 23,750\\ & & & \text{Prepaid Insurance}& & 600\\ & & & \text{Closing stock}& & 30,000\\ & & \overline{\underset{–}{\underset{–}{4,15,350}}}& & & \overline{\underset{–}{\underset{–}{4,15,350}}}\end{array}$