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 March 31, 2017.

Account Title	Amount Rs	Account Title	Amount Rs
Opening stock	2,26,000	Sales	6,80,000
Purchases	4,40,000	Return outwards	15,000
Drawings	75,000	Creditors	50,000
Buildings	1,00,000	Bills payable	63,700
Motor van	30,000	Interest received	20,000
Freight inwards	3,400	Capital	3,50,000
Sales return	10,000
Trade expense	3,300
Heat and Power	8,000
Salary and Wages	5,000
Legal expense	3,000
Postage and Telegram	1,000
Bad debts	6,500
Cash in hand	79,000
Cash at bank	98,000
Sundry debtors	25,000
Investments	40,000
Insurance	3,500
Machinery	22,000
	11,78,700		11,78,700

The following additional information is available :

1. Stock on December 31, 2017 was Rs 30,000.

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

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

4. Unexpired insurance was Rs 600.

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

Answer 1

Trading Account
Dr.										Cr.
Particulars				Amount Rs	Particulars					Amount Rs
Opening Stock				2,26,000	Sales				6,80,000
Purchases			4,40,000				Less: Sales Return		10,000	6,70,000
	Less: Returns Outwards		15,000	4,25,000	Closing Stock					30,000
Freight Inwards				3,400
Heat and Power				8,000
Gross Profit				37,600
				7,00,000						7,00,000

Profit and Loss Account
Dr.									Cr.
Particulars				Amount Rs	Particulars				Amount Rs
Trade Expenses				3,300	Gross Profit				37,600
Salary and Wages				5,000	Interest Received				20,000
Legal Expenses				3,000
Postage and Telegram				1,000
Bad Debts			6,500
	Add: New Provision		1,250	7,750
Depreciation on Building				5,000
Depreciation on Motor Van				3,000
Insurance			3,500
	Less: Unexpired Insurance		600	2,900
Net Profit				26,650
				57,600					57,600
Manager’s Commission Payable				1,269	Balance b/d				26,650
Net Profit after Commission				25,381
				26,650					26,650

Balance Sheet
Liabilities			Amount Rs	Assets				Amount Rs
Capital		3,50,000		Cash in Hand				79,000
	Add: Net Profit	25,381		Cash at Bank				98,000
	Less: Drawings	75,000	3,00,381	Buildings			1,00,000
Creditors			50,000		Less: Depreciation		5,000	95,000
Bills Payable			63,700
Manager’s Commission Payable			1,269	Motor Van			30,000
					Less: Depreciation		3,000	27,000
				Sundry Debtors			25,000
					Less: New Provision		1,250	23,750
				Investments				40,000
				Machinery				22,000
				Unexpired Insurance				600
				Closing Stock				30,000
			4,15,350					4,15,350

Note:

In NCERT, Q-7 adjustment (5) is a misprint. The answer represents the Net Profit after the Manager’s Commission. However, in the adjustment, the Net Profit has been mentioned before the Manager’s Commission.