Question

Following is the Trial Balance of Atam Prakash as on 31st March, 2018:

Heads of Accounts		Dr. Balances (₹)	Cr. Balances (₹)
Capital A/c	................................................................................	…	8,00,000
Drawings A/c	................................................................................	60,000	…
Stock on 1st April, 2017	................................................................................	4,50,000	…
Purchases	................................................................................	26,00,000	…
Sales	................................................................................	…	31,00,000
Furniture	................................................................................	1,00,000	…
Sundry Debtors	................................................................................	4,00,000	…
Freight and Octroi	................................................................................	46,000	…
Trade Expenses	................................................................................	5,000	…
Salaries	................................................................................	55,000	…
Rent	................................................................................	24,000	…
Advertisement Expenses	................................................................................	50,000	…
Insurance Premium	................................................................................	4,000	…
Commission	................................................................................	…	13,000
Discount	................................................................................	2,000	…
Bad Debts	................................................................................	16,000	…
Provision for Doubtful Debts	................................................................................	…	9,000
Creditors	................................................................................	…	2,00,000
Cash in Hand	................................................................................	52,000	…
Bank	................................................................................	58,000	…
Land and Building	................................................................................	2,00,000	…
Total		41,22,000	41,22,000

Adjustments:
(i) Stock on 31st March, 2018 was valued at ₹ 5,30,000.
(ii) Salaries have been paid so far for 11 months only.
(iii) Unexpired insurance is ₹ 1,000
(iv) Commission earned but not yet received amounting to ₹ 1,220 plus IGST @ 12% is to be recorded in books of account.
(v) Provision for Doubtful Debts is to be bought up 3% of Sundry Debtors.
(vi) Manager is to be allowed a commission of 10% on net profits after charging such commission.
(vii) Furniture is depreciated @ 10% p.a.
(viii) Only one-fourth of advertisement expenses are to be written off.
Prepare Trading and Profit and Loss Account for the year ended 31st March, 2018 and Balance Sheet as on that date.

Answer 1

Financial Statement of Atam Prakash Trading Account for the year ended March 31, 2018
Dr.			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	4,50,000	Sales	31,00,000
Purchases	26,00,000	Closing Stock	5,30,000
Freight and Octori	46,000
Gross Profit (Balancing Figure)	5,34,000
	36,30,000		36,30,000

***

Profit and Loss Account for the year ended March 31, 2018
Dr.						Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Trade Expenses			5,000	Gross Profit		5,34,000
Salaries	55,000			Commission	13,000
Add: Outstanding Salaries	5,000		60,000	Add: Accrued Commission	1,220	14,220
(55,000 × 1/11)
Rent			24,000
Advertising Expenses $(50,000\times \frac{1}{4})$			12,500
Insurance Premium		4,000
Less: Prepaid Insurance		(1,000)	3,000
Discount			2,000
Bad Debts		16,000
Add: Provision for Doubtful Debts		12,000
		28,000
Less: Existing Provision		(9,000)	19,000
Depreciation on furniture			10,000
Manager’s Commission			37,520
Net Profit (Balancing Figure)			3,75,200
			5,48,220			5,48,220

Balance Sheet as on March 31, 2018
Liabilities		Amount (₹)	Assets		Amount (₹)
Capital	8,00,000		Furniture	1,00,000
Less: Drawings (WN2)	(60,000)		Less: 10% Depreciation	(10,000)	90,000
Add: Net Profit	3,75,200	11,15,200	Sundry Debtors	4,00,000
Creditors		2,00,000	Less: Provision for Doubtful Debts	(12,000)	3,88,000
Manager’s Commission Payable		37,520	Land and Building		2,00,000
Salaries Outstanding		5,000	Closing Stock		5,30,000
GST Payable (Output IGST)		146	Bank		58,000
			Cash in Hand		52,000
			Prepaid Insurance		1,000
			Accrued Commission Advertisement Expenses $(50,000\times \frac{3}{4})$ GST Receivable		1,220 37,500 146
		13,57,866			13,57,866

Working Notes:
WN1:

WN2: Advance for Furniture is for furniture of proprietor's residence. Therefore, it will transferred to drawings.

WN3: IGST on commission has not been received being accrued commission. Hence, GST of ₹146 has been taken as GST payable and second as GST receivable.