Question

Following is the Trial Balance of Mr. Gautam as at 31st March, 2017:

Dr. Balances	(₹)	Cr. Balances	(₹)
Goodwill	30,000	Purchase Returns	2,650
Land & Buildings	60,000	Capital A/c	2,03,000
Plant & Machinery	40,000	Bills Payable	13,800
Loose Tools	3,000	Sundry Creditors	30,000
Bills Receivable	2,000	Sales	1,15,000
Stock 1st April, 2016	40,000
Purchases	51,000
Wages	20,000
Carriage Inwards	1,200
Coal & Gas	5,600
Salaries	4,000
Rent	2,700
Discount allowed	1,500
Cash at Bank	25,000
Cash in hand	1,400
Sundry Debtors	45,000
Repairs	1,800
Printing & Stationery	600
Bad-debts	1,200
Advertisements	3,500
Furniture and Fixtures	1,200
General Expenses	250
Investments	5,000
Drawings	15,000
Carriage Outwards	1,500
Sales Returns	2,000
	3,64,450		3,64,450

You are required to prepare Final Accounts after taking into account the following adjustments:
(a) Closing Stock on 31st March, 2017 was ₹ 60,000.
(b) Depreciate Plant and Machinery at 5%, Loose Tools at 15% and Furniture and fixtures at 5%.
(c) Provide $2\frac{1}{2}\%$ for discount on Sundry Debtors and also provide 5% for Bad and Doubtful Debts on Sundry Debtors.
(d) Only three quarter's rent has been paid, the last quarter's rent being outstanding.
(e) Interest earned but not received ₹ 600.
(f) Write off $\frac{1}{4}\mathrm{th}$ of Advertisement expenses.

Answer 1

Financial Statements of Mr. Gautam
Trading Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			40,000	Sales	1,15,000
Purchases		51,000		Less: Sales Return	2,000	1,13,000
Less: Purchases Return		2,650	48,350	Closing Stock		60,000
Wages			20,000
Carriage Inwards			1,200
Coal and Gas			5,600
Gross Profit (Balancing Figure)			57,850
			1,73,000			1,73,000

Profit and Loss Account for the year ended March 31, 2017
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Depreciation: (WN1)				Gross Profit	57,850
Plant & Machinery		2,000		Accrued Interest	600
Loose Tools		450
Furniture		60	2,510
Rent		2,700
Add: Outstanding Rent (WN2)		900	3,600
Bad Debts		1,200
Add: New Provision (WN3)		2,250	3,450
Discount Allowed			1,500
Provision for Discount on Debtors (WN4)			1,069
Advertisement Expenses written-off			875
Salaries			4,000
Repairs			1,800
Printing & Stationery			600
General Expenses			250
Carriage Outwards			1,500
Net Profit (Balancing Figure)			37,296
			58,450		58,450

Balance Sheet as on March 31, 2017
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital	2,03,000		Fixed Assets
Add : Net Profit	37,296		Plant & Machinery	40,000
Less: Drawings	15,000	2,25,296	Less: Depreciation	2,000	38,000
			Loose Tools	3,000
Current Liabilities			Less: Depreciation	450	2,550
Creditors		30,000	Furniture & Fixtures	1,200
Bills Payable		13,800	Less: Depreciation	60	1,140
Outstanding Rent		900	Investments		5,000
			Land & Building		60,000
			Goodwill		30,000
			Current Assets
			Closing Stock		60,000
			Accrued Interest		600
			Advertisement Expenditure		2,625
			Bills Receivable		2,000
			Cash at Bank		25,000
			Debtors	45,000
			Less: Provision for Bad Debts	2,250
			Less: Provision for Discount	1,069	41,681
			Cash in Hand		1,400
		2,69,996			2,69,996

Working Notes:

WN1: Calculation of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Plant}\mathrm{}\&\mathrm{Machinery}=40,000\times \frac{5}{100}=\mathrm{Rs}2,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}\mathrm{}\&\mathrm{}\mathrm{Fixtures}=1,200\times \frac{5}{100}=\mathrm{Rs}60\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loose}\mathrm{}\mathrm{Tools}\mathrm{}=3,000\times \frac{15}{100}=\mathrm{Rs}450\end{array}$

WN2: Calculation of Outstanding Rent

$\begin{array}{l}\mathrm{Rent}\mathrm{}\mathrm{paid}\mathrm{}\mathrm{for}\mathrm{}3\mathrm{}\mathrm{quarters}=2,700\\ \mathrm{Rent}\mathrm{}\mathrm{per}\mathrm{}\mathrm{quarter}=\frac{2,700}{3}=\mathrm{Rs}900=\mathrm{Outstanding}\mathrm{}\mathrm{Rent}\end{array}$

WN3: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& \mathrm{Sundry}\mathrm{}\mathrm{Debtors}\times \frac{\mathrm{Rate}}{100}\\ & =& 45,000\times \frac{5}{100}=\mathrm{Rs}2,250\end{array}$

WN4: Calculation of Provision for Discount on Debtors

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Discount}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Debtors}& =& \left(\mathrm{Sundry}\mathrm{}\mathrm{Debtors}\mathrm{}-\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\right)\times \frac{\mathrm{Rate}}{100}\\ & =& \left(45,000-2,250\right)\times \frac{2.5}{100}=\mathrm{Rs}1,068.75\mathrm{or}1,069\end{array}$