Question

From the following balances extracted from the books of Raga Ltd. prepare a trading and profit and loss account for the year ended December 31, 2011 and a balance sheet as on that date.

$\begin{array}{cccc}\text{Account Title}& \text{Amt. (Rs.)}& \text{Account Title}& \text{Amt. (Rs.)}\\ \text{Drawings}& 20,000& \text{Sales}& 2,20,000\\ \text{Land and Buildings}& 12,000& \text{Capital}& 1,01,110\\ \text{Plant and Machinery}& 40,000& \text{Discount}& 1,260\\ \text{Carriage Inwards}& 100& \text{Apprentice Premium}& 5,230\\ \text{Wages}& 500& \text{Bills Payable}& 1,28,870\\ \text{Salary}& 2,000& \text{Purchase Return}& 10,000\\ \text{Sales Return}& 200& & \\ \text{Bank Charges}& 200& & \\ \text{Coal, Gas and Water}& 1,200& & \\ \text{Purchase}& 1,50,000& & \\ \text{Trade Expenses}& 3,800& & \\ \text{Stock (Opening)}& 76,800& & \\ \text{Cash at Bank}& 50,000& & \\ \text{Rates and Taxes}& 870& & \\ \text{Bills Receivable}& 24,500& & \\ \text{Sundry Debtors}& 54,300& & \\ \text{Cash in Hand}& 30,000& & \\ & \overline{\underset{–}{\underset{–}{4,66,470}}}& & \overline{\underset{–}{\underset{–}{4,66,470}}}\end{array}$

The additional information is as under:

1. Closing stock was valued at the end of the year Rs. 20,000.

2. Depreciation on plant and machinery charged @ 5% and land and building @ 10%.

3. Discount on debtors @ 3%.

4. Make a provision @ 5% on debtors for bad debts.

5. Salary outstanding was Rs. 100 and wages prepaid was Rs. 40.

6. The manager is entitled a commission of 5% on net profit after charging such commission.

Answer 1

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

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs.)}& \text{Particulars}& & \text{Amt. (Rs.)}\\ \text{Opening Stock}& & 76,800& \text{Sales}& 2,20,000& \\ \text{Purchases}& 1,50,000& & \text{(-)Sales Return}& \underset{–}{200}& 2,19,800\\ \text{(-) Purchase Return}& \underset{–}{10,000}& 1,40,000& \text{Closing Stock}& & 20,000\\ \text{Carriage Inwards}& & 100& & & \\ \text{Wages}& 500& & & & \\ \text{(-) Prepaid Wages}& \underset{–}{40}& 460& & & \\ \text{Coal, Gas, and Water}& & 1,200& & & \\ \text{Gross Profit c/d}& & 21,240& & & \\ & & \overline{\underset{–}{\underset{–}{2,39,800}}}& & & \overline{\underset{–}{\underset{–}{2,39,800}}}\\ \text{Salary}& 2,000& & \text{Gross Profit b/d}& & 21,240\\ \text{(+) Outstanding Salary}& \underset{–}{100}& 2,100& \text{Discount}& & 1,260\\ \text{Bank Charges}& & 200& \text{Apprentice Premium}& & 5,230\\ \text{Trade Expenses}& & 3,800& & & \\ \text{Rates and Taxes}& & 870& & & \\ \text{Depreciation on Plant and Machinery}& & 2,000& & & \\ \text{Depreciation on Land and Building}& & 1,200& & & \\ \text{Provision for Doubtful Debts}& & 2,715& & & \\ \text{Discount Allowed on Debtors}& & 1,548& & & \\ \text{Manager's Commission}& & 633& & & \\ [13,297\times \frac{5}{105}]& & & & & \\ \text{Net Profit}& & 12,664& & & \\ & & \overline{\underset{–}{\underset{–}{27,730}}}& & & \overline{\underset{–}{\underset{–}{27,730}}}\end{array}$

Balance Sheet
as on 31st December, 2011

$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt. (Rs.)}& \text{Assets}& & \text{Amt. (Rs.)}\\ \text{Capital}& 1,01,110& & \text{Land and Building}& 12,000& \\ \text{(+)Net Profit}& 12,664& & \text{(-)Depreciation}& \underset{–}{1,200}& 10,800\\ & \overline{1,13,774}& & \text{Cash at Bank}& & 50,000\\ \text{(-)Drawings}& \underset{–}{20,000}& 93,774& \text{Plant and Machinery}& 40,000& \\ \text{Bills Payable}& & 1,28,870& \text{(-)Depreciation}& \underset{–}{2,000}& 38,000\\ \text{Outstanding Salary}& & 100& \text{Bills Receivable}& & 24,500\\ \text{Outstanding Manager's}& & & \text{Sundry Debtors}& 54,300& \\ \text{Commission}& & 633& \text{(-)Provision}& 2,715& \\ & & & \text{(-)Discount}& \underset{–}{1,548}& 50,037\\ & & & \text{Cash in Hand}& & 30,000\\ & & & \text{Closing Stock}& & 20,000\\ & & & \text{Prepaid Wages}& & 40\\ & & \overline{\underset{–}{\underset{–}{2,23,377}}}& & & \overline{\underset{–}{\underset{–}{2,23,377}}}\end{array}$