Question

From the following balances extracted from the books of Sharma, prepare the Trading and Profit & Loss Account for the year ended 31st March 2019 and Balance Sheet as at that date after taking into consideration the adjustments given below:

Trial Balance
as at 31st March, 2019

Particulars			Dr. (₹)	Cr. (₹)
Drawing and Capital			7,500	50,000
Purchases and Sales			72,100	95,000
Returns			1,300	2,700
Sundry Debtors and Creditors			18,200	35,750
Stock (1.04.2018)			19,800	-
Bad Debts			3,000	-
Bill Receivable and Payable			12,000	23,000
Cash in Hand			300	-
Office Expenses			6,210	-
Sales Van			15,000	-
Sales Van Expenses			1,400	-
Discount			-	2,910
Rent and Taxes			10,700	-
Telephone Charges			1,050	-
Postage			950	-
Furniture			5,000	-
Printing and Stationery			2,750	-
Commission			8,400	-
Carriage Inwards			3,200	-
Salaries and Wages			20,500
			2,09,360	2,09,360

Adjustments:
(i) Closing Stock was valued at ₹ 61,700.
(ii) Depreciate Furniture and Machinery @10% p.a. and Sale Van @20% p.a.
(iii) Outstanding Rent amounted to ₹ 900.
(iv) Bad Debts ₹ 200.
(v) Make a provision for Doubtful Debts @5% on Debtors.
(vi) Charge one-fourth of salaries and wages to the Trading Account.
(vii) A new machinery was purchased on credit and installed on 31st December 2018 costing ₹ 15,000. No entry for the same has yet been passed in the books.

Answer 1

Financial Statements of Sharma
Trading Account for the year ended March 31, 2019
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Opening Stock			19,800	Sales	95,000
Purchases		72,100		Less: Return Inwards	1,300	93,700
Less: Return Outwards		2,700	69,400	Closing Stock		61,700
Salaries & Wages (1/4th)			5,125
Carriage Inwards			3,200
Gross Profit (Balancing Figure)			57,875
			1,55,400			1,55,400

Profit and Loss Account for the year ended March 31, 2019
Dr.							Cr.
Particulars				Amount (₹)	Particulars	Amount (₹)
Depreciation: (WN1)					Gross Profit	57,875
Machinery			375		Discount Received	2,910
Furniture			500
Sales Van			3,000	3,875
Bad Debts			3,000
Add: Further Bad Debts			200
Add: New Provision (WN2)			900	4,100
Office Expenses				6,210
Telephone Charges				1,050
Rent and Taxes		10,700
Add: Outstanding		900		11,600
Postage & Telegram				950
Printing & Stationery				2,750
Salaries & Wages (3/4th)				15,375
Commission				8,400
Sales Van Expenses				1,400
Net Profit (Balancing Figure)				5,075
				60,785		60,785

Balance Sheet as on March 31, 2019
Liabilities		Amount (₹)	Assets			Amount (₹)
Capital	50,000		Fixed Assets
Add: Net Profit	5,075		Furniture		5,000
Less: Drawings	7,500	47,575	Less: Depreciation		500	4,500
			Machinery		15,000
Current Liabilities			Less: Depreciation		375	14,625
Creditors for Machinery		15,000	Sales Van		15,000
Sundry Creditors		35,750	Less: Depreciation		3,000	12,000
Outstanding Rent		900
Bills Payable		23,000	Current Assets
			Closing Stock			61,700
			Bills Receivable			12,000
			Cash in Hand			300
			Sundry Debtors	18,200
			Less: Further Bad Debts	200
			Less: Provision for Doubtful Debts	900		17,100
		1,22,225				1,22,225

Working Notes:
WN1: Calculation of Amount of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}=5,000\times \frac{10}{100}=\mathrm{Rs}500\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Sales}\mathrm{}\mathrm{Van}=15,000\times \frac{20}{100}=\mathrm{Rs}3,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Machinery}=15,000\times \frac{10}{100}\times \frac{3}{12}=\mathrm{Rs}375\end{array}$

WN2: Calculation of Provision for Doubtful Debts
$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{Debts}& =& \left(\mathrm{Sundry}\mathrm{}\mathrm{Debtors}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\right)\times \frac{\mathrm{Rate}}{100}\\ & =& \left(18,200-200\right)\times \frac{5}{100}=\mathrm{Rs}900\end{array}$