Question

From the following figures prepare the Trading and Profit and Loss Account for the year ended 31st March, 2012 and the Balance Sheet as at that date:-

Particulars			(₹)	Particulars	(₹)
Stock (1st April, 2011)			75,000	Sundry Debtors	82,000
Purchases			8,00,000	Loan from X	10,000
Sales			12,00,000	Interest on X Loan	1,500
Motor Car			1,50,000	Furniture	20,000
Car Expenses			42,000	Land and Building	2,00,000
Rent			5,500	Capital	2,50,000
Salaries			35,200	Sundry Creditors	91,300
Bad Debts			1,500	Returns Inward	7,500
Provision for bad debts			8,100	Returns Outward	6,000
Commission (Cr.)			4,600	Cash in hand	16,400
Wages			1,25,000
Insurance			8,400

Adjustments:-
(i) Commission include ₹ 1,600 being commission received in advance.
(ii) Write off ₹ 2,000 as further Bad-debts and maintain Bad-debts provision at 5% on debtors.
(iii) Expenses paid in advance are: Wages ₹ 5,000 and Insurance ₹ 1,200.
(iv) Rent and Salaries have been paid for 11 months.
(v) Loan from X has been taken at 18% p.a. interest.
(vi) Depreciate furniture by 15% p.a. and Motor Car by 20% p.a.
(vii) Closing Stock was valued at ₹ 60,000.

Answer 1

Trading Account for the year ended March 31, 2012
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			75,000	Sales	12,00,000
Purchases		8,00,000		Less: Return Inwards	7,500	11,92,500
Less: Return Outwards		6,000	7,94,000	Closing Stock		60,000
Wages		1,25,000
Less: Prepaid		5,000	1,20,000
Gross Profit (Balancing Figure)			2,63,500
			12,52,500			12,52,500

Profit and Loss Account for the year ended March 31, 2012
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Depreciation: (WN1)				Gross Profit		2,63,500
Furniture		3,000		Commission	4,600
Motor Car		30,000	33,000	Less: Comm. received in advance	1,600	3,000
Salaries		35,200		Old Provision for Doubtful Debts	8,100
Add: Outstanding (WN2)		3,200	38,400	Less: New Provision (WN3)	4,000	4,100
Rent		5,500
Add: Outstanding Taxes (WN2)		500	6,000
Insurance		8,400
Less: Prepaid		1,200	7,200
Interest on Loan		1,500
Add: Outstanding (WN2)		300	1,800
Old Bad Debts		1,500
Add: Further Bad Debts		2,000	3,500
Car Expenses			42,000
Net Profit (Balancing Figure)			1,38,700
			2,70,600			2,70,600

Balance Sheet as on March 31, 2012
Liabilities		Amount (Rs)	Assets			Amount (Rs)
Capital	2,50,000		Fixed Assets
Add : Net Profit	1,38,700	3,88,700	Land & Building			2,00,000
Loan from X	10,000		Furniture	20,000
Add: Outstanding Interest on Loan	300	10,300	Less: Depreciation	3,000		17,000
			Motor Car	1,50,000
Current Liabilities			Less: Depreciation	30,000		1,20,000
Creditors		91,300
Outstanding Salaries		3,200	Current Assets
Outstanding Rent		500	Closing Stock			60,000
Commission received in advance		1,600	Prepaid Insurance			1,200
			Prepaid Wages			5,000
			Debtors		82,000
			Less: Further Bad Debts		2,000
			Less: Provision for Bad Debts		4,000	76,000
			Cash in Hand			16,400
		4,95,600				4,95,600

Working Notes:

WN1: Calculation of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}\mathrm{}=20,000\times \frac{15}{100}=3,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Motor}\mathrm{}\mathrm{Car}=1,50,000\times \frac{20}{100}=30,000\end{array}$

WN2: Calculation of Outstanding Expenses

$\begin{array}{cl}1.& \mathrm{}\mathrm{Salaries}\mathrm{}\mathrm{for}\mathrm{}11\mathrm{}\mathrm{months}=35,200\\ & \mathrm{}\mathrm{Salary}\mathrm{}\mathrm{for}\mathrm{}1\mathrm{}\mathrm{month}=\frac{35,200}{11}\times 1=3,200=\mathrm{Salary}\mathrm{}\mathrm{Outstanding}\end{array}$

$\begin{array}{cl}2.& \mathrm{Rent}\mathrm{for}\mathrm{}1\mathrm{}1\mathrm{months}=5,500\\ & \mathrm{Rent}\mathrm{for}\mathrm{}1\mathrm{}\mathrm{month}=\frac{5,500}{11}\times 1=500=\mathrm{Rent}\mathrm{}\mathrm{Outstanding}\end{array}$

$\begin{array}{cl}3.& \mathrm{}\mathrm{Interest}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loan}=10,000\times \frac{18}{100}=1,800\\ & \mathrm{Interest}\mathrm{}\mathrm{paid}=1,500\\ & \therefore \mathrm{Interest}\mathrm{}\mathrm{Outstanding}=300(1,800-1,500)\end{array}$

WN3: Calculation of Provision for Doubtful Debts

$\begin{array}{lll}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& \left(Sundry\mathrm{}Debtors\mathrm{}-Further\mathrm{}Bad\mathrm{}Debts\right)\times \frac{\mathrm{Rate}}{100}\\ & =& \left(82,000-2,000\right)\times \frac{5}{100}=4,000\end{array}$