Question

From the following information prepare financial Statements of M/s Raj & Bros, for the year ending March 31, 2017.

			Dr Bal. (₹)		Cr Bal. (₹)
Stock (1-4-2016)			16,800	Capital	78,000
Sales Returns			8,000	Sales	3,09,000
Purchases			2,43,000	Returns Outward	5,700
Freight-in			8,600	Trade Creditors	4,800
Rent and Taxes			5,700	10% Bank Loan (1-7-2016)	24,000
Salaries			9,300	Income from Investment	3,600
Trade debtors			24,000	Discount Received	2,250
Bank interest			1,000
Printing and Advertising			14,600
Cash at bank			18,300
Discount Allowed			1,340
Investment			25,000
Furniture			3,800
General Expenses			3,610
Audit Fees			500
Insurance			800
Travelling Expenses			3,000
Plant & Machinery			30,000
Drawings			10,000
			4,27,350		4,27,350

Additional Information:-
(i) Depreciation on Plant and Machinery @ 10% p.a., a Machine has been purchased on July 01, 2016 for ₹ 12,000.
(ii) The manager is entitled to a commission of 10% of the net profit before charging such commission.
(iii) Closing stock in trade is valued at ₹ 6,000 (cost); ₹ 6,200 (Market Price).
(iv) Rent outstanding ₹ 5,000.

Answer 1

Financial Statements of M/s Raj & Bros.
Trading Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			16,800	Sales	3,09,000
Purchases		2,43,000		Less: Return Inwards	8,000	3,01,000
Less: Return Outwards		5,700	2,37,300	Closing Stock		6,000
Freight Inward			8,600
Gross Profit (Balancing Figure)			44,300
			3,07,000			3,07,000

Profit and Loss Account for the year ended March 31, 2017
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Depreciation on Plant (WN1)			2,700	Gross Profit	44,300
Salaries			9,300	Income on Investments	3,600
Rates and Taxes		5,700		Discount Received	2,250
Add: Outstanding		5,000	10,700
Interest on Loan		1,000
Add: Outstanding (WN2)		800	1,800
Printing & Advertisement			14,600
Discount			1,340
General Expenses			3,610
Audit Fees			500
Insurance			800
Travelling Expenses			3,000
Outstanding Manager’s Commission (WN3)			180
Net Profit (Balancing Figure)			1,620
			50,150		50,150

Balance Sheet as on March 31, 2017
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital	78,000		Fixed Assets
Add: Net Profit	1,620		Plant & Machinery	30,000
Less: Drawings	10,000	69,620	Less: Depreciation	2,700	27,300
10% Bank Loan		24,000	Furniture		3,800
			Investments		25,000
Current Liabilities			Current Assets
Trade Creditors		4,800	Closing Stock		6,000
Outstanding Rent		5,000	Cash at Bank		18,300
Outstanding Interest		800	Trade Debtors		24,000
Outstanding Manager’s Commission		180
		1,04,400			1,04,400

Working Notes:

WN1: Calculation of Amount of Depreciation

$\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Machinery}\mathrm{}=18,000\mathrm{}\times \mathrm{}\frac{10}{100}\mathrm{}\text{+ 12},000\mathrm{}\times \mathrm{}\frac{10}{100}\times \mathrm{}\frac{9}{12}\mathrm{}=\mathrm{Rs}\mathrm{}2,700$

WN2: Calculation of Outstanding Interest on Bank Loan

$\begin{array}{l}\mathrm{Interest}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loan}\mathrm{}=\mathrm{}24,000\mathrm{}\times \mathrm{}\frac{10}{100}\mathrm{}\times \mathrm{}\frac{9}{12}\mathrm{}=\mathrm{Rs}\mathrm{}1,800\\ \text{Interest Already Paid = Rs 1,000}\\ \text{Outstanding Interest = Rs 800}\end{array}$

WN3: Calculation of Manager’s Commission

$\begin{array}{l}\mathrm{Profit}\mathrm{}\mathrm{before}\mathrm{}\mathrm{Manager}\text{'}\mathrm{s}\mathrm{}\mathrm{Commission}=\mathrm{}\mathrm{Rs}\mathrm{}1,800\mathrm{}(50,150\mathrm{}-\mathrm{}48,350\mathrm{})\mathrm{}\\ \mathrm{Manager}\text{'}\mathrm{s}\mathrm{}\mathrm{Commission}\mathrm{}=1,800\times \mathrm{}\frac{10}{100}=\mathrm{Rs}\mathrm{}180\end{array}$