Question

From the following information prepare trading and profit and loss account of M/s Indian sports house for the year ending March 31, 2017.

Account Title	Amount Rs	Account Title	Amount Rs
Drawings	20,000	Capital	2,00,000
Sundry debtors	80,000	Return outwards	2,000
Bad debts	1,000	Bank overdraft	12,000
Trade Expenses	2,400	Provision for bad debts	4,000
Printing and Stationery	2,000	Sundry creditors	60,000
Rent Rates and Taxes	5,000	Bills payable	15,400
Freight	4,000	Sales	2,76,000
Return inwards	7,000
Opening stock	25,000
Purchases	1,80,000
Furniture and Fixture	20,000
Plant and Machinery	1,00,000
Bills receivable	14,000
Wages	10,000
Cash in hand	6,000
Discount allowed	2,000
Investments	40,000
Motor car	51,000
	5,69,400		5,69,400

Adjustments

1. Closing stock was Rs 45,000.

2. Provision for doubtful debts is to be maintained @ 2% on debtors.

3. Depreciation charged on : furniture and fixture @ 5%, plant and Machinery @ 6% and motor car @ 10%.

4. A Machine of Rs 30,000 was purchased on October 01, 2016.

5. The manager is entitle to a commission of @ 10% of the net profit after charging such commission.

Answer 1

Trading Account
Dr.							Cr.
Particulars			Amount Rs	Particulars			Amount Rs
Opening Stock			25,000	Sales		2,76,000
Purchases		1,80,000			Less: Return Inwards	7,000	2,69,000
	Less: Return Outwards	2,000	1,78,000	Closing Stock			45,000
Wages			10,000
Freight			4,000
Gross Profit			97,000
			3,14,000				3,14,000

Profit and Loss Account
Dr.											Cr.
Particulars				Amount Rs	Particulars						Amount Rs
Trade Expenses				2,400	Gross Profit						97,000
Printing and Stationery				2,000	Old Provision for Bad Debts				4,000
Rent Rates and Taxes				5,000		Less: Bad Debts			1,000
Discount Allowed				2,000		Less: New Provision			1,600		1,400
Depreciation on Motor Car				5,100
Depreciation on Furniture and Fixtures				1,000
*Depreciation on P & M of Rs 70,000				4,200
**Depreciation on P & M of Rs 30,000				900
Net Profit Before Manager’s Commission				75,800
				1,02,400							1,02,400
Manager’s Commission				6,891
Net Profit After Commission				68,909	Balance b/d						75,800
				75,800							75,800

Balance Sheet
Liabilities			Amount Rs	Assets				Amount Rs
Capital		2,00,000		Cash in Hand				6,000
	Add: Net Profit	68,909		Sundry Debtors			80,000
	Less: Drawings	20,000	2,48,909		Less: New Provision		1,600	78,400
O/S Manager’s Commission			6,891	Furniture and Fixtures			20,000
Bank Overdraft			12,000		Less: Depreciation		1,000	19,000
Creditors			60,000
Bills Payable			15,400	Plant and Machinery			1,00,000
					Less: Depreciation 1*		4,200
					Less: Depreciation 2**		900	94,900
				Bills Receivable				14,000
				Investments				40,000
				Motor Car			51000
					Less: Depreciation		5100	45,900
				Closing Stock				45,000
			3,43,200					3,43,200

Working Notes

1. Manager’s Commission

= Net Profit before commission ×			10
			110
= 75,800 ×	10
	110
= Rs 6,891

2. Out of the machinery of Rs 1,00,000, Rs 30,000 worth of machinery was purchased on 01/October/2016. Therefore, the depreciation on this machinery will be for 6 months at 6% p.a.

*Depreciation on machinery (30,000) =	30,000 ×	6	×	6	= Rs 900
		12		100

**The rest of the machinery of Rs 70,000 will bear depreciation at 6% p.a.

Depreciation on machinery (70,000) =	70,000 ×	6	= Rs 900
		12

Note: As per our solution Gross Profit is Rs 97,000, however, as per book it is Rs 1,01,000.