Question

From the following information prepare trading and profit and loss account of M/s Indian sports house for the year ending December 31, 2011.

Account Title	Amt. (Rs)	Account Title	Amt. (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 Stationaery	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
Purchase	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 bad 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 July 1, 2011.
5. The manager is entitled to a commission of @ 10% of the net profit after charging such commission.

Answer 1

Trading and Profit and Loss Account
as on 31st December,2011
Dr Cr

Particulars	Amt. (Rs.)	Particular	Amt. (Rs.)
To Opening Stock	25,000	By Sales	2,76,000
To Purchase	1,80,000	(-) Return Inwards	7,000 2,69,000
(-) Return Outwards	2,000 1,78,000	By Closing Stock	45,000
To Wages	10,000
To Gross Profit c/d	1,01,000 3,14,000		3,14,000
To Bad Debts	1,000	By Gross Profit b/d	1,01,000
To Trade Expenses	2,400	By Provision for Bad Debts	4,000
To Printing and Stationery	2,000	By Interest	2,000
To Rent, Rates and Taxes	5,000	(-) New Provision	1,600 2,400
To Freight	4,000
To Discount Allowed	2,000
To Depreciation on Furniture and Fixture	1,000
To Depreciation on Plant Machinery	(4,200 + 900) 5,100
To Depreciation on Motor Car	5,100
To Manager's Commission	6,891
To Net Profit c/d	68,909
	1,03,400		1,03,400

Working Note
1. Depreciation on Plant and Machinery Rs. 30,000 Machinery was purchased on 1 July, 2011. Hence, Dep on 70,000 (1,00,000 - 30,000) @ 6% = 4,200 and Dep on 36,000 @ 6% for six months = 900 = Rs.15,100
2. Profit Before Manager's Commission = (1,03,400 27,600) = 75,800
Manager is entitled to a commission @10% on the new profit after charging such commission = $[75,800\times \frac{10}{11}]=Rs.6,891$
Balance Sheet
as on 31st December, 2011

Liabilities	Amt. (Rs.)	Assets	Amt. (Rs.)
Capital	2,00,000	Sundry Debtors	80,000
(+) Net Profit (-) Drawings	68,909 2,68,909 20,000 2,48,909	(-) Provisions for Bad Debts	1,600 78,400
Bank Overdraft Creditors	12,000 60,000	Furniture and Fixture	20,000
Bills Payable	15,400	(-) Depreciation @ 5%	1,000 19,000
Manager's Commission Outstanding	6,891	Plants and Machinery	1,00,000
		(-) Depreciation @ 6% (4,200 + 900)	51,000 94,900
		Motor Car	51,000
		(-) Depreciation @ 10 %	5,100 45,900
		Cash in Hand	6,000
		Bills Receivable	14,000
		Investments	40,000
		Closing Stock	45,000
	3,43,200		3,43,200