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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 TitleAmt. (Rs)Account TitleAmt. (Rs)
Drawings20,000Capital2,00,000
Sundry Debtors80,000Return Outwards2,000
Bad Debts1,000Bank Overdraft12,000
Trade Expenses2,400Provision for Bad Debts4,000
Printing and Stationaery2,000Sundry Creditors60,000
Rent, Rates and Taxes5,000Bills Payable15,400
Freight4,000Sales2,76,000
Return Inwards7,000
Opening Stock25,000
Purchase1,80,000
Furniture and Fixture20,000
Plant and Machinery1,00,000
Bills Receivable14,000
Wages10,000
Cash in Hand6,000
Discount Allowed2,000
Investments40,000
Motor Car51,000
5,69,4005,69,400
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.

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Solution

Trading and Profit and Loss Account
as on 31st December,2011
Dr Cr
ParticularsAmt. (Rs.)ParticularAmt. (Rs.)
To Opening Stock25,000By Sales2,76,000
To Purchase1,80,000(-) Return Inwards7,000
2,69,000
(-) Return Outwards2,000
1,78,000
By Closing Stock45,000
To Wages10,000

To Gross Profit c/d1,01,000
3,14,000
3,14,000
To Bad Debts1,000By Gross Profit b/d1,01,000
To Trade Expenses2,400By Provision for Bad Debts4,000
To Printing and Stationery2,000By Interest2,000
To Rent, Rates and Taxes5,000(-) New Provision1,600
2,400
To Freight
4,000
To Discount Allowed2,000
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

1,03,4001,03,400
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 = [75,800×1011]=Rs.6,891
Balance Sheet
as on 31st December, 2011
LiabilitiesAmt. (Rs.)AssetsAmt. (Rs.)
Capital2,00,000Sundry Debtors80,000
(+) Net Profit
(-) Drawings
68,909
2,68,909
20,000
2,48,909
(-) Provisions for Bad Debts1,600
78,400
Bank Overdraft
Creditors
12,000
60,000
Furniture and Fixture
20,000
Bills Payable15,400(-) Depreciation @ 5%1,000
19,000
Manager's Commission Outstanding6,891Plants and Machinery1,00,000


(-) Depreciation @ 6% (4,200 + 900)51,000
94,900
Motor Car51,000
(-) Depreciation @ 10 %5,100
45,900
Cash in Hand6,000
Bills Receivable14,000

Investments40,000
Closing Stock45,000
3,43,200
3,43,200

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