Question

From the following trail balance extracted from the books of MMN, prepare the trading and profit and loss account for the year ended 31st December, 2016.

$\begin{array}{ccc}\text{Name of Accounts}& \text{Debit (Rs.)}& \text{Credit (Rs.)}\\ \text{Capital}& & 90,000\\ \text{Drawings}& 6,480& \\ \text{Land and Building}& 25,000& \\ \text{Plant and Machinery}& 14,270& \\ \text{Furniture and Fixtures}& 1,250& \\ \text{Carriage Inwards}& 4,370& \\ \text{Wages}& 21,470& \\ \text{Salaries}& 4,670& \\ \text{Provision for Bad Debts}& & 2,470\\ \text{Sales}& & 91,230\\ \text{Sales Return}& 1,760& \\ \text{Bank Charges}& 140& \\ \text{Coal, Gas and Water}& 720& \\ \text{Rates and Taxes}& 840& \\ \text{Discount}& & 120\\ \text{Purchases}& 42,160& \\ \text{Purchase Return}& & 8,460\\ \text{Bills Receivable}& 1,270& \\ \text{Trade Expenses}& 1,990& \\ \text{Sundry Debtors}& 37,800& \\ \text{Sundry Creditors}& & 12,170\\ \text{Stock(1st January, 2016)}& 26,420& \\ \text{Apprentice Premium}& & 500\\ \text{Fire Insurance}& 490& \\ \text{Cash at Bank}& 13,000& \\ \text{Cash in Hand}& 850& \\ \text{Total}& \overline{\underset{–}{\underset{–}{2,04,950}}}& \overline{\underset{–}{\underset{–}{2,04,950}}}\\ & & \end{array}$

Additional Adjustments:

Charge depreciation on land and building at $2\frac{1}{2}\%$, on plant and machinery account at 10% and on furniture and fixtures at 10%. Make a provision of 5% on debtors for doubtful debts.

Carry forward the following unexpired amounts.

(i) Fire insurance Rs. 125.

(ii) Rates and taxes Rs. 240

(iii) Apprentice premium Rs. 400.

(iv) Closing stock Rs. 29,390

Answer 1

$\text{Trading and Profit and Loss Account}$
$\text{Dr.}\text{for the year ending 31st December, 2016}\text{Cr.}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs.)}& \text{Particulars}& & \text{Amt. (Rs.)}\\ \text{Opening Stock}& & 26,420& \text{Sales}& 91,230& \\ \text{Purchases}& 42,160& & (-)\text{Sales Return}& \underset{–}{1,760}& 89,470\\ (-)\text{Purchase Return}& \underset{–}{8,460}& 33,700& \text{Closing Stock}& & 29,390\\ \text{Wages}& & 21,470& & & \\ \text{Carraige Inwards}& & 4,370& & & \\ \text{Coal,Gas and Water}& & 720& & & \\ \text{Gross Profit c/d}& & 32,180& & & \\ & & \overline{\underset{–}{\underset{–}{1,18,860}}}& & & \overline{\underset{–}{\underset{–}{1,18,860}}}\\ \text{Salaries}& & 4,670& \text{Gross Profit b/d}& & 32,180\\ \text{Bank Charges}& & 140& \text{Discount Received}& & 120\\ \text{Rates and Taxes}& 840& & \text{Apprentice Premium}& 500& \\ (-)\text{Prepaid}& \underset{–}{240}& 600& (-)\text{Unexpired}& \underset{–}{400}& 100\\ \text{Trade Expenses}& & 1,990& \text{Old Provision for Doubtful Debts}& & 2,470\\ \text{Fire Insurance}& 490& & & & \\ (-)\text{Prepaid}& \underset{–}{125}& 365& & & \\ \text{Provision for Doubtful Debts}& & 1,890& & & \\ \text{Depreciation on Land and Building}& 625& & & & \\ \text{Depreciation on Plant and Machinery}& 1,427& & & & \\ \text{Depreciation on Furniture and Fixtures}& \underset{–}{125}& 2,177& & & \\ \text{Net Profit Transferred to Capital A/c}& & 23,038& & & \\ & & \overline{\underset{–}{\underset{–}{34,870}}}& & & \overline{\underset{–}{\underset{–}{34,870}}}\\ & & & & & \end{array}$

Working Notes:

1. Depreciation on land and building = $25,000\times \frac{2.5}{100}=Rs.625$
2. Depreciation on Plant and Machinery = $14,270\times \frac{10}{100}=Rs.1,427$
3. Depreciation on Furniture and Fixtures = $1,250\times \frac{10}{100}=Rs.125$
4. Provision for doubtful debts = $37,800\times \frac{5}{100}=Rs.1,890$