Question

From the following trail balance,prepare the trading and profit and loss account for the year ended 31st March,2016 and the balance sheet as that date.

$\begin{array}{cccc}\text{Name of Accounts}& \text{Amt. (Rs.)}& \text{Name of Accounts}& \text{Amt. (Rs.)}\\ \text{Salaries}& 20,446& \text{Sales}& 1,32,840\\ \text{Bills Receivables}& 12,754& \text{Capital}& 1,00,000\\ \text{Investments}& 80,000& \text{Provision for Doubtful Debts}& 5,000\\ \text{Furniture}& 24,000& 10\%\text{Loan (1st October, 2015)}& 20,000\\ \text{Opening Stock}& 9,000& \text{Discounts Received}& 800\\ \text{Purchases}& 60,000& \text{Sundry Creditors}& 18,600\\ \text{Sundry Debtors}& 40,000& \text{Bills Payable}& 10,000\\ \text{Interest on Loan}& 800& \text{Outstanding Salaries}& 1,000\\ \text{Insurance Premium}& 1,800& \text{Bad Debts Recovered}& 400\\ \text{Wages}& 9,200& \text{Interest on Investments}& 4,000\\ \text{Rent}& 3,040& \text{Trading Commission}& 14,000\\ \text{Bad Debts}& 2,400& & \\ \text{Carriage Outwards}& 1,200& & \\ \text{Cash at Bank}& 20,000& & \\ \text{Depreciation on Furniture}& 5,000& & \\ \text{Accrued Commission}& 2,000& & \\ \text{Advertisement}& 15,000& & \\ & \overline{\underset{–}{\underset{–}{3,06,640}}}& & \overline{\underset{–}{\underset{–}{3,06,640}}}\\ & & & \end{array}$

Additional Information:

(i) Closing stock Rs. 12,000.

(ii) Goods costing Rs. 2,000 were distributed as free samples while goods costing Rs. 1,000 were taken by the proprietor for personal use.

(iii) A credit sale of Rs. 4,000 was not recorded in the sales book.

(iv) Closing stock included goods costing Rs. 2,000 which were sold and recorded as sales but not delivered to the customers.

(v) Maintain provision for doubtful debts @ 5%.

Answer 1

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

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs.)}& \text{Particulars}& & \text{Amt. (Rs.)}\\ \text{Opening Stock}& & 9,000& \text{Sales}& 1,32,840& \\ \text{Purchases}& 60,000& & (+)\text{Credit Sales}& \underset{–}{4,000}& 1,36,840\\ (-)\text{Free Samples}& \underset{–}{2,000}& & \text{Closing Stock}& 12,000& \\ & 58,000& & (-)\text{Cost of Goods Sold}& & \\ (-)\text{Drawings of Goods}& \underset{–}{1,000}& 57,000& \text{but not Delivered}& \underset{–}{2,000}& 10,000\\ \text{Wages}& & 9,200& & & \\ \text{Gross Profit c/d}& & 71,640& & & \\ & & \overline{\underset{–}{\underset{–}{1,46,840}}}& & & \overline{\underset{–}{\underset{–}{1,46,840}}}\\ \text{Salaries}& & 20,446& \text{Gross Profit b/d}& & 71,640\\ \text{Interest on Loan}& 800& & \text{Provision for Doubtful Debts}& & 400\\ (+)\text{Outstanding Interest on Loan}& \underset{–}{200}& 1,000& \text{Discount Received}& & 800\\ \text{Insurance Premium}& & 1,800& \text{Bad Debts Recovered}& & 400\\ \text{Rent}& & 3,040& \text{Interest On Invetment}& & 4,000\\ \text{Carriage Outwards}& & 1,200& \text{Trading Commission}& & 14,000\\ \text{Depreciation on Furniture}& & 5,000& & & \\ \text{Advertisement}& & 15,000& & & \\ \text{Free Samples}& & 2,000& & & \\ \text{Net Profit Transferred to Capital A/c}& & 41,754& & & \\ & & \overline{\underset{–}{\underset{–}{91,240}}}& & & \overline{\underset{–}{\underset{–}{91,240}}}\\ & & & & & \end{array}$

Balance Sheet

as at 31st March,2016

$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt. (Rs.)}& \text{Assets}& & \text{Amt. (Rs.)}\\ 10\%\text{Loan}& & 20,000& \text{Bills Receivable}& & 12,754\\ \text{Outstanding Interest on Loan}& & 200& \text{Investments}& & 80,000\\ \text{Creditors}& & 18,600& \text{Furniture}& & 24,000\\ \text{Bills Payable}& & 10,000& \text{Debtors}& 40,000& \\ \text{Outstanding Salaries}& & 1,000& (+)\text{Credit Sales not Recorded}& 4,000& \\ \text{Capital}& 1,00,000& & & \overline{44,000}& \\ (+)\text{Net Profit}& 41,754& & (-)\text{New Provision}& \underset{–}{2,200}& 41,800\\ & \overline{1,41,754}& & \text{Accrued Commission}& & 2,000\\ (-)\text{Drawings of Goods}& \underset{–}{1,000}& 1,40,754& \text{Closing Stock}& & 10,000\\ & & & \text{Bank}& & 20,000\\ & & \overline{\underset{–}{\underset{–}{1,90,554}}}& & & \overline{\underset{–}{\underset{–}{1,90,554}}}\\ & & & & & \end{array}$

Working Notes:

Interest on loan=$20,000\times \frac{10}{100}\times \frac{6}{12}=Rs1,000$

$(-)\text{Already Paid}=Rs.\left(800\right)\text{Outstanding}=\overline{\underset{–}{Rs.200}}$

Outstanding of Provision for Doubtful Debts:

$\begin{array}{cc}\text{To Bad Debts}& 2,400\\ (+)\text{New Provision}& \underset{–}{2,200}\\ & 4,600\\ (-)\text{Old Provision}& \underset{–}{5,000}\\ & \left(400\right)\end{array}$

Since the old provision is in excess of new provision the difference i.e., 400 will be shown the the credit side of profit and loss account.