Question

From the following Trial Balance extracted from the books of A, prepare Trading and Profit & Loss Account for the year ending 31st March, 2019 and a Balance Sheet as at that date:-

	Dr. (₹)	Cr. (₹)
Furniture	640
Loose Tools	6,250
Buildings	7,500
Capital Account		12,500
Bad-debts	125
Provision for Bad-debts		200
Sundry Debtors and Creditors	3,800	2,500
Stock on 1st April, 2018	3,460
Purchases and Sales	5,475	15,450
Bank Overdraft		2,850
Sales Return and Purchases Return	200	125
Stationery	450
Interest Account	118
Commission		375
Cash in hand	650
Taxes and Insurance	1,250
General Expenses	782
Salaries	3,300
	34,000	34,000

The following adjustments are to be made:
(i) Stock in hand on 31st March, 2019 was ₹ 3,250.
(ii) Depreciate Building at 5% and Furniture at 10%. Loose Tools are revalued at ₹ 5,000 at the end of the year.
(iii) Salaries ₹ 300 and taxes ₹ 120 are outstanding.
(iv) Insurance amounting to ₹ 100 is prepaid.
(v) Write off a further ₹ 100 as Bad-Debts and provision for Doubtful Debts is to be made equal to 5% on Sundry Debtors.
(vi) Half of the stationery was used by the proprietor for his personal purposes.

Answer 1

Financial Statement of A
Trading Account for the year ended March 31, 2019
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Opening Stock			3,460	Sales	15,450
Purchases		5,475		Less: Sales Return	200	15,250
Less: Purchases Return		125	5,350	Closing Stock		3,250
Gross Profit (Balancing Figure)			9,690
			18,500			18,500

Profit and Loss Account for the year ended March 31, 2019
Dr.						Cr.
Particulars			Amount (₹)	Particulars	Amount (₹)
Depreciation: (WN1)				Gross Profit	9,690
Building		375		Commission Received	375
Furniture		64
Loose Tools		1,250	1,689
Salaries		3,300
Add: Outstanding		300	3,600
Taxes & Insurance		1,250
Add: Outstanding Taxes		120
Less: Prepaid Insurance		100	1,270
Old Bad Debts		125
Add: Further Bad Debts		100
Add: New Provision (WN2)		185
Less: Old Provision		200	210
Stationery		450
Less: Drawings (1/2)		225	225
Interest			118
General Expenses			782
Net Profit (Balancing Figure)			2,171
			10,065		10,065

Balance Sheet as on March 31, 2019
Liabilities		Amount (₹)	Assets			Amount (₹)
Capital	12,500		Fixed Assets
Add: Net Profit	2,171		Building	7,500
Less: Drawings (1/2 of Stationery)	225	14,446	Less: Depreciation	375		7,125
			Furniture	640
Current Liabilities			Less: Depreciation	64		576
Creditors		2,500	Loose tools	6,250
Outstanding Salaries		300	Less: Depreciation	1,250		5,000
Outstanding Taxes		120
Bank Overdraft		2,850	Current Assets
			Closing Stock			3,250
			Prepaid Insurance			100
			Debtors		3,800
			Less: Further Bad Debts		100
			Less: Provision for Bad Debts		185	3,515
			Cash in Hand			650
		20,216				20,216

Working Notes:

WN1: Calculation of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Buildings}=7,500\times \frac{5}{100}=375\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}\mathrm{}=640\times \frac{10}{100}=64\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Patents}=6,250-5,000=1,250\end{array}$

WN2: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& (\mathrm{Sundry}\mathrm{}\mathrm{Debtors}\mathrm{}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\mathrm{})\mathrm{}\times \mathrm{}\frac{\mathrm{Rate}}{100}\\ & =& (3,800-100)\times \frac{5}{100}=185\end{array}$