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Question

From the following Trial Balance extracted from the books of Sh. Pawan Kumar, prepare a Trading Account, Profit & Loss Account for the year ended 31st March, 2014 and a Balance Sheet as at that date :
Dr. Balances () Cr. Balances ()
Drawings 1,20,000 Capital 16,00,000
Plant and Machinery 12,00,000 Creditors 2,60,000
Horses and Carts 2,60,000 Sales 8,20,000
Debtors 3,40,000 Bills Payable 2,21,200
Purchases 2,00,000 Interest on Ram's Loan 1,800
Wages 80,000 Rent Received 12,000
Cash at Bank 2,60,000
Salaries 80,000
Repairs 5,000
Stock (1-4-2013) 7,000
Stock (31-3-2014) 92,000
Rent 45,000
Manufacturing expenses 15,000
Bad-Debts 50,000
Carriage 15,000
Income Tax 20,000
Life Insurance Premium 30,000
Loan to Ram at 12% p.a. 20,000
Insurance 12,000
Insurance Prepaid 1,000
29,15,000 29,15,000

Adjustments:-
1. Plant and Machinery includes a new machinery purchased on 1st October, 2013 for ₹ 2,00,000.
2. Depreciate Plant and Machinery by 10% p.a. and Horses and Carts by 20% p.a.
3. Salaries for the month of February and March 2014 are outstanding.
4. Goods worth ₹ 15,000 were sold and dispatched on 27th March but no entry was passed to this effect.
5. Make a provision for Doubtful Debts at 5% on Debtors.

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Solution

Financial Statement of Sh. Pawan Kumar
Trading Account
for the year ended March 31, 2014
Dr.
Cr.
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
Opening Stock
70,000
Sales
8,20,000
Purchases
2,00,000
Add: Unrecorded Sales
15,000
8,35,000
Carriage
15,000
Wages
80,000
Manufacturing Expenses
15,000
Gross Profit (Balancing Figure)
4,55,000
8,35,000
8,35,000


Profit and Loss Account

for the year ended March 31, 2014

Dr.

Cr.

Particulars

Amount

(Rs)

Particulars

Amount

(Rs)

Depreciation: (WN1)

Gross Profit

4,55,000

Plant & Machinery

1,10,000

Rent Received

12,000

Horse & Carts

52,000

1,62,000

Interest on Ram’s Loan

1,800

Old Bad Debts

50,000

Add: Accrued Interest (WN4)

600

2,400

Add: New Provision (WN2)

17,750

67,750

Insurance

12,000

Salaries

80,000

Add: Outstanding (WN3)

16,000

96,000

Repairs

5,000

Rent

45,000

Net Profit (Balancing Figure)

81,650

4,69,400

4,69,400


Balance Sheet
as on March 31, 2014
Liabilities
Amount
(Rs)
Assets
Amount
(Rs)
Capital
16,00,000
Fixed Assets
Add : Net Profit
81,650
Plant & Machinery
12,00,000
Less: Drawings (incl. LIP and Income Tax)
1,70,000
15,11,650
Less: Depreciation
1,10,000
10,90,000
Horses & Carts
2,60,000
Current Liabilities
Less: Depreciation
52,000
2,08,000
Creditors
2,60,000
Outstanding Salaries 16,000 Current Assets
Bills Payable
2,21,200
Closing Stock
92,000
Prepaid Insurance
1,000
Accrued Interest
600
Ram’s Loan
20,000
Cash at Bank
2,60,000
Debtors
3,40,000
Add: Unrecorded
15,000
Less: Provision for Doubtful Debts
17,750
3,37,250
20,08,850
20,08,850

Working Notes:

WN1: Calculation of Amount of Depreciation
Depreciation on Plant & Machinery=10,00,000 × 10100+ 2,00,000 × 10100× 612=Rs 1,10,000Depreciation on Horse & Carts = 2,60,000 × 20100=Rs 52,000

WN2: Calculation of Provision for Doubtful Debts
Provision for Doubtful Debts=Sundry Debtors +Unrecorded Sales × Rate100=3,40,000 +15,000 × 5100=Rs 17,750

WN3: Calculation of Outstanding Expenses

Salaries for 10 months = 80,000Salary for 2 months=80,00010 ×2=Rs 16,000


WN4: Calculation of Accrued Interest on Ram’s Loan
Interest on Loan =20,000 × 12100 = Rs 2,400Interest on Loan already received = Rs 1,800So, Accrued Interest = Rs 600

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Q. From the following Trial Balance of Sh. Swamy Narain, prepare Trading and Profit & Loss Account for the year ended 31st March 2018 and a Balance Sheet as at that date :
Dr. Balances Cr. Balances
Opening Stock 50,000 Capital 20,00,000
Purchases 5,30,000 Sales 12,50,000
General Expenses 45,000 Sundry Creditors 1,36,000
Stationery 6,000 Trade Charges due but not paid 5,000
Wages 2,15,000 Outstanding Rent 4,000
Trade Charges 25,000 Bank Balance 45,000
Rent 44,000
Charity 5,000
Advertisement Expenses 30,000
Carriage on Sales 12,000
Bills Receivables 30,000
Sundry Debtors 2,20,000
Cash Discount 16,000
Cash in Hand 22,000
Furniture 1,00,000
Advance for Furniture 40,000
Plant & Machinery 6,00,000
Building 14,50,000
34,40,000 34,40,000

Adjustments:
(i) Stock on 31 March, 2018 was valued at ₹ 60,000.
(ii) A new machine was installed during the year costing ₹ 2,00,000 but it was not recorded in the books. Wages paid for its installation ₹ 10,000 have been debited to Wages Account.
(iii) An advance of ₹ 10,000 given alongwith purchase order was wrongly recorded in purchases.
(iv) General expenses include ₹ 20,000 paid for Wages.
(v) Wages include a sum of ₹ 50,000 spent on the erection of a Scooter Stand for employees.
(vi) Advance for Furniture is for furniture at proprietor's residence.
(vii) Depreciate Furniture at 15%, Plant & Machinery at 20% and Building at 10%.
(viii) Carry forward 2/3 of Advertisement Expenses as unexpired.
(ix) A B/R of ₹ 20,000 was discounted with bank on 15 Nov. 2017, but not yet matured.
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