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, 2019 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 (1-4-2018)			70,000
Stock (31-3-2019)			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, 2018 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 2019 are outstanding.
4. Goods worth ₹ 15,000 were sold and despatched on 27th March but no entry was passed to this effect.
5. Make a provision for Doubtful Debts at 5% on Debtors.

Answer 1

Financial Statement of Sh. Pawan Kumar
Trading Account for the year ended March 31, 2019
Dr.						Cr.
Particulars		Amount (₹)	Particulars		Amount (₹)
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, 2019
Dr.								Cr.
Particulars				Amount (₹)	Particulars		Amount (₹)
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, 2019
Liabilities		Amount (₹)	Assets		Amount (₹)
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
$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Plant}\mathrm{}\&\mathrm{Machinery}=10,00,000\times \frac{10}{100}+2,00,000\times \frac{10}{100}\times \frac{6}{12}=\mathrm{Rs}1,10,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Horse}\mathrm{}\&\mathrm{}\mathrm{Carts}=2,60,000\times \frac{20}{100}=\mathrm{Rs}52,000\end{array}$

WN2: Calculation of Provision for Doubtful Debts
$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& \left(\mathrm{Sundry}\mathrm{}\mathrm{Debtors}+\mathrm{Unrecorded}\mathrm{}\mathrm{Sales}\right)\times \frac{\mathrm{Rate}}{100}\\ & =& \left(3,40,000+15,000\right)\times \frac{5}{100}=\mathrm{Rs}17,750\end{array}$

WN3: Calculation of Outstanding Expenses

$\begin{array}{l}\mathrm{Salaries}\mathrm{for}10\mathrm{months}=80,000\\ \mathrm{Salary}\mathrm{}\mathrm{for}\mathrm{}2\mathrm{}\mathrm{months}=\frac{80,000}{10}\times 2=\mathrm{Rs}16,000\end{array}$

WN4: Calculation of Accrued Interest on Ram’s Loan
$\begin{array}{l}\mathrm{Interest}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loan}\mathrm{}=20,000\times \frac{12}{100}=\mathrm{Rs}\mathrm{}2,400\\ \mathrm{Interest}\mathrm{on}\mathrm{Loan}\mathrm{already}\mathrm{received}=\mathrm{Rs}1,800\\ \mathrm{So},\mathrm{Accrued}\mathrm{Interest}=\mathrm{Rs}600\end{array}$