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Question

From the following Trial Balance of M/s Arjun and Sons as on 31st March, 2018, prepare Trading and Profit and Loss Account and Balance Sheet:
Heads of Accounts
Debit
Balances
(₹)
Credit
Balances
(₹)
Drawings ................................................................................
1,80,000
Capital ................................................................................
8,00,000
Purchases ................................................................................
8,26,000
...
Sales ................................................................................
15,50,000
Opening Stock ................................................................................
4,20,000
Returns Outward ................................................................................
16,000
Carriage Inwards ................................................................................
12,000
Wages ................................................................................
40,000
Power ................................................................................
60,000
Machinery ................................................................................
5,00,000
Furniture ................................................................................
1,40,000
Rent ................................................................................
2,20,000
Salary ................................................................................
1,50,000
Insurance ................................................................................
36,000
8% Bank Loan ................................................................................
2,50,000
Debtors ................................................................................
2,06,000
Creditors ................................................................................
1,89,000
Cash in Hand ................................................................................
15,000
Total
28,05,000
28,05,000

Adjustments:
(i) Closing Stock ₹ 6,40,000.
(ii) Wages Outstanding ₹ 24,000.
(iii) Bad Debts ₹ 6,000 and Provision for Bad and Doubtful Debts to 5% on Debtors.
(iv) Rent is paid for 11 months.
(v) Loan from bank was taken on 1st October, 2017.
(vi) Provide Depreciation on Machinery @ 10% p.a.
(vii) Provide Manager’s Commission at 10% on net profit after charging such commission.

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Solution

Financial Statements of M/s Arjun and Sons

Trading Account

for the year ended March 31, 2018

Dr.

Cr.

Particulars

Amount

(Rs)

Particulars

Amount

(Rs)

Opening Stock

4,20,000

Sales

15,50,000

Purchases

8,26,000

Closing Stock

6,40,000

Less: Return Outwards

(16,000)

8,10,000

Carriage Inwards

12,000

Wages

40,000

Add: Outstanding

24,000

64,000

Power

60,000

Gross Profit (Balancing Figure)

8,24,000

21,90,000

21,90,000

Profit and Loss Account

for the year ended March 31, 2018

Dr.

Cr.

Particulars

Amount

(Rs)

Particulars

Amount

(Rs)

Depreciation on Machinery

50,000

Gross Profit

8,24,000

Rent

2,20,000

Add: Outstanding Rent

20,000

2,40,000

Salary

1,50,000

Insurance

36,000

Interest on Bank Loan (for 6 Months)

10,000

Bad Debts

6,000

Add: Provision for Doubtful Debts

10,000

16,000

Manger’s Commission

29,273

Net Profit (Balancing Figure)

2,92,727

8,24,000

8,24,000

Balance Sheet

as on March 31, 2018

Liabilities

Amount

(Rs)

Assets

Amount

(Rs)

Capital

8,00,000

Fixed Assets

Less: Drawings

(1,90,000)

Machinery

5,00,000

Add: Net Profit

2,92,727

9,02,727

Less: 10% Depreciation

(50,000)

4,50,000

8% Bank Loan

2,50,000

Furniture

1,40,000

Add: Interest Outstanding

10,000

2,60,000

Current Assets

Current Liabilities

Closing Stock

6,40,000

Creditors

1,89,000

Debtors

2,06,000

Wages Outstanding

24,000

Less: Bad Debts

(6,000)

Rent Outstanding

20,000

2,00,000

Manger’s Commission Payable

29,273

Less: 5% Provision for Doubtful Debts

(10,000)

1,90,000

Cash in Hand

15,000

14,35,000

14,35,000

Working Notes:

WN1 Calculation of Interest on Loan

Bank Loan = Rs 2,50,000

Interest on Loan (from Oct. 01 to Mar. 31) = 2,50,000×8100×612=Rs 10,000

WN2 Calculation of Manager’s Commission
Manager's Commission=Profit before charging Commission×10100+RateProfit before charging Commission=8,24,000-5,02,000=3,22,000Manager's Commission = 3,22,000×10100+10=Rs 29,273


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Q. From the following Trial Balance of M/s. Shradha & Sons as on 31st March, 2018, prepare Trading and Profit and Loss Account and Balance Sheet.
Heads of Accounts
Dr.
Balance
(₹)
Cr.
Balance
(₹)
Capital ................................................................................
80,000
Drawings ................................................................................
18,000
Sales ................................................................................
1,55,000
Purchases ................................................................................
82,600
Stock (1st April, 2017) ................................................................................
42,000
Returns Outward ................................................................................
1,600
Carriage Inwards ................................................................................
1,200
Wages ................................................................................
4,000
Power ................................................................................
6,000
Machinery ................................................................................
50,000
Furniture ................................................................................
14,000
Rent ................................................................................
22,000
Salary ................................................................................
15,000
Insurance ................................................................................
3,600
8% Bank Loan ................................................................................
25,000
Debtors ................................................................................
20,600
Creditors ................................................................................
18,900
Cash in Hand ................................................................................
1,500
Total
2,80,500
2,80,500

Adjustments:
(i) Closing Stock ₹ 64,000.
(ii) Wages outstanding ₹ 2,400.
(iii) Bad Debts ₹ 600.
(iv) Provision for Doubtful Debts to be 5%.
(v) Rent is paid for 11 months.
(vi) Insurance premium is paid per annum, ended 31st May, 2018.
(vii) Loan from the bank was taken on 1st October, 2017.
(viii) Provide Depreciation on machinery @ 10% and on Furniture @ 5%.
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