Question

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

Dr. Balances			(₹)	Cr. Balances	(₹)
Drawings			5,275	Capital	59,700
Bills Receivable			4,750	Loan at 8% p.a. (on.1.4.2018)	10,000
Machinery			14,400	Commission Received	2,820
Debtors (including X for dishonoured Bill of ₹ 1,000)			30,000	Creditors	29,815
Wages			20,485	Sales	1,78,215
Returns Inward			2,390
Purchases			1,28,295
Rent			2,810
Stock (1.4.2018)			44,840
Salaries			5,500
Travelling Expenses			945
Insurance			200
Cash			9,750
Repairs			1,685
Interest on Loan			500
Discount Allowed			2,435
Bad-Debts			1,810
Furniture			4,480
			2,80,550		2,80,550

The following adjustments are to be made:
(i) Stock in the shop on 31st March, 2019 was ₹ 64,480.
(ii) Half the amount of X's Bill is irrecoverable.
(iii) Create a provision of 5% on other debtors.
(iv) Wages include ₹ 600 for erection of new Machinery.
(v) Depreciate Machinery by 5% and Furniture by 10%.
(vi) Commission includes ₹ 300 being Commission received in advance.

Answer 1

Financial Statement of Mr. Alok
Trading Account for the year ended March 31, 2019
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Opening Stock			44,840	Sales	1,78,215
Purchases			1,28,295	Less: Return Inwards	2,390	1,75,825
Wages		20,485		Closing Stock		64,480
Less: Erection Charges of New Machinery		600	19,885
Gross Profit (Balancing Figure)			47,285
			2,40,305			2,40,305

Profit and Loss Account for the year ended March 31, 2019
Dr.								Cr.
Particulars				Amount (₹)	Particulars		Amount (₹)
Depreciation: (WN1)					Gross Profit		47,285
Machinery		750			Commission	2,820
Furniture		448		1,198	Less: Comm. Received in advance	300	2,520
Old Bad Debts		1,810
Add: Further Bad Debts		500
Add: New Provision (WN2)		1,450		3,760
Rent				2,810
Interest on Loan			500
Add: Outstanding (WN3)			300	800
Salaries				5,500
Travelling Expenses				945
Insurance				200
Repairs				1,685
Discount Allowed				2,435
Net Profit (Balancing Figure)				30,472
				49,805			49,805

Balance Sheet as on March 31, 2019
Liabilities		Amount (₹)	Assets			Amount (₹)
Capital	59,700		Fixed Assets
Add: Net Profit	30,472		Machinery		14,400
Less: Drawings	5,275	84,897	Add: Erection charges		600
8% Loan		10,000	Less: Depreciation		750	14,250
			Furniture		4,480
Current Liabilities			Less: Depreciation		448	4,032
Creditors		29,815
Outstanding Interest		300	Current Assets
Commission received in advance		300	Closing Stock			64,480
			Bills Receivables			4,750
			Debtors	30,000
			Less: Bad Debts	500
			Less: Provision for Doubtful Debts	1,450		28,050
			Cash in Hand			9,750
		1,25,312				1,25,312

Working Notes:

WN1: Calculation of Amount of Depreciation
$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Machinery}=(14,400+600)\times \frac{5}{100}=\mathrm{Rs}750\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}=4,480\times \frac{10}{100}=\mathrm{Rs}448\end{array}$

WN2: Calculation of Provision for Doubtful Debts
$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& \left(\mathrm{Sundry}\mathrm{}\mathrm{Debtors}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}-\mathrm{Amount}\mathrm{}\mathrm{recoverable}\mathrm{}\mathrm{from}\mathrm{}\mathrm{X}*\right)\times \frac{\mathrm{Rate}}{100}\\ & =& \left(30,000-500-500\right)\times \frac{5}{100}=\mathrm{Rs}1,450\end{array}$
$*\mathrm{Provision}\mathrm{}\mathrm{is}\mathrm{}\mathrm{to}\mathrm{}\mathrm{be}\mathrm{}\mathrm{maintained}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Debtors}\mathrm{}\mathrm{other}\mathrm{}\mathrm{than}\mathrm{}\mathrm{X}$

WN3: Calculation of Outstanding Interest on Loan
$\begin{array}{l}\mathrm{Interest}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loan}=10,000\times \frac{8}{100}=\mathrm{Rs}800\\ \mathrm{Interest}\mathrm{on}\mathrm{Loan}\mathrm{already}\mathrm{Paid}=300\\ \therefore \mathrm{Outstanding}\mathrm{Interest}\mathrm{on}\mathrm{Loan}=\mathrm{Rs}300\end{array}$