Question

From the following Trial Balance of Mr. Tarun Ghosh, prepare Trading and Profit and Loss A/c for the year ending 31st March, 2017 and a Balance Sheet as at that date:

Dr. Balances			(₹)	Cr. Balances	(₹)
Opening Stock			38,000	Capital	3,00,000
Purchases			12,60,000	Secured Loan	20,000
Wages: Factory Office			20,000 1,600	Sales	15,40,000
Salary			54,000	Sundry Creditors	40,000
Business Premises			2,00,000	Returns Outwards	15,000
Furniture and Fixtures			40,000	Bills Payable	12,000
Packing Machinery			60,000	Bank	33,000
Tools			15,000
Rent			58,400
Loan to Mr. Ram Narain on 1st November, 2016 @ 12% p.a.			10,000
Sundry Debtors			1,31,500
Cash in Hand			7,400
Drawings			60,000
Bills Receivable			4,100
			19,60,000		19,60,000

Adjustments:-
(i) Closing Stock amounted to ₹ 50,000.
(ii) Goods costing ₹ 8,000 were sent to a customer on sale or return basis for ₹ 10,000 on 30th March, 2017 and had been recorded in the books as actual sales.
(iii) Allow 8% interest on Capital and charge ₹ 3,000 as interest on drawings.
(iv) Depreciate: Business premises by 5%; Furniture and Fixtures by 20% and Packing Machinery by 10%. Tools are to be revalued at ₹ 12,000.
(v) $2\frac{1}{2}\%$ for discounts is to be provided on Debtors.
(vi) ₹ 1,500 is to be provided for Bad and Doubtful Debts.

Answer 1

Financial Statements of Mr. Tarun Ghosh
Trading Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			38,000	Sales	15,40,000
Purchases		12,60,000		Less: Sale on Approval Basis	10,000	15,30,000
Less: Return Outwards		15,000	12,45,000	Closing Stock	50,000
Wages			20,000	Add: Sale on Approval Basis	8,000	58,000
Gross Profit (Balancing Figure)			2,85,000
			15,88,000			15,88,000

Profit and Loss Account for the year ended March 31, 2017
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Provision for Discount on Debtors			3,000	Gross Profit	2,85,000
Bad and Doubtful Debts			1,500	Accrued Interest on Loan	500
Depreciation:				Interest on Drawings	3,000
Business Premises		10,000
Tools		3,000
Packing Machinery		6,000
Furniture		8,000	27,000
Interest on Capital			24,000
Wages			1,600
Salaries			54,000
Rent			58,400
Net Profit (Balancing Figure)			1,19,000
			2,88,500		2,88,500

Balance Sheet as on March 31, 2017
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital	3,00,000		Fixed Assets
Add: Interest on Capital	24,000		Business Premises	2,00,000
Add: Net Profit	1,19,000		Less: Depreciation	10,000	1,90,000
Less: Drawings	60,000		Furniture & Fixtures	40,000
Less: Interest on Drawings	3,000	3,80,000	Less: Depreciation	8,000	32,000
Secured Loan		20,000	Packing Machinery	60,000
			Less: Depreciation	6,000	54,000
Current Liabilities			Tools	15,000
Sundry Creditors		40,000	Less: Depreciation	3,000	12,000
Bills Payable		12,000	Loan to Ram Narain		10,000
Bank Overdraft		33,000
			Current Assets
			Closing Stock (50,000 + 8,000)		58,000
			Bills Receivable		4,100
			Accrued Interest on Loan		500
			Sundry Debtors	1,31,500
			Less: Sale on Approval Basis	10,000
			Less: Bad & Doubtful Debts	1,500
			Less: Provision for Discount on Debtors	3,000	1,17,000
			Cash in Hand		7,400
		4,85,000			4,85,000

Working Notes:

WN1: Calculation of Amount of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Premises}\mathrm{}=\mathrm{}2,00,000\mathrm{}\times \mathrm{}\frac{5}{100}=\mathrm{Rs}\mathrm{}10,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}=40,000\mathrm{}\times \mathrm{}\frac{20}{100}=\mathrm{Rs}\mathrm{}8,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Packing}\mathrm{}\mathrm{Machinery}\mathrm{}=\mathrm{}60,000\mathrm{}\times \mathrm{}\frac{10}{100}=\mathrm{Rs}\mathrm{}6,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Tools}=\mathrm{}\mathrm{Rs}\mathrm{}3,000(15,000-12,000)\end{array}$

WN2: Calculation of Provision for Discount on Debtors

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Discount}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Debtors}& =& (\mathrm{Sundry}\mathrm{}\mathrm{Debtors}\mathrm{}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\mathrm{}-\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts})\mathrm{}\times \mathrm{}\frac{\mathrm{Rate}}{100}\\ & =& (1,31,500\mathrm{}-\mathrm{}1,500-0)\times \mathrm{}\frac{2.5}{100}=Rs3,250\end{array}$

WN3: Calculation of Accrued Interest

$\begin{array}{l}\mathrm{Accrued}\mathrm{}\mathrm{Interest}=\mathrm{}10,000\times \mathrm{}\frac{12}{100}\times \mathrm{}\frac{5}{12}=\mathrm{Rs}\mathrm{}500\\ \end{array}$