Question

From the following Trial Balance of Sh. Parveen Kumar, prepare Trading and Profit & Loss Account for the year ending 31st March, 2014 and a Balance Sheet as at that date:

Dr. Balances			(₹)	Cr. Balances	(₹)
Stock at Commencement			40,000	Sales	5,10,000
Purchases			3,20,000	Loan from Mr. Naresh @ 15% p.a.	40,000
Returns Inward			7,000	Returns Outwards	8,000
Sundry Debtors			80,000	Bank	24,200
Cash			9,400	Provision for Doubtful Debts	2,500
Manufacturing Expenses			44,000	Discount	1,800
Trade Expenses			7,200	Rent to Premises sublet, for the year to 30th Sep., 2014	4,000
Carriage			3,500	Capital	1,20,000
Salaries and Wages			15,800	Sundry Creditors	47,000
Postage			1,500
Stationery			800
Freight Inwards			4,300
Land and Building			2,00,000
Patents			8,000
Furniture			10,000
Insurance Premium			6,000
			7,57,500		7,57,500

Informations:-
(1) Closing Stock was valued at ₹ 60,000. You are informed that goods valued ₹ 12,000 were sold and despactched on 29th March, 2014, but no entry was passed to this effect.
2. Insurance Premium include ₹ 1,200 paid on 1st October, 2013 to run for one year from Oct. 1, 2013 to Sept. 30, 2014.
(3) Loan from Mr. Naresh was taken on 1st July, 2013. Interest has not been paid so far.
(4) Create provision for Doubtful Debts at 5% on Sundry Debtors after writing off ₹ 600 as Bad-debts during the year.
(5) A bill of ₹ 3,200 for advertisement in newspaper remained unpaid at the end of the year.
(6) Purchases include Furniture costing ₹ 5,000 purchased on 1st April, 2013.
(7) Charge 10% p.a. depreciation on Furniture and write off $\frac{1}{5}\mathrm{th}$ of patents.

Answer 1

Financial Statement of Sh. Parveen Kumar
Trading Account for the year ended March 31, 2014
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			40,000	Sales	5,10,000
Purchases		3,20,000		Add: Unrecorded	12,000
Less: Return Outwards		8,000		Less: Return Inwards	7,000	5,15,000
Less: Furniture		5,000	3,07,000	Closing Stock		60,000
Manufacturing Expenses			44,000
Carriage Inward			3,500
Freight Inwards			4,300
Gross Profit (Balancing Figure)			1,76,200
			5,75,000			5,75,000

Profit and Loss Account for the year ended March 31, 2014
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Depreciation: (WN1)				Gross Profit		1,76,200
Furniture		1,500		Rent of Premises sublet	4,000
Patents		1,600	3,100	Less: Unearned (WN5)	2,000	2,000
Insurance Premium		6,000		Discount		1,800
Less: Prepaid (WN2)		600	5,400
Further Bad Debts		600
Add: New Provision (WN3)		4,570
Less: Old Provision		2,500	2,670
Outstanding Interest on Naresh’s Loan (WN4)			4,500
Outstanding Advertisement Bill			3,200
Trade Expenses			7,200
Salaries & Wages			15,800
Postage & Telegrams			1,500
Stationery			800
Net Profit (Balancing Figure)			1,35,830
			1,80,000			1,80,000

Balance Sheet as on March 31, 2014
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital	1,20,000		Fixed Assets
Add: Net Profit	1,35,830	2,55,830	Patents	8,000
Loan from Naresh		40,000	Less: Depreciation	1,600	6,400
			Furniture (10,000 + 5,000)	15,000
Current Liabilities			Less: Depreciation	1,500	13,500
Creditors		47,000	Land & Building		2,00,000
Outstanding Advertisement Bill		3,200
Unearned Rent		2,000	Current Assets
Bank Overdraft		24,200	Closing Stock		60,000
Outstanding Interest on Loan		4,500	Prepaid Insurance Premium		600
			Debtors	80,000
			Add: Unrecorded	12,000
			Less: Bad Debts	600
			Less: Provision for Doubtful Debts	4,570	86,830
			Cash in Hand		9,400
		3,76,730			3,76,730

Working Notes:

WN1: Calculation of Amount of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Patents}=8,000\times \frac{1}{5}=\mathrm{Rs}1,600\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}=15,000\times \frac{10}{100}=\mathrm{Rs}1,500\end{array}$

WN2: Calculation of Prepaid Insurance

$\mathrm{Prepaid}\mathrm{}\mathrm{Insurance}=\mathrm{}1,200\times \mathrm{}\frac{6}{12}=\mathrm{Rs}\mathrm{}600$

WN3: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& (\mathrm{Sundry}\mathrm{}\mathrm{Debtors}\mathrm{}+\mathrm{}\mathrm{Unrecorded}\mathrm{}\mathrm{Sales}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\mathrm{})\mathrm{}\times \mathrm{}\frac{\mathrm{Rate}}{100}\\ & =& (80,000\mathrm{}+\mathrm{}12,000\mathrm{}-\mathrm{}600)\times \mathrm{}\frac{5}{100}=\mathrm{Rs}\mathrm{}4,570\end{array}$

WN4: Calculation of Outstanding Interest on Loan

$\mathrm{Outstanding}\mathrm{}\mathrm{Interest}=40,000\times \frac{15}{100}\times \frac{9}{12}=\mathrm{Rs}4,500$

WN5: Calculation of Rent Received in Advance

$\mathrm{Rent}\mathrm{}\mathrm{Received}\mathrm{}\mathrm{in}\mathrm{}\mathrm{Advance}=4,000\times \frac{6}{12}=\mathrm{Rs}2,000$