Question

Kajol and Sunny were partners sharing profits and losses in the ratio of 3:2. The following Balances were extracted from the books of account for the year ended March 31, 2006.

$\begin{array}{ccc}\text{Account Name}& \text{Amt. (Dr)}& \text{Amt. (Cr)}\\ \text{Capital}& & \\ \text{Kajol}& & 115,000\\ \text{Sunny}& & 91,000\\ \text{Current Accounts (on 1-04-2005)}& & \\ \text{Kajol}& & 4,500\\ \text{Sunny}& 3,200& \\ \text{Drawings}& & \\ \text{Kajol}& 6,000& \\ \text{Sunny}& 3,000& \\ \text{Opening Stock}& 22,700& \\ \text{Purchase and Sales}& 1,65,000& 2,35,800\\ \text{Freight Inward}& 1,200& \\ \text{Returns}& 2,000& 3,200\end{array}$

$\begin{array}{ccc}\text{Account Name}& \text{Amt. (Dr)}& \text{Amt. (Cr)}\\ \text{Printing and Stationery}& 900& \\ \text{Wages}& 5,500& \\ \text{Bills Receivables and Bills}& 25,000& 21,000\\ \text{Payables}& & \\ \text{Discount}& 400& 800\\ \text{Salaries}& 6,000& \\ \text{Rent}& 7,200& \\ \text{Insurance Premium}& 2,000& \\ \text{Travelling Expenses}& 700& \\ \text{Soundry Expenses}& 1,100& \\ \text{Commission}& & 1,600\\ \text{Debtors and Creditors}& 74,000& 78,000\\ \text{Building}& 85,000& \\ \text{Plant and Machinery}& 70,000& \\ \text{Motor Car}& 60,000& \\ \text{Furniture and Fixtures}& 15,000& \\ \text{Bad Debts}& 1,500& \\ \text{Provision for Doubtful Debts}& & 2,200\\ \text{Loan}& & 25,000\\ \text{Legal Expenses}& 300& \\ \text{Audit Fee}& 900& \\ \text{Cash in Hand}& 7,500& \\ \text{Cash at Bank}& 12,000& \\ & \overline{\underset{–}{5,78,100}}& \overline{\underset{–}{5,78,100}}\end{array}$

Prepare final accounts for the year ended March 31, 2006, with following adjustments

(a) Stock on March 31, 2006 was Rs 37,500.

(b) Bad debts Rs 3,000; Provision for bad debts is to be made at 5% on debtors.

(c) Rent prepaid were Rs 1,200.

(d) Wages outstanding were Rs 2,200.

(e) Interest on capital to be allowed on capital at 6% per annum and interest on drawings to be charged @ 5% per annum.

(f) Kajol is entitled to a Salary of Rs 1,500 per annum.

(g) Prepaid insurance was Rs 500.

(h) Depreciation was charged on Building, @ 4%; Plant and Machinery @5% Motor car, @10% and Furnniture and Fixture, @ 5%.

(i) Goods worth Rs 7,000 were destroyed by fire on January 20, 2005. Insurance company agreed to pay Rs 5,000 in full settlement of the case.

Answer 1

Trading Account

$\begin{array}{cccccccccccccc}\text{Dr}& & & & & & \text{For the year ending 31 March, 2006}& & & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt.(Rs)}\\ \text{Opening Stock}& & 22,700& \text{Sales}& 2,35,800& \\ \text{Purchase}& 1,65,000& & \text{(-) Sales Return}& \underset{–}{2,000}& 2,33,800\\ \text{(-) Purchase Return}& (3,200)& & \text{Closing Stock}& & 37,500\\ \text{(-) Goods Lost by Fire}& \underset{–}{(7,000)}& 1,54,800& & & \\ \text{Freight Inward}& & 1,200& & & \\ \text{Wages}& 5,500& & & & \\ \text{(+) Outstanding}& \underset{–}{2,200}& 7,700& & & \\ \text{Gross Profit c/d}& & 84,900& & & \\ & & \underset{–}{\overline{2,71,300}}& & & \underset{–}{\overline{2,71,300}}\end{array}$

Profit and Loss Account

$\begin{array}{cccccccccccccccc}\text{Dr}& & & & & & & & \text{For the year ending 31 March, 2006}& & & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Printing and Stationery}& & 900& \text{Gross Profit b/d}& & 84,900\\ \text{Discount Allowed}& & 400& \text{Discount Received}& & 800\\ \text{Salaries}& & 6,000& \text{Commission}& & 1,600\\ \text{Rent}& 7,200& & \text{Insurance Co (Claim)}& & 5,000\\ \text{(-) Prepaid}& \underset{–}{(1,200)}& 6,000& & & \\ \text{Insurance Premium}& 2,000& & & & \\ \text{(-) Prepaid}& \underset{–}{\left(500\right)}& 1,500& & & \\ \text{Travelling Expenses}& & 700& & & \\ \text{Sundry Expenses}& & 1,100& & & \\ \text{Bad Debt}& 1,500& & & & \\ \text{(+) Further Bad Debts}& 3,000& & & & \\ \text{(+) Provision for Bad Debts}& \underset{–}{3,550}& & & & \\ \text{(-) Provision for Bad Debt}& 8,050& & & & \\ \text{(Old)}& \underset{–}{(2,200)}& 5,850& & & \\ \text{Legal Expenses}& & 300& & & \\ \text{Audit Fee}& & 900& & & \\ \text{Goods Lost by Fire}& & 7,000& & & \\ \text{Depreciation on}& & & & & \\ \text{Building}& 3,400& & & & \\ \text{Plant and Machinery}& 3,500& & & & \\ \text{Motor Car}& 6,000& & & & \\ \text{Furniture and Fixture}& \underset{–}{750}& 13,650& & & \\ \text{Net Profit}& & 48,000& & & \\ & & \overline{\underset{–}{\underset{–}{92,300}}}& & & \overline{\underset{–}{\underset{–}{92,300}}}\end{array}$

Profit and Loss Appropriation Account

$\begin{array}{cccccccccccccccc}\text{Dr}& & & & & & & & \text{For the year ending 31 March, 2006}& & & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Interest on Capital}& & & \text{Net Profit}& & 48,000\\ \text{Kajol}& 6,900& & & & \\ \text{Sunny}& \underset{–}{5,460}& 12,360& \text{Interest on Drawings}& & \\ & & & \text{Kajol}& 150& \\ \text{Partner's Salaries}& & & \text{Sunny}& \underset{–}{75}& 225\\ \text{Kajol}& & 1,500& \text{(Calculated for Average 6}& & \\ & & & \text{Months)}& & \\ \text{Profit Transferred to}& & & & & \\ \text{Kajol's Current A/c}& 20,619& & & & \\ \text{Sunny's Current A/c}& \underset{–}{13,746}& \underset{–}{34,365}& & & \\ & & \underset{–}{48,225}& & & \overline{\underset{–}{48,225}}\end{array}$

$\begin{array}{ccccccccccccc}\text{Dr}& & & & & & & & \text{Partner's Capital Account}& & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& \text{Kajol}& \text{Sunny}& \text{Particulars}& \text{Kajol}& \text{Sunny}\\ & & & \text{Balance b/d}& 1,15,000& 91,000\\ \text{Balance c/d}& \underset{–}{1,15,000}& \underset{–}{91,000}& & & \\ & \underset{–}{\underset{–}{1,15,000}}& \underset{–}{\underset{–}{91,000}}& & \underset{–}{\overline{\underset{–}{1,15,000}}}& \underset{–}{\overline{\underset{–}{91,000}}}\end{array}$

$\begin{array}{ccccccccccccccc}\text{Dr}& & & & & & & & \text{Partner's Current Account}& & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& \text{Kajol}& \text{Sunny}& \text{Particulars}& \text{Kajol}& \text{Sunny}\\ \text{Balance b/d}& & 3,200& \text{Balance b/d}& 4,500& \\ \text{Drawings}& 6,000& 3,000& \text{Interest on Capital}& 6,900& 5,460\\ \text{Interest on Drawings}& 150& 75& \text{Partner's Salaries}& 1,500& \\ \text{Balance c/d}& 27,369& 12,931& \text{Profit and Loss}& 20,619& 13,746\\ & & & \text{Appropriation A/c}& & \\ & \overline{\underset{–}{33,519}}& \overline{\underset{–}{19,206}}& & \overline{\underset{–}{33,519}}& \overline{\underset{–}{19,206}}\end{array}$

Note: In the absence of date of withdrawl, interest on drawings should be charged for 6 months on the whole of amount.

Balance Sheet

As on 31 March, 2006

$\begin{array}{cccccc}\text{Liabilities}& & \text{Amt. (Rs)}& \text{Assets}& & \text{Amt. (Rs)}\\ \text{Bills Payable}& & 21,000& \text{Bills Receivable}& & 25,000\\ \text{Creditors}& & 78,000& \text{Debtors}& 74,000& \\ \text{Loan}& & 25,000& \text{(-) Further Bad Debts}& \underset{–}{(3,000)}& \\ \text{Wages Outstanding}& & 2,200& & 71,000& \\ \text{Capital}& & & (-)5\%\text{Provision for}& & \\ \text{Kajol}& 1,15,000& & \text{Bad Debts}& \underset{–}{(3,550)}& 67,450\\ \text{Sunny}& \underset{–}{91,000}& 2,06,000& & & \\ \text{Current}& & & \text{Building}& 85,000& \\ \text{Kajol}& 27,369& & (-)\%4\text{Depreciation}& \underset{–}{(3,400)}& 81,600\\ \text{Sunny}& \underset{–}{12,931}& 40,300& \text{Plant and Machinery}& 70,000& \\ & & & (-)5\%\text{Depreciation}& \underset{–}{3,500}& 66,500\\ & & & \text{Motor Car}& 60,000& \\ & & & (-)10\%\text{Depreciation}& \underset{–}{(6,000)}& 54,000\\ & & & \text{Furniture and}& & \\ & & & \text{Fixture}& 15,000& \\ & & & (-)5\%\text{Depreciation}& \underset{–}{\left(750\right)}& 14,250\\ & & & \text{Cash in Hand}& & 7,500\\ & & & \text{Cash at Bank}& & 12,000\\ & & & \text{Closing Stock}& & 37,500\\ & & & \text{Prepaid Rent}& & 1,200\\ & & & \text{Prepaid Rent}& & 500\\ & & & \text{Insurance Co(Claim)}& & 5,000\\ & & \underset{–}{\overline{3,72,500}}& & & \underset{–}{\overline{3,72,500}}\end{array}$