Question

On 31st March, 2017 the following Trial Balance was extracted from the books of Mohan:-

	Dr. (₹)	Cr. (₹)
Capital		30,000
Drawings	5,000
Debtors and Creditors	20,000	10,000
Bank Loan		9,500
Interest on Loan	300
Cash	2,000
Provision for Bad-Debts		700
Stock 1-4-2016	6,800
Motor Vehicles	10,000
Bank	3,500
Land and Buildings	12,000
Bad-Debts	500
Purchases and Sales	66,000	1,10,000
Returns	8,000	1,500
Carriage Outward	2,500
Carriage Inward	3,000
Salaries	9,000
Rent and Insurance	3,000
Advertising	3,500
Discount		500
General Expenses	3,400
B/R and B/P	6,000	2,000
Rent received		300
	1,64,500	1,64,500

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date after taking into account the following:-
(a) Private purchases amounting to ₹ 4,000 have been debited to Purchases Account.
(b) Depreciate Land and Buildings at $2\frac{1}{2}\%$ and Motor Vehicles at 20%.
(c) Salaries outstanding ₹ 200.
(d) Prepaid Insurance ₹ 200.
(e) Provision for Doubtful Debts is to be maintained at 5% on Debtors.
(f) Stock on 31st March, 2017 was valued at ₹ 7,000.

Answer 1

Trading Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			6,800	Sales	1,10,000
Purchases		66,000		Less: Return Inwards	8,000	1,02,000
Less: Return Outwards		1,500		Closing Stock		7,000
Less: Drawings		4,000	60,500
Carriage Inward			3,000
Gross Profit (Balancing Figure)			38,700
			1,09,000			1,09,000

Profit and Loss Account for the year ended March 31, 2017
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Depreciation: (WN1)				Gross Profit	38,700
Land & Building		300		Discount received	500
Motor Vehicle		2,000	2,300	Rent received	300
Salary		9,000
Add: Outstanding		200	9,200
Rent & Insurance		3,000
Less: Pre-paid		200	2,800
Old Bad Debts		500
Add: New Bad Debts		–
Add: New Provision (WN2)		1,000
Less: Old Provision		700	800
Interest on Bank Loan			300
Carriage Outward			2,500
Advertisement			3,500
General Expenses			3,400
Net Profit (Balancing Figure)			14,700
			39,500		39,500

Balance Sheet as on March 31, 2017
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital	30,000		Fixed Assets
Add: Net Profit	14,700		Land & Buildings	12,000
Less: Drawings (5,000 + 4,000)	9,000	35,700	Less: Depreciation	300	11,700
			Motor Vehicles	10,000
Current Liabilities			Less: Depreciation	2,000	8,000
Creditors		10,000
Outstanding Salaries		200	Current Assets
Bank Loan		9,500	Closing Stock		7,000
Bills Payable		2,000	Prepaid Insurance		200
			Debtors	20,000
			Less: Provision for Bad Debts	1,000	19,000
			Bills Receivables		6,000
			Cash at Bank		3,500
			Cash in Hand		2,000
		57,400			57,400

Working Notes:

WN1: Calculation of Depreciation



WN2: Calculation of Provision for Doubtful Debts