Question

On 31st March, 2017 the following Trial Balance was extracted from the books of Sh. Ghanshyam Das:-

	Dr. (₹)	Cr. (₹)
Capital Account		2,00,000
Debtors and Creditors	40,000	25,000
Loan on Mortgage		30,000
Interest on Loan	2,250
Discount		1,800
Stock on 1st April, 2016	20,000
Motor Vehicle	50,000
Cash at Bank	4,450
Investments	16,000
Wages	18,000
Land and Building	2,80,000
Bad-Debts	1,500
Purchases and Sales	2,50,000	4,80,000
Purchases and Sales Returns	12,000	10,000
Carriage Outward	8,000
Carriage Inward	6,500
Salaries	7,200
Outstanding Salaries		600
Rates, Taxes and Insurance	15,000
Advertising	5,000
General Expenses	6,400
Bills Receivable and Payable	7,500	5,400
Prepaid Insurance	3,000
	7,52,800	7,52,800

Prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and Balance Sheet as at that date, after making adjustments for the following matters:
1. Depreciate Land and Building at 2.5% and Motor Vehicles at 20%.
2. Interest on Loan at 15% p.a. is unpaid for six months.
3. Ghanshyam Das withdrew ₹ 2,000 for his private use. This amount was included in general expenses.
4. Interest on Investments is receivable for full year @ 10%.
5. Provide for Manager's Commission at 10% on Net Profit after charging such commission.
6. Stock in hand on 31st March, 2017 was valued at ₹ 25,000 (Realisable value ₹ 22,000).

Answer 1

Financial Statement of Sh. Ghanshyam Das
Trading Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			20,000	Sales	4,80,000
Purchases		2,50,000		Less: Sales Return	12,000	4,68,000
Less: Purchases Return		10,000	2,40,000	Closing Stock		22,000
Wages			18,000
Carriage Inwards			6,500
Gross Profit (Balancing Figure)			2,05,500
			4,90,000			4,90,000

Profit and Loss Account for the year ended March 31, 2017
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Depreciation: (WN1)				Gross Profit	2,05,500
Land & Building		7,000		Accrued Interest on Investment	1,600
Motor Vehicle		10,000	17,000	Discount Received	1,800
Interest on Loan		2,250
Add: Outstanding (WN2)		2,250	4,500
General Expenses		6,400
Less: Drawings		2,000	4,400
Bad Debts			1,500
Carriage Outwards			8,000
Salaries			7,200
Rates, Taxes and Insurance			15,000
Advertisement			5,000
Outstanding Manager’s Commission (WN3)			13,300
Net Profit (Balancing Figure)			1,33,000
			2,08,900		2,08,900

Balance Sheet as on March 31, 2017
Liabilities			Amount (Rs)	Assets		Amount (Rs)
Capital	2,00,000			Fixed Assets
Add: Net Profit	1,33,000			Land & Building	2,80,000
Less: Drawings	2,000		3,31,000	Less: Depreciation	7,000	2,73,000
				Motor Vehicle	50,000
Current Liabilities				Less: Depreciation	10,000	40,000
Creditors			25,000	Investments		16,000
Outstanding Manager’s Commission			13,300	Current Assets
Outstanding Salaries			600	Closing Stock		22,000
Bills Payable			5,400	Bills Receivable		7,500
Loan on Mortgage		30,000		Debtors		40,000
Outstanding Interest on Loan		2,250	32,250	Prepaid Insurance		3,000
				Accrued Interest on Investment		1,600
				Cash at Bank		4,450
			4,07,550			4,07,550

Working Notes:

WN1: Calculation of Amount of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Land}\mathrm{}\&\mathrm{}\mathrm{Building}=2,80,000\times \frac{2.5}{100}=\mathrm{Rs}7,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Motor}\mathrm{Vehicle}=50,000\times \frac{20}{100}=\mathrm{Rs}10,000\end{array}$

WN2: Calculation of Outstanding Interest on Loan

$\mathrm{Outstanding}\mathrm{}\mathrm{Interest}\mathrm{}=30,000\times \frac{15}{100}\times \frac{6}{12}=\mathrm{Rs}2,250$

WN3: Calculation of Manager’s Commission

$\begin{array}{l}\mathrm{Profit}\mathrm{}\mathrm{before}\mathrm{}\mathrm{Manager}\text{'}\mathrm{s}\mathrm{}\mathrm{Commission}=\mathrm{Rs}1,46,300\left(2,08,900-62,600\right)\\ \mathrm{Manager}\text{'}\mathrm{s}\mathrm{}\mathrm{Commission}=1,46,300\times \frac{10}{110}=\mathrm{Rs}\mathrm{}13,300\end{array}$