Question

Practical Problem

From the following Trial Balance of M/s Sanjay and Vijay, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2013 and Balance Sheet as on that date after taking into consideration the adjustments given below.

Trial Balance as on 31st March, 2013
Debit Balance	Amount Rs	Credit Balance		Amount Rs
Salaries and wages	12,000	Sales		1,10,000
Postage and Telegram	1,750	Sundry Creditors		72,700
Opening Stock	23,500	Bills Payable		40,000
Plant and Machinery	70,000	10% Bank loan (Taken on 1st Oct. 2012)		60,000
Advertisement	5,000	Outstanding Audit fees		5,900
Import duty	2,100	Capital A/c-	Sanjay	45,000
Bad debts	1,000		Vijay	45,000
Purchases	98,500
Sundry Debtors	45,800
Bills Receivable	16,700
Carriage outward	1,800
Wages and stationery* (Note 2)	14,000
Printing and stationery	4,600
Cash in hand	1,850
Leasehold Premises	80,000
	3,78,600			3,78,600

Adjustments:
1) Closing stock was valued at Rs 30,000.

2) Postage stamps of Rs 250 and stationery of Rs 400 are unused.

3) Goods of Rs 2,500 distributed as free samples.

4) Leasehold property is to be run for 10 years w.e.f. 1st October, 2012.

5) Depreciate Plant and Machinery at 10% p.a.

6) Mr. Rajan, our customer become insolvent and could not pay his debts of Rs 1,500.

Answer 1

Trading Account for the year ended March 31,2013
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Opening Stock		23,500	Sales	1,10,000
Purchases		98,500	Closing Stock	30,000
Import duty		2,100	Goods distributed as Free Sample	2,500
Wages and Salaries		14,000
Gross Profit (Balancing Figure)		4,400
		1,42,500		1,42,500

Profit and Loss Account for the year ended March 31, 2013
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Salaries and Wages			12,000	Gross Profit	4,400
Postage and Telegram		1,750		Net Loss (Balancing Figure)	39,100
Less: Unused		250	1,500
Advertisement		5,000
Add: Free Sample		2,500	7,500
Bad debts		1,000
Add: Further Bad-Debts		1,500	2,500
Carriage outward			1,800
Printing and stationery		4,600
Less: Unused		400	4,200
Depreciation on:
Leasehold Premises		4,000
Plant and Machinery		7,000	11,000
Outstanding Interest on Loan			3,000
			43,500		43,500

Balance Sheet as on March 31, 2013
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital			Fixed Assets
Sanjay	45,000		Plant and Machinery	70,000
Vijay	45,000		Less: Depreciation	7,000	63,000
Less: Net Loss	(39,100)	50,900	Leasehold Premises	80,000
Current Liabilities			Less: Depreciation	4,000	76,000
Creditors		72,700	Current Assets
Bills Payable		40,000	Closing Stock		30,000
10% Bank Loan	60,000		Debtors	45,800
Add: Outstanding Interest	3,000	63,000	Less: Further Bad-Debts	1,500	44,300
Outstanding Audit fees		5,900	Bills Receivable		16,700
			Unused stock of Printing and Stationery		400
			Unused Stock of Postage and Telegram		250
			Cash in Hand		1,850
		2,32,500			2,32,500

Note 1: As per the textbook, the Gross Profit, the Net Loss and the total of Balance Sheet are Rs 15,900, Rs 27,600 and Rs 2,44,000, respectively, however, as per the above solution these should be Rs 4,400, Rs 39,100 and Rs 2,32,500 respectively.

Note 2: *It should be Wages and Salaries instead of Wages and stationery