Question

Practical Problem

Mohini and Rohini are in partnership firm sharing profits and losses equally. From the following Trial Balance and adjustments given below, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2010 and Balance Sheet as on that date.

Trial Balance as on 31st March, 2010
Particulars		Debit Amount Rs	Credit Amount Rs
Partner’s Capital Ac-	Mohini		1,20,000
	Rohini		90,000
Purchases and Sales		2,20,000	4,30,000
Sundry Debtors and Creditors		45,000	35,000
Bills Receivable and Bills Payable		45,000	50,000
Discount		4,000	3,500
Opening stock		25,000
Wages and Salaries		23,000
Manufacturing Expenses		9,000
Factory Insurances		5,000
Factory Building*		1,40,000
Plant and Machinery		75,000
Advertisement (for 2years w.e.f. 1st Jan. 2010)		10,000
Salaries and Wages		45,000
Warehouse rent		6,000
Import duty		11,500
Cash in hand		5,000
10% Government Bond		60,000
(purchased on 1st July, 2009)
		7,28,500	7,28,500

Adjustments:

1) Closing stock was valued at market price Rs 92,000 which is 15% above its cost price.

2) Goods costing Rs 3,000 purchased and received on 31st March, 2010 were not recorded in purchase book.

3) Depreciate Machinery at 10% p.a.

4) Outstanding Wages were Rs 2,500.

5) Goods of Rs 2,000 were taken by Mohini for personal use but no entry was made in the books of account.

6) Maintain R.D.D at 5% on Sundry Debtors.

Answer 1

Financial Statement of….
Trading Account for the year ended March 31,2010
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Opening Stock			25,000	Sales	4,30,000
Purchases		2,20,000		Closing Stock	80,000
Add: Additions		3,000
Add: Import Duty		11,500
Less: Drawings by Mohini		(2,000)	2,32,500
Factory Insurance			5,000
Manufacturing Expenses			9,000
Wages and Salaries		23,000
Add: Outstanding wages		2,500	25,500
Gross Profit (Balancing Figure)			2,13,000
			5,10,000		5,10,000

Profit and Loss Account for the year ended March 31, 2010
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Discount			4,000	Gross Profit	2,13,000
Advertisement		10,000		Discount	3,500
Less: Prepaid $\left(10,000\times \frac{21}{24}\right)$		(8,750)	1,250	Accrued Interest on Government Bonds $\left(60,000\times \frac{10}{100}\times \frac{9}{2}\right)$	4,500
Salaries and Wages			45,000
Warehouse Rent			6,000
Depreciation on Machinery			7,500
Reserve on Doubtful Debts			2,250
Net Profit (Balancing Figure)
Mohini		77,500
Rohini		77,500	1,55,000
			2,21,000		2,21,000

Balance Sheet as on March 31, 2010
Liabilities		Amount (Rs)	Assets			Amount (Rs)
Capital			Fixed Assets
Mohini	1,95,500		Building			1,40,000
Rohini	1,67,500	3,63,000	Plant and Machinery	75,000
Current Liabilities			Less: 10% Depreciation	(7,500)		67,500
Creditors	35,000		Current Assets
Add: Additions	3,000	38,000	Closing Stock			80,000
Bills Payable		50,000	Debtors		45,000
Outstanding Wages		2,500	Less: Reserve for Doubtful Debts $\left(\mathrm{Rs}45,000\times \frac{5}{100}\right)$		2,250	42,750
			Bills Receivable			45,000
			Cash in Hand			5,000
			10% Government Bond		60,000
			Add: Accrued Interest		4,500	64,500
			Prepaid Advertisement			8,750
		4,53,500				4,53,500

Working Notes:

Partners’ Capital Accounts
Dr.							Cr.
Particulars		Mohini	Rohini	Particulars	Mohini	Rohini
Drawings		2,000		Balance b/d	1,20,000	90,000
Balance c/d		1,95,500	1,67,500	Profit and Loss A/c-Profit	77,500	77,500
		1,97,500	1,67,500		1,97,500	1,67,500

Note: As per the textbook the Total of Balance sheet is Rs 4,48,500 but as per our solution it should be Rs 4,53,500.

*There is difference of Rs 10,000 in the Debit and Credit side of Trial Balance, therefore, Factory Building has been increased by Rs 10,000.