Question

Prepare a Trading and Profit and loss account for year ending December 31, 2010 from the balances extracted to M/s Rahul Sons. Also prepare a balance sheet at the end of the year.

$\begin{array}{cccc}\text{Account Title}& \text{Amt. (Rs.)}& \text{Account Title}& \text{Amt.(Rs)}\\ \text{Opening Stock}& 50,000& \text{Sales}& 1,80,000\\ \text{Wages}& 3,000& \text{Purchase Return}& 2,000\\ \text{Salary}& 8,000& \text{Discount Received}& 500\\ \text{Purchase}& 1,75,000& \text{Provision for Bad Debts}& 2,500\\ \text{Sales Return}& 3,000& \text{Capital}& 3,00,000\\ \text{Sundry Debtors}& 82,000& \text{Bills Payable}& 22,000\\ \text{Discount Allowed}& 1,000& \text{Commission Received}& 4,000\\ \text{Insurance}& 3,200& \text{Rent}& 6,000\\ \text{Rent, Rates and Taxes}& 4,300& \text{Loan}& 34,800\\ \text{Fixtures and Fittings}& 20,000& & \\ \text{Trade Expenses}& 1,500& & \\ \text{Bad Debts}& 2,000& & \\ \text{Drawings}& 32,000& & \\ \text{Repair and Renewals}& 1,600& & \\ \text{Travelling Expenses}& 4,200& & \\ \text{Postage}& 300& & \\ \text{Telegram Expenses}& 200& & \\ \text{Legal Fees}& 500& & \\ \text{Bills Receivable}& 50,000& & \\ \text{Building}& 1,10,000& & \\ & \underset{–}{\underset{–}{\overline{5,51,800}}}& & \underset{–}{\underset{–}{\overline{5,51,800}}}\\ & & & \end{array}$

Adjustments:

1. Commission received in advance Rs. 1,000.

2. Rent received Rs. 2,000.

3. Salary outstanding Rs. 1,000 and insurance prepaid Rs. 800.

4. Further bad debts Rs. 1,000 and provision for bad debts @5% on debtors and discount on debtors @ 2%.

5. Closing stock Rs. 32,000.

6. Depreciation on building @ 6% pa.

Answer 1

$\begin{array}{ccc}& \text{Trading and Profit and Loss Account}& \\ \text{Dr.}& \text{as on 31st December, 2010}& \text{Cr.}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt.(Rs.)}& \text{Particulars}& & \text{Amt. (Rs.)}\\ \text{Opening Stock}& & 50,000& \text{Sales}& 1,80,000& \\ \text{Purchases}& 1,75,000& & \text{(-)Sales Return}& \underset{–}{3,000}& 1,77,000\\ \text{(-)Purchase}& & & \text{Closing Stock}& & 32,000\\ \text{Return}& \underset{–}{2,000}& 1,73,000& \text{Gross Loss c/d}& & 17,000\\ \text{Wages}& & 3,000& & & \\ & & \overline{\underset{–}{\underset{–}{2,26,000}}}& & & \overline{\underset{–}{2,26,000}}\\ \text{Gross Loss b/d}& & 17,000& \text{Discount Received}& & 500\\ \text{Salary}& 8,000& & \text{Commission}& 4,000& \\ \text{(+)Outstanding}& & & \text{(-)Advance}& \underset{–}{1,000}& 3,000\\ \text{Salary}& \underset{–}{1,000}& 9,000& \text{Rent}& 6,000& \\ \text{Discount Allowed}& & 1,000& \text{(+)Accrued Rent}& \underset{–}{2,000}& 8,000\\ \text{Insurance}& 3,200& & \text{Net Loss}& & 43,189\\ \text{(-) Prepaid Insurance}& \underset{–}{800}& 2,400& & & \\ \text{Rent, Rates and Taxes}& & 4,300& & & \\ \text{Trade Expenses}& & 1,500& & & \\ \text{Bad Debts}& 2,000& & & & \\ \text{(+)Further Bad Debts}& 1,000& & & & \\ \text{(+)New Provision}& 4,050& & & & \\ \text{(+)Discount}& 1,539& & & & \\ \text{(-)Old Provision}& \underset{–}{2,500}& 6,089& & & \\ \text{Postage}& & 300& & & \\ \text{Telegram Expenses}& & 200& & & \\ \text{Repair and Renewals}& & 1,600& & & \\ \text{Travelling Expenses}& & 4,200& & & \\ \text{Legal Fees}& & 500& & & \\ \text{Depreciation on Building}& & 6,600& & & \\ & & \underset{–}{\underset{–}{\overline{54,689}}}& & & \underset{–}{\underset{–}{\overline{54,689}}}\\ & & & & & \end{array}$

Balance Sheet
as on 31st December, 2010

$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt. (Rs.)}& \text{Assets}& & \text{Amt.(Rs)}\\ \text{Capital}& 3,00,000& & \text{Sundry Debtors}& 82,000& \\ \text{(-)Net Loss}& 43,189& & \text{(-)Further Bad}& & \\ & \overline{2,56,811}& & \text{Debts}& 1,000& \\ \text{(-)Drawings}& \underset{–}{32,000}& 2,24,811& \text{(-)New provision}& 4,050& \\ \text{Bills Payable}& & 22,000& \text{(-)Discount}& \underset{–}{1,539}& 75,411\\ \text{Loan}& & 34,800& \text{Bills Receivable}& & 50,000\\ \text{Advance Commission}& & 1,000& \text{Fixture and Fitting}& & 20,000\\ \text{Outstanding Salary}& & 1,000& \text{Prepaid Insurance}& & 800\\ & & & \text{Building}& 1,10,000& \\ & & & \text{(-)Depreciation}@6\%& \underset{–}{6,600}& 1,03,400\\ & & & \text{Rent (Accrued)}& & 2,000\\ & & & \text{Closing Stock}& & 32,000\\ & & \underset{–}{\underset{–}{\overline{2,83,611}}}& & & \underset{–}{\underset{–}{\overline{2,83,611}}}\\ & & & & & \end{array}$

Working Note:

$\begin{array}{cc}\text{Sundry Debtors}& 82,000\\ \text{(-) Further Bad Debts}& \underset{–}{1,000}\\ & 81,000\\ \text{(-) Provision at 5}\%& \underset{–}{4,050}\\ & 76,950\\ \text{(-) Discount at 2}\%& \underset{–}{1,539}\\ & Rs.75,411\end{array}$