Question

Prepare a Trading and Profit & Loss account for the year ending March 31, 2018, from the balances extracted of M/s Rahul Sons. Also prepare a balance sheet as at that date.

Debit Balances	₹	Credit Balances	₹
Stock	50,000	Sales	1,80,000
Wages	3,000	Purchase return	2,000
Salary	8,000	Discount received	500
Purchases	1,75,000	Provision for bad debts	2,500
Sales Return	3,000	Capital	2,90,000
S. Debtors	82,000	Bills Payable	22,000
Discount allowed	1,000	Commission received	4,000
Insurance	3,200	Rent	6,000
Rent, rates and taxes	4,300	Loan	34,800
Fixtures and fittings	20,000	Output CGST	15,000
Trade Expenses	1,500	Output SGST	15,000
Bad debts	2,000
Drawings	32,000
Repair and renewals	1,600
Travelling expenses	4,200
Postage	500
Legal fees	500
Bills Receivable	50,000
Building	1,10,000
Input CGST	10,000
Input SGST	10,000
	5,71,800		5,71,800

Adjustments :-
(i) Commission received in advance ₹ 1,000.
(ii) Rent receivable ₹ 2,000, subject to levy of CGST and SGST @ 9% each.
(iii) Salary outstanding ₹ 1,000 and insurance prepaid ₹ 800.
(iv) Further Bad-debts ₹ 1,000 and provision for Bad-debts @ 5% on debtors and provision for discount on debtors @ 2%.
(v) Closing Stock ₹ 32,000.
(vi) Depreciation on Building @ 6% p.a.

Answer 1

Financial Statement of M/s Rahul Sons
Trading Account for the year ended March 31, 2018
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Opening Stock			50,000	Sales	1,80,000
Purchases		1,75,000		Less: Sales Return	3,000	1,77,000
Less: Purchases Return		2,000	1,73,000	Closing Stock		32,000
Wages			3,000	Gross Loss (Balancing Figure)		17,000
			2,26,000			2,36,000

Profit and Loss Account for the year ended March 31, 2018
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Gross Loss			17,000	Commission	4,000
Depreciation on Building (WN1)			6,600	Less: Unearned	1,000	3,000
Salaries		8,000		Rent received	6,000
Add: Outstanding		1,000	9,000	Add: Accrued	2,000	8,000
Insurance		3,200		Discount Received		500
Less: Prepaid		800	2,400	Net Loss (Balancing Figure)		43,189
Old Bad Debts		2,000
Add: New Bad Debts		1,000
Add: New Provision (WN2)		4,050
Less: Old Provision		2,500	4,550
Provision for Discount on Debtors			1,539
Discount Allowed			1,000
Rent, Rates and Taxes			4,300
Trade Expenses			1,500
Repairs & Renewable			1,600
Travelling Expenses			4,200
Postage			300
Telegram Expenses			200
Legal Fees			500
			54,689			54,689

Balance Sheet as on March 31, 2018
Liabilities		Amount (₹)	Assets			Amount (₹)
Capital	2,90,000		Fixed Assets
Less: Net Loss	43,189		Building	1,10,000
Less: Drawings	32,000	2,14,811	Less: Depreciation	6,600		1,03,400
Loan		34,800	Fixture and Fittings			20,000
Current Liabilities			Current Assets
Bills Payable		22,000	Closing Stock			32,000
Outstanding Salaries		1,000	Prepaid Insurance			800
Commission received in advance		1,000	Bills Receivable			50,000
Output CGST 15,180			Debtors		82,000
(15,000+180*)		5,180	Less: Bad Debts		1,000
Less: Input CGST 10,000			Less: Provision for Bad Debts		4,050
Output CGST 15,180 (15,000+180*)			Less: Provision for Discount on Debtors		1,539	75,41
Less: Input CGST 10,000		5,180	Accrued Rent*			2,360
		2,83,971				2,83,971

Working Notes:

WN1: Calculation of Depreciation

$\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Building}\mathrm{}=1,10,000\times \frac{6}{100}=6,600$

WN2: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& \left(\mathrm{Debtors}\mathrm{}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\right)\times \frac{\mathrm{Rate}}{100}\\ & =& \left(82,000-1,000\right)\times \frac{5}{100}=4,050\end{array}$

WN3: Calculation of Provision for Discount on Debtors

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Discount}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Debtors}& =& \left(\mathrm{Debtors}\mathrm{}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\mathrm{}-\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}\right)\times \frac{\mathrm{Rate}}{100}\\ & =& \left(82,000-1,000-4,050\right)\times \frac{2}{100}=1,539\end{array}$

*WN4: Adjustment Entry for Accrued Rent

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2018
Mar. 31	Accrued Rent A/c	Dr.		2,360
	To Rent A/c				2,000
	To Output CGST A/c				180
	To Output SGST A/c				180
	(Rent receivable plus 9% intra-state GST for the period)