Question

Prepare a trading and profit & loss account of M/s Green Club Ltd. for the year and a Balance Sheet as at that date from the following figures taken from their trial balance:

Debit Balances			(₹)	Credit Balances	(₹)
Opening Stock			1,25,000	Sales	2,50,000
Purchases			35,000	Purchase Return	6,000
Return inward			25,000	Creditors	55,000
Postage			600	Capital	50,000
Salary			12,300	Discount received	1,000
Wages			3,000	Provision for bad debts	4,500
Rent and rates			1,000	Commission received	5,400
Packing and transport			500
General expenses			400
Insurance			4,000
Debtors			50,000
Cash in hand			20,000
Closing Stock			40,000
Machinery			20,000
Lighting			5,000
Discount			3,500
Bad debts			3,500
Investments			23,100
			3,71,900		3,71,900

Adjustments:-
(i) Depreciation charged on Machinery @ 5% p.a.
(ii) Further Bad-debts ₹ 1,500, provision for discount on debtors @ 5% and provision for Doubtful Debts on debtors @ 6%.
(iii) Wages prepaid ₹ 1,000.
(iv) Interest on investments @ 5% p.a.

Answer 1

Financial Statements of M/s Green Club Ltd.
Trading Account for the year ended …
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			1,25,000	Sales	2,50,000
Purchases		35,000		Less: Return Inwards	25,000	2,25,000
Less: Return Outwards		6,000	29,000			–
Wages		3,000
Less: Prepaid		1,000	2,000
Gross Profit (Balancing Figure)			69,000
			2,25,000			2,25,000

Profit and Loss Account for the year ended …
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Depreciation on Machinery (WN1)			1,000	Gross Profit	69,000
Discount Allowed			3,500	Commission Received	5,400
Provision for Discount on Debtors (WN3)			2,280	Discount Received	1,000
Old Bad Debts		3,500		Accrued Interest on Investment (WN4)	1,155
Add: Further Bad Debts		1,500
Add: New Provision (WN2)		2,910
Less: Old Provision		4,500	3,410
Salaries			12,300
Lighting			5,000
Postage and Telegram			600
Rent and Rates			1,000
Packing and Transport			500
General Expenses			400
Insurance			4,000
Net Profit (Balancing Figure)			42,565
			76,555		76,555

Balance Sheet as on …
Liabilities		Amount (Rs)	Assets			Amount (Rs)
Capital	50,000		Fixed Assets
Add: Net Profit	42,565		Machinery	20,000
Less: Drawings	–	92,565	Less: Depreciation	1,000		19,000
			Investments			23,100
Current Liabilities
Creditors		55,000	Current Assets
			Closing Stock			40,000
			Prepaid Wages			1,000
			Accrued Interest on Investment			1,155
			Debtors		50,000
			Less: Further Bad Debts		1,500
			Less: New Provision for Bad Debts		2,910
			Less: Provision for Discount on Debtors		2,280	43,310
			Cash in Hand			20,000
		1,47,565				1,47,565

Working Notes:
WN1: Calculation of Amount of Depreciation

WN2: Calculation of Provision for Doubtful Debts

WN3: Calculation of Provision for Discount on Debtors

WN4: Calculation of Accrued Interest on Investment