Question

Prepare trading account and profit and loss account from the following particulars for the year ended 31st December, 2015.

$\begin{array}{ccc}\text{Particulars}& \text{Amt. (Dr.)}& \text{Amt (Cr.)}\\ \text{Cash in Hand}& 7,600& \\ \text{Cash at Bank}& 16,218& \\ \text{Purchases and Sales}& 3,16,000& 6,50,000\\ \text{Return Inwards}& 5,000& \\ \text{Return Outwards}& & 3,600\\ \text{Carriage on Purchases}& 2,000& \\ \text{Carriage on Sales}& 600& \\ \text{Fuel and Power}& 7,800& \\ \text{Stock 1.1.2015}& 56,420& \\ \text{Building}& 1,64,000& \\ \text{Machinery}& 2,25,000& \\ \text{Debtors and Creditors}& 1,44,000& 44,000\\ \text{Investments}& 1,00,000& \\ \text{Interest on Investments}& & 2,000\\ \text{Loan from Narayan on 1.7.2015}@10\%\text{per annum}& & 40,000\\ \text{Repairs}& 8,562& \\ \text{General Expenses}& 40,800& \\ \text{Provision for Bad Debts}& & 4,200\\ \text{Wages and Salaries}& 39,440& \\ \text{Miscellaneous Receipts}& & 9,040\\ \text{Interest on Mr. Narayan's Loan}& 1,400& \\ \text{Capital}& & 4,00,000\\ \text{Drawings}& 18,000& \\ & \overline{11,52,840}& \overline{11,52,840}\end{array}$

Adjustments:

(i) Bad Debts Rs. 2,000.

(ii) Provision for doubtful debts is to be maintained at 5% on sundry debtors.

(iii) Provision for 2% discount on debtors and creditors.

(iv) Manager is entitled to get the commission at 10% on net profit after changing such commission.

(v) Closing stock was valued at Rs. 60,000.

(vi) Allow interest on capital @ 10%.

(vii) Charge Rs. 1,000 as interest on drawings.

Answer 1

$\text{Trading and Profit and Loss Account}$
$\text{Dr.}\text{for the year ended 31st December, 2015}\text{Cr.}$

$\begin{array}{cccc}\text{Particulars}& \text{Amt. (Rs.}& \text{Particulars}& \text{Amt. (Rs.}\\ \text{Opening Stock}& 56,420& \text{Sales}6,50,000& \\ \text{Purchases}3,16,000& & (-)\text{Returns Inwards}\underset{–}{5,000}& 6,45,000\\ (-)\text{Returns Outwards}\underset{–}{3,600}& 3,12,400& \text{Closing Stock}& 60,000\\ \text{Carriage on Purchases}& 2,000& & \\ \text{Fuel and Power}& 7,800& & \\ \text{Wages and Salaries}& 39,440& & \\ \text{Gross Profit c/d}& 2,86,940& & \\ & \overline{\underset{–}{7,05,000}}& & \overline{\underset{–}{7,05,000}}\\ \text{Carriage on Sales}& 600& \text{Gross Profit b/d}& 2,86,940\\ \text{Repairs}& 8,562& \text{Interest on Investments}& 2,000\\ \text{General Expenses}& 40,800& \text{Miscellaneous Receipts}& 9,040\\ \text{Further Bad Debts}2,000& & \text{Provision for Discount on Creditors}& 880\\ (+)\text{New Provision}\underset{–}{7,100}& & \text{Interest on Drawings}& 1,000\\ 9,100& & & \\ (-)\text{Old Provision}\underset{–}{4,200}& 4,900& & \\ \text{Interest on Narayan's Loan}1,400& & & \\ (+)\text{Outstanding Interest}\underset{–}{600}& 2,000& & \\ \text{Provision for Discount on Debtors}& 2,698& & \\ \text{Interest on Capital}(4,00,000\times 10\%)& 40,000& & \\ \text{Manager's Commission (Outstanding)}& 18,209& & \\ \text{Net Profit Transferred to Capital A/c}& 1,82,091& & \\ & \overline{\underset{–}{2,99,860}}& & \overline{\underset{–}{2,99,860}}\end{array}$

Working Note

• Manager's commission=(2,99,860-99,560)=2,00,300$\times \frac{10}{110}=Rs18,209$
• Interest on loan= Rs. $40,000\times \frac{10}{100}\times \frac{6}{12}=Rs.2,000$

$(-)\text{Already Paid}=1,400\text{Outstanding}=\overline{\underset{–}{Rs.600}}$