Question

Prepare Trading and Profit and Loss Account and Balance Sheet as at 31st March, 2017 from the following Balances of Mr. Sardari Lal :

Particulars			(₹)	Particulars	(₹)
Capital Account			41,000	Drawings	5,000
Creditors – Trade			30,000	Purchases	1,71,000
Creditors – Expenses			6,800	Carriage inwards	1,500
Rent Received			600	Wages	23,000
Purchases Returns			4,000	Power	9,000
Sales			2,89,600	Rent and Insurance	19,900
Bad-Debts Provision on 1st April, 2016			600	Salaries	34,400
Advertising Development			8,000	Discount Received	1,800
Goodwill			5,000	General Charges	8,600
Plant and Machinery			20,000	Sales Returns	600
Traveller's Samples			2,700	Traveller's Commission	2,890
Stock on 1-4-2016			32,000	Traveller's Salaries	9,100
Debtors			14,600	Discount Allowed	5,000
Cash at Bank			2,000
Cash in hand			110

Adjustments:- The Closing stock was ₹ 23,000 but there has been a loss by fire on 20th March, 2017, to the extent of ₹ 20,000, not covered by insurance. Depreciate Plant and Machinery by 10% and Traveller's Samples by $33\frac{1}{3}\%$. Increase the Bad-debts Provision to ₹ 2,000. Write 20% off Advertising Development Account. Annual premium on insurance expiring 1st June, 2017 was ₹ 1,200. Provide for Manager's commission @ 5% on Net Profits after charging such Commission.

Answer 1

Financial Statements of Mr. Sardari Lal
Trading Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			32,000	Sales	2,89,600
Purchases		1,71,000		Less: Sales Return	600	2,89,000
Less: Purchases Return		4,000		Closing Stock		23,000
Less: Goods Destroyed by Fire		20,000	1,47,000
Power			9,000
Carriage Inwards			1,500
Wages			23,000
Gross Profit (Balancing Figure)			99,500
			3,12,000			3,12,000

Profit and Loss Account for the year ended March 31, 2017
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Depreciation: (WN1)				Gross Profit	99,500
Traveler’s Sample		900		Rent Received	600
Plant & Machinery		2,000	2,900	Discount Received	1,800
Rent & Insurance		19,900		Net Loss (Balancing Figure)	3,690
Less: Prepaid (WN2)		200	19,700
New Provision		2,000
Less: Old Provision		600	1,400
Traveler’s Commission			2,890
Traveler’s Salaries			9,100
Salaries			34,400
Discount Allowed			5,000
Loss by Fire			20,000
Advertisement Development Expenditure written-off (WN3)			1,600
General Charges			8,600
			1,05,590		1,05,590

Balance Sheet as on March 31, 2017
Liabilities		Amount (Rs)	Assets		Amount (Rs)
Capital	41,000		Fixed Assets
Less: Net Loss	3,690		Plant & Machinery	20,000
Less: Drawings	5,000	32,310	Less: Depreciation	2,000	18,000
			Traveler’s Samples	2,700
Current Liabilities			Less: Depreciation	900	1,800
Creditors- Expenses		6,800	Goodwill		5,000
Creditors- Trade		30,000	Current Assets
			Closing Stock		23,000
			Advertisement Development		6,400
			Prepaid Insurance		200
			Cash in Hand		110
			Debtors	14,600
			Less: Provision for Doubtful Debts	2,000	12,600
			Cash at Bank		2,000
		69,110			69,110

Working Notes:

WN1: Calculation of Amount of Depreciation

WN2: Calculation of Prepaid Insurance

WN3: Calculation of Advertisement Expenditure Written-off

WN4: Calculation of Manager’s Commission

Manager will not be entitled to any commission because there is a net loss.