Question

Prepare Trading and Profit and Loss Account and Balance Sheet from the following Trial Balance and information as on 31st March, 2019:

Name of Account			Debit (₹)	Credit (₹)
Drawings and Capital			15,000	3,25,000
Plant and Machinery			2,00,000	–
Motor Vehicle			1,50,000	–
Return Inward and Outward			25,000	37,000
Stock on 1st April, 2018			82,000	–
Purchases and Sales			4,40,000	6,75,000
Carriage Inward			6,000	–
Trade Expenses			2,500	–
Bad Debts			4,250	–
Provision for Doubtful Debts			–	6,000
Commission			–	4,000
Rent, Rates & Taxes			12,000	–
Salaries and Wages			24,000	–
Debtors and Creditors			70,000	55,000
Fuel and Water			4,750	–
Cash in Hand			16,500	–
Cash at Bank			50,000	–
Total			11,02,000	11,02,000

Adjustments:
(i) Closing Stock was valued at ₹ 1,12,500.
(ii) Commission include ₹ 1,200 being commission received in advance.
(iii) Salaries and wages is outstanding for the month of Feb. & March, 2019.
(iv) Depreciate Plant & Machinery by 15% and Motor Vehicle by 20%.
(v) Write off ₹ 500 as further Bad Debts and maintain provision for doubtful debts at 1% on debtors.

Answer 1

Trading Account for the year ended March 31, 2019
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Opening Stock			82,000	Sales	6,75,000
Purchases		4,40,000		Less: Return Inwards	25,000	6,50,000
Less: Return Outwards		37,000	4,03,000	Closing Stock		1,12,500
Carriage Inward			6,000
Fuel and Water			4,750
Gross Profit (Balancing Figure)			2,66,750
			7,62,500			7,62,500

Profit and Loss Account for the year ended March 31, 2019
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Depreciation:				Gross Profit		2,66,750
Plant & Machinery		30,000		Commission	4,000
Motor Vehicle		30,000	60,000	Less: Unearned	1,200	2,800
Salaries & Wages		24,000		Provision for Doubtful Debts
Add: Outstanding		4,800	28,800	(Old Provision - New Provision)		5,305
Old Bad Debts		4,250
Add: Further Bad Debts		500	4,750
Trade Expenses			2,500
Rent, Rates and Taxes			12,000
Net Profit (Balancing Figure)			1,66,805
			2,74,855			2,74,855

Balance Sheet as on March 31, 2019
Liabilities		Amount (₹)	Assets			Amount (₹)
Capital	3,25,000		Fixed Assets
Add : Net Profit	1,66,805		Plant & Machinery	2,00,000
Less: Drawings	15,000	4,76,805	Less: Dep.	30,000		1,70,000
			Motor Vehicle	1,50,000
			Less: Dep.	30,000		1,20,000
Current Liabilities			Current Assets
Creditors		55,000	Closing Stock			1,12,500
Outstanding Salaries and Wages		4,800	Debtors		70,000
Unearned Commission		1,200	Less: Bad Debts		500
			Less: Provision for Bad Debts		695	68,805
			Cash in Hand			16,500
			Cash at Bank			50,000
		5,37,805				5,37,805

Working Note:

WN1: Calculation of Amount of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Machinery}\mathrm{}=2,00,000\mathrm{}\times \mathrm{}\frac{15}{100}\mathrm{}=\mathrm{Rs}\mathrm{}30,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Motor}\mathrm{}\mathrm{Vehicle}\mathrm{}=1,50,000\mathrm{}\times \mathrm{}\frac{20}{100}\mathrm{}=\mathrm{Rs}\mathrm{}30,000\end{array}$

WN2: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& (\mathrm{Sundry}\mathrm{}\mathrm{Debtors}\mathrm{}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\mathrm{})\mathrm{}\times \mathrm{}\frac{\mathrm{Rate}}{100}\\ & =& \mathrm{}(70,000\mathrm{}-\mathrm{}500)\times \mathrm{}\frac{1}{100}=\mathrm{Rs}\mathrm{}695\end{array}$

WN3: Calculation of Outstanding Salaries and Wages

$\begin{array}{l}\text{Salaries and Wages paid for 10 months = 24,000}\\ \text{Salaries and Wages outstanding for 2 months =24,000 ×}\frac{\text{2}}{\text{10}}\text{= Rs 4,800}\end{array}$