Question

Prepare trading and profit and loss account from the following trial balance as on 31st March, 2016.
$$\begin{array}{cccc}\text{Name of Accounts}& \text{Dr. Balance (Rs.)}& \text{Cr. Balance (Rs.)}& \\ \text{Cash in Hand}& 20,000& & \\ \text{Cash at Bank}& 1,80,000& & \\ \text{Purchase and Sales}& 22,00,000& 35,00,000& \\ \text{Return Inwards}& 60,000& & \\ \text{Return Outwards}& & 75,000& \\ \text{Carriage on Purchases}& 44,000& & \\ \text{Carriage on Sales}& 21,000& & \\ \text{Fuel and Power}& 1,55,000& & \\ \text{Stock (1st April, 2015)}& 3,60,000& & \\ \text{Bad Debts}& 62,000& & \\ \text{Bad Debts Provision}& & 25,000& \\ \text{Debtors and Creditors}& 8,20,000& 3,00,000& \\ \text{Capital}& & 21,70,000& \\ \text{Investment}& 2,00,000& & \\ \text{Interest on Investments}& & 20,000& \\ \text{Loan from X(@18\% per annum)}& & 1,00,000& \\ \text{Repairs}& 15,200& & \\ \text{General Expenses}& 1,06,000& & \\ \text{Land and Buildings}& 18,00,000& & \\ \text{Wages and Salaries}& 1,80,000& & \\ \text{Miscellaneous Receipts}& & 1,200& \\ \text{Bills Payable}& & 52,000& \\ \text{Stationery}& 20,000& & \\ & \underset{–}{}& \underset{–}{}& \\ & 62,43,200& 62,43,200& \end{array}$$

Additiional Information:
(i) Written off Rs. 20,000 as bad debts and provision for doubtful debts is to be maintained at 5% on debtors.
(ii) Loan from X was taken on 1st August, 2015. No Interest has been paid so far.
(iii) Included in general expenses is insurace premium Rs. 12,000, paid for one year ending 30th June, 2016
(iv) $\frac{1}{3}$ of wages and salaries is to be charged to trading account and the balance to profit and loss account.
(v) Entire stationery was used by the proprietor for his personal purpose.
(vi) Closing stock was valued at Rs. 5,00,000.

Answer 1

Trading and Profit and loss Account
Dr. for the year ended 31st March, 2016 Cr.

$$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs.)}& \text{Particulars}& & \text{Amt. (Rs.)}\\ \text{Opening Stock}& & 3,60,000& \text{Sales}& 35,00,000& \\ \text{Purchases}& 22,00,000& & \text{(-)Return Inwards}& \underset{–}{60,000}& 34,40,000\\ \text{(-)Return Outwards}& \underset{–}{75,000}& 21,25,000& \text{Closing Stock}& & 5,00,000\\ \text{Carriage on Purchases}& & 44,000& & & \\ \text{Fuel and Power}& & 1,55,000& & & \\ \text{Wages and Salaries}& & 60,000& & & \\ \text{Gross Profit c/d}& & 11,96,000& & & \\ & & \underset{–}{}& & & \underset{–}{}\\ & & \underset{–}{39,40,000}& & & \underset{–}{39,40,000}\\ \text{Carriage on Sales}& & 21,000& \text{Gross Profit b/d}& & 11,96,000\\ \text{Wages and Salaries}& & 1,20,000& \text{Interest on Investment}& & 20,000\\ \text{Repairs}& & 15,200& \text{Miscellaneous Receipts}& & 1,200\\ \text{General Expenses}& 1,06,000& & & & \\ \text{(-) Prepaid Insurance}& \underset{–}{3,000}& 1,03,000& & & \\ \text{Bad Debts}& 62,000& & & & \\ \text{(+)Further bad Dets}& 20,000& & & & \\ \text{(+) New provison for doubtful debts}& \underset{–}{40,000}& & & & \\ & 1,22,000& & & & \\ \text{(-)Old Provision}& \underset{–}{25,000}& 97,000& & & \\ \text{Outstanding Interest}& & 12,000& & & \\ \text{Net Profit transferred to Capital A/c}& & 8,49,000& & & \\ & & \underset{–}{}& & & \underset{–}{}\\ & & \underset{–}{12,17,200}& & & \underset{–}{12,17,200}\end{array}$$

Working Notes:
1. Provision for Doubtful Debts
$=(8,20,000-20,000)\times \frac{5}{100}=Rs.40,000$
2. Interest on loan (from August, 2015 to March, 2016)
$=1,00,000\times \frac{18}{100}\times \frac{8}{12}=Rs.12,000$
3. Prepaid Insurance Premium
$=12,000\times \frac{3}{12}=Rs.3,000$
4. Wages and salaries to be debited
(i) in trading account $=1,80,000\times \frac{1}{3}=60,000$
(ii) in profit and loss account $=1,80,000\times \frac{2}{3}=Rs.1,20,000$