Question

Prepare Trading and Profit & Loss Account and Balance Sheet as at 31st March, 2017, from the following balances:

Particulars			(₹)	Particulars	(₹)
Capital A/c			5,00,000	Stock on 1.4.2016	67,000
Drawings A/c			36,000	Salaries & Wages	24,000
Bills Receivable			5,800	Outstanding Salaries and Wages	2,000
Plant & Machinery			3,80,000	Insurance (including premium of ₹ 1,000 per annum paid upto 30-9-2017)	2,600
Sundry Debtors			58,000	Cash	46,600
Loan A/c (Cr.) at 12% p.a.			20,000	Bank Overdraft	15,000
Manufacturing Wages			40,000	Repairs & Renewals	1,600
Returns Inwards			3,000	Interest & Discount (Dr.)	4,400
Purchases			1,20,000	Bad-Debts	4,000
Sales			2,60,000	Sundry Creditors	30,000
Rent			28,000	Fixtures & fittings	12,000
Commission Received			6,000

Adjustments:-
1. Stock on hand on 31st March, 2017 was ₹ 80,000.
2. Further Bad-debts written off ₹ 2,000 and Create a provision of 5% of Sundry Debtors.
3. Rent has been paid up to 31st May, 2017.
4. Manufacturing wages include ₹ 10,000 of a new Machinery purchased on 1st October, 2016.
5. Depreciate Plant and Machinery by 10% p.a. and Fixtures and Fittings by 20% p.a.
6. Commission earned but not received ₹ 1,000.
7. Interest on Loan for the last two months is not paid.
8. Goods worth ₹ 4,000 were distributed as free samples.

Answer 1

Trading Account for the year ended March 31, 2017
Dr.								Cr.
Particulars				Amount (Rs)	Particulars		Amount (Rs)
Opening Stock				67,000	Sales	2,60,000
Purchases			1,20,000		Less: Return Inwards	3,000	2,57,000
Less: Advertisement			4,000	1,16,000	Closing Stock		80,000
Manufacturing Wages		40,000
Less: New Machinery		10,000		30,000
Gross Profit (Balancing Figure)				1,24,000
				3,37,000			3,37,000

Profit and Loss Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Depreciation: (WN1)				Gross Profit		1,24,000
Plant & Machinery		38,500		Commission Received	6,000
Fixture & Fittings		2,400	40,900	Add: Accrued	1,000	7,000
Rent		28,000
Less: Prepaid (WN2)		4,000	24,000
Bad Debts		4,000
Add: Further Bad Debts		2,000
Add: New Provision (WN3)		2,800	8,800
Outstanding Interest on Loan (WN4)			400
Insurance		2,600
Less: Prepaid (WN5)		500	2,100
Advertisement			4,000
Salaries & Wages			24,000
Repairs & Renewals			1,600
Interest & Discount			4,400
Net Profit (Balancing Figure)			20,800
			1,31,000			1,31,000

Balance Sheet as on March 31, 2017
Liabilities		Amount (Rs)	Assets			Amount (Rs)
Capital	5,00,000		Fixed Assets
Add: Net Profit	20,800		Plant & Machinery	3,80,000
Less: Drawings	36,000	4,84,800	Add: New Machinery	10,000
12% Loan		20,000	Less: Depreciation	38,500		3,51,500
			Fixture & Fittings	12,000
Current Liabilities			Less: Depreciation	2,400		9,600
Sundry Creditors		30,000
Outstanding Salaries & Wages		2,000	Current Assets
Outstanding Interest on Loan		400	Closing Stock			80,000
Bank Overdraft		15,000	Accrued Commission			1,000
			Prepaid Insurance			500
			Prepaid Rent			4,000
			Cash in Hand			46,600
			Sundry Debtors		58,000
			Less: Further Bad Debts		2,000
			Less: Provision for Doubtful Debts		2,800	53,200
			Bills Receivable			5,800
		5,52,200				5,52,200

Working Notes:

WN1: Calculation of Amount of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Plant}\mathrm{}\&\mathrm{Machinery}\mathrm{}=3,80,000\mathrm{}\times \mathrm{}\frac{10}{100}\mathrm{}\text{+ 10},000\mathrm{}\times \mathrm{}\frac{10}{100}\times \mathrm{}\frac{6}{12}\mathrm{}=\mathrm{Rs}\mathrm{}38,500\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Fixtures}\mathrm{}\&\mathrm{}\mathrm{Fittings}=12,000\mathrm{}\times \mathrm{}\frac{20}{100}\mathrm{}=\mathrm{Rs}\mathrm{}2,400\end{array}$

WN2: Calculation of Prepaid Rent

$\begin{array}{l}\text{Rent paid for 14 months = Rs 28,000}\\ \mathrm{Prepaid}\mathrm{}\mathrm{Rent}=\mathrm{}28,000\times \frac{2}{14}=\text{Rs 4},0\text{0}0\end{array}$

WN3: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& (\mathrm{Sundry}\mathrm{}\mathrm{Debtors}\mathrm{}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\mathrm{})\mathrm{}\times \mathrm{}\frac{\mathrm{Rate}}{100}\\ & =& (58,000\mathrm{}-\mathrm{}2,000)\times \mathrm{}\frac{5}{100}=\mathrm{Rs}\mathrm{}2,800\end{array}$

WN4: Calculation of Interest on Loan

$\mathrm{}\mathrm{Interest}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loan}\mathrm{}\mathrm{Outstanding}=\mathrm{}20,000\times \frac{12}{100}\times \frac{2}{12}=\mathrm{Rs}400$

WN5: Calculation of Prepaid Insurance

$\mathrm{}\mathrm{Prepaid}\mathrm{}\mathrm{Insurance}=\mathrm{}1,000\times \frac{6}{12}=\mathrm{Rs}500$