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Question

Roshan, whose accounts are maintained by Single Entry System, acquired a retail business on 1st April, 2017. He had ₹40,000 of his own and he borrowed ₹ 20,000 from his wife. He paid ₹15,000 for Goodwill, ₹5,000 for Furniture and ₹35,000 for Stock.
Total cash received by him during the financial year from the Debtors was ₹2,30,000. His payments were:
Purchases 1,56,000
Salary and Wages 21,400
Trade Expenses 7,200
Rent:
For business premises 5,920
For private house 2,960
Payments made for domestic purposes and drawings 26,400

At the end of the year, the Stock was ₹37,500. He owed ₹13,500 to Creditors for goods and his customers owed to him ₹15,000. Provide 5% for Depreciation on Furniture, Interest at 5% on wife's Loan and ₹1,000 for Doubtful Debts.
Prepare the Cash Account, the Profit and Loss Account for the year ended 31st March, 2018 and the Balance Sheet at the close of the year.

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Solution

Trading Account for the year ended 31st March, 2018
Dr.
Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Opening Stock
35,000
Sales
2,45,000
Purchases: Cash
1,56,000
Closing Stock
37,500
Credit
13,500
1,69,500
Gross Profit c/d
78,000
2,82,500
2,82,500
Profit and Loss Account
for the year ended March 31, 2018
Dr.
Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Salary and Wages
21,400
Gross Profit b/d
78,000
Trade Expenses
7,200
Rent for Business Premises
5,920
Provision for Doubtful Debts
1,000
Depreciation on Furniture
250
Interest on wife’s loan
1,000
Net Profit t/d to Capital
41,230
78,000
78,000
Balance Sheet
as on March 31, 2018
Liabilities
Amount
(₹)
Assets
Amount
(₹)
Creditors
13,500
Cash Balance
15,120
Wife’s Loan from Wife
20,000
Stock
37,500
Add: O/s Interest
1,000
21,000
Furniture
5,000
Capital
40,000
Less: Depreciation
250
4,750
Less: Drawings
29,360
Debtors
15,000
10,640
Less: Provision for Doubtful Debts
1,000
14,000
Add: Net Profit
41,230
51,870
Goodwill
15,000
86,370
86,370
Cash Account
Liabilities
Amount
(₹)
Assets
Amount
(₹)
Capital
40,000
Goodwill
15,000
Wife’s Loan
20,000
Furniture
5,000
Debtors
2,30,000
Stock
35,000
Purchases
1,56,000
Salary and Wages
21,400
Trade Expenses
7,200
Rent for Business Premises
5,920
Drawings( 2,960+26,400)
29,360
Balance c/d
15,120
2,90,000
2,90,000

Working Notes
Dr.
Creditors Account
Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Balance c/d 13,500 Purchases-Credit (B/F) 13,500
13,500
13,500
Dr.
Debtors Account
Cr.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Sales A/c (B/F)
2,45,000
Cash
2,30,000
Balance c/d
15,000
2,45,000
2,45,000

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