Question

Sh. Param Bhushan does not maintain proper books of accounts. From the following, prepare his trading and profit & loss account for the year ended 31st March, 2015, together with balance sheet as at that date:

BALANCE SHEET
as at 31st March, 2014

Liabilities			(₹)	Assets	(₹)
Sundry Creditors			80,000	Cash	22,000
Outstanding Salaries			4,000	Sundry Debtors	1,50,000
Capital			8,08,000	Stock	1,20,000
				Plant and Machinery	2,00,000
				Freehold Premises	4,00,000
			8,92,000		8,92,000

Cash book analysis shows the following:

	₹
Payment to Creditors	4,00,000
Staff Salaries	76,000
Rent Paid	17,300
General Expenses (including insurance premium of ₹ 2,400 paid on 1st January 2015 to run for one year)	8,700
Personal Withdrawals	12,000
Received from Debtors	5,50,000
Cash Sales	1,10,000
Purchase of Computers (on 1st January, 2015)	40,000
Purchase of Furniture (on 1st January, 2015)	60,000

The following further information is available:
Closing Stock ₹ 1,35,000; Closing Debtors ₹ 1,92,000; Closing Creditors ₹ 72,000; Outstanding Salaries at the end ₹ 6,000; General Expenses include ₹ 5,000 for house rent of Sh. Param Bhushan and Cash Sale include ₹ 30,000 for sale of his personal jewellery.
Create a provision of $2\frac{1}{2}\%$ for doubtful debts and depreciate plant and machinery by 10% p.a. and computers and furniture by 20% p.a. Also provide 5% for group incentive commission to staff on net profit after charging such commission.

Answer 1

Trading Account for the year ended March 31, 2015
Dr.			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	1,20,000	Sales (Cash + Credit)	6,72,000
Purchases (Credit)	3,92,000	Closing Stock	1,35,000
Gross Profit	2,95,000
	8,07,000		8,07,000

Profit & Loss Account for the year ended March 31, 2015
Dr.				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
Staff Salaries		76,000	Gross Profit	2,95,000
Rent Paid		17,300
General Expenses		1,300
Insurance Premium		600
Outstanding Salaries (6,000 – 2,000)		2,000
Provision for Doubtful Debts		4,800
Depreciation on
Plant & Machinery	20,000
Computer	2,000
Furniture	3,000	25,000
Staff Commission		8,000
Net Profit		1,60,000
		2,95,000		2,95,000

Balance Sheet as on March 31, 2015
Dr.				Cr.
Liabilities		Amount (₹)	Assets	Amount (₹)
Capital (8,08,000 + 30,000)	8,38,000		Cash	68,000
Less: Drawings	17,000		Debtors (1,92,000 – 4,800)	1,87,200
Add: Net Profit	1,60,000	9,81,000	Stock	1,35,000
Closing Creditors		72,000	Plant &Machinery (2,00,000 – 20,000)	1,80,000
Outstanding Salary		6,000	Computer (40,000 – 2,000)	38,000
Staff Commission Payable		8,000	Furniture (60,000 – 3,000)	57,000
			Freehold Premises	4,00,000
			Prepaid Insurance Premium	1,800
		10,67,000		10,67,000

Working Notes:

Cash Account
Dr.			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	22,000	Creditors A/c	4,00,000
Debtors A/c	5,50,000	Staff Salaries	76,000
Sales A/c	80,000	Rent	17,300
Capital A/c	30,000	General Expenses	3,700
		Drawings (12,000 + 5,000)	17,000
		Computer	40,000
		Furniture	60,000
		Balance c/d (Balancing Figure)	68,000
	6,82,000		6,82,000

Debtors Account
Dr.			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Balance b/d	1,50,000	Cash A/c	5,50,000
Sales A/c	5,92,000	Balance c/d	1,92,000
	7,42,000		7,42,000

Creditors Account
Dr.			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Cash A/c	4,00,000	Balance b/d	80,000
Balance c/d	72,000	Purchases A/c	3,92,000
	4,72,000		4,72,000