Question

The following balances appeared in the books of Parasuram Flour Mills Ltd., as on December 31, 2005 :

Details	Rs	Details	Rs
Stock of wheat	9,500	Furniture	5,100
Stock of flour	16,000	Vehicles	5,100
Wheat Purchases	4,05,000	Stores and spare parts	18,300
Manufacturing Expenses	90,000	Advances	24,500
Flour Sales	5,55,000	Book Debts	51,700
Salaries and Wages	13,000	Investments	4,000
Establishment	4,700	Share Capital	72,000
Interest (Cr.)	500	Pension Fund	23,000
Rent Received	800	Dividend Equalisation fund	10,000
Profit and Loss Account (Cr.)	15,000	Taxation Provision	8,500
Director’s Fees	1,200	Unclaimed Dividends	900
Dividend for 2004	9,000	Deposits (Cr.)	1,600
Land	12,000	Trade Creditors	1,24,000
Buildings	50,500	Cash in Hand	1,200
Plants and Machinery	50,500	Cash at Bank	40,000

Prepare the company’s trading and profit and loss account for the year and balance sheet as on December 31, 2005 after taking the following adjustments into account:

(a) Stock on December 31, 2005 were: Wheat at cost, Rs 14,900: Flour at market price, Rs 21,700; (b) Outstanding expenses: Manufacturing expenses, Rs 23,500; and salaries and wages, Rs 1,200; (c) Provide depreciation : Building at 2% ; Plant and machinery at 10%: Furniture at 10% ; and Vehicle 20%. (d) Interest accrued on Government Securities, Rs100: (e) A tax provision of Rs 8,000 is considered necessary. (f) The directors propose a dividend of 20%. (g) The authorised capital consists of 12,000 equity shares of Rs 10 each of which 7,200 shares were issued and fully paid up.

Answer 1

Parasuram Flour Mills Ltd. Profit and Loss Account for the year ended December 31, 2005
Dr.						Cr.
Expenses/Losses				Amount Rs	Revenues/Gains				Amount Rs
Opening Stock:					Sales (Flour)				5,55,000
Wheat			9,500		Closing Stock
Flour			16,000	25,500			Wheat (at cost)	14,900
Purchases (wheat)				4,05,000			Flour (at market price)	21,700	36,600
Manufacturing Expenses			90,000
	Add: Outstanding		23,500	1,13,500
	Gross Profit c/d			47,600
				5,91,600					5,91,600
	Salaries and Wages		13,000		Gross Profit b/d				47,600
	Add: Outstanding		1,200	14,200			Interest	500
	Establishment			4,700			Add: Accrued	100	600
	Director’s Fees			1,200			Rent Received		800
Depreciation:							Taxation Provision		500
		Building	1,010				(8,500 – 8,000)
		Plant and Machinery	5,050
		Furniture	510
		Vehicle	1,020	7,590
Net Profit c/d				21,810
				49,500					49,500
Dividend for 2004				9,000	Balance b/d				15,000
Proposed Dividend				14,400	Net Profit for the current year				21,810
Balance c/d				13,410
				36,810					36,810

Balance Sheet as on December 31, 2005
Liabilities		Amount Rs	Assets			Amount Rs
Share Capital			Fixed Assets
Authorised Capital:				Land		12,000
12,000 shares of Rs 10 each		1,20,000		Buildings	50,500
				Less: Depreciation	(1,010)	49,490
Issued and Subscribed and Paid up
7,200 shares of Rs 10 each		72,000		Plants and Machinery	50,500
				Less: Depreciation	(5,050)	45,450
Reserves and Surplus
	Pension Fund	23,000		Furniture	5,100
	Dividend Equalisation Fund	10,000		Less: Depreciation	(510)	4,590
	Profit and Loss	13,410
				Vehicles	5,100
Secured Loans		–		Less: Depreciation	(1,020)	4,080
Unsecured Loans			Investments
	Deposits	1,600		Investments	4,000
Current Liabilities and Provisions				Add: Accrued	100	4,100
A. Current Liabilities:			Current Assets, Loan and Advances
	Trade Creditors	1,24,000	A. Current Assets:
	Unclaimed Dividends	900		Book Debts		51,700
	Outstanding Manufacturing Expenses	23,500		Stores and Spare Parts		18,300
	Outstanding Salaries and Wages	1,200		Closing Stock:
B. Provisions:				Wheat (at cost)	14,900
	Proposed Dividend	14,400		Flour (at market price)	21,700	36,600
	Provision for Taxation	8,000		Cash in Hand		1,200
				Cash at Bank		40,000
			B. Loan and Advances:
			Advances			24,500
		2,92,010				2,92,010

Note: It has been assumed that the dividend of Rs 9,000 for the year 2004 is declared and paid in the year 2005. Moreover, the Pension Fund created has been created out of profits not against profit, hence it is a part of Reserves and Surplus.