Question

The following balances have been extracted from the trial of M/s Haryana Chemical Ltd. You are required to prepare a trading and profit and loss account and balance sheet as on December 31, 2010 from the given information

$\begin{array}{cccc}\text{Account Title}& \text{Amt. (Rs.)}& \text{Account Title}& \text{Amt.(Rs)}\\ \text{Opening Stock}& 50,000& \text{Sales}& 3,50,000\\ \text{Purchase}& 1,25,500& \text{Purchase Return}& 2,500\\ \text{Sales Return}& 2,000& \text{Creditors}& 25,000\\ \text{Cash in Hand}& 21,200& \text{Rent}& 5,000\\ \text{Cash at Bank}& 12,000& \text{Interest}& 2,000\\ \text{Carriage}& 100& \text{Bills Payable}& 1,71,700\\ \text{Freehold Land}& 3,20,000& \text{Capital}& 3,00,000\\ \text{Patents}& 1,20,000& & \\ \text{General Expenses}& 2,000& & \\ \text{Sundry Debtors}& 32,500& & \\ \text{Building}& 86,000& & \\ \text{Machinery}& 34,500& & \\ \text{Insurance}& 12,400& & \\ \text{Drawings}& 10,000& & \\ \text{Motor Vehicle}& 10,500& & \\ \text{Bad Debts}& 2,000& & \\ \text{Light and Water}& 1,200& & \\ \text{Trade Expenses}& 2,000& & \\ \text{Power}& 3,900& & \\ \text{Salary and Wages}& 5,400& & \\ \text{Loan 15}\%\left(\mathrm{1.9.2010}\right)& 3,000& & \\ & \overline{\underset{–}{\underset{–}{8,56,200}}}& & \overline{\underset{–}{\underset{–}{8,56,200}}}\end{array}$

Adjustments

1. Closing stock was valued at the end of the year Rs. 40,000.

2. Salary amounting Rs. 500 and trade expenses Rs. 300 are due.

3. Depreciation charged on building and machinery are @ 4% and @ 5% respectively.

4. Make a provision of @ 5% on sundry debtors.

Answer 1

$\text{Trading and Profit and Loss Account}\text{Dr.}\text{as on 31st December, 2010}\text{Cr.}\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs.)}& \text{Particulars}& & \text{Amt (Rs.)}\\ \text{Opening Stock}& & 50,000& \text{Sales}& 3,50,000& \\ \text{Purchase}& 1,25,500& & \text{(-)Return Inwards}& \underset{–}{2,000}& 3,48,000\\ \text{(-)Return Outwards}& \underset{–}{2,500}& 1,23,000& & & \\ \text{Carriage Inwards}& & 100& \text{Closing Stock}& & 40,000\\ \text{Power}& & 3,900& & & \\ \text{Gross Profit c/d}& & 2,11,000& & & \\ & & \overline{\underset{–}{\underset{–}{3,88,000}}}& & & \overline{\underset{–}{\underset{–}{3,88,000}}}\\ \text{Salary and Wages}& 5,400& & \text{Gross Profit b/d}& & 2,11,000\\ \text{(+)Outstanding Salary}& \underset{–}{500}& 5,900& \text{Rent}& & 5,000\\ \text{General Expenses}& & 2,000& \text{Interest}& 2,000& \\ \text{Insurance}& & 12,400& \text{(+)Interest on Investment}& \underset{–}{150}& 2,150\\ \text{Bad Debts}& 2,000& & & & \\ \text{(+)Provisionfor Bad Debts}& \underset{–}{1,625}& 3,625& & & \\ \text{Trade Expenses}& 2,000& & & & \\ \text{(+)Outstanding Trade Expenses}& \underset{–}{300}& 2,300& & & \\ \text{Depreciation on Building}& & 3,440& & & \\ \text{Depreciation on Machinery}& & 1,725& & & \\ \text{Lighting and Water}& & 1,200& & & \\ \text{Net Profit}& & 1,85,560& & & \\ & & \overline{\underset{–}{\underset{–}{2,18,150}}}& & & \overline{\underset{–}{\underset{–}{2,18,150}}}\end{array}$

Balance Sheet
as on 31st December, 2010

$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt. (Rs.)}& \text{Assets}& & \text{Amt.(Rs.)}\\ \text{Capital}& 3,00,000& & \text{Loan}& 3,000& \\ \text{(+)Net Profit}& \underset{–}{1,85,560}& & \text{(+)Interest}@15\%& \underset{–}{150}& 3,150\\ & 4,85,560& & \text{Motor Vechicle}& & 10,500\\ \text{(-)Drawings}& \underset{–}{10,000}& 4,75,560& \text{Cash in Hand}& & 21,200\\ \text{Creditors}& & 25,000& \text{Cash at Bank}& & 12,000\\ \text{Bills Payable}& & 1,71,700& \text{Freehold Land}& & 3,20,000\\ \text{Outstanding Trade Expenses}& & 300& \text{Patents}& & 1,20,000\\ \text{Outstanding Salary}& & 500& \text{Sundry Debtors}& 32,500& \\ & & & \text{(-)Provision for}& & \\ & & & \text{Bad Debts}& \underset{–}{1,625}& 30,875\\ & & & \text{Buildings}& 86,000& \\ & & & \text{(-)Depreciation}& \underset{–}{3,440}& 82,560\\ & & & \text{Machinery}& 34,500& \\ & & & \text{(-)Depreciation}& \underset{–}{1,725}& 32,775\\ & & & \text{Closing Stock}& & 40,000\\ & & \overline{\underset{–}{\underset{–}{6,73,060}}}& & & \overline{\underset{–}{\underset{–}{6,73,060}}}\end{array}$

Working Note

Interest on Loan = $3,000\times \frac{15}{100}\times \frac{4}{12}=Rs.150$