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 March 31, 20170 from the given information.

Account Title	Amount Rs	Account Title	Amount Rs
Opening stock	50,000	Sales	3,50,000
Purchases	1,25,500	Purchases return	2,500
Sales return	2,000	Creditors	25,000
Cash in hand	21,200	Rent	5,000
Cash at bank	12,000	Interest	2,000
Carriage	100	Bills payable	1,71,700
Free hold land	3,20,000	Capital	3,00,000
Patents	1,20,000
General Expenses	2,000
Sundry Debtors	32,500
Building	86,000
Machinery	34,500
Insurance	12,400
Drawings	10,000
Motor vehicle	10,500
Bad debts	2,000
Light and Water	1,200
Trade expenses	2,000
Power	3,900
Salary and Wages	5,400
Loan a 15% (01.09.2010)	3,000
	8,56,200		8,56,200

Adjustments

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

2. Salary amounting Rs 500 and trade expense 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

Trading Account
Dr.										Cr.
Particulars					Amount Rs	Particulars				Amount Rs
Opening Stock					50,000	Sales			3,50,000
Purchases				1,25,500				Less: Return	2,000	3,48,000
		Less: Return Outwards		2,500	1,23,000	Closing Stock				40,000
Carriage					100
Power					3,900
Gross Profit					2,11,000
					3,88,000					3,88,000

Profit and Loss Account
Dr.							Cr.
Particulars			Amount Rs	Particulars			Amount Rs
General Expenses			2,000	Gross Profit			2,11,000
Insurance			12,400	Rent			5,000
Bad Debts		2,000		Interest			2,000
	Add: Provision for Bad Debts	1,625	3,625	Accrued Interest on Loan			150
Light and Water			1,200
Trade Expenses		2,000
	Add: Outstanding Trade Expenses	300	2,300
Salary and Wages		5,400
	Add: Outstanding Salary	500	5,900
Depreciation on Building			3,440
Depreciation on Machinery			1,725
Net Profit			1,85,560
			2,18,150				2,18,150

Balance Sheet
Liabilities			Amount Rs	Assets					Amount Rs
Capital		3,00,000		Cash in Hand					21,200
	Add: Net Profit	1,85,560		Cash at Bank					12,000
	Less: Drawings	10,000	4,75,560	Freehold Land					3,20,000
Creditors			25,000	Patents					1,20,000
Bills Payable			1,71,700	Sundry Debtors				32,500
Outstanding Trade Expenses			300		Less: Provision for Bad Debts			1,625	30,875
Outstanding Salary			500
				Building				86,000
					Less: Depreciation			3,440	82,560
				Machinery				34,500
					Less: Depreciation			1,725	32,775
				Motor Vehicle					10,500
				Loan				3,000
					Add: Interest on Loan			150	3,150
				Closing Stock					40,000
			6,73,060						6,73,060

Working Note

In the question, the loan given by us bears an interest of 15% p.a. and interest is unpaid from 01-9-2017 to 31-12-2017. Thus, interest for loan is outstanding for four months and is calculated as follows:

Interest on loan =	3000 ×	15	×	4	= Rs 150
		100		12