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

Account Title	Amt. (Rs)	Account Title	Amt. (Rs)
Opening Stock	50,000	Sales	3,50,000
Purchase	1,25,500	Purchase 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	1,72,700
Freehold 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 15% (1.9.2010)	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 expenses Rs. 300 a redue.
3. Depreciation charged on building and machinery are @ 4% and @ 5% respectively.
4. Make a provision of @ 5% on sundry debtors.

Answer 1

Trading and Profit and Loss Account
as on 31st December,2010
Dr Cr

Particulars	Amt. (Rs.)	Particular	Amt. (Rs.)
To Opening Stock	50,000	By Sales	3,50,000
To Purchase	1,25,500	(-) Return Inwards	2,000 3,48,000
(-) Return Outwards	2,500 1,23,000	By Closing Stock	40,000
To Carriage Inwards	100
To Power	3,900
To Gross Profit c/d	2,11,000 3,88,000		3,80,000
To Salary and Wages	5,400	By Gross Profit b/d	2,11,000
(+) Outstanding Salary	500 5,900	By Rent	5,000
To General Expenses	2,000	By Interest	2,000
To Insurance	12,400	(+) Interest on Investment	150 2,150
To Bad Debts	2,000
(+)Provision for Bad Debts	1,625 3,625
To Trade Expenses	2,000
(+) Outstanding Trade Expenses	300 2,300
To Depreciation on Building	3,440
To Depreciation on Machinery	1,725
To Lighting and Water	1,200
To Net Profit	1,85,560
	2,18,150		2,18,150

Balance Sheet
as on 31st December, 2010

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

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