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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 TitleAmt. (Rs)Account TitleAmt. (Rs)
Opening Stock50,000Sales3,50,000
Purchase1,25,500Purchase Return2,500
Sales Return2,000Creditors25,000
Cash in Hand21,200Rent5,000
Cash at Bank12,000Interest2,000
Carriage100Bills Payable1,72,700
Freehold Land3,20,000Capital3,00,000
Patents1,20,000
General Expenses2,000
Sundry Debtors32,500
Building86,000
Machinery34,500
Insurance12,400
Drawings10,000
Motor Vehicle10,500
Bad Debts2,000
Light and Water1,200
Trade Expenses2,000
Power3,900
Salary and wages5,400
Loan 15% (1.9.2010)3,000
8,56,2008,56,200
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.

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Solution

Trading and Profit and Loss Account
as on 31st December,2010
Dr Cr
ParticularsAmt. (Rs.)ParticularAmt. (Rs.)
To Opening Stock50,000By Sales3,50,000
To Purchase1,25,500(-) Return Inwards2,000
3,48,000
(-) Return Outwards2,500
1,23,000
By Closing Stock40,000
To Carriage Inwards100
To Power3,900


To Gross Profit c/d2,11,000
3,88,000
3,80,000
To Salary and Wages5,400By Gross Profit b/d2,11,000
(+) Outstanding Salary500
5,900
By Rent5,000
To General Expenses2,000By Interest2,000
To Insurance12,400(+) Interest on Investment150
2,150
To Bad Debts
2,000
(+)Provision for Bad Debts1,625
3,625
To Trade Expenses
2,000
(+) Outstanding Trade Expenses300
2,300
To Depreciation on Building3,440
To Depreciation on Machinery
1,725
To Lighting and Water1,200
To Net Profit1,85,560

2,18,1502,18,150







Balance Sheet
as on 31st December, 2010
LiabilitiesAmt. (Rs.)AssetsAmt. (Rs.)
Capital3,00,000Loan3,000
(+) Net Profit
(-) Drawings
1,85,560
4,85,560
10,000
4,75,560
(+) Interest @ 15%
Motor Vehicle
1,150
3,150
10,500
Creditors25,000Cash in Hand
Cash at Bank
21,200
12,000
Bills Payable1,71,700Freehold Land3,20,000
Outstanding Trade Expenses300Patents1,20,000
Outstanding Salary500Sundry Debtors32,500
(+) Provision for Bad Debts1,625
30,875
Buildings86,000
(-) Depreciation Machinery3,440
34,500
82,560
(-) Depreciation Closing Stock1,725
32,775
40,000
6,73,060
6,73,060




Working Note
Interest on Loan = 3,000×15100×412=Rs.150

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