Question

The following balances were extracted from the books of Modern Traders as at 31st March, 2017:-

Particulars		(₹)	Particulars		(₹)
Capital Account		85,000	Printing and Stationery		800
Drawings Account		5,000	Sundry Creditors		23,000
Plant and Machinery		40,000	Sales		1,20,000
Stock on 1-4-2016		15,000	Postage		800
Purchases		82,000	Bad-Debts		400
Sundry Debtors		20,600	Provision for Doubtful Debts		800
Furniture		5,000	Discount received		400
Freight Inward		2,000	Rent Revenue		1,200
Carriage Outward		500	Insurance		700
Rent, Rates and Taxes		4,600	Salaries		20,000
			Wages		1,300
			Cash in Hand		6,200
			Cash at Bank		25,500

Prepare Final Accounts for the year ended 31st March, 2017 after taking into account the following:
(i) Stock on 31st March, 2017 was valued at ₹ 15,000.
(ii) Goods costing ₹ 6,000 were sent to a customer on "Sale on Return basis" for ₹ 7,200 on 26th March, 2017 and had been recorded in the books as actual sales.
(iii) Provision for Doubtful Debts is to be maintained at 5% of the Debtors.
(iv) Prepaid Insurance was ₹ 100.
(v) Provide Depreciation on Plant and Machinery @ 10% and on Furniture @ 5%.

Answer 1

Financial Statements of Modern Traders
Trading Account for the year ended March 31, 2017
Dr.						Cr.
Particulars		Amount (Rs)	Particulars		Amount (Rs)
Opening Stock		15,000	Sales	1,20,000
Purchases		82,000	Less: Sale on Approval Basis	7,200	1,12,800
Freight Inwards		2,000	Closing Stock	15,000
Wages		1,300	Add: Sale on Approval Basis	6,000	21,000
Gross Profit (Balancing Figure)		33,500
		1,33,800			1,33,800

Profit and Loss Account for the year ended March 31, 2017
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Depreciation: (WN1)				Gross Profit	33,500
Plant & Machinery		4,000		Discount Received	400
Furniture		250	4,250	Rent Revenue	1,200
Bad Debts		400
Add: New Provision (WN2)		670
Less: Old Provision		800	270
Carriage Outwards			500
Insurance		700
Less: Prepaid		100	600
Rent, Rates & Taxes			4,600
Printing & Stationery			800
Postage & Telegram			800
Salaries			20,000
Net Profit (Balancing Figure)			3,280
			35,100		35,100

Balance Sheet as on March 31, 2017
Liabilities		Amount (Rs)	Assets				Amount (Rs)
Capital	85,000		Fixed Assets
Add: Net Profit	3,280		Plant & Machinery	40,000
Less: Drawings	5,000	83,280	Less: Depreciation	4,000			36,000
			Furniture	5,000
Current Liabilities			Less: Depreciation	250			4,750
Creditors		23,000
			Current Assets
			Closing Stock		15,000
			Add: Sale on Approval Basis		6,000		21,000
			Prepaid Insurance				100
			Cash in Hand				6,200
			Cash at Bank				25,500
			Debtors			20,600
			Less: Sale on Approval Basis			7,200
			Less: Provision for Doubtful Debts			670	12,730
		1,06,280					1,06,280

Working Notes:

WN1: Calculation of Amount of Depreciation

$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Machinery}=40,000\times \frac{10}{100}=\mathrm{Rs}4,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}=5,000\times \frac{5}{100}=\mathrm{Rs}250\end{array}$

WN2: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& (\mathrm{Sundry}\mathrm{}\mathrm{Debtors}\mathrm{}-\mathrm{Sale}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Approval}\mathrm{}\mathrm{Basis}\mathrm{})\mathrm{}\times \mathrm{}\frac{\mathrm{Rate}}{100}\\ & =& \left(20,600-7,200\right)\times \frac{5}{100}=\mathrm{Rs}670\end{array}$