Question

The following balances were extracted from the books of Shri Krishan Kumar as at 31st March, 2017:

	Dr. (₹)	Cr. (₹)
Capital		24,500
Drawings	2,000
General Expenses	2,500
Buildings	11,000
Machinery	9,340
Stock (1-4-2016)	16,200
Power	2,240
Taxes and Insurance	1,315
Wages	7,200
Sundry Debtors	6,280
Sundry Creditors		2,500
Charity	105
Bad-debts	550
Bank Overdraft		11,180
Sales		65,360
Purchases	47,000
Scooter	2,000
Scooter Expenses	500
Bad-debts Provision		900
Commission		1,320
Trade Expenses	1,280
Bills Payable		3,850
Cash	100
	1,09,610	1,09,610

Adjustments:-
(i) Stock on 31st March, 2017 was valued at ₹ 23,500.
(ii) $\frac{1}{5}\mathrm{th}$ of general expenses and taxes & insurance to be charged to factory and the balance to the office.
(iii) Write off a further Bad-debts of ₹ 160 and maintain the provision for Bad-debts at 5% on Debtors.
(iv) Depreciate Machinery at 10% and Scooter by ₹ 240.
(v) Provide ₹ 700 for outstanding interest on Bank Overdraft.
(vi) Prepaid Insurance is to the extent of ₹ 50.
(vii) Provide for Manager's Commission at 10% on the Net Profit after charging such Commission.
Prepare final accounts for the year ended 31st March, 2017 after giving effect to the above adjustments.

Answer 1

Financial Statements of Shri Krishan Kumar
Trading Account for the year ended March 31, 2017
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Opening Stock		16,200	Sales	65,360
Purchases		47,000	Closing Stock	23,500
Wages		7,200
General Expenses (1/5th)		500
Taxes and Insurance (1/5th)		253
Power		2,240
Gross Profit (Balancing Figure)		15,467
		88,860		88,860

Profit and Loss Account for the year ended March 31, 2017
Dr.												Cr.
Particulars				Amount (Rs)		Particulars				Amount (Rs)
Depreciation: (WN1)						Gross Profit				15,467
Machinery		934				Commission Received				1,320
Scooter		240		1,174
Old Bad Debts		550
Add: Further Bad Debts		160
Add: New Provision (WN2)		306
Less: Old Provision		900		116
Outstanding Interest on Bank Overdraft				700
Taxes & Insurance		1,315
Less: Pre-paid		50
Less: T/f to Trading A/c		253		1,012
General Expenses		2,500
Less: T/f to Trading A/c		500		2,000
Charity				105
Scooter Expenses				500
Trade Expenses				1,280
Outstanding Manager’s Commission (WN3)				900
Net Profit (Balancing Figure)				9,000
				16,787						16,787
Balance Sheet as on March 31, 2017
Liabilities					Amount (Rs)		Assets				Amount (Rs)
Capital			24,500				Fixed Assets
Add: Net Profit			9,000				Machinery		9,340
Less: Drawings			2,000		31,500		Less: Depreciation		934		8,406
							Scooter		2,000
Current Liabilities							Less: Depreciation		240		1,760
Creditors					2,500		Building				11,000
Outstanding Manager’s Commission					900
Bills Payable					3,850		Current Assets
Outstanding Interest on Bank Overdraft					700		Closing Stock				23,500
Bank Overdraft					11,180		Prepaid Insurance				50
							Debtors	6,280
							Less: Bad Debts	160
							Less: Provision for Bad Debts	306			5,814
							Cash in Hand				100
					50,630						50,630

Working Notes:

WN1: Calculation of Amount of Depreciation

$\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Machinery}\mathrm{}=9,340\times \frac{10}{100}=\mathrm{Rs}934$

WN2: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}& =& \left(\mathrm{Sundry}\mathrm{}\mathrm{Debtors}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\right)\times \frac{\mathrm{Rate}}{100}\\ & =& \left(6,280-160\right)\times \frac{5}{100}=\mathrm{Rs}306\end{array}$

WN3: Calculation of Manager’s Commission

$\begin{array}{l}\mathrm{Profit}\mathrm{}\mathrm{before}\mathrm{}\mathrm{Manager}\text{'}\mathrm{s}\mathrm{}\mathrm{Commission}=\mathrm{Rs}9,900\left(16,787-6,887\right)\\ \mathrm{Manager}\text{'}\mathrm{s}\mathrm{}\mathrm{Commission}\mathrm{}=9,900\times \frac{10}{110}=\mathrm{Rs}\mathrm{}900\end{array}$