Question

The following is the trail balance on Swati on 31st March,2016.

$\begin{array}{ccc}\text{Name of Accounts}& \text{Debit (Rs.)}& \text{Credit (Rs.)}\\ \text{Purchases}& 3,00,000& \\ \text{Debtors}& 4,00,000& \\ \text{Interest Earned}& & 8,000\\ \text{Salaries}& 60,000& \\ \text{Sales}& & 6,42,000\\ \text{Purchases Return}& & 10,000\\ \text{Wages}& 40,000& \\ \text{Rent}& 30,000& \\ \text{Sales Return}& 20,000& \\ \text{Bad Debts Written-off}& 14,000& \\ \text{Creditors}& & 2,40,000\\ \text{Capital}& & 2,00,000\\ \text{Drawings}& 48,000& \\ \text{Provision for Doubtful Debts}& & 12,000\\ \text{Printing and Stationery}& 16,000& \\ \text{Insurance}& 24,000& \\ \text{Opening Stock}& 1,00,000& \\ \text{Office Expenses}& 24,000& \\ \text{Furniture and Fittings}& 40,000& \\ \text{Provision for Depreciation}& & 4,000\\ & \overline{\underset{–}{\underset{–}{11,16,000}}}& \overline{\underset{–}{\underset{–}{11,16,000}}}\\ & & \end{array}$

Prepare the trading and profit and loss account for the year ended 31st March, 2016 and the balance sheet as at that date for making the following adjustments.

(i) Depreciation furniture and fittings by 10% on original cost.

(ii) Make a provision for doubtful debts equal to 5% of debtors.

(iii) Salaries for the month of March amounted to
Rs. 6,000 were unpaid which must be provided for. The balance in the account includes Rs. 4,000 paid in advance.

(iv) Insurance is prepaid to the extent of Rs. 4,000.

(v) Provide Rs. 16,000 for office expenses.

(vi) Stock valued a Rs. 12,000 were put up by Swati for her personal use, the cost of which has not been adjusted in the books of accounts.

(vii) Closing stock valued at Rs. 1,36,000 (net realisable value Rs. 1,20,000).

Answer 1

Trading and Profit and Loss Account

$\text{Dr.}\text{for the year ending 31st March,2016}\text{Cr.}\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs.)}& \text{Particulars}& & \text{Amt. (Rs.)}\\ \text{Opening Stock}& & 1,00,000& \text{Sales}& 6,42,000& \\ \text{Purchases}& 3,00,000& & (-)\text{Sales Return}& \underset{–}{20,000}& 6,22,000\\ (-)\text{Purchases Return}& \underset{–}{10,000}& & \text{Closing Stock}& & 1,20,000\\ & 2,90,000& & & & \\ (-)\text{Drawings}& \underset{–}{12,000}& 2,78,000& & & \\ \text{Wages}& & 40,000& & & \\ \text{Gross Profit c/d}& & 3,24,000& & & \\ & & \overline{\underset{–}{\underset{–}{7,42,000}}}& & & \overline{\underset{–}{\underset{–}{7,42,000}}}\\ \text{Salaries}& 60,000& & \text{Gross Profit b/d}& & 3,24,000\\ (+)\text{Outstanding Salaries}& \underset{–}{6,000}& & \text{Interest Earned}& & 8,000\\ & 66,000& & & & \\ (-)\text{Paid in Advance}& \underset{–}{4,000}& 62,000& & & \\ \text{Rent}& & 30,000& & & \\ \text{Bad Debts}& 14,000& & & & \\ (+)\text{New Provision}& \underset{–}{20,000}& & & & \\ & 34,000& & & & \\ & & & & & \\ (-)\text{Old Provision}& \underset{–}{12,000}& 22,000& & & \\ \text{Printing and Stationery}& & 16,000& & & \\ \text{Insurance}& 24,000& & & & \\ (-)\text{Prepaid}& \underset{–}{4,000}& 20,000& & & \\ \text{Office Expenses}& 24,000& & & & \\ (+)\text{Outstanding}& \underset{–}{16,000}& 40,000& & & \\ \text{Depreciation on Funiture and Fittings}& & 4,000& & & \\ \text{Net Profit Transferred to Capital A/c}& & 1,38,000& & & \\ & & \overline{\underset{–}{\underset{–}{3,32,000}}}& & & \overline{\underset{–}{\underset{–}{3,32,000}}}\\ & & & & & \end{array}$

Balance Sheet

as on 31st March,2016

$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt. (Rs.)}& \text{Assets}& & \text{Amt. (Rs.)}\\ \text{Sundry Creditors}& & 2,40,000& \text{Stock}& & 1,20,000\\ \text{Outstanding Salaries}& & 6,000& \text{Debtors}& 4,00,000& \\ \text{Outstanding Office Expenses}& & 16,000& (-)\text{Provision for Doubtful Debts}& \underset{–}{(20,000)}& 3,80,000\\ \text{Capital}& 2,00,000& & \text{Prepaid Salaries}& & 4,000\\ (+)\text{Net profit}& \underset{–}{1,38,000}& & \text{Prepaid Insurance}& & 4,000\\ & 3,38,000& & \text{Furniture and Fittings}& 40,000& \\ (-)\text{Drawings}& (48,000)& & (-)\text{Depreciation}& \underset{–}{(8,000)}& 32,000\\ (-)\text{Stock for Personal Use}& \underset{–}{(12,000)}& 2,78,000& & & \\ & & \overline{\underset{–}{\underset{–}{5,40,000}}}& & & \overline{\underset{–}{\underset{–}{5,40,000}}}\\ & & & & & \end{array}$

Working Note:

1. Depreciation on Furniture & Fittings =$Rs.40,000\times \frac{10}{100}=Rs.4,000$
2. Balance in Provision for Depreciation Account = Rs. 4,000 + Rs. 4,000 = Rs. 8,000
3. Provision for Doubtful Debts = $Rs.4,00,000\times \frac{5}{100}=Rs.20,000$