Question

The following is the trial balance of Alfa Ltd., for the year ended June 30, 2005

Details	Amount Rs	Details	Amount Rs
Land and Buildings	3,00,000	Sundry Creditors	40,000
Plant and Machinery	4,50,000	Bills Payable	20,000
Furniture and Fittings	40,000	General Reserve	2,00,000
Goodwill	60,000	Profit and Loss Account Balance (on 1.7.04)	90,000
Sundry Debtors	60,000	Sales	6,25,000
Bills Receivable	26,000	Purchase Returns	15,000
Investments (5% Govt. Securities)	30,000	Equity Share Capital	5,00,000
Cash in Hand	2,000	8% Preference Share Capital	2,00,000
Cash at Bank	55,000
Preliminary Expenses	29,000
Purchases	4,00,000
Sales Return	10,000
Stock on 1-7-04	85,000
Wages	47,000
Salaries	55,000
Rent, rates and taxes	9,000
Carriage Inwards	6,500
Law Charges	2,500
Trade Expenses	23,000
	16,90,000		16,90,000

Prepare the Profit and Loss Account and Balance Sheet of the company after taking the following particulars into consideration:

a) The original cost of land and building plant and machinery and furniture and fittings was Rs 2,50,000, Rs 6,00,000 and Rs 60,000 respectively. Additions during the year were: Building Rs 50,000 and Plant Rs 20,000.

b) Depreciation is to be charged on plant and machinery and furniture and fitting at 10 per cent on original cost.

c) Of the sundry debtors, Rs 10,000 is outstanding for a period exceeding 6 months, Rs 5,000 are considered doubtful, while the others are considered good.

d) The directors are entitled to a commission at 1 percent of the net profits before charging such commission.

e) Stock on 30th June, 2005 is Rs 1,30,000.

f) Provide Rs 34,800 for income tax

Answer 1

Alfa Ltd. Profit and Loss Account for the year ended June 30, 2005
Dr.							Cr.
Expenses/Losses			Amount Rs	Revenues/Gains			Amount Rs
Opening Stock			85,000	Sales		6,25,000
Purchases		4,00,000			Less: Return	(10,000)	6,15,000
	Less: Return	(15,000)	3,85,000	Closing Stock			1,30,000
Wages			47,000
Carriage Inwards			6,500
Gross Profit c/d			2,21,500
			7,41,500				7,45,000
Salaries			55,000	Gross Profit b/d			2,21,500
Rent, Rates and Taxes			9,000	Accrued Interest on 5% Govt. Securities			1,500
Law Charges			2,500
Trade Expenses			23,000
Depreciation on:
	Plant and Machinery	60,000
	Furniture	6,000	66,000
Provision for Income Tax			34,800
Directors’ Commission			324
Net profit c/d			32,376
			2,23,000				2,23,000
Proposed Dividend on Preference Shares			16,000	Balance b/d			90,000
Balance c/d			1,06,376	Net Profit for the current year			32,376
			1,22,376				1,22,376

Balance Sheet as on June 30, 2005
Liabilities		Amount Rs	Assets				Amount Rs
Share Capital
Authorised Capital:			Fixed Assets
…..shares of Rs ….. each				Goodwill			60,000
Issued and Subscribed:				Land and Building		2,50,000
Equity Shares Capital		5,00,000		Add: Addition during the year		50,000	3,00,000
8% Preference Shares Capital		2,00,000		Plant and Machinery		6,00,000
Reserves and Surplus				Add: Addition during the year		20,000
	General Reserve	2,00,000				6,20,000
	Profit and Loss account	1,06,376		Less: Accumulated Depreciation		2,30,000	3,90,000
Current Liabilities and Provisions				Furniture and Fittings		60,000
	Current Liabilities:			Less: Accumulated Depreciation		26,000	34,000
	Sundry Creditors	40,000
	Bills Payable	20,000	Investments
	Directors Commission	324		Investment (5% Govt. Securities)		30,000
Provisions:				Add: Accrued Interest on 5% Govt. Securities		1,500	31,500
	Provision for Income Tax	34,800	Current Assets, Loan and Advances
	Proposed Dividend on Preference Shares	16,000	Sundry Debtors:
				Debtors outstanding for the period exceeding six months	10,000
				Less than six months	50,000
				Good	55,000
				Doubtful	5,000		60,000
				Bills Receivable			26,000
				Stock in Hand			1,30,000
				Cash in Hand			2,000
				Cash at Bank			55,000
			Miscellaneous Expenditures
				Preliminary Expenses			29,000
		11,17,500					11,17,500

Working Notes:

1. Calculation of Accumulated Depreciation on Plant and Machinery

2. Calculation of Accumulated Depreciation on Furniture and Fittings