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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

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Solution

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


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