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Question

The following is the trial balance on June 30, 2006 of the Modern Manufacturing Company Ltd.

Details

Amount

Rs

Details

Amount

Rs

Stock, 30th June, 2005

7,500

Dividend paid in, August, 2005

500

Sales

35,000

Interim Dividend paid in Feb., 2006

400

Purchases

24,500

Capital- 10,000 Rs 1 shares full Paid

10,000

Productive wages

5,000

Debtors

3,750

Discounts (Dr.)

700

Creditors

1,750

Discounts (Cr.)

500

Plant and machinery

2,900

Salaries

750

Cash in Bank

1,620

Rent

495

Reserve

1,550

General expenses

1,705

Loan to Managing Director

325

Profit and loss account,

1,503

Bad Debts

158

30th June 2005 (Cr.)

Stock, on June 30, 2006 Rs 8,200. You are required to make out the trading account, and profit and loss account for the year ended June 30, 2006 and the balance sheet as on the date. You are also to make provision in respect of the following: (i) Depreciate machinery @ 10% per annum; (ii) Reserve 5% for discount on debtors; (iii) One month rent Rs 45 was due on 30th June; and (iv) Six month’s insurance, included in general expenses, was unexpired at Rs 75.

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Solution

Modern Manufacturing Company Ltd.

Trading and Profit and Loss Account for the year ended June 30, 2006

Dr.

Cr.

Expenses/Losses

Amount

Rs

Revenues/Gains

Amount

Rs

Opening Stock

7,500

Sales

35,000

Purchases

24,500

Closing Stock

8,200

Productive Wages

5,000

Gross Profit c/d

6,200

43,200

43,200

Salaries

750

Gross Profit b/d

6,200

Discount

700

Discount

500

Rent

495

Add: Outstanding

45

540

General Expenses

1,705

Less: Prepaid Insurance

(75)

1,630

Depreciation on Machinery

290

Bad Debts

158

Reserve for discount on Debtors

187.5

Net Profit c/d

2,444.5

6,700

6,700

Dividend paid in Aug.

500

Balance b/d

1,503

Interim Dividend

400

Net Profit for the Current year

2,444.5

Balance c/d

3,047.5

3,947.5

3,947.5

Balance Sheet as on June 30, 2006

Liabilities

Amount

Rs

Assets

Amount

Rs

Share Capital

Fixed Assets

Authorised Capital:

….shares of Rs …. each

Plant and Machinery

2,900

Issued and Subscribed:

Less: Depreciation

290

2,610

10,000 shares of Rs 1 each

10,000

Reserves and Surplus

Current Assets, Loans and Advances

Reserve

1,550

Debtors

3,750

Profit and Loss

3,047.5

Less: Reserve for Discount

187.5

3,562.5

Current Liabilities and Provision

Cash at Bank

1,620

Current Liabilities:

Prepaid Insurance

75

Creditors

1,750

Stock

8,200

Rent Outstanding

45

Loan to Managing Director

325

16,392.5

16,392.5

Note: It has been assumed that the Dividend Paid, August, 2005 of Rs 500 has been declared and paid in the same accounting period.


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Q.

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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