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.

Answer 1

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.