Question

The following Trial Balance has been extracted from the books of Shri Santosh Kumar as at 31st March, 2017:-

			Dr. (₹)	Cr. (₹)
Plant and Machinery			1,00,000
Furniture			12,000
Capital Account				1,91,000
Household Expenses			16,000
Sales				4,68,000
Loose Tools			20,000
Goodwill			10,000
Opening Stock (1-4-2016)			20,000
Returns Outward				4,000
Discount				6,000
Purchases			2,12,000
Returns Inwards			8,000
Wages			1,00,000
Salaries			60,000
Outstanding Salaries				5,000
Investments at 10% p.a.			6,000
Interest on Investments				300
Sundry Creditors				24,000
Miscellaneous Receipts				2,000
Carriage Inwards			12,000
General Expenses and Insurance			39,000
Advertisement Expenses			15,000
Postage			4,000
Sundry Debtors			56,000
B. Barua			2,000
Cash Balance			14,000
Bank				3,200
Suspense Account				2,500
			7,06,000	7,06,000

The following additional information is available:-
(I) Stock on 31st March, 2017 was ₹ 30,800.
(II) Depreciation is to be charged on Plant and Machinery at 5% and Furniture at 6%. Loose Tools are revalued at ₹ 16,000.
(III) Create a provision of 2% for Discount on Debtors.
(IV) Salary of ₹ 2,000 paid to Shri B. Barua, a temporary employee, stands debited to his personal account and it is to be corrected.
(V) Write off 1/5th of advertisement expenses.
You are to prepare Trading and Profit & Loss Account for the year ended 31st March, 2017 and a Balance Sheet as at that date.

Answer 1

Financial Statements of Shri Santosh Kumar
Trading Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Opening Stock			20,000	Sales	4,68,000
Purchases		2,12,000		Less: Return Inwards	8,000	4,60,000
Less: Return Outwards		4,000	2,08,000	Closing Stock		30,800
Carriage Inwards			12,000
Wages			1,00,000
Gross Profit (Balancing Figure)			1,50,800
			4,90,800			4,90,800

Profit and Loss Account for the year ended March 31, 2017
Dr.							Cr.
Particulars			Amount (Rs)	Particulars		Amount (Rs)
Depreciation: (WN1)				Gross Profit		1,50,800
Plant & Machinery		5,000		Discount		6,000
Furniture		720		Miscellaneous Receipts		2,000
Loose Tools		4,000	9,720	Interest on Investment	300
Salaries		60,000		Add: Accrued (WN3)	300	600
Add: Salary to B.Barua		2,000	62,000
Advertisement Expenses written-off			3,000
Provision for Discount on Debtors (WN2)			1,120
General Expenses & Insurance			39,000
Postage & Telegram			4,000
Net Profit (Balancing Figure)			40,560
			1,59,400			1,59,400

Balance Sheet as on March 31, 2017
Liabilities		Amount (Rs)	Assets			Amount (Rs)
Capital	1,91,000		Fixed Assets
Add: Net Profit	40,560		Plant & Machinery	1,00,000
Less: Drawings	16,000	2,15,560	Less: Depreciation	5,000		95,000
			Furniture	12,000
Current Liabilities			Less: Depreciation	720		11,280
Creditors		24,000	Loose Tools	20,000
Bank Overdraft		3,200	Less: Depreciation	4,000		16,000
Outstanding Salaries		5,000	10% Investment			6,000
Suspense Account		2,500	Current Assets
			Goodwill			10,000
			Closing Stock			30,800
			Advertisement Expenditure			12,000
			Accrued Interest on Investments			300
			Cash in Hand			14,000
			Debtors		56,000
			Less: Provision for Discount on Debtors		1,120	54,880
		2,50,260				2,50,260

Working Notes:

WN1: Calculation of Amount of Depreciation
$\begin{array}{l}\mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Machinery}=1,00,000\times \frac{5}{100}=\mathrm{Rs}5,000\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Furniture}=12,000\times \frac{6}{100}=\mathrm{Rs}720\\ \mathrm{Depreciation}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loose}\mathrm{}\mathrm{Tools}=\mathrm{Rs}\mathrm{}4,000\left(20,000-16,000\hspace{0.17em}\right)\end{array}$

WN2: Calculation of Provision for Discount on Debtors
$\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Discount}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Debtors}=56,000\times \frac{2}{100}=\mathrm{Rs}1,120$

WN3: Calculation of Accrued Interest on Investment
$\mathrm{Interest}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Investment}=6,000\times \frac{10}{100}=\mathrm{Rs}600$
Interest on Loan already received = Rs 300
So, Accured Interest = Rs 300