Question

The following Trial Balance was extraced from the books of Mr. Gupta as at 31st March, 2019:

Dr. Balances			(₹)	Cr. Balances	(₹)
Stock on 1-4-2018			65,000	Capital	2,50,000
Purchases			7,10,000	Rent Received	3,900
Wages			22,000	Loan from Mr. Yadav @ 15% p.a.	20,000
Trade Expenses			5,000	Sales	9,50,000
Freight and Dock Charges			8,000	Discount	600
Travelling Expenses			3,800	Outstanding Wages	2,000
Lighting and Heating (Factory)			7,200	Trade Expenses accrued but not paid	500
Stores Consumed			2,000	Sundry Creditors	80,000
Rent Paid			16,500
Establishment Charges			18,000
Interest on Mr. Yadav's Loan			1,500
Sundry Debtors			1,42,000
Cash			6,000
Fixed Assets			3,00,000

Adjustments:-
(i) Goods costing ₹ 20,000 were purchased and included into stock but no entry was passed to record the purchase.
(ii) Loan from Mr. Yadav was taken on 1st June, 2018.
(iii) Sundry Debtors include an amount of ₹ 2,000 due from a customer who has become insolvent and nothing is recoverable from his estate.
(iv) Create a provision of 5% for Doubtful Debts and 2% for discount on Debtors.
(v) Three months lighting and heating bill due but not paid ₹ 3,000.
(vi) Rent is paid for 11 months but is received for 13 months.
(vii) Stock amounted to ₹ 90,000 on 31st March, 2019.
Prepare Trading and Profit & Loss Account for the year ended 31st March, 2019 and a Balance Sheet as at that date.

Answer 1

Financial Statements of Mr. Gupta
Trading Account for the year ended March 31, 2019
Dr.							Cr.
Particulars				Amount (₹)	Particulars	Amount (₹)
Opening Stock				65,000	Sales	9,50,000
Purchases		7,10,000			Closing Stock	90,000
Add: Unrecorded		20,000		7,30,000
Wages				22,000
Store Consumed				2,000
Lighting & Heating			7,200
Add: Outstanding			3,000	10,200
Freight & Dock Charges				8,000
Gross Profit (Balancing Figure)				2,02,800
				10,40,000		10,40,000

Profit and Loss Account for the year ended March 31, 2019
Dr.							Cr.
Particulars			Amount (₹)	Particulars		Amount (₹)
Interest on Loan		1,500		Gross Profit		2,02,800
Add: Outstanding (WN1)		1,000	2,500	Rent Received	3,900
Further Bad Debts		2,000		Less: Rent received in Advance (WN4)	300	3,600
Add: New Provision (WN2)		7,000	9,000	Discount		600
Trade Expenses			5,000
Provision for Discount on Debtors WN3)			2,660
Rent		16,500
Add: Outstanding (WN5)		1,500	18,000
Travelling Expenses			3,800
Establishment Expenses			18,000
Net Profit (Balancing Figure)			1,48,040
			2,07,000			2,07,000

Balance Sheet as on March 31, 2019
Liabilities		Amount (₹)	Assets		Amount (₹)
Capital	2,50,000		Fixed Assets
Add: Net Profit	1,48,040	3,98,040	Fixed Assets		3,00,000
Loan from Mr. Yadav		20,000
Current Liabilities			Current Assets
Sundry Creditors	80,000		Closing Stock		90,000
Add: Unrecorded	20,000	1,00,000	Cash in Hand		6,000
Outstanding Wages		2,000	Sundry Debtors
Outstanding Trade Expenses		500	Less: Further Bad Debts	2,000
Outstanding Lighting & Heating		3,000	Less: Provision for Doubtful Debts	7,000
Outstanding Rent		1,500	Less: Provision for Discount on Debtors	2,660	1,30,340
Outstanding Interest on Loan		1,000
Rent received in advance		300
		5,26,340			5,26,340

Working Notes:

WN1: Calculation of Outstanding Interest on Loan

$\begin{array}{l}\mathrm{Interest}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loan}=\mathrm{}20,000\times \mathrm{}\frac{15}{100}\times \mathrm{}\frac{10}{12}=\mathrm{Rs}\mathrm{}2,500\\ \mathrm{Interest}\mathrm{}\mathrm{Already}\mathrm{}\mathrm{Paid}\mathrm{}=\mathrm{}\mathrm{Rs}\mathrm{}1,500\\ \therefore \mathrm{}\mathrm{Outstanding}\mathrm{}\mathrm{Interest}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Loan}\mathrm{}=\mathrm{}\mathrm{Rs}\mathrm{}1,000\end{array}$

WN2: Calculation of Provision for Doubtful Debts

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Doubtful}\mathrm{}\mathrm{Debts}\mathrm{}& =& (S\mathrm{undry}\mathrm{}\mathrm{Debtors}\mathrm{}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\mathrm{})\mathrm{}\times \frac{\mathrm{Rate}}{100}\\ & =& (1,42,000-2,000)\times \frac{5}{100}=\mathrm{Rs}\mathrm{}7,000\end{array}$

WN3: Calculation of Provision for Discount on Debtors

$\begin{array}{ccl}\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Discount}\mathrm{}\mathrm{on}\mathrm{}\mathrm{Debtors}& =& (\mathrm{Sundry}\mathrm{}\mathrm{Debtors}\mathrm{}-\mathrm{Further}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts}\mathrm{}-\mathrm{Provision}\mathrm{}\mathrm{for}\mathrm{}\mathrm{Bad}\mathrm{}\mathrm{Debts})\mathrm{}\times \mathrm{}\frac{\mathrm{Rate}}{100}\\ & =& (1,42,000-2,000-7,000)\times \frac{2}{100}=\mathrm{Rs}2,660\end{array}$


WN4: Calculation of Advance Rent Received

$\mathrm{Advance}\mathrm{}\mathrm{Rent}=3,900\times \frac{1}{13}=\mathrm{Rs}300$

WN5: Calculation of Outstanding Rent

$\mathrm{Out}\mathrm{standing}\mathrm{}\mathrm{Rent}=16,500\times \frac{1}{11}=\mathrm{Rs}1,500$