Question

The following were the balances extracted from the books of Yogita as on 31st March, 2016.

$\begin{array}{cccc}\text{Particulars}& \text{Debit (Rs.)}& \text{Particulars}& \text{Credit (Rs.)}\\ \text{Cash in Hand}& 540& \text{Sales}& 98,780\\ \text{Cash at Bank}& 2,630& \text{Return Outwards}& 500\\ \text{Purchases}& 40,675& \text{Capital Account}& 62,000\\ \text{Return Inwards}& 680& \text{Sundry Creditors}& 6,300\\ \text{Wages}& 8,480& \text{Rent}& 9,000\\ \text{Fuel and Power}& 4,730& & \\ \text{Carriage on Sales}& 3,200& & \\ \text{Carriage on Purchases}& 2,040& & \\ \text{Opening Stock}& 5,760& & \\ \text{Building}& 32,000& & \\ \text{Freehold Land}& 10,000& & \\ \text{Machinery}& 20,000& & \\ \text{Salaries}& 15,000& & \\ \text{Patents}& 7,500& & \\ \text{General Expenses}& 3,000& & \\ \text{Insurance}& 600& & \\ \text{Drawings}& 5,245& & \\ \text{Sundry Debtors}& 14,500& & \end{array}$

Taking into account the following adjustments, prepare the trading and profit and loss account and balance sheet as at 31st March, 2016.

(i) Stock in hand on 31st March, 2016 was Rs. 6,800.

(ii) Machinery is to be depreciated @ 10% and patents @ 20%.

(iii) Salaries for the month of March, 2013 amounting to Rs. 1,500 were outstanding.

(iv) Insurance includes an annual premium of Rs. 170 on a policy expiring on 30th September, 2016.

(v) Further bad debts are Rs. 725. Create a provision of 5% on debtors.

(vi) Rent receivable Rs. 1,000.

Answer 1

Trading and Profit and Loss Account

$\text{Dr.}\text{for the year ended 31st March, 2016}\text{Cr.}\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs.)}& \text{Particulars}& & \text{Amt. (Rs.)}\\ \text{Opening Stock}& & 5,760& \text{Sales}& 98,780& \\ \text{Purchases}& 40,675& & (-)\text{Return Inwards}& \underset{–}{680}& 98,100\\ (-)\text{Return Outwards}& \underset{–}{500}& 40,175& \text{Closing Stock}& & 6,800\\ \text{Wages}& & 8,480& & & \\ \text{Fuel and Power}& & 4,730& & & \\ \text{Carraige on Purchases}& & 2,040& & & \\ \text{Gross Profit c/d}& & 43,715& & & \\ & & \overline{\underset{–}{\underset{–}{1,04,900}}}& & & \overline{\underset{–}{\underset{–}{1,04,900}}}\\ \text{Carriage on Sales}& & 3,200& \text{Gross Profit b/d}& & 43,715\\ \text{Salaries}& 15,000& & \text{Rent}& 9,000& \\ (+)\text{Outstanding Salaries}& \underset{–}{1,500}& 16,500& (+)\text{Rent Receivable}& \underset{–}{1,000}& 10,000\\ \text{General Expenses}& & 3,000& & & \\ \text{Insurance}& 600& & & & \\ (-)\text{Unexpired Insurance}& \underset{–}{85}& 515& & & \\ \text{Further Bad Debts}& 725& & & & \\ (+)\text{New Provision}& \underset{–}{689}& 1,414& & & \\ \text{Depreciation on Machinery}& & 2,000& & & \\ \text{Depreciation on Patents}& & 1,500& & & \\ \text{Net profit Transferred to Capital A/c}& & 25,586& & & \\ & & \overline{\underset{–}{\underset{–}{53,715}}}& & & \overline{\underset{–}{\underset{–}{53,715}}}\\ & & & & & \end{array}$

Balance Sheet

as at 31st March, 2016

$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt. (Rs.)}& \text{Assets}& & \text{Amt. (Rs.)}\\ \text{Creditors}& & 6,300& \text{Cash in Hand}& & 540\\ \text{Salaries Outstanding}& & 1,500& \text{Cash at Bank}& & 2,630\\ \text{Capital}& 62,000& & \text{Closing Stock}& & 6,800\\ (+)\text{Net Profit}& \underset{–}{25,586}& & \text{Sundry Debtors}& 14,500& \\ & 87,586& & (-)\text{Further Bad Debts}& 725& \\ (-)\text{Drawings}& \underset{–}{5,245}& 82,341& & \overline{13,775}& \\ & & & (-)\text{Provision for Bad Debts}& \underset{–}{689}& 13,086\\ & & & \text{Rent Receivable}& & 1,000\\ & & & \text{Prepaid Insurance}& & 85\\ & & & \text{Patents}& 7,500& \\ & & & (-)\text{Depreciation}& \underset{–}{1,500}& 6,000\\ & & & \text{Freehold Land}& & 10,000\\ & & & \text{Building}& & 32,000\\ & & & \text{Machinery}& 20,000& \\ & & & (-)\text{Depreciation}& \underset{–}{2,000}& 18,000\\ & & \overline{\underset{–}{\underset{–}{90,141}}}& & & \overline{\underset{–}{\underset{–}{90,141}}}\\ & & & & & \end{array}$

Working Notes:

1. Depreciation on machinery=$20,000\times \frac{10}{100}=Rs.2,000$
2. Depreciation on parents=$7,500\times \frac{20}{100}=Rs.1,500$
3. Prepaid insurance==$170\times \frac{6}{12}=Rs.85\left(\text{from April to September 2016}\right)$
4. Provision for doubtful debts=$(14,500-725)\times \frac{5}{100}=Rs.689$