Question

The trial balance of Ramesh Vyas as on 31st March, 2016 was as follows:

$\begin{array}{cccc}\text{Name of Accounts}& \text{Debit Balance (Rs.)}& \text{Credit Balance (Rs.)}& \\ \text{Purchases/Sales}& 81,25,250& 1,26,20,000& \\ \text{Provision for Doubtful Debts}& & 2,60,000& \\ \text{Sundry Debtors/Sundry Creditors}& 25,10,000& 15,26,300& \\ \text{Bills Payable}& & 1,97,500& \\ \text{Opening Stock}& 13,36,250& & \\ \text{Wages}& 11,56,850& & \\ \text{Salaries}& 2,78,750& & \\ \text{Furniture}& 3,62,500& & \\ \text{Postage}& 2,11,300& & \\ \text{Power and Fuel}& 67,500& & \\ \text{Trade Expenses}& 2,91,550& & \\ \text{Bad Debts}& 26,250& & \\ \text{Loan to Ram}@10\%\text{(1st December, 2015)}& 1,50,000& & \\ \text{Cash in Hand and at Bank}& 5,00,000& & \\ \text{Trade expenses Accrued but Not Paid}& & 35,000& \\ \text{Drawings/Capital A/c}& 2,22,600& 5,00,000& \\ \text{Outstanding Wages}& & 1,00,000& \\ & & & \\ & \overline{\underset{–}{\underset{–}{1,52,38,800}}}& \overline{\underset{–}{\underset{–}{1,52,38,800}}}& \\ & & & \end{array}$

Prepare the trading and profit and loss account for the year ended 31st March, after taking into consideration the following information.

(i) Stock on 31st March,2016 was Rs. 6,27,500.

(ii) Depreciation on furniture is to be charged @ 10%.

(iii) Provision for doubtful debt is to be maintained @ 5% on sundry debtors.

(iv) Sundry debtors include an item of Rs. 25,000 due from a customer who has become insolvent

(v) Goods of the value of Rs. 75,000 have been destroyed by fire and insurance company admitted a claim for Rs. 50,000.

(vi) Received Rs. 60,000 worth of goods on 27th March, 2016 but the invoice of purchases was not recorded in purchases book.

Answer 1

$\text{Trading And Profit and Loss Account}\text{Dr.}\text{for the year ended 31st March,2016}\text{Cr.}\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs.)}& \text{Particulars}& & \text{Amt. (Rs.)}\\ \text{Opening Stock}& & 13,36,250& \text{Sales}& & 1,26,20,000\\ \text{Purchases}& 81,25,250& & \text{Abnormal Loss of goods by Fire}& & 75,000\\ (+)\text{Omitted Purchases}& \underset{–}{60,000}& 81,85,250& \text{Closing Stock}& & 6,27,500\\ \text{Wages}& & 11,56,850& & & \\ \text{Power and Fuel}& & 67,500& & & \\ \text{Gross Profit c/d}& & 25,76,650& & & \\ & & \overline{\underset{–}{\underset{–}{1,33,22,500}}}& & & \overline{\underset{–}{\underset{–}{1,33,22,500}}}\\ \text{Loss by Fire}& 75,000& & \text{Gross Profit b/d}& & 25,76,650\\ (-)\text{Insurance Claim}& \underset{–}{50,000}& 25,000& \text{Provision for Doubtful Debts}& & 84,500\\ \text{Salaries}& & 2,78,750& \text{Accrued Interest on Loan}& & 5,000\\ \text{Postage}& & 2,11,300& & & \\ \text{Trade Expenses}& & 2,91,550& & & \\ \text{Depreciation on Furniture}& & 36,250& & & \\ \text{Net Profit Transferred to Capital A/c}& & 18,23,300& & & \\ & & \overline{\underset{–}{\underset{–}{26,66,150}}}& & & \overline{\underset{–}{\underset{–}{26,66,150}}}\\ & & & & & \end{array}$

Working Note:

1. Depreciation on furniture = Rs. $3,62,500\times \frac{10}{100}=Rs.36,250$

2.Interest on loan = Rs. $1,50,000\times \frac{10}{100}\times \frac{4}{12}=Rs.5,000$

$\begin{array}{cc}\text{3. Bad Debts}& 26,250\\ (+)\text{Further Bad Debts}& \underset{–}{25,000}\\ & 51,250\\ (+)\text{New Provision}& \underset{–}{1,24,250}\\ & 1,75,500\\ (-)\text{Old Provision}& \underset{–}{2,60,000}\\ & \underset{–}{(84,500)}\end{array}$

4. Purchases were omitted to be recorded in purchases book, implying that it was a credit transaction.