Page 1 4. Interest on bank loan paid Rs.2,500 5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation 4] 6. Salaries (11 months) [Explanation 5] 7. Patent rights (5 years) [Explanation 6] 8. Insurance Premium (including an annual premium of Rs.12,000 paid up to 30th June, 2011) [Explanation 7] 9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010) [Explanation 8] 10. Interest on Investment 2,500 10,00,000 1,10,000 1,00,000 36,000 5,40,000 1,00,000 30,000 Note: Financial Year is the Accounting Year. Explanations: 1. Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August, 2010 to 31st March, 2011) — Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000. The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet. 2. Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to 31st March, 2011) = Rs.3,000. The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 3. 10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance of Rs.7,500 will be shown on the liabilities side of the Balance Sheet. 4. 1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet. 5. One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he added to salary on the debit side of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 6. 1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss Account as amortisation of patents right and the same will be shown as deduction from patents right on the assets side of the Balance Sheet. 7. Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 = Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss Account and shown on the assets side of the Balance Sheet. 8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to Profit and Loss Account as income for the year. Out of this Rs.30,000 has been received. The balance Rs.15,000 will be shown on the assets side of the Balance Sheet as accrued income. Illustration 1 From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year ending 31 st March, 2015 and Balance Sheet as at the date. Particulars Dr. (Rs.) Cr. (Rs.) Capital 72,000 Drawings 8,400 Printing Charges 1,000 Machinery 20,000 Purchases 55,000 Sales 96,000 Salaries 9,300 Advertising 2,500 Bills Receivable 1,900 Bills Payable 2,700 Stock (01.04.2014) 24,000 Bank Loan 7,300 Rent 3,000 Page 2 4. Interest on bank loan paid Rs.2,500 5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation 4] 6. Salaries (11 months) [Explanation 5] 7. Patent rights (5 years) [Explanation 6] 8. Insurance Premium (including an annual premium of Rs.12,000 paid up to 30th June, 2011) [Explanation 7] 9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010) [Explanation 8] 10. Interest on Investment 2,500 10,00,000 1,10,000 1,00,000 36,000 5,40,000 1,00,000 30,000 Note: Financial Year is the Accounting Year. Explanations: 1. Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August, 2010 to 31st March, 2011) — Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000. The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet. 2. Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to 31st March, 2011) = Rs.3,000. The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 3. 10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance of Rs.7,500 will be shown on the liabilities side of the Balance Sheet. 4. 1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet. 5. One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he added to salary on the debit side of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 6. 1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss Account as amortisation of patents right and the same will be shown as deduction from patents right on the assets side of the Balance Sheet. 7. Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 = Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss Account and shown on the assets side of the Balance Sheet. 8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to Profit and Loss Account as income for the year. Out of this Rs.30,000 has been received. The balance Rs.15,000 will be shown on the assets side of the Balance Sheet as accrued income. Illustration 1 From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year ending 31 st March, 2015 and Balance Sheet as at the date. Particulars Dr. (Rs.) Cr. (Rs.) Capital 72,000 Drawings 8,400 Printing Charges 1,000 Machinery 20,000 Purchases 55,000 Sales 96,000 Salaries 9,300 Advertising 2,500 Bills Receivable 1,900 Bills Payable 2,700 Stock (01.04.2014) 24,000 Bank Loan 7,300 Rent 3,000 Building 25,000 Wages 6,500 Sundry Debtors 30,000 Sundry Creditors 12,000 Insurance Premium 1,400 Furniture 2,000 1,90,000 J 1,90,000 Adjustments: (i) Value of Closing Stock 27,500 on 31 st March, 2015. (ii) Salaries outstanding Rs. 1,500. (iii) Insurance Premium Prepaid Rs. 300. (iv) Depreciate Machinery by 10% and Building by 2%. (v) Write off further Bad Debts amounting to Rs. 1,500. Solution: TRADING AND PROFIT AND LOSS ACCOUNT Particulars Amt.(Rs.) Particulars Amt.(Rs.) To Opening Stock 24.000 By Sales 96.000 To Purchases 55,000 By Closing Stock 27,500 To Wages 6,500 To Gross Profit transferred to Profit and Loss A/c 38,000 1,23,500 1,23,500 To Printing Charges 1,000 By Gross Profit transferred from Trading A/c 38,000 To Salaries 9,300 Add: Outstanding Salaries 1,500 10,800 To Advertising 2,500 To Rent 3,000 To Insurance Premium 1,400 Less: Prepaid Insurance 300 1,100 To Depreciation: Machinery :?,000 Building 500 2,500 To Bad Debts 1,500 To Net Profit Transferred to Capital A/c 15,600 38,000 38,000 BALANCE SHEET as at 31 st March, 2015 Liabilities Amt.(Rs.) Assets Amt.(Rs.) Capital ,000 Machinery 20.000 Add: Net Profit 15,600 Less: Depreciation 2,000 18,000 Less: Drawings 8,400 79,200 Building 25,000 Bills Payable 2,700 Less: Depreciation 500 24,500 Sundry Creditors 12,000 Furniture 2,000 Bank Loan 7,300 Sundry Debtors 30,000 Outstanding Salaries 1,500 Less: Bad Debts 1,500 28,500 Stock 27,500 Prepaid Insurance 300 Bills Receivable 1,900 1,02,700 1,02,700 Illustration 2 Trial Balance of Mr. Gopal Das as on 31st March, 2014 was as follows: Heads of Accounts Dr.(Rs.) Cr.(Rs.) Purchases/Sales Provision for Doubtful Debts 8,12,525 12,62,000 26,000 Page 3 4. Interest on bank loan paid Rs.2,500 5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation 4] 6. Salaries (11 months) [Explanation 5] 7. Patent rights (5 years) [Explanation 6] 8. Insurance Premium (including an annual premium of Rs.12,000 paid up to 30th June, 2011) [Explanation 7] 9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010) [Explanation 8] 10. Interest on Investment 2,500 10,00,000 1,10,000 1,00,000 36,000 5,40,000 1,00,000 30,000 Note: Financial Year is the Accounting Year. Explanations: 1. Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August, 2010 to 31st March, 2011) — Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000. The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet. 2. Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to 31st March, 2011) = Rs.3,000. The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 3. 10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance of Rs.7,500 will be shown on the liabilities side of the Balance Sheet. 4. 1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet. 5. One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he added to salary on the debit side of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 6. 1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss Account as amortisation of patents right and the same will be shown as deduction from patents right on the assets side of the Balance Sheet. 7. Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 = Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss Account and shown on the assets side of the Balance Sheet. 8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to Profit and Loss Account as income for the year. Out of this Rs.30,000 has been received. The balance Rs.15,000 will be shown on the assets side of the Balance Sheet as accrued income. Illustration 1 From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year ending 31 st March, 2015 and Balance Sheet as at the date. Particulars Dr. (Rs.) Cr. (Rs.) Capital 72,000 Drawings 8,400 Printing Charges 1,000 Machinery 20,000 Purchases 55,000 Sales 96,000 Salaries 9,300 Advertising 2,500 Bills Receivable 1,900 Bills Payable 2,700 Stock (01.04.2014) 24,000 Bank Loan 7,300 Rent 3,000 Building 25,000 Wages 6,500 Sundry Debtors 30,000 Sundry Creditors 12,000 Insurance Premium 1,400 Furniture 2,000 1,90,000 J 1,90,000 Adjustments: (i) Value of Closing Stock 27,500 on 31 st March, 2015. (ii) Salaries outstanding Rs. 1,500. (iii) Insurance Premium Prepaid Rs. 300. (iv) Depreciate Machinery by 10% and Building by 2%. (v) Write off further Bad Debts amounting to Rs. 1,500. Solution: TRADING AND PROFIT AND LOSS ACCOUNT Particulars Amt.(Rs.) Particulars Amt.(Rs.) To Opening Stock 24.000 By Sales 96.000 To Purchases 55,000 By Closing Stock 27,500 To Wages 6,500 To Gross Profit transferred to Profit and Loss A/c 38,000 1,23,500 1,23,500 To Printing Charges 1,000 By Gross Profit transferred from Trading A/c 38,000 To Salaries 9,300 Add: Outstanding Salaries 1,500 10,800 To Advertising 2,500 To Rent 3,000 To Insurance Premium 1,400 Less: Prepaid Insurance 300 1,100 To Depreciation: Machinery :?,000 Building 500 2,500 To Bad Debts 1,500 To Net Profit Transferred to Capital A/c 15,600 38,000 38,000 BALANCE SHEET as at 31 st March, 2015 Liabilities Amt.(Rs.) Assets Amt.(Rs.) Capital ,000 Machinery 20.000 Add: Net Profit 15,600 Less: Depreciation 2,000 18,000 Less: Drawings 8,400 79,200 Building 25,000 Bills Payable 2,700 Less: Depreciation 500 24,500 Sundry Creditors 12,000 Furniture 2,000 Bank Loan 7,300 Sundry Debtors 30,000 Outstanding Salaries 1,500 Less: Bad Debts 1,500 28,500 Stock 27,500 Prepaid Insurance 300 Bills Receivable 1,900 1,02,700 1,02,700 Illustration 2 Trial Balance of Mr. Gopal Das as on 31st March, 2014 was as follows: Heads of Accounts Dr.(Rs.) Cr.(Rs.) Purchases/Sales Provision for Doubtful Debts 8,12,525 12,62,000 26,000 Sundry Debtors/Sundry Creditors Bills Payable Opening Stock Wages Salaries Furniture Postage Power and Fuel Trade Expenses Bad Debts Loan to Ram @ 10% (1.12.2013) Cash in Hand and at Bank Trade Expenses accrued but not paid Drawings A/c/Capital A/o Outstanding Wages 2,51,000 1,33,625 1,15,685 27,875 36,250 21,130 6,750 29,155 2,625 15,000 50,000 22,260 1,52,630 19,750 3,500 50,000 10,000 Total 15,23,880 15,23,880 Prepare Trading and Profit and Loss Account for the year ended 31st March, 2014 and Balance Sheet as at that date after taking into consideration the following information: (i) Stock on 31st March, 2014 was Rs.62,750. (ii) Depreciation on Furniture is to be charged @ 10%. (iii) Provision for Doubtful Debts is to be maintained @ 5% on Sundry Debtors. (iv) Sundry Debtors include an item of Rs.2,500 due from a customer who has become insolvent. (v) Goods of the value of Rs.7,500 have been destroyed by fire and insurance company admitted a claim for Rs.5,000. (vi) Received Rs.6,000 worth of goods on 27th March, 2014 but the invoice of purchases was not recorded in Purchases Book. Solution: TRADING AND PROFIT AND LOSS ACCOUNT for the year ended 31st March, 2014 Particulars Rs. Particulars Rs. To Opening Stock To Purchases 8,12,525 Add:Omitted Purchases 6,000 To Wages To Power and Fuel To Gross Profit c/d 1,33,625 8,18,525 1,15,685 6,750 2,57,665 By Sales By Abnormal Loss by Fire By Closing Stock 12,62,000 7,500 62,750 13,32,250 13,32,250 To Irrecoverable Loss of Stock To Salaries To Postage To Trade Expenses To Depreciation on Furniture To Net Profit trfd. to Capital A/c 2,500 27,875 21,130 29,155 3,625 1,82,330 By Gross Profit By Provision for Doubtful debts (Old) 26,000 Less: Bad Debts 2,625 Further Bad Debts 2,500 Provision for Doubtful Debts (New) 12,425 (5/100 x Rs.2,48,525) 17,550 By Interest on Loan 2,57,665 8,450 500 2,66,615 2,66,615 BALANCE SHEET as at 31st March, 2014 Liabilities Rs. Assets Rs. Current Liabilities Creditors 1,52,630 Add: Omitted Purchases 6,000 Bills Payable Outstanding Wages 1,58,630 19,750 10,000 Current Assets Insurance Claim (Receivable) Cash in Hand Closing Stock Debtors 2,51,000 5,000 50,000 62,750 Page 4 4. Interest on bank loan paid Rs.2,500 5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation 4] 6. Salaries (11 months) [Explanation 5] 7. Patent rights (5 years) [Explanation 6] 8. Insurance Premium (including an annual premium of Rs.12,000 paid up to 30th June, 2011) [Explanation 7] 9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010) [Explanation 8] 10. Interest on Investment 2,500 10,00,000 1,10,000 1,00,000 36,000 5,40,000 1,00,000 30,000 Note: Financial Year is the Accounting Year. Explanations: 1. Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August, 2010 to 31st March, 2011) — Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000. The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet. 2. Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to 31st March, 2011) = Rs.3,000. The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 3. 10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance of Rs.7,500 will be shown on the liabilities side of the Balance Sheet. 4. 1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet. 5. One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he added to salary on the debit side of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 6. 1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss Account as amortisation of patents right and the same will be shown as deduction from patents right on the assets side of the Balance Sheet. 7. Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 = Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss Account and shown on the assets side of the Balance Sheet. 8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to Profit and Loss Account as income for the year. Out of this Rs.30,000 has been received. The balance Rs.15,000 will be shown on the assets side of the Balance Sheet as accrued income. Illustration 1 From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year ending 31 st March, 2015 and Balance Sheet as at the date. Particulars Dr. (Rs.) Cr. (Rs.) Capital 72,000 Drawings 8,400 Printing Charges 1,000 Machinery 20,000 Purchases 55,000 Sales 96,000 Salaries 9,300 Advertising 2,500 Bills Receivable 1,900 Bills Payable 2,700 Stock (01.04.2014) 24,000 Bank Loan 7,300 Rent 3,000 Building 25,000 Wages 6,500 Sundry Debtors 30,000 Sundry Creditors 12,000 Insurance Premium 1,400 Furniture 2,000 1,90,000 J 1,90,000 Adjustments: (i) Value of Closing Stock 27,500 on 31 st March, 2015. (ii) Salaries outstanding Rs. 1,500. (iii) Insurance Premium Prepaid Rs. 300. (iv) Depreciate Machinery by 10% and Building by 2%. (v) Write off further Bad Debts amounting to Rs. 1,500. Solution: TRADING AND PROFIT AND LOSS ACCOUNT Particulars Amt.(Rs.) Particulars Amt.(Rs.) To Opening Stock 24.000 By Sales 96.000 To Purchases 55,000 By Closing Stock 27,500 To Wages 6,500 To Gross Profit transferred to Profit and Loss A/c 38,000 1,23,500 1,23,500 To Printing Charges 1,000 By Gross Profit transferred from Trading A/c 38,000 To Salaries 9,300 Add: Outstanding Salaries 1,500 10,800 To Advertising 2,500 To Rent 3,000 To Insurance Premium 1,400 Less: Prepaid Insurance 300 1,100 To Depreciation: Machinery :?,000 Building 500 2,500 To Bad Debts 1,500 To Net Profit Transferred to Capital A/c 15,600 38,000 38,000 BALANCE SHEET as at 31 st March, 2015 Liabilities Amt.(Rs.) Assets Amt.(Rs.) Capital ,000 Machinery 20.000 Add: Net Profit 15,600 Less: Depreciation 2,000 18,000 Less: Drawings 8,400 79,200 Building 25,000 Bills Payable 2,700 Less: Depreciation 500 24,500 Sundry Creditors 12,000 Furniture 2,000 Bank Loan 7,300 Sundry Debtors 30,000 Outstanding Salaries 1,500 Less: Bad Debts 1,500 28,500 Stock 27,500 Prepaid Insurance 300 Bills Receivable 1,900 1,02,700 1,02,700 Illustration 2 Trial Balance of Mr. Gopal Das as on 31st March, 2014 was as follows: Heads of Accounts Dr.(Rs.) Cr.(Rs.) Purchases/Sales Provision for Doubtful Debts 8,12,525 12,62,000 26,000 Sundry Debtors/Sundry Creditors Bills Payable Opening Stock Wages Salaries Furniture Postage Power and Fuel Trade Expenses Bad Debts Loan to Ram @ 10% (1.12.2013) Cash in Hand and at Bank Trade Expenses accrued but not paid Drawings A/c/Capital A/o Outstanding Wages 2,51,000 1,33,625 1,15,685 27,875 36,250 21,130 6,750 29,155 2,625 15,000 50,000 22,260 1,52,630 19,750 3,500 50,000 10,000 Total 15,23,880 15,23,880 Prepare Trading and Profit and Loss Account for the year ended 31st March, 2014 and Balance Sheet as at that date after taking into consideration the following information: (i) Stock on 31st March, 2014 was Rs.62,750. (ii) Depreciation on Furniture is to be charged @ 10%. (iii) Provision for Doubtful Debts is to be maintained @ 5% on Sundry Debtors. (iv) Sundry Debtors include an item of Rs.2,500 due from a customer who has become insolvent. (v) Goods of the value of Rs.7,500 have been destroyed by fire and insurance company admitted a claim for Rs.5,000. (vi) Received Rs.6,000 worth of goods on 27th March, 2014 but the invoice of purchases was not recorded in Purchases Book. Solution: TRADING AND PROFIT AND LOSS ACCOUNT for the year ended 31st March, 2014 Particulars Rs. Particulars Rs. To Opening Stock To Purchases 8,12,525 Add:Omitted Purchases 6,000 To Wages To Power and Fuel To Gross Profit c/d 1,33,625 8,18,525 1,15,685 6,750 2,57,665 By Sales By Abnormal Loss by Fire By Closing Stock 12,62,000 7,500 62,750 13,32,250 13,32,250 To Irrecoverable Loss of Stock To Salaries To Postage To Trade Expenses To Depreciation on Furniture To Net Profit trfd. to Capital A/c 2,500 27,875 21,130 29,155 3,625 1,82,330 By Gross Profit By Provision for Doubtful debts (Old) 26,000 Less: Bad Debts 2,625 Further Bad Debts 2,500 Provision for Doubtful Debts (New) 12,425 (5/100 x Rs.2,48,525) 17,550 By Interest on Loan 2,57,665 8,450 500 2,66,615 2,66,615 BALANCE SHEET as at 31st March, 2014 Liabilities Rs. Assets Rs. Current Liabilities Creditors 1,52,630 Add: Omitted Purchases 6,000 Bills Payable Outstanding Wages 1,58,630 19,750 10,000 Current Assets Insurance Claim (Receivable) Cash in Hand Closing Stock Debtors 2,51,000 5,000 50,000 62,750 Trade Expenses Accrued Capital Opening Balance 50,000 Lees: Drawings 22,260 27,740 Add: Net Profit 1,82,330 3,500 2,10,070 Less: Bad Debts 2,500 2,48,500 Less: Provision 12,425 Loan to Ram 15,000 Add: Interest 500 Fixed Assets Furniture 36,250 Less: Depreciation 3,625 2,36,075 15,500 32,625 4,01,950 4,01,950 Illustration 3 On 31 st March, 2015, the following Trial Balance was extracted from the books of M/s Bajaj Trader: Particulars Dr. (Rs.) Cr.(Rs.) Capital 30,000 Drawings 5,000 Debtors and Creditors 20,000 10,000 Loan 8,400 Interest on Loan 300 Cash 2,000 Provision for Doubtful Debts 1,800 Stock on (0104-2014) 6,800 Motor Vehicle 10,000 Bank 3,500 Machinery 12,000 Bad Debts 500 Purchases and Sales 66,000 1,10,000 Returns 8,000 1,500 Carriage Outwards 2,500 Carriage Inwards 3,000 Salaries 9,000 Rent and Insurance 3,000 Advertising 3,500 Discount 500 General Expenses 3,400 Bills Receivable and Bills Payable 6,000 2,000 Rent Received 300 1,64,500 1,64,500 Prepare Trading and Profit and Loss Account for the year ended 31 st March, 2015 and Balance Sheet as on that date after taking into account the following adjustments: (i) Machinery includes a machinery purchased on 1 st October, 2014 for Rs. 2,000. Depreciate machinery @ 2% p.a. (ii) Depreciate motor vehicles at 20% (iii) Salaries outstanding Rs. 200. (iv) Insurance includes a premium of Rs. 400 on a policy expiring on 30 th September, 2015. (v) Provision for Doubtful Debts is to be maintained at 5% on debtors, (vi) Stock on 31 st March, 2015 was valued at Rs. 7,000. Solution: Trading and Profit and loss account Particulars Amt.(Rs.) Particulars Amt. (Rs.) To Opening Stock 6,800 By Sales 1,10,000 To Purchases 66,000 Less: Sales Return 8,000 1,02,000 Less: Purchases Return 1,500 64,500 7,000 To Carriage Inwards 3,000 To Gross Profit transferred to Profit and Loss A/c 34,700 1,09,000 1,09,000 Page 5 4. Interest on bank loan paid Rs.2,500 5. Leasehold premises (10 years to run from 1st April, 2010) [Explanation 4] 6. Salaries (11 months) [Explanation 5] 7. Patent rights (5 years) [Explanation 6] 8. Insurance Premium (including an annual premium of Rs.12,000 paid up to 30th June, 2011) [Explanation 7] 9. 10% Investment (face value Rs.6,00,000 purchased on 1st July, 2010) [Explanation 8] 10. Interest on Investment 2,500 10,00,000 1,10,000 1,00,000 36,000 5,40,000 1,00,000 30,000 Note: Financial Year is the Accounting Year. Explanations: 1. Adjustment should be made for interest earned but not received on Rs.6,00,000 @ 10% for 8 months (1st August, 2010 to 31st March, 2011) — Rs.6,00,000 x 8/12 x 10/100 = Rs.40,000. The amount will be credited to Profit and Loss Account and shown on the assets side of the Balance Sheet. 2. Adjustment should be made for interest due not paid on Rs.90,000 @ 8% for 5 months (1st November, 2010 to 31st March, 2011) = Rs.3,000. The amount will be debited to Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 3. 10 months interest on bank loan (Rs.1,00,000 x 12/100 x 10/12) or Rs.10,000 will be debited to Profit and Loss Account as expense for the year. But out of this Rs.2,500 (see item 4 in Trial Balance) has been paid. The balance of Rs.7,500 will be shown on the liabilities side of the Balance Sheet. 4. 1/10th of the cost of lease, i.e., Rs.1,00,000 will be debited to Profit and Loss Account as amortisation of lease and this will be shown as deduction from leasehold premises on the assets side of the Balance Sheet. 5. One month salary (Rs.1,10,000 x 1/17) Rs.10,000 is still outstanding. It must he added to salary on the debit side of the Profit and Loss Account and shown on the liabilities side of the Balance Sheet. 6. 1/5th of the cost of patent rights, i.e., Rs.20,000, will be debited to Profit and Loss Account as amortisation of patents right and the same will be shown as deduction from patents right on the assets side of the Balance Sheet. 7. Adjustment should be made for unexpired insurance or prepaid insurance for 3 months— Rs.12,000 x 3/12 = Rs.3,000. This amount will be deducted from the insurance premium on the debit side of the Profit and Loss Account and shown on the assets side of the Balance Sheet. 8. Nine months’ interest (Rs.00,000 x 9/12 x 10/100) or Rs.45,000 will be credited to Profit and Loss Account as income for the year. Out of this Rs.30,000 has been received. The balance Rs.15,000 will be shown on the assets side of the Balance Sheet as accrued income. Illustration 1 From the following Trial Balance of Kajal Enterprise, prepare Trading Account and Profit and Loss Account for the year ending 31 st March, 2015 and Balance Sheet as at the date. Particulars Dr. (Rs.) Cr. (Rs.) Capital 72,000 Drawings 8,400 Printing Charges 1,000 Machinery 20,000 Purchases 55,000 Sales 96,000 Salaries 9,300 Advertising 2,500 Bills Receivable 1,900 Bills Payable 2,700 Stock (01.04.2014) 24,000 Bank Loan 7,300 Rent 3,000 Building 25,000 Wages 6,500 Sundry Debtors 30,000 Sundry Creditors 12,000 Insurance Premium 1,400 Furniture 2,000 1,90,000 J 1,90,000 Adjustments: (i) Value of Closing Stock 27,500 on 31 st March, 2015. (ii) Salaries outstanding Rs. 1,500. (iii) Insurance Premium Prepaid Rs. 300. (iv) Depreciate Machinery by 10% and Building by 2%. (v) Write off further Bad Debts amounting to Rs. 1,500. Solution: TRADING AND PROFIT AND LOSS ACCOUNT Particulars Amt.(Rs.) Particulars Amt.(Rs.) To Opening Stock 24.000 By Sales 96.000 To Purchases 55,000 By Closing Stock 27,500 To Wages 6,500 To Gross Profit transferred to Profit and Loss A/c 38,000 1,23,500 1,23,500 To Printing Charges 1,000 By Gross Profit transferred from Trading A/c 38,000 To Salaries 9,300 Add: Outstanding Salaries 1,500 10,800 To Advertising 2,500 To Rent 3,000 To Insurance Premium 1,400 Less: Prepaid Insurance 300 1,100 To Depreciation: Machinery :?,000 Building 500 2,500 To Bad Debts 1,500 To Net Profit Transferred to Capital A/c 15,600 38,000 38,000 BALANCE SHEET as at 31 st March, 2015 Liabilities Amt.(Rs.) Assets Amt.(Rs.) Capital ,000 Machinery 20.000 Add: Net Profit 15,600 Less: Depreciation 2,000 18,000 Less: Drawings 8,400 79,200 Building 25,000 Bills Payable 2,700 Less: Depreciation 500 24,500 Sundry Creditors 12,000 Furniture 2,000 Bank Loan 7,300 Sundry Debtors 30,000 Outstanding Salaries 1,500 Less: Bad Debts 1,500 28,500 Stock 27,500 Prepaid Insurance 300 Bills Receivable 1,900 1,02,700 1,02,700 Illustration 2 Trial Balance of Mr. Gopal Das as on 31st March, 2014 was as follows: Heads of Accounts Dr.(Rs.) Cr.(Rs.) Purchases/Sales Provision for Doubtful Debts 8,12,525 12,62,000 26,000 Sundry Debtors/Sundry Creditors Bills Payable Opening Stock Wages Salaries Furniture Postage Power and Fuel Trade Expenses Bad Debts Loan to Ram @ 10% (1.12.2013) Cash in Hand and at Bank Trade Expenses accrued but not paid Drawings A/c/Capital A/o Outstanding Wages 2,51,000 1,33,625 1,15,685 27,875 36,250 21,130 6,750 29,155 2,625 15,000 50,000 22,260 1,52,630 19,750 3,500 50,000 10,000 Total 15,23,880 15,23,880 Prepare Trading and Profit and Loss Account for the year ended 31st March, 2014 and Balance Sheet as at that date after taking into consideration the following information: (i) Stock on 31st March, 2014 was Rs.62,750. (ii) Depreciation on Furniture is to be charged @ 10%. (iii) Provision for Doubtful Debts is to be maintained @ 5% on Sundry Debtors. (iv) Sundry Debtors include an item of Rs.2,500 due from a customer who has become insolvent. (v) Goods of the value of Rs.7,500 have been destroyed by fire and insurance company admitted a claim for Rs.5,000. (vi) Received Rs.6,000 worth of goods on 27th March, 2014 but the invoice of purchases was not recorded in Purchases Book. Solution: TRADING AND PROFIT AND LOSS ACCOUNT for the year ended 31st March, 2014 Particulars Rs. Particulars Rs. To Opening Stock To Purchases 8,12,525 Add:Omitted Purchases 6,000 To Wages To Power and Fuel To Gross Profit c/d 1,33,625 8,18,525 1,15,685 6,750 2,57,665 By Sales By Abnormal Loss by Fire By Closing Stock 12,62,000 7,500 62,750 13,32,250 13,32,250 To Irrecoverable Loss of Stock To Salaries To Postage To Trade Expenses To Depreciation on Furniture To Net Profit trfd. to Capital A/c 2,500 27,875 21,130 29,155 3,625 1,82,330 By Gross Profit By Provision for Doubtful debts (Old) 26,000 Less: Bad Debts 2,625 Further Bad Debts 2,500 Provision for Doubtful Debts (New) 12,425 (5/100 x Rs.2,48,525) 17,550 By Interest on Loan 2,57,665 8,450 500 2,66,615 2,66,615 BALANCE SHEET as at 31st March, 2014 Liabilities Rs. Assets Rs. Current Liabilities Creditors 1,52,630 Add: Omitted Purchases 6,000 Bills Payable Outstanding Wages 1,58,630 19,750 10,000 Current Assets Insurance Claim (Receivable) Cash in Hand Closing Stock Debtors 2,51,000 5,000 50,000 62,750 Trade Expenses Accrued Capital Opening Balance 50,000 Lees: Drawings 22,260 27,740 Add: Net Profit 1,82,330 3,500 2,10,070 Less: Bad Debts 2,500 2,48,500 Less: Provision 12,425 Loan to Ram 15,000 Add: Interest 500 Fixed Assets Furniture 36,250 Less: Depreciation 3,625 2,36,075 15,500 32,625 4,01,950 4,01,950 Illustration 3 On 31 st March, 2015, the following Trial Balance was extracted from the books of M/s Bajaj Trader: Particulars Dr. (Rs.) Cr.(Rs.) Capital 30,000 Drawings 5,000 Debtors and Creditors 20,000 10,000 Loan 8,400 Interest on Loan 300 Cash 2,000 Provision for Doubtful Debts 1,800 Stock on (0104-2014) 6,800 Motor Vehicle 10,000 Bank 3,500 Machinery 12,000 Bad Debts 500 Purchases and Sales 66,000 1,10,000 Returns 8,000 1,500 Carriage Outwards 2,500 Carriage Inwards 3,000 Salaries 9,000 Rent and Insurance 3,000 Advertising 3,500 Discount 500 General Expenses 3,400 Bills Receivable and Bills Payable 6,000 2,000 Rent Received 300 1,64,500 1,64,500 Prepare Trading and Profit and Loss Account for the year ended 31 st March, 2015 and Balance Sheet as on that date after taking into account the following adjustments: (i) Machinery includes a machinery purchased on 1 st October, 2014 for Rs. 2,000. Depreciate machinery @ 2% p.a. (ii) Depreciate motor vehicles at 20% (iii) Salaries outstanding Rs. 200. (iv) Insurance includes a premium of Rs. 400 on a policy expiring on 30 th September, 2015. (v) Provision for Doubtful Debts is to be maintained at 5% on debtors, (vi) Stock on 31 st March, 2015 was valued at Rs. 7,000. Solution: Trading and Profit and loss account Particulars Amt.(Rs.) Particulars Amt. (Rs.) To Opening Stock 6,800 By Sales 1,10,000 To Purchases 66,000 Less: Sales Return 8,000 1,02,000 Less: Purchases Return 1,500 64,500 7,000 To Carriage Inwards 3,000 To Gross Profit transferred to Profit and Loss A/c 34,700 1,09,000 1,09,000 To Interest on Loan 300 By Gross Profit transferred from Trading A/C 34,700 To Carriage Outwards 2,500 By Discount Received 500 To Salaries 9,000 By Rent 300 Add: Outstanding Salaries 200 9,200 By Provision for Doubtful To Rent and Insurance 3,000 Debts (Old) 1,800 Less: Prepaid Insurance 200 2,800 Less: Bad Debts 500 To Advertising 3,500 Less: Provision for Doubtful To General Expenses 3,400 Debts (New) 1,000 300 To Depreciation on: Machinery 220 Motor Vehicles 2,000 2,220 To Net Profit Transferred to Capital A/c 11,880 35,800 35,800 Balance sheet as on 31/3/2015 Liabilities Amt. (Rs.) Assets Amt. (Rs.) Capital 30,000 Machinery 12,000 Add: Net Profit 11,880 Less: Depreciation 220 11,780 41,880 Motor Vehicle 10,000 Less: Drawings 5,000 36,880 Less: Depreciation 2,000 8,000 Creditors 10,000 Debtors 20,000 Loan 8,400 Less: Provision for Doubtful Debts 1,000 19,000 Bills Payable 2,000 Closing Stock 7,000 Outstanding salaries 200 Bills Receivable 6,000 Prepaid Insurance 200 Cash 2,000 Bank 3,500 57,480 57,480 Illustration 4 The following is the Trial Balance of M/s Reliable Enterprises on 31 st December, 2014: Particulars Dr.(Rs.) cr.(Rs.) Cash in Band 1,080 Cash at Bank 5,260 Purchases 81,350 Returns Outward 1,000 Sales Account 1,97,560 Returns Inward 1,360 Wages 20,960 Fuel and Power 9,460 Carriage 4,080 Stock (1.1.2014) 11,520 Building 60,000 Freehold land 20,000 Machinery 40,000 Salaries 30,000 Patents 15,000 General Expenses 6,000 Insurance 1,200 Capital 1,42,000 Drawings 10,490 Sundry Debtors 29,000 Carriage on Sales 6,400 Sundry Creditors 12,600Read More
![]() |
Use Code STAYHOME200 and get INR 200 additional OFF
|
Use Coupon Code |
67 docs|53 tests
|