(1) From the following balances taken from the book of a
trader, prepare Trading and Profit & Loss Account for the
year ending 31st March, 2018.
Purchases
25,000 Capital
20,000
Opening Stock
15,000 Debtors
20,000
Salary
12,000 Provision for Bad Debts 600
1,000 Machinery
10,000
Bad Debts
500 Interest Received
800
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800 Tax & Insurance
700
Wages
600 Discount Received
600
100
Sales
40,000
Trade Expenses
Octroi
Other Information:
(a) Make 4% Provision for Bad Debts on Debtors.
(b) Charge Interest on Capital @5% p.a.
(c) Depreciation on Machinery @10% p.a.
(d) The Trader withdrew goods worth Rs. 2000 for personal
use.
(e) Closing Stock Rs.20,000.
Answers
Explanation:
Trading and Profit and Loss Account
as on 31st December,2011
Dr Cr
Particulars Amt. (Rs.) Particular Amt. (Rs.)
To Opening Stock 25,000 By Sales 2,76,000
To Purchase 1,80,000 (-) Return Inwards 7,000
2,69,000
(-) Return Outwards 2,000
1,78,000 By Closing Stock 45,000
To Wages 10,000
To Gross Profit c/d 1,01,000
3,14,000 3,14,000
To Bad Debts 1,000 By Gross Profit b/d 1,01,000
To Trade Expenses 2,400 By Provision for Bad Debts 4,000
To Printing and Stationery 2,000 By Interest 2,000
To Rent, Rates and Taxes 5,000 (-) New Provision 1,600
2,400
To Freight
4,000
To Discount Allowed 2,000
To Depreciation on Furniture and Fixture
1,000
To Depreciation on Plant Machinery
(4,200 + 900)
5,100
To Depreciation on Motor Car
5,100
To Manager's Commission
6,891
To Net Profit c/d
68,909
1,03,400 1,03,400
Working Note
1. Depreciation on Plant and Machinery Rs. 30,000 Machinery was purchased on 1 July, 2011. Hence, Dep on 70,000 (1,00,000 - 30,000) @ 6% = 4,200 and Dep on 36,000 @ 6% for six months = 900 = Rs.15,100
2. Profit Before Manager's Commission = (1,03,400 27,600) = 75,800
Manager is entitled to a commission @10% on the new profit after charging such commission = [75,800×
11
10
]=Rs.6,891
Balance Sheet
as on 31st December, 2011
Liabilities Amt. (Rs.) Assets Amt. (Rs.)
Capital 2,00,000 Sundry Debtors 80,000
(+) Net Profit
(-) Drawings 68,909
2,68,909
20,000
2,48,909 (-) Provisions for Bad Debts 1,600
78,400
Bank Overdraft
Creditors 12,000
60,000 Furniture and Fixture
20,000
Bills Payable 15,400 (-) Depreciation @ 5% 1,000
19,000
Manager's Commission Outstanding 6,891 Plants and Machinery 1,00,000
(-) Depreciation @ 6% (4,200 + 900) 51,000
94,900
Motor Car 51,000
(-) Depreciation @ 10 % 5,100
45,900
Cash in Hand 6,000
Bills Receivable 14,000
Investments 40,000
Closing Stock 45,000
3,43,200
3,43,200