From the following Trial Balance of M/s.Vinod and Sons as on 31st December. 2002, prepare
Trading and Profit & Loss Account and Balance Sheet.
Particulars Amount Particulars Amount
Trade expenses
Freight & duty
Carriage outwards
Sundry debtors
Furniture & fixtures
Returns inwards
Printing & stationery
Rent, rates & taxes
Sundry creditors
Sales
Returns outwards
Postage & telegrams
Purchases
800
2,000
500
20,600
5,000
2,000
400
4,600
10,000
1,20,000
1,000
800
82,000
Stock (opening)
Plant & Machinery (on 1 Jan)
Additions to Plant & Machinery (on 1 July)
Drawings
Capital
Reserve for doubtful debts
Rent for premises sublet
Insurance charges
Salaries and wages
Cash in hand
Cash at bank
15,000
20,000
5,000
6,000
80,000
800
1,600
700
21,300
6,200
20,500
Adjustments:
(i) Stock in hand on 31-12-2002 Rs.14,000.
(ii) Write off Rs.600 as bad debts.
(iii) Reserve for doubtful debts is to be maintained at 5% on sundry debtors.
(iv) Provide for depreciation furniture & fixtures at 5% p.a. and on plant & machinery 20% p.a.
(v) Insurance prepaid was Rs.100.
(vi) A fire occurred on 5th December 2002 in the godown and stock of the value of Rs.5,000 was
Destroyed. It was insured and insurance company admitted full claim.
Answers
Answer:
your correct answer is (ii) write off Rs.600 as bad debts.
Answer:
The amount received from the insurance company for the destroyed stock has not been taken into consideration while preparing the final accounts as it is a subsequent event that occurred after the year-end.
Explanation:
Trading and Profit & Loss Account for M/s. Vinod and Sons for the year ended 31st December 2002
Particulars Amount Particulars Amount
To Opening Stock 15,000 By Sales 1,20,000
To Purchases 82,000 Less: Returns Outwards 1,000 1,19,000
Add: Freight & Duty 2,000
Carriage Outwards 500
Less: Returns Inwards 2,000
Gross Profit c/d 16,500
1,20,500 1,20,500
To Trade Expenses 800
Printing & Stationery 400
Postage & Telegraphs 800
Rent, Rates & Taxes 4,600
Insurance Charges 700
To Depreciation:
Furniture & Fixtures 250
Plant & Machinery 5,400
To Bad Debts Written off 600
To Provision for Doubtful Debts 1,030
To Rent for Premises Sublet 1,600
To Net Profit transferred to Balance Sheet 2,020
Total 28,800 Total 28,800
Balance Sheet of M/s. Vinod and Sons as on 31st December 2002
Liabilities Amount Assets Amount
Sundry Creditors 10,000 Sundry Debtors 20,600
Capital 80,000 Less: Provision for Doubtful Debts (1,030) 19,570
Add: Net Profit 2,020
Reserve for Doubtful Debts 800 Stock (31-12-2002) 14,000
Outstanding Expenses: Plant & Machinery 20,600
Rent 1,000 Less: Depreciation (5,400) 15,200
Insurance 100
Provision for Depreciation:
Furniture & Fixtures 5,250
Plant & Machinery 20,000 Less: Depreciation (250) 4,750
Cash in Hand 6,200
Cash at Bank 20,500
Total 96,870 Total 96,870
Note:
The Trading and Profit & Loss Account and Balance Sheet have been prepared in the vertical format.
The adjustments have been taken into consideration to prepare the final accounts.
The Gross Profit is calculated as Rs.16,500.
The Net Profit transferred to the Balance Sheet is calculated as Rs.2,020.
The Provision for Doubtful Debts is calculated as Rs.1,030.
The Depreciation is calculated as follows:
Furniture & Fixtures = Rs.5,000 x 5% = Rs.250
Plant & Machinery = (Rs.20,000 + Rs.5,000) x 20% = Rs.5,400
The amount received from the insurance company for the destroyed stock has not been taken into consideration while preparing the final accounts as it is a subsequent event that occurred after the year-end.
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