Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. from the following particulars.
| Account Title | Amount ₹ | Account Title | Amount ₹ |
|---|---|---|---|
| Sundry debtors | 1,00,000 | Bills payable | 85,550 |
| Bad debts | 3,000 | Sundry creditors | 25,000 |
| Trade expenses | 2,500 | Provision for bad debts | 1,500 |
| Printing and Stationary | 5,000 | Return outwards | 4,500 |
| Rent, Rates and Taxes | 3,450 | Capital | 2,50,000 |
| Freight | 2,250 | Discount received | 3,500 |
| Sales return | 6,000 | Interest received | 11,260 |
| Motor car | 25,000 | Sales | 1,00,000 |
| Opening stock | 75,550 | ||
| Furniture and Fixture | 15,500 | ||
| Purchases | 75,000 | ||
| Drawings | 13,560 | ||
| Investments | 65,500 | ||
| Cash in hand | 36,000 | ||
| Cash in bank | 53,000 | ||
| 4,81,310 | 4,81,310 |
Adjustments
- Closing stock was valued ₹ 35,000.
- Depreciation charged on furniture and fixture @ 5%.
- Further bad debts ₹ 1,000. Make a provision for bad debts @ 5% on sundry debtors.
- Depreciation charged on motor car @ 10%.
- Interest on drawing @ 6%.
- Rent, rates and taxes was outstanding ₹200.
- Discount on debtors 2%.
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Start your 14-day free trial to unlock the full solution →Sales (₹1,00,000) are far below cost of goods sold, so there is a Gross Loss ₹17,050 carried to the debit of P&L; after all indirect items and interest on drawings the Net Loss is ₹27,482; Balance Sheet total ₹3,18,894.
Concept & treatment. When the Trading A/c debit exceeds its credit, the balancing figure is a gross loss shown on the debit side of the P&L. Freight is treated as an indirect expense (P&L). Interest on drawings is an income to the firm (credit P&L) and is also added to drawings (deducted from Capital). Outstanding rent is added to rent and shown as a liability. On debtors: further bad debts, a 5% provision and a 2% discount are all charged and deducted from debtors.
Trading Account for the year ended 31 March 2017
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Opening Stock | 75,550 | By Sales 1,00,000 | |
| To Purchases 75,000 | Less: Sales return 6,000 | 94,000 | |
| Less: Return outwards 4,500 | 70,500 | By Closing Stock | 35,000 |
| By Gross Loss c/d | 17,050 | ||
| Total | 1,46,050 | Total | 1,46,050 |
Profit & Loss Account for the year ended 31 March 2017
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Gross Loss b/d | 17,050 | By Discount received | 3,500 |
| To Trade Expenses | 2,500 | By Interest received | 11,260 |
| To Printing and Stationery | 5,000 | By Interest on Drawings (WN 3) | 814 |
| To Rent, Rates and Taxes 3,450 + o/s 200 | 3,650 | By Net Loss (to Capital) | 27,482 |
| To Freight | 2,250 | ||
| To Depreciation on Furniture & Fixture (WN 1) | 775 | ||
| To Depreciation on Motor Car (WN 1) | 2,500 | ||
| To Bad debts & Provision for D/D (WN 2) | 7,450 | ||
| To Discount on Debtors (WN 2) | 1,881 | ||
| Total | 43,056 | Total | 43,056 |
Balance Sheet as at 31 March 2017
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capital 2,50,000 | Sundry debtors 1,00,000 | ||
| Less: Drawings 13,560 | Less: Further bad debts 1,000 | ||
| Less: Interest on drawings 814 | Less: Provision @5% 4,950 | ||
| Less: Net Loss 27,482 | 2,08,144 | Less: Discount @2% 1,881 | 92,169 |
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