The following balances have been extracted from the books of M/s Green House for the year ended March 31, 2017, prepare trading and profit and loss account and balance sheet as on this date.
| Account Title | Amount ₹ | Account Title | Amount ₹ |
|---|---|---|---|
| Purchases | 80,000 | Capital | 2,10,000 |
| Bank balance | 11,000 | Bills payable | 6,500 |
| Wages | 34,000 | Sales | 2,00,000 |
| Debtors | 70,300 | Creditors | 50,000 |
| Cash in hand | 1,200 | Return outwards | 4,000 |
| Legal expenses | 4,000 | ||
| Building | 60,000 | ||
| Machinery | 1,20,000 | ||
| Bills receivable | 7,000 | ||
| Office expenses | 3,000 | ||
| Opening stock | 45,000 | ||
| Gas and fuel | 2,700 | ||
| Freight and Carriage | 3,500 | ||
| Factory lighting | 5,000 | ||
| Office furniture | 5,000 | ||
| Patent right | 18,800 | ||
| 4,70,500 | 4,70,500 |
Adjustments :
- Machinery is depreciated at 10% and buildings depreciated at 6%.
- Interest on capital @ 4%.
- Outstanding wages ₹ 50.
- Closing stock ₹ 50,000.
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Start your 14-day free trial to unlock the full solution →Trading A/c gives Gross Profit ₹83,750; P&L A/c gives Net Profit ₹52,750 after charging interest on capital ₹8,400; the Balance Sheet totals ₹3,27,700. Interest on capital is debited to P&L and added back to capital in the Balance Sheet.
Concept & treatment. Factory lighting, gas & fuel, freight & carriage and wages are direct expenses (Trading A/c). Interest on capital is a charge against profit (P&L debit) but is a return to the owner, so it is added to capital in the Balance Sheet. Outstanding wages are added to wages and shown as a current liability.
Trading and Profit & Loss Account for the year ended 31 March 2017
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Opening Stock | 45,000 | By Sales | 2,00,000 |
| To Purchases 80,000 | By Closing Stock | 50,000 | |
| Less Return outwards 4,000 | 76,000 | ||
| To Wages 34,000 + Outstanding 50 | 34,050 | ||
| To Gas and fuel | 2,700 | ||
| To Freight and Carriage | 3,500 | ||
| To Factory lighting | 5,000 | ||
| To Gross Profit c/d | 83,750 | ||
| Total | 2,50,000 | Total | 2,50,000 |
| To Legal expenses | 4,000 | By Gross Profit b/d | 83,750 |
| To Office expenses | 3,000 | ||
| To Depreciation: Machinery | 12,000 | ||
| To Depreciation: Building | 3,600 | ||
| To Interest on capital | 8,400 | ||
| To Net Profit (to Capital) | 52,750 | ||
| Total | 83,750 | Total | 83,750 |
Balance Sheet as on 31 March 2017
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capital 2,10,000 | Building 60,000 | ||
| Add Interest on capital 8,400 | Less Dep. 3,600 | 56,400 | |
| Add Net Profit 52,750 | 2,71,150 | Machinery 1,20,000 |
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