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Numerical Questions · Q13
Q.

Prepare the trading and profit and loss account and balance sheet of M/s Control Device India on March 31, 2017 from the following balance as on that date.

Account TitleDebit Amount ₹Credit Amount ₹
Drawings and Capital19,53067,500
Purchase and Sales45,0001,12,500
Salary and Commission25,4701,575
Carriage2,700
Plant and Machinery27,000
Furniture6,750
Opening stock42,300
Insurnace premium2,700
Interest7,425
Bank overdraft24,660
Rent and Taxes2,160
Wages11,215
Returns2,3851,440
Carriage outwards1,485
Debtors and Creditors36,00058,500
General expenses6,975
Octroi530
Investment41,400
2,73,6002,73,600

Closing stock was valued ₹ 20,000.

  1. Interest on capital @ 10%.
  2. Interest on drawings @ 5%.
  3. Wages outstanding ₹ 50.
  4. Outstanding salary ₹ 20.
  5. Provide a depreciation @ 5% on plant and machinery.
  6. Make a 5% provision on debtors.
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Trading A/c gives Gross Profit ₹29,760, but heavy indirect expenses (including interest on capital ₹6,750) turn the year into a Net Loss of ₹8,973; the Balance Sheet totals ₹1,28,000. The net loss and interest on drawings both reduce capital in the Balance Sheet.

Concept & treatment. "Carriage" (no suffix) is treated as carriage inwards (Trading A/c); carriage outwards is a selling expense (P&L). Salary & commission is an expense; commission ₹1,575 and interest ₹7,425 on the credit side are incomes. Interest on capital (charge) is debited to P&L and added to capital; interest on drawings (gain) is credited to P&L and deducted from capital along with drawings. When the P&L debit exceeds its credit, the balancing figure is a Net Loss, deducted from capital.

Trading and Profit & Loss Account for the year ended 31 March 2017

ParticularsAmount (₹)ParticularsAmount (₹)
To Opening Stock42,300By Sales 1,12,500
To Purchases 45,000Less Return inwards 2,3851,10,115
Less Return outwards 1,44043,560By Closing Stock20,000
To Carriage (inwards)2,700
To Wages 11,215 + Outstanding 5011,265
To Octroi530
To Gross Profit c/d29,760
Total1,30,115Total1,30,115
To Salary & Commission 25,470 + O/s 2025,490By Gross Profit b/d29,760
To Insurance premium2,700By Interest7,425
To Rent and Taxes2,160By Commission1,575
To Carriage outwards1,485By Interest on drawings977
To General expenses6,975By Net Loss (to Capital)8,973
To Depreciation: Plant & Machinery1,350
To Provision for doubtful debts1,800
To Interest on capital6,750
Total48,710Total48,710

Balance Sheet as on 31 March 2017

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital 67,500Plant and Machinery 27,000
Add Interest on capital 6,750Less Dep. 1,35025,650
Less Drawings 19,530Furniture6,750
Less Interest on drawings 977Investment41,400

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