From the following information prepare trading and profit and loss account of M/s Indian sports house for the year ending March 31, 2017.
| Account Title | Amount ₹ | Account Title | Amount ₹ |
|---|---|---|---|
| Drawings | 20,000 | Capital | 2,00,000 |
| Sundry debtors | 80,000 | Return outwards | 2,000 |
| Bad debts | 1,000 | Bank overdraft | 12,000 |
| Trade Expenses | 2,400 | Provision for bad debts | 4,000 |
| Printing and Stationery | 2,000 | Sundry creditors | 60,000 |
| Rent Rates and Taxes | 5,000 | Bills payable | 15,400 |
| Feright | 4,000 | Sales | 2,76,000 |
| Return inwards | 7,000 | ||
| Opening stock | 25,000 | ||
| Purchases | 1,80,000 | ||
| Furniture and Fixture | 20,000 | ||
| Plant and Machinery | 1,00,000 | ||
| Bills receivable | 14,000 | ||
| Wages | 10,000 | ||
| Cash in hand | 6,000 | ||
| Discount allowed | 2,000 | ||
| Investments | 40,000 | ||
| Motor car | 51,000 | ||
| 5,69,400 | 5,69,400 |
Adjustments
- Closing stock was ₹45,000.
- Provision for doubtful debts is to be maintained @ 2% on debtors.
- Depreciation charged on : furniture and fixture @ 5%, plant and Machinery @ 6% and motor car @ 10%.
- A Machine of ₹30,000 was purchased on October 01, 2016.
- The manager is entitle to a commission of @ 10% of the net profit after charging such commission.
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Start your 14-day free trial to unlock the full solution →The tricky bits: the old provision (₹4,000) exceeds the new provision + bad debts, so ₹1,400 is written back as income; the ₹30,000 machine bought on 1 Oct gets only 6 months' depreciation; and the manager's 10% commission is after charging it (× 10/110). Gross Profit ₹1,01,000, Commission ₹6,891, Net Profit ₹68,909, Balance Sheet total ₹3,43,200.
Concept & treatment. Freight here is treated as a selling/indirect expense (P&L, debit). Provision for doubtful debts @ 2% is created on debtors; since the existing provision ₹4,000 is larger than new provision ₹1,600 + bad debts ₹1,000, the surplus ₹1,400 is credited to P&L. Depreciation is time-apportioned for the mid-year machine. Commission on net profit after charging such commission = profit × 10 / (100 + 10).
Trading Account for the year ended 31 March 2017
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Opening Stock | 25,000 | By Sales 2,76,000 | |
| To Purchases 1,80,000 | Less: Return inwards 7,000 | 2,69,000 | |
| Less: Return outwards 2,000 | 1,78,000 | By Closing Stock | 45,000 |
| To Wages | 10,000 | ||
| To Gross Profit c/d | 1,01,000 | ||
| Total | 3,14,000 | Total | 3,14,000 |
Profit & Loss Account for the year ended 31 March 2017
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Trade Expenses | 2,400 | By Gross Profit b/d | 1,01,000 |
| To Printing and Stationery | 2,000 | By Provision for D/D written back (WN 2) | 1,400 |
| To Rent, Rates and Taxes | 5,000 | ||
| To Freight | 4,000 | ||
| To Discount allowed | 2,000 | ||
| To Depreciation (WN 1) | 11,200 | ||
| To Manager's Commission (WN 3) | 6,891 | ||
| To Net Profit (to Capital) | 68,909 | ||
| Total | 1,02,400 | Total | 1,02,400 |
Balance Sheet as at 31 March 2017
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capital 2,00,000 | Furniture & Fixture 20,000 − Dep. 1,000 | 19,000 | |
| Less: Drawings 20,000 | Plant & Machinery 1,00,000 − Dep. 5,100 | 94,900 | |
| Add: Net Profit 68,909 | 2,48,909 | Motor car 51,000 − Dep. 5,100 | 45,900 |
| Bank Overdraft | 12,000 | Sundry debtors 80,000 − Provision 1,600 | 78,400 |
| Sundry Creditors | 60,000 | Bills receivable | 14,000 |
| Bills Payable | 15,400 | Investments | 40,000 |
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