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Numerical Questions · Q6
Q.

Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. from the following particulars.

Account TitleAmount ₹Account TitleAmount ₹
Sundry debtors1,00,000Bills payable85,550
Bad debts3,000Sundry creditors25,000
Trade expenses2,500Provision for bad debts1,500
Printing and Stationary5,000Return outwards4,500
Rent, Rates and Taxes3,450Capital2,50,000
Freight2,250Discount received3,500
Sales return6,000Interest received11,260
Motor car25,000Sales1,00,000
Opening stock75,550
Furniture and Fixture15,500
Purchases75,000
Drawings13,560
Investments65,500
Cash in hand36,000
Cash in bank53,000
4,81,3104,81,310

Adjustments

  1. Closing stock was valued ₹ 35,000.
  2. Depreciation charged on furniture and fixture @ 5%.
  3. Further bad debts ₹ 1,000. Make a provision for bad debts @ 5% on sundry debtors.
  4. Depreciation charged on motor car @ 10%.
  5. Interest on drawing @ 6%.
  6. Rent, rates and taxes was outstanding ₹200.
  7. Discount on debtors 2%.
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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

ParticularsAmount (₹)ParticularsAmount (₹)
To Opening Stock75,550By Sales 1,00,000
To Purchases 75,000  Less: Sales return 6,00094,000
  Less: Return outwards 4,50070,500By Closing Stock35,000
By Gross Loss c/d17,050
Total1,46,050Total1,46,050

Profit & Loss Account for the year ended 31 March 2017

ParticularsAmount (₹)ParticularsAmount (₹)
To Gross Loss b/d17,050By Discount received3,500
To Trade Expenses2,500By Interest received11,260
To Printing and Stationery5,000By Interest on Drawings (WN 3)814
To Rent, Rates and Taxes 3,450 + o/s 2003,650By Net Loss (to Capital)27,482
To Freight2,250
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
Total43,056Total43,056

Balance Sheet as at 31 March 2017

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital 2,50,000Sundry 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 27,4822,08,144  Less: Discount @2% 1,88192,169

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