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Numerical Questions · Q5
Q.

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 TitleAmount ₹Account TitleAmount ₹
Drawings20,000Capital2,00,000
Sundry debtors80,000Return outwards2,000
Bad debts1,000Bank overdraft12,000
Trade Expenses2,400Provision for bad debts4,000
Printing and Stationery2,000Sundry creditors60,000
Rent Rates and Taxes5,000Bills payable15,400
Feright4,000Sales2,76,000
Return inwards7,000
Opening stock25,000
Purchases1,80,000
Furniture and Fixture20,000
Plant and Machinery1,00,000
Bills receivable14,000
Wages10,000
Cash in hand6,000
Discount allowed2,000
Investments40,000
Motor car51,000
5,69,4005,69,400

Adjustments

  1. Closing stock was ₹45,000.
  2. Provision for doubtful debts is to be maintained @ 2% on debtors.
  3. Depreciation charged on : furniture and fixture @ 5%, plant and Machinery @ 6% and motor car @ 10%.
  4. A Machine of ₹30,000 was purchased on October 01, 2016.
  5. The manager is entitle to a commission of @ 10% of the net profit after charging such commission.
Ladakh CbseNCERTSubjective· 5mImportance★★★★★est
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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

ParticularsAmount (₹)ParticularsAmount (₹)
To Opening Stock25,000By Sales 2,76,000
To Purchases 1,80,000  Less: Return inwards 7,0002,69,000
  Less: Return outwards 2,0001,78,000By Closing Stock45,000
To Wages10,000
To Gross Profit c/d1,01,000
Total3,14,000Total3,14,000

Profit & Loss Account for the year ended 31 March 2017

ParticularsAmount (₹)ParticularsAmount (₹)
To Trade Expenses2,400By Gross Profit b/d1,01,000
To Printing and Stationery2,000By Provision for D/D written back (WN 2)1,400
To Rent, Rates and Taxes5,000
To Freight4,000
To Discount allowed2,000
To Depreciation (WN 1)11,200
To Manager's Commission (WN 3)6,891
To Net Profit (to Capital)68,909
Total1,02,400Total1,02,400

Balance Sheet as at 31 March 2017

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital 2,00,000Furniture & Fixture 20,000 − Dep. 1,00019,000
  Less: Drawings 20,000Plant & Machinery 1,00,000 − Dep. 5,10094,900
  Add: Net Profit 68,9092,48,909Motor car 51,000 − Dep. 5,10045,900
Bank Overdraft12,000Sundry debtors 80,000 − Provision 1,60078,400
Sundry Creditors60,000Bills receivable14,000
Bills Payable15,400Investments40,000

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