From the following balances extracted from the books of Raga Ltd. prepare a trading and profit and loss account for the year ended March 31, 2017 and a balance sheet as on that date.
| Account Title | Amount ₹ | Account Title | Amount ₹ |
|---|---|---|---|
| Drawings | 20,000 | Sales | 2,20,000 |
| Land and Buildings | 12,000 | Capital | 1,01,110 |
| Plant and Machinery | 40,000 | Discount | 1,260 |
| Carriage inwards | 100 | Apprentice premium | 5,230 |
| Wages | 500 | Bills payable | 1,28,870 |
| Salary | 2,000 | Purchases return | 10,000 |
| Sales return | 200 | ||
| Bank charges | 200 | ||
| Coal, Gas and Water | 1,200 | ||
| purchases | 1,50,000 | ||
| Trade Expenses | 3,800 | ||
| Stock (Opening) | 76,800 | ||
| Cash at bank | 50,000 | ||
| Rates and Taxes | 870 | ||
| Bills receivable | 24,500 | ||
| Sundry debtors | 54,300 | ||
| Cash in hand | 30,000 | ||
| 4,66,470 | 4,66,470 |
The additional information is as under :
- Closing stock was valued at the end of the year ₹, 20,000.
- Depreciation on plant and machinery charged at 5% and land and building at 10%.
- Discount on debtors at 3%.
- Make a provision at 5% on debtors for doubtful debts.
- Salary outstanding was ₹100 and Wages prepaid was ₹ 40.
- The manager is entitled a commission of 5% on net profit after charging such commission.
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Start your 14-day free trial to unlock the full solution →Trading A/c gives Gross Profit ₹21,240; P&L A/c gives Net Profit ₹12,664 after a manager's commission of ₹633 (5% on profit after commission); the Balance Sheet totals ₹2,23,377. Note the two debtor adjustments applied in order — first the 5% provision for doubtful debts, then the 3% provision for discount on the reduced debtors.
Concept & treatment. Wages, carriage inwards and coal/gas/water are direct (Trading A/c debit). Discount received and apprentice premium are incomes (P&L credit). A provision for discount on debtors is charged on debtors after deducting the provision for doubtful debts, because discount is allowed only to those debtors expected to pay. Prepaid wages (asset) reduce wages; outstanding salary (liability) increases salary.
Trading and Profit & Loss Account for the year ended 31 March 2017
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Opening Stock | 76,800 | By Sales 2,20,000 | |
| To Purchases 1,50,000 | Less Sales return 200 | 2,19,800 | |
| Less Purchases return 10,000 | 1,40,000 | By Closing Stock | 20,000 |
| To Carriage inwards | 100 | ||
| To Wages 500 − Prepaid 40 | 460 | ||
| To Coal, Gas and Water | 1,200 | ||
| To Gross Profit c/d | 21,240 | ||
| Total | 2,39,800 | Total | 2,39,800 |
| To Salary 2,000 + Outstanding 100 | 2,100 | By Gross Profit b/d | 21,240 |
| To Bank charges | 200 | By Discount | 1,260 |
| To Trade Expenses | 3,800 | By Apprentice premium | 5,230 |
| To Rates and Taxes | 870 | ||
| To Depreciation: Land & Building | 1,200 | ||
| To Depreciation: Plant & Machinery | 2,000 | ||
| To Provision for doubtful debts | 2,715 | ||
| To Provision for discount on debtors | 1,548 | ||
| To Manager's commission | 633 | ||
| To Net Profit (to Capital) | 12,664 | ||
| Total | 27,730 | Total | 27,730 |
Balance Sheet as on 31 March 2017
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capital 1,01,110 | Land and Buildings 12,000 | ||
| Less Drawings 20,000 | Less Dep. 1,200 | 10,800 | |
| Add Net Profit 12,664 | 93,774 | Plant and Machinery 40,000 | |
| Bills payable | 1,28,870 | Less Dep. 2,000 | 38,000 |
| Salary outstanding | 100 | Closing stock | 20,000 |
| Manager's commission outstanding | 633 | Bills receivable | 24,500 |
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