From the Trial Balance of Mrs. Sunita as on 31st March, 2024 and the adjustments given, prepare the Trading and Profit and Loss Account and the Balance Sheet:

Debit balances: Opening Stock ₹18,000; Purchases ₹1,40,000; Carriage Inward ₹3,000; Sundry Debtors ₹80,000; Machinery ₹1

Question

From the Trial Balance of Mrs. Sunita as on 31st March, 2024 and the adjustments given, prepare the Trading and Profit and Loss Account and the Balance Sheet:

Debit balances: Opening Stock ₹18,000; Purchases ₹1,40,000; Carriage Inward ₹3,000; Sundry Debtors ₹80,000; Machinery ₹1,20,000; Insurance ₹5,000; Cash in Hand ₹57,000; Drawings ₹12,000.
Credit balances: Capital ₹1,70,000; Sales ₹2,30,000; Sundry Creditors ₹35,000.

Adjustments: (1) Closing Stock ₹30,000. (2) Prepaid Insurance ₹1,000. (3) Depreciate Machinery by 10%. (4) Create Reserve for Doubtful Debts at 5% on Sundry Debtors.

Accepted Answer

**Trading Account for the year ended 31st March, 2024**

| Dr. | ₹ | Cr. | ₹ |
|---|---|---|---|
| To Opening Stock | 18,000 | By Sales | 2,30,000 |
| To Purchases | 1,40,000 | By Closing Stock | 30,000 |
| To Carriage Inward | 3,000 | | |
| To Gross Profit c/d | 99,000 | | |
| **Total** | **2,60,000** | **Total** | **2,60,000** |

Gross Profit = (2,30,000 + 30,000) − (18,000 + 1,40,000 + 3,000) = 2,60,000 − 1,61,000 = **₹99,000**.

**Profit and Loss Account for the year ended 31st March, 2024**

| Dr. | ₹ | Cr. | ₹ |
|---|---|---|---|
| To Insurance 5,000 Less: Prepaid 1,000 | 4,000 | By Gross Profit b/d | 99,000 |
| To Depreciation on Machinery (10% of 1,20,000) | 12,000 | | |
| To Reserve for Doubtful Debts (5% of 80,000) | 4,000 | | |
| To Net Profit (transferred to Capital A/c) | 79,000 | | |
| **Total** | **99,000** | **Total** | **99,000** |

Net Profit = 99,000 − (4,000 + 12,000 + 4,000) = 99,000 − 20,000 = **₹79,000**.

**Balance Sheet as on 31st March, 2024**

| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital 1,70,000 Add: Net Profit 79,000 | 2,49,000 | Machinery 1,20,000 Less: Depreciation 12,000 | 1,08,000 |
| Less: Drawings (12,000) | 2,37,000 | Closing Stock | 30,000 |
| Sundry Creditors | 35,000 | Sundry Debtors 80,000 Less: RDD 4,000 | 76,000 |
| | | Prepaid Insurance | 1,000 |
| | | Cash in Hand | 57,000 |
| **Total** | **2,72,000** | **Total** | **2,72,000** |

Both sides of the Balance Sheet correctly total to ₹2,72,000: Liabilities side = 2,37,000 + 35,000 = 2,72,000; Assets side = 1,08,000 + 30,000 + 76,000 + 1,000 + 57,000 = 2,72,000, confirming the trial balance, both accounts and every adjustment have been applied consistently.

> [!ANSWER]
> Gross Profit = ₹99,000; Net Profit = ₹79,000; Sundry Debtors appear in the Balance Sheet at ₹76,000 (₹80,000 less 5% Reserve for Doubtful Debts of ₹4,000); Balance Sheet totals ₹2,72,000 on both sides.

Dr.	₹	Cr.	₹
To Opening Stock	18,000	By Sales	2,30,000
To Purchases	1,40,000	By Closing Stock	30,000
To Carriage Inward	3,000
To Gross Profit c/d	99,000
Total	2,60,000	Total	2,60,000

Dr.	₹	Cr.	₹
To Insurance 5,000 Less: Prepaid 1,000	4,000	By Gross Profit b/d	99,000
To Depreciation on Machinery (10% of 1,20,000)	12,000
To Reserve for Doubtful Debts (5% of 80,000)	4,000
To Net Profit (transferred to Capital A/c)	79,000
Total	99,000	Total	99,000

Liabilities	₹	Assets	₹
Capital 1,70,000 Add: Net Profit 79,000	2,49,000	Machinery 1,20,000 Less: Depreciation 12,000	1,08,000
Less: Drawings (12,000)	2,37,000	Closing Stock	30,000
Sundry Creditors	35,000	Sundry Debtors 80,000 Less: RDD 4,000	76,000
		Prepaid Insurance	1,000
		Cash in Hand	57,000
Total	2,72,000	Total	2,72,000

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