Varsha and Harsha are partners sharing profits and losses in their capital ratio. You are required to prepare Trading Account, Profit and Loss Account for the year ending 31 st March, 2020 and Balance sheet as on that date: | Trial Balance as on 31st March, 2020 | | | | | --- | --- | --- | --- | | Debit Balance | Amount ₹ | Credit Balance | Amount ₹ | | sundry Debtors | 56,000 | Sales | 2,40,000 | | Purchases | 1,10,000 | Sundry Creditors | 99,600 | | Plant & machinery | 1,60,000 | Purchases Return | 2,000 | | Furniture | 1,05,800 | Capital accounts | | | Salaries | 8,600 | Varsha | 1,80,000 | | Sales return | 1,000 | Harsh | 60,000 | | Cash in hand | 1,02,000 | Current Accounts: | | | Opening stock | 35,600 | Varsha | 10,000 | | Rent, Rates & Taxes | 9,000 | Harsha | 6,000 | | Advertisement | 9,600 | | | | | 5,97,600 | | 5,97,600 | Adjustments: Stock on 31 st March, 2020 was valued at ₹ 74,000. Depreciation on Plant and Machinery @ 5% p.a. Partners are entitled to get Interest on Capital at 5% p.a. Outstanding expenses: Salaries ₹ 700. Provide further Bad debts of ₹ 1,680 on Sundry debtors.

> > [!TLDR] > Partners share profit in the capital ratio 3:1. In the Trading A/c, sales and purchases are taken net of returns and closing stock Rs. 74,000 is credited, giving Gross Profit Rs. 1,69,400. The P&L A/c charges salaries (with outstanding), rent, advertisement, depreciation on plant (Rs. 8,000), further bad debts (Rs. 1,680) and interest on capital (Rs. 12,000), leaving Net Profit Rs. 1,19,820 split 3:1. > > **Working Notes** > > 1. Profit-sharing ratio = Capital ratio = 1,80,000 : 60,000 = **3 : 1**. > 2. Depreciation on Plant & Machinery = 1,60,000 x 5% = **Rs. 8,000**. > 3. Interest on Capital @ 5%: Varsha 1,80,000 x 5% = Rs. 9,000; Harsha 60,000 x 5% = Rs. 3,000 (total Rs. 12,000). > 4. Salaries = 8,600 + Outstanding 700 = Rs. 9,300; Outstanding Salaries Rs. 700 is a liability. > 5. Further Bad Debts Rs. 1,680 reduce Debtors to 56,000 - 1,680 = Rs. 54,320. > > **Trading Account for the year ended 31st March 2020** > > | Dr. Particulars | Amount Rs. | Cr. Particulars | Amount Rs. | > | --- | --- | --- | --- | > | To Opening Stock | 35,600 | By Sales 2,40,000 - Returns 1,000 | 2,39,000 | > | To Purchases 1,10,000 - Returns 2,000 | 1,08,000 | By Closing Stock | 74,000 | > | To Gross Profit c/d | 1,69,400 | | | > | | 3,13,000 | | 3,13,000 | > > **Profit and Loss Account for the year ended 31st March 2020** > > | Dr. Particulars | Amount Rs. | Cr. Particulars | Amount Rs. | > | --- | --- | --- | --- | > | To Salaries (8,600 + 700) | 9,300 | By Gross Profit b/d | 1,69,400 | > | To Rent, Rates & Taxes | 9,000 | | | > | To Advertisement | 9,600 | | | > | To Depreciation on Plant & Machinery | 8,000 | | | > | To Further Bad Debts | 1,680 | | | > | To Interest on Capital: | | | | > | Varsha 9,000 | | | | > | Harsha 3,000 | 12,000 | | | > | To Net Profit c/d: | | | | > | Varsha (3/4) 89,865 | | | | > | Harsha (1/4) 29,955 | 1,19,820 | | | > | | 1,69,400 | | 1,69,400 | > > **Partners' Current Accounts** > > | Part

Varsha and Harsha are partners sharing profits and losses in their capital ratio. You are required to prepare

Question 21 of 42

Varsha and Harsha are partners sharing profits and losses in their capital ratio. You are required to prepare Trading Account, Profit and Loss Account for the year ending 31

March, 2020 and Balance sheet as on that date:

Trial Balance as on 31st March, 2020
Debit Balance	Amount ₹	Credit Balance	Amount ₹
sundry Debtors	56,000	Sales	2,40,000
Purchases	1,10,000	Sundry Creditors	99,600
Plant & machinery	1,60,000	Purchases Return	2,000
Furniture	1,05,800	Capital accounts
Salaries	8,600	Varsha	1,80,000
Sales return	1,000	Harsh	60,000
Cash in hand	1,02,000	Current Accounts:
Opening stock	35,600	Varsha	10,000
Rent, Rates & Taxes	9,000	Harsha	6,000
Advertisement	9,600
	5,97,600		5,97,600
Adjustments:
Stock on 31
st
March, 2020 was valued at ₹ 74,000.
Depreciation on Plant and Machinery @ 5% p.a.
Partners are entitled to get Interest on Capital at 5% p.a.
Outstanding expenses: Salaries ₹ 700.
Provide further Bad debts of ₹ 1,680 on Sundry debtors.

Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2023Subjective· 12mImportance★★★★★

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Partners share profit in the capital ratio 3:1. In the Trading A/c, sales and purchases are taken net of returns and closing stock Rs. 74,000 is credited, giving Gross Profit Rs. 1,69,400. The P&L A/c charges salaries (with outstanding), rent, advertisement, depreciation on plant (Rs. 8,000), further bad debts (Rs. 1,680) and interest on capital (Rs. 12,000), leaving Net Profit Rs. 1,19,820 split 3:1.

Working Notes

Profit-sharing ratio = Capital ratio = 1,80,000 : 60,000 = 3 : 1.
Depreciation on Plant & Machinery = 1,60,000 x 5% = Rs. 8,000.
Interest on Capital @ 5%: Varsha 1,80,000 x 5% = Rs. 9,000; Harsha 60,000 x 5% = Rs. 3,000 (total Rs. 12,000).
Salaries = 8,600 + Outstanding 700 = Rs. 9,300; Outstanding Salaries Rs. 700 is a liability.
Further Bad Debts Rs. 1,680 reduce Debtors to 56,000 - 1,680 = Rs. 54,320.

Trading Account for the year ended 31st March 2020

Dr. Particulars	Amount Rs.	Cr. Particulars	Amount Rs.
To Opening Stock	35,600	By Sales 2,40,000 - Returns 1,000	2,39,000
To Purchases 1,10,000 - Returns 2,000	1,08,000	By Closing Stock	74,000
To Gross Profit c/d	1,69,400
	3,13,000		3,13,000

Profit and Loss Account for the year ended 31st March 2020

Dr. Particulars	Amount Rs.	Cr. Particulars	Amount Rs.
To Salaries (8,600 + 700)	9,300	By Gross Profit b/d	1,69,400
To Rent, Rates & Taxes	9,000
To Advertisement	9,600
To Depreciation on Plant & Machinery	8,000
To Further Bad Debts	1,680
To Interest on Capital:
Varsha 9,000
Harsha 3,000	12,000
To Net Profit c/d:
Varsha (3/4) 89,865
Harsha (1/4) 29,955	1,19,820
	1,69,400		1,69,400

Partners' Current Accounts

Particulars	Varsha Rs.	Harsha Rs.	Particulars	Varsha Rs.	Harsha Rs.
To Balance c/d	1,08,865	38,955	By Balance b/d	10,000	6,000

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The missing term is Closing Stock. Cost of goods sold measures only the goods actually sold, so the stock still on hand at the year end must be removed from the goods available for sale.

Method

Goods available for sale during the year = Opening Stock + Purchases (plus any direct expenses). The stock that remains unsold at the close of the year has not yet been sold, so it is deducted to arrive at the cost of the goods that were actually sold.

| Item | Amount | …

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CBSE 2026Set ANNUAL1 mark
$Q. Complete the table: Sales Purchases Gross Profit ........ 1,80,000 20,000$
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Sales = ₹2,00,000. Gross Profit = Sales − Cost of goods sold, so Sales = Cost of goods sold + Gross Profit. With only purchases given (no opening/closing stock), purchases stand for the cost of goods sold.

Method

In the Trading Account, Gross Profit = Sales − Cost of goods sold. Re-arranging gives Sales = Cost of goods sold + Gross Profit. As no opening or closing stock is stated, purchases (₹1,80,000) are taken as the cost of goods sold.

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CBSE 2026Set ANNUAL1 mark
$Q. Expenses which are paid before due date are called as _____.$
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Expenses paid before their due date are called Prepaid Expenses (expenses paid in advance).

Under the accrual/matching principle, only the expense relating to the current accounting year is charged to the Profit and Loss Account. When an expense is paid before it becomes due — i.e. its benefit will be received in the next period — the amount paid in advance is a Prepaid Expense.

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Sales	Purchases	Gross Profit
........	1,80,000	20,000

CBSE 2025Set ANNUAL1 mark

Q. Trading Account is prepared on the basis of ______ expenses.

›Reveal solution

The missing word is Direct.

Final accounts split expenses into two groups:

Expense type	Where recorded	Examples
Direct (incurred to bring goods to saleable condition)	Trading Account	Wages, carriage inward, freight, import duty, factory power
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CBSE 2025Set ANNUAL1 markMCQ
$Q. Find the odd one:$
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(c) Royalty account
(d) Import duty account
›Reveal solutionSolution

The odd one is the Salary account.

Group the four items by where they are recorded in final accounts:

Item Nature Recorded in
Wages account Direct expense Trading A/c
Royalty account Direct expense Trading A/c
Import duty account Direct expense Trading A/c
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…

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Item	Nature	Recorded in
Wages account	Direct expense	Trading A/c
Royalty account	Direct expense	Trading A/c
Import duty account	Direct expense	Trading A/c
Salary account	Indirect expense	Profit & Loss A/c
…

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Q. Find the odd one:

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(b) Furniture account

(d) Rent account

›Reveal solution

The odd one is the Rent account.

Group the four items by their nature:

Item	Nature	Shown in
Machinery account	Fixed asset	Balance Sheet (Assets)
Furniture account	Fixed asset	Balance Sheet (Assets)
Computer account	Fixed asset	Balance Sheet (Assets)
Rent account	Expense (nominal)	Profit & Loss A/c
…

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CBSE 2025Set ANNUAL1 markMCQ

Q. Find the odd one:

(a) General reserve account

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(d) Capital account

›Reveal solution

Group the four accounts by where they appear in the books. Three of them are liabilities/owners' claims; only Machinery account is an asset, so it is the odd one out.

Classifying each item

Item	Nature	Side of Balance Sheet
General Reserve account	Accumulated profit (owners' fund)	Liabilities side
Creditors account	Liability (amount owed to suppliers)	Liabilities side
Machinery account	Fixed / real asset	Assets side
Capital account	Owners' fund	Liabilities side

Three of the four are claims against the firm's assets (liabilities and owners' funds) and appear on the liabilities side. Machinery is the only asset in the list, so it does not fit the common feature shared by the rest.

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CBSE 2024Set ANNUAL1 markMCQ
$Q. Find odd one.$
(a) Building
(b) Machinery
(c) Furniture
(d) Bills payable.
›Reveal solutionSolution

Three of the items are assets; one is a liability. The liability is the odd one.

When the items are placed in a Balance Sheet they split cleanly:

Item Nature Balance Sheet side
Building Fixed asset Assets
Machinery Fixed asset Assets
Furniture Fixed asset Assets
Bills Payable Current liability Liabilities
…

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CBSE 2024Set ANNUAL1 markMCQ
$Q. Find the odd one:$
(a) General Reserve
(b) Creditors
(c) Investments
(d) Capital
›Reveal solutionSolution

Three items appear on the liabilities side of the Balance Sheet; one is an asset. The asset is the odd one.

Sorting the four items into a Balance Sheet:

Item Nature Balance Sheet side
General Reserve Accumulated profit (owners' fund) Liabilities
Creditors Current liability Liabilities
Capital Owners' fund Liabilities
Investments Asset Assets
…

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CBSE 2023Set ANNUAL1 mark
$Q. Write the word/phrase/term, which can substitute the following sentence. Credit balance of Profit and Loss Account.$
›Reveal solutionSolution

A credit balance in the Profit and Loss Account means the total of the credit side (incomes/gains) is greater than the debit side (expenses/losses) — the term for it is Net Profit.

Why: The Profit and Loss Account is a nominal account. Following the rule "debit all expenses and losses, credit all incomes and gains," a credit balance shows that gains have exceeded losses. This surplus is the firm's Net Profit …

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CBSE 2023Set ANNUAL1 mark
$Q. Calculate 12.5% P.A. depreciation on Furniture: on ₹ 2,20,000 for 1 year on ₹ 10,000 for 6 months$
›Reveal solutionSolution

Charge 12.5% p.a. on each amount for its own period: ₹2,20,000 for a full year and ₹10,000 for 6 months. Total depreciation = ₹28,125.

Method: Depreciation = Value × Rate × (Months ÷ 12).

Amount (₹) Rate Period Depreciation (₹)
2,20,000 12.5% p.a. 1 year (12/12) 27,500
10,000 12.5% p.a. 6 months (6/12) 625

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CBSE 2022Set ANNUAL1 markMCQ
$Q. To find out Net Profit or Net Loss of the business __________ account is prepared.$
(a) Trading
(b) Capital
(c) Current
(d) Profit & Loss
›Reveal solutionSolution
The Profit & Loss Account is the account prepared to ascertain the Net Profit or Net Loss.

The question tests where the net result of a business is determined among the final accounts.

Trading Account deals only with direct items (opening/closing stock, purchases, sales, direct expenses) and gives the Gross Profit or Gross Loss.

The Profit & Loss Account then takes that gross result and adjusts all indirect expenses (salaries, rent, depreciation, etc.) and indirect incomes to arrive at the Net Profit or Net Loss. …
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Item	Nature	Balance Sheet side
Building	Fixed asset	Assets
Machinery	Fixed asset	Assets
Furniture	Fixed asset	Assets
Bills Payable	Current liability	Liabilities
…

Item	Nature	Balance Sheet side
General Reserve	Accumulated profit (owners' fund)	Liabilities
Creditors	Current liability	Liabilities
Capital	Owners' fund	Liabilities
Investments	Asset	Assets
…

Amount (₹)	Rate	Period	Depreciation (₹)
2,20,000	12.5% p.a.	1 year (12/12)	27,500
10,000	12.5% p.a.	6 months (6/12)	625

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