Mama and Kaka are partners in partnership firm sharing profits and losses equally. You are required to prepare Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as on that date: | Trial Balance as on 31st March, 2019 | | | | | --- | --- | --- | --- | | Debit Balances | Amount (₹) | Cebit Balances | Amount (₹) | | Insurance | 30,000 | Capital Accounts: | | | Land and Building ((Addition of ₹ 40,000 wef. 1st July, 2018)) | 1,00,000 | Mama | 1,00,000 | | Salaries | 10,000 | Kaka | 1,00,000 | | Export duty | 5,000 | 10% Bank Loan (taken on1st Oct. 2018) | 60,000 | | Interest | 2,000 | Interest | 3,000 | | Furniture | 80,000 | Bills payable | 16,000 | | Debtors | 52,000 | | - | | | 2,79,000 | | 2,79,000 | Adjustment: Gross profit amounted to ₹ 69,000. Prepaid insurance ₹ 7,500. Depreciate Land and Building at 10% p.a. and Furniture 5% p.a. Write ₹ 2,000 for bad debts and maintain R.D.D. at 5% on sundry debtors. Closing stock is valued at ₹ 69,000.

> > [!TLDR] > Gross Profit ₹69,000 plus interest received ₹3,000 gives ₹72,000 of income. Indirect expenses total ₹58,000 after adjustments (insurance net of prepaid ₹22,500, salaries ₹10,000, export duty ₹5,000, loan interest ₹3,000, depreciation L&B ₹9,000 and furniture ₹4,000, bad debts ₹2,000, new R.D.D. ₹2,500). Net Profit ₹14,000 is shared equally. The Balance Sheet totals ₹2,91,000. > > **Working notes** > - Insurance = 30,000 − prepaid 7,500 = **22,500** > - Interest on 10% Bank Loan (₹60,000, taken 1 Oct 2018 → 6 months) = 60,000 × 10% × 6/12 = **3,000**; only ₹2,000 paid, so **₹1,000 outstanding** > - Depreciation on Land & Building: old ₹60,000 for full year × 10% = 6,000; addition ₹40,000 from 1 July 2018 (9 months) × 10% × 9/12 = 3,000 → total **9,000** > - Depreciation on Furniture = 80,000 × 5% = **4,000** > - Debtors 52,000 − further bad debts 2,000 = 50,000; new R.D.D. 5% = **2,500** > > **Step 1 — Profit and Loss Account (for the year ended 31 March 2019)** > > | Dr. Particulars | Amount (₹) | Cr. Particulars | Amount (₹) | > | --- | --- | --- | --- | > | To Insurance (30,000 − 7,500) | 22,500 | By Gross Profit b/d | 69,000 | > | To Salaries | 10,000 | By Interest received | 3,000 | > | To Export duty | 5,000 | | | > | To Interest on Bank Loan (2,000 + 1,000 o/s) | 3,000 | | | > | To Depreciation — Land & Building | 9,000 | | | > | To Depreciation — Furniture | 4,000 | | | > | To Bad debts | 2,000 | | | > | To R.D.D. (new) | 2,500 | | | > | To Net Profit c/d: | | | | > | Mama 7,000 · Kaka 7,000 | 14,000 | | | > | **Total** | **72,000** | **Total** | **72,000** | > > **Step 2 — Balance Sheet as on 31 March 2019** > > | Liabilities | Amount (₹) | Assets | Amount (₹) | > | --- | --- | --- | --- | > | Capital A/cs: | | Land & Building 1,00,000 − dep. 9,000 | 91,000 | …

Mama and Kaka are partners in partnership firm sharing profits and losses equally. You are required to prepare

Question 27 of 42

Mama and Kaka are partners in partnership firm sharing profits and losses equally. You are required to prepare Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as on that date:

Trial Balance as on 31st March, 2019
Debit Balances	Amount (₹)	Cebit Balances	Amount (₹)
Insurance	30,000	Capital Accounts:
Land and Building ((Addition of ₹ 40,000 wef. 1st July, 2018))	1,00,000	Mama	1,00,000
Salaries	10,000	Kaka	1,00,000
Export duty	5,000	10% Bank Loan (taken on1st Oct. 2018)	60,000
Interest	2,000	Interest	3,000
Furniture	80,000	Bills payable	16,000
Debtors	52,000		-
	2,79,000		2,79,000
Adjustment:
Gross profit amounted to ₹ 69,000.
Prepaid insurance ₹ 7,500.
Depreciate Land and Building at 10% p.a. and Furniture 5% p.a.
Write ₹ 2,000 for bad debts and maintain R.D.D. at 5% on sundry debtors.
Closing stock is valued at ₹ 69,000.

Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2024Subjective· 12mImportance★★★★★

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Gross Profit ₹69,000 plus interest received ₹3,000 gives ₹72,000 of income. Indirect expenses total ₹58,000 after adjustments (insurance net of prepaid ₹22,500, salaries ₹10,000, export duty ₹5,000, loan interest ₹3,000, depreciation L&B ₹9,000 and furniture ₹4,000, bad debts ₹2,000, new R.D.D. ₹2,500). Net Profit ₹14,000 is shared equally. The Balance Sheet totals ₹2,91,000.

Working notes

Insurance = 30,000 − prepaid 7,500 = 22,500
Interest on 10% Bank Loan (₹60,000, taken 1 Oct 2018 → 6 months) = 60,000 × 10% × 6/12 = 3,000; only ₹2,000 paid, so ₹1,000 outstanding
Depreciation on Land & Building: old ₹60,000 for full year × 10% = 6,000; addition ₹40,000 from 1 July 2018 (9 months) × 10% × 9/12 = 3,000 → total 9,000
Depreciation on Furniture = 80,000 × 5% = 4,000
Debtors 52,000 − further bad debts 2,000 = 50,000; new R.D.D. 5% = 2,500

Step 1 — Profit and Loss Account (for the year ended 31 March 2019)

Dr. Particulars	Amount (₹)	Cr. Particulars	Amount (₹)
To Insurance (30,000 − 7,500)	22,500	By Gross Profit b/d	69,000
To Salaries	10,000	By Interest received	3,000
To Export duty	5,000
To Interest on Bank Loan (2,000 + 1,000 o/s)	3,000
To Depreciation — Land & Building	9,000
To Depreciation — Furniture	4,000
To Bad debts	2,000
To R.D.D. (new)	2,500
To Net Profit c/d:
Mama 7,000 · Kaka 7,000	14,000
Total	72,000	Total	72,000

Step 2 — Balance Sheet as on 31 March 2019

Liabilities	Amount (₹)	Assets	Amount (₹)
Capital A/cs:		Land & Building 1,00,000 − dep. 9,000	91,000

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Expenses paid before their due date are called Prepaid Expenses (expenses paid in advance).

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Sales	Purchases	Gross Profit
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The missing word is Direct.

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Expense type	Where recorded	Examples
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Item Nature Recorded in
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Item	Nature	Recorded in
Wages account	Direct expense	Trading A/c
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Import duty account	Direct expense	Trading A/c
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The odd one is the Rent account.

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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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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.

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

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Item Nature Balance Sheet side
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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
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$Q. Write the word/phrase/term, which can substitute the following sentence. Credit balance of Profit and Loss Account.$
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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.

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$Q. Calculate 12.5% P.A. depreciation on Furniture: on ₹ 2,20,000 for 1 year on ₹ 10,000 for 6 months$
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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.

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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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