From the following Trial Balance you are required to prepare trading and profit and loss account for the year ending March 31, 2017 and Balance Sheet on that date.
| Particulars | Amount ₹ | Particulars | Amount ₹ |
|---|---|---|---|
| Opening stock | 25,000 | Sales | 7,00,000 |
| Furniture | 16,000 | Creditors | 72,500 |
| Purchases | 5,55,300 | Bank Overdraft | 50,000 |
| Carriage Inwards | 4,700 | Provision for bad and doubtful debts | 2,100 |
| Bad debts | 1,800 | Discount | 500 |
| Wages | 52,000 | Capital | 2,00,000 |
| Debtors | 80,000 | Purchases Return | 20,000 |
| Sales Return | 15,000 | ||
| Rent | 24,000 | ||
| Miscellaneous Expenses | 3,400 | ||
| Salaries | 68,000 | ||
| Cash | 8,900 | ||
| Drawings | 14,000 | ||
| Buildings | 1,60,000 | ||
| Advertising | 10,000 | ||
| Interest on Bank Overdraft | 7,000 | ||
| 10,45,100 | 10,45,100 |
Adjustments
- Closing stock valued at ₹ 36,000.
- Private purchases amounting to ₹ 5000 debited to purchases account.
- Provision for doubtful debts @ 5% on debtors.
- Sign board costing ₹ 4,000 includes in advertising.
- Depreciate furniture by 10%.
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Start your 14-day free trial to unlock the full solution →Two capital/personal adjustments matter: private purchases ₹5,000 are drawings (remove from purchases), and the ₹4,000 sign board hidden in advertising is a fixed asset (remove from advertising, add to furniture, then depreciate). Gross Profit ₹1,09,000, Net Loss ₹4,600, Balance Sheet total ₹2,98,900.
Concept & treatment. Goods bought for private use wrongly debited to Purchases must be credited to Purchases and treated as Drawings (reduce Capital). Capital expenditure (the sign board) wrongly booked as advertising (revenue) is removed from advertising and capitalised with furniture, so only ₹6,000 advertising is an expense; the ₹20,000 furniture (16,000 + 4,000) is then depreciated 10% = ₹2,000. The provision for doubtful debts is raised to 5% of debtors; the old provision is set off.
Trading Account for the year ended 31 March 2017
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Opening Stock | 25,000 | By Sales 7,00,000 | |
| To Purchases 5,55,300 | Less: Sales return 15,000 | 6,85,000 | |
| Less: Private purchases 5,000 | By Closing Stock | 36,000 | |
| Less: Purchases return 20,000 | 5,30,300 | ||
| To Carriage Inwards | 4,700 | ||
| To Wages | 52,000 | ||
| To Gross Profit c/d | 1,09,000 | ||
| Total | 7,21,000 | Total | 7,21,000 |
Profit & Loss Account for the year ended 31 March 2017
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Bad debts & Provision for D/D (WN 2) | 3,700 | By Gross Profit b/d | 1,09,000 |
| To Rent | 24,000 | By Discount received | 500 |
| To Miscellaneous Expenses | 3,400 | By Net Loss (to Capital) | 4,600 |
| To Salaries | 68,000 | ||
| To Advertising 10,000 − Sign board 4,000 | 6,000 | ||
| To Interest on Bank Overdraft | 7,000 | ||
| To Depreciation on Furniture (WN 1) | 2,000 | ||
| Total | 1,14,100 | Total | 1,14,100 |
Balance Sheet as at 31 March 2017
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capital 2,00,000 | Buildings | 1,60,000 | |
| Less: Drawings 14,000 | Furniture 16,000 + Sign board 4,000 |
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