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Numerical Questions · Q4
Q.

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.

ParticularsAmount ₹ParticularsAmount ₹
Opening stock25,000Sales7,00,000
Furniture16,000Creditors72,500
Purchases5,55,300Bank Overdraft50,000
Carriage Inwards4,700Provision for bad and doubtful debts2,100
Bad debts1,800Discount500
Wages52,000Capital2,00,000
Debtors80,000Purchases Return20,000
Sales Return15,000
Rent24,000
Miscellaneous Expenses3,400
Salaries68,000
Cash8,900
Drawings14,000
Buildings1,60,000
Advertising10,000
Interest on Bank Overdraft7,000
10,45,10010,45,100

Adjustments

  1. Closing stock valued at ₹ 36,000.
  2. Private purchases amounting to ₹ 5000 debited to purchases account.
  3. Provision for doubtful debts @ 5% on debtors.
  4. Sign board costing ₹ 4,000 includes in advertising.
  5. Depreciate furniture by 10%.
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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

ParticularsAmount (₹)ParticularsAmount (₹)
To Opening Stock25,000By Sales 7,00,000
To Purchases 5,55,300  Less: Sales return 15,0006,85,000
  Less: Private purchases 5,000By Closing Stock36,000
  Less: Purchases return 20,0005,30,300
To Carriage Inwards4,700
To Wages52,000
To Gross Profit c/d1,09,000
Total7,21,000Total7,21,000

Profit & Loss Account for the year ended 31 March 2017

ParticularsAmount (₹)ParticularsAmount (₹)
To Bad debts & Provision for D/D (WN 2)3,700By Gross Profit b/d1,09,000
To Rent24,000By Discount received500
To Miscellaneous Expenses3,400By Net Loss (to Capital)4,600
To Salaries68,000
To Advertising 10,000 − Sign board 4,0006,000
To Interest on Bank Overdraft7,000
To Depreciation on Furniture (WN 1)2,000
Total1,14,100Total1,14,100

Balance Sheet as at 31 March 2017

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital 2,00,000Buildings1,60,000
  Less: Drawings 14,000Furniture 16,000 + Sign board 4,000

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