From the following Trial Balance of a trader as on 31st March 2024, prepare the Trading and Profit and Loss Account for the year ended 31st March 2024 and the Balance Sheet as on that date, after giving effect to the adjustments given below.
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Opening Stock | 30,000 | |
| Purchases / Sales | 2,50,000 | 4,20,000 |
| Carriage Inward | 5,000 | |
| Salaries | 40,000 | |
| Sundry Debtors | 1,00,000 | |
| Provision for Doubtful Debts | 4,000 | |
| Machinery | 1,50,000 | |
| Cash at Bank | 46,000 | |
| Drawings | 15,000 | |
| Interest on Investments Received | 3,000 | |
| Commission Received | 12,000 | |
| Sundry Creditors | 60,000 | |
| Capital | 1,37,000 | |
| Total | 6,36,000 | 6,36,000 |
Adjustments: (1) Closing Stock ₹38,000. (2) Write off further bad debts ₹2,000, and maintain a Provision for Doubtful Debts at 5% on the remaining debtors. (3) ₹2,000 of the Commission Received relates to next year. (4) Interest accrued but not received on investments, ₹1,500. (5) Provide Interest on Capital at 5% per annum. (6) Provide Interest on Drawings, ₹500.
You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.
Start your 14-day free trial to unlock the full solution →Step 1 — Trading Account:
| Dr. Trading Account for the year ended 31.03.2024 | ₹ | Cr. | ₹ |
|---|---|---|---|
| To Opening Stock | 30,000 | By Sales | 4,20,000 |
| To Purchases | 2,50,000 | By Closing Stock | 38,000 |
| To Carriage Inward | 5,000 | ||
| To Gross Profit c/d | 1,73,000 | ||
| Total | 4,58,000 | Total | 4,58,000 |
Gross Profit = 4,20,000 + 38,000 − 30,000 − 2,50,000 − 5,000 = ₹1,73,000.
Step 2 — Bad Debts and Provision. Remaining Debtors = 1,00,000 − 2,000 = 98,000. New Provision = 98,000 × 5% = 4,900. Amount debited to P&L = Further Bad Debts (2,000) + New Provision (4,900) − Old Provision (4,000) = ₹2,900.
Step 3 — Interest on Capital. 5% of ₹1,37,000 = ₹6,850.
Step 4 — Profit and Loss Account:
| Dr. Profit and Loss Account for the year ended 31.03.2024 | ₹ | Cr. | ₹ |
|---|---|---|---|
| To Salaries | 40,000 | By Gross Profit b/d | 1,73,000 |
| To Bad Debts and Provision (further ₹2,000 + increase in provision ₹900) | 2,900 | By Interest on Investments (3,000 + 1,500 accrued) | 4,500 |
| To Interest on Capital | 6,850 | By Commission Received (12,000 − 2,000 advance) | 10,000 |
| To Net Profit (to Capital A/c) | 1,38,250 | By Interest on Drawings | 500 |
| Total | 1,88,000 | Total | 1,88,000 |
Net Profit = (1,73,000 + 4,500 + 10,000 + 500) − (40,000 + 2,900 + 6,850) = 1,88,000 − 49,750 = ₹1,38,250.
Step 5 — Capital Account reconciliation (the key step for this question). Closing Capital = Opening Capital + Interest on Capital (direct credit) + Net Profit − Drawings − Interest on Drawings (direct debit) = 1,37,000 + 6,850 + 1,38,250 − 15,000 − 500 = ₹2,66,600.
Step 6 — Balance Sheet as on 31.03.2024:
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital | 1,37,000 | Machinery | 1,50,000 |
Unlock everything free for 14 days
- Full step-by-step solutions
- Concept-first explanations
- Methods, shortcuts & mistakes
- PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.