(a) Given below are the balances extracted from the books of Nagarajan as on 31st March, 2016.
| Particulars | Rs. | Particulars | Rs. |
|---|---|---|---|
| Purchases | 10,000 | Sales | 15,100 |
| Wages | 600 | Commission received | 1,900 |
| Freight inwards | 750 | Rent received | 600 |
| Advertisement | 500 | Creditors | 2,400 |
| Carriage outwards | 400 | Capital | 5,000 |
| Cash | 1,200 | ||
| Machinery | 8,000 | ||
| Debtors | 2,250 | ||
| Bills Receivable | 300 | ||
| Stock 1st Jan. 2016 | 1,000 | ||
| 25,000 | 25,000 |
Prepare the Trading and Profit and Loss account for the year ended 31st March, 2016 and the Balance sheet as on that date after adjusting the following :
- Commission received in advance Rs. 400
- Advertisement paid in advance Rs. 150
- Wages outstanding Rs. 200
- Closing stock as on 31.03.2016, Rs. 2,100 OR
(b) Classify the following items into Capital or Revenue.
(i) Audit fees paid Rs. 10,000
(ii) Labour welfare expenses Rs. 5,000
(iii) Rs. 2,000 paid for servicing the company vehicle
(iv) Repair to Machinery purchased in second hand Rs. 3,000
(v) Rent paid for the factory Rs. 12,000
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Start your 14-day free trial to unlock the full solution →(a) Trading A/c gives Gross Profit Rs. 4,650; P&L A/c gives Net Profit Rs. 6,000; Balance Sheet totals Rs. 14,000 on each side after the four adjustments. (b) Only the repair to newly bought second-hand machinery is capital; the rest are revenue.
(a) Trading and Profit & Loss Account of Nagarajan for the year ended 31 March 2016
| Dr — Trading A/c | Rs. | Cr — Trading A/c | Rs. |
|---|---|---|---|
| To Opening Stock | 1,000 | By Sales | 15,100 |
| To Purchases | 10,000 | By Closing Stock | 2,100 |
| To Wages (600 + 200 outstanding) | 800 | ||
| To Freight Inwards | 750 | ||
| To Gross Profit c/d | 4,650 | ||
| Total | 17,200 | Total | 17,200 |
| Dr — Profit & Loss A/c | Rs. | Cr — Profit & Loss A/c | Rs. |
|---|---|---|---|
| To Advertisement (500 − 150 prepaid) | 350 | By Gross Profit b/d | 4,650 |
| To Carriage Outwards | 400 | By Commission Received (1,900 − 400 advance) | 1,500 |
| To Net Profit (to Capital) | 6,000 | By Rent Received | 600 |
| Total | 6,750 | Total | 6,750 |
Balance Sheet of Nagarajan as on 31 March 2016
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Capital 5,000 + Net Profit 6,000 | 11,000 | Machinery | 8,000 |
| Creditors | 2,400 | Debtors | 2,250 |
| Commission Received in Advance | 400 | Bills Receivable | 300 |
| Outstanding Wages | 200 | Cash | 1,200 |
| Closing Stock | 2,100 | ||
| Prepaid Advertisement | 150 | ||
| Total | 14,000 | Total | 14,000 |
(b) Capital or Revenue classification
| Item | Classification | Reason |
| --- | --- | --- | …
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