Accountancy · Ch 13 — Final Accounts of Sole Proprietors – II
Worked Illustration — Final Accounts with Multiple Adjustments
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Worked Illustration — Final Accounts with Multiple Adjustments
Worked Illustration
From the following Trial Balance of a sole 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 listed below.
| Trial Balance as on 31.03.2024 | Debit (₹) | Credit (₹) |
|---|---|---|
| Opening Stock | 40,000 | |
| Purchases / Sales | 3,00,000 | 5,00,000 |
| Wages | 15,000 | |
| Salaries | 50,000 | |
| Rent | 20,000 | |
| Insurance | 6,000 | |
| Sundry Debtors / Sundry Creditors | 80,000 | 50,000 |
| Furniture | 60,000 | |
| Cash at Bank | 39,000 | |
| Drawings | 20,000 | |
| Capital | 80,000 | |
| Total | 6,30,000 | 6,30,000 |
Adjustments:
- Closing Stock as on 31.03.2024 was valued at ₹45,000.
- Salaries outstanding for the year, ₹5,000.
- Insurance paid includes ₹1,000 relating to the next accounting year (prepaid).
- Depreciate Furniture at 10% per annum.
Step 1 — Trading Account:
| Dr. Trading Account for the year ended 31.03.2024 | ₹ | Cr. | ₹ |
|---|---|---|---|
| To Opening Stock | 40,000 | By Sales | 5,00,000 |
| To Purchases | 3,00,000 | By Closing Stock | 45,000 |
| To Wages | 15,000 | ||
| To Gross Profit c/d | 1,90,000 | ||
| Total | 5,45,000 | Total | 5,45,000 |
Gross Profit = 5,00,000 + 45,000 − 40,000 − 3,00,000 − 15,000 = ₹1,90,000.
Step 2 — Profit and Loss Account:
| Dr. Profit and Loss Account for the year ended 31.03.2024 | ₹ | Cr. | ₹ |
|---|---|---|---|
| To Salaries | 50,000 | By Gross Profit b/d | 1,90,000 |
| Add: Outstanding | 5,000 | ||
| 55,000 | |||
| To Rent | 20,000 | ||
| To Insurance | 6,000 | ||
| Less: Prepaid | (1,000) | ||
| 5,000 | |||
| To Depreciation on Furniture (10% of ₹60,000) | 6,000 | ||
| To Net Profit (to Capital A/c) | 1,04,000 | ||
| Total | 1,90,000 | Total | 1,90,000 |
Net Profit = 1,90,000 − 55,000 − 20,000 − 5,000 − 6,000 = ₹1,04,000.
Step 3 — Balance Sheet as on 31.03.2024:
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Capital | 80,000 | Furniture | 60,000 |
| Add: Net Profit | 1,04,000 | Less: Depreciation | (6,000) |
| 1,84,000 | 54,000 |