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Q.

From the following Ledger balances of Mr. Akash Singh, prepare Trading and Profit and Loss A/c for the year ended on 31st March, 2017 and Balance Sheet as on that date after making the necessary adjustments:

Particulars₹Particulars₹
Trade Expenses800Purchase82,000
Freight Duty2,000Stock (1st April, 2016)15,000
Carriage Outward500Plant and Machinery (1st April, 2016)20,000
Sundry Debtors20,600Plant and Machinery (Additions on 1st October, 2016)5,000
Furniture and Fixtures5,000Drawings6,000
Returns Inward2,000Capital80,000
Printing and Stationery400Provision for Doubtful Debts800
Rent, Rates and Taxes4,600Rent for Premises sublet1,600
Sundry Creditors10,000Insurance Charges700
Sales1,20,000Salaries and Wages21,300
Returns Outward1,000Cash in Hand6,200
Postage and Telegram800
Cash at Bank20,500

Adjustments/Other Information:

  1. Closing stock on 31st March, 2017 was ₹14,000.
  2. Write off ₹600 as bad debts.
  3. Provision for Doubtful Debts is to be maintained @ 5% on Sundry Debtors.
  4. Provision for Depreciation on Furniture and Fixtures @ 5% p.a. and on Plant and Machinery @ 20% p.a.
  5. Insurance prepaid was ₹100.
  6. A fire occurred in the godown and stock of the value of ₹5,000 was destroyed. Insurance Company admitted the claim of ₹3,000 only.
West Bengal WbchseWBCHSE West Bengal Class-XI Commerce Board 2018Subjective· 10mImportance★★★★★est
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Gross Profit = Rs 39,000, Net Profit = Rs 4,050, and the Balance Sheet totals Rs 88,050.

Working notes:

  • WN1 Debtors & provision: Debtors 20,600 - bad debts 600 = 20,000; new provision @ 5% = 1,000; charge to P&L = bad debts 600 + new provision 1,000 - old provision 800 = 800. Debtors in Balance Sheet = 20,000 - 1,000 = 19,000.
  • WN2 Depreciation: Furniture 5,000 x 5% = 250; Plant & Machinery 20,000 x 20% = 4,000, plus additions 5,000 x 20% x 6/12 = 500, total 4,500. Furniture carried at 4,750; Plant & Machinery at 25,000 - 4,500 = 20,500.
  • WN3 Insurance: 700 - 100 prepaid = 600 charged; prepaid 100 is an asset.
  • WN4 Fire: stock lost Rs 5,000 credited to Trading A/c; claim admitted Rs 3,000 is an asset (insurance claim receivable); uninsured Rs 2,000 charged to P&L.
  • 'Salaries and Wages' is an indirect expense (P&L); 'Freight Duty' is a direct expense (Trading).

Trading and Profit & Loss Account for the year ended 31 March 2017:

ParticularsRsParticularsRs
To Opening Stock15,000By Sales 1,20,000 less Returns Inward 2,0001,18,000
To Purchases 82,000 less Returns Outward 1,00081,000By Closing Stock14,000
To Freight Duty2,000By Loss of Stock by Fire (cost)5,000
To Gross Profit c/d39,000
1,37,0001,37,000
To Trade Expenses800By Gross Profit b/d39,000
To Carriage Outward500By Rent (premises sublet)1,600
To Printing & Stationery400
To Rent, Rates & Taxes4,600
To Postage & Telegram800
To Insurance (700 - 100 prepaid)600
To Salaries & Wages21,300
To Depreciation (Furniture 250 + Plant & Mach. 4,500)4,750
To Provision for Doubtful Debts (600 + 1,000 - 800)800

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