Sanjeev Varshney Classes

1/47, Lalita park, Near Gurudwara, Laxmi Nagar, Delhi – 92

Visit us – www.sanjeevvarshneyclasses.com
Ph. Nos. 9910205262, 9810374305

FINANCIAL STATEMENTS
PROBLEM 1
From the following particulars extracted from the books of Mr. G, prepare Trading, Profit and Loss Account and
Balance Sheet as on 31st March, 2018 after making the necessary adjustments:
Particulars Amount (Rs.) Particulars Amount(Rs.)
Opening Capital Account 54,050 Sundry Debtors 12,000
Stock 23,400 Sundry Creditors 7,400
Sales 1,44,800 Loan from Dena Bank Ltd. @ 12% 10,000
Sales Returns 4,300 Interest paid 450
Purchases 1,21,550 Printing and Stationery 1,700
Purchases Returns 2,900 Advertisement 5,600
Carriage Inwards 9,300 Interest received 725
Rent 2,850 Audit fees 350
Salaries 4,650 Fire Insurance Premium 300
Cash with Traders Bank Ltd. 4,000 Travelling Expenses 1,165
Discounts received 1,495 Postage and Telegrams 435
Investments @ 5% as on 1.4.2017 2,500 Cash on hand 190
Furniture (as on 1.4.2017) 900 Deposits @ 10% as on 1.4.2017 (Dr.) 15,000
Discount allowed 3,770 Drawings 5,000
General expenses 1,960
Adjustments:
(a) Value of Stock as on 31st March, 2018 is Rs.39,300. This includes goods returned by customers on 31st March,
2018 to the value of Rs.1,500 of which no entry has been passed in the books.
(b) Purchases include furniture purchased on 1 st January, 2018 for Rs.1,000.
(c) Depreciation should be provided on furniture @ 13% per annum.
(d) The loan account from Dena Bank in the books of Ganguli appears as follows:
31.03.2018 To Balance c/d 10,000 01.04.2017 By Balance b/d 5,000
31.03.2018 By Bank A/c 5,000
10,000 10,000
(e) Sundry Debtors included Rs.2,000 due from Mr. Robert and Sundry Creditors included Rs.1,000 due to him.
(f) Interest paid included Rs.300 paid to Dena Bank.
(g) Interest received represents `100 from the Sundry Debtors and the balance on investments and deposits.
(h) Provide for interest payable to Dena Bank for interest receivable on investments and deposits.
(i) Provide provision for doubtful debts at 5% on the balance under “Sundry Debtors”. No provision need be created
for the deposits.

SOLUTION
TRADING AND PROFIT AND LOSS ACCOUNT
Dr. FOR THE YEAR ENDED 31ST MARCH, 2018 Cr.
Particulars ` Particulars `
To Opening Stock 23,400 By Sales 1.44,800
To Purchases 1,21,550 Less: Returns
Less; Furniture 1,000 (` 4,300 + ` 1,500) 5,800 1,39,000

Less: Returns 2,900 1,17,650 By Closing Stock 39,300

To Carriage Inwards 9,300
To Gross Profit c/d 27,950
1,78,300 1,78,300
To Rent 2,850 By Gross Profit b/d 27,950
To Salaries paid 4,650 By Interest Received 725
To Interest paid 450 Add: Interest accrued 1,000 1,725
Add: outstanding 300 750 By Discount Received 1,495
To Printing & Stationery 1,700
To Advertisements 5,600
To Discount allowed 3,770
To General Expenses 1,960
To Audit Fees 350
To Fire Insurance Premium 300
To Travelling Expenses 1,165
To Postage & Telegrams 435
To Dep. on Furniture [ Rs.900 ×
13% × 12/12] + [ Rs.1,000 x 13%
x 3/12]
(On Rs.900 for 12 months, 150

On Rs.1,000 for 3 months)

To Provision for Doubtful Debts 475
To Net Profit transferred to Capital A/c 7,015
31,170 31,170

BALANCE SHEET AS AT 31 ST MARCH, 2018

Liabilities ` Liabilities `
Capital Account: Furniture:
Opening Balance 54,050 Opening Balance 900
Add: Net Profit 7,015 Add: Purchases 1,000
Less: Drawings 5,000 56,065 Less: Depreciation 150 1,750
Loan from Dena Bank: Investments: 2,500
Opening Balance 5,000 Closing stock 39,300
Add: Addition 5,000 10,000 Sundry Debtors 12,000
O/S Interest on Bank Loan Less: Returns not entered 1,500
Sundry Creditors 7,400 300 Less: Adjusted in creditors 1,000
Less: Adjusted in Debtors 1,000 6,400 9,500
Less: Provision 475 9,025
Interest Receivable 1,000
Deposit 15,000
Cash at Bank 4,000
Cash in hand 190
72,765 72,765

PROBLEM 2
From the following Trial balance of Hari and additional information, prepare Trading and Profit & Loss Account
for the year ended 31st March, 2018 and a Balance Sheet as on that date:
Particulars Dr. (Rs.) Cr. (Rs.) Dr. (Rs.) Cr. (Rs.)
Capital & Drawing 24,000 1,00,000 Bad Debt Written off 7,000 —
Furniture 20,000 — Provision for Doubtful Debts — 6,000
Purchases & Purchase 1,50,000 5,000 Printing & Stationery 8,000 —
Returns
Debtors & Creditors 2,00,000 1,20,000 Insurance 12,000 —
Interest Earned — 4,000 Opening Stock 50,000 —
Salaries 30,000 — Office Expenses 12,000 —
Sales & Sales Return 10,000 3,21,000 Provision for Depreciation — 2,000
Wages 20,000 —
Rent 15,000 —
Additional Information:
(a) Depreciate Furniture by 10% on original cost;
(b) A provision for Doubtful Debts is to be created to the extent of 5% on Sundry Debtors;
(c) Salaries for the month of March, 2018 amounting to Rs.3,000 were unpaid which must be provided for.
However, salaries included Rs.2,000 paid in advance;
(d) Insurance amounting to Rs.2,000 is prepaid;
(e) Provide for outstanding office expenses Rs.8,000;
(f) Stock used for private purpose Rs.6,000;
(g) Closing Stock 160,000.

SOLUTION:
TRADING AND PROFIT AND LOSS ACCOUNT OF HARI
Dr. FOR THE YEAR ENDED 31ST MARCH, 2018 Cr.
Particulars ` Particulars `
To Opening Stock 50,000 By Sales 3,21,000
To Purchases 1,50,000 Less: Returns 10,000
Less: Returns 5,000 3,11,000
Less: Drawings 6,000 1,39,000 By Closing stock 60,000
To Wages 20,000
To Gross Profit c/d 1,62,000
3,71,000 3,71,000
To Salaries 30,000 By Gross Profit b/d 1,62,000
Add: Outstanding 3,000 By Interest 4,0 00
Less: Prepaid 2,000 31,000
To Office expenses 12,000
Add: Outstanding 8,000 20,000
To Rent 15,000
To Insurance 12,000
Less: Prepaid 2,000 10,000
To Printing & Stationery 8,000
To Bad debts 7,000
To Provision for Doubtful 10,000
debts
Less: Existing Provision 6,000 4,000
To Depreciation on Furniture 2,000
To Net Profit t/f to Capital A/c 69,000
1,66,000 1,66,000

BALANCE SHEET AS AT 31ST MARCH, 2018

Liabilities ` Assets `
Capital Account: Furniture 20,000
Opening Balance 1,00,000 Less: Depreciation 4,000 16,000
Add: Net Profit 69,000 Stock 60,000
Less: Drawings 24,000 Debtors 2,00,000
Less: Goods for personal 6,000 1,39,000 Less: Provision 10,000 1,90,000
use
Creditors 1,20,000 Prepaid Salaries 2,000
O/s Salaries 3,000 Prepaid Insurance 2,000
O/s Office Expenses 8,000
2,70,000 2,70,000

PROBLEM 3
From the following particulars prepare Trading and Profit and Loss Account of Mr. R for the year ended 31.3.2018
and a Balance Sheet as on 31.3.2018.
Particulars Debit Balance Credit Balance
` `
Building 5,00,000
Machineries 2,00,000
Furniture 1,00,000
Cash & Bank 1,00,000
15% p.a. Loan obtained by Mr. R on 1.4.2017 on mortgage of his building 3,00,000
Capital 5,20,000
Sundry Debtors/Sundry Creditors 5,00,000 4,00,000
Opening Stock 1,20,000
Purchases/Sales 25,00,000 32,20,000
Sales returns/Purchases returns 1,20,000 1,00,000
Rent 60,000
Establishment expenses 1,80,000
Electricity charges 15,000
Telephone charges 10,000
Commission on sales 30,000
Insurance Premium 10,000
Bad debts 20,000
Bills Receivable 75,000
45,40,000 45,40,000

You are required to provide for depreciation on building at 5% p.a.; on machinery at 25% p.a.; on furniture at 10%
p.a. Provision for doubtful debts is to be made at 5% on sundry debtors. Mr. R’s manager is entitled to a
commission of 10% on the net profit after charging his commission. Closing stock was not taken on 31st March
but only on 7th April. Following transactions had taken place during the period from 1st April to 7th April. Sales
Rs.2,50,000, Purchases Rs.1,50,000, Stock on 7th April, was Rs.1,80,000 and the rate of gross profit on sales after
was 20%. Insurance premium mentioned in the trial balance was in respect of building and machineries. Interest
on mortgage loan to be provided up to 31.3.2018.

SOLUTION:
TRADING AND PROFIT AND LOSS ACCOUNT
DR. FOR THE YEAR ENDED 31ST MARCH, 2018 CR.
Particulars ` Particulars `
To Opening Stock 1,20,000 By Sales 32,20,000
To Purchases 25,00,000 Less: Returns 1,20,000 31,00,000
Less: Returns 1,00,000 24,00,000 By Closing Stock 2,30,000
To Gross Profit c/d 8,10,000
33,30,000 33,30,000
To Rent 60,000 By Gross Profit b/d 8,10,000
To Establishment Expenses 1,80,000
To Electricity Charges 15,000
To Telephone Charges 10,000
To Commission on Sales 30,000
To Insurance Premium 10,000
To Bad Debts 20,000
To Interest on Loan 45,000
To Depreciation on Building 25,000
To Depreciation on Machinery 50,000
To Depreciation on Furniture 10,000
To Provision for Doubtful Debts 25,000
To Manager's Commission 30,000
To Net Profit t/f to Capital A/c 3,00,000
8,10,000 8,10,000

BALANCE SHEET OF MR. R AS AT 31ST MARCH, 2018

Liabilities ` Assets `
O/S Manager’s Commission 30,000 Cash & Bank 1,00,000
Sundry Creditors 4,00,000 Sundry Debtors 5,00,000
18% p.a. Loan (on mortgage Less: Provision 25,000 4,75,000
of Building) 3,00,000 Bills Receivable 75,000
Add: Interest 45,000 3,45,000 Closing Stock 2,30,000
Capital Account: Furniture 1,00,000
Opening Balance 5,20,000 Less: Deprecation 10,000 90,000
Add: Net Profit 3,00,000 8,20,000 Machineries 2,00,000
Less: Depreciation 50,000 1,50,000
Buildings 5,00,000
Less: Depreciation 25,000 4,75,000
15,95,000 15,95,000

Working Note: Calculation of Closing Stock `

th
A. Stock as on 7 April Rs.1,80,000
B. Add: Cost of Goods sold (80% of Rs.2,50,000) Rs.2,00,000
C. Less: Cost of Purchases Rs.1,50,000

Rs.2,30,000
PROBLEM 4
From the following trial balance and information, prepare Trading and Profit and Loss Account of Mr Rishabh for
the year ended 31st March, 2018 and a Balance Sheet as on that date:
Particulars Debit Credit
Balance ` Balance `
Capital & Drawings 12,000 1,00,000
Land and Buildings 90,000 —
Plant and Machinery 20,000 —
Furniture 5,000 —
Sales & Return Inward 5,000 1,40,000
Debtors & Creditors 18,400 12,000
Loan from Gajanand on 1.7.2017 @ 6% p.a. — 30,000
Purchases & Return Outward 80,000 4,000
Carriage 10,000 —
Sundry Expenses 600 —
Printing and Stationery 500 —
Insurance Expenses 1,000 —
Provision for Doubtful Debts — 1,000
Provision for Discount on Debtors — 380
Bad Debts 400 —
Profit of Textile Deptt. — 10,000
Stock of General Goods on 1.4.2017 21,300 —
Salaries and Wages 18,500 —
Trade Expenses 800 —
Stock of Textile Goods on 31.3.2018 8,000 —
Cash & Bank 5,880 —
2,97,380 2,97,380

Information:
(a) Stock of General goods on 31.3.2018 valued at Rs.27,300.
(b) Fire occurred on 23rd March, 2018 and Rs.10,000 worth of general goods were destroyed. The Insurance
Company accepted claim for Rs.6,000 only and paid the claim money on 10th April, 2018.
(c) Bad Debts amounting to Rs.400 are to be written off. Provision for Bad and Doubtful debts is to be made
at 5% and for discount at 2% on debtors.
(d) Received Rs.6,000 worth of goods on 27th March, 2018 but the invoice of purchase was not recorded in
Purchases Book.
(e) Rishabh took away goods worth Rs.2,000 for personal use but no record was made thereof.
(f) Charge depreciation at 2% on Land and Buildings, 20% on Plant and Machinery, and 5% on Furniture.
(g) Insurance prepaid amounts to Rs.200.

SOLUTION:
TRADING AND PROFIT AND LOSS ACCOUNT
DR. FOR THE YEAR ENDED 31ST MARCH, 2018 CR.
Particulars ` Particulars `
To Opening Stock 21,300 By Sales 1,40,000
To Purchases 80,000 Less: Returns 5,000 1,35,000
Less: Returns 4,000 By Loss by Fire A/c 10,000
Add: Omitted Purchases 6,000 By Closing Stock 27,300
Less: Drawings 2,000 80,000
To Carriage 10,000
To Gross Profit c/d 61,000
1,72,300 1,72,300
To Sundry Expenses 600 By Gross Profit b/d 61,000
To Printing & Stationery 500 By Profit of Textile Deptt. 10,000
To Insurance Expenses By Provision for Discount on 38
Paid 1,000 Debtors
Less: Prepaid 200 800
To Salaries & Wages 18,500
To Trade Expenses 800
To Depreciation on:
Land & Building 1,800
Plant & Machinery 4,000
Furniture 250
To Interest on Loan 1,350
[30,000 x 6% x 9/12]
To Bad Debts 400
Add: Additional 400
Add: New Provision 900
Less: Old Provision 1,000 700
To Loss by Fire A/c 4,000
To Net Profit t/f to Capital A/c 37,738
71,038 71,038

BALANCE SHEET AS AT 31ST MARCH, 2018

Liabilities ((Rs.) Assets (Rs.)
Creditors 12,000 Cash & Bank Debtors 18,400 5,880
Add: Omitted Purchases 6,000 18,000 Less: Additional Bad 400
Debts
Loan from Gajanand 18,000
Balance 30,000 Less: Provision for 900
Doubtful Debts
Add: Interest 1,350 31,350 17,100
Capital: Less: Provision for 342 16,758
Discount
Opening Balance 1,00,000 Stock of General Goods 27,300
Add: Net Profit 37,738 Stock of Textile Goods 8,000
Less: Drawings 12,000 Insurance Company 6,000
Less: Goods taken 2,000 1,23,738 Prepaid Insurance 200
Furniture 5,000
Less: Depreciation 250 4,750
Plant & Machinery 20,000
Less: Depreciation 4,000 16,000
Land & Building 90,000
Less: Depreciation 1,800 88,200
1,73,088 1,73,088
 PROBLEM 5
The following in the Trial Balance of Shri Arihant as on 31st March 2018.
Particulars Debit Balance Credit Balance
Capital & Drawings 75,000 14,00,000
Opening Stock 80,000 —
Purchases & Sales 16,20,000 25,00,000
Freight on Purchases 15,000 —
Wages 1,10,000 —
Salaries 1,00,000 —
Travelling Expenses 23,000 —
Miscellaneous Expenses 35,000 —
Printing and Stationery 27,000 —
Advertisement Expenses 25,000 —
Postage and Telegrams 13,000 —
Discounts 7,600 14,500
Bad Debts written off (after adjusting recovery of bad debts of ` 6,000 written off 14,000 —
in 2016-2017)
Building 10,00,000 —
Machinery 75,000 —
Furniture 40,000 —
Debtors 1,50,000 —
Provision for Doubtful Debts — 19,000
Creditors — 1,60,0000
Investments (12% Purchased on 1st Jan. 2018) 6,00,000 —
Bank Balance 83,900 —
40,93,500 40,93,500

Adjustments:
(a) Closing Stock Rs. 2,25,000
(b) Goods worth Rs.5,000 were taken for personal use, but no entry was made in the books.
(c) Machinery worth Rs.35,000 purchased on 1st April 2015 was wrongly written off against Profit and Loss Account.
This asset is to be brought into account on 1st April 2017 taking depreciation at 10% per annum on straight line
basis upto 31st March 2017.
(d) Depreciate Building at 2-1/2% p.a., Machinery at 10% p.a. and Furniture at 10% p.a.
(e) Provision for Doubtful Debts should be 6% on Debtors.
(f) The Manager is entitled to a commission of 5% of Net Profits after charging his commission.

Required: Prepare Trading and Profit and Loss Account for the year ending 31st March 2018 and a Balance Sheet
as at that date.
SOLUTION:
TRADING AND PROFIT AND LOSS ACCOUNT
DR. FOR THE YEAR ENDED 31ST MARCH, 2018 CR.
Particulars ` Particulars `
To Opening Stock 80,000 By Sales 25,00,000
To Purchases 16,20,000 By Closing Stock 2,25,000
Less: Drawings 5,000 16,15,000
To Freight 15,000
To Wages 1,10,000
To Gross Profit c/d 9,05,000
27,25,000 27,25,000
To Depreciation: By Gross Profit b/d 9,05,000
Building 25,000 By Discount Received 14,500
Machinery 11,000 By Bad debts recovered 6,000
Furniture 4,000 40,000 By Interest Accrued on Investments 18,000
To Salaries 1,00,000
To Travelling Expenses 23,000
To Misc Expenses 35,000
To Printing & Stationary 27,000
To Advertisement Expenses 25,000
To Postage & Telegram 13,000
To Discount Allowed 7,600
To Provision for Doubtful debts 10,000
To Manager's Commission O/s 31,567
To Net Profit t/f to Capital A/c 6,31,333
9,43,500 9,43,500
BALANCE SHEET AS AT 31 ST MARCH, 2018
Liabilities (Rs.) Assets (Rs.)

Capital 14,00,000 Building 10,00,000

Less: Drawings (Cash) 75,000 Less: Depreciation 25,000 9,75,000
Less: Drawings (Goods) 5,000 Machinery 75,000
Add: NP 6,31,333 Add: P&L A/c 28,000
Add: Prior Period Item 28,000 19,79,333 Less: Depreciation 11,000 92,000
Creditors 1,60,000 Furnitures 40,000
O/s Manager's Commission 31,567 Less: Depreciation 4,000 36,000
Debtors 1,50,000
Less: Provision 9,000 1,41,000
Investments 6,00,000
Accrued Interest on Investment 18,000
Bank balance 83,900
Closing stock 2,25,000
21,70,900 21,70,900
Working Notes:
DR. (I)PROVISION FOR DOUBTFUL DEBTS ACCOUNT CR.
Particulars (Rs.) Particulars (Rs.)
To Bad Debts (14,000 + 6000) 20,000 By Balance b/d 19,000
To Balance c/d [6% on ` 1,50,000] 9,000 By Profit & Loss A/c (b.f) 10,000
29,000 29,000
(ii) Book Value of Machinery wrongly charged to P & L A/c
= Original Cost - Depreciation for 2 years = Rs.35,000 - (Rs.35, 000 x 10% x 2) = Rs.28,000
(iii) Calculation of Depreciation on Machinery
(a) On Machinery wrongly charged to P & L A/c (an SLM Basis) Rs.3,500
(b) On other Machinery [10% of Rs.75,000] Rs.7,500
Rs. 11,000
PROBLEM 6
The following is the Trial Balance of K on 31st March, 2018:
Particulars Debit Balance Credit Balance
Capital & Drawing 60,000 8,00,000
Opening Stock 75,000 —
Purchases & Sales 15,95,000 23,10,000
Freight on Purchases 25,000 —
Wages (11 months upto 29.2.2018) 66,000 —
Salaries 1,40,000 —
Postages, Telegrams, Telephones 12,000 —
Printing and Stationery 18,000 —
Miscellaneous Expenses 30,000 —
Investments 1,00,000 —
Discounts Received — 15,000
Debtors & Creditors 2,50,000 3,00,000
Bad Debts 15,000 —
Provision for Doubtful Debts — 8,000
Building 3,00,000 —
Machinery 5,00,000 —
Furniture 40,000 —
Commission on Sales 45,000 —
Interest on Investments — 12,000
Insurance (Year upto 31.7.2018) 24,000 —
Bank Balance 1,50,000 —
34,45,000 34,45,000
Adjustments:
(a) Closing Stock Rs.2,25,000.
(b) Machinery worth Rs.45,000 purchased on 1.10.2017 was shown as Purchases. Freight paid on the
Machinery was Rs.5,000, which is included in Freight on Purchases.
(c) Commission is payable at 2.5% on Sales.
(d) Investments were sold at 10% profit, but the entire sales proceeds have been taken as Sales.
(e) Write off Bad Debts Rs.10,000 and create a provision for Doubtful Debts at 5% of Debtors.
(f) Depreciate Building by 21/2% p.a. and Machinery and Furniture at 10% p.a.

Required: Prepare Trading and Profit and Loss Account for the year ending 31st March, 2018 and a Balance Sheet
as on that date.

SOLUTION:
TRADING AND PROFIT AND LOSS ACCOUNT
DR. FOR THE YEAR ENDED 31ST MARCH, 2018 CR.
Particulars ` Particulars `
To Opening Stock 75,000 By Sales 23,10,000
To Purchases 15,95,000 Less: Sale of
Less: Machinery 45,000 15,50,000 investments 1,10,000 22,00,000
To Freight on Purchases 25,000 By Closing Stock 2,25,000
Less: Freight on Machinery 5,000 20,000
ToWages 66,000
Add: O/s Wages 6,000 72,000
To Gross Profit t/f to P&L A/c 7,08,000
24,25,000 24,25,000
To Salaries 1,40,000 By Gross Profit b/d 7,08,000
To Postage, Telegrams & Telephones 12,000 By Discount 15,000
To Printing & Stationery 18,000 By Interest on investment 12,000
To Miscellaneous Expenses 30,000 By Profit on Sale of Investment 10,000
To Commission on Sale 45,000
Add: O/s 10,000 55,000
To Insurance
Paid 24,000
Less Pre paid 8,000 16,000
To Bad debts 15,000
Add: Additional Bad debt 10,000
Less: Old Provision 8,000
Add: New Provision 12,000 29,000
To Depreciation on Building 7,500
To Depreciation on Machinery 52,500
To Depreciation on Furniture 4,000
To Net Profit t/f to Capital A/c 3,81,000
7,45,000 7,45,000

BALANCE SHEET AS AT 31ST MARCH, 2018

Liabilities ` Assets `
Capital 8,00,000 Building 3,00,000
Less: Drawings 60,000 Less: Depreciation 7,500 2,92,500
Add: Net profit 3,81,000 11,21,000 Machinery 5,00,000
Outstanding Wages 6,000 Add: Purchases 45,000
Creditors 3,00,000 Add: Freight 5,000
Outstanding Commission 10,000 Less: Depreciation 52,500 4,97,500
Furniture 40,000
Less: Depreciation 4,000 36,000
Prepaid insurance 8,000
Bank Balance 1,50,000
Closing Stock 2,25,000
Debtors 2,50,000
Less: Add Bad debts 10,000
Less: Provision 12,000 2,28,000
14,37,000 14,37,000

PROBLEM 7
Mr. James submits you the following information for the year ended 31.3.2018:
Stock as on 1.4.2017 1,50,500
Purchases 4,37,000
Manufacturing Expenses 85,000
Expenses on Sales 33,000
Expenses on Administration 18,000
Financial Charges 6,000
Sales 6,25,000
During the year damaged goods costing Rs.12,000 were sold for Rs.5,000. Barring the above transaction Gross
Profit has been @ 20% on Sales.

Required: Compute the Net Profit of Mr. James for the year ended 31.3.2018.

SOLUTION
TRADING AND PROFIT AND LOSS ACCOUNT
DR. FOR THE YEAR ENDED 31ST MARCH, 2018 CR.
Particulars ` Particulars `
To Opening Stock 1,50,500 By Sales 6,25,000
To Purchases 4,37,000 By Closing stock (balancing figure) 1,64,500
To Manufacturing expenses 85,000
To Gross Profit c/d 1,17,000
(` 1,24,000- ` 7,000) 7,89,500 7,89,500

To Administration expenses 18,000 By Gross Profit b/d 1,17,000

To Selling expenses 33,000
To Financial Charges 6,000
To Net profit 60,000
1,17,000 1,17,000
PROBLEM 8
The following is the Trial Balance of Mr. ‘A’ as on 31st March 2018. You are required to prepared the Trading and
Profit & Loss Account for the year ended 31st March, 2018 and Balance Sheet as on that date after making the
necessary adjustments.
Particulars Debit Credit Balance
Balance
Opening Stock 5,50,000 —
Purchases and Sales 19,25,000 29,35,000
Wages and Salaries 1,25,000 —
Discount — 2,000
Carriage inward 40,000 —
Bill Receivable and Bill Payable 2,25,000 1,85,000
Insurance 35,000 —
Debtors and Creditors 15,00,000 9,32,500
Consignor’s Balance (1-4-2017) — 4,00,000
Capital — 8,95,000
Commission 40,000 —
Cash sent to Consignor 8,00,000 —
Interest 35,000 —
Trade Expenses 34,500 —
Furniture (1-4-2017) 60,000 —
Consignment Sales — 6,40,000
Cash in hand and at Bank 4,22,500 —
Rent and Taxes 1,27,500 —
Sale of furniture (31-3-2018) — 10,000
Charges paid against Consignment 80,000 —
59,99,500 59,99,500
Adjustments:
(a) Closing Stock was valued at Rs.8,00,000 (including stock of stationery ` 800)
(b) Bill receivable include a dishonoured bill of Rs.8,000.
(c) Trade expenses include payment for stationery of Rs.22,500.
(d) Stock in the beginning include stock of stationery Rs.1,800.
(e) Furniture sold was appearing in the Balance Sheet on 31st March, 2018 at Rs.13,000.
(f) Creditors at the end include creditors for stationery Rs.3,000 for credit purchases.
(g) Commission receivable on sale of consignment is Rs.40,000.
(h) Stationery of Rs.2,000 was consumed by Mr. ‘A’.
(i) Make provision for bad and doubtful debts at 5% on debtors.
(j) Depreciate furniture at 10% p.a.
SOLUTION:
TRADING AND PROFIT AND LOSS ACCOUNT OF MR A
Dr. FOR THE YEAR ENDED 31ST MARCH, 2018 Cr.
Particulars (Rs.) Particulars (Rs.)
To Opening Stock 5,50,000 By Sales 29,35,000
Less: Stock of stationery 1,800 5,48,200 By Closing Stock 8,00,000
To Purchases 19,25,000 Less: Stock of 800 7,99,200
Stationery
Less: Stationery 3,000 19,22,000
To Wages and Salaries 1,25,000
To Carriage inward 40,000
To Gross Profit c/d 10,99,000
37,34,200 37,34,200
To Insurance 35,000 By Gross Profit b/d 10,99,000
To Commission 40,000 By Discount 2,000
To Interest 35,000 By Commission from 40,000
To Rent & taxes 1,27,500 consignment business
To Trade expenses 34,500
Less: Stationery 22,500 12,000
To Stationery consumed 24,500
To Provision for doubtful debts 75,400
To Loss on sale of furniture 1,700
To Depreciation on furniture 6,000
To Net profit t/f to Capital A/c 7,83,900
11,41,000 11,41,000

BALANCE SHEET OF MR A AS AT 31 ST MARCH, 2018

Liabilities (Rs.) Assets (Rs.)

Capital 8,95,000 Furniture 60,000

Add: Net Profit 7,83,900 Less: Furniture sold 11,700
Less: Drawings 2,000 16,76,900 Less: Depreciation 6,000 42,300
Consignor’s balance 1,20,000 Debtors 15,00,000
Creditors for goods 9,29,500 Add: B/R Dish 8,000
Creditors for stationery 3,000 Less: Provision 75,400 14,32,600
Bills payable 1,85,000 Bill Receivable 2,25,000
Less: B/R Dish 8,000 2,17,000
Closing Stock 7,99,200
Stock of stationery 800
Cash in hand & at Bank 4,22,500
29,14,400 29,14,400
Working Notes:
(I) Dr. CONSIGNOR'S ACCOUNT Cr.
Particulars (Rs.) Particulars (Rs.)
To Cash 8,00,000 By Balance b/d 4,00,000
To Charges 80,000 By Consignment sales 6,40,000
To Commission 40,000
To Balance c/d 1,20,000
10,40,000 10,40,000

(ii) Loss on sale of furniture = (Rs.13,000 x 10%) – Rs.10,000 = Rs.1,700

(III) Dr. STATIONERY ACCOUNT Cr

Particulars (Rs.) Particulars (Rs.)
To Balance b/d 1,800 By Drawing 2,000
To Cash purchases 22,500 By Profit & loss A/c 24,500
To Credit purchases 3,000 (stationery consumed)
By Balance c/d 800
27,300 27,300

PROBLEM 9
Mr. Neel had prepared the following Trial Balance from his ledger as on 31st March, 2018
Particulars Debit Credit Balance
Balance
Opening Stock 5,00,000
Purchases and Returns 31,00,000 45,000
Sales and Returns 55,000 41,50,000
Cash & Bank 7,50,000
Capital & Drawings 45,000 22,59,200
Rates and Taxes 50,000
Salaries 95,000
Postage and Telegram 1,05,000
Insurance 90,000
Salesman Commission 78,000
Printing and Stationery 95,500
Advertisement 1,70,000
Furniture and Fittings 5,50,000
Motor Car 48,000
Discounts 50,000 75,000
General Expenses 65,700
Carriage Inwards 10,000
Carriage Outwards 22,000
Wages 50,000
Sundry Debtors/Creditors 10,00,000 4,00,000
Total 69,29,200 69,29,200
Additional Information:
(a) Closing Stock Rs.1,45,000.
(b) Neel had withdrawn goods worth Rs.50,000 during the year.
(c) Purchases include Purchase of furniture worth Rs.1,00,000.
(d) Debtors include Rs.50,000 bad debts.
(e) Sales include goods worth Rs.1,50,000 sent out to NN & Co. on approval and remained unsold as on 31st
March, 2018. The cost of the goods was Rs.1,00,000.
(f) Provision for Doubtful Debts is to be created at 5% of Sundry Debtors.
(g) Depreciate Furniture and Fittings by 10% and Motor Car by 20%.
(h) The salesman is entitled to a commission of 10% on total sales.

You are required to prepare Trading and Profit & Loss Account for the year ended on 31st March, 2018 and Balance
Sheet as on that date.

SOLUTION:
TRADING AND PROFIT AND LOSS ACCOUNT
Dr. FOR THE YEAR ENDED 31 ST MARCH, 2018 Cr.
Particulars (Rs.) Particulars (Rs.)
To Opening Stock 5,00,000 By Sales 41,50,000
To Purchases 31,00,000 Less: Returns 55,000
Less: Returns 45,000 Less: Sent on 1,50,000 39,45,000
approval
Less: For personal Use 50,000 By Closing Stock 1,45,000
Less: Furniture 1,00,000 29,05,000 Add: Cost of goods
To Carriage Inwards 10,000 sent on approval 1,00,000 2,45,000
To Wages 50,000
To Gross Profit c/d 7,25,000
41,90,000 41,90,000
To Rates and Taxes 50,000 By Gross Profit b/d 7,25,000
To Salaries 95,000 By Discounts Received 75,000
To Postage and Telegram 1,05,000 By Net Loss 5,02,300
To Salesman’s Commission 78,000
Add: O/s 3,16,500 3,94,500
To Insurance 90,000
To Advertisement 1,70,000
To Printing and Stationery 95,500
To Bad Debts 50,000
To Provision for Doubtful Debts
(5% of ` 8,00,000) 40,000
To Discounts Allowed 50,000
To General Expenses 65,700
 To Carriage Outwards 22,000
To Depreciation:
Furniture and Fittings 65,000
Motor Car 9,600 74,600
13,02,300 13,02,300

BALANCE SHEET OF MR. NEEL AS ON 31 ST MARCH 2018

Liabilities (Rs.) Assets (Rs.)
Capital 22,59,200 Furniture & Fittings 5,50,000
Less: Net Loss 5,02,300 Add: Addition 1,00,000
Less: Drawings Less: Dep 65,000 5,85,000
(45,000 + 50,000) 95,000 16,61,900 Motor Car 48,000
Sundry Creditors 4,00,000 Less: Dep 9,600 38,400
O/s Salesman's Commission 3,16,500 Sundry Debtors 10,00,000
Less: on approval 1,50,000
8,50,000
Less: Bad Debts 50,000
Less: Provision 40,000 7,60,000
Cash & Bank 7,50,000
Closing Stock 1,45,000
Add: Sent on approval 1,00,000 2,45,000
23,78,400 23,78,400

PROBLEM 10
The following are the balances as at 31st March, 2018 extracted from the books of Mr. XYZ.
(Rs.) (Rs.)
Plant and Machinery 19,550 Bad debts 1,100
Furniture and Fittings 10,250 Bad debt recovered 450
Bank Overdraft 80,000 Salaries 22,550
Capital Account 65,000 Salaries payable 2,450
Drawings 8,000 Prepaid rent 300
Purchases 1,60,000 Rent 4,300
Opening Stock 32,250 Carriage inward 1,125
Wages 12,165 Carriage outward 1,350
Provision for doubtful debts 3,200 Sales 2,15,300
Provision for Discount on debtors 1,375 Advertisement Expenses 3,350
Sundry Debtors 1,20,000 Printing and Stationery 1,250
Sundry Creditors 47,500 Cash & Bank 4,575
Interest paid on loan 3,000 Office Expenses 10,160
Additional Information:
(a) Purchases include sales return of Rs.2,575 and sales include purchases return of Rs.1,725.
(b) Goods withdrawn by Mr. XYZ for own consumption Rs.3,500 included in purchases.
(c) Wages paid in the month of April for installation of Plant and Machinery amounting to Rs.450 were included in
wages account.
(d) Free samples distributed for Publicity costing Rs.825.
(e) Create a provision for doubtful debts @ 5% and provision for discount on debtors @ 2.5%.
(f) Depreciation is to be provided on Plant and Machinery @ 15% p.a. and on furniture and fittings @ 10% p.a.
(g) Bank overdraft is secured against hypothecation of stock. Bank overdraft outstanding as on 31.3.2018 has been
considered as 80% of real value of stock (deducting 20% as margin) and after adjusting the marginal value 80% of
the same has been allowed to draw as on overdraft.

Required: Prepare a trading and Profit Loss Account for the year ended 31st March, 2018, and a Balance Sheet as on
that date. Also show the rectification entries.

SOLUTION:
JOURNAL
Particulars L.F. Dr. (`) Cr.(`)
(i) Returns Inward A/c Dr. 2,575
Sales A/c Dr. 1,725
To Purchases A/c 2,575
To Returns outward A/c 1,725
(Being sales return and purchases return wrongly included in purchases
and sales respectively, now rectified)
00 Drawings A/c Dr. 3,500
To Purchases A/c 3,500
(Being goods withdrawn for own consumption included in purchases,
now rectified)
(iii) Plant and Machinery A/c Dr. 450
To Wages A/c 450
(Being wages paid for installation of plant and machinery wrongly
debited to wages, now rectified)
(iv) Advertisement expenses A/c Dr. 825
To Purchases A/c 825
(Being free samples distributed for publicity out of purchases, now
rectified)
TRADING AND PROFIT AND LOSS ACCOUNT
Dr. FOR THE YEAR ENDED 31ST MARCH, 2018 Cr.
Particulars ` Particulars `
To Opening Stock 32,250 By Sales 2,13,575
To Purchases 1,53,000 Less: Sales returns 2,575 2,11,000
Less: Returns 1,725 1,51,325 By Closing Stock
To Carriage inward 1,125 [80,0 00 x (100/80) x (100/80)] 1,25,000
To Wages 11,715
To Gross profit c/d 1,39,535
3,36,000 3,36,000
To Salaries 22,550 By Gross profit b/d 1,39,535
To Rent 4,300 By Bad debts recovered 450
To Advertisement expenses 4,175
To Printing and stationery 1,250
To Bad debts 1,100
To Carriage outward 1,350
To Provision for doubtful debts
5% of ` 1,20,000 6,000
Less: Existing provision 3,200 2,800
To Provision for discount on debtors
2.5% of ` 1,14,000 2,850
Less: Existing provision 1,375 1,475
To Depreciation:
Plant and Machinery 3,000
Furniture and Fittings 1,025 4,025
To Office expenses 10,160
To Interest on loan 3,000
To Net t/f to Capital A/c 83,800
1,39,985 1,39,985

BALANCE SHEET OF MR XYZ AS AT 31ST MARCH, 2018

Liabilities ` Assets `
Capital account: Plant and machinery 20,000
Opening Balance 65,000 Less: Depreciation 3,000 17,000
Add: Net profit 83,800 Furniture and fittings 10,250
Less: Drawings 11,500 1,37,300 Less: Depreciation 1,025 9,225
Bank overdraft 80,000 Closing Stock 1,25,000
Sundry creditors 47,500 Sundry Debtors 1,20,000
Payable salaries 2,450 Less: Provision for
doubtful debts 6,000
Less: Provision for 2,850 1,11,150
Discount
Prepaid rent 300
Cash & bank 4,575
2,67,250 2,67,250

PROBLEM 11
From the following Trial Balance of Shri Shivam as on 31st March, 2018, you are required to prepare a Trading and
Profit and Loss Account for the year ended 31st March, 2018 and Balance Sheet as on that date, after making the
necessary adjustment as mentioned hereunder:
Particulars Debit Credit
Balance ` Balance `
Capital & Drawings 24,000 1,60,000
Furniture and fixtures 8,000 —
Plant and machinery 60,000 —
Patents (ten years from 1,4.2017) 40,000 —
Opening Stock 40,000
Purchases & Sales 1,70,000 2,64,000
Salaries 14,800 —
Wages 30,000 —
Sundry Debtors & Creditors 20,400 24,000
Land 28,350 —
Loan from Shyam (at 6% from 1.10.2017) — 20,000
Postage and fax 3,000 —
Rent, rates and taxes 7,200 —
Bad debts 800 —
Discount — 1,200
Carriage inward 400
Interest on loan 300
Insurance 1,600
Travelling expenses 1,000
Sundry expenses 600
Cash & Bank 33,750
Bank overdraft — 15,000
Total 4,84,200 4,84,200

Adjustments:
(a) Closing Stock is valued at Rs.30,000
(b) A new machine was installed on 1st April, 2017 for Rs.3,000. No entry in this respect was passed in the
books. Wages of Rs.1,000 paid for installing the machine were debited to Wages Account.
(c) Of the sundry debtors, Rs.200 are bad and are to be written off. You are required to maintain a provision
for doubtful debts @ 5% on debtors and provision for discount on debtors @2%.
(d) Goods costing Rs,2,000 were given away as free samples for publicity.
(e) Depreciate Plant and Machinery at 20% per annum and Furniture and Fixtures at 10% per annum.
(f) On 1.4.2004 machinery of the value of Rs.10,000 was destroyed by fire and the insurance claim settled at
Rs.8,000 was credited to Machinery Account.
(g) Goods for Rs.1,200 were sent to a customer at a profit of 20% on cost on 30th March, 2018 on sale or return
basis. This was recorded as actual sales.

SOLUTION:
TRADING AND PROFIT AND LOSS ACCOUNT
Dr. for the year ended 31st March, 2018 Cr.
Particulars (Rs.) Particulars (Rs.)
To Opening Stock 40,000 By Sales 2,64,000
To Purchases 1,70,000 Less: Sent for approval 1,200 2,62,800
Less: Free samples 2,000 1,68,000 By Closing stock 30,000
To Carriage Inward 400 Add: Sent for approval 1,000 31,000
To Wages 30,000
Less: Installation 1,000 29,000
To Gross Profit c/d 56,400
2,93,800 2,93,800
To Rent, rates and taxes 7,200 By Gross profit b/d 56,400
To Salaries 14,800 By Discount received 1,200
To Postage and fax 3,000
To Sundry expenses 600
To Travelling expenses 1,000
To Interest on loan 300
Add: Accured interest 300 600
To Advertising 2,000
To Insurance 1,600
To Loss of machinery by fire 2,000
To Bad debts 800
Add: Written off 200
Add: Provision 950 1,950
To Provision for Discount on debtors 361
To Depreciation:
Plant and machinery 12,400
Furniture and fixtures 800
Patents 4,000 17,200
To Net Profit t/f to Capital a/c 5.289
57,600 57,600

BALANCE SHEET OF MR XYZ AS ON 31 ST MARCH, 2018

Liabilities ` Assets `
Capital Account Land 28,350
Opening Balance 1,60,000 Plant and machinery 60,000
Add: Net Profit 5,289 Add: Purchased 3,000
Less: Drawings 24,000 1,41,289 Add: installation charges 1,000
Loans from Shyam @6% 20,000 Less: Loss by fire 2,000
Add: Accrued interest 300 20,300 62,000
Sundry Creditors 24,000 Less: Depreciation 12,400 49,600
Creditor for machinery 3,000 Patents 40,000
Bank Overdraft 15,000 Less: Depreciation 4,000 36,000
Furniture & Fixtures 8,000
Less: Depreciation 800 7,200
Closing Stock 30,000
Add: with Customers 1,000 31,000
 Debtors 20,400
Less: Sent on approval 1,200
Less: Bad debts w/o 200
19,000
Less: Provision doubtful 950
debts @ 5% 18,050
Lesss: Provision for
discount @2% 361 17,689
Cash & bank 33,750
2,03,589 2,03,589

PROBLEM 12
The following is the Trial Balance of Mr. X on 31.3.2018. Prepare a Trading and Profit and Loss Account for the
year 2017-2018 and Balance Sheet as at 31.3.2018 from it.
Debit Balances (Rs.) Credit Balances (Rs.)
Purchases 1,80,000 Sales 2,05,000
Opening Stock 10,000 Loans (10%) 10,000
Salary Less P.F. 5,400 Creditors 15,000
P.F. remittance including Capital 55,000
Proprietor’s contribution 50% 1,200
Rent @ 250 p.m. 2,750
Machinery 29,000
Wages 3,000
Furniture & Fittings 5,000
Electricity 550
Trade Expenses 1,500
Debtors 10,500
Interest on Loan 900
Commission 200
Buildings 30,000
Drawings 5,000
2,85,000 2,85,000
Additional Information:
On 1.4.2017, machinery worth Rs.5,000 was sold for Rs.4,000 and credited to Sales account. Wages include
Rs.1,000 paid for machinery erection charges. Purchases include cost of Moped Scooter for Rs.5,000. Proprietor
has taken goods costing Rs.1,000 for which no entry has been made. Sundry debtors include Rs.500 which have
become bad. Provide 10% provision for doubtful debts. Electricity outstanding Rs.50. Goods costing Rs.5,000
were destroyed by fire, and insurance claim was received for Rs.4,000. Provide depreciation @ 10% on machinery,
furniture and moped. Provide depreciation @ 5% on building. Closing stock is Rs.12,000.
SOLUTION:
TRADING AND PROFIT & LOSS ACCOUNT
DR. for the year ending on 31st March, 2018 CR.
Particulars ` Particulars `
To Opening Stock 10,000 By Sales 2,05,000
To Purchases 1,80,000 Less: Sales of Machinary 4,000 2,01,000
Less: Cost of Moped 5,000 By Closing Stock 12,000
Less: Loss of stock 5,000
Less: Drawings of goods 1,000 1,69,000
To Wages 3,000
Less: Machinery
erection charged 1,000 2,000
To Gross Profit c/d 32,000
2,13,000 2,13,000
To Salaries 5,400 By Gross Profit b/d 32,000
Add: PF (employees 600
share)
Add: PF (employer share) 600 6,600
To Rent 2,750
Add: Outstanding 250 3,000
To Electricity 550
Add: Outstanding 50 600
To Trade Expenses 1,500
To Interest on loan 900
Add: Outstanding 100 1,000
(10/100x10,000-900)
To Commission 200
To Bad debts 500
To Provision for doubtful debts 1,000
T Stock destroyed by fire 1,000
To Loss on sale of Machinery
(` 5,000 — ` 4,000) 1,000
To Depreciation:
Building 1,500
Machinery 2,900
Moped Scooter 500
Furniture 500 5,400
To Net Profit t/f to Capital 10,200
32,000 32,000
 BALANCE SHEET
as at 31st March, 2018
Liabilities (Rs.) Assets (Rs.)
Capital: Building 30,000
Opening Balance 55,000 Less: Depreciation 1,500 28,500
Less: Drawings 5,000 (5,100 x Rs.30,000)
Less: Drawing of goods 1,000 Machinery 29,000
Add: Net Profit 10,200 59,200 Add: Erection 1,000
Creditors 15,000 Less: Loss on Sale 1,000
10% of Loan 10,000 (Rs.5,000- Rs.4,000) 29,000
O/s Electricity Expenses 50 Less: Depreciation 2,900 26,100
O/s Rent 250 (10/100x29,000)
O/s Interest or Loan 100 Moped Scooter 5,000
Less: Depreciation 500
(10/100x5,000) 4,500
Furniture 5,000
Less: Depreciation 500
(10/100 x 5,000) 4,500
Closing Stock
Debtors 10,500 12,000
Less: Add. Bad debts 500
Less: Provision
(10/100 x 10,000) 1,000 9,000
84,600 84,600

PROBLEM 13
From the following particulars prepare the Trading and Profit and Loss Account for the year 2017- 2018 and
Balance Sheet as on 31.3.2018 of Mr. X.
Particulars Debit Credit
Balance Balance
Building 50,000
Machinery 22,000
Furniture 10,000
Bank 9,000
Cash 1,000
10% Loan (since 1.4.2017) 30,000
Capital 52,000
Debtors/Creditors 50,000 40,000
Opening Stock 12,000
Purchases/Returns 2,50,000 10,000
Sales/Returns 12,000 3,22,000
Rent 6,000
Establishment 16,000
P.F. deducted from Salaries 1,000
Interest on loan 2,000
Electricity 1,000
Phone 1,000
Commission 6,000
Insurance Premium 1,000
Bad Debts 2,000
Bills Receivable 4,000
4,55,000 4,55,000

Provide depreciation on Building @ 5%, Machinery @ 15% and Furniture @ 10%. Stock was not taken on
31.03.2018 but only on 7th April. The transactions from 1st April to 7th April are—Sales Rs.25,000. Purchases
Rs.15,000, Stock on 7th April Rs.18,000 and the Gross Profit 20%. During the year machinery to the value of
Rs.10,000 was destroyed by fire and the insurance claim was settled at Rs,8,000 and credit to Machinery Account.
Also provide—Employers’ share of P.F. Rs.1,000. Provision for Doubtful Debts at 5%, Commission to the Manager
@ 10% on net profit after providing the commission.

SOLUTION:
TRADING AND PROFIT & LOSS ACCOUNT
Dr. for the year ending on 31st March, 2018 Cr.
Particulars ` Particulars `
To Opening Stock 12,000 By Sales 3,22,000
To Purchases 2,50,000 Less: Returns 12,000 3,10,000
Less: Returns 10,000 2,40,000 By Closing Stock:
To Gross Profit c/d 81,000 (Stock 7th Jan) 18,000
Add: Cost of sale 20,000
during 1st Apr. to 7th Apr.
(80/100x25,000)
Less: Purchases during 1st 15,000 23,000
Apr. to 7th Apr.
3,33,000 3,33,000
To Rent 6,000 By Gross Profit b/d 81,000
To Establishment 6,000
To Provident Fund Contribution 1,000
To Interest on Loan 2,000
Add: Outstanding 1,000 3,000
To Electricity 1,000
To Phone 1,000
To Commission 6,000
To Insurance 1,000
To Bad Debts 2,000
To Loss on machine destroyed
by fire (` 10,000- ` 8,000) 2,000
To Depreciation on Building 2,500
To Depreciation on Machinery 3,000
To Depreciation on Furniture 1,000
To Provision for Doubtful Debts 2,500
To Provision for Manager’s Commission 3,000
(10/110 x ` 33,000)
To Net Profit t/f to Capital A/c 30,000
81,000 81,000

BALANCE SHEET
as at 31st March, 2018
Liabilities (Rs.) Assets (Rs.)

Capital Account: Building 50,000

Opening Balance 52,000 Less: Depreciation 2,500 47,500
Add: Profit 30,000 82,000
Loan 30,000 Machinery 22,000
O/s Interest on Loan 1,000 Less: Destroyed by fire 10,000
Sundry Creditors 40,000 Add: Insurance Claim 8,000
Provident Fund: Less: Depreciation 3,000 17,000
Employees: Contribution 1,000 Furniture 10,000
Employer’s Contribution 1,000 2,000 Less: Depreciation 1,000 9,000
O/s Manager’s Commission 3,000 Stock in trade 23,000
Debtors 50,000
Less: Provision 2,500 47,500
Bills Receivable 4,000
Cash at Bank 9,000
Cash in hand 1,000
1,58,000 1,58,000

PROBLEM 14
From the following trial balance of Mr. X, prepare Trading and Profit and Loss Account for the year ending on 31st
March 2018, and Balance Sheet as on that date after taking into consideration the adjustment given at the end
of the trial balance:—
TRIAL BALANCE AS AT 31ST MARCH, 2018
Debit Balances ` Credit Balances `
Purchases (adjusted) 3,49,600 Sales 3,70,000
Wages 10,450 Capital Account 34,250
National Insurance 150 Discount earned 300
Carriage Inwards 200 Creditors 10,000
Carriage Outwards 250 Dividends Received 150
Lighting 300
Rates and Insurance (including premium 200
of ` 150 p.a. paid up to 30th Sept 2018)
Stock at 31.3.2018 30,625
Cash & bank 875
Plant and Machinery 15,000
Discount Allowed 50
Debtors 3,000
Furniture 4,000
4,14,700 4,14,700

Adjustments: (a) National Insurance also includes employee’s contribution of Rs.75. Wages are shown “Net” after
deducting national insurance contribution borne by the employee, (b) Owing to the nature of employment, some
employees are housed in the building of the business. The rental value of such portion is assessed at Rs.250 p.a.
The benefit to the employee treated as wages and the rental as income for Mr. X. (c) Depreciate Plant and
Machinery @ 15% p.a. and Furniture @ 10% p.a. (d) Goods costing Rs.2,000 given by Mr. X. to his son. (e) The
Manager is entitled to a commission of 20% of the Net Profit after charging his commission. (Calculation may be
made nearest to the multiple of a Rupee).

SOLUTION:
TRADING AND PROFIT & LOSS ACCOUNT
Dr. for the year ending on 31st March, 2018 Cr.
Particulars ` Particulars `
To Purchases 3,49,600 By Sales 3,70,000
Less: Drawings 2,000 3,47,600
To Wages 10,450
Add: Employees
Contribution to
National Insurance 75
Employer's Contribution
to National Insurance 75
Rental Value of free
Accommodation 250 10,850
To Carriage Inwards 200
To Gross Profit c/d 11,350
3,70,000 3,70,000
To Carriage Outward 250 By Gross Profit b/d 11,350
To Lighting 300 By Discount earned 300
To Rates & Insurance 200 By Dividends received 150
Less: Prepaid 75 125 By Rental Value of Free
To Discount Allowed 50 Accommodation 250
To Depreciation P & M 2,250
(15,100x15,000)
To Depreciation on Furniture 400
(10/100x4,000)
To Manager’s Commission 1,446
(20/120 x 8,675) 7,229
To Net Profit t/f to Capital A/c
12,050 12,050

BALANCE SHEET AS AT 31 ST MARCH, 2018

Liabilities ` Assets `
Capital Account: Plant & Machinery 15,000
Opening Balance 34,250 Less: Depreciation 2,250 12,750
Less: Drawings 2,000 Furniture 4,000
(goods given to son) 32,250 Less: Depreciation 400 3,600
Add: Net Profit 7,229 39,479 Stock-in-trade 30,625
Sundry Creditors 10,000 Sundry Debtors 3,000
Manager's Commission Prepaid Insurance 75
(yet to be paid) 1,446 Cash & Bank 875
50,925 50,925