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The transactions of a business enterprise for the accounting period are first recorded in the books of original entry, then posted there from into the ledger and lastly tested as to their arithmetical accuracy with the help of trial balance. After the preparation of the trial balance, every businessman is interested in knowing about two more facts.
They are:
1. Whether he has earned a profit or suffered a loss during the period covered by the trial balance, and
2. Where does he stand now? In other words, what is his financial position?
For the above said purposes, the businessman prepares financial statements for his business i.e. he prepares the Trading and Profit and Loss Account and Balance Sheet at the end of the accounting period. These financial statements are popularly known as final accounts. The preparation of financial statements depends upon whether the business concern is a trading concern or manufacturing concern. If the business concern is a trading concern, it has to prepare the following accounts along with the Balance Sheet:
1. Trading Account; and
2. Profit and Loss Account.
But, if the business concern is a manufacturing concern, it has to prepare the following accounts along with the Balance Sheet:
1. Manufacturing Account;
2. Trading Account; and
3. Profit and Loss Account.
Trading Account is prepared to know the Gross Profit or Gross Loss. Profit and Loss Account discloses net profit or net loss of the business. Balance sheet shows the financial position of the business on a given date. For preparing final accounts, certain accounts representing incomes or expenses are closed either by transferring to Trading Account 146 or Profit and Loss Account. Any Account which cannot find a place in any of these two accounts goes to the Balance Sheet.
After the preparation of trial balance, the next step is to prepare Trading Account. Trading Account is one of the financial statements which shows the result of buying and selling of goods and/or services during an accounting period. The main objective of preparing the Trading Account is to ascertain gross profit or gross loss during the accounting period. Gross Profit is said to have made when the sale proceeds exceed the cost of goods sold. Conversely, when sale proceeds are less than the cost of goods sold, gross loss is incurred. For the purpose of calculating cost of goods sold, we have taken into consideration opening stock, purchases, direct expenses on purchasing or manufacturing the goods and closing stock. The balance of this account i.e. gross profit or gross loss is transferred to the Profit and Loss Account.
The term ‘stock’ includes goods lying unsold on a particular date.
The stock may be of two types:
a. Opening stock
b. Closing stock
Opening stock refers to the closing stock of unsold goods at the end of previous accounting period which has been brought forward in the current accounting period. This is shown on the debit side of the Trading Account.
Closing stock refers to the stock of unsold goods at the end of the current accounting period. Closing stock is valued either at cost price or at market price whichever is less. Such valuation of stock is based on the principle of conservatism which lays down that the expected profit should not be taken into account but all possible losses should be duly provided for. Closing stock is an item which is not generally available in the trial balance. If it is given in Trial Balance, it is not to be shown on the credit side of Trading Account but appears only in the Balance Sheet as an asset. But if it is given outside the trial balance, it is to be shown on the credit side of the Trading Account as well as on the asset side of the Balance Sheet. 148
Purchases refer to those goods which have been bought for resale. It includes both cash and credit purchases of goods. The following items are shown by way of deduction from the amount of purchases:
a. Purchases Returns or Return Outwards.
b. Goods withdrawn by proprietor for his personal use.
c. Goods received on consignment basis or on approval basis or on hire purchase.
d. Goods distributed by way of free samples.
e. Goods given as charity.
Direct expenses are those expenses which are directly attributable to the purchase of goods or to bring the goods in saleable condition. Some examples of direct expenses are as under:
a. Carriage Inward: Carriage paid for bringing the goods to the Godown is treated as carriage inward and it is debited to Trading Account.
b. Freight and insurance: Freight and insurance paid for acquiring goods or making them saleable is debited to Trading Account. If it is paid for the sale of goods, then it is to be charged (debited) to Profit and Loss Account.
c. Wages: Wages incurred in a business is direct, when it is incurred on manufacturing or merchandise or on making it saleable. Other wages are indirect wages. Only direct wages are debited to the Trading Account. Other wages are debited to the Profit and Loss Account. If it is not mentioned whether wages are direct or indirect, it should be assumed as direct and should appear in the Trading Account.
d. Fuel, Power and Lighting Expenses: Fuel and power expenses are incurred for running the machines. Being directly related to production, these are considered as direct expenses and debited to Trading Account. Lighting expenses of factory is also charged to Trading Account, but lighting expenses of administrative office or sales office are charged to Profit and Loss Account.
e. Octroi: When goods are purchased within municipality limits, generally octroi duty has to be paid on it. It is debited to Trading Account.
f. Packing Charges: There are certain types of goods which cannot be sold without a container or proper packing. These form a part of the finished product. One example is ink, which cannot be sold without a bottle. These type of packing charges are debited to Trading Account. But if the goods are packed for their safe dispatch to customers, i.e. packing meant for transportation or fancy packing meant for advertisement will appear in the Profit and Loss Account.
g. Manufacturing Expenses: All expenses incurred in manufacturing the goods in the factory such in factory rent, factory insurance etc. are debited to Trading Account.
h.Royalties: These are the payments made to a patentee, author or landlord for the right to use his patent, copyright or land. If royalty is paid on the basis of production, it is debited to Trading Account and if it is paid on the basis of sales, it is debited to Profit and Loss Account.
Sales include both cash and credit sales of those goods which were purchased for resale purposes. Some customers might return the goods sold to them (called sales return) which are deducted from the sales in 150 the inner column and net amount is shown in the outer column. While ascertaining the amount of sales, the following points need attention:
a. If a fixed asset such as furniture, machinery etc. is sold, it should not be included in sales.
b. Goods sold on consignment or on hire purchase or on sale or return basis should be recorded separately.
c. If goods have been sold but not yet despatched, these should not be shown under sales but are to be included in closing stock.
d. Sales of goods on behalf of others and forward sales should also be excluded from sales. Account is given below:
Trading Account results in the gross profit/loss made by a businessman on purchasing and selling of goods. It does not take into consideration the other operating expenses incurred by him during the course of running the business. Besides this, a businessman may have other sources of income. In order to ascertain the true profit or loss which the business has made during a particular period, it is necessary that all such expenses and incomes should be considered. Profit and Loss Account considers all such expenses and incomes and gives the net profit made or net loss suffered by a business during a particular period. All the indirect revenue expenses and losses are shown on the debit side of the Profit and Loss Account, whereas all indirect revenue incomes are shown on the credit side of the Profit and Loss Account. Profit and Loss Account measures net income by matching revenues and expenses according to the accounting principles. Net income is the difference between total revenues and total expenses. In this connection, we must remember that all the expenses, for the period are to be debited to this account – whether paid or not. If it is paid in advance or outstanding, proper adjustments are to be made (Discussed later). Likewise all revenues, whether received or not are to be credited. Revenue if received in advance or accrued but not received, proper adjustment is required.
1. Selling and Distribution Expenses
These expenses are incurred for promoting sales and distribution of sold goods. Example of such expenses are godown rent, carriage outwards, advertisement, cost of after sales service, selling agents commission, etc.
2. Management Expenses
These are the expenses incurred for carrying out the day-to-day administration of a business. Expenses, under this head, include office salaries, office rent and lighting, printing and stationery and telegrams, telephone charges, etc.
3. Maintenance Expenses
These expenses are incurred for maintaining the fixed assets of the administrative office in a good condition. They include repairs and renewals, etc.
4. Financial Expenses
These expenses are incurred for arranging finance necessary for running the business. These include interest on loans, discount on bills, etc.
5. Abnormal Losses
There are some abnormal losses that may occur during the accounting period. All types of abnormal losses are treated as extra 158 ordinary expenses and debited to Profit and Loss Account. Examples are stock lost by fire and not covered by insurance, loss on sale of fixed assets, etc.
Following are the expenses not to appear in the Profit and Loss Account:
a. Domestic and household expenses of proprietor or partners.
b. Drawings in the form of cash, goods by the proprietor or partners.
c. Personal income tax and life insurance premium paid by the firm on behalf of proprietor or partners.
6. Gross Profit
This is the balance of the Trading Account transferred to the Profit and Loss Account. If the Trading Account shows a gross loss, it will appear on the debit side.
7. Other Income
During the course of the business, other than income from the sale of goods, the business may have some other income of financial nature. The examples are discount or commission received.
8. Non-trading Income
Such incomes include interest on bank deposits, loans to employees and investment in debentures of companies. Similarly, dividend on investment in shares of companies and units of mutual funds are also known as non-trading incomes and shown in Profit and Loss Account.
9. Abnormal Gains
There may be capital gains arising during the course of the year, e.g., profit arising out of sale of a fixed asset. Such profit is shown as a separate income on the credit side of the Profit and Loss Account.
A Balance Sheet is a statement of financial position of a business concern at a given date. It is called a Balance Sheet because it is a sheet of balances of those ledger accounts which have not been closed till the preparation of Trading and Profit and Loss Account. After the preparation of Trading and Profit and Loss Account the balances left in the trial balance represent either personal or real accounts. In other words, they either represent assets or liabilities existing on a particular date. Excess of assets over liabilities represent the capital and is indicative of the financial soundness of a company. A Balance Sheet is also described as a “Statement showing the Sources and Application of Capital”. It is a statement and not an account and prepared from real and personal accounts. The left hand side of the
162 Balance Sheet may be viewed as description of the sources from which the business has obtained the capital with which it currently operates and the right hand side as a description of the form in which that capital is invested on a specified date.
The characteristics of a Balance Sheet are summarised as under:
1. A Balance Sheet is only a statement and not an account. It has no debit side or credit side. The headings of the two sides are ‘Assets’ and ‘Liabilities’.
2. A Balance Sheet is prepared at a particular point of time and not for a particular period. The information contained in the Balance Sheet is true only at that particular point of time at which it is prepared.
3. A Balance Sheet is a summary of balances of those ledger accounts which have not been closed by transfer to Trading and Profit and Loss Account.
4. A Balance Sheet shows the nature and value of assets and the nature and the amount of liabilities at a given date.
Assets are the properties possessed by a business and the amount due to it from others. The various types of assets are:
All assets that are acquired for the purpose of using them in the conduct of business operations and not for reselling to earn profit are called fixed assets. These assets are not readily convertible into cash in 163 the normal course of business operations. Examples are land and building, furniture, machinery, etc.
2. Current Assets
All assets which are acquired for reselling during the course of business are to be treated as current assets. Examples are cash and bank balances, inventory, accounts receivables, etc.
3. Tangible Assets
There are definite assets which can be seen, touched and have volume such as machinery, cash, stock, etc.
4. Intangible Assets
Those assets which cannot be seen, touched and have no volume but have value are called intangible assets. Goodwill, patents and trademarks are examples of such assets.
5. Fictitious Assets
Fictitious assets are not assets at all since they are not represented by any tangible possession. They appear on the asset side simply because of a debit balance in a particular account not yet written off e.g. provision for discount on creditors, discount on issue of shares etc.
6. Wasting Assets
Such assets as mines, quarries etc. that become exhausted or reduce in value by their working are called wasting assets.
7. Contingent Assets
Contingent assets come into existence upon the happening of a certain event or the expiry of a certain time. If that event happens, the 164 asset becomes available otherwise not, for example, sale agreement to acquire some property, hire purchase contracts etc. In practical no reference is made to contingent assets in the Balance Sheet. At the most, they may form part of notes to the BalanceSheet.
A liability is an amount which a business is legally bound to pay. It is a claim by an outsider on the assets of a business. The liabilities of a business concern may be classified as:
1. Long Term Liabilities
The liabilities or obligations of a business which are not payable within the next accounting period but will be payable within next five to ten years are known as long term liabilities. Public deposits, debentures, bank loan are the examples of long term liabilities.
2. Current Liabilities
All short term obligations generally due and payable within one year are current liabilities. This includes trade creditors, bills payable etc.
3. Contingent Liabilities
A contingent liability is one which is not an actual liability. They become actual on the happenings of some event which is uncertain. In other words, they would become liabilities in the future provided the contemplated event occurs. Since such a liability is not actual liability it is not shown in the Balance Sheet. Usually it is mentioned in the form of a footnote below the Balance Sheet.
The arrangement of assets and liabilities in a particular order is called marshalling of the Balance Sheet. Assets and liabilities can be arranged in the Balance Sheet into two ways:
1. In order of liquidity.
2. In order of permanence.
When assets and liabilities are arranged according to their reliability and payment preferences, such an order is called liquidity order. When the order is reversed from that what is followed in liquidity, it is called order of permanence. In other words, assets and liabilities are listed in order of permanence.
Profit And Loss Account
Dr. For the year ending…………………. Cr.
| Particular | Amount | Particular | Amount |
| To Gross Loss b/d
( Transferred from Trading A/c) |
By Gross Profit
( Transferred from Trading A/c) |
||
| Office Expenses | By Rent from Tenant | ||
| To Salaries | By Rent ( Cr.) | ||
| To Salaries & Wages | By Discount received or Discount (Cr.) | ||
| To Rent, Rates and Taxes | By Commission received | ||
| To Printing and Stationery | By Interest on Investment | ||
| To Postage and Telegram | By Dividend on shares | ||
| To Lighting | By Bad debts Recovered | ||
| To Insurance Premium | By Apprentice Premium * | ||
| To Telephone charges | By Profit on sale of Assets | ||
| To Legal Charges | By Income from other Sources | ||
| To Audit Fees | By Miscellaneous Receipts | ||
| To Travelling Expenses | By Net Loss (if any)
Transferred to Capital A/c |
||
| To Establishment Expenses | |||
| To Trade Expenses | |||
| To General Expenses | |||
| Selling And Distribution Expenses:- | |||
| To Carriage outwards or Carriage on Sale | |||
| To Advertisement | |||
| To Commission | |||
| To Brokerage | |||
| To Bad – debts | |||
| To Export duty | |||
| To Packing Charges | |||
| To Delivery Van Expanses | |||
| To Stable Expenses | |||
| Miscellaneous expenses | |||
| To Discount | |||
| To Repairs | |||
| To Depreciation | |||
| To Interest Dr. | |||
| To Bank charges | |||
| To Entertainment Expanses | |||
| To Conveyance Expanses | |||
| To Donation and Charity | |||
| To Loss on Sale of Assets | |||
| To Net Profit | |||
| To Transferred to Capital A/c |
Trading Account.
For the year ending………………….
Dr. Cr.
| Particular | Amount | Particular | Amount |
| To Opening stock | By Sales | ||
| To Purchases Returns
Or Returns outwards |
By Less: Sales Returns
Returns Inwards |
||
| To Wages | By Closing Stock | ||
| To Wages and Salaries | By Gross Loss | ||
| To Direct expenses | ( If any )transferred to Profit and Loss A/c | ||
| To Carriage or | (Balancing figure) | ||
| To Carriage inward or | |||
| To Carriage on Purchases | |||
| To Gas fuel and Power | |||
| To Freight, octroi and cartage | |||
| To Manufacturing Expenses, or Productive Expensive | |||
| To Factory Expenses, such : | |||
| Factory Lighting | |||
| Factory Rent etc. | |||
| To Dock Charges and Cleaning charges | |||
| To Import Duty or Custom Duty | |||
| To Royalty | |||
| To Gross Profit | |||
| Transferred to P &L A/c | |||
| ( Balancing Figure). | |||
1 Opening stock Rs10,000, Purchases Rs18,200 Expenses of purchases Rs2,000 sales Rs30,000, Expenses of sales Rs1,000 Closing stock Rs12,200 Calculate Cost of goods sold and gross profit.
Solution:- Cost of Goods sold = Opening stock +Purchases +Expenses on Purchases-Closing Stock.
= Rs10,000 +Rs18,200 +Rs2,000 –Rs12,200
= Rs18,000
Gross Profit = Net sales – Cost of goods sold
= Rs30,000 – Rs18,000
= Rs12,000
Opening stock Rs5,000 , Sales Rs16,000,Carriage Inward Rs1,000 Sales Returns Rs1,000 Gross profit Rs6,000 , Purchases Rs10,000, Purchases Returns Rs900 Calculate the closing stock and the cost of goods sold .
Solution :-
Net Sales = Sales – Sales Return
Cost of goods sold = Net Sales – Gross Profit
= RS 15,000 – RS 6,000
= RS 9,000
Cost of Goods sold =Opening stock +Purchases – Purchases Returns + Carriage inward – Closing stock.
RS 9,000 = RS 5,000 +RS 10,000 – RS 900 +RS 1,000 – Closing Stock
Closing Stock = RS 15,100 – RS 9,000
= RS 6,100.
Cash sales RS 29,000,Credit sales RS 31,000 , Cost of goods sold RS 52,000 Expenses of purchases RS 3,000 ,Expanses on sales RS 6,700, Find out Gross profit and Net profit.
Solution:-
Gross Profit = Net Sales – Cost of goods sold
= (RS 29,000 + RS 31,000) – RS 52,000
Net Profit = Cross profit – Indirect Expenses
= RS 8,000 –RS 6,700
= RS 1,300
Opening Capital RS 60,000, Drawing RS 5,000, Capital added during the year Rs10,000, Closing Capital RS 90,000. Calculate profit or loss.
Solution :-
Profit = Closing Capital + Drawings – Addition Capital – Opening Capital
= RS 90,000 + RS 5,000 –RS 10,000 – RS 60,000
= 25,000
Drawings RS 15,000 Profit for the year RS 25,000, Losing Capital RS 70,000. Calculate Opening Capital.
Solution :-
Profit = Closing Capital + Drawings – Addition Capital – Opening Capital
RS 25,000 =RS 70,000 +Rs 15,000 –0- Opening Capital
Opening Capital = RS 85,000 – RS 25,000
=60,000.
From the understated Trial Balance, prepare: (a) Manufacturing Account; (b) Trading and Profit & Loss Account; and (c) Balance Sheet.
Trial Balance as at 31st March 20X2
| RS | RS | ||
| Debit Balance | Debit Balance | ||
| Wages | 2,00,000 | General Expenses | 29,420 |
| Stock (Raw Material) 1.4,20X1 | 57,100 | Carriage Outward | 94,240 |
| Purchases | 8,82,740 | Other Assets | 11,38,840 |
| Carriage Inward | 36,860 | Drawings | 10,000 |
| Repair | 60,000 | Stock on 1.4 20X1 | |
| Salaries (Factory) | 21,000 | Finished Goods | 5,60,000 |
| Salaries (General) | 10,000 | Work- in- progress | 10,000 |
| Rates and Taxes | 22,400 | Credit Balances | |
| Travelling Expenses | 35,500 | Sales | 17,40,000 |
| Insurance (Factory) | 7,000 | Profit and Loss Balance 1.4 20X1 | 1,20,000 |
| Insurance (General) | 800 | Capital | 13,00,000 |
| Bad Debts | 4,100 | Sale of Scrap | 10,000 |
Closing stock: Raw materials RS 52,720; Finished Goods RS 3,43.240, Work in Progress RS 1,00,000
For the period ended 31st March 20X2 Dr. Cr.
| Particular | RS | Particular | RS |
| To Raw Material consumed | By sale of scrap | 10,000 | |
| Opening stock 57,100 | By Closing WIP | 1,00,000 | |
| Add. Purchases 8,82,740 | By Cost of Goods manufactured
( t/f to Trading A/c) |
11,11,980 | |
| Less. Closing stock 52,720 | 8,87,120 | ||
| To Opening WIP | 10,000 | ||
| To wages | 2,00,000 | ||
| To Carriage Inward | 36,860 | ||
| To Repair | 60,000 | ||
| To Salaries | 21,000 | ||
| To insurance | 7,000 | ||
| 12,21,980 | 12,21,980 |
For the year ended 31st march 20X2
Dr. Cr.
| Particular | RS | Particular | RS |
| To opening stock finish goods | 5,60,000 | By sales | 17,40,000 |
| To cost of goods Manufactured | 11,11,980 | By closing Stock of Finished Goods | 3,43,240 |
| To Gross Profit c/d | 4,11,260 | 20,83,240 | |
| 20,83,240 | |||
| To salaries General | 10,000 | By Gross Profit b/d | 4,11,260 |
| To Rent & Taxes | 22,400 | ||
| To Travelling Expenses | 35,500 | ||
| To Insurance (General) | 800 | ||
| To Bad Debts | 4,100 | ||
| To General Expenses | 29,420 | ||
| To Carriage outward | 94,240 | ||
| To Net profit transferred to Capital A/c | 2,14,800 | ||
| 4,11,260 | 4,11,260 |
As at 31st March 20X2
| Liabilities | RS | Assets | RS |
| Capital Account: | Closing Stock: | ||
| Opening Balance 13,10,000 | Raw Material | 52,720 | |
| Less: Drawings 10,000 | 13,00,000 | Work in Progress | 1,00,000 |
| Profit & Loss A/c: | Finish Goods | 3,43,240 | |
| Opening Balance 1,20,000 | Other Asset | 11,38,840 | |
| Add: Current
Years Profit 2,14,800 |
3,34,800 | ||
| 16,34,800 | 16,34,800 |
The following is the Trial Balance of Mr. wise as at 31st March20X2.
| Debit Balance | RS | Credit Balance | RS |
| Fixed Assets | 3,00,000 | Creditors | 1,00,000 |
| Opening Stock | 75,000 | Bills Payables | 5,600 |
| Debtors | 2,05,000 | Loan from Bank | 4,000 |
| Bills Receivables | 10,000 | Capital Account | 5,00,000 |
| 12% Investments (purchase on 1.7 20 X1) | 50,000 | Sales | 6,30,000 |
| Cash in Hand | 5,000 | Purchases Returns | 5,000 |
| Cash at Bank | 10,000 | Discount Earned | 1,000 |
| Drawings | 10,000 | Bad debts Recovered
Interest |
3,500
3,000 |
| Purchases | 5,25,000 | ||
| Sales Returns | 10,000 | ||
| Carriage inwards | 5,000, | ||
| Carriages outwards | 2,000 | ||
| Rent | 3,000 | ||
| Insurance | 3,000 | ||
| Office & Administration Expenses | 13,200 | ||
| Discount Allowed | 2,000 | ||
| Bad Debts | 5,000 | ||
| Interest | 2,500 | ||
| Selling & Distribution Expenses | 15,800 | ||
| 12,52,100 | 12,52,100 |
| ( a ). Closing Stock as on 31st March 20X2 was RS 42,000 |
| ( b ). Rent is payable at the rate of RS 300 per month. |
| ( c ). Insurance Premium was paid for the year ending on June ,20X2. |
| ( d ). Write of further RS 5,000as bad . |
| ( e ). Create a Provision for discount on debtors @2%. |
| ( f ). Create a Provision for Doubtful debts @ 10% . |
| ( g ). Create a Reserve for discount on Creditor @ 2% . |
| ( h ). Provide for discount on Creditors @ 10% p.a. |
Required: Prepare Trading and Profit and Loss Account for the year ending on 31st March 20X2 and a Balance Sheet as at 31st March 20X2.
Dr. Cr.
| Particular | RS | Particular | RS |
| To Opening Stock | 75,000 | By Sales 6,30,000 | |
| To Purchases 5,25,000 | Less Returns 10,000 | 6,20,000 | |
| Less Returns 5,000 | 5,20,000 | By Closing Stock | 42,000 |
| TO Carriage inwards | 5,000 | ||
| TO Gross Profit c/d | 62,000 | ||
| 6,62,000 | 6,62,000 | ||
| To Carriage outward | 2,000 | By Gross Profit b/d | 62,000 |
| TO Rent Paid 3,000 | By Discount | 1,000 | |
| Add. Outstanding 600 | 3,600 | By Bad debts Recovered | 3,500 |
| To Insurance Paid 3,500 | By Interest | ||
| Less Prepaid 900 | 2,700 | Received 3,000 | |
| To office & Adm Expenses | 13,200 | Add. Accrued but not due 1,500 | 4,500 |
| To discount | 2,000 | By Reserve for Discount on | |
| To Bad debts 5,000 | Creditor | 2,000 | |
| Add. Further 5,000 | 10,000 | By Net Loss transferred to | |
| To interest | 2,500 | Capital Account | 32,400 |
| To Selling &Distribution Expenses | 15,800 | ||
| To Provision for doubtful debts | 20,000 | ||
| To Provision for Discount on Debtors | 3,600 | ||
| To Depreciation on Fixed Assets | 30,000 | 1,05,400 | |
| 1,05,400 |
As at 31st March 20X2
| Liabilities | RS | Assets | RS |
| Capital Account: | Fixed Assets | ||
| Opening Balance 5,00,000 | Fixed Assets 3,00,000 | ||
| Less: Net Loss 32,400 | Less: Depreciation 30,000 | 2,70,000 | |
| Less: Drawing 10,000 | 4,57,600 | 12% investment | 50,000 |
| Loans: | Current Assets | ||
| Loan from Bank | 4,000 | Close stock | 42,000 |
| Current Liability: | Debtors 2,00,000 | ||
| Creditors 1,00,000 | Less: Provision for | ||
| Less: Reserve for Discount 2,000 | 98,000 | Doubtful debts 20,000 | |
| 1,80,000 | |||
| Bills Payable | 5,600 | Less Provision for | |
| Out Standing Rent | 600 | Discount 3,600 | 1,76,400 |
| Interest accrued but not due | 1,500 | ||
| Cash in Hand | 5,000 | ||
| Cash at Bank | 10,000 | ||
| Bills Receivable | 10,000 | ||
| Prepaid Insurance | 900 | ||
| 5,65,800 | 5,65,800 |
From the following Trial Balance, extracted from the books MMN, prepare a Trading and Profit & Loss Account for the year ended 31st March 20X2 and a Balance Sheet. As on the Date:
| Particular | Dr. RS | Cr. RS |
| MMNs Capital Account/ Drawings Account | 6,480 | 90,000 |
| Land and Buildings | 25,000 | – |
| Plant and Machinery | 14,270 | – |
| Furniture and Fixture | 1,250 | – |
| Carriage Inward | 4,370 | – |
| Wages | 21,470 | – |
| Salaries | 4,670 | – |
| Provision for doubtful Debts April 1,20X1 | – | 2,470 |
| Returns | 1,760 | 8,460 |
| Bank Charges | 140 | – |
| Coal, Gas and Water | 720 | – |
| Rates and Taxes | 840 | – |
| Discount Account | – | 120 |
| Purchases/ Sales | 42,160 | 91,230 |
| Bill Receivable | 1,270 | – |
| Trade Expanses | 1,990 | – |
| Sundry Debtors/Creditors | 37,800 | 12,170 |
| Stock( 1April 20X1) | 26,420 | – |
| Apprentice premium ( Received from an apprentice in factory) | – | 500 |
| Fire Insurance | 490 | – |
| Cash at Bank | 13,000 | – |
| Cash in Hand | 850 | – |
| 2,04,950 | 2,04,950 |
Charge depreciation on Land and Building Account at 2-1/2% p.a. on plant and Machinery Account at 10% p.a. and on furniture & Fixtures Account at 10% p.a. Make a Provision of 5% on the Sundry Debtors for Doubtful Debts. Carry forward the following unexpired amount.
1. Fire Insurance RS 125.
2. Rates and Taxes RS 240.
3. Apprentice Premium RS 400.
Charge Interest Capital @ 5% p.a. but not on Drawings. The value of Stock as at 31st March 20X2 was agreed at RS 29,390.
Dr. For the year ending 31st March 20X2 Cr.
| Particular | RS | Particular | RS |
| To Opening Stock | 26,420 | By Sales 91, 230 | |
| To Purchases 42,160 | Less: Returns 1,760 | 89,470 | |
| Less: Returns 8,460 | 33,700 | B y Closing Stock | 29,390 |
| To Wages | 21,470 | ||
| To Carriage Inward | 4,370 | ||
| To Coal, Gas, & Water | 720 | ||
| To Gross c/d | 32, 180 | ||
| 1,18,860 | 1,18,860 | ||
| To Salaries | 4,670 | By Gross Profit b/d | 32,180 |
| To Bank Charges | 140 | By Discount | 120 |
| To Rates & Taxes 840 | By Apprentice premium 500 | ||
| Less: prepaid 240 | 600 | Less: Unexpired 400 | 100 |
| To Trade Expenses | 1,990 | By Bad debts Prov. 2,470 | |
| To Fire Insurance 490 | Less: New Provision 1,890 | 580 | |
| Less: prepaid 125 | 365 | ||
| To Depreciation on: | |||
| Land & Buildings 625 | |||
| Plant & Machinery 1,427 | |||
| Furniture & Fittings 125 | 2,177 | ||
| To Interest on Capital | 4,500 | ||
| To Net Profit transferred
To Capital A/c |
18, 538 | ||
| 32,980 | 32,980 |
| Liabilities | RS | Assets | RS |
| Sundry Creditors | 12,170 | Cash in Hand | 850 |
| Apprentice Premium | 400 | Cash at Bank | 13,000 |
| Capital: | Bills Receivable | 1,270 | |
| Opening Balance 90,000 | Sundry Debtors 37,800 | ||
| Add: Net Profit 18,538 | Less: Prov. For D/D 1,890 | 35,910 | |
| Add: Interest 4,500 | Closing Stock | 29,390 | |
| Less: Drawings 6,480 | 1,06,558 | Prepaid Insurance | 125 |
| Prepaid Rent & Taxes | 240 | ||
| Fixtures & Fittings 1,250 | |||
| Less: Depreciation 125 | 1,125 | ||
| Land & Buildings 25,000 | |||
| Less: Depreciation 625 | 24,375 | ||
| Plant & Machinery 14,270 | |||
| Less: Depreciation 1,427 | 12,843 | ||
| 1,19,128 | 1,19,128 |
In a burglary at the godown of Sh. Hansraj o the night of 14th July, 2009, part of the stock was stolen.
From the following Particular, find out the estimated value of Loss of stock by theft:
| Particular | Amount |
| Stock on 1st April, 2009 | 60,000 |
| Purchases from 1st April to 14th July, 2009 | 4,10,000 |
| Sales from 1st April to 14th July, 2009 | 6,00,000 |
| Stock remaining after burglary | 12,000 |
The normal rate of gross profit for his business in 30% of selling price .
| Particular | Amount | Particular | Amount |
| To Opening Stock | 60,000 | By Sales | 6,00,000 |
| To Purchases | 4,10,000 | By Closing Stock
(Balancing figure) |
50,000 |
| To gross profit @30% on Sales | 1,80,000 | ||
| 6,50,000 | 6,50,000 |
From the following particulars, prepare a Profit and Loss Account for the year ending 31st December, 2009:-
| Particular | Amount | Particular | Amount |
| Gross Profit | 2,10,500 | Discount Allowed | 3,000 |
| Trade Expenses | 2,000 | Lighting | 780 |
| Carriage on Sales | 10,000 | Commission Received | 840 |
| Office Salaries | 15,800 | Bad debts | 1,200 |
| Postage and Telegram | 720 | Discount Cr. | 600 |
| Office Rent | 7,500 | Interest on Loan | 2,200 |
| Legal Charges | 400 | Stable Expenses | 1,400 |
| Audit Fee | 1,600 | Export duty | 2,300 |
| Donation | 1,100 | Miscellaneous Receipt | 500 |
| Sundry Expenses | 360 | Unproductive Expenses | 4,100 |
| Selling Expenses | 5,320 | Travelling Expenses | 2,500 |
For the year ending on 31st December 2009
| Particular | Amount | Particular | Amount |
| To Trade expenses | 2,000 | By Gross Profit | 2,10,000 |
| T Carriage on Sales | 10,000 | By Commission received | 840 |
| To Office salaries | 15,800 | By Discount | 600 |
| To Postage & Telegram | 720 | By Miscellaneous | 500 |
| To Office Rent | 7,500 | ||
| To Legal charges | 400 | ||
| To Audit fee | 1,600 | ||
| To Donation | 1,100 | ||
| To Sundry Expenses | 360 | ||
| To Selling Expenses | 5,320 | ||
| To Discount Allowed | 3,000 | ||
| To Lighting | 780 | ||
| To Bad – debts | 1,200 | ||
| To interest on Loan | 2,200 | ||
| To Stable Expenses | 1,400 | ||
| To Export Duty | 2,300 | ||
| To Unproductive expenses | 4,100 | ||
| To Travelling Expenses | 2,500 | ||
| To Net Profit transferred to Capital Account | 1,50,160 | ||
| 2,12,440 | 2,12,440 | ||
| Liabilities | Amount | Assets | Amount |
| Current Liabilities:- | Current Assets:- | ||
| Bank Overdraft | Cash in Hand | ||
| Bills payables | Cash at Bank | ||
| Sundry Creditors | Bills Receivable | ||
| Outstanding Expenses | Short Term Insurance | ||
| Discount Inwards | Sundry Debtors | ||
| Fixed Liabilities:- | Closing Stock:- | ||
| Long term Loan | Prepaid Expenses | ||
| Reserve Capital | Accrued Income | ||
| Add: Net Profit | Fixed Assets:- | ||
| Less: Drawings | Furniture | ||
| Less: Income Tax | Loose Tools | ||
| Less: Life Insurance premium | Motor Vehicle | ||
| Long Term Insurance | |||
| Plant & Machinery | |||
| Land & Buildings | |||
| Patents | |||
| Goodwill |
Given Below is the Trial Balance of Sh Gopi Chand as on 31st March 2010.Yo are required to prepare a Trading and Profit Loss Account for the year ended 31st March 2010 and Balance sheet as at that date.
| Debit Balances | Amount | Credit Balances | Amount |
| Opening Stock | 45,000 | Sundry Creditors | 22,100 |
| Purchases | 1,20,000 | Returns outwards | 2,500 |
| Returns Inwards | 3,200 | Sales | 3,50,000 |
| Carriage Inwards | 2,400 | Capital | 2,00,000 |
| Carriage Outwards | 1,500 | Loan from Bank | 24,000 |
| Office Furniture | 8,000 | Discount Received | 2,000 |
| Sundry Debtors | 68,000 | Commission | 1,600 |
| Dock charges | 5,000 | ||
| Electric Power | 10,000 | ||
| Fuel, Gas ,And Water | 12,000 | ||
| Bad –Debts | 1,100 | ||
| Advertisement | 25,000 | ||
| Salary | 36,000 | ||
| Cash in Hand | 8,100 | ||
| Cash at Bank | 30,000 | ||
| Motor Vehicles | 58,000 | ||
| Motor repairs | 3,000 | ||
| Interest on Bank loan | 2,400 | ||
| Rent and Insurance | 24,500 | ||
| Business Premises | 1,06,000 | ||
| Household Expenses | 33,000 | ||
| 6,02,200 | 6,02,200 |
Stock at the end RS 75,000.
For the year ending 31st March 2010.
Dr. Cr.
| RS | RS | ||
| To Opening Stock | 45,000 | By Sales 3,50,000 | |
| To Purchases 1,20,000 | Less: Return Inwards 3,200 | 3,46,800 | |
| Less: Returns Outwards 2,500 | 1,17,500 | By Closing stock | 75,000 |
| To Carriage Inwards | 2,400 | ||
| To Dock charges | 5,000 (1) | ||
| To Electric Power | 10,000 | ||
| To Fuel, gas and Water | 12,000 | ||
| To Gross Profit c/d | 2,29,900 | ||
| 4,21,800 | 4,21,800 | ||
| To Carriage Outwards | 1,500 | By Gross profit b/d | 20,29,900 |
| To Bad –debts | 1,100 | By Discount | 2,000 |
| To Advertisement | 25,000 | BY Commission | 1,600 |
| To Salary | 36,000 | ||
| To Motor repairs | 3,000 | ||
| To Interest on Bank Loan | 2,400 | ||
| To Rent and Insurance | 224,500 | ||
| To Net profit transferred to
Capital A/c |
1,40,000 | ||
| 2,33,500 | 2,33,500 |
As on 31st March 2010
| Liabilities | Amount | Assets | Amount |
| Loan from Bank | 24,000 | Cash in Hand | 8,100 |
| Sundry Creditors | 22,100 | Cash at Bank | 30,000 |
| Capital 2,00,000 | Sundry Debtors | 68,000 | |
| Add: Net Profit 1,40,000 | Closing stock | 75,000 | |
| 3,40,000 | |||
| Less: Drawings
(Household Expenses) 35,000 |
3,07,000 | Office furniture | 8,000 |
| Motor Vehicle | 58,000 | ||
| Business Premises | 1,06,000 | ||
| 3,53,100 | 3,53,100 |
From the following balance taken from the of book of Sh. Murli Manohar prepare rading and profit and loss Account for the year ended 31st March 2010. And a balance sheet as on that date. Stock in Hand on 31st March 2010. Was RS 56,000.
| Name of Account | Dr, Balance | Cr. Balance |
| Stock at Commencement | 15,320 | |
| Purchases and Sales | 1,00,00 | 1,20,000 |
| Returns | 2,200 | 3,000 |
| Drawing and Capital | 10,000 | 1,30,000 |
| Rtage | 2,200 | |
| Factory heating and Lighting | 6,600 | |
| Factory Expenses | 15,200 | |
| Rent Received | 7,300 | |
| Cash at shop | 800 | |
| Account Receivable | ||
| Kapil | 8,000 | |
| Jadeja | 5,000 | |
| Yadav | 1,500 | |
| Account Payable | ||
| Parbhakar | 16,000 | |
| Tendulkar | 7,540 | |
| Horses and Carts | 25,000 | |
| B/R and B/P | 10,000 | 2,120 |
| Rent Paid | 15,000 | |
| Fire Insurance premium | 4,800 | |
| Life Insurance Premium | 6,000 | |
| Bank Overdraft | 67,000 | |
| Bank Interest | 2,400 | |
| Telephone Expenses | 3,000 | |
| Advertisement Expenses | 52,00 | |
| Salaries and Wages | 32,240 | |
| Freehold Property | 81,000 | |
| Audit fees | 1,500 | |
| 3,52,960 | 3,52,960 |
For the year ending 31st March 2010.
| Amount | Amount | ||
| To Opening Stock | 15,320 | By sales 1,20,000 | |
| To Purchases 1,00,000 | Less: Return Inwards 2,200 | 1,17,800 | |
| Less: Return Outwards 3,000 | 97,000 | By Closing Stock | 56,000 |
| To Cartage | 2,200 | ||
| To Factory Heating & Lighting | 6,600 | ||
| To Works Expenses | 15,200 | ||
| To Gross Profit c/d | 37,480 | ||
| 1,73,800 | 1,73,800 | ||
| To Rent | 15,000 | BY Gross profit b/d | 37,480 |
| To Fire Insurance premium | 4,800 | BY Rent Received | 7,300 |
| To Bank Interest | 2,400 | BY Net loss transferred to Capital Account | 19,360 |
| To Telephone Expenses | 3,000 | ||
| To Advertisement Expenses | 5,200 | ||
| To Salaries Expenses | 32,240 | ||
| To Audit Fees | 1,500 | ||
| 64,140 | 64,140 |
As on 31st March 2010.
| Liabilities | Amount | Assets | Amount |
| Bank overdraft | 67,000 | Cash at shop | 800 |
| B/P | 2,120 | B/R | 10,000 |
| Account Payable | Account Receivable: | ||
| Parbhakar 16,000 | Kapil 8,000 | ||
| Tendulkar 7,540 | Jadeja 5,000 | ||
| Capital 1,30,000 | Yadav 1,500 | 14,500 | |
| Less: Net loss 19,360 | Closing Stock | 56,000 | |
| 1,10,640
|
Horses &Carts | 25,000 |
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