Practical Problem 02
Practical Problem | Q 2 | Page 55
From the following Trial Balance of M/S Mitesh and Mangesh, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March 2019, and Balance Sheet as on that date.
Trial Balance as on 31st March 2019
Trial Balance | |||
Debit Balance | ₹ | Credit Balance | ₹ |
Stock as on (1/4/2018) | 25,000 | Sundry Creditors | 38,000 |
Building | 48,500 | Sales | 1,75,000 |
Carriage | 1,780 | Capital : | |
Factory Insurance | 2,700 | Mitesh | 1,50,000 |
Postage | 1,600 | Mangesh | 50,000 |
Bills Receivable | 13,700 | Outstanding Salaries | 2,000 |
Sundry Debtors | 52,200 | Bills Payable | 18,000 |
Return Inward | 1,600 | Return outward | 1,800 |
Purchases | 68,900 | Current A/c : | |
Audit fees | 1,800 | Mitesh | 3,000 |
Loose tools | 32,000 | Mangesh | 2,000 |
Manufacturing Expenses | 1,820 | ||
Electricity Charges | 2,600 | ||
General Expenses | 3,400 | ||
Export duty | 1,000 | ||
Cash in hand | 75,000 | ||
Bank Balance | 29,000 | ||
Conveyance | 4,100 | ||
Furniture | 64,000 | ||
Salaries | 2,000 | ||
Rent, Rate & Taxes | 3,700 | ||
Drawings : | |||
Mitesh | 1,200 | ||
Mangesh | 2,200 | ||
| 4,39,800 |
| 4,39,800 |
Adjustments : |
1) Mitesh and Mangesh are sharing Profit and losses in the ratio 3:1. |
2) Partners are entitled to get Commission @ 1% each on Gross Profit. |
3) The closing stock is valued at ₹ 23,700. |
4) Outstanding Expenses – Audit fees ₹ 400; carriage ₹ 600. |
5) Building is valued at ₹ 46,500. |
6) Furniture is depreciated by 5%. |
7) Provide Interest on Partner’s capital at 2.5% pa. |
8) Goods of ₹ 900 were taken by Mangesh for his personal use. |
9) Write off ₹ 1,000 as Bad Debts and maintain R.D.D at 3% on Sundry Debtors |
SOLUTION
In the books of M/S Mitesh and Mangesh | |||||
Dr Trading and Profit and loss accounts for the year ended 31st March, . Cr | |||||
Particular | ₹ | ₹ | Particular | ₹ | ₹ |
To Opening Stock | 25,000 | By Sales | 1,75,000 | ||
To Purchase | 68,900 | Less: Return Inward | -1,600 | 1,73,400 | |
Less: Return Outword | -1,800 | 67,100 | |||
To Carriage | 1,780 | By Goods withdrawn by Mangesh | 900 | ||
Add: Outstanding | 600 | 2,380 | |||
To Factory Insurance | 2,700 | By Closing Stock | 23,700 | ||
To Manufacturing Expenses | 1,820 | ||||
To Gross Profit c/d |
| 99,000 | |||
1,98,000 | 1,98,000 | ||||
To Postage | 1,600 | By Gross Profit b/d |
| 99,000 | |
To Audit fees | 1,800 | ||||
Add: outstanding | 400 | 2,200 | |||
To Electricity Charges | 2,600 | ||||
To General Expenses | 3,400 | ||||
To Export duty | 1,000 | ||||
To Conveyance | 4,100 | ||||
To Salaries | 2,000 | ||||
To Rent, Rate & Taxes | 3,700 | ||||
To Bad debts (Adj) | 1,000 | ||||
Add: RDD (Adj) | 1536 | 2,536 | |||
To Depreciation on Building | 2,000 | ||||
To Depreciation on Furniture | 3,200 | ||||
To Commission | |||||
Mitesh | 990 | ||||
Mangesh | 990 | 1,980 | |||
To Interest on Capital | |||||
Mitesh | 3,750 | ||||
Mangesh | 1,250 | 5,000 | |||
To Net Profit | |||||
Mitesh | 47,763 | ||||
Mangesh | 15,921 | 63,684 | ` | ||
99,000 | 99,000 | ||||
Dr Partners Current A/c Cr | |||||
Particular | Mitesh | Mangesh | Particular | Mitesh | Mangesh |
To Drawing | 1,200 | 2,200 | BY Bal b/d | 3,000 | 2,000 |
To Goods Withdrawn | 900 | By Commission to partner | 990 | 990 | |
By Interest on Capital | 3,750 | 1,250 | |||
By Net Profit | 47,763 | 15,921 | |||
To Balance C/d | 54,303 | 17,061 | |||
55,503 | 20,161 | 55,503 | 20,161 | ||
Balance Sheet as on 31st March, 2019 . | |||||
Liabilities | ₹ | ₹ | Asset | ₹ | ₹ |
Capital : | Building | 48,500 | |||
Mitesh | 1,50,000 | Less: Depreciation | -2,000 | 46,500 | |
Mangesh | 50,000 | 2,00,000 | Loose tools | 32,000 | |
Furniture | 64,000 | ||||
Current Account : | Less: Depreciation @ 5% | -3,200 | 60,800 | ||
Mitesh | 54,303 | Bills Receivable | 13,700 | ||
Mangesh | 17,061 | 71,364 | Sundry Debtors | 52,200 | |
Sundry Creditors | 38,000 | Less: Bad Debts (adj) | -1,000 | ||
Outstanding Salaries | 2,000 | 51,200 | |||
Bills Payable | 18,000 | Less: RDD @ 3% | -1,536 | 49,664 | |
Outstanding Audit fees | 400 | Cash in hand | 75,000 | ||
Outstanding Carriage | 600 | Bank Balance | 29,000 | ||
Closing Stock | 23,700 | ||||
3,30,364 | 3,30,364 | ||||
Working Notes:
(1) In this problem, Current Account balances are given. So, the total amount of fixed capital is directly shown on the Liabilities side of the Balance Sheet. Effects of adjustments related to the commission to partners, interest on capital, goods withdrawn by Mangesh are given in the Current Account. Closing balances of Current Account are shown separately on the Liability side of the Balance Sheet.
(2) Building is valued at ₹46,500 whereas the opening balance of the Building given is ₹ 48,500. Therefore, the difference of the amount of ₹2,000 (48,500 – 46,500) is nothing but Depreciation charged on Building.
(3) Return Inward ⇒ Sales Return
Return Outward ⇒ Purchase Return
(4) Commission payable to partners:
Mitesh 1% on Gross Profit = (1/100) x 99000 = ₹ 990/-
Mangesh 1% on Gross Profit = (1/100) x 99000 = ₹ 990/-