Practical Problem 03
Practical Problem | Q 3 | Page 56
From the following Trial Balance and adjustments given below of Reena and Aarti, 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 | |||
Particular | ₹ | Particular | ₹ |
Purchases | 35,500 | Sales | 58,200 |
Sundry Debtors | 40,000 | Sundry Creditors | 25,700 |
Sales Returns | 1,000 | Purchases Return | 500 |
Opening Stock | 18,100 | R.D.D | 800 |
Bad debts | 500 | Discount | 50 |
Land & Building | 25,000 | Commission | 250 |
Furniture | 20,000 | Capital : | |
Discount | 1,000 | Reena | 50,000 |
Royalties | 700 | Aarti | 30,000 |
Rent | 1,900 | ||
Salaries | 3,000 | ||
Wages | 800 | ||
Insurance | 1,500 | ||
Drawings : | |||
Reena | 2,000 | ||
Aarti | 1,000 | ||
Cash at Bank | 11,500 | ||
Cash in Hand | 2,000 | ||
1,65,500 |
| 1,65,500 | |
Adjustments : |
1) Closing Stock valued at ₹ 22,000. |
2) Write off ` 900 for Bad & doubtful debts and create a provision for Reserve for |
Doubtful debts ₹ 1,000. |
3) Create a provision for Discount on Debtors @ 3% and creditors @ 5%. |
4) Outstanding Expenses – Wages ₹ 700 and Salaries ₹ 800. |
5) Insurance is paid for 15 months, w.e.f. 1st April 2018 |
6) Depreciate Land and Building @ 5% |
7) Reena & Aarti are Sharing Profits & Losses in their Capital Ratio |
Solution:
In the books of Reena and Aarti
Dr Trading and Profit and loss accounts for the year ended 31st March,2019 . Cr | |||||
Particular | ₹ | ₹ | Particular | ₹ | ₹ |
To Opening Stock | 18,100 | By sales | 58,200 | ||
To Purchase | 35,500 | Less: Sales Return | -1,000 | 57,200 | |
Less: Return | -500 | 35,000 | |||
To Royalty | 700 | ||||
To Wages | 800 | By Closing Stock | 22,000 | ||
Add: O/s Wages | 700 | 1500 | |||
To Gross Profit C/d | 23,900 | ||||
79,200 | 79,200 | ||||
To Bad Debts | 500 | By Gross Profit b/d | 23,900 | ||
Add: New Bad Debts | 900 | By Discount | 50 | ||
Add: New RDD | 1,000 | By Commission | 250 | ||
2,400 | BY Discount on Creditor | 1285 | |||
Less: Old RDD | -800 | 1,600 | |||
To RFDD | 1,143 | ||||
To Discount | 1,000 | ||||
To Rent | 1,900 | ||||
To Salaries | 3,000 | ||||
Add: O/S Salaries | 800 | 3,800 | |||
To Insurance | 1,500 | ||||
Less: Pre Paid Insurance | -300 | 1,200 | |||
To Dep on Land & Building | 1250 | ||||
To Net Profit C/d | |||||
REENA CAPITAL A/C | 8,495 | ||||
ARTI CAPITAL A/C | 5097 | 13592 | |||
25,485 | 25,485 | ||||
Dr Partners Capital A/c Cr | |||||
Particular | Reena | Aarti | Particular | Reena | Aarti |
To Drawing | 2,000 | 1,000 | By Bal B/d | 50,000 | 30,000 |
BY Net Profit | 8495 | 5097 | |||
To bal C/d | 56,495 | 34,097 | |||
58495 | 35097 | 58495 | 35097 | ||
Balance Sheet as on 31st March,2019 . | |||||
Liabilities | ₹ | ₹ | Asset | ₹ | ₹ |
Capital A/c | Land & Building | 25,000 | |||
Reena | 56,495 | Less: Depreciation @ 5% | -1250 | 23,750 | |
AARTI | 34,097 | 90,592 | Furniture | 20,000 | |
Sundry Creditor | 25,700 | Sundry Debtor | 40,000 | ||
Less: RFDC@5% | -1285 | 24,415 | Less: Bad Debts | -900 | |
O/S Wages | 700 | 39,100 | |||
O/S SALARIES | 800 | Less: RDD | -1000 | ||
38,100 | |||||
Less: RFDD @ 3% | -1143 | 36,957 | |||
Cash at Bank | 11,500 | ||||
Cash in Hand | 2,000 | ||||
Closing Stock | 22,000 | ||||
Prepaid Insurance | 300 | ||||
1,16,507 | 1,16,507 | ||||
Working Notes:
(1) Insurance premium ₹ 1,500 is paid for 15 months i.e. prepaid insurance premium for 3 months = ₹ 300.
(2) Reserve for Discount on Debtors = 3% on (Debtors – New Bad debts – New Reserve)
= 3% x (40000 – 900 – 1000)
= 3% x (40000 – 1900) = 3% x 38100
= ₹ 1143
(3) Reserve for Discount on Creditors = 5% on (Value of Creditors) = 5% x 25700 = ₹ 1285.
(4) Profit and Loss ratio = Capital ratio = 50,000: 30,000 = 5: 3.