Practical Problem 03

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.