Question

Ram and Shyam are partners sharing profits and losses equally. You are required to prepare Profit and Loss Account and Balance Sheet only for the year ending 31^st March, 2022 from the information given below:

Trial Balance as on 31st March, 2022
Debit Balances	Amount (₹)	Credit Balances	Amount (₹)
Insurance	30,000	Capital Account:
Land and Building (Addition of T 40,000 w.e.f., 1st July, 2021)	1,00,000	Ram	1,00,000
Salaries	10,000	Shyam	1,00,000
Export Duty	5,000	10% Bank loan (taken on 1 October, 2021)	60,000
Rent	2,000	Interest	3,000
Furniture	80,000	Bills payable	16,000
Debtors	52,000
	2,79,000		2,79,000

Adjustments:

1. Closing stock was valued at ₹ 69,000.
2. Gross Profit amounted to ₹ 69,000.
3. Insurance paid for 15 months w.e.f. 1^st April, 2021
4. Depreciate Land and Building @ 10% p.a. and Fumiture @ 5% p.a.
5. Write off ₹ 2,000 for bad debts and Maintain R.D.D. @ 5% on Sundry Debtors.

Answer 1

In the books of Ram and Shyam
Dr.	Profit and Loss Account for the year ended 31st March, 2022.			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Insurance	30,000	24,000	By Gross Profit b/d (given)	69,000
Less: Prepaid for (3 months)	6,000		By Interest	3,000
To Salaries		10,000
To Export Duty		5,000
To Rent		2,000
To Depreciation on		13,000
Building	9,000
Furniture	4,000
To Interest on 10% Bank loan		3,000
To Bad debts (Adj.)	2,000	4,500
Add: To RDD (Adj.)	2,500
To Net Profit transferred to Partner’s Capital A/c in PSR		10,500
Ram	5,250
Shyam	5,250
		72,000		72,000

 

Balance Sheet for the year ended 31st March, 2022
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Account			Land and Building (Addition of  ₹ 40,000 on 1/7/21)	1,00,000	91,000
Ram	1,00,000	1,05,250	Less: Depn. @ 10% p.a.	9,000
Add: Net Profit	5,250		Furniture	80,000	76,000
Shyam	1,00,000	1,05,250	Less: Depn. @ 5% p.a.	4,000
Add: Net Profit	5,250		Debtors	52,000	47,500
10% Bank loan (Taken on 1st Oct. 2021)	60,000	63,000	Less: Bad-debts (Adj.)	2,000
Add: O/s Interest (6m)	3,000		Less: RDD @ 5% (Adj.)	50,000
Bills Payable		16,000	Prepaid insurance	2,500	6,000
			Closing stock		69,000
		2,89,500			2,89,500

Working Note:

(1) Insurance paid for 15 months. i.e. prepaid for 3 months

Insurance for 1 month = `(30,000)/15`

= ₹ 2,000

Prepaid insurance = ₹ 2,000 × 3 

= ₹ 6,000

(2) Depreciation on Land and Building

Total Depreciation ₹ 9,000

₹ 1,00,000 = 40,000 + 60,000

40,000 (1/7/2021) 

∴ `40,000xx10/100xx9/12` = ₹ 3,000

60,000 (1/4/2021) 

∴ `60,000xx10/100` = ₹ 6,000