Question

Sun and Moon are partners sharing profits and losses equally. From the following trial balance and additional information prepare trading and Profit and Loss Account for the year ended 31st march 2020 and balance sheet as on that date.

Trial Balance as on 31st March, 2020
Debit Balance	Amount (₹)	Credit Balance	Amount (₹)
Stock (1/4/2019)	65,000	General Reserve	14,500
Bills Receivable	28,000	Capital:
Wages and Salaries	9,000	Sun	1,60,000
Sundry Debtors	1,32,500	Moon	1,20,000
Bad-debts	1,000	Creditors	98,000
Purchases	1,48,000	R.D.D.	1,800
Motor car	68,000	Sales	2,85,500
Machinery	1,14,800	Outstanding Wages	700
Audit Fees	1,200	Purchases Returns	4,000
Sales Return	2,000	Discount	1,800
Discount	2,300
Building	75,000
Cash at Bank	12,000
10% Investment	20,000
Advertisement (Paid for 9 months)	4,500
Royalties	3,000
	6,86,300		6,86,300

Adjustment and Additional Information:

1. Closing Stock ₹ 40,000.
2. Depreciate Building and Machinery @ 5% and 3% respectively.
3. Bills Receivable included dishonoured bill of ₹ 3000.
4. Goods worth ₹ 1000 taken by sun for personal use was not entered in the books of accounts.
5. Write off ₹ 1800 as Bad debts and maintain R.D.D. at 5% on Sundry Debtors.
6. Goods of ₹ 6000 were sold but no entry was made in the books of accounts.

Answer 1

Dr.	In the Books of Sun and Moon Trading and Profit and Loss A/c for the year ended 31st March 2020				Cr.
Particulars		Amount (₹)	Particulars		Amount (₹)
To Opening Stock		65,000	By Sales	2,85,500	2,89,500
To Purchases	1,48,000	1,43,000	Add: Unrecorded Sales	6,000
Less: Purchase Return	4,000			2,91500
Less: Goods taken for personal use	1,000		Less: Sales Return	2,000
To Royalties		3,000	By Closing Stock		40,000
To Wages and Salaries		9,000
To Gross Profit c/d		1,09,500
		3,29,500			3,29,500
To Advertisement	4,500	6,000	By Gross Profit b/d		1,09,500
Add: o/s for 3 months	1,500		By Interest Accrued on Investment		2,000
To Audit fees		1,200	By Discount		1,800
To Depreciation on:
Building	3,750	7,194
Machinery	3,444
To Bad debts (old)	1,000	7,985
Add: New Bad Debts	1,800
Add: New RDD	6,985
	9,785
Less: RDD (old)	1,800
To Discount		2,300
To Net Profit (Transferred to Capital A/c's)
Sun	44,311	88,621
Moon	44,310
		1,13,300			1,13,300

 

Balance Sheet as on 31st March, 2020
Liabilities		Amount (₹)	Assets		Amount (₹)
Capitals: Sun	1,60,000	2,03,311	Building	75,000	71,250
Add: Net Profit	44,311		Less: Depreciation 5%	3,750
Less: (Goods taken over by sun of Personal use)	1,000		Machinery	1,14,800	1,11,356
Capital Moon	1,20,000	1,64,310	Less: Depreciation 3%	3,444
Add: Net Profit	44,310		Bills Receivable	28,000	25,000
General Reserve		14,500	Less: Bills Receivable Dishonoured	3,000
O/s Advertisement Exp. (3 months)		1,500	Motor Car		68,000
Creditors		98,000	Cash at Bank		12,000
Outstanding Wages		700	Closing Stock		40,000
			Sundry Debtors	1,32,500	1,32,715
			Add: Bills Receivable Dishonoured	3,000
				1,35,500
			Add: Unrecorded Sales	6,000
				1,41,500
			Less: Bad debts (New)	1,800
				1,39,700
			Less: RDD 5% (new)	6,985
			10% Investment	20,000	22,000
			Add: Interest Accrued	2,000
		4,82,321			4,82,321

Working Notes:

1. Adjustment No. 3, 5, and 6 are co-related with sundry debtors. So, while calculating RDD 5% on Sundry Debtors, Amount of dishonour of Bills ₹ 3,000 and goods sold but not recorded ₹ 6,000 will be added into the Sundry Debtors, then new Bad Debts will be deducted and then less RDD (New) 5% 6,985 after 5% RDD should be calculated.

1st effected Sundry Debtors	1,32,500
Add: Bills dishonoured	3,000
Add: Unrecorded sales	6,000
	1,41,500
Less: Bad debts (New)	1,800
	1,39,700
Less: R.D.D (New) 5%	6,985
(Shown on Assets side of Balance Sheet)	₹ 1,32,715

2.

2nd effected Sundry Debtors	1,000
Add: Bad debts (New)	1,800
Add: New RDD	6,985
	9,785
Less: RDD (Old)	1,800
(Shown on Debit side of Profit and Loss A/c)	₹ 7,985