Question

Ashok and Tanaji are Partners sharing Profits and Losses in the ratio 2 : 3 respectively. Their Trial Balance as on 21^st March, 2007 is given below. You are required to prepare Trading and Profit and Loss Account for the year ended 31^st March, 2007 and Balance Sheet as on that date after taking into account the given adjustments.

 Trial Balance as on 31 st March 2007

Receipts		Debit Amount  (Rs)	Particulars	Credit Amount  (Rs)
Purchases Patents Right Building Stock (1.04.2006) Printing and Stationery Sundry Debtors Wages and Salaries Audit fees Sundry Expenses Furniture 10% Investment (Purchased on 30.09.2006) Cash Provident Fund Contribution Carriage Inwards Travelling Expenses		98,000 4,000 1,00,000 15,000 1,750 35,000 11,000 700 3,500 8,000   10,000 4,000   800 1,300 2,700	Capitals :        Ashok        Tanaji Provident Fund Creditors Bank Loan Sales Reserve for Doubtful Debts Purchase Returns	30,000 40,000 7,000 45,000 12,000 1,58,000   250 3,500
		2,95,750		2,95,750

Adjustments:

1. Closing stock is valued at the cost of Rs. 15,000 while its market price is Rs. 18,000

2. On 31^st March, 2007 the stock of stationery was Rs. 500.

3. Provided reserve for bad and doubtful debts at 5% on debtors.

4. Depreciate building at 5% and patent rights at 10%.

5. Interest on capitals is to be provided at 5% p. a.

6. Goods worth Rs. 10,000 were destroyed by fire.

The Insurance company admitted a claim for Rs. 8,000. 

Answer 1

Financial Statements of Ashok and Tanaji
Trading Account  for the year ended March 31,2007
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Opening Stock			15,000	Sales	1,58,000
Purchases		98,000		Closing Stock	15,000
Less: Return Outwards		3,500
Less: Goods Lost		10,000	84,500
Carriage Inwards			1,300
Wages & Salaries			11,000
Gross Profit (Balancing Figure)			61,200
			1,73,000		1,73,000

 

Profit and Loss Account  for the year ended March 31, 2007
Dr.							Cr.
Particulars				Amount (Rs)	Particulars	Amount (Rs)
Printing & Stationery		1,750			Gross Profit	61,200
Less: Stock of stationery		500		1,250	Accrued Interest on Investment	500
Interest on Capital
Ashok		1,500
Tanaji		2,000		3,500
Depreciation on Building				5,000
Depreciation on Patents Right				400
Loss by Fire				2,000
New Provision for Doubtful Debts		1,750
Less: Old Provision		250		1,500
Audit Fees				700
Sundry Expenses				3,500
Provident Fund Contribution				800
Travelling Expenses				2,700
Net Profit transferred to Partners’ Capital A/c
Ashok			16,140
Tanaji			24,210	40,350
				61,700		61,700

 

Balance Sheet  as on March 31, 2007
Liabilities		Amount (Rs)	Assets			Amount (Rs)
Capital			Fixed Assets
Ashok	30,000		Building		1,00,000
Add: Interest on Capital	1,500		Less: Depreciation		5,000	95,000
Add: Profit	16,140	47,640	Patents Right		4,000
			Less: Depreciation		400	3,600
Tanaji	40,000		Furniture			8,000
Add: Interest on Capital	2,000		Current Assets
Add: Profit	24,210	66,210	Closing Stock			15,000
Provident Fund		7,000	Stock of Stationery			500
Bank Loan		12,000	Debtors	35,000
Current Liabilities			Less: Provision for Doubtful Debts	1,750		33,250
Creditors		45,000	Insurance Company			8,000
			Investment 10%	10,000
			Add: Accrued Interest	500		10,500
			Cash in Hand			4,000
		1,77,850				1,77,850

Note: Closing stock is valued at cost price or market price, whichever is less.

Working Notes:

WN1 Calculation of Provision for Doubtful Debts

\[\text{Provision for doubtful debts} = 35, 000 \times\frac{5}{100}= Rs 1,750\]

WN2 Calculation of Depreciation

\[\text{On Building} = 1, 00, 000 \times \frac{5}{100} = Rs 5,000\]

\[\text{On Patents Right} = 4, 000 \times \frac{10}{100} = Rs 400\]

WN3 Calculation of Interest on Capital

\[\begin{array}{ccl}\text{Interest on Ashok's Capital} & = & 30, 000 \times \frac{5}{100} = Rs 1,500 \\ \text{Interest on Tanaji's Capital} & = & 40, 000 \times \frac{5}{100} = Rs 2,000\end{array}\]

WN4 Calculation of Accrued Interest

\[\text{Accrued Interest on Investment} = 10, 000 \times \frac{10}{100} \times \frac{6}{12} = Rs 500\]

WN5 Distribution of Profit

\[\begin{array}{cl}\text{Ashok's Share} & = & 40, 350 \times \frac{2}{5}= Rs\ 16, 140 \\ \text{Tanaji's Share} & = & 40, 350 \times \frac{3}{5}= Rs\ 24, 210\end{array}\]