Question

Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss account and a balance sheet as on March 31, 2017.

Account Title	Amount (₹)	Account Title	Amount (₹)
Opening stock	2,26,000	Sales	6,80,000
Purchases	4,40,000	Return outwards	15,000
Drawings	75,000	Creditors	50,000
Buildings	1,00,000	Bills payable	63,700
Motor van	30,000	Interest received	20,000
Freight inwards	3,400	Capital	3,50,000
Sales return	10,000
Trade expense	3,300
Heat and Power	8,000
Salary and Wages	5,000
Legal expense	3,000
Postage and Telegram	1,000
Bad debts	6,500
Cash in hand	79,000
Cash at bank	98,000
Sundry debtors	25,000
Investments	40,000
Insurance	3,500
Machinery	22,000
	11,78,700		11,78,700

The following additional information is available:

1. Stock on December 31, 2017 was ₹ 30,000.
2. Depreciation is to be charged on building at 5% and motor van at 10%.
3. Provision for doubtful debts is to be maintained at 5% on Sundry Debtors.
4. Unexpired insurance was ₹ 600.
5. The Manager is entitled to a commission @ 5% on net profit before charging such commission.

Answer 1

Dr.	Trading Account				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Opening Stock		2,26,000	By Sales	6,80,000	6,70,000
To Purchases	4,40,000	4,25,000	Less: Sales Return	10,000
Less: Returns Outwards	15,000		By Closing Stock		30,000
To Freight Inwards		3,400
To Heat and Power		8,000
To Gross Profit c/d		37,600
		7,00,000			7,00,000

 

Dr.	Profit and Loss Account			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Trade Expenses		3,300	By Gross Profit b/d	37,600
To Salary and Wages		5,000	By Interest Received	20,000
To Legal Expenses		3,000
To Postage and Telegram		1,000
To Bad Debts	6,500	7,750
Add: New Provision	1,250
To Insurance	3,500	2,900
Less: Prepaid	600
To Depreciation on Building		5,000
To Depreciation on Motor Van		3,000
To Manager’s commission		1,269
To Net Profit		25,381
		57,600		57,600

 

Balance Sheet
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital	3,50,000	3,00,381	Cash in Hand		79,000
Add: Net Profit	25,381		Cash at Bank		98,000
	3,75,381		Buildings	1,00,000	95,000
Less: Drawings	75,000		Less: Depreciation	5,000
Creditors		50,000	Motor Van	30,000	27,000
Bills Payable		63,700	Less: Depreciation	3,000
Manager’s Commission Outstanding		1,269	Sundry Debtors	25,000	23,750
			Less: New Provision	1,250
			Investments		40,000
			Machinery		22,000
			Prepaid Insurance		600
			Closing Stock		30,000
		4,15,350			4,15,350