Question

From the following Trial Balance of M/S Mitesh and Mangesh, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March 2019, and Balance Sheet as on that date.

Trial Balance as on 31st March 2019

Debit Balance	Amount (₹)	Credit Balance	Amount (₹)
Stock as on (1/4/2018)	25,000	Sundry Creditors	38,000
Building	48,500	Sales	1,75,000
Carriage	1,780	Capital:
Factory Insurance	2,700	Mitesh	1,50,000
Postage	1,600	Mangesh	50,000
Bills Receivable	13,700	Outstanding Salaries	2,000
Sundry Debtors	52,200	Bills Payable	18,000
Return Inward	1,600	Return outword	1,800
Purchases	68,900
Audit fees	1,800	Current A/c:
Loose tools	32,000	Mitesh	3,000
Manufacturing Expenses	1,820	Mangesh	2,000
Electricity Charges	2,600
General Expenses	3,400
Export duty	1,000
Cash in hand	75,000
Bank Balance	29,000
Conveyance	4,100
Furniture	64,000
Salaries	2,000
Rent, Rate & Taxes	3,700
Drawings:
Mitesh	1,200
Mangesh	2,200
	4,39,800		4,39,800

Adjustments :

1) Mitesh and Mangesh are sharing Profit and losses in the ratio 3: 1.
2) Partners are entitled to get Commission @ 1% each on Gross Profit.
3) The closing stock is valued at ₹ 23,700.
4) Outstanding Expenses - Audit fees ₹ 400; carriage ₹ 600.
5) The building is valued at ₹ 46,500.
6) Furniture is depreciated by 5%.
7) Provide Interest on Partner's capital at 2.5% pa.
8) Goods of ₹ 900 were taken by Mangesh for his personal use.
9) Write off ₹ 1,000 as Bad Debts and maintain R.D.D at 3% on Sundry Debtors.

Answer 1

Dr.	In the books of M/s. Mitesh and Mangesh Trading and Profit and Loss Account for the year ended on 31st March 2019						Cr.
Particulars		Amt ₹	Amt ₹	Particulars	Amt ₹	Amt ₹
To Opening Stock			25,000	By Sales	1,75,000
To Purchase		68,900		Less: Sales Return	1,600	1,73,400
(-) Purchase Return		1,800	67,100	By Closing Stock		23,700
To Factory Insurance			2,700	By Goods Withdrawn for personal use Mangesh		900
To Manufacturing Expenses			1,820
To Carriage		1,780
Add : O/s Carriage		600	2,380
To Gross Profit c/d			99,000
			1,98,000			1,98,000
To Postage			1,600	By Gross Profit b/d		99,000
To Audit Fees		1,800
Add: O/s Audit Fees		400	2,200
To Electricity Charges			2,600
To General Expenses			3,400
To Export Duty			1,000
To Conveyance			4,100
To Salaries			2,000
To Rent, Rate & Taxes			3,700
To Depreciation on:
Building		2,000
Furniture		3,200	5,200
To R.B.D.D. A/c
New Bad debts		1,000
Add: New Reserve		1,536	2,536
To Interest on Capital A/cs:
Mitesh		3,750
Mangesh		1,250	5,000
To Commission to Partners A/c:
Mitesh		990
Mangesh		990	1,980
To Net Profit (Transferred to Partners’ Current A/cs)
Mitesh		47,763
Mangesh		15,921	63,684
			99,000			99,000

 

Dr.		Partners’ Current Accounts				Cr.
Particulars		Mitesh	Mangesh	Particulars	Mitesh	Mangesh
To Drawings		1,200	2,200	By Balance b/d	3,000	2,000
To Additional Drawings (Goods)			900	By Profit and Loss A/c (Commission)	990	990
To Balance c/d		54,303	17,061	By Profit and Loss A/c (Interest on Capital)	3,750	1,250
				By Profit and Loss A/c	47,763	15,921
		55,503	20,161		55,503	20,161
				By Balance b/d	54,303	17,061

Balance Sheet as on 31st March 2019

Liabilities	Amount ₹	Amount ₹	Asset	Amount ₹	Amount ₹
Capital Accounts:			Building	48,500
Mitesh	1,50,000		(-) Depreciation	2,000	46,500
Mangesh	50,000	2,00,000	Bills Receivable		13,700
Current Accounts:			Sundry Debtors	52,200
Mitesh	54,303		(-) B.D. (New)	1,000
Mangesh	17,061	71,364		51,200
Sundry Creditors		38,000	(-) R.D.D. (New)	1,536	49,664
Bills Payable		18,000	Loose Tools		32,000
Outstanding expenses			Cash in Hand		75,000
Salaries	2,000		Bank Balance		29,000
Audit fees	400		Furniture	64,000
Carriage	600	3,000	(-) Depreciation	3,200	60,800
			Closing Stock		23,700
		3,30,364			3,30,364

Working Notes:

(1) In this problem, Current Account balances are given. So, the total amount of fixed capital is directly shown on the Liabilities side of the Balance Sheet. Effects of adjustments related to the commission to partners, interest on capital, goods are withdrawn by Mangesh are given in the Current Account. Closing balances of Current Account are shown separately on the Liability side of the Balance Sheet.

(2) Building is valued at ₹ 46,500 whereas the opening balance of the Building given is ₹ 48,500. Therefore, the difference of the amount of ₹2,000 (48,500 - 46,500) is nothing but Depreciation charged on Building.

(3) Return Inward ⇒ Sales Return
Return Outward ⇒ Purchase Return

(4) Commission payable to partners:

Mitesh = `1%  "on Gross Profit" = 1/100 × 99000/1` = ₹ 990.

Mangesh = `1% " on Gross Profit" = 1/100 × 99,000` = ₹ 990.