Question

Rajan and Rohit are partners in partnership firm sharing profits and losses equally. You are required to prepare Profit and Loss Account for the year ended 31st March 2020 and Balance Sheet as on that date with the help of following information: 

Trial Balance as on 31st March 2020
Debit Balances	Amount (₹)	Credit Balances	Amount (₹)
Insurance	30,000	Capital Account:
Land and Building (Addition of 40,000 w.e.f. 1st July 2019)	1,00,000	Rajan	1,00,000
Salaries	10,000	Rohit	1,00,000
Export Duty	5,000	10% Bank loan (taken on 1st October 2019)	60,000
Interest	2,000	Bills payable	19,000
Furniture	80,000
Debtors	52,000
	2,79,000		2,79,000

Additional information:

1. Gross profit amounted to ₹ 69,000.
2. Insurance paid for 15 months w.e.f. 1st April 2019.
3. Depreciate land and building at 10% p.a. and furniture at 5% p.a.
4. Write off ₹ 2,000 for bad debts and maintain R.D.D. at 5% on sundry debtors.
5. Closing stock is valued at ₹ 69,000.

Answer 1

In the books of Rajan and Rohit
Dr.	Profit and Loss A/c for the year ended 31st march 2020			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Insurance	30,000	24,000	By Gross Profit b/d	69,000
Less: Prepaid	6,000
To Depreciation		13,000
Furniture	4,000
Land and Building	9,000
To Bad Debts	-	4,500
Add: Further bad debts	2,000
Add: New R.D.D.	2,500
To Salaries		10,000
To Export Duty		5,000
To Interest		2,000
To Interest on bank loan		3,000
To Net Profit c/d		7,500
Rajan	3,750
Rohit	3,750
		69,000		69,000

 

Balance Sheet as on 31st March 2020
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital A/c		1,03,750	Prepaid Insurance		6,000
Rajan	1,00,000		Land and Building	1,00,000	91,000
Add: Net Profit	3,750		Less: Depreciation (10%)	9,000
Rohit	1,00,000	1,03,750	Furniture	80,000	76,000
Add: Net Profit	3,750		Less: Depreciation (5%)	4,000
10% Bank loan (taken on 1st October 2019)	60,000	63,000	Debtors	52,000	47,500
Add: Interest on bank loan	3,000		Less: Further bad debts	2,000
Bills payable		19,000		50,000
			Less: R.D.D. (5%)	2,500
			Closing stock		69,000
		2,89,500			2,89,500

Working note:

i. Prepaid Insurance:

= `(30,000)/15 xx 3`

= 2,000 × 3

= ₹ 6,000

ii. Depreciation on Land and Building:

Opening = `60,000 xx 10/100` = ₹ 6,000

Additional = `40,000 xx 10/100 xx 9/12` = ₹ 3,000

Total depreciation = ₹ 6,000 + ₹ 3,000 = ₹ 9,000

iii. Interest on bank loan:

= `60,000 xx 10/100 xx 6/12`

= ₹ 3,000