Question

Satish and Pradeep are partners in a partnership firm, sharing profit and losses equally. From the following Trial Balance and Adjustment given below, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March 2013 and Balance sheet as on that date.

Balance Sheet as on 31st March 2013

Debit Balance	Amount (₹)	Credit Balance	Amount (₹)
Purchases	220000	Partners' Capital
Sundry Debtors	45000	Satish	120000
Discount	4000	Pradeep	90000
Opening stock	25000	Sales	430000
Wages and salaries	23000	Sundry Creditors	85000
Manufacturing expenses	25500	Discount	3500
Factory Building	175000
Plant and Machinery	75000
Advertisement (for 2 yrs w.e.f. 1.1.13)	10000
Salary and wages	45000
Cash in hand	15000
10 % Govt. Bonds (purchased on 01.07.2012)	60000
Warehouse Rent	6000
	728500		728500

Adjustments :

(1) The closing stock was valued at the market price at ₹ 92000, which is 15 % above its cost price.

(2) Depreciation machinery at 10 % p.a.

(3) Outstanding wages were ₹ 2500

(4) Maintain R.D.D. at 5 % on sundry debtors.

Answer 1

In the books of M/s Satish and Pradeep

Tradind A/c for the year ended 31.3.2013

Dr.                                                                                             Cr.

Particulars	Amount	Amount	Particulars	Amount	Amount
To Opening stock		25000	By Sales		430000
To Purchases		220000
To Wages and Salaries	23000	25500	By Closing Stock		80000
Add: Outstanding	2500
To Manufacturing expenses		25500
To Gross Profit C/d		214000
		510000			510000

Profit and Loss A/c
for the year ended 31.3.2013

Dr.                                                                                           Cr.

Particulars	Amount	Amount	Particulars	Amount	Amount
To Discount		4000	By Gross Profit C/d		214000
To Advertisement	10000	1250	By Discount		3500
Less: Prepaid	8750		By Interst on Govt. Bond		4500
To Salaries and Wages		45000
To Warehouse Rent		6000
To Depreciation on Machinery		7500
To R.D.D.		2250
To Net Profit Transferred to Partners Capital A/c
Satish Capital A/c	78000
Pradeep Capital A/c	78000	156000
		222000			222000

Partners’ Capital A/c

Dr.                                                                                           Cr.

Particulars	Satish	Pradeep	Particulars	Satish	Pradeep
			By Balance b/d	120000	90000
			By Profit and Loss A/c	78000	78000
To Balance C/d	198000	168000
	198000	168000		198000	168000

 

M/s Satish and Pradeep

Balance Sheet as on 31.3.13

Liabilities	Amount	Amount	Assets	Amount	Amount
Capital :			Sundry Debtors	45000
Satish	198000		Less: New R.D.D.	2250	42750
Pradeep	168000	366000	Factory Building		175000
Sundry Creditors		85000	Plant and Machinery	75000
Outstanding Wages		2500	Less: Depreciation	7500	67500
			Cash in Hand		15000
			10% Govt. Bond	60000
			Add: Interest on Bonds	4500	64500
			Prepaid Advertisements		8750
			Closing Stock		80000
		453500			453500

Working Notes:

1) Closing Stock:

Since market price is 15% above cost price, we value stock at cost price which is calculated as

cost = `"Market price"/115 xx 100 = "Rs." 80000`

2) Depreciation = Rs. 70000 x 10% = Rs. 7000

3) RDD = 5% x Debtors = Rs. 45000 = Rs. 2250

4) Interest accrued on Government Bond

`= 10% xx "Rs". 60000 xx 9/12 = "Rs". 4500`

5) Deferred Advertisement:

Since the advertisement has been paid for 2 years but only 1 quarter is in the current year, expenditure of 7 quarters is deferred Deferred expenditure = Rs. `10000 xx 7/8` = Rs. 8750

6) Distribution of Profit:

Mohini = Rs. `155000 xx 1/2` = Rs. 77500

Rohini  = Rs. `155000 xx 1/2` = Rs. 77500