Question

Satish and Pramod are Partners. Prepare Trading Account and Profit and Loss Account for the year 31^st March 2019. You have to find out Gross Profit and Net Profit only.

Trial Balance as on 31^st March 2019

Debit Balance	Amount  ₹	Credit Balance	Amount ₹
Stock (1/4/2018)	8,700	Sales	68,000
Purchases	18,300	Dividend	2,000
Wages	1,000	Purchases Return	500
Insurance	800	Sundry Creditors	13,000
Unproductive Wages	1,400	10% Bank Loan (w.e.f. 1/7/2018)	8,000
Warehouse Rent	600
Carriage Outward	1,200	Other Receipts	1,000
Sales Return	600
Export Duty	1,400
Customs Duty	800
Sundry Debtors	40,000
Investments	15,700
Factory Rent	1,600
Postage & Telegram	400
	92,500		92,500

Adjustments:

1. The Closing Stock is valued at ₹ 15,400.
2. Outstanding Wages ₹ 500.
3. Create provision for Bad debts ₹ 800 and maintain R.D.D. 3% on Sundry Debtors.
4. Goods of ₹ 1,800 distributed as a free sample.
5. Goods of ₹ 2,000 were sold and delivered on 31^st March 2019 but no entry is passed in the Books of Account.

Answer 1

Dr.	In the books of Satish and Pramod Trading and Profit and Loss Account for the year ended on 31st March 2019						Cr.
Particulars		Amount ₹	Amount ₹	Particulars	Amount ₹	Amount ₹
To Opening Stock			8700	By Sales	68,000
To Purchases		18,300		(−) Sales Return	600
(−) Purchase Return		500	17,800		67,400
To Wages		1,000		(+) Unrecorded Sales	2,000	69,400
(+) O/s Wages		500	1,500	By Closing Stock		15,400
To Custom Duty			800	By Goods Distributed as Free Samples		1,800
To Factory Rent			1,600
To Gross Profit c/d			56,200
			86,600			86,600
To Advertisement Expenses			1,800	By Gross Profit b/d		56,200
To Insurance			800	By Dividend		2,000
To Unproductive Wages			1,400	By Other Receipts		1,000
To Carriage Outward			1,200
To Warehouse Rent			600
To Export Duty			1,400
To Postage & Telegram			400
To O/s Interest on Bank Loan			600
To R.B.D.D A/c		-
Bad debts		-
(+) New Bad debts		800
(+) New Reserve		1,236	2,036
To Net Profit (Transferred to Capital A/cs)
Satish		24,482
Pramod		24,482	48,964
			59,200			59,200

Working Notes and Adjustment:

(1)         

Balance Sheet as on 31st March, 2019

Liabilities	Amount ₹	Amount ₹	Assets	Amount ₹	Amount ₹
Capital A/c:			Sundry Debtors	40,000
Satish	24,482		(+) Unrecorded Sales	2,000
Pramod	24,482	48,964		42,000
			(−) New Bad debts	800
Sundry Creditor		13,000		41,200
10% Bank Loan (w.e.f. 1/7/2018)	8,000		(−) New R.D.D.  (3% of 41,200)	1,236	39,964
(+) O/s Interest	600	8,600	Investments		15,700
O/s Wages		500	Closing Stock		15,400
		71,064			71,064

(2) Closing stock: The adjustment with regard to the closing stock is done by (i) by crediting it to the trading and profit and loss account, and (ii) by showing it on the asset side of the balance sheet.

(3) Outstanding Expenses: The amount of outstanding expenses is (i) added to the total of expenses under a particular head for the purpose of preparing trading and profit and loss account, and (ii) shown on the liabilities side of the balance sheet.

(4) Goods distributed as free samples is an advertisement expense for business.

(5) Interest on 10% bank loan is calculated for 9 months (From 1.7.2018 to 31.3.2019)

I = `"PRN"/100 = 8,000 × 10/100 × 9/12` = ₹ 600.

(6) 

Sundry Debtors	40,000
Add: Unrecorded Sales	2,000
Less: Provision for Bad Debts	800
	41,200
Less: R.D.D. (New) (3 % of 41,200)	1,236
	39,964