Question

Amit bhai and Narendra bhai are in Partnership Sharing Profits and Losses equally. From the following Trial Balance and Adjustments given below, 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 ₹
Plant & Machinery	2,80,000	Capital A/c:
Factory Building	75,000	Amitbhai	3,50,000
Sundry Debtors	28,700	Narendrabhai	3,00,000
Purchases	85,500	Sales	1,80,000
Bad Debts	500	Bills Payable	8,500
Sales Return	2,200	Discount	1,200
10% Govt. Bond (Purchased on 1st Oct 2018)	40,000	Creditors	38,500
Import Duty	1,800	R.D.D.	2,700
Legal Charges	2,000	Bank Loan	15,000
Motive Power	12,000	Purchases Return	2,000
Warehouse Rent	1,800
Cash in Hand	20,000
Cash at Bank	70,000
Advertisement (for 2 years, w.e.f 1st Jan 2019)	10,000
Salaries	3,800
Rent	1,500
Drawings :
Amitbhai	2,400
Narendrabhai	3,200
Furniture	1,95,800
Bills Receivable	20,700
Freehold Property	41,000
	8,97,900		8,97,900

Adjustments:

1) Stock on hand on 31^st March 2019 was valued at  ₹ 43,000.

2) Uninsured goods worth ₹ 8,000 were stolen.

3) Create R.D.D at 2% on Sundry debtors.

4) Mr. Patil, our customer becomes insolvent and could not pay his debts of ₹ 500.

5) Outstanding Expenses - Rent ₹ 800 and Salaries ₹ 300

6) Depreciate Factory Building by ₹ 2,500 and Furniture by ₹ 1,800

Answer 1

In the books of Amitbhai and Narendrabhai

Dr.	Trading and Profit and Loss Account for the year ended on 31st March 2019
Particulars		Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Purchases		85,500		By Sales	1,80,000
(-) Purchase Return		2,000	83,500	(-) Sales Return	2,200	1,77,800
To Import Duty			1,800	By Goods Stolen Away		8,000
To Motive Power			12,000	By Closing Stock		43,000
To Gross Profit c/d			1,31,500
			2,28,800			2,28,800
To Warehouse Rent			1,800	By Gross Profit b/d		1,31,500
To R.B.D.D. A/C				By Discount		1,200
Bad debts		500		By O/s Interest on Govt. Bonds		2,000
(+) New Bad debts		500		By R.D.D. A/c (Excess Reserve)(2,700 – 1,564)		1,136
(+) New R.D.D.		564
		1564
(-) Old Reserve		2700
To Legal Charges			2,000
To Advertisement Expenses		10,000
(-) Prepaid Adv. Exp.		8,750	1,250
To Salaries		3,800
(+) O/s Salaries		300	4,100
To Rent		1,500
(+) O/s Rent		800	2,300
To Depreciation on:
Furniture		1,800
Factory Building		2,500	4,300
To Loss due to Theft			8,000
To Net Profit Transferred to Capital A/c:
Amitbhai		56,043
Narendrabhai		56,043	1,12,086
			1,35,836			1,35,836

Balance Sheet as on 31st March 2019

Liabilities	Amount ₹	Amount ₹	Assets	Amount ₹	Amount ₹
Capital Account:			Plant & Machinery		2,80,000
Amit bhai:			Factory Building	75,000
Opening Balance	3,50,000		(-) Depreciation	2,500	72,500
(+) Net Profit	56,043		Furniture	1,95,800
(-) Drawings	2,400	4,03,643	(-) Depreciation	1,800	1,94,000
Narendra bhai:			Closing Stock		43,000
Opening Balance	3,00,000		Sundry Debtors	28,700
(+) Net Profit	56,043		(-) B.D. (New)	500
(-) Drawings	3,200	3,52,843		28,200
Bills Payable		8,500	(-) R.D.D. (New)	564	27,636
Creditors		38,500	10 % Govt. Bond		40,000
Bank Loan		15,000	O/s Interest on Govt. Bond		2,000
O/s expenses:			Cash in Hand		20,000
Rent	800		Cash at Bank		70,000
Salaries	300	1,100	Prepaid Advertisement Expense		8,750
			Bills Receivable		20,700
			Freehold property		41,000
		8,19,586			8,19,586

Notes :

(1) Import duty and Motive power are recorded in the Trading A/c.

(2) 10% govt. bond is an investment. It was purchased on 1.10.2018.

∴  Interest is calculated for six months.

Interest on Govt. Bond = `40,000 ×  6/12 × 10/100` = ₹ 2,000

(3) Adv. exp. paid for 2 years from 01.01.2019. Up to 31.3.2019, 3 months adv. exp. is written off to Profit and Loss A/c. It is calculated as below:

`10,000 × 3/24` =  ₹ 1,250 

Prepaid adv. exp. = 10,000 – 1,250 = ₹ 8,750