Question

Given below is the Trial Balance of M/s. Shailesh and Nilesh as on 31st March, 2016. You are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2016 and Balance Sheet as on that date :

Trial Balance
as on 31.03.2016

Debit Balances	Amount	Credit Balances	Amount
Opening stock	88,000	Capital accounts :
Purchase	1,76,000	Shailesh	1,20,000
Wages	23,500	Nilesh	1,20,000
Salaries (10 months)	18,000	Sundry creditors	1,03,000
Office expenses	8,000	Bank overdraft	60,000
Bank charges	2,600	Sales	3,08,000
Machinery	90,000	Current accounts :
Land and building	1,30,000	Shailesh	5,000
Bad debts	4,000	Nilesh	4,000
Sundry debtors	82,000
Electricity charges	9,900
Furniture	43,000
8% Debentures (1.10.2015)	40,000
Drawings :
Shailesh	3,000
Nilesh	2,000
	7,20,000		7,20,000

Adjustments :
1. Stock on 31^st March, 2016 was valued at market price of Rs 84,000, which was 20% above its cost price.
2. Depreciate machinery at 10% p.a.
3. Create reserve for bad and doubtful debts at 5% on sundry debtors.
4. Provide interest on capital at 8% p.a.
5. Machinery includes purchase of machinery for Rs 40,000 on 1^st January, 2016.

Answer 1

M/S Shailesh and Nilesh

Trading for the year ended 31st March 2016,

Particulars	Rs.	Rs.	Particulars	Rs.	Rs.
To Opening Stock		88,000	By Sales		308,000
To Purchases		176,000	By Closing Stock		70,000
To wages		23,500
To Gross Profit c/d		90,500
		378,000			378,000

 

Profit and Loss A/c for the year ended 31st March, 2016

Particulars	Rs.	Rs.	Particulars	Rs.	Rs.
To Bad debts	4,000		By Gross Profit b/d		90,500
Add: N.R.D.D.	4,100	8,100	By Interest on Debentures		1,600
To Salaries	18,000
Add: Outstanding	3,600	21,600
To Office Expenses		8,000
To Bank Charges		2,600
To Electricity Charges		9,900
To Depreciation on Machinery		6,000
To Interest on Capital
Shailesh	9,600
Nilesh	9,600	19,200
To Net Profit:
Shailesh Current A/c	8,350
Nilesh Current A/c	8,350	16700
		92100			92100

 

Partners Current A/c

Particulars	Shailesh	Nilesh	Particulars	Shailesh	Nilesh
To Drawings	3,000	2,000	By Balance b/d	5,000	4,000
To Balance c/d	19,950	19,950	By Interest on Capital	9,600	9,600
			By Profit and Loss A/c	8,350	8,350
	22,950	21,950		22,950	21,950

 

Balance Sheet as on 31st March, 2016.

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Partners Capital A/c			Land and Building		130000
Shailesh	120,000		Machinery	90000
Nilesh	120,000	240,000	Less: Depreciation	6000	84000
Partners’ Current A/c			Furniture		43000
Shailesh	19,950		Sundry Debtors	82000
Nilesh	19,950	39,900	Less: R.D.D.	4100	77900
Sundry Creditors		1,03,000	8% Debentures	40000
Bank Overdraft		60,000	Add: Interest	1600	41600
Outstanding Salaries		3,600	Closing Stock		70000
		446,500			446500

Working Note :
1. Market value of closing stock :
Market value of closing stock = 80,000
Cost value of closing stock = 84,000 x `100/120`
                                            = 700 x 100
                                            = Rs. 70,000
Closing stock is taken on market value or cost value whichever is lower.

2. Depreciation on machinery :
Old Machinery    = 50,000 x `10/100` = 5,000

 Purchase of new machinery 0n 1.1.16   = 40,000 x `10/100 xx 3/12` = 1,000
Total Depreciation = Rs. 6,000

3. Interest on debentures : 
= 40,000 x `8/100 xx 6/12` = 1600.

4) Reserve for doubtful debts :
Debtors                                = 82,000
( - ) R.D.D.[ 5% on 82,000]   =    4,100