From the following Trial Balance and adjustments given below of Reena and Aarti, 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 ₹ Purchases 35,500 Sales 58,200 Sundry Debtors 40,000 Sundry Creditors 25,700 Sales Returns 1,000 Purchases Returns 500 Opening Stock 18,100 R.D.D 800 Bad debts 500 Discount 50 Land and Building 25,000 Commission 250 Furniture 20,000 Capital: Discount 1,000 Reena 50,000 Royalties 700 Aarti 30,000 Rent 1,900 Salaries 3,000 Wages 800 Insurance 1,500 Drawings: Reena 2,000 Aarti 1,000 Cash at Bank 11,500 Cash in Hand 2,000 1,65,500 1,65,500 Adjustments : Closing Stock valued at ₹ 22,000. Write off ₹ 900 for Bad and doubtful debts and create a provision for Reserve for doubtful debts ₹ 1,000. Create a provision for Discount on Debtors @ 3% and creditors @ 5%. Outstanding Expenses - Wages ₹ 700 and Salaries ₹ 800. Insurance is paid for 15 months, w.e.f. 1st April 2018 Depreciate Land and Building @ 5% Reena & Aarti are Sharing Profits & Losses in their Capital Ratio.

Dr. In the books of Reena and Aarti Trading and Profit and Loss Account for the year ended on 31st March 2019 Cr. Particulars Amount ₹ Amount ₹ Particulars Amount ₹ Amount ₹ To Opening Stock 18,100 By Sales 58,200 To Purchases 35,500 Less: Sales Return 1,000 57,200 Less: Purchase Return 500 35,000 By Closing Stock 22,000 To Royalties 700 To Wages 800 Add: O/s Wages 700 1,500 To Gross Profit c/d 23,900 79,200 79,200 To Rent 1,900 By Gross Profit b/d 23,900 To Salaries 3,000 By Commission 250 Add: O/s Salaries 800 3,800 By Discount 50 To Insurance 1,500 By R.D.C. (New) 1,285 Less: Prepaid Ins. 300 1,200 To Depreciation on Land and Buildings 1,250 To R.B.D.D. A/c Bad debts 500 Add: New Bad debts 900 Add: New Reserve 1,000 2,400 Less: Old Reserve 800 1,600 To Reserve for Discount on Debtors A/c Discount 1,000 Add: New Reserve for Discount 1,143 2,143 To Net Profit (Transferred to Capital A/cs) Reena 8,495 Aarti 5,097 13,592 25,485 25,485 Balance Sheet as on 31st March 2019 Liabilities Amount ₹ Amount ₹ Assets Amount ₹ Amount ₹ Capital Account: Reena Land and Building 25,000 Opening Balance 50,000 Less: Depreciation 1,250 23,750 Add: Net Profit 8,495 Furniture 20,000 Less: Drawings 2,000 56,495 Closing Stock 22,000 Capital Account: Aarti Sundry Debtors 40,000 Opening Balance 30,000 Less: Bad Debts (New) 900 Add: Net Profit 5,097 39,100 Less: Drawings 1,000 34,097 Less: Provision for Doubtful Debts (New) 1,000 Sundry Creditors 25,700 38,100 Less: Provision for Discount on creditors 1,285 24,415 Less: Provision for Discount on Debtors 3% 1,143 36,957 Outstanding expenses Prepaid Insurance Premium 300 Wages 700 Cash at Bank 11,500 Salaries 800 1,500 Cash in Hand 2,000 1,16,507 1,16,507 Dr. Partner's Capital Account Cr. Particulars Reena Amount ₹ Aarti Amount ₹ Particulars Reena Amount ₹ Aarti Amount ₹ To Drawing 2,000 1,000 By Balance b/d 50,000 30,000 By Net profit b/d 8,495 5,097 By Balance c/d 56,495 34,097 58,495 35,097 58,495 35,097 Working Notes: (1) Insurance premium ₹ 1,500 is paid for 15 months i.e. prepaid insurance premium for 3 months = ₹ 300. (2) Reserve for Discount on Debtors = 3% on (Debtors – New Bad debts – New Reserve) `= 3/100 xx(40,000 – 900 – 1,000)` `= 3/100 xx(40,000 – 1,900)` `= 3/100 xx38100` = ₹ 1,143 (3) Reserve for Discount on Creditors = 5% on (Value of Creditors) = `5/100xx 25,700` = ₹ 1,285 (4) Profit and Loss ratio = Capital ratio = 50,000: 30,000 = 5: 3.

Practise Problems: From the following Trial Balance and adjustments given below of Reena and Aarti, you arerequired to prepare Trading and Profit and Loss

Question

From the following Trial Balance and adjustments given below of Reena and Aarti, 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 ₹
Purchases	35,500	Sales	58,200
Sundry Debtors	40,000	Sundry Creditors	25,700
Sales Returns	1,000	Purchases Returns	500
Opening Stock	18,100	R.D.D	800
Bad debts	500	Discount	50
Land and Building	25,000	Commission	250
Furniture	20,000	Capital:
Discount	1,000	Reena	50,000
Royalties	700	Aarti	30,000
Rent	1,900
Salaries	3,000
Wages	800
Insurance	1,500
Drawings:
Reena	2,000
Aarti	1,000
Cash at Bank	11,500
Cash in Hand	2,000
	1,65,500		1,65,500

Adjustments :

Closing Stock valued at ₹ 22,000.
Write off ₹ 900 for Bad and doubtful debts and create a provision for Reserve for doubtful debts ₹ 1,000.
Create a provision for Discount on Debtors @ 3% and creditors @ 5%.
Outstanding Expenses - Wages ₹ 700 and Salaries ₹ 800.
Insurance is paid for 15 months, w.e.f. 1^st April 2018
Depreciate Land and Building @ 5%
Reena & Aarti are Sharing Profits & Losses in their Capital Ratio.

Ledger

Solution

Dr.	In the books of Reena and Aarti Trading and Profit and Loss Account for the year ended on 31st March 2019						Cr.
Particulars		Amount ₹	Amount ₹	Particulars	Amount ₹	Amount ₹
To Opening Stock			18,100	By Sales	58,200
To Purchases		35,500		Less: Sales Return	1,000	57,200
Less: Purchase Return		500	35,000	By Closing Stock		22,000
To Royalties			700
To Wages		800
Add: O/s Wages		700	1,500
To Gross Profit c/d			23,900
			79,200			79,200
To Rent			1,900	By Gross Profit b/d		23,900
To Salaries		3,000		By Commission		250
Add: O/s Salaries		800	3,800	By Discount		50
To Insurance		1,500		By R.D.C. (New)		1,285
Less: Prepaid Ins.		300	1,200
To Depreciation on Land and Buildings			1,250
To R.B.D.D. A/c
Bad debts		500
Add: New Bad debts		900
Add: New Reserve		1,000
		2,400
Less: Old Reserve		800	1,600
To Reserve for Discount on Debtors A/c
Discount		1,000
Add: New Reserve for Discount		1,143	2,143
To Net Profit (Transferred to Capital A/cs)
Reena		8,495
Aarti		5,097	13,592
			25,485			25,485

Balance Sheet as on 31st March 2019

Liabilities	Amount ₹	Amount ₹	Assets	Amount ₹	Amount ₹
Capital Account: Reena			Land and Building	25,000
Opening Balance	50,000		Less: Depreciation	1,250	23,750
Add: Net Profit	8,495		Furniture		20,000
Less: Drawings	2,000	56,495	Closing Stock		22,000
Capital Account: Aarti			Sundry Debtors	40,000
Opening Balance	30,000		Less: Bad Debts (New)	900
Add: Net Profit	5,097			39,100
Less: Drawings	1,000	34,097	Less: Provision for Doubtful Debts (New)	1,000
Sundry Creditors	25,700			38,100
Less: Provision for Discount on creditors	1,285	24,415	Less: Provision for Discount on Debtors 3%	1,143	36,957
Outstanding expenses			Prepaid Insurance Premium		300
Wages	700		Cash at Bank		11,500
Salaries	800	1,500	Cash in Hand		2,000

		1,16,507			1,16,507

Dr.	Partner's Capital Account				Cr.
Particulars	Reena Amount ₹	Aarti Amount ₹	Particulars	Reena Amount ₹	Aarti Amount ₹
To Drawing	2,000	1,000	By Balance b/d	50,000	30,000
			By Net profit b/d	8,495	5,097
By Balance c/d	56,495	34,097

	58,495	35,097		58,495	35,097

Working Notes:

(1) Insurance premium ₹ 1,500 is paid for 15 months i.e. prepaid insurance premium for 3 months = ₹ 300.

(2) Reserve for Discount on Debtors

= 3% on (Debtors – New Bad debts – New Reserve)

`= 3/100 xx(40,000 – 900 – 1,000)`

`= 3/100 xx(40,000 – 1,900)`

`= 3/100 xx38100`

= ₹ 1,143

(3) Reserve for Discount on Creditors = 5% on (Value of Creditors)

= `5/100xx 25,700`

= ₹ 1,285

(4) Profit and Loss ratio = Capital ratio
= 50,000: 30,000
= 5: 3.

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Partnership Final Accounts

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Q 3.Q 2.Q 4.

Chapter 1: Introduction to Partnership and Partnership Final Accounts - Exercise 1.2 (Practical Problems) [Page 56]

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Chapter 1 Introduction to Partnership and Partnership Final Accounts
Exercise 1.2 (Practical Problems) | Q 3. | Page 56

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RELATED QUESTIONS

Rokadimal of Rajkot and Gunjal of Pune, entered into a Joint Venture to purchase and sale goods and agreed to share profit and losses in the proportion of 4 : 1 respectively.

Rokadimal sent goods of Rs 4,00,000 to Gunjal for sale.

Rokadimal paid Rs 11,500 for carriage.

Rokadimal drew a bill of Rs 95,000 on Gunjal, which he accepts.

Rokadimal discounted this bill with the bank for Rs 92,000.

The amount of discount is to be treated as joint venture expenditure.

Gunjal paid Rs 13,500 got advertisement.

Gunjal sold all the goods for Rs 5,00,000.

Gunjal paid Rs 7,000 for selling expenses and he is entitled for a commission on sales at 5% Co-venturers settled their accounts.

Give Journal Entries in the books of Gunjal of Pune.

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Debit balance of trading account.

Sanjay and Sudhir are partners sharing profit and losses in the ratio 3: 2. The Trial Balance of the firm on 31st March, 2010 was follows:

Trial Balance as on 31st March, 2010
Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
Opening stock	20,000	Capital A/c's
Purchases	30,000	Sanjay	40,000
Debtors	12,000	Sudhir	30,000
Wages	5,000	Sales	70,000
Salaries	10,000	Sundry Creditors	21,000
Land and building	30,000	Bills Payable	20,000
Plant and machinery	25,000	Discount	5,000
Furniture	16,000	Outstanding Rent	1,500
Advertisement (for 2 years)	6,000
Bills Receivable	8,000
Insurance	2,000
Drawings:
Sanjay	2,000
Sudhir	3,000
Cash in hand	5,500
Rent	10,000
Power and Fuel	3,000
	1,87,500		1,87,500

Adjustments:

1) Stock on hand on 31st March, 2010 was at Rs. 35,000.

2) Write off Rs. 2,000, for further Bad debts and maintain R.D.D. at 5% on debtors.

3) Depreciate Land and Building at 5% and Machinery at 10%.

4) Outstanding expenses were wages Rs 2,000 and salary Rs 1,000.

5) Credit purchases amounted to Rs 4,000 were not recorded in the books of accounts.

6) Provide interest on Partners Capital at 5% p.a.

From the above Trial Balance and adjustments prepare Trading and Profit and Loss Account for the year ended 31st March, 2010 and Balance Sheet as on that data.

From the following Trial Balance of M/s Mahesh and Umesh, 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. Profit sharing ratio of Mahesh and Umesh was 3/5th and 2/5th respectively.

Trial Balance as on 31^st March, 2013
Debit Balance	Amount (₹)	Credit Balance	Amount (₹)
Investments	56,000	Capital A/c:
Carriage	7,000	Mahesh	1,62,000
Loose Tools	17,000	Umesh	1,08,000
Building	1,50,000	Current A/c:
Salary	13,000	Mahesh	16,200
Audit fees	8,500	Umesh	10,800
Opening stock	83,000	Sundry Creditors	99,000
Wages	7,500	Sales	4,20,000
Purchases	1,97,000	Bank Overdraft	56,400
Motive Power	15,000
Bad Debts	6,400
Printing and Stationery	4000
Debtors	96,000
Cash at Bank	52,000
Machinery	72,000
Motor Van	88,000
	8,72,400		8,72,400

Adjustments:

1) Stock on hand on 31st March, 2013 was valued at Rs 76,000.

2) Interest on partner’s capital at 5% p.a. was allowed.

3) Goods worth Rs 2,000 and Rs 1,500 withdrawn by Mahesh and Umesh respectively for their personal use.

4) Mahesh is entitled to get salary of Rs 6,500 and Umesh is to be given 20% commission on sales.

5) Rs. 2,500 due from customer is not recoverable.

6) Depreciate Motor Van at 8% p.a. and Building at 7% p.a.

From the following Trial Balance of M/s Sanjay and Vijay, 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 after taking into consideration the adjustments given below.

Trial Balance as on 31^st March, 2013

Debit Balance	Amount Rs	Credit Balance	Amount Rs
Salaries and wages	12000	Sales	110000
Postage and Telegram	1,750	Sundry Creditors	72700
Opening Stock	23,500	Bills Payable	40000
Plant and Machinery	70,000	10% Bank loan (Taken on 1st Oct 2012)	60000
Advertisement	5,000	Outstanding Audit fees	5900
Import duty	2,100	Capital A/c-
Bad debts	1000	Sanjay	45000
Purchases	98500	Vijay	45000
Sundry Debtors	45800
Bills Receivable	16700
Carriage outward	1800
Wages and stationery (Note 2)	14000
Printing and stationery	4600
Cash in hand	1850
Leasehold Premises	80000
	378600		378600

Adjustments:
1) Closing stock was valued at Rs 30,000.

2) Postage stamps of Rs 250 and stationery of Rs 400 are unused.

3) Goods of Rs 2,500 distributed as free samples.

4) Leasehold property is to be run for 10 years w.e.f. 1st October, 2012.

5) Depreciate Plant and Machinery at 10% p.a.

6) Mr. Rajan, our customer become insolvent and could not pay his debts of Rs 1,500.

Following is the Balance sheet of Harsha and Versha’s firm on 31st March, 2016. They share profit and losses in the ratio of 3 : 2.

Balance sheet as on 31st March, 2016
Liabilities	Amount (₹)	Assets	Amount (₹)
Capital A/c:		Land & building	2,00,000
Harsha	2,80,000	Furniture	76,000
Varsha	2,80,000	Sundry debtors	3,00,000
Sundry creditors	4,00,000	Stock	1,60,000
		Cash at bank	2,24,000
	9,60,000		9,60,000

They decided to admit Asha on 1st April, 2016, into partnership on the following terms:

Asha should bring Rs. 80,000 as her share of goodwill, which is to be retained in the business.
She should bring Rs. 1,00,000 as her capital for 1/4th share in future profits.
land and building to be valued at Rs. 2,40,000 and furniture be reduced by 10%.
A provision of 5% on debtors to be made for doubtful debts.
The stock is to be taken at a value of Rs. 2,00,000.
The excess of capital of Harsha and Varsha over their due proportion of sharing profits in the firm is to be transferred to their respective loan accounts.

Prepare:

Profit and Loss Adjustment Account, Partner’s Capital Account and new Balance Sheet of the firm.

Ashok and Sangmesh are in partnership sharing profit and losses in the ratio of 2 : 1. From the following trial balance and adjustments given below, you are required to prepare Trading and Profit and Loss Account for the year ended on 31st March 2016 and Balance sheet as on that date:

Trial Balance as on 31st March 2016
Particulars	Debit Amount (₹)	Credit Amount (₹)
Prepaid insurance	3,200
Insurance	8,000
R.D.D.		4,000
Discount	3,200
Postage and telephone	12,800
Debtors and creditors	2,64,000	2,72,000
Salaries	2,24,000
Wages	96,000
Opening stock	1,92,000
Carriage	4,000
Purchased and sales	7,72,800	12,06,400
Return inward/Outward	22,400	36,800
Bank Overdraft		4,83,200
Plant and Machinery	96,000
Land and Building	7,04,000
Partner's Capital accounts:
Ashok		2,08,000
Sangmesh		1,92,000
	24,02,400	24,02,400

Adjustment:

Write off Rs. 8,000 for bad debts and provide R.D.D. @ 5% on debtors.
Goods worth Rs. 16,000 were distributed as free samples.
Closing stock on 31st March 2016 was valued at the cost of Rs. 2,24,000 while its market price was Rs. 2,40,000.
The salaries were outstanding at Rs. 8,000.
Depreciation: Land and Building @ 5% p.a. and Plant and Machinery @ 10 % p.a.

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Expenses which are paid before they are due.

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