Q.

Mr. Kamal, a furniture merchant submits the following Trial Balance on 31.12.12

Particulars Dr. Cr.

₹ ₹

Capital 50,400

Office Furniture 11,500

Stock on 1.1.13 14,600

Purchase and Sales 1,01,620 1,19,060

Return 2,100 2,910

General Expenses 2,300 ----

Wages 2,400 -----

Rent & Rates 3,200 ----

Bad Debts 520 ----

Debtors and Creditors 30,000 10,000

Loan to Debu (on 1.7.13 @ 6% p.a) 15,000 ----

Interest on Loan ---- 300

Cash in hand 480 ----

Bad Debt Reserve ---- 1,050

1,83,720 1,83,720

Prepare Trading and Profit and Loss Account for the year ended on 31.12.13 and a Balance Sheet as
on the same date after taking into consideration the following:
1. A credit sale of ₹ 2,000 has not been recorded in the books.
2. Secondhand furniture of ₹ 2,000 was purchased on 1.12.12 for resale was included in Office
Furniture.
3. Bad Debts Reserve is to be increased to 5% on Debtors.
4. Goods costing ₹ 500 has been taken by the proprietor for his private use.
5. Rent outstanding on 31.12.12 was ₹ 400 and rates paid in advance ₹ 800.
6. Stock on 31.12.13 was valued at ₹ 15,300.
7. Provide 10% depreciation on Office Furniture.
8. The manager is to be paid a commission of 10% of Net Profit before charging such commission.
 Solution:

Kamal
Dr. Trading and Profit and Loss Account for the year ended 31st December 2012
Cr.

Particulars Amount Amount Particulars Amount Amount

₹ ₹ ₹ ₹

To Opening Stock 14,600 By Sales 1,19,060

‘’ Purchases 1,01,620 Add: Unrecorded Sales [Note 2] 2,000

Add: Purchase wrongly 1,21,060

Included within Asset [Note 1] 2,000 Less: Returns (Dr.) 2,100 1,18,960

1,03,620 “” Closing Stock [Note 1] 17,300

Less: Goods withdrawn for

private use 500

1,03,120

Less: Returns (Cr.) 2,910 1,00,210

“” Wages 2,400

“” Gross Profit c/d 19,050

1,36,260 1,36,260

To General Expenses 2,300 By Gross Profit b/d 19,050

“” Rent & Rates 3,200 “” Interest on Loan 300

Add: Outstanding Rent 400 Add: Accrued Interest [Note 3] 150 450

3,600

Less: Prepaid Rates 800 2,800

“” Bad Debts 520

“” Bad debts Reserve

(Provision for Bad Debts)

New [5% of 32,000] 1,600

Less: Old / Existing 1,050 550

“Depreciation on Office Furniture 950

[10 % of 9,500]

“” Manager’s Commission [Note 4] 1,238

“” Capital Account 11,142

 (Net Profit transferred)

19,500 19,500

Balance Sheet as on 31st December 2012

Liabilities Amount Amount Assets Amount Amount

₹ ₹ ₹ ₹

Capital 50,400 Office Furniture 11,500

Add : Net Profit of the year 11,142 Less: Purchases wrongly included 2,000

61,542 9,500

Less : Drawings of Goods 500 61,042 Less: Depreciation 950 8,550

Creditors 10,000 Loan to Debu 15,000

Outstanding Rent 400 Stock [Note 1] 17,300

Outstanding Manager’s Commission 1,238 Debtors 30,000

[Note 4] Add: Unrecorded Credit Sale effect 2,000

32,000

Less: Bad Debts Reserves @ 5% 1,600 30,400

Accrued Interest on Loan 150

Prepaid Rates 800

Cash in hand 480

72,680 72680

Working Notes :

1. Purchase of Furniture for re-sale

Kamal is a furniture merchant. If he purchases any furniture for re-sale, that should be recorded as his
Purchases and not as Office Furniture. So, ₹ 2,000 should be added with purchases and deducted
from Office Furniture. Other effects to be considered for the rectification made above --

(a) Depreciation on Furniture should be 10% of ( ₹ 11,500 - ₹ 2,000).

(b) Closing Stock of goods should be ₹ 15,300 + ₹ 2,000 = ₹ 17,300

2. Unrecorded Credit Sale

The entry to be made now is --

Debtors A/C………………………... Dr. 2,000

 To Sales A/c 2,000

Effects to be considered --
(a) Closing Debtors = ₹ 30,000 + ₹ 2,000 = ₹ 32,000
(b) Closing Provision for Bad Debts = 5% of ₹ 32,000 = ₹ 1,600
(c) ₹ 2,000 to be added with sales.

3. Interest on Loan to Debu on 1.7.13

Interest [on ₹ 15,000 @ 6% p.a. For 6 months ] 450

Less: Actual Interest received 300

Outstanding Interest 150

4. Manager’s Commission

Profit before allowing for Commission:

Total Credits of Profit / Loss A/C 19,500

Total Credits of Profit / Loss A/C 7,120

12,380

Commission @ 10% 1,238

Net Profits (after allowing Commission) 11,142

5. Depreciation has been calculated @ 10% and not @ 10% p.a.

Q 1.
₹
₹
Opening Stock 36,000 Misc. Income
566
Sundry Creditors 11,000 Capital Account
80,000
Sundry Debtors 28,000 Commission (Cr.)
2,500
Bill Receivable 16,000 Reserve for Bad & Doubtful Debts
850
Carriage on Purchases 1,200 Purchases
77,000
Wages 13,500 Plant
50,000
Salary 9,900 Sales
1,59,050
Bills Payable 6,500 Furniture
9,600
Telephone Expenses 900 Sundry Expenses
900
Repairs 450 Cash in hand & Bank
17,016

Prepare the Trading & Profit and Loss Account and the Balance of the shop after
taking into consideration the following:
(i) Closing Stock – ₹ 51,324; (ii) Unpaid expenses – Salary ₹ 1,600; Wages ₹ 2,100
and Rent ₹ 4,200;
1
(iii) Write off 10% on Plant and 7 % on Furniture as depreciation; (iv) Write off ₹
2
400 on debtors as bad debts and increase the balance of the reserve for bad &
1
Doubtful Debts to 2 % on Debtors; (v) The manager is to be paid a commission at
2
4% on the net profit left after deducting the commission.

Solution:

Dr. Trading and Profit & Loss Account for the year ended
31.12.2019 Cr.
 Particulars Amount Amount Particulars Amount Amount
₹ ₹ ₹ ₹
To Opening Stock 36,000 By Sales 1,59,050
‘’ Purchases 77,000 ‘’ Closing Stock 51,324
‘’ Carriage on 1,200
Purchases 13,500
‘’ Wages 2,100 15,600
Add: Unpaid
Amount 80,574

‘’ Profit & Loss 2,10,37 2,10,374

Account 4
(Gross Profit)

cont. next page

To Salary 9,900 By Trading Account 80,574
Add: Unpaid Amount 1,600 11,500 (Gross Profit)
‘’ Miscellaneous Income 566
‘’ Telephone expenses 900 ‘’ Commission 2,500
‘’ Repairs 450 ‘’ Provision of Bad
‘’ Sundry Expenses 900 Debts: 850
‘’ Rent (Unpaid) 4,200 Existing Provision 690 160
‘’ Bad Debts 400 Less : New Provision
‘’ Depreciation on: [Note]
Plant [10 % of 50,000] 5,000
1 720 5,720
Furniture (7 % of 9,600)
2

‘’Manager’s Commission 2,297

[Note] 57,433
‘’ Capital Account (Net
Profit)
83,800 83,800

Balance Sheet as on 31.12.2019

Liabilities Amount Amount Assets Amount Amount
₹ ₹ ₹ ₹
Capital: Plant 50,000
Opening Balance 80,000 Less: Depreciation 5,000 45,000
Add: Net Profit 57,433 1,37,433
Furniture 9,600
Sundry Creditors 11,000 Less: Depreciation 720 8,880
Bills Payable 6,500
Outstanding Liabilities for: Stock 51,324
Salary 1,600 Sundry Debtors [Note] 26,910
Wages 2,100 Bills Receivable 16,000
Rent 4,200 Cash & Bank 17,016
Manager’s Commissions 2,2,97 10,197

1,65,130 1,65,130

Working Notes:

1. Calculations on Debtors

Debtors as per Trial Balance

28,000
Less : Bad Debts
400

27,600

1
Less : Provision for Bad Debts 2 % on 27,600
2
690

Adjusted Debtors Balance

26,910

2. Manager’s Commission

Net Profit (Balancing figure of P/L) before commission = ₹ 59,730

4
⸫ Commission = of 59,730 = 2,297.3076 or 2,297 (approx)
104
Question 1:
The following Trial Balance was extracted from the book of Mr. S. Sengupta as on
31.12.2019
Debit (₹) Credit (₹)
Capital 3,25,000
Freehold Land and Building 1,17,000 Prepare a
Furniture and Fittings 17,420 Trading and
Stock in Trade (1.1.2019) 1,48,200 Profit and Loss
Electricity 2,314 Account for the
Drawings 75,400 year ended
Purchases 10,21,800 31.12.2019 and
Sales 12,37,600 Balance Sheet as
General Expenses 46,826 on that date after
Balance at Bank 10,712 taking into
Motor Van 3,120 consideration the
Discount Received 22,932 following
information:
Discount Allowed 28,964
a) The stock
Trade Debtors 1,23,500
in trade
Trade Creditors 99,450
on
Rates and Insurance 2,496
Wages and Salary 64,610
Goodwill 15,600
Bad Debts Written Off 11,180
Provision for Bad Debts (1.1.2019) 4,160
16,89,142 16,89,142
31.12.2019 was valued at ₹2,05,400
b) Rates and Insurance paid in advance on 31.12.2019 amounted to ₹650.
c) The Motor Van shown in the Trial Balance was sold on 31.12.2019 for ₹1,040 for
cash, which Mr. Sengupta retained for private use. No entry for this transaction was
made in the books.
d) The provision for doubtful debts is to be increased to ₹ 5,980.
e) Provide depreciation on Furniture and Fittings ₹1,742.

Trading and P & L A/c for the year eneded 31 DEC 2019
Particulars ₹ ₹ Particulars ₹ ₹
To op Stock 148200 By Sales 123
760
0
To Purchases 1021800 By Closing 205
Stock 400
To salaries 64610  
To Gross Profit 2,08,390  
1443000 144
300
0
By Gross 2,08
Profit ,390
To rates and 2496
Insurance
less: Prepaid 650 By Provision 416
for BD 0
To General 46826
expenses
To electricity 2314
To bad debt 11,180 By Discount 229
Received 32
To prov for BD 5980
To dist allowed 28964
To dep on 1742
furniture

To Net Profit 1,35,330

300092 300
092

Particulars ₹ ₹ Particulars ₹ ₹
Capital 3,25,000   Goodwill   156
00
Add:Net profit 135330        
Less: 76440 383890 Freehold land   117
Drawings and building 000
[75400+1040]
      Furniture & 17420  
fittings
      Less: Dep 1742 156
 78
           
      Stock in trade   205
400
Trade   99450 Debtors 123500  
Creditors
      Less: prov for 5980 117
BD 520
           
      Prepaid rates   650
and insurance
           
      Bank   107
12
           
           
    4,82,560     482
560
 

Question 2:
The following Trial Balance was extracted from the book of Mr. AII as on 31.3.2020.
 Debit Balances ₹ Credit Balances ₹
Machinery 30,000 Capital 60,000
Debtors 22,000 Creditors 18,000
Stock (1.4.2019) 10,000 Sales 1,80,00
0
Purchases 98,000 Bills Payable 13,000
Salary 23,000 Outstanding Rent 4,000
(1.4.2019)
Freight Outward 9,000 Interest Received 4,000
Bills Receivable 14,000 PF Payable 2,000
Rent 18,000 Income Tax Refund 1,000
Prepaid Salary (1.4.2019) 1,000
Investment 25,000
Drawings 12,000
Advance Income Tax 5,000
Accrued Interest 2,000
(1.4.2019)
Bank 10,000
Cash 3,000
2,82,000 2,82,00
0

On scrutiny the following information are revealed which need necessary adjustment.
a) Unsold stock on 31.3.2020 is valued at ₹ 19,000.
b) Outstanding Expenses on 31.3.2020 – Salary ₹3,000 and Rent ₹5,000.
c) Interest still receivable on 31.3.2020 ₹1,000
d) Depreciation is to be charged on Machinery at 10%
e) Freight outward represents the amount of freight paid during the year; total freight for
the year amounted to ₹10,500.
f) Purchases include goods costing ₹3,000 purchased for owner’s personal use.
g) Interest received ₹4,000 is the amount received after deduction of Tax ₹500; tax
deduction remained unrecorded.
h) The bank has informed that a customer’s cheque of ₹3,000 (deposited on 29.3.2020)
has been dishonoured.
Required to pass the necessary adjustment entries and to prepare Trading and Profit
and Loss Account for the year ended on 31.3.2020 and the Balance Sheet as on
31.3.2020.