Prepare trading and profit and loss account and balance sheet as on March 31, 2017: Account Titles: Machinery (₹27,000), Sundry debtors (₹21,600), Drawings (₹2,700), Purchases (₹58,500), Wages (₹15,000), Sundry expenses (₹600), Rent & taxes (₹1,350), Carriage inwards (₹450), Bank (₹4,500), Opening stock (₹6,000), Capital (₹60,000), Bills payable (₹2,800), Sundry creditors (₹1,400), Sales (₹73,500). Closing stock as on March 31, 2017 ₹22,400.
Trading Account for the year ended March 31, 2017
| Particulars | Amount ₹ | Particulars | Amount ₹ |
|---|---|---|---|
| To Opening stock | 6,000 | By Sales | 73,500 |
| To Purchases | 58,500 | By Closing stock | 22,400 |
| To Wages | 15,000 | ||
| To Carriage inwards | 450 | ||
| To Gross Profit c/d | 15,950 | ||
| Total | 95,900 | Total | 95,900 |
Profit and Loss Account for the year ended March 31, 2017
| Particulars | Amount ₹ | Particulars | Amount ₹ |
|---|---|---|---|
| To Sundry expenses | 600 | By Gross Profit b/d | 15,950 |
| To Rent & taxes | 1,350 | ||
| To Net Profit | 14,000 | ||
| Total | 15,950 | Total | 15,950 |
Balance Sheet as on March 31, 2017
| Liabilities | Amount ₹ | Assets | Amount ₹ |
|---|---|---|---|
| Capital | 60,000 | Machinery | 27,000 |
| Add: Net Profit | 14,000 | Sundry debtors | 21,600 |
| Less: Drawings | (2,700) | Bank | 4,500 |
| 71,300 | Closing stock | 22,400 | |
| Bills payable | 2,800 | ||
| Sundry creditors | 1,400 | ||
| Total | 75,500 | Total | 75,500 |
Gross Profit: ₹15,950 | Net Profit: ₹14,000 | Total Balance Sheet: ₹75,500
Explanation
This question tests the student's ability to prepare final accounts from a trial balance. The Trading Account calculates gross profit by matching direct revenues (Sales, Closing Stock) against direct expenses (Opening Stock, Purchases, Wages, Carriage Inwards). The Profit & Loss Account then determines net profit by deducting indirect expenses (Sundry Expenses, Rent & Taxes) from the gross profit. The Balance Sheet balances assets against liabilities and capital, with net profit added to and drawings deducted from the capital account.
Solution Steps
Step 1: Prepare Trading Account - Credit side: Sales (₹73,500) + Closing Stock (₹22,400) = ₹95,900; Debit side: Opening Stock (₹6,000) + Purchases (₹58,500) + Wages (₹15,000) + Carriage Inwards (₹450) = ₹79,950; Gross Profit = ₹95,900 - ₹79,950 = ₹15,950
Step 2: Prepare Profit & Loss Account - Debit indirect expenses: Sundry Expenses (₹600) + Rent & Taxes (₹1,350) = ₹1,950; Credit: Gross Profit (₹15,950); Net Profit = ₹15,950 - ₹1,950 = ₹14,000
Step 3: Prepare Balance Sheet - Liabilities: Capital (₹60,000) + Net Profit (₹14,000) - Drawings (₹2,700) = ₹71,300; Bills Payable (₹2,800); Sundry Creditors (₹1,400) = Total ₹75,500; Assets: Machinery (₹27,000) + Sundry Debtors (₹21,600) + Bank (₹4,500) + Closing Stock (₹22,400) = Total ₹75,500