Question 24 of 26intermediate🔧 ApplyNumerical8 marks

Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2017: Account Titles (Dr/Cr): Purchases and Sales (3,52,000/5,60,000), Return inwards and Return outwards (9,600/12,000), Carriage inwards (7,000/-), Carriage outwards (3,360/-), Fuel and power (24,800/-), Opening stock (57,600/-), Bad debts (9,950/-), Debtors and Creditors (1,31,200/48,000), Capital (-/3,48,000), Investment (32,000/-), Interest on investment (-/3,200), Loan (-/16,000), Repairs (2,400/-), General expenses (17,000/-), Wages and salaries (28,800/-), Land and buildings (2,88,000/-), Cash in hand (32,000/-), Miscellaneous receipts (-/160), Sales tax collected (-/8,350). Closing stock ₹ 30,000.

Correct Answer

Trading and Profit and Loss Account for the year ended March 31, 2017

Dr.Expenses/LossesAmount (₹)Cr.Revenues/GainsAmount (₹)
Opening Stock57,600Sales5,60,000
Purchases3,52,000Less: Return Inwards(9,600)
Less: Return Outwards(12,000)5,50,400
3,40,000Closing Stock30,000
Wages and Salaries28,800
Carriage Inwards7,000
Fuel and Power24,800
Gross Profit c/d1,22,200
Total5,80,400Total5,80,400
Carriage Outwards3,360Gross Profit b/d1,22,200
Bad Debts9,950Interest on Investment3,200
Repairs2,400Miscellaneous Receipts160
General Expenses17,000
Net Profit92,850
Total1,25,560Total1,25,560

Balance Sheet as on March 31, 2017

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital3,48,000Land and Buildings2,88,000
Add: Net Profit92,850Investment32,000
4,40,850Debtors1,31,200
Loan16,000Cash in Hand32,000
Creditors48,000Closing Stock30,000
Sales Tax Collected8,350
Total5,13,200Total5,13,200
Exercise: Questions for Practice - Numerical Questions | Q: 10 | (Page 38)
For More Understanding

Explanation

To solve this problem, we first classify the accounts into Trading, Profit & Loss, and Balance Sheet items.

  1. Trading Account: Computes Gross Profit. It includes direct expenses like Wages and Salaries, Carriage Inwards, and Fuel and Power on the debit side, and direct revenues like Sales (net of returns) on the credit side. Opening Stock is debited, and Closing Stock is credited.
  2. Profit & Loss Account: Computes Net Profit. Indirect expenses like Carriage Outwards, Bad Debts, Repairs, and General Expenses are debited. Indirect incomes like Interest on Investment and Miscellaneous Receipts are credited. Sales Tax Collected is a liability, not income.
  3. Balance Sheet: Lists Assets (Land, Debtors, Cash, Stock, Investment) and Liabilities (Capital, Loan, Creditors, Sales Tax). Net Profit is added to Capital.

Solution Steps

  1. Step 1: Prepare Trading Account. Credit Sales (5,60,000 - 9,600 = 5,50,400) and Closing Stock (30,000). Debit Opening Stock (57,600), Net Purchases (3,52,000 - 12,000 = 3,40,000), Wages (28,800), Carriage Inwards (7,000), Fuel/Power (24,800). Gross Profit = 5,80,400 (Credit Total) - 4,58,200 (Debit Expenses) = 1,22,200.

  2. Step 2: Prepare Profit & Loss Account. Credit Gross Profit (1,22,200), Interest on Inv (3,200), Misc Receipts (160). Debit Carriage Out (3,360), Bad Debts (9,950), Repairs (2,400), Gen Exp (17,000). Net Profit = 1,25,560 (Credit) - 32,710 (Debit) = 92,850.

  3. Step 3: Prepare Balance Sheet. Liabilities: Capital (3,48,000 + 92,850 NP), Loan (16,000), Creditors (48,000), Sales Tax (8,350). Total Liabilities = 5,13,200. Assets: Land (2,88,000), Inv (32,000), Debtors (1,31,200), Cash (32,000), Closing Stock (30,000). Total Assets = 5,13,200.

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