Question 26 of 26intermediate🔧 ApplyNumerical8 marks

Prepare trading and profit and loss account of M/s Sports Equipments for the year ended March 31, 2017 and balance sheet as on that date: Debit Amounts: Opening stock (50,000), Purchases and sales (3,50,000/-), Sales returns (5,000/-), Cash in hand (32,000), Furniture (1,28,000), Debtors (1,40,000), Plants (60,000), Carriage on purchases (12,000), Wages (8,000), Rent (15,000), Bad debts (7,000), Drawings (24,000), Stationery (6,000), Travelling expenses (2,000), Insurance (7,000), Discount (5,000), Office expenses (2,000). Credit Amounts: Capital (3,00,000), Commission (4,000), Creditors (1,00,000), Bank overdraft (28,000), Sales (4,21,000). Closing stock as on March 31, 2017 ₹2,500.

Correct Answer

Trading and Profit & Loss Account of M/s Sports Equipments For the year ended March 31, 2017

ParticularsAmount (₹)Amount (₹)ParticularsAmount (₹)Amount (₹)
To Opening Stock50,000By Sales4,21,000
To Purchases3,50,000Less: Sales Returns5,0004,16,000
To Carriage on Purchases12,000By Closing Stock2,500
To Wages8,000
To Gross Loss c/d(1,500)
4,20,5004,18,500
To Gross Loss b/d1,500By Commission4,000
To Rent15,000By Net Loss c/d45,500
To Bad Debts7,000
To Stationery6,000
To Travelling Expenses2,000
To Insurance7,000
To Discount5,000
To Office Expenses2,000
49,50049,500

Balance Sheet of M/s Sports Equipments As on March 31, 2017

LiabilitiesAmount (₹)Amount (₹)AssetsAmount (₹)Amount (₹)
Capital3,00,000Closing Stock2,500
Less: Drawings24,000Debtors1,40,000
Less: Net Loss41,5002,34,500Furniture1,28,000
Creditors1,00,000Plants60,000
Bank Overdraft28,000Cash in Hand32,000
3,62,5003,62,500
Exercise: Questions for Practice - Numerical Questions | Q: 15 | (Page 41)
For More Understanding

Explanation

The solution is prepared using the Trial Balance figures provided in the question text. The Closing Stock is taken as ₹2,500 as explicitly stated in the question, although the reference context mentions different values (₹35,000 or ₹22,000) for different variations of this problem. Based on the provided data (Purchases ₹3,50,000 vs Net Sales ₹4,16,000), the cost of goods sold exceeds sales, resulting in a Gross Loss of ₹1,500. After adjusting for operating expenses (Rent, Bad Debts, etc.) and income (Commission), a Net Loss of ₹41,500 is calculated. The Balance Sheet balances at ₹3,62,500.

Solution Steps

  1. Step 1: Calculate Net Sales. Sales (₹4,21,000) - Sales Returns (₹5,000) = ₹4,16,000.

  2. Step 2: Calculate Gross Profit/Loss. Net Sales (₹4,16,000) - [Opening Stock (₹50,000) + Purchases (₹3,50,000) + Carriage (₹12,000) + Wages (₹8,000) - Closing Stock (₹2,500)]. Cost of Goods Sold = ₹4,17,500. Gross Loss = ₹4,16,000 - ₹4,17,500 = ₹1,500.

  3. Step 3: Calculate Net Profit/Loss. Debit side expenses (Rent ₹15,000 + Bad Debts ₹7,000 + Stationery ₹6,000 + Travelling ₹2,000 + Insurance ₹7,000 + Discount ₹5,000 + Office Exp ₹2,000) = ₹44,000. Add Gross Loss ₹1,500. Total Debits = ₹45,500. Credit side income = Commission ₹4,000. Net Loss = ₹45,500 - ₹4,000 = ₹41,500.

  4. Step 4: Prepare Balance Sheet. Liabilities: Capital (₹3,00,000 - ₹24,000 Drawings - ₹41,500 Net Loss) = ₹2,34,500; Creditors ₹1,00,000; Bank OD ₹28,000. Total = ₹3,62,500. Assets: Closing Stock ₹2,500; Debtors ₹1,40,000; Furniture ₹1,28,000; Plants ₹60,000; Cash ₹32,000. Total = ₹3,62,500.

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