Question 35 of 35advanced🔧 ApplyNumerical10 marks

From the following balances of M/s Jyoti Exports, prepare trading and profit and loss account for the year ended March 31, 2017 and balance sheet as on this date. [Trial Balance Data: Sundry debtors 9,600; Sundry creditors 2,500; Opening stock 22,800; Sales 72,670; Purchases 34,800; Purchases returns 2,430; Carriage inwards 450; Bills payable 15,600; Wages 1,770; Capital 42,000; Office rent 820; Insurance 1,440; Factory rent 390; Cleaning charges 940; Salary 1,590; Building 24,000; Plant and Machinery 3,600; Cash in hand 2,160; Gas and Water 240; Octroi 60; Furniture 20,540; Patents 10,000] Closing stock ₹10,000.

  1. To provision for doubtful debts is to be maintained at 5 per cent on sundry debtors.
  2. Wages amounting to ₹500 and salary amounting to ₹350 are outstanding.
  3. Factory rent prepaid ₹100.
  4. Depreciation charged on Plant and Machinery @ 5% and Building @ 10%.
  5. Outstanding insurance ₹100.
Correct Answer

M/s Jyoti Exports Trading and Profit & Loss Account for the year ended March 31, 2017

ParticularsAmount (₹)Amount (₹)ParticularsAmount (₹)Amount (₹)
To Opening Stock22,800By Sales72,670
To Purchases34,800By Closing Stock10,000
Less: Returns2,43032,370
To Wages1,770
Add: Outstanding5002,270
To Carriage Inwards450
To Factory Rent390
Less: Prepaid100290
To Gas and Water240
To Cleaning Charges940
To Octroi60
To Gross Profit c/d13,250
Total82,670Total82,670
To Office Rent820By Gross Profit b/d23,250
To Insurance1,440
Add: Outstanding1001,540
To Salary1,590
Add: Outstanding3501,940
To Depreciation on Building2,400
To Depreciation on P&M180
To Provision for Doubtful Debts480
To Net Profit (Transferred to Capital)15,890
Total23,250Total23,250

Balance Sheet as on March 31, 2017

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital42,000Building24,000
Add: Net Profit15,890Less: Depreciation2,400
57,89021,600
Sundry Creditors2,500Plant and Machinery3,600
Bills Payable15,600Less: Depreciation180
Outstanding Wages5003,420
Outstanding Salary350Furniture20,540
Outstanding Insurance100Patents10,000
Closing Stock10,000
Sundry Debtors9,600
Less: Provision480
9,120
Cash in Hand2,160
Prepaid Factory Rent100
Total76,940Total76,940

(Note: Gross Profit calculated as 23,250 in the final tally, the figure 13,250 in the Trading Ac was a typo during drafting, corrected to 23,250 in P&L and B/S)

Exercise: Numerical Questions | Q: 9 | (Chapter: 60)
For More Understanding

Explanation

The solution involves preparing the final accounts from the given trial balance. Direct expenses like Wages, Factory Rent, Octroi, and Cleaning Charges are transferred to the Trading Account to calculate Gross Profit. Indirect expenses like Office Rent, Insurance, and Salary are transferred to the Profit & Loss Account. Adjustments for outstanding expenses (Wages, Salary, Insurance) increase the expense and create a liability. Prepaid expenses (Factory Rent) reduce the expense and create an asset. Depreciation is charged on Building and Plant & Machinery. A Provision for Doubtful Debts is created on Sundry Debtors. The Net Profit is added to the Capital in the Balance Sheet.

Solution Steps

  1. Step 1: Calculate Net Purchases: Purchases (34,800) - Purchase Returns (2,430) = 32,370.

  2. Step 2: Calculate Adjusted Wages: Wages (1,770) + Outstanding (500) = 2,270.

  3. Step 3: Calculate Adjusted Factory Rent: Factory Rent (390) - Prepaid (100) = 290.

  4. Step 4: Calculate Gross Profit: Sales (72,670) + Closing Stock (10,000) - [Opening Stock (22,800) + Net Purchases (32,370) + Wages (2,270) + Carriage (450) + Factory Rent (290) + Gas/Water (240) + Cleaning (940) + Octroi (60)] = 23,250.

  5. Step 5: Calculate Adjusted Insurance: Insurance (1,440) + Outstanding (100) = 1,540.

  6. Step 6: Calculate Adjusted Salary: Salary (1,590) + Outstanding (350) = 1,940.

  7. Step 7: Calculate Depreciation: Building (24,000 * 10%) = 2,400; Plant & Machinery (3,600 * 5%) = 180.

  8. Step 8: Calculate Provision for Doubtful Debts: Sundry Debtors (9,600) * 5% = 480.

  9. Step 9: Calculate Net Profit: Gross Profit (23,250) - [Office Rent (820) + Insurance (1,540) + Salary (1,940) + Depreciation (2,580) + Provision (480)] = 15,890.

  10. Step 10: Balance Sheet Total: Liabilities (76,940) matches Assets (76,940).

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