Prepare a trading and profit and loss account of M/s Green Club Ltd. for the year ending March 31, 2017. from the following figures taken from his trial balance: [Trial Balance Data: Opening stock 35,000; Sales 2,50,000; Purchases 1,25,000; Purchase return 6,000; Return inwards 25,000; Creditors 10,000; Postage and Telegram 600; Bills payable 20,000; Salary 12,300; Discount 1,000; Wages 3,000; Provision for bad debts 4,500; Rent and Rates 1,000; Interest received 5,400; Packing and Transport 500; Capital 75,000; General expense 400; Insurance 4,000; Debtors 50,000; Cash in hand 20,000; Cash at bank 40,000; Machinery 20,000; Lighting and Heating 5,000; Discount 3,500; Bad debts 3,500; Investment 23,100] Adjustments:
- Depreciation charged on machinery @ 5% p.a.
- Further bad debts ₹1,500, discount on debtors @ 5% and make a provision on debtors @ 6%.
- Wages prepaid ₹1,000.
- Interest on investment @ 5% p.a.
- Closing stock 10,000.
Trading and Profit & Loss Account of M/s Green Club Ltd. For the year ending March 31, 2017
| Particulars | Amount (₹) | Amount (₹) | Particulars | Amount (₹) | Amount (₹) |
|---|---|---|---|---|---|
| Opening Stock | 35,000 | Sales | 2,50,000 | ||
| Purchases | 1,25,000 | Less: Return Inwards | 25,000 | 2,25,000 | |
| Less: Return Outwards | 6,000 | 1,19,000 | Closing Stock | 10,000 | |
| Wages | 3,000 | ||||
| Less: Prepaid Wages | 1,000 | 2,000 | |||
| Gross Profit c/d | 79,000 | ||||
| 2,35,000 | 2,35,000 | ||||
| To Bad Debts | 3,500 | By Gross Profit b/d | 79,000 | ||
| Add: Further Bad Debts | 1,500 | By Discount | 1,000 | ||
| (50,000 - 1,500 = 48,%) | 5,000 | By Interest Received | 5,400 | ||
| Add: New Provision for Bad Debts | 2,910 | Add: Accrued Interest | 1,155 | 6,555 | |
| (48,500 - 2,910 = 45,%) | 7,910 | By Old Provision for Bad Debts | 4,500 | ||
| Add: Provision for Discount on Debtors | 2,280 | ||||
| Less: Old Provision | 4,500 | 10,190 | |||
| To Depreciation on Machinery | 3,410 | ||||
| (20,%) | 1,000 | ||||
| To Postage and Telegram | 600 | ||||
| To Salary | 12,300 | ||||
| To Discount | 3,500 | ||||
| To Rent and Rates | 1,000 | ||||
| To Packing and Transport | 500 | ||||
| To General Expense | 400 | ||||
| To Insurance | 4,000 | ||||
| To Lighting and Heating | 5,000 | ||||
| To Net Profit transferred to Capital | 52,565 | ||||
| 91,055 | 91,055 |
Balance Sheet of M/s Green Club Ltd. as on March 31, 2017
| Liabilities | Amount (₹) | Amount (₹) | Assets | Amount (₹) | Amount (₹) |
|---|---|---|---|---|---|
| Capital | 75,000 | Cash in hand | 20,000 | ||
| Add: Net Profit | 52,565 | 1,27,565 | Cash at bank | 40,000 | |
| Creditors | 10,000 | Closing Stock | 10,000 | ||
| Bills Payable | 20,000 | Investment | 23,100 | ||
| Add: Accrued Interest | 1,155 | 24,255 | |||
| Debtors | 50,000 | ||||
| Less: Further Bad Debts | 1,500 | ||||
| Less: Prov. for Bad Debts | 2,910 | ||||
| Less: Prov. for Discount | 2,280 | 43,310 | |||
| Machinery | 20,000 | ||||
| Less: Depreciation | 1,000 | 19,000 | |||
| Prepaid Wages | 1,000 | ||||
| Total | 1,57,565 | Total | 1,57,565 |
Explanation
The solution is prepared based on the specific trial balance and adjustments provided in the question text. Although the context provided contains fragments of a similar problem with different adjustment figures (e.g., Closing stock ₹32,000), the solution strictly adheres to the values in the prompt (e.g., Closing stock ₹10,000).
Key calculations for adjustments:
- Provisions: Bad debts, provision for bad debts, and discount on debtors are calculated sequentially. Further bad debts (₹1,500) are deducted from Debtors (₹50,000) first. The new provision for bad debts (6%) is calculated on the balance (₹48,500), and the discount (5%) is calculated on the resulting balance.
- Interest: Interest on investment is calculated as 5% of ₹23,100 (₹1,155). This is added to the Interest Received in the P&L and shown as an asset in the Balance Sheet.
- Wages: Prepaid wages (₹1,000) are deducted from the Trading account expense and shown as an asset.
Solution Steps
Step 1: Trading Account Preparation - Calculate Net Sales (₹2,50,000 - ₹25,000) and Net Purchases (₹1,25,000 - ₹6,000). Adjust Wages for prepaid amount (₹3,000 - ₹1,000). Use Closing Stock of ₹10,000. Resulting Gross Profit is ₹79,000.
Step 2: Adjustments Calculation -
- Bad Debts Adjustment: Total Bad Debt expense = Old (3,500) + Further (1,500) + New Prov (48,500 * 6% = 2,910) + Discount Prov ((48,500-2,910) * 5% = 2,280) - Old Provision Credit (4,500) = ₹5,690 (Net Debit).
- Depreciation: 20,000 * 5% = ₹1,000.
- Interest Accrued: 23,100 * 5% = ₹1,155.
Step 3: Profit & Loss Account Preparation - Credit side includes Gross Profit (₹79,000), Discount Received (₹1,000), Interest Received + Accrued (₹5,400 + ₹1,155), and Old Provision (₹4,500). Debit side includes all expenses and the net bad debt adjustment. Net Profit calculated is ₹52,565.
Step 4: Balance Sheet Preparation - Assets include Cash, Bank, Stock, Investment (plus accrued interest), Net Debtors (after all deductions), Machinery (after depreciation), and Prepaid Wages. Liabilities include Capital (plus Net Profit), Creditors, and Bills Payable. Total matches at ₹1,57,565.