Example -4 Following is the trial
Balance of a trading concern on year ending Chaitra 31,2069.
Particulars
|
Debit
|
Credit
|
Furniture
|
22,000
|
|
Creditors
|
40,000
|
|
Debtors
|
90,000
|
|
Purchases
|
32,0000
|
|
Sales
|
4,15,000
|
|
Opening
stock
|
50,000
|
|
Rent,
rates, and taxes
|
5,000
|
|
Cash
at Bank
|
17,000
|
|
Cash
in hand
|
12,000
|
|
Advertisement
|
2,100
|
|
Capital
|
288000
|
|
Income
tax paid
|
3,400
|
|
Salaries
|
32,000
|
|
Postage
and communication
|
11,500
|
|
Printing
and stationary
|
3,000
|
|
Carriage
inwards
|
10,000
|
|
Prepaid
insurance
|
90,000
|
|
Discount
allowed
|
4,000
|
|
Vehicles
|
48,000
|
|
Bad
Debts
|
2,000
|
|
Patents
|
10,000
|
|
Carriage
on sales
|
22,000
|
|
Wages
|
21,000
|
|
Commission
to salesman
|
35,000
|
|
General
expenses
|
10,000
|
|
Patent
written off
|
4,000
|
|
Total
|
7,43,000
|
7,43,000
|
ADJUSTMENTS:
i. Provide depreciation on furniture @15% and
vehicle by 20%.
ii. Closing stock at
the end of the year was valued at Rs. 35,000.
iii. Prepaid
insurance has been expired to the extent of Rs. 7,500.
iv. Outstanding
general expenses amounted to Rs. 2000.
v. Make provision
of doubtful debts by 10% and provision for discount on debtors by 5%
vi. Make a provision
for discount on creditors by 4.5%
Required: a)
Trading
account b)
Profit and
Loss Account
c) Balance Sheet as on Chaitra 31, 2069
Step -1 Trading Account Presents Gross Profit or loss
Less: Prepaid (advance)
Expenses
Less: Pre-receipt (advance) Incomes
Debit Total
(Expenses) = Opening
Stock+ (Purchase – Purchase return- Goods Lost) + Carriage on purchase +freight
+ (Wages + Outstanding - Prepaid) + Duty (Custom+ Excise+ Import) + Factory/Manufacturing
Expenses + Royalty + Power+ Fuel + lighting + Heating + Octroi
Credit Total
(Incomes) = (Sales – Sales
return) + Closing Stock
Note: Add: Outstanding (due/payable) Expenses
Add: Outstanding (Receivable/Accrued)
Income
Gross Profit = Credit Total - Debit
total of Trading account
Gross Loss = Debit Total – Credit Total
of Trading Account
Step -2 Profit and Loss Account Presents Net profit or Loss
Net Profit = Credit Total - Debit
total of Profit & Loss account
Net Loss = Debit Total – Credit Total
of Profit & Loss Account
Debit Total
(Expenses/Losses) = Gross
Loss+ Office Operating and Selling Expenses ( Salary + due/outstanding - Prepaid)
+ Office rent +Depreciation+ Interest on
loan + advertisement + General expenses + Bad debt+ bad debt write off +
Travelling expenses + printing and stationery expenses + Charges ( telephone + electricity
+ bank + legal)+ Discount and commission allowed + audit fees + insurance+
selling and distribution expenses)
Credit Total
(Incomes/Gains) = Gross
Profit + Office operating Income/gains (appreciation + Discount and commission
received + Receivable (accrued) – Advance Received+ provision for bad debt +
interest and rent received + other incomes/gains)
Note: Add: Outstanding (due/payable) Expenses
Less: Pre-receipt (advance) Incomes
Step -3 Preparation of Balance Sheet
Balance Sheet
Show the Financial Position of a business concern including Assets, Capital and
Liabilities
Note: Add: Outstanding (due/payable) Expenses
(Liabilities: Double Entries)
(Assets: Double Entries)
Add: Outstanding (Receivable/Accrued)
Income
(Assets: Double Entries)
(Liabilities: Double Entries)
ConversionConversion EmoticonEmoticon