Example -5 The following balance extracted from the ledger, you are
required to prepare trading account, profit and loss account and balance sheet
as on 31st December 2013.
Additional information:
Particulars
|
Amount
|
Particulars
|
Amount
|
Drawing
|
2,000
|
Sales
|
9,4000
|
Debtors
|
50,000
|
Overdraft
|
7,500
|
Purchases
|
44,500
|
Returns
to suppliers
|
500
|
Furniture
|
2,200
|
Capital
|
24,000
|
Cash
in hand
|
2,800
|
Creditors
|
11,000
|
Rent
|
1,000
|
Bills
payable
|
2,000
|
Salaries
|
4,700
|
Discount
received
|
2,000
|
Machinery
|
5,000
|
Loan
to mortgage
|
10,150
|
Stock
of commencement
|
24,000
|
||
Cash
at bank
|
3,200
|
||
Trade
expenses
|
1,200
|
||
Duty
and clearing charges
|
1,700
|
||
Building
|
5,350
|
||
Return
from customers
|
500
|
||
Loose
tools
|
3,000
|
||
Total
|
1,51,150
|
Total
|
1,51,150
|
Additional information:
·
Closing stock at the end of
the year is equal to 50% of opening stock value.
·
Loose tools were revalued
on December 31, 2013 at Rs. 2400.
·
Depreciate furniture by
10%, machinery by 5%, building by 3%
·
Write off bad debts of Rs.
700
·
Make reserve for bad debts
equal to 5% of the debtors.
·
Salaried paid in advance to
the extent of Rs. 500
·
The goods costing Rs. 1000
used by proprietor for own use
·
Goods costing Rs. 500
destroyed by fire but the firm recovers only Rs. 200 from insurance company.
[ans: Gp:Rs.37300, NP: Rs. 28204.5 and BS Rs. 79854.5]
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)
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