Final Accounts

Study Note - 4
Final Accounts
This Study Note includes

Introduction Profit and Loss Account Balance Sheet

4.0 Introduction
Preparation of final accounts is the final destination of the accounting process. As discussed earlier these final accounts include two statements Income statement which reflects the outcome of business activities during an accounting period (i.e. profit or loss) and the balance sheet which show the position of the business at the end of the accounting period (i.e. resources owned as assets and sources of funds as liabilities plus capital). The objective of financial statements is to provide information about the financial strength, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organizations financial position. Reported income and expenses are directly related to an organizations financial performance. Financial statements are intended to be understandable by readers who have a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently. The formats of these statements are standard. They depend on the need of each type of organization and the requirement of information to be disclosed to the stakeholders. However, for company type of organizations, the formats are governed by the schedule VI to the companies act 1956. Students are advised to refer to this schedule. In this chapter, we will see how conceptually these statements are prepared and what each of them contains. a) Profitability Statement This statement is related to a complete accounting period. It shows the outcome of business activities during that period in a summarised form. The activities of any business will include, purchase, manufacture, and sell. To carry out these main activities company will require to spend money for other services such as labour, rent, insurance, advertising, travel etc, which are related to the same period. b) Balance sheet Business needs some resources which have longer life (say more than a year). Such resources are, therefore, not related to any particular accounting period, but are to be used over the useful life thereof. The resources do not come free. One requires finance to acquire them. This funding is provided by owners through their investment, bank & other through loans, suppliers by way of credit terms. The Balance sheet shows

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the list of resources and the funding of the resources i.e. assets and liabilities (towards owners and outsiders). It is also referred as Sources of funds (i.e. liabilities & capital) and application of funds (i.e. assets) Let us discuss these statements in depth.

4.1 Profit and loss account

The income statement, as it is called, shows revenue items and expenses incurred to earn this revenue during the period. We see application of the concepts of matching and accounting period here. It must be ensured to match revenues and expenses to the accounting period to which they are related. As accounting exhibits the business activity in monetary terms, the P & L also follows the activity flow. For example, the details given in P & L a/c will be different depending on whether the business is engaged in manufacturing and selling or only trading or rendering services. Based on the nature of business activity, the P & L a/c is split into one or more components. In case of a manufacturing business, the stakeholders will want to know the result of manufacturing activity first, then the result when the manufactured goods are sold and then the net results after deducting the indirect expenses from the sales revenue. A trading business will reflect only buying and selling as first component and then the net result. A service business will reflect results out of acquiring or generating a service and then the net result in terms of profit or loss. This could be clear from the following:

Type of business

Information required

Manufacturing business: 1. Activity is manufacturing 2. articles from raw material, and then selling it. 3. Trading business: Activity 1. is buying and selling of articles 2. Service business 1.

Components of P & L Cost of Production 1. Manufacturing a/c Gross profit or Gross Loss on sales 2. Trading a/c Net profit 3. P & L a/c Gross profit or gross loss on 1. Trading a/c sales 2. P & L a/c Net profit or loss Net profit or loss 1. P & L a/c

Depending on these components, the detailing of the components can be done. The basic idea is, however, to show details of revenue earned from various streams and expenses incurred to earn that. Let us see these in depth. a) Sales Revenue: The sales revenue denotes income earned from the main business activity or activities. The income is earned when goods or services are sold to customers. As per the accrual concept, income should be recognised as soon as it is accrued and not necessarily only when the cash is paid for. The Accounting standard 7 (in case of contracting
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Final Accounts business) and Accounting standard 9 (in other cases) define the guidelines for revenue recognition. The essence of the provisions of both standards is that revenue should be recognised only when significant risks and rewards (vaguely referred to as ownership in goods) are transferred to the customer. For example, if an invoice is made for sale of goods and the term of sale is door delivery; then sale can be recognised only on getting the proof of delivery of goods at the door of customer. If such proof is pending at the end of accounting period, then this transaction cannot be taken as sales, but will be treated as unearned income. In the P & L a/c sales are always shown as net of returns. b) Stocks: In case of manufacturing business, there will be stock of raw material, work-inprocess (W.I.P.) and finished goods. In case of trading business, there will be stocks of finished goods only. Stocks of raw material and WIP will be shown in the manufacturing a/c, whereas stock of finished goods will be shown in trading a/c c) Cost of sales: This term refers to the cost of goods sold. The goods could be manufactured and sold or bought and sold. The cost of goods sold will include the basic cost of goods, and all the expenses that can be directly identified with goods. For example, consider the case of a TV dealer. He procures TV sets @ Rs 8500 per piece as the basic price. The expenses like freight paid to bring TV sets to the stores will be included as cost of goods sold. In case of manufacturing business, the examples of direct expenses to be included as cost of production are wages paid, power & fuel, factory expenses etc. The student must be able to distinguish these expenses and show them in a proper component. The cost of sales will always include the cost of raw material or finished goods purchased for sale. d) Expenses: All expenses which are not directly related to main business activity will be reflected in the P & L component. These are mainly the Administrative, Selling and distribution expenses. Examples are salary to office staff, salesmen commission, insurance, legal charges, audit fees, advertising, free samples, bad debts etc. It will also include items like loss on sale of fixed assets, interest and provisions. Students should be careful to include accrued expenses as well. e) Other Incomes: The business will generate incomes other than from its main activity. These are purely incidental. It will include items like interest received, discount received, commission received, profit on sale of asset, scrap sales.etc. The end result of one component of the P & L a/c is transferred over to the next component and the net result will be transferred to the balance sheet as addition in owners equity. The profits actually belong to owners of business. In case of company organizations, where ownership is widely distributed, the profit figure is separately shown in balance sheet.

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Dr Manufacturing Account for the year ended ----Particulars Amount Particulars Opening stock Closing stock Raw material Raw material Work in process Work in process Purchases of raw material less purchase returns Factory rent Power & fuel Stores & spares consumed Wages Manufacturing expenses Depreciation on factory assets Total Dr Particulars Opening stock Finished goods Scrap sales

Cr Amount

Cost of Production (transferred to Trading a/c)

Total Cr Amount

Trading Account for the year ended --------Amount Particulars Sales less sales returns Closing stock Finished goods Gross Loss (transferred to P & L a/c) Total

Cost of production (transferred from manufacturing a/c) Gross Profit (transferred to P & L a/c) Total

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Final Accounts

Dr Particulars Gross Loss

Profit and Loss Account for the year ended -----Cr Amount Particulars Amount Gross Profit (transferred from Trading (transferred from Trading a/c) a/c) Administrative expenses Office salaries Communication Travel & Conveyance Office rent Depreciation of office assets Audit fees Insurance Repairs & maintenance Selling & Distribution expenses Advertising Salesmen commission Delivery van expenses Depreciation on delivery vans Bad debts Financial expenses Bank charges Interest on loans Loss on sale of assets Net profit Total
Profit and Loss Appropriation Account We know that the net profit or loss is added to or deducted from owners equity. The net profit may be used by the business to distribute dividends, to create reserves etc. In order to show these adjustments, a P & L Appropriation a/c is maintained. Distribution of profits is only appropriation and does not mean expenses. After passing such distribution entries, the remaining surplus is added in owners equity. The format of P & L Appropriation a/c is given below.

Other Income Interest received Commission received Profit on sale of assets Rent received.

Net loss Total

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Profit and Loss Appropriation Account for the year ended Particulars To proposed dividend To Transfer to General Reserve To surplus carried to Capital a/c Total Amount Particulars By Net profit transferred from P & L a/c Total Amount

Please note these formats are illustrative only and details could change depending on the nature of business. Also, note that in trading a/c there could be either a gross profit or gross loss. Here, both are shown to enable students to understand where to reflect the same. Same is the case of net profit or net loss. Many times these components are also shown in vertical format, mainly by company organizations. Illustration 1 Indicate where the following items will be shown in various components of P & L a/c: 1) Wages 3) Depreciation on office car 5) Power & fuel 7) Maintenance of office building 9) Closing stock of WIP 11) Interest received 13) Telephone 15) Insurance 17) Carriage inward 19) Bad debts 21) Return inwards or sales returns 23) Depreciation on delivery van 25) Sales 2) Salaries to office staff 4) Neon sign advertisement 6) Repairs to machinery 8) Purchase returns or return outwards 10) Opening stock of finished goods 12) Commission paid 14) Travel & conveyance 16) Audit fees 18) Freight outward 20) Provision for outstanding rent 22) Discount earned 24) Printing and stationery

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Final Accounts

Item Wages Salaries to office staff Depreciation on office car Power & fuel Repairs to machinery Maintenance of office building Purchase returns or return outwards Closing stock of WIP Opening stock of finished goods Interest received Commission paid Telephone Travel & conveyance Insurance Audit fees Carriage inward Freight outward Bad debts Provision for outstanding rent Return inwards or sales returns Discount earned Depreciation on delivery van Printing and stationery Sales

Treatment Manufacturing a/c P & L a/c P & L a/c Manufacturing a/c Manufacturing a/c P & L a/c Trading a/c Manufacturing a/c Trading a/c P & L a/c P & L a/c P & L a/c P & L a/c P & L a/c P & L a/c Manufacturing a/c P & L a/c P & L a/c P & L a/c Trading a/c P & L a/c P & L a/c P & L a/c Trading a/c

Where Dr Dr Dr Dr Dr Dr Dr less from purchases Cr Dr Cr Dr Dr Dr Dr Dr Dr Dr Dr Dr Cr less from sales Cr Dr Dr Cr

4.2 Balance Sheet

In a horizontal format, typical balance sheet has two sides viz. Assets and Liabilities. The term Liability here is used broadly to include owners capital and equity. Let us see the meaning of various items included therein. In vertical format also they are shown as one under the other. Liabilities In accounting nomenclature, all credit balances in personal accounts are called as liabilities. These are obligations of business or sources of funds. 1) Capital: This indicates the initial amount the owner or owners of the business contributed. This contribution could be at the time of starting business or even at a later stage to satisfy requirements of funds for expansion, diversification etc. As per business entity concept, owners and business are distinct entities, and thus, any contribution by owners by way of capital is liability of the business. However, as this obligation is towards the owners, it is reflected separately in the balance sheet. In case of company organization, the capital is shown as share capital.

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2) Reserves and Surplus: The business is a going concern and will keep making profit or loss year by year. The accumulation of these profit or loss figures (called as surpluses) will keep on increasing or decreasing owners equity. In case of non-corporate forms of business, the profits or losses are added to the capital a/c and not shown separately in the balance sheet. However, in case of corporate entities, the accumulated profits or losses are not added to share capital, but shown as a separate item in balance sheet. Reserves reflect profits kept aside for future exigencies. In case non-corporate as well as corporate entities, the reserves are to be shown as separate item in balance sheet. 3) Long Term Liabilities: These are obligations which are to be settled over a longer period of time say 5-10 years. These funds are raised by way of loans from banks and financial institutions. Such borrowed funds are to be repaid in installments during the tenure of the loan as agreed. Such funds are usually raised to meet financial requirements to procure fixed assets. These funds should not be generally used for day-to-day business activities. Such loan are normally given on the basis of some security from the business e.g. against a charge on the fixed assets. So, long term loan are called as Secured Loan also. 4) Short Term or Current Liabilities: These are obligations that are to be settled within very short period of time which is normally within the year. These are used in running day-today running of business activities. Current liabilities comprise of: a) Sundry Creditors - Amounts payable to suppliers against purchase of goods. This is usually settled within 30- 180 days. b) Advances from customers At times customer may pay advance i.e. before they get delivery of goods. Till the business supplies goods to them, it has an obligation to pay back the advance in case of failure to supply. Hence, such advances are treated as liability till the time they get converted to sales. c) Outstanding Expenses: These represent services procured but not paid for. These are usually settled within 30 60 days e.g. phone bill of Sept is normally paid in Oct. d) Bills payable: There are times when suppliers do not give clean credit. They supply goods against a promissory note to be signed as a promise to pay after or on a particular date. These are called as bills payable or notes payable. e) Bank overdrafts: Banks may give fund facilities like overdraft whereby, business is permitted to issue cheques up to a certain limit. The bank will honour these cheques and will recover this money from business. This is a short term obligation. Assets In accounting language, all debit balances in personal and real accounts are called as assets. Assets are broadly classified into fixed assets and current assets. 1) Fixed Assets: These represent the facilities or resources owned by the business for a longer period of time. The basic purpose of these resources is not to buy and sell them, but to use for future earnings. The benefit from use of these assets is spread over a very long period. The fixed assets could be in tangible form such as buildings, machinery, vehicles, computers etc, whereas some could be in intangible form viz. patents, trademarks, goodwill etc.

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Final Accounts The fixed assets are subject to wear and tear which is called as depreciation. In the balance sheet, fixed assets are always shown as original cost less depreciation. 2) Investments: These are funds invested outside the business on a temporary basis. At times, when the business has surplus funds, and they are not immediately required for business purpose, it is prudent to invest it outside business e.g. in mutual funds or fixed deposit. The purpose if to earn a reasonable return on this money instead of keeping them idle. These are assets shown separately in balance sheet. 3) Current Assets: These are assets held for running day-to-day business activities. They dont remain in the same form. Typically, material stock when used in production gets converted to finished goods, which when sold either becomes cash or receivable. This cycle continues for relatively short period of time i.e. a year. Current assets comprise of: a) Stocks: This includes stock of raw material, semi-finished goods or WIP, and finished goods. Stocks are shown at lesser of the cost or market price. Provision for obsolescence, if any, is also reduced. Generally, stocks are physically counted and compared with book stocks to ensure that there are no discrepancies. In case of discrepancies, the same are adjusted to P & L a/c and stock figures are shown as net of this adjustment. b) Debtors: They represent customer balances which are not paid. The bad debts or a provision for bad debt is reduced from debtors and net figure is shown in balance sheet. c) Bills receivables: Credit to customers may be given based on a bill to be signed by them payable to the business at an agreed date in future. At the end of accounting period, the bills accepted but not yet paid are shown as bills receivables. d) Cash in Hand: This represents cash actually held by the business on the balance sheet date. This cash may be held at various offices, locations or sites from where the business activity is carried out. Cash at all locations is physically counted and verified with the book balance. Discrepancies if any are adjusted. e) Cash at Bank: Dealing through banks is quite common. Funds held as balances with bank are also treated as current asset, as it is to be applied for paying to suppliers. The balance at bank as per books of accounts is always reconciled with the balance as per bank statement, the reasons for differences are identified and required entries are passed. f) Prepaid Expenses: They represent payments made against which services are expected to be received in a very short period. g) Advances to suppliers: When amounts are paid to suppliers in advance and goods or services are not received till the balance sheet date, they are to be shown as current assets. This is because advances paid are like right to claim the business gets. Please note that both current assets and current liabilities are used in day-to-day business activities. The current assets minus current liabilities are called as working capital or net current assets. The following report is usual horizontal form of balance sheet. Please note that the assets are normally shown in descending order of their liquidity. Also, capital, long term liabilities and short term liabilities are shown in that order.

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The Balance Sheet as on Capital & Liabilities Amount Assets Capital Fixed Assets (separate figures are shown for each owner) Long term Liabilities Loans from banks or financial institutions Vehicles less depreciation Computer systems less depreciation Current Liabilities Sundry creditors Bills payable Advances from customers Outstanding expenses Current Assets Stocks Sundry debtors less provisions Bills receivables Cash in hand Cash at bank Prepaid expenses Advances to suppliers Total Illustration 2 Indicate where the following items will be shown in the balance sheet. 1) Credit balance in the bank column of the cash book 2) Debit balance to the account of A who is a customer 3) Credit balance in a/c of B who is supplier 4) Debit balance in a/c of C who is a supplier Total Office equipments less depreciation Land less depreciation Building less depreciation Plant and Machinery less depreciation Amount

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Final Accounts 5) Credit balance in a/c of D who is a customer 6) Outstanding rent 7) Insurance paid for the next year 8) Loan from HDFC bank for 7 years 9) Interest due on loan 10) Provision for doubtful debtors 11) Net profit for the year 12) Machinery 13) Accumulated depreciation on vehicle 14) Cash at Bangalore office 15) Balance with Citi Bank Answer: 1) Credit balance in the bank column of cash book indicates a liability towards bank. This is actually a bank overdraft. Hence, it should be shown as current liability. 2) Debit balance in As a/c mean amount due from him as a customer. To be shown as sundry debtors. 3) Credit balance in suppliers a/c is a liability, hence will be shown under current liabilities. 4) Debit balance in suppliers a/c reflects an advance given to supplier, hence will be shown under current asset. 5) Credit balance in customers a/c means advance from customer, hence will be shown as current liability. 6) Outstanding rent will be shown under current liability. 7) Insurance paid for next year is prepaid for current year, hence will be taken as current Asset 8) Loan from HDFC is for 7 years which is a long term loan, hence will be shown as long term liability. 9) Interest due on loan is current liability. 10) Provision for doubtful debts will be reduced from the sundry debtors amount under current assets as it denotes chances of not receiving the money from customers. 11) Net profit for the year will be added to the owners capital in balance sheet. 12) Machinery is a fixed asset. 13) Accumulated depreciation on vehicle is reduction in its value, so will be shown as deduction from vehicle under fixed assets. A 110
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14) Cash at Bangalore office is a current asset. 15) Balance with Citi bank is current asset. Mixed bag illustrations Q 1: Complex Corporation operates in an industry that has a high rate of bad debts. On 31st March 2005, the Accounts Receivables showed a balance of Rs 750000 before any year end adjustment and the balance in the Reserve of doubtful debts was Rs. 37500. The year end balance in the reserve for doubtful debts a/c will be based on the following ageing schedule. Days outstanding Less than 16 16 30 31 45 46 60 61 75 Over 75 Amount Rs. 450000 150000 75000 45000 15000 15000 Probability of collection 0.99 0.94 0.80 0.65 0.50 0.00

Find out the appropriate balance in the Reserve for doubtful debts account as on 31st March 2005. Show how Debtors balance be shown in the balance sheet. Calculate the effect of year end adjustment on account of reserve for doubtful debts. Answer 1: We need to work out the provision for doubtful debts based on the collection probability given e.g. in the first ageing band, the probability of collection is given as 0.99 which means 1% of the outstanding amount in this band is unlikely to be collected, so a provision of 1% will be needed. The total provision required based on the ageing is shown in the following table.

Days outstanding Less than 16 16 30 31 45 46 60 61 75 Over 75 Total

Amount Rs. 450000 150000 75000 45000 15000 15000 750000

Probability of collection 0.99 0.94 0.80 0.65 0.50 0.00

Provision required 1% 6% 20% 35% 50% 100%

Provision Amount Rs 4500 9000 15000 15750 7500 15000 66750

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Final Accounts It will be seen that the existing provision in the books stands at Rs 37500, as against the required provision of Rs 66750. This means additional provision of Rs 29250 will be required to be made as year end adjustment for the year ended 31-03-2005. The answer will be: a) Appropriate balance in Reserve for doubtful debts a/c as on 31-03-2005 is Rs 66750. b) Debtors amount will be shown in the balance sheet as under Outstanding debtors Less: Reserve for doubtful debts Additional provision required Net Debtors 750000 37500 29250 66750 683250

c) The effect of this additional provision of Rs 29250 will reduce the profit for the year by the same amount Q 2 A property dealer owned many properties which it had acquired by taking bank loans. There were separate loan agreements for different properties. In some cases, interest was paid in advance and in other cases it was payable in arrears. These properties were let out to different tenants on various agreements. Some agreements provided for rentals in advance while the others provided for rent payable in arrears. The dealer has given the following balances:

Interest payable Interest prepaid Rentals due from tenants Rentals received in advance

31-03-2005 12000 8000 15000 3000

31-03-2006 14500 6400 19000 2500

During the year 2005-06, the amount of interest payable transferred to P & L a/c was Rs 56000 and cash collected from tenants for rentals was Rs 116000. You are required to prepare Interest Payable a/c and Rental Income a/c for the year ended 2005-06 Answer 2: Please note although 4 different figures are given, we are asked to prepare only two accounts. This means the opening as well as closing balances will have to be written in these 2 accounts only. Thus, we should find out what these 4 figures represent. This is shown in following table:

Interest payable Interest prepaid Rentals due from tenants Rentals received in advance
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31-03-2005 Opening Liability Asset Asset Liability

31-03-2006 Closing Liability Asset Asset Liability

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Please be careful to notice how the opening and closing balances are shown. Now, students should be able to interpret the balancing figures in these accounts.

Dr Date Particulars To Balance (prepaid) To Cash paid (balancing figure) To Balance (due) To Balance (prepaid) Dr Date Particulars To Balance (receivable) To P & L a/c (balancing figure) To Balance (advance) To Balance (receivable) J. F. J. F.

Interest payable Amount Rs Date Particulars By balance b/d (due) 8000 51900 14500 74400 6400 By P & L /ac By balance b/d (prepaid) By balance b/d (due)

J. F.

Cr Amount Rs 12000 56000 6400 74400 14500 Cr Amount Rs 3000 116000

Rentals Income Amount Rs Date Particulars By balance b/d 15000 (advance) By cash received 120500 By Balance (receivable) By balance b/d (advance)

J. F.

2500 138000 19000

19000 138000 2500

The balancing figure in Interest payable a/c will reflect interest actually paid during the year, whereas the balancing figure in Rentals Income is the income taken to P & L a/c for the year. Q3 The book-keeper of a supermarket prepared a schedule of balances of individual suppliers accounts in the creditors ledger as on 31st March 2005 and arrives at the total of Rs 6,923,062.40. The accountant was in charge of general ledger. He maintained the Sundry Creditors Account in the general ledger which is given below:

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Final Accounts

Dr Date 30-Apr-05 30-Apr-05 30-Apr-05

Particulars Purchase returns Bank To balance c/d

Sundry Creditors Control a/c Amount Rs Date Particulars 44,814.40 1-Apr-05 7,705,016.00 30-Apr-05 6,775,064.80 30-Apr-05 - 30-Apr-05 By balance b/d Purchases Discount received Debtors control a/c (contra)

Cr Amount Rs 7,141,690.40 8,038,679.20 212,545.60 243,980.00

15,404,895.20

15,620,895.20

Subsequently, on investigation, the accountant discovered several mistakes in the control a/c as well as individual creditors a/cs as given below: 1) One supplier was paid Rs 817.60 out of petty cash. This was correctly recorded to his personal a/c, but was omitted to be posted to control a/c 2) Credit side of a suppliers a/c was under-cast by Rs 2400 3) A suppliers credit balance of Rs 43,851.20 was by mistake taken as Rs 46,752.80 while preparing the schedule of balances of all suppliers a/cs. 4) There was an omission of a supplier credit balance of Rs 53,945.60 from the schedule. 5) Discounts received of Rs 1004.80 and Rs 650.40 were posted to wrong side of suppliers a/cs. 6) Goods of Rs 316.80 were returned to a supplier not entered in purchase return book. 7) Debtors control contra represents the sale of goods to suppliers. Prepare a statement rectifying the errors and prepare the control a/c. Answer: First of all, theres a totaling error in the control a/c Total of debit side should be Rs 14,524,895.20 and credit side is Rs 15,636,895.20. This needs to be corrected. There is a difference of Rs 1,112,000 due to this. The revised credit balance should be Rs 7,887,064.80 instead of Rs 6,775,064.80 as shown in the control a/c. In addition, the errors that have affected the control a/c should be corrected. These are: a) Discounts received will reduce the balance due to creditors, hence should appear on the debit side in control a/c. Here, it appears on credit side. We must show double the amount on credit side to rectify this error.

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b) Payment to a supplier of Rs 817.60 were omitted hence, it must be written on debit side of control a/c c) Purchase return of Rs 316.80 omitted should be recorded. The other errors will affect only individual a/cs and not control a/c. The revised control a/c is shown below:

Dr Date 30-Apr-05 30-Apr-05 30-Apr-05

Sundry Creditors Control a/c Particulars Amount Rs Date Purchase returns Bank Discount received (rectified) Debtors control a/c ( contra) rectified Purchase returns (omission rectified) Bank (payment recorded) To balance c/d 44,814.40 1-Apr-05 7,705,016.00 30-Apr-05 425,091.20 30-Apr-05

Particulars By balance b/d Purchases Discount received Debtors control a/c ( contra)

Cr Amount Rs 7,141,690.40 8,038,679.20 212,545.60

30-Apr-05

487,960.00 30-Apr-05

243,980.00

30-Apr-05 30-Apr-05 30-Apr-05

316.80 817.60 6,972,879.20

15,636,895.20
The effect on individual accounts will be as follows: Total of the schedule as given Add: under-casting of credit side Add: omission of a supplier in schedule Less: Wrong amount taken (43,851.20 46,752.80) Less: Discounts received recorded on wrong side rectified (1004.80)*2 & (650.4)*2 Less: purchase return omitted, now rectified Revised balance in individual a/cs tallied with control a/c

15,636,895.20
Amount Rs 6,923,062.40 2,400.00 53,945.60 (2,901.60) (3,310.40)

(316.80) 6,972,879.20

Q4 The accountant of Modern Manufacturing Company has given the following details from its ledger for the year ended 31st March 2005
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Final Accounts

Item Advertising Depreciation on factory equipment Depreciation on office equipment Direct wages Raw material purchases Opening stock Raw material Opening stock WIP Opening stock Finished goods Sales Stores and consumables Factory insurance Heating Power Salaries of factory staff Electricity of office General expenses Postage & telephone Office salaries

Amount (Rs) 160000 560000 320000 3200000 16160000 640000 960000 1920000 40992000 400000 80000 1200000 1600000 2000000 1200000 720000 232000 5600000

The closing stock as on 31st March 2005 was valued as raw material Rs 800000, WIP Rs 720000 and finished goods Rs 2400000. It was revealed that an advertising bill of Rs 80000 was due but not paid and Rs 120000 was paid for electricity charges in advance. These were not entered in books of a/c Prepare the Manufacturing, Trading and P & L a/c clearly showing factory cost of production, gross profit and net profit. Answer:

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In the books of Modern Manufacturing Company Manufacturing Account for the year ended 31st March 2005 Amount Rs. Particulars Particulars Opening stock Closing stock Raw material Work in process 640,000 960,000 Raw material Work in process

Amount Rs.

800,000 720,000

Purchases of raw material Factory Insurance Power Heating Stores & spares consumed Wages Salary of factory staff Depreciation on factory equipment Total

16,160,000 80,000 1,200,000 1,600,000 400,000 3,200,000 2,000,000 560,000 26,800,000 Total 26,800,000 Cost of Production (transferred to Trading a/c) 25,280,000

Trading Account for the year ended 31st March 2005

Particulars Opening stock Finished goods Cost of production (transferred from manufacturing a/c) 1,920,000 Amount Rs. Particulars Sales less sales returns Closing stock 25,280,000 Finished goods 2,400,000 Amount Rs. 40,992,000

Gross Profit (transferred to P & L a/c) Total

ACCOUNTING

16,192,000

43,392,000

Total

43,392,000

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Final Accounts
Profit and Loss Account for the year ended 31 st March 2005 Amount Particulars Rs. Particulars Administrative expenses Gross Profit (transferred from Office salaries 5,600,000 Trading a/c) Postage & Telephone 232,000 Electricity (1200000 - 120000) 1,080,000 Depreciation of office 320,000 equipment General expenses 720,000 Selling & Distribution expenses Advertising (160000 + 80000) Net profit Total 240,000 8,000,000 16,192,000 Total 16,192,000

Amount Rs.

16,192,000

Q5 Following is the trial Balance of M/s Brijesh and Sons. Prepare final accounts for the year ended on 31st March 2006.
Particulars Stock as on 01-04-2005 Purchases and sales Bills receivables Returns Carriage Inwards Debtors and creditors Carriage Outwards Discounts Salaries and wages Insurance Rent Wages and salaries Bad debts Furniture Brijeshs capital Brijeshs drawing Loose tools Printing & stationery Advertising Cash in hand Cash at bank Petty Cash Machinery Commission Total Debit Rs 200000 2200000 50000 100000 50000 200000 40000 5000 220000 60000 60000 80000 10000 400000 70000 100000 30000 50000 45000 200000 5000 300000 10000 4485000 Credit Rs 3500000 50000 400000 5000

500000

30000 4485000
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A 118

Adjustments: (1) Stock on 31st March was valued at Cost price Rs 420000 and market price Rs 400000. (2) Depreciate furniture @ 10% pa and machinery @ 20% pa on reducing balance method. (3) Rent of Rs 5000 was paid in advance. (4) Salaries & wages due but not paid Rs 30000. (5) make a provision for doubtful debts @ 5% on debtors. (6) Commission receivable Rs 5000

Answer: Trading Account for the year ended 31st March 2006 Amount Amount Particulars (Rs.) Rs. Particulars Opening stock Finished goods Purchases Less purchases returns Carriage inwards Wages & salaries Gross Profit c/d Total 2,200,000 50,000 2,150,000 Closing stock 50,000 Finished goods 80,000 1,320,000 3,800,000 Total Sales 200,000 less sales returns

Amount (Rs.) 3,500,000 100,000

Amount Rs.

3,400,000

400,000

3,800,000

ACCOUNTING

A 119

Final Accounts

Profit & Loss Account for the Year Ended 31st March 2006

Particulars Administrative expenses Salaries & wages Add unpaid Depreciation on furniture Depreciation of Machinery Insurance Rent Less paid in advance Printing & Stationery Selling & Distribution expenses Advertising Carriage Outwards Discounts Bad debts Commission Provision for doubtful debts Net profit Total

Amount Rs.

Amount Rs. Particulars Gross Profit b/d

Amount Rs.

Amount Rs. 1,320,000 5,000

220,000 30,000

Discount received 250,000 Commission received 40,000 Add receivable 60,000 60,000 30,000 5,000

35,000

60,000 5,000 55,000 30,000

50,000 40,000 5,000 10,000 10,000 10,000 740,000 1,360,000 Total 1,360,000

A 120

ACCOUNTING

The Balance Sheet as on 31st March 2006 Amount Amount Capital & Liabilities Rs. Rs. Assets Brijesh's Capital Less drawings Add Net Profit for the year Long term Liabilities 500,000 70,000 Fixed Assets Furniture

Amount Rs.

Amount Rs.

400,000 40,000 300,000 60,000 360,000

740,000 1,170,000 Less depreciation Machinery Less depreciation Loose tools Office equipments 400,000 30,000 Current Assets Stocks Sundry debtors Less provision for doubtful debts Bills receivables Cash in hand Cash at bank Petty cash Prepaid Rent Commission receivable

240,000 100,000

Current Liabilities Sundry creditors Outstanding salaries & wages

400,000 200,000 10,000 190,000 50,000 45,000 200,000 5,000 5,000 5,000 1,600,000

Total

1,600,000 Total

ACCOUNTING

A 121

Final Accounts Notes: 1) 2) 3) 4) Closing stock is valued at market price here as it is less than cost price (conservatism concept) Returns in debit column mean sales return, while that in credit column means purchase returns Discounts in debit column mean allowed (expense) and that in credit means received (income) Commission in debit column mean allowed (expense) and that in credit means received (income) 5) There are two peculiar items given in the TB. One is Salaries & wages and the other is Wages and salaries. The interpretation is where first reference is made to wages, its assumed to be directly for goods and taken to trading a/c. If the first reference is to salaries, its assumed to be related to office and taken to P & L. Q6 Mr. Arvindkumar had a small business enterprise. He has given the trial balance as on 31st March 2006 as below.

Particulars Mr. Arvinkumars capital Machinery Depreciation on machinery Repairs to machinery Wages Salaries Income tax of Mr. Arvindkumar Cash in had Land & Building Depreciation on building Purchases Purchase returns Sales Citi Bank Accrued Income Salaries outstanding Bills receivables Provision for doubtful debts Bills payable Bad debts Discount on purchases Debtors Creditors Opening stock Total

Debit Rs 36000 4000 5200 54000 21000 1000 4000 149000 5000 250000

Credit Rs. 100000

3000 498000 7600 3000 4000 30000 10000 16000 2000 7080 70000 62520 74000 708200 708200

A 122

ACCOUNTING

Additional information: 1) Stock as on 31st March 2006 was valued at Rs 60000 2) Write off further Rs 6000 as bad debt and maintain a provision of 5% on doubtful debt. 3) Goods costing Rs 10000 were sent on approval basis to a customer for Rs 12000 on 30th March 2006. This was recorded as actual sales. 4) Rs 2400 paid as rent for office was debited to Landlords a/c and was included in debtors. 5) General Manager is to be given commission at 10% of net profits after charging his commission. 6) Works manager is to be given a commission at 12% of net profit before charging General Managers commission and his own. You are required to prepare final accounts in the books of Mr. Arvindkumar. Answer :
In the books of Mr. Arvindkumar Trading Account for the year ended 31st March 2006 Amount Amount Rs. Rs. Particulars Particulars Opening stock Finished goods Purchases Less purchases returns Carriage inwards Wages Gross Profit c/d Total 54,000 181,000 556,000 Total 556,000 250,000 (3,000) 247,000 Closing stock Finished goods Add sent on approval 60,000 10,000 70,000 74,000 Sales less sent on approval

Amount Rs. 498,000 (12,000)

Amount Rs.

486,000

ACCOUNTING

A 123

Final Accounts

Profit and Loss Account for the year ended 31st March 2006 Amount Rs. Particulars Particulars Administrative expenses Salaries Repairs to machinery Depreciation of Machinery Depreciation of Building Rent Selling & Distribution expenses Gross Profit b/d 21,000 Discount received 5,200 4,000 5,000 2,400

Amount Rs. 181,000 7,080

Bad debts Additional bad debts Provision for doubtful debts Less Provision opening Commission to works manager Commission to General Manager Net profit Total

2,000 6,000 2,480 (10,000) 480 18,000 12,000 120,000 188,080 Total 188,080

A 124

ACCOUNTING

The Balance Sheet as on 31st March 2006 Amount Amount Capital & Liabilities Rs . Rs Assets Arvind kumars Capital Less drawings (income tax) Add Net Profit for the year Long term Liabilities Current Liabilities Sundry creditors Outstanding salaries 100,000 (1,000) 120,000 Fixed Assets Land & building 219,000 Machinery Current Assets Stocks 62,520 Add sent on approval 4,000 Sundry debtors Less goods on approval 7,600 Less Bad debts Less related to 16,000 landlord Less provision for 30,000 doubtful debts Bills receivables Cash in hand Accrued Income

Amount Rs .

Amount Rs

149,000 36,000

60,000 10,000 70,000 (12,000) (6,000) (2,400) (2,480) 47,120 30,000 4,000 3,000 70,000

Citi Bank Overdraft Bills payable Commission payable

Total

339,120 Total

339,120

ACCOUNTING

A 125

Final Accounts

Notes: 1) The closing entries are passed for the items: depreciation, accrued income, outstanding salary. Hence, they are directly taken to the respective places in Balance sheet and P & L a/c. 2) Income tax paid for Mr. Arvindkumar will be treated as drawings. 3) Commission payable to works manager & general manager is computed as below: Profit before charging any commission 150,000 Commission to works manager @ 12% on 150000 18,000 Profit after works managers commission 132,000 Commission to General Manager 12,000 (132000/110 x 100) Q7 Jamnadas provides you with the following T. B. as on 31st March 2005.

Particulars Stock as on 1st April 04 Depreciation Accumulated depreciation Fixed asset Loss on sale of fixed asset Investments Profit on sale of investments Sales at 20% gross margin Purchases Customers accounts Creditors accounts Expenses Discount Commission Amounts due to principals Amounts due from dealers Deposits with Principals Deposits from Dealers Cash Income on investments Interest on deposits with Principals Interest on deposits from dealers Prepaid/outstanding expenses As on 31st March 2004 As on 31st March 2005 Fixed deposits with bank Interest on fixed deposits with bank Drawings/Capital Banks Total
A 126

Debit Rs 35000 5000 50000 8000 125000

Credit Rs

40000

80000 800000 750000 100000 5000 42000 18000 50000 75000 100000 150000 7000 5000 12000 18000 7000 9000 200000 60000 1664000 13000 6000 20000 300000 58000 1664000
ACCOUNTING

20000 60000 12000 80000 8000

The cost of fixed assets sold is Rs 30000, accumulated depreciation being Rs 9000. Prepare the financial statements. Also, separately show Accumulated depreciation a/c, and expenses a/c. Answer: Answer: Dr

Date 31-Mar-05

31-Mar-05

Accumulated depreciation a/c Amount Particulars Rs Date Particulars To Asset (sold) 9000 1-Apr-04 By balance b/d (balancing figure) By P & L 31-Mar-05 (depreciation) To Balance c/d 40000 49000 By balance b/d

Cr Amount Rs 44000

5000 49000 40000

Dr Date 1-Apr-04 Particulars To Balance (prepaid) To Cash paid (balancing figure) To Balance (due) To Balance (prepaid)

Expenses a/c Amount Rs Date 7000 1-Apr-04

Particulars By balance b/d (due) By P & L /ac (4200013000+7000) By balance b/d (prepaid)

Cr Amount Rs 13000

31-Mar-05 31-Mar-05

45000 31-Mar-05 6000 31-Mar-05 58000 9000

36000 9000 58000 6000

By balance b/d (due)

Trading Account for the year ended 31st March 2005 Amount Rs. Particulars Particulars Opening stock Sales Finished goods 35,000 Purchases 750,000 Closing stock Finished goods Gross Profit c/d Total 160,000 945,000

Amount Rs. 800,000 -

145,000

Total

945,000

ACCOUNTING

A 127

Final Accounts

Profit and Loss Account for the year ended 31st March 2005 Amount Particulars Administrative expenses Expenses Depreciation Loss on sale of fixed asset Discount allowed Commission given Interest on deposits to dealers Rs. Particulars Gross Profit b/d 36,000 Profit on sale of investment 5,000 Discount received 8,000 Commission received 18,000 Income from investments Interest 50,000 principals deposits 12,000 20,000 Amount Rs. 160,000 80,000 12,000 80,000 5,000

18,000 Interest bank deposits

Net profit Total

Sales Cost of goods sold Goods available for sale Hence, closing stock should be 800,000 640,000

234,000 369,000 Total 369,000

Gross margin on sales @ 20% 160,000 785,000this is op stock 35000 + purchases 750000 145,000(785000- 640000)

Now, the balance sheet is given below.

A 128

ACCOUNTING

The Balance Sheet as on 31st March 2005 Amount Rs. 300,000 (60,000) 234,000 474,000 Amount Rs. Amount Rs. 80,000 (30,000) 50,000 44,000 (9,000) 5,000 40,000 10,000 Amount Rs.

Capital & Liabilities Jamnadas's Capital Less drawings (income tax) Add Net Profit for the year

Assets Fixed Assets less acc Dep for sold Balance of assets Depreciation opening less acc Dep for sold Add for the year

Long term Liabilities Current Liabilities Sundry creditors Advance from Customers Dues to Principals Bank overdraft Outstanding expenses Deposits from dealers 60,000 20,000 8,000 58,000 6,000 150,000

Net acc Dep Net fixed Asset

Investments

125,000

Current Assets Stocks Sundry debtors Deposits with Principals Cash in hand Fixed deposit with Bank Dues from dealers Advance to suppliers Prepaid expenses 145,000 100,000 100,000 7,000 200,000 75,000 5,000 9,000 776,000

Total
ACCOUNTING

776,000

Total

A 129

Final Accounts Please carefully interpret the balances given. Customer balances are in debit as well as credit column. While debit indicates Debtor and credit means advances received from customers. Same logic will apply to suppliers, commission, discounts. Computation of closing stock was very important in this case. Q8 Abhay runs a small shop and deals in various goods. He has not been able to tally his trial balance and has closed it by taking the difference to suspense a/c. It is given below.

Particulars (as on 31st March 2005) Abhays capital Drawings Fixed assets Opening stock Purchases & returns Sales & returns Due from customer & to creditors Expenses Cash Bank deposits & interest earned Suspense a/c Advertising Total

Debit Rs 75000 135000 36500 675000 34000 95000 45750 55000 200000 1351250

Credit Rs 150000

13500 850000 325000 3000 5750 4000 1351250

Mr. Abhay has requested you to help him in tallying his trial balance and also prepare his final accounts. On investigation of his books you get the following information: 1) Closing Stock on 31st March 2005 was 45000 at cost and could sell over this value. 2) Depreciation of Rs 13500 needs to be provided for the year. 3) A withdrawal slip indicated a cash withdrawal of Rs 15000 which was charged as drawing. However, it was noticed that Rs 11000 was used for business purpose only and was entered as expenses in cash book. 4) Goods worth Rs 19000 were purchased on 24th March 2005 and sold on 29th March 2005 for Rs 23750. Sales were recorded correctly, but purchase invoice was missed out. 5) Purchase returns of Rs 1500 were routed through sales return. Partys a/c was correctly posted. 6) Expenses include Rs 3750 related to the period after 31st March 2005. 7) Purchase book was over-cast by Rs 1000. Posting to suppliers a/c is correct. 8) Advertising will be useful for generating revenue for 5 years.

A 130

ACCOUNTING

Answer:

Rectification of errors:

a) Cash withdrawn was recorded as Cash a/c Dr To Bank

15000 15000

But it was charged to drawing and Rs 11000 was recorded as expenses as well i.e. Drawings a/c Dr 15000 Expenses a/c Dr 11000 To Cash 26000 This resulted in negative cash of Rs 11000. The rectification entry to be passed is Cash a/c To Drawings Dr 11000 11000

b) Omitted transaction to be recorded Purchases a/c Dr To Suppliers a/c

19000 19000

c) Incorrect recording of purchase returns corrected by Suspense a/c Dr 3000 To Purchase return a/c 1500 To sales return a/c 1500 d) Incorrect expenses rectified by Prepaid expenses a/c Dr To Expenses a/c

3750 3750

e) Over-casting of purchase book rectified by Suspense a/c Dr 1000 To Purchases

1000

ACCOUNTING

A 131

Final Accounts

Based on these rectifications we can now proceed to complete the final accounts. Trading Account for the year ended 31st March 2005 Amount Rs. Amount Rs. Particulars 36,500 675,000 (13,500) (1,500) 19,000 (1,000) 678,000 148,000 Sales Less Returns Add rectification Closing stock Finished goods 45,000 Amount Rs. 850,000 (34,000) 1,500 817,500 Amount Rs.

Particulars Opening stock Purchases Less returns Less additional returns Add purchases missed out Less over-casting rectified Gross Profit c/d

Total 862,500 Total Profit and Loss Account for the year ended 31st March 2005 Amount Amount Particulars Rs. Rs. Particulars Expenses Less prepaid Depreciation Advertising Less Deferred over 5 years Net profit Total 200,000 (160,000) 40,000 58,250 153,750 Total 45,750 (3,750) 42,000 13,500 Gross Profit b/d Interest bank deposits

862,500 Amount Amount Rs. Rs. 148,000 5,750

153,750

A 132

ACCOUNTING

The Balance Sheet as on 31st March 2005 Amount Rs. 150,000 (75,000) 11,000 58,250 144,250 Amount Rs. Amount Rs. 135,000 (13,500) 121,500 Amount Rs.

Capital & Liabilities Abhay's Capital Less drawings Add wrong charge to drawing Add Net Profit for the year

Assets Fixed Assets less Depreciation Current Assets Stocks Sundry debtors

45,000 95,000 (3,000) 11,000 8,000 55,000 3,750 160,000 488,250

Current Liabilities Sundry creditors Add missed out purchases 325,000 19,000 344,000

Cash in hand Add Rectification Fixed deposit with Bank Prepaid expenses Deferred revenue expenditure

Total

488,250

Total

ACCOUNTING

A 133

Final Accounts Q 9: Apte and Sapte are partners sharing profits and losses equally. From the following trial balance of their firm and adjustments prepare Trading and Profit and Loss A/C for the year ended 31st March 2004and Balance Sheet on that date. Trial Balance as on 31st March 2004

Dr. Particulars Opening stock Purchases Sales Returns Debtors Wages Royalties Furniture Machinery Advertisement for 4 years Salaries Provident Fund contribution Provident Fund investment Insurance Cash Depreciation on Machinery Amount 45000 160200 1000 40000 8000 4000 25000 Particulars Capital A/Cs Apte Sapte Sales Purchase Returns Commission Provident Fund Reserve for 85000 doubtful debts

Cr. Amount 50000 50000 223800 4200 12000 60000 2100 40000

8000 Creditors 24000 6000 12000 2400 13000 8500 442100

442100

Adjustments: 1) The cost price of the closing stock was Rs.80000 while its market price was Rs.85000. 2) Goods of Rs.8000 were sold on 30th March 2004 but no entry thereof has been made in the sale books. 3) During the year goods worth Rs.4000 withdrawn by Sapte for his personal use. 4) Depreciate Furniture by 15%. 5) Write off Rs. 1600 as Bad Debts and maintain Reserve for Doubtful Debts at 5% on Sundry Debtors, provide discount on debtors at 3% and discount on creditors at 2%. 6) Prepaid insurance Rs.600 and salaries include Rs.4500 paid as advance against salary. 7) Provide interest on capital at 12% pa and interest on drawing is to be 12% pa for six months.

A 134

ACCOUNTING

Trading and Profit and Loss A/C For the year ended 31st March 2004 Dr. Particulars To opening stock To purchases Less purchase Return To wages To Royalties To Gross Profit c/d To salaries Less advance To Advertisement Less Prepaid To provident fund Contribution To insurance Less prepaid To Bad Debts Add new R.D.D. less old R.D.D. To Depreciation Machinery Furniture To Reserve for discount on debtors To interest on capital Apte Sapte To Net Profit Apte Sapte 24000 4500 8000 6000 Cr. Amount Rs.

Amount Rs. 160200 4200

Amount Rs. 45000

Particulars By sales less sales returns Add unrecorded By goods(Withdrawn by Sapte) By closing stock By Net Profit b/d By Commission received By Reserve for discount on creditors By interest on Drawings ApteSapte

Amount Rs. 223800 1000 222800 8000

156000 8000 4000 101800 314800 19500 2000 6000

230800

4000 80000 314800 101800 12000 800

2400 600 1600 2320 3920 2100 8500 3750 1800

240

240

1820

12250 1322

6000 6000 29074 29074

12000

58148 114840

114840 A 135

ACCOUNTING

Final Accounts Partners Capital A/C

Dr. Particulars To Drawings To interest on Drawings To Balance c/d

Apte Sapte Particulars 4000 By Balance b/d By interest on 240 capital 85074 80834 By Net Profit 85074 85074
Balance Sheet as on 31st March 2004

Cr. Apte Sapte 50000 50000 6000 29074 85074 6000 29074 85074

Liabilities Capital A/Cs Apte Sapte Creditors Less Reserve for Discount on creditors Provident Fund

Amount Rs.

Amount Rs.

Assets Machinery

Amount Rs.

Amount Rs. 85000

85074 80834 40000 165908

Furniture Less Depreciation Provident Fund Investment Debtors Add unrecorded 39200 60000 Less Bad Debts Less R.D.D. Less Reserve for Discount on Debtors Cash Prepaid Insurance Prepaid Advertisement Advance Salaries Closing stock 265108

25000 3750 21250

800

12000 40000 8000 48000 1600 46400 2320 44080

1322

42758 13000 600 6000 4500 80000 265108

A 136

ACCOUNTING

Q 10: Sara and Lara are partners sharing profit and losses in the ratio of 2:1 respectively. The trial balance of their firm as on 31st March 2005 was as follows: Trial Balance as on 31st March 2005

Particulars Purchases Wages Opening stock Land and building Debtors Machinery Royalties Carriage Inwards Carriage Outwards Office expenses Bad Debts Power and fuel Furniture Drawings Sara Lara Cash in hand Cash at bank Advertisement Insurance

Amt.(Dr.) 48000 23000 25000 30000 45000 25000 1800 1300 1700 2550 750 8000 3000 3000 2000 500 4300 3000 400 228300

Particulars Capital A/Cs Sara Lara Creditors Unpaid wages Sales Commission

Amt.(Cr.) 25000 20000 49000 1000 131100 2200

228300

Adjustments: 1) Closing stock on 31st March 2005 was valued at Rs. 18500. 2) Goods worth Rs.3000 were taken by Sara for his personal use were not entered in the books of accounts. 3) Goods worth Rs.5000 were destroyed by fire and insurance company admitted the claim for Rs.3500. 4) Write off Rs.1000 for Bad Debts and create R.D.D. at 5% for debtors.5) Insurance is paid for the year ended 30th June 2005. 6) Charge Depreciation on Land and Building at 2 % Machinery at 10% and Furniture at 15%. 7) Prepare Trading and Profit and Loss Account for the year ended 31st March 2005 and Balance-sheet on that date.

ACCOUNTING

A 137

Final Accounts Trading and profit and Loss Account For the year ended 31st March 2005 Dr. Particulars To opening stock To Purchases To wages To carriage inward To Royalties To power and fuel To Gross Profit To office expenses To Bad Debts Add further Add new R.D.D. To carriage outward To Advertisement To insurance Less prepaid To loss by fire To Depreciation Land & Building Machinery Furniture To Net Profit Sara Lara Amount Rs. Amount Rs. 25000 48000 23000 1300 1800 8000 50500 157600 2550 750 1000 1750 2200 Particulars By Sales By Goods(Taken over by Sara) By Goods(Destroyed by fire) By closing stock Amount Rs. Cr. Amount Rs. 131100 3000 5000 18500 157600 50500 2200

By Gross Profit By Commission

3950 1700 3000 300 1500

400 100

750 2500 450 24000 12000

3700

36000 52700

52700

Partners Capital A/C Dr. Particulars To Drawing To goods To Balance c/d Sara 3000 3000 43000 49000 Lara Particulars 2000 By Balance b/d By Net Profit 30000 32000 Sara 25000 24000 49000 Cr. Lara 20000 12000 32000

A 138

ACCOUNTING

Balance-sheet as on 31st March 2005 Liabilities Amount Rs. Amount Rs. Assets Amount Rs. 30000 750 25000 2500 3000 450 45000 1000 44000 Less R.D.D. Closing stock Insurance claim Prepaid Insurance Cash in hand Cash at Bank 123000 2200 41800 18500 3500 100 500 4300 123000 2550 22500 29250 Amount Rs.

Capital A/Cs Sara Lara Creditors Unpaid wages 43000 30000 73000 49000 1000

Land & Building Less Depreciation Machinery Less Depreciation Furniture Less Depreciation Debtors Less Bad Debts

ACCOUNTING

A 139