Page 266 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Particulars Particulars
To Rent and Rates 12,000 By Gross Profit 2,70,000
To Insurance 3,000
To Electricity Charges 2,400
To Salaries 36,000
To Directors’ Fees 7,200 Unit 11: Profit and Loss Prior to Incorporation

To Interest on Deb. 7,500
To Audit Fees 2,250
To Discount on Sale 5,400
To Depreciation 36,000 Notes
To Advertisement 7,200
To Stationery & Printing 27,000
To Commission on Sales 5,400
To Bad Debt ( 750 relating to pre-incorporation) 2,250
To Interest to vendor (upto 1 May, 2010). 4,500
st
To Net Profit 1,11,900
2,70,000 2,70,000
Solution:

Working Notes:
1. Time Ratio:
1 November 2009 to 1 March, 2010 = 4 months
st
st
st
st
1 March, 2010 to 31 October, 2010 = 8 months
Time Ratio- = 4:8 or 1:2
2. Turnover Ratio:
Turnover for prior period is 3,75,000
Turnover for post period is 9,00,000 – 3,75,000

= 5,25,000
Turnover Ratio is 3,75,000:5,25,000 or 5:7
Profit and Loss Account for the year ending 31 October, 2010
st
Pre- Pre- Post-
Basis of Post-
Particulars Allocatio incorpo- incorporati Particulars incorpor incorpo
n ration on period ation ration
period period period
To Rent & Rates Time 4,000 8,000 By Gross Profit 1,12,500 1,57,500
To Insurance Time 1,000 2,000 (Turnover ratio)
To Electricity Time 800 1,600
Charges
To Salaries Time 12,000 24,000
To Directors’ fees — — 7,200
To Interest on — 7,500
Debentures
To Audit fees Time 750 1,500
To Discount Turnover 2,250 3,150
To Depreciation Time 12,000 24,000
To Advertisement Turnover 3,000 4,200
To Stationery and Time 9,000 18,000
Printing
To Commission on Turnover 2,250 3,150
Sales
To Bad Debts Turnover 750 1,500
To Interest to 4:2 3,000 1,500
Vendors
To Net Profit 61,700 50,200
1,12,500 1,57,500 1,12,500 1,57,500

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