Page 276 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 11: Profit and Loss Prior to Incorporation

Cash Account Notes
Particulars Particulars
To Share Capital 20,00,000 By Vendor 5,00,000
To Sales 90,00,000 By Machinery 12,50,000
By Purchases (calculated as below) 77,00,000
To Expenses (except expenses) 5,80,000
To Balance c/d. 9,70,000
1,10,00,000 1,10,00,000
Trading Account (to find out purchases)

Particulars Particulars
To Opening Stock 3,00,000 By Sales 90,00,000
To Purchases (Balancing figure) 77,00,000 By Closing Stock 3,50,000
To Gross Profit 13,50,000
93,50,000 93,50,000

Notes It is assumed that all transactions are cash transaction therefore there is no debtor
and creditor.
Illustration 7

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On 1 June, 2011 Sushil & Co. sold their business to Sushil Company Limited as on 1 April, 2011
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for a total consideration of 5,00,000: for Goodwill 1,50,000, Building 1,50,000, Machinery
75,000 and Stock 1,25,000
Sushil Company Limited was incorporated on 1st June, 2011 and the purchase consideration was
met by the issue of shares. The business was carried on by the vendors on the behalf of the
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company from 1 April and the same set of account books was maintained till 30 June, 2011
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when the following Trial Balance was prepared:
Particulars Dr. Cr.
Capital Account - Sushil 1,80,000
Capital account - Mohan 1,50,000
Sundry creditors (including for June purchase of 25,000) 50,000
Sales 5,00,000
Salaries and Wages (including 5000 being sitting fees to Directors) 60,000
Rent 7,500
Purchases 1,80,000
Sushil Company Limited 50,000
Expenses 25,000
Bank 17,500
Goodwill 1,25,000
Buildings 1,00,000
Machinery (purchases after 1.4.2006 were 50,000) 1,25,000
Stock on 31.3.2006 1,25,000
Sundry Debtors (including sales of 40,000 in June) 65,000
8,80,000 8,80,000

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