Page 189 - DMGT104_FINANCIAL_ACCOUNTING

Unit 8: Financial Statements

Additional Information: Notes
1. Stock on 31st March 2011 was valued at 40,000.
2. Included in debtors are 8,000 due from Ram and included in creditors are 6,000 due to
Ram.
3. Bills Receivable include a bill of 5,000 received from Varun, which has been dishonoured.

4. Sales include 5,000 for the goods sold on approval basis. Goods are sold at a profit of 25%
on cost.
5. Wages include 5,000 spent on the erection of machinery.
6. Advertisement include 20,000 spent at the time of launching a new product. It is the
policy of the business to write off such expenses in 5 years.
7. Create a provision for doubtful debts at 5% on debtors.
8. Prepaid taxes amounted to 2,000.
9. Depreciate machinery by 10%
Prepare Trading and Profit & Loss Account for the year ended 31st March 2011 and a Balance
Sheet as on that date.

Solution: Trading and Profit & Loss Account of Mr. Alok for the year ended on 31.3.2011.
Balance Sheet of Mr. Alok
as on 31.3.2011
Particulars ( ) Particulars ( )
To Stock 10,000 By Sales 1,90,000
To Purchases 95,000 – Sale on approval 5,000 1,85,000
To Carriage 6,000 By Closing Stock 40,000
To Custom Duty 16,000 +Sale on approval 4,000 44,000
To Wages 28,000 (5000-1000)
– Erection of Machine 5,000 23,000
To Gross Profit c/d 79,000
2,29,000 2,29,000
To Salaries 16,000 By Gross Profit b/d 79,000
To Rent, Rates & Taxes 15,000 By Int on Investments 2,000
– Prepaid 2,000 13,000 + Accrued Interest 1,000 3000
To Bad debts 6,000
+ New Prov 950
6,950
– Old 2,000 4,950
To Trade Expenses 11,000
To Advertisement 30,000
– Deferred 16,000 14,000
To Depreciation on Machinery 5,500
To Net Profit 17,550
82,000 82,000

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