Format of Trading and Profit & Loss Account of XYZ Ltd.

for the Year Ending on _______

Dr Cr
Particulars Amt. (Dr.) Particulars Amt.(Cr.)
To Opening stock (RM+WIP+FG) XXX By Sales XXX
To Purchases XXX Less: Returns Inwards (SR) XXX XXX
Less: Return outwards (PR) XXX XXX By Closing Stock (RM + WIP + XXX
To Direct Expenses: FG)
To Wages By Gross Loss (transferred to XXX
To Freight XXX P&L A/c)
To Carriage Inwards XXX
To Clearing charges XXX
To Packing charges XXX
To Dock dues XXX
To Power (factory) XXX
To Octroi duty XXX
To Gross Profit c/d (transferred to XXX
P&L A/c) XXX
XXX XXX
To Gross Loss b/d XXX By Gross Profit b/d XXX
To Indirect Expenses: By Other Incomes:
To Selling expenses: By Interest received XXX
To Advertisement XXX By Discount received XXX
To Traveller’s salaries, expenses & XXX By Commission received XXX
commission By Rent from tenants XXX
To Bad debts XXX By Income from investments XXX
To Godown rent XXX By Apprenticeship Premium XXX
To Export expenses XXX By Interest on Debentures / bonds XXX
To Carriage outwards XXX By Income from any other source XXX
To Bank charges XXX By Miscellaneous Revenue XXX
To Agent’s commission XXX receipts XXX
To Upkeep of motor lorries / vans XXX By Net Loss transferred to
To Management expenses (office Capital A/c
& admin exps):
1
To Rent, rates & taxes XXX
To Heating & Lighting XXX
To Office salaries XXX
To Printing & Stationary XXX
To Postage & Telegrams XXX
To Telephone charges XXX
To Legal expenses XXX
To Audit fees XXX
To Insurance XXX
To General expenses XXX
To Depreciation XXX
To Repairs & Maintenance XXX
To Financial expenses:
To Discount allowed XXX
To Interest on capital XXX
To Interest on loans XXX
To Extraordinary expenses:
Loss by fire (not covered by XXX
insurance)
To Cash defalcation XXX
To Net Profit transferred to XXX
Capital A/c
Total XXX Total XXX

Simple Problem 1:
Prepare the trading account of Siva for the year ending 31.3.2020
Rs.
Opening stock 4,00,000
Purchases 43,00,000
Carriage inwards 2,60,000
Wages 1,20,000
Credit sales 72,00,000
2
Cash sales 18,00,000
Sales returns 15,80,000
Purchases returns 50,000
Closing stock 5,00,000
Solution:
Trading Account of Siva for the year ending 31.3.2020
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To Opening stock 400,000 By Sales:
Cash sales 18,00,000
Credit sales 72,00,000
90,00,000
Less: SR 15,80,000 74,20,000
To Purchases 43,00,000 By Closing stock 5,00,000
Less: PR 50,000 42,50,000
To Carriage inwards 2,60,000
To Wages 1,20,000
To Gross Profit (BF) c/d 28,90,000
79,20,000 79,20,000
79,20,000 – 50,30,000 = 28,90,000

Simple Problem 2:
From the following balances in the ledger of Mr. Anand for the year ended
31.3.2019, prepare trading account.
Rs.
Opening work-in-progress 1,00,000
Opening stock of raw materials 55,000
Purchases of raw material 10,00,000

3
Closing stock of raw materials 40,000
Carriage on purchases 10,000
Factory wages 50,000
Fuel and coal 45,000
Factory power 20,000
Depreciation on plant and machinery 15,000
Factory supervisor’s salary 75,000
Closing work-in-progress 20,000
Solution:
Trading Account of Mr. Anand for the year ending 31.3.2019
Dr Cr
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To Opening stock: By Sales 15,00,000
Work-in-progress 100,000
Raw material 55,000 1,55,000
To Purchases of raw 10,00,000 By Closing stock:
materials Work-in-progress 20,000
Rawmaterial 40,000 60,000
To Carriage on purchases 10,000
To Factory wages 50,000
To Fuel and coal 45,000
To Factory power 20,000
To Depreciation on P&M 15,000
To Factory Supervisor’s 75,000
salary
To Gross Profit c/d 200,000
15,60,000 15,60,000

4
Simple Problem 3:
From the following trial balance of Rajesh, prepare profit and loss account for the
year ended 31.3.2020.
Debit (Rs.) Credit (Rs.)
Gross profit 9,50,000
Commission received 5,000
Interest received 4,000
Sundry income 7,000
Depreciation 10,000
Salaries 15,000
Discount (Dr.) 8,000
Discount (Cr.) 12,000
Bank charges 4,000
Audit fees 2,000
Stationery 400

Solution:
Profit and Loss Account of Mr. Rajesh for the year ended 31.3.2020
Dr. Cr.
Particulars Rs. Particulars Rs.
To Depreciation 10,000 By Gross profit 9,50,000
To Discount 8,000 By Sundry income 7,000
To Bank charges 4,000 By Commission 5,000
received
To Salaries 15,000 By Interest received 4,000
To Stationery 400 By Discount 12,000
To Audit fees 2,000
To Net Profit (BF) 9,38,600
5
 9,78,000 9,78,000
9,78,000 - 39,400 = 9,38,600
Format
Balance Sheet of XYZ Ltd. as on 31.12.2018
Liabilities & Capital Amt. Assets Amt.
Capital: XXX Fixed Assets:
Add: Net Profit XXX Land & Building XXX
(OR) Less: Net Loss XXX Plant & Machinery XXX
Reserves & Surplus XXX Furniture & Fixtures XXX
Long Term Liabilities XXX Vehicles – vans, cars, etc. XXX
Current Liabilities: Investments XXX
Bills Payable XXX Current Assets:
Sundry Creditors XXX Sundry Debtors XXX
Customer’s advances XXX Bills Receivable XXX
Short term loans XXX Closing Stock XXX
Bank Overdraft XXX Accrued income XXX
Outstanding expenses XXX Prepaid expenses XXX
Income Tax Payable XXX Cash balance on hand XXX
Bank balances XXX
Short term investments XXX
Intangible Assets:
Goodwill XXX
Copyrights, Patents XXX
Fictitious Assets:
Formation expenses XXX
Underwriting commission XXX
XXX XXX

6
Simple Problem 4:
From the following balances extracted from the books of Arun of Chennai, prepare
a trading and profit and loss account and balance sheet as on 31.3.2020.
Particulars Rs. Particulars Rs.
Opening stock 6,250 Plant and 31,150
machinery
Sales 59,000 Returns outwards 6,900
Depreciation 3,335 Cash in hand 4,475
Commission (Cr.) 1,055 Salaries 3,750
Insurance 1,900 Debtors 9,525
Carriage inwards 1,500 Discount (Dr) 1,640
Furniture 3,350 Bills receivable 13,650
Printing charges 2,405 Wages 7,945
Carriage outwards 1,000 Returns inwards 8,295
Capital 46,140 Bank overdraft 20,000
Creditors 8,900 Purchases 43,395
Bills payable 2,705 Petty cash in hand 235
Bad debts 900
The value of stock on 31st March 2020 was Rs. 18,500.
Solution:

Trading and Profit and Loss Account of Mr. Arun for the year ending 31st
March 2020
Dr. Cr.
Particulars Rs. Particulars Rs.
To opening stock 6,250 By Sales 59,000
Less: Returns inwards 8,295 50,705
To Purchases 43,395 By Closing Stock 18,500
7
Less: Returns outwards 6,900 36,495
To Carriage inwards 1,500
To Wages 7,945
To Gross Profit c/d (BF) 17,015
69,205 69,205
To Depreciation 3,335 By Gross Profit b/d 17,015
To Printing charges 2,405 By Commission 1,055
To Insurance 1,900
To Bad debts 900
To Carriage outwards 1,000
To Salaries 3,750
To Discount 1,640
To Net Profit transferred to 3,140
Balance Sheet
18,070 18,070

Balance Sheet of Mr. Arun as on 31.3.2020

Liabilities Rs. Assets Rs.
Capital 46,140 Fixed Assets:
Add: Net Profit 3,140 49,280
Furniture 3,350
Plant and machinery 31,150
Current Liabilities: Current Assets:
Creditors 8,900 Petty Cash in hand 235
Bills payable 2,705 Cash 4,475
Bank overdraft 20,000 Bills receivable 13,650
Debtors 9,525

8
 Closing stock 18,500
80,885 80,885

Simple Problem 5:
From the balances taken from the books of Vignesh & Co. on 31.3.2020, you are
required to prepare the trading and profit & loss account and balance sheet as on
that date.
Particulars Rs. Particulars Rs.
Opening stock 1,000 Interest on capital 700
Bills receivable 4,500 Stationery 450
Purchases 39,000 Returns inward 1,300
Wages 2,800 Cash in hand 500
Commission (Cr.) 400 Cash at bank 4,750
Returns outward 500 Rent & taxes 1,100
Trade expenses 200 Carriage outward 1,450
Office fixtures 1,000 Sales 50,000
Insurance 1,100 Bills payable 3,000
Sundry debtors 30,000 Creditors 19,650
Carriage inward 800 Capital 17,900
Commission (Dr.) 800
The closing stock was valued at Rs. 25,000
Solution:
Trading and Profit and Loss Account of Mr. Vignesh for the year ending 31st
March 2020
Dr. Cr.
Particulars Rs. Particulars Rs.
9
To opening stock 1,000 By Sales 50,000
Less: Returns in 1,300 48,700
To Purchases 39,000 By Closing stock 25,000
Less: Ret. Out. 500 38,500
To Wages 2,800
To Carriage inwards 800
To Gross Profit c/d (BF) 30,600
73,700 73,700
To Trade expenses 200 By Gross Profit b/d 30,600
To Insurance 1,100 By Commission (Cr.) 400
To Commission (Dr.) 800
To Interest on capital 700
To Stationery 450
To Rent & taxes 1,100
To Carriage outward 1,450
To Net profit transferred to 25,200
Capital A/c
31,000 31,000

Balance Sheet of Mr. Vignesh & Co. as on 31.3.2020

Liabilities Rs. Assets Rs.
Capital 17,900 Fixed Assets:
Add: Net Profit 25,200 43,100 Office fixtures 1,000
Current Liabilities: Current Assets:
Creditors 19,650 Sundry Debtors 30,000
Bills payable 3,000 Bills receivable 4,500
Cash in hand 500

10
 Cash at bank 4,750
Closing Stock 25,000
65,750 65,750

Simple Problem 6:
The following balances are drawn from the books of M/s. Arvind Mills as on
31.12.2019.
Account Amount (Rs.) Account Amount (Rs.)
Land 100,000 Sales 300,000
Building 200,000 Purchases 175,000
Sales returns 10,000 Stock (1.1.2019) 25,000
Purchases returns 5,000 Debtors 50,000
Bank overdraft 15,000 Cash in hand 5,000
Creditors 20,000 Salaries 10,000
Wages 12,000 Goodwill 15,000
General expenses 5,000 Selling expenses 12,000
Bad debts 1,000 Insurance 1,000
Capital 281,000
Adjustments:
i. Closing stock is Rs. 30,000.
ii. Provide for depreciation @ 10% on buildings.
iii. Write off further bad debts Rs. 1,000.
iv. Salaries yet to be paid Rs. 3,000.
You are required to prepare a trading, profit and loss account and a Balance Sheet
of Arvind Mills.
Solution:
11
 Trading & Profit & Loss Account of M/s. Arvind Mills for the year ending 31.12.2019.
Dr. Cr.
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To opening stock 25,000 By Sales 300,000
Less: SR 10,000 290,000
To Purchases 175,000 By closing stock 30,000
Less: PR 5,000 170,000
To Wages 12,000
To Gross profit c/d (BF) 113,000
320,000 320,000
To general expenses 5,000 By Gross profit b/d 113,000
To selling expenses 12,000
To Insurance 1,000
To Bad debts -old 1,000
Add: New Bad debts 1,000 2,000
To salaries 10,000
Add: Outstanding sal. 3,000 13,000
To depreciation on buildings
200,000 @ 10% 20,000
To Net profit (BF) 60,000
transferred to Capital A/c

12
 113,000 113,000

Balance Sheet of M/s Arvind Mills as on 31.12.2019

Liabilities Amount Assets Amount
(Rs.) (Rs.)
Capital 281,000 Fixed Assets:
Add: Net profit 60,000 341,000
Current Liabilities: Land 100,000
Creditors 20,000 Buildings 200,000
Less: Dep. @ 10% 20,000 180,000
Bank overdraft 15,000 Goodwill 15,000
Outstanding salaries 3,000 Current Assets:
Cash on hand 5,000
Debtors 50,000
Less: Bad debts written off
1,000 49,000
Closing stock 30,000
379,000 379,000

Simple Problem 7:
The following is the Trial balance as on 31st December 2019 extracted from the
books of Mr. Satish:
Particulars Debit (Rs.) Credit (Rs.)
Freehold land 35,000
13
 Mortgage loan 20,000
Plant & Machinery 45,500
Loose tools 1.1.2019 5,600
Bills payable 3,400
Book debts 18,200
Sales 121,500
Cash at bank 11,000
Stock on 1.1.2019 10,500
Insurance 300
Bad debts 560
Sundry creditors 15,600
Bills receivable 5,400
Purchases 50,000
Cash on hand 640
Rent, rates, etc. 1,300
Interest 250
Wages 10,700
Trade expenses 150
Salaries 1,560
Repairs to plant 875
Carriage inwards 350
Discount 290 175
Satish’s Capital A/c 40,000
Drawings 2,500
200,675 200,675
Prepare trading and profit and loss account and Balance sheet after making the
following adjustments:
i. Provision for doubtful debts at 5% on book debts
14
 ii. Interest on capital at 5%
iii. Unexpired insurance premium Rs. 90
iv. Rent outstanding 31.12.2019 Rs. 300
v. Loose tools revalued at Rs. 4,500
vi. Closing stock Rs. 30,000
Solution:
Trading & Profit & Loss Account of M/s. Satish for the z year ending
31.12.2019
Dr. Cr.
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To opening stock 10,500 By Sales 121,500
To Purchases 50,000 By closing stock 30,000
To Wages 10,700
To Carriage inwards 350
To Gross profit c/d (BF) 79,950
151,500 151,500
To Insurance 300 By Gross profit b/d 79,950
Less: Unexpired Ins. 90 210
To Bad debts 560 By Discount 175
Add: Provision for DD 910 1,470
(Rs 18,200 X 5%)
To Rent & rates 1,300
Add: Outstanding rent 300 1,600
To interest 250
To Trade expenses 150
To Salaries 1,560
To Repairs to plant 875

15
To Discount 290
To Interest on capital 2,000
(Rs 40,000 X 5%)
To Depreciation on loose 1,100
tools (5,600 – 4,500)
To Net profit transferred to 70,620
Capital A/c (BF)
80,125 80,125

Balance Sheet of Mr. Satish as on 31.12.2019

Liabilities Amount Assets Amount
(Rs.) (Rs.)
Capital 40,000 Fixed Assets:
Add: Net profit 70,620 Plant & Machinery 45,500
Add: Int. on cap. 2,000
112,620
Less: Drawings 2,500 110,120
Mortgage loan 20,000 Freehold land 35,000
Current Liabilities: Loose tools 5,600
Less: Depreciation 1,100 4,500
Bills payable 3,400 Current Assets:
Sundry creditors 15,600 Cash at bank 11,000
Outstanding rent 300 Cash on hand 640
Book debts 18,200
Less: Prov. For DD 910 17,290
Bills receivable 5,400
Closing stock 30,000
Prepaid insurance 90
16
 1,49,420 1,49,420

I. Cash Flow Statement

In 1994, International Accounting Standard Committee accepted this statement. In
India Institute of Chartered Accountants of India accepted this statement in 1997
and has become a mandatory statement to be prepared by companies.

Profit and Loss Appropriation Account: it is prepared as a separate account, or

as the extended version of the profit and loss account. It shows how the profits
earned are distributed. Three parts, dividend to the shareholders, transfer of
specific reserves such general reserves, debenture redemption reserve, etc., balance
profits will be passed on to the balance sheet and added to the capital.

Profit & Loss Appropriation Account

Amount Amount
(Rs.) (Rs.)
To Interim dividend paid XXX By balance b/d XXX
To General reserve XXX By Net profit XXX
To balance c/d (surplus XXX
carried to Balance sheet)
XXX XXX

Funds flow statement is a kind of a cash flow statement, but an enlarged version
of the cash flow statement. In the cash flow statement only those assets and

17
liabilities which affect cash are considered, but in fund flow statement, almost all
the assets and liabilities are included, because in the long run, everything all the
liabilities and assets can be converted into cash. But it is not a mandatory
requirement.

Basic Ideas about Income and Expense

Profit and loss account consists of two elements: one element is the inflows
that result from the sale of goods and services to customers which are called as
revenues. The other element reports the outflows that were made in order to
generate those revenues; these are called as expenses. Income is the amount by
which revenues exceed expenses. The term ‘net income’ is used to indicate the
excess of all the revenues over all the expenses. The basic equation is:
Revenue – Expenses = Net Income
Income and Owner’s Equity:
The net income of an accounting period increases owner’s equity because it
belongs to the owner. To quote an example, goods costing rs.20,000 are sold on
credit for rs.28,000. The result is that stock is reduced by rs.20,000 and a new asset
namely debtor for rs.28,000 is created and the total assets increase by the
difference of rs.8,000. Because of the dual aspect concept, we know that the equity
side of the balance sheet would also increase by rs.8,000 and the increase would be
in owner’s equity. This is because the profit on sale of goods belongs to the owner.
It is clear from the above example that income increases the owner’s equity.
Income Vs. Receipts:
Income of a period increases the owner’s equity but it need not result in
increase in cash balance. Loss of a period decreases owner’s equity but it need not
result in decrease in cash balance. Similarly, increase in cash balance need not
result in increased income and owner’s equity and decrease in cash balance need
not denote loss and decrease in owner’s equity. All these are due to the fact that
18
income is not the same as cash receipt. The following examples make clear the
above point:
● when goods costing rs.20,000 are sold on credit for rs.28,000 it results in an
income of rs.8,000 but the cash balance does not increase.
● when goods costing rs.18,000 are sold on credit for rs.15,000 there is a loss
of rs.3,000 but there is no corresponding decrease in cash.
● when a loan of rs.5,000 is borrowed the cash balance increases but there is
no impact on income.
● when a loan of rs.8,000 is repaid it decreases only the cash balance and not
the income.
Expenses:
An expense is an item of cost applicable to an accounting period. It
represents economic resources consumed during the current period. When
expenditure is incurred the cost involved is either an asset or an expense. If the
benefits of the expenditure relate to further periods, it is an asset. If not, it is an
expense of the current period. Over the entire life of an enterprise, most
expenditure becomes expenses. But according to accounting period concept,
accounts are prepared for each accounting period. Hence, we get the following four
types of transactions relating to expenditure and expenses:
Expenditures that are also Expenses: This is the simplest and most
common type of transaction to account for. If an item is acquired during the year, it
is expenditure. If the item is consumed in the same year, then the expenditure
becomes expense. E.g. Raw materials purchased are converted into saleable goods
and are sold in the same year.
Assets that Become Expenses: When expenditures incurred result in
benefits for the future period they become assets. When such assets are used in
subsequent years they become expenses of the year in which they are used. For e.g.
Inventory of finished goods are assets at the end of a particular accounting year.
When they are sold in the next accounting year they become expenses.
19
 Expenditures that are not Expenses: As already pointed, out when the
benefits of the expenditure relate to future periods they become assets and not
expenses. This applies not only to fixed assets but also to inventories which remain
unsold at the end of the accounting year. For e.g. The expenditure incurred on
inventory remaining unsold is asset until it is sold out.
Expenses not yet paid: Some expenses would have been incurred in the
accounting year but payment for the same would not have been made within the
accounting year. These are called accrued expenses and are shown as liabilities at
the year end.

Adjustments for Final Accounts

● were not considered while preparing T/B
● are outside the T/B
● appear in 2 places
Sl.No. Item of Adjustment Treatment
Trading account P&L account Balance Sheet
1. Closing stock Shown on credit - Shown on
side assets side as
CA
2. Outstanding Added to - Shown on
expenses concerned liabilities side
(considered as expenses on debit as CL
liability) side
(relating to Trading
account, like wages)
Outstanding - Added to Shown on
expenses (relating to concerned liabilities side
P&L account) as CL

20
 expenses on
debit side
3. Prepaid expenses - Reduced from Shown on
(considered as an concerned assets side as a
asset) expenses on CA
debit side
4. Accrued Income – - Added to Shown on
income earned but concerned assets side as a
not yet received income on CA
(considered as an credit side
asset)
5. Income received in - Reduced from Shown on
advance – concerned liabilities side
(considered as a income on as a CL
liability) credit side
6. Additional Bad - Shown on Reduced from
debts as per debit side debtors on
adjustments assets side
7. Provision for - Shown on Reduced from
doubtful debts of debit side debtors on
current year assets side
8. Provision on - Shown on Reduced from
discount on debtors debit side debtors on
of current year assets side
9. Provision for - Shown on Reduced from
discount on credit side creditors on
creditors liabilities side

21
10. Depreciation on - Shown on Reduced from
fixed assets debit side fixed assets
concerned on
assets side
11. Interest on capital - Shown on Added to
debit side Capital on
liabilities side
12. Interest on drawings - Shown on Reduced from
credit side Capital on
liabilities
13. Abnormal loss of Amount of stock Actual loss – Amount due
stock lost - Shown on shown on from
credit side debit side Insurance
Company -
Shown on
assets side

Problem 8: Ascertain Gross profit and Net profit from the following balances extracted from
books of Alfa Associates.
Particulars Amount (Rs.) Particulars Amount (Rs.)
Sales 1,60,000 Purchase returns 4,000
Purchases 91,300 Sales Returns 5,000
Wages 18,100 Salaries (office) 6,000
Rent – Factory 3,000 General Expenses 4,500
- Office 2,0000
Freight - Purchases 3,000 Discount from creditors 1,100
Sales 1500
Opening Stock 24,000 Discount to customers 1,800
Closing stock 22,100
Solution
22
Trading and Profit and Loss Account of Alpha Associates for the year ending
______

Debit Amt. Credit Amt. (Rs.)

(Rs.)
To Opening stock 24,000 By Sales 1,55,000
1,60,000
Less: Sales Returns
5,000
To Purchases 87,300 By Closing Stock 22,100
91,300
Less: Purchases returns
4,000
To Wages 18,100
To Rent – Factory 3,000
To Freight – Purchases 3,000
To Gross Profit b/d 41,700
1,77,100 1,77,100
To Rent - Office 20,000 By Gross Profit c/d 41700
To Freight - Sales 1,500 By Discount from creditors 1,100
To Salaries (office) 6,000
To General Expenses 4,500
To Discount to customers 1,800
To Net Profit b/d 9,000
42,800 42,800

Problem 9: The following balances are extracted from the books of Kautilya &
Co. on 31st Dec., 2018. You are required to prepare the Trading and Profit & Loss
Account and Balance Sheet as on that date:
Particulars Amount Particulars Amount
(Rs.) (Rs.)
Stock in 1st Jan., 2018 500 Return outwards 250
Bills Receivable 2250 Trade Expenses 100
Purchases 19,500 Office Fixtures 500
Wages 1400 Cash in Hand 250
Insurance 550 Cash at Bank 2375

23
Sundry Debtors 15000 Rent & Taxes 550
Carriage Inwards 400 Carriage outward 725
Commission (Dr.) 400 Sales 25,000
Interest on Capital 350 Bills Payable 1500
Stationery 225 Creditors 9825
Return Inwards 650 Capital 8950
Commission (Cr.) 200
Closing stock was valued at Rs 12,500.

Solution
Trading and Profit & Loss Account of Kautilya & Co. for the year ending 31st
Dec., 2018
Amount Amount
(Rs.) (Rs.)
To Stock in 1st Jan., 2018 500 By Sales 24,350
25,000
Less: Return Inwards
650
To Purchases 19,250 By Closing stock 12,500
19,500
Less: Return outwards
250
To Wages 1,400
To Carriage Inwards 400
To Gross Profit 15,300
36,850 36,850
To Insurance 550 To Gross Profit 15,300
To Commission (Dr.) 400 To Commission (Cr.) 200
24
To Interest on Capital 350
To Stationery 225
To Trade Expenses 100
To Rent & Taxes 550
To Carriage outward 725
To Net Profit 12,600
15,500 15,500

Balance Sheet of Kautilya & Co. as on 31st Dec. 2018

Liabilities Amount Assets Amount
(Rs.) (Rs.)
Capital 8950 Office Fixtures 500
Add: Net Profit 12,600 21,550
Bills Payable 1,500 Cash in Hand 250
Creditors 9,825 Cash at Bank 2,375
Sundry Debtors 15,000
Bills Receivable 2250
Closing stock 12,500
32,875 32,875

Problem 10:
From the following Trial Balance extracted from the books of Waterfalls Pvt. Ltd.,
prepare a Trading and Profit and Loss Account for the year ended on 30th
September, 2018 and a Balance Sheet as on that date:
Debit Balances Rs. Debit Balances Rs.
Drawings 6,480 Sundry Debtors 37,800
Land and Buildings 25,000 Stock (1st October, 2017) 26,420
Plant and Machinery 14,270 Fire Insurance 490
25
Furniture and Fixtures 1,250 Cash at bank 13,000
Carriage Inwards 4,370 Cash in Hand 850
Wages 21,470 Credit Balances Rs.
Salaries 4,670 Capital Account 90,000
Sales Returns 1,760 Bad Debts Provisions (as 2,470
on 1-10-2017)
Bank Charges 140 Sales 91,230
Coal, Gas and Water 720 Discount Account 120
Rate and Taxes 840 Purchases Returns 8,460
Purchases 42,160 Sundry Creditors 12,170
Bills Receivable 1,270 Apprentice Premium 500
Trade Expenses 1,990
Adjustments:
⮚ Charges depreciation on Land and Building account at 2.5%, on Plant and
Machinery Account at 10%, and on Furniture and Fixtures Account at 10%.
⮚ Make a Provision of 5% on Sundry debtors for Doubtful Debts.
⮚ Carry forward the unexpired amounts for Fire Insurance Rs. 125, Rates and
Taxes Rs. 240 and Apprentice Premium Rs. 400.
⮚ Charges 5% interest on Capital and interest on Drawings is Rs. 300.
⮚ The value of stock as on 30th September, 2018, was Rs. 29,390. (204950).
Solution:

Depreciation of L&B = 25,000 X 2.5% = Rs. 625

Depreciation of P&M = 14,270 X 10% = Rs. 1,427

Depreciation of F&F = 1,250 X 10% = Rs. 125

Trading & Profit and Loss Account of Waterfalls Pvt. Ltd. for the year ended
30th Sep. 2018

Particulars Amt. Particulars Amt. (Rs.)

(Rs.)
26
To Stock (1st October, 2017) 26,420 By Sales 89,470
91,230
Less: Sales Returns
1,760
To Purchases 33,700 By Closing stock 29,390
42,160
Less: Purchases Returns
8,460
To Carriage Inwards 4,370
To Wages 21,470
To Coal, Gas and Water 720
To Gross Profit 32,180
1,18,860 1,18,860
To Salaries 4,670 By Gross Profit 32,180
To Bank Charges 140 By Discount Account 120
To Rate and Taxes By Apprentice Premium
840 600 500 100
Less: Unexpired Rates Less: Unexpired
240 400
& Taxes
To Trade Expenses 1,990 By Bad Debts Provisions 2,470
(as on 1-10-2017)
To Fire Insurance By Interest on Drawings 300
490 365
Less: Unexpired Fire
125
Insurance

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To interest on capital (90,000 4,500
X 5/100)
To Provision for doubtful 1,890
debts = (37,800 X 5/100)
To Depreciation:
Land and Building @ 2.5%
Rs 625
Plant & Machinery @ 10% 2,177
1,427
Furniture & Fixtures @ 10%
125
To Net Profit 18,838
35,170 35,170

Balance Sheet of Waterfalls Pvt. Ltd. as on 30th Sep. 2018

Liabilities Amt. Assets Amt. (Rs.)

(Rs.)
Capital Land & Buildings
90,000 25,000 24,375
Add: Net Profit Less: Depreciation
18,838 625 12,843
Plant & Machinery
1,08,838 14,270 1,125
Add: Interest on Capital 1,06,558 Less: Depreciation
4,500 1,427
Furniture and Fixtures
1,13,338 1,250

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Less: Drawings Less: Depreciation
(6,480) 125
Less: Int. on Drawings
(300)
Sundry Creditors 12,170 Bills Receivable 1,270
Unexpired Apprentice 400 Sundry Debtors
Premium 37,800 35,910
Less: Bad debts Provision
1,890
Closing stock 29,390
Cash at bank 13,000
Cash in Hand 850
Unexpired Fire Insurance 125
Unexpired Rates & Taxes 240
1,19,128 1,19,128

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