Question

From the following Trial Balance and Adjustments given below of Rutul and Atul, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March, 2023 and Balance Sheet as on that date.

Trial Balance as on 31st March, 2023
Debit Balances	Amount (₹)	Credit Balances	Amount (₹)
Purchases	71,000	Sales	1,16,400
Sundry Debtors	80,000	Sundry Creditors	51,400
Sales Returns	2,000	Purchase Returns	1,000
Opening Stock	36,200	R.D.D.	1,600
Bad Debts	1,000	Discount	100
Land & Building	50,000	Commission	500
Furniture	40,000	Capital A/cs:
Discount	2,000	Rutul	1,00,000
Royalties	1,400	Atul	60,000
Rent	3,800
Salaries	6,000
Wages	1,600
Insurance	3,000
Drawing:
Rutul	4,000
Atul	2,000
Cash at Bank	23,000
Cash in Hand	4,000
	3,31,000		3,31,000

Adjustments:

(1) Closing stock valued at ₹ 44,000.

(2) Write off ₹ 1,800 for bad and doubtful debts and create a provision for reserve for doubtful debts ₹ 2,000.

(3) Create a provision for discount on debtors @ 3% and on creditors @ 5%.

(4) Outstanding expenses: Wages ₹ 1,400 and Salaries ₹ 1,600.

(5) Insurance is paid for 15 months, w.e.f. 1st April, 2022.

(6) Depreciate Land and Building @ 5%.

(7) Rutul and Atul are sharing Profits and Losses in their Capital Ratio.

Answer 1

Dr.	In the books of Rutul and Atul Trading and Profit and Loss Account for the year ended on 31st March, 2023				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Opening Stock		36,200	By Sales	1,16,400	1,14,400
To Purchases	71,000	70,000	Less: Sales Returns	2,000
Less: Purchase Returns	1,000		By Closing Stock		44,000
To Royalties		1,400
To Wages	1,600	3,000
Add: O/s Wages	1,400
To Gross Profit c/d		47,800
		1,58,400			1,58,400
To Rent		3,800	By Gross Profit b/d		47,800
To Salaries	6,000	7,600	By Commission		500
Add : O/s Salaries	1,600		By Discount		100
To Insurance	3,000	2,400	By R.D.C. (New)		2,570
Less: Prepaid Ins	600
To Depreciation on Land and Building		2,500
To R.B.D.D. A/
Bad debts (Old)	1,000	3,200
Add : New Bad debts	1,800
Add : New Reserve	2,000
	4,800
Less: Old Reserve	1,600
To Reserve for Discount on Debtors A/c
Discount	2,000	4,286
Add: New Reserve for Discount	2,286
To Net Profit (Transferred to Partner's Capital A/cs)
Rutul	16,990	27,184
Atul	10,194
		50,970			50,970

 

Balance Sheet as on 31st March, 2023
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Account: Rutul			Land and Building	50,000	47,500
Opening Balance	1,00,000	1,12,990	Less: Depreciation	2,500
Add : Net Profit	16,990		Furniture		40,000
Less: Drawings	4,000		Closing Stock		44,000
Capital Account: Atul			Sundry Debtors	80,000	73,914
Opening Balance	60,000	68,194	Less: Bad Debts (New)	1,800
Add : Net Profit	10,194			78,200
Less: Drawings	2,000		Less: Provision for Doubtful Debts (New)	2,000
Sundry Creditors	51,400	48,830		76,200
Less: Provision for Discount on creditors @ 5%	2,570		Less: Provision for Discount on Debtors @ 3%	2,286
Outstanding expenses			Prepaid Insurance Premium		600
Wages	1,400	3,000	Cash at Bank		23,000
Salaries	1,600		Cash in Hand		4,000
		2,33,014			2,33,014

Working Notes:

(1) Insurance premium ₹ 3,000 is paid for 15 months. i.e. prepaid insurance premium for 3 months = ₹ 600.

2) Reserve for Discount on Debtors = 3% on (Debtors – New Bad debts – New Reserve)

`= 3/100 - (80,000 - 1,800 - 2,000) = 3/100 xx (80,000 - 3,800) = 3/100 xx 76,200 = ₹ 2,286`

(3) Reserve for Discount on Creditors = 5% on (Value of Creditors) = `5/100 xx 51,400 = ₹ 2,570`

(4) Profit and Loss ratio = Capital ratio = 1,00,000 : 60,000 = 10 : 6 = 5 : 3