Question

From the following Trial Balance of Hira and Manek, 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 (₹)
Stock (1 /4/2022)	50,000	Bank Overdraft	10,000
Debtors	1,61,000	Bills Payable	25,000
Bills Receivable	20,000	Creditors	1,36,000
Purchases	4,17,000	Sales	6,50,000
Sales Returns	2,000	Outstanding Rent	4,000
Carriage Inward	6,000	Unpaid Wages	3,000
Carriage Outward	9,000	Capital A/cs:
Motor Vehicle	1,10,000	Hira	1,50,000
General Expenses	3,600	Manek	1,50,000
Export Duty	1,800	Purchase Returns	2,000
Advertisement (For 3 years from 1/10/2022)	9,600
Printing and Stationery	2,400
Drawings:
Hira	7,000
Manek	4,000
Leasehold Premises	2,20,000
Cash at Bank	90,000
Furniture	16,600
	11,30,000		11,30,000

Adjustments:

(1) Closing stock is valued at ₹ 64,000.

(2) Provide provision for doubtful debts ₹ 4,000.

(3) Create reserve for discount on debtors @ 3%

(4) Value of leasehold premises on 31st March, 2023 ₹ 2,00,000.

(5) Outstanding expenses: Printing and Stationery ₹ 1,000.

Answer 1

Dr.	In the books of Hira and Manek Trading and Profit and Loss Account for the year ended on 31st March, 2023				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Opening Stock		50,000	By Sales	6,50,000	6,48,000
To Purchases	4,17,000	4,15,000	Less: Sales Returns	2,000
Less: Purchase Returns	2,000		By Closing Stock		64,000
To Carriage Inward		6,000
To Gross Profit c/d		2,41,000
		7,12,000			7,12,000
To Carriage Outward		9,000	By Gross Profit b/d		2,41,000
To General Expenses		3,600
To Export Duty		1,800
To Advertisement	9,600	1,600
Less : Prepaid	8,000
To Printing and Stationery	2,400	3,400
Add: O/s Printing and Stationery	1,000
To Written off Leasehold Premises		20,00
To Provision for Doubtful debts (New)		4,000
To R.D.D. (New)		4,710
To Net Profit (Transferred to Partners Capital A/c)
Hira	96,445	1,92,890
Manek	96,445
		2,41,000			2,41,000

 

Balance Sheet as on 31st March, 2023
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Account : Hira			Motor Vehicle		1,10,000
Opening Balance	1,50,000	2,39,445	Prepaid Advertisement Expense		8,000
Add: Net Profit	96,445		Leasehold Premises	2,20,000	2,00,000
Less : Drawings	7,000		Less : Written off	20,000
Capital Account : Manek			Closing Stock		64,000
Opening Balance	1,50,000	2,42,445	Debtors	1,61,000	1,52,290
Add: Net Profit	96,445		Less: Provision for Doubtful Debts (New)	4,000
Less : Drawings	4,000			1,57,000
Bank Overdraft		10,000	Less : R.D.D. (New)	4,710
Bills Payable		25,000	Bills Receivable		20,000
Creditors		1,36,000	Cash at Bank		90,000
O/s Rent		4,000	Furniture		16,600
Unpaid Wages		3,000
O/s Stationery & Printing		1,000
		6,60,890			6,60,890

Working Notes:

(1) Advertisement expenses written off to Profit and Loss account during the year 2022–23 for six months i.e. from 1/10/22 to 31/03/23.

Advertisement expenses written off = `"(Advertisement bill paid)" xx 1/3 xx 6/12`

`9,600 × 1/3 × 6/12 = ₹ 1,600.`

Prepaid Advertisement = 9,600 – 1,600 = ₹ 8,000.

(2) Reserve for Discount on Debtors = 3% (Balance in debtors)

`= 3/100(1,61,000 – 4,000) = 3/100 xx 1,57,000 = ₹ 4,710`

(3) Difference of opening balance (₹ 2,20,000) and closing balance (₹ 2,00,000) for leasehold premises is to be considered as written off leasehold premises.