Question

From the following Trial Balance and Adjustments of Rushabh and Yesha, you are required to prepare final accounts as on 31st March, 2023. Profit and Loss sharing ratio of partners is their capital ratio.

Trial Balance as on 31st March, 2023
Particulars (Name of Accounts)	Debit (₹)	Credit (₹)
Capital and Drawings :
Rushabh	40,000	2,00,000
Yesha	28,000	1,00,000
Purchases and Sales	2,80,000	5,21,000
Debtors and Creditors	1,80,000	1,20,000
Sales Return and Purchase Return	4,000	6,000
Bills Receivable and Bills Payable	30,000	41,600
Cash Balance and Bank Overdraft	2,000	28,000
Bad Debts and Provision for Doubtful Debts	800	2,600
Wages and Outstanding Wages	70,000	4,000
Machinery	80,000
Furniture	24,000
Opening Stock of Goods	92,200
Prepaid Insurance	400
Salaries	46,000
Insurance Premium	4,000
Rent -Taxes	24,000
Advertisement Expenses	5,800
Goodwill	1,44,000
Leasehold Building	28,000
8 % Loan (From 1111/22)		60,000
	10,83,200	10,83,200

Adjustments :

(1) Closing stock is of ₹ 2,20,000. Its market value is 20 % more than its value.

(2) Calculate interest on capital @ 6 % p.a.

(3) Interest on drawings to be charged from partners: Rushabh ₹ 1,800, Yesha ₹ 1,200

(4) Provision for doubtful debts is to be kept at 5 %.

(5) Outstanding expenses at the end of the year: Rent ₹  600, Salary ₹ 1,900.

(6) Provide depreciation at 10 % on machinery and at 5 % on furniture.

(7) Write off ₹ 8,000 from Leasehold Building.

Answer 1

Dr	In the books of Rushabh and Yesha Trading and Profit and Loss Account for the year ended on 31st March, 2023				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Opening Stock of Goods		92,200	By Sales	5,21,000	5,17,000
To Purchases	2,80,000	2,74,00	Less: Sales Returns	4,000
Less: Purchase Return	6,000		By Closing Stock		2,20,000
To Wages		70,000
To Gross Profit c/d		3,00,800
		7,37,00			7,37,00
To Salaries	46,000	47,900	By Gross Profit b/d		3,00,800
Add: O/s Salary	1,900		By Interest on Drawings
To Insurance Premium		4,000	Rushabh	1,800	3,000
To Advertisement Expense		5,800	Yesha	1,200
To Rent – Taxes	24,000	24,600
Add: O/s Rent	600
To Interest on Loan (O/s)		2,000
To Bad Debts (Old)	800	7,200
Add: Provision for Doubtful Debts (New)	9,000
	9,800
Less: Provision for Doubtful Debts (Old)	2,600
To Depreciation
Machinery	8,000	9,200
Furniture	1,200
To Written off Leasehold Building		8,000
To Interest on Capital
Rushabh	12,000	18,000
Yesha	6,000
To Net Profit (Transferred to Partners’ Capital A/cs)
Rushabh	1,18,066	1,77,100
Yesha	59,034
		3,03,800			3,03,800

 

Balance Sheet as on 31st March, 2023
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Capital Account: Rushabh			Machinery	80,000	72,000
Opening Balance	2,00,000	2,88,266	Less: Depreciation (10 %)	8,000
Add: Interest on Capita	12,000		Furniture	24,000	22,800
Add: Net Profit	1,18,066		Less: Depreciation (5 %)	1,200
	3,30,066		Leasehold Building	28,000	20,000
Less: Drawings	40,000		Less: Written off	8,000
Less: Interest on Drawings	1,800		Goodwill		1,44,000
Capital Account: Yesha			Debtors	1,80,000	1,71,000
Opening Balance	1,00,000	1,35,834	Less: Provision for Doubtful Debts	9,000
Add: Interest on Capital	6,000		Bills Receivable		30,000
Add: Net Profit	59,034		Cash Balance		2,000
	1,65,034		Prepaid Insurance		400
Less: Drawings	28,000		Closing Stock		2,20,000
Less: Interest on Drawing	1,200
8 % Loan (1/11/22)	60,000	62,000
Add: O/s Interest on Loan	2,00
Creditors		1,20,000
Bills Payable		41,600
Bank Overdraft		28,000
Outstanding expenses:
Wages	4,000	6,500
Salary	1,900
Rent	600
		6,82,200			6,82,200

Working Notes:

(1) Consider closing stock value ₹ 2,20,000 as its market value is 20 % more.

(2) Interest on drawings: Record it on Cr. side of Profit & Loss A/c and subtract it from capital. (As shown)

(3) Interest on 8 % loan is calculated for 5 months (i.e. 1/11/22 to 31/3/23)

I - `"PRN"/100 = 60,000 xx 8/100 xx 5/12 = ₹ 2,000`

4) In the Trial Balance, following balances have credit balance: Bills payable, Bank Overdraft, Provision for doubtful debts, 8 % Loan, etc.

(5) Outstanding wages – Cr. bal. – write it on Liabilities side of Balance Sheet.

(6) Prepaid insurance – Dr. bal. – write it on Assets side of Balance Sheet.