Question

Seema and Vivek are partners sharing profit and losses In the ratio 1:1. From the following trial balance and additional information prepare Trading and Profit and Loss Account for the year ended 31st March, 2020 and Balance Sheet as on that date.

Trial Balance as on 31st March, 2020
Debit Balance	Amt. (₹)	Credit Balance	Amt. (₹)
Stock (1st April, 2019)	65,000	Capital:	1,60,000
Wages and salary	9,000	Seema
Debtors	1,32,000	Vivek	1,20,000
Bad debts	1,000	Creditors	78,000
Purchases	1,48,000	Sales	1,84,200
Motor car	68,000	Purchases Return	4,000
Sales return	2,000	Interest	1,800
Building	75,000
Bank Balance	35,000
Advertisement (paid for 9 months)	4,500
Audit fees	5,000
Printing and stationery	3,000
	5,48,000		5,48,000

Adjustments:

1. Closing stock ₹40,000.
2. Depreciate building @ 5% and motorcar @ 3% p.a.
3. Create a provision for bad-debts ₹1,800.
4. Prepaid expenses-wages ₹700.
5. Interest receivable ₹900.

Answer 1

In the books of Seema and Vivek
Dr.	Trading and Profit and Loss A/c for the year ended 31st March, 2020				Cr.
Particulars	Amt. (₹)	Amt. (₹)	Particulars	Amt. (₹)	Amt. (₹)
To Opening Stock		65,000	By Sales	1,84,000	1,82,000
To Purchases	1,48,000	1,44,000	Less: Sales Return	2,000
Less: Returns Outward	4,000		By Closing Stock		40,000
To Wages and Salary	9,000	8,300
Less: Prepaid Wages	700
To Gross Profit c/d		4,900
		2,22,200			2,22,200
To R.B.D.D. A/c:	1,000	2,800	By Gross Profit b/d		4,900
Bad Debts			By Interest	1,800
Add: New Bad Debts	1,800		Add: Interest receivable	900	2,700
To Advertisement	4,500	6,000	By Partners' Capital A/c: (Loss)	7,495	14,990
Add: Outstanding bill for advertisement	1,500		Seema
To Audit fees		5,000	Vivek	7,495
To Printing & Stationary		3,000
To Depreciation:	2,040	5,790
on Motor Car
on Building	3,750
		22,590			22,590

 

Balance Sheet as on 31st March, 2020
Liabilities	Amt. (₹)	Amt. (₹)	Assets	Amt. (₹)	Amt. (₹)
Capital Accounts:	1,60,000	1,52,505	Building	75,000	71,250
Seema			Less: Depreciation @ 5%	3,750
Less: Net Loss	7,495		Motor Car	68,000	65,960
Vivek	1,20,000	1,12,505	Less: Depreciation @ 3%	2,040
Less: Net Loss	7,495		Debtors	1,32,500	1,30,700
Creditors		78,000	Less: Bad Debts	1,800
Outstanding bill for advertisement		1,500	Closing Stock		40,000
			Prepaid Wages		700
			Interest receivable		900
			Bank balance		35,000
		3,44,510			3,44,510

Working Notes:

(1) Outstanding bill for advertisement = `"Payment made for 9 months"/9xx`Payment due for 3 months

`= (4,500)/9 xx 3=500xx3` = ₹1,500

Outstanding bill for advertisement ₹1,500 is first added to advertisement on the debit side of Profit and Loss Account and then it is shown on the Liabilities side of Balance Sheet.

(2) Depreciation on Building = 5%  on ₹75,000 = `5/100`× 75,000 = ₹3,750 and

Depreciation on Motor Car = 3% on ₹68,000 = `3/100xx68,000` = ₹2,040.

(3) New provision for bad debts ₹1,800 is first added to Bad debts on the debit side of Profit and Loss Account and then it is deducted from Debtors on the Assets side of Balance Sheet.

(4) Prepaid wages of ₹700 is deducted from wages in Trading Account and interest receivable added to interest in the Profit and Loss Account. Both Prepaid Wages and Interest Receivables are shown on the Assets side of Balance Sheet.