Trial Balance as on 31st March, 1996
| Particulars (Debit) |
Rs. | Particulars (Credit) |
Rs. |
|---|---|---|---|
|
Stock (1-4-1995) Purchases Returns Inwards Carriage Motive Power Wages Trade Expenses Sundry Debtors Salaries Insurance Postage Commission Plant & Machinery Furniture Advertising Office Rent (10 months) Drawings Vinod Vikas Building Cash in Hand |
44000 170000 10000 4000 6000 56000 4000 72000 38000 2400 3600 5000 60000 16000 8000 10000 14000 6000 24000 3000 |
Capital A/c Vinod Vikas Sales Creditors Commission Bank Loan |
80000 80000 320000 40000 4000 32000 |
| TOTAL | 556000 | TOTAL | 556000 |
Adjustments
- Stock on 31.3.1996 was valued at cost price Rs. 80,000 and market price Rs. 72,000.
- Insurance has been paid for one year ending 31.6.1996.
- Goods withdrawn by Vinod amounting to Rs. 10,000 during the year were not recorded in the books.
- Bad debts were Rs. 2000 and an R.D.D. is to be created at 5% on debtors.
- Goods of Rs. 6000 were purchased on 30.3.1996 and also included in the closing stock, but the purchase was not recorded in the books of account.
Solution:
In the books of M/s Vinod and Vikas
Trading Account for the year ended 31.03.1996
| Particulars | Amt. | Amt. | Particulars | Amt. | Amt. |
|---|---|---|---|---|---|
| To Opening Stock | 44000 | By Sales | 320000 | ||
| To Purchases | 170000 | (-) Return | -10000 | 310000 | |
| (+) Unrecorded | 6000 | 176000 | By Goods withdrawn by Partner Vinod | 10000 | |
| To Carriage | 4000 | ||||
| To Motive Power | 6000 | ||||
| To Wages | 56000 | ||||
| To Gross Profit C/d | 106000 | By Closing Stock | 72000 | ||
| TOTAL | 392000 | TOTAL | 392000 |
Profit and Loss Account for the year ended 31.03.1996
| Particulars | Amt. | Amt. | Particulars | Amt. | Amt. |
|---|---|---|---|---|---|
| To Trade Expenses | 4000 | By Gross Profit b/d | 106000 | ||
| To Salaries | 38000 | By Commission | 4000 | ||
| To Insurance | 2400 | ||||
| (-) Prepaid | -600 | 1800 | |||
| To Postage | 3600 | ||||
| To Commission | 5000 | ||||
| To Advertising | 8000 | ||||
| To Office Rent | 10000 | ||||
| (+) Outstanding | 2000 | 12000 | |||
| To Bad Debts | - | ||||
| (+) F.B.D. | 2000 | ||||
| (+) N.R.D.D. | 3500 | ||||
| (-) O.R.D.D. | - | 5500 | |||
| To Net Profit C/d | |||||
| Vinod | 16050 | ||||
| Vikas | 16050 | 32100 | |||
| TOTAL | 110000 | TOTAL | 110000 |
Partners Capital Account as on 31.03.1996
| Particulars | Vinod | Vikas | Particulars | Vinod | Vikas |
|---|---|---|---|---|---|
| To Drawings | 14000 | 6000 | By Balance B/d | 80000 | 80000 |
| To Drawings [Goods] | 10000 | - | By Net Profit b/d | 16050 | 16050 |
| To Balance C/d | 72050 | 90050 | |||
| TOTAL | 96050 | 96050 | TOTAL | 96050 | 96050 |
Balance Sheet as on 31.03.1996
| Liability | Amt. | Amt. | Assets | Amt. | Amt. |
|---|---|---|---|---|---|
| Capital A/c | Sundry Debtors | 72000 | |||
| Vinod | 72050 | (-) F.B.D. | -2000 | ||
| Vikas | 90050 | 162100 | 70000 | ||
| Creditors | 40000 | (-) N.R.D.D. | -3500 | 66500 | |
| (+) Unrecorded Purchases | 6000 | 46000 | Plant & Machinery | 60000 | |
| Bank Loan | 32000 | Furniture | 16000 | ||
| Outstanding Office Rent | 2000 | Building | 24000 | ||
| Cash in Hand | 3000 | ||||
| Closing Stock | 72000 | ||||
| Prepaid Insurance | 600 | ||||
| TOTAL | 242100 | TOTAL | 242100 |
Difficult Words & Meanings:
- Trial Balance:
- A bookkeeping worksheet where the balances of all ledger accounts are compiled into debit and credit columns. A company prepares a trial balance periodically, usually at the end of every reporting period, to ensure the mathematical accuracy of the ledger.
- Debit (Dr.):
- An accounting entry that results in either an increase in assets or a decrease in liabilities and owner's equity on a company's balance sheet. For income statements, a debit increases expenses or losses.
- Credit (Cr.):
- An accounting entry that results in either a decrease in assets or an increase in liabilities and owner's equity. For income statements, a credit increases income or gains.
- Particulars:
- The specific details or names of accounts involved in a transaction or listed in a financial statement.
- Stock (Inventory):
- The goods and materials that a business holds for the ultimate goal of resale or repair.
- Purchases:
- The cost of goods bought by a business for resale during an accounting period.
- Returns Inwards (Sales Returns):
- Goods returned to the seller by a buyer, usually because they are defective, damaged, or not as ordered.
- Carriage (Carriage Inwards):
- The cost of transporting goods purchased by a business to its premises. It's considered part of the cost of goods.
- Motive Power:
- Expenses for energy (like electricity or fuel) used directly in the manufacturing process or to operate factory machinery.
- Wages:
- Remuneration paid to employees, especially for manual labor, typically calculated on an hourly, daily, or piecework basis.
- Trade Expenses:
- General day-to-day operating expenses of a business that are not specifically attributable to another category.
- Sundry Debtors (Accounts Receivable):
- Individuals or companies that owe money to a business for goods or services supplied on credit.
- Salaries:
- Fixed compensation paid to employees on a regular basis (e.g., monthly) for their services, often for administrative or managerial roles.
- Insurance:
- The amount paid for coverage against potential losses or damages. The portion related to the current period is an expense.
- Postage:
- The cost incurred for sending letters, parcels, and other mail items.
- Commission:
- A payment made to an employee or agent for successfully completing a business transaction or service. It can be an expense (commission paid) or income (commission received).
- Plant & Machinery:
- Tangible long-term assets, such as equipment and machinery, used by a business in its operations to produce goods or provide services.
- Furniture:
- Long-term assets like desks, chairs, cabinets, and other office furnishings used by a business.
- Advertising:
- Expenses incurred to promote a business's products or services to attract customers.
- Office Rent:
- The cost of using office premises that are leased or rented by the business.
- Drawings:
- Withdrawals of cash or goods by the proprietor or partners from the business for their personal use.
- Capital A/c (Account):
- An account that represents the total investment made by the owner(s) or partners in the business. It increases with profits and additional investment and decreases with losses and drawings.
- Sales:
- The total amount of revenue generated from the sale of goods or services during an accounting period.
- Creditors (Accounts Payable):
- Individuals or companies to whom a business owes money for goods or services purchased on credit.
- Bank Loan:
- An amount of money borrowed from a bank that the business is obligated to repay, usually with interest, over a specified period.
- Adjustments:
- Entries made in the accounts at the end of an accounting period to record revenues and expenses in the correct period and to update asset and liability accounts.
- Bad Debts:
- Amounts owed to a business by debtors that are considered uncollectible and are written off as an expense.
- R.D.D. (Reserve for Doubtful Debts / Provision for Doubtful Debts):
- An estimate of the portion of debtors that may not be collectible in the future. It's created to anticipate potential bad debts.
- Unrecorded Purchases:
- Purchases of goods or services made during the accounting period that have not yet been entered into the accounting records.
- Trading Account:
- The first part of the final accounts, prepared to determine the Gross Profit or Gross Loss of a business from its primary trading activities (buying and selling goods).
- Opening Stock:
- The value of inventory (goods) at the beginning of an accounting period.
- Closing Stock:
- The value of unsold inventory (goods) at the end of an accounting period.
- Gross Profit:
- The profit a company makes after deducting the direct costs of producing or acquiring the goods it sells (Sales minus Cost of Goods Sold).
- C/d (Carried down):
- An accounting term indicating that the balance of an account is to be moved to the next accounting period or to another part of the financial statements.
- Profit and Loss Account (P&L Account):
- A financial statement that summarizes a company's revenues, expenses, and profits or losses over a specific period. It shows the Net Profit or Net Loss.
- B/d (Brought down):
- An accounting term indicating that a balance has been transferred from a previous accounting period or from another part of the financial statements.
- Prepaid Insurance:
- Insurance premiums paid in advance for coverage that will extend into future accounting periods. It's an asset until the benefit is consumed.
- Outstanding Office Rent:
- Office rent expense that has been incurred during the period but has not yet been paid. It's a current liability.
- F.B.D. (Further Bad Debts):
- Additional bad debts identified at the time of preparing final accounts, which were not previously recorded.
- N.R.D.D. (New Reserve for Doubtful Debts):
- The newly calculated amount required for the Reserve for Doubtful Debts at the end of the current accounting period.
- O.R.D.D. (Old Reserve for Doubtful Debts):
- The existing balance of the Reserve for Doubtful Debts brought forward from the previous accounting period.
- Net Profit:
- The final profit of a business after all operating expenses, interest, and taxes have been deducted from the gross profit and other incomes.
- Partners Capital Account:
- An equity account for each partner in a partnership, showing their initial investment, additional contributions, share of profits or losses, and withdrawals.
- Balance Sheet:
- A snapshot financial statement that shows a company's assets, liabilities, and owners' equity at a specific point in time, verifying the accounting equation (Assets = Liabilities + Equity).
- Liability:
- A company's financial debts or obligations that arise during the course of its business operations.
- Assets:
- Resources with economic value that an individual, corporation, or country owns or controls with the expectation that they will provide future benefit.
- Cash in Hand:
- The amount of physical currency (notes and coins) held by a business on its premises.