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Prem a trader keeps his books by the single entry Method. His financial position on 1st April 06 and on 31st March, 07 were as follows:


Particulars
1.04.06
31.03.07
Cash in hand
Bank balance
Stock in trade
Debtors
Creditors
Machinery
Furniture
1,500
1,200(Dr.)
4,000
3,400
2,400
6,000
1,200
1,600
1,800(Cr.)
4,650
3,800
3,600
8,000
1,600


During the year, Prem had withdrawn Rs.75 per month for his household use. From the above information ascertain his profit or loss for the year ended and also give his statement of affairs as on 31.03.07 after taking into account the following further information:
1.      Depreciate plant and machinery by 15% and furniture by 12 ½ % p.a (assume the addition on 30th September,2006)
2.      Of the debtors Rs100 are bad and to be written off.
3.      Create a reserve for Discount on Debtors at 2% and a reserve for Doubtful debts at 5%.
4.      Allow interest on capital at 5% and charge interest on Drawing at 6%p.a

Solution: In the books of Mr. Prem
Statement of Affairs as on 1-4-06 and 31.03.07
Liability
1-4-06
31-3-07
Assets
1-4-06
31-3-07
Capital
(Bal. Fig.)
14900
14250
Cash in hand
1500
1600
Bank Overdraft
-
1800
Cash in bank
1200
-
Creditors
2400
3600
Stock in trade
4000
4650



Debtors
3400
3800



Machinery
6000
8000



Furniture
1200
1600

17300
19650

17300
19650

Statement of Profit or Loss for the year ended 31.03.2007

Particulars
Rs.
Rs.
Capital at the end of the year

14250
Add: Drawings:


Amount withdrawn for Household use
Rs. 75 × 12 months

900


15150
Less: Capital at the beginning of the year

-14900
Trading Profit

250
Less: Depreciation:


On Plant and Machinery
On Opening Machinery:
6000 × 15%
900

On Additional Machinery
2000 × 15% × 6 months
150

On Furniture
On opening Furniture
1200 × 12.5%
150

On Additional Machinery
400 × 12.5% × 6 months
25
-1225


-975
Less: Bad debts

-100


-1075
Less: R.D.D. @ 5% on Debtors
(3800 – 100) × 5%

-185


-1260
Less: Discount on Debtors @ 2%
(3800 – 100 – 185) × 2%
70.30
-70


-1330
Less: Interest on Capital
On opening Capital
14900 × 5%

-745


-2075
Add: Interest on drawings
900 × 6% × 6 months

27
Net Loss

-2048

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