Jitesh and Lailesh are in partnership sharing profits and losses in the ratio of 2:1. From the following Trial Balance and adjustments given below, you are required to prepare Trading and Profit and Loss A/c for the year ended 31st March, 2013 and the Balance Sheet as on that date: [15]

Trial Balance as on 31st March, 2013.
Particulars
Debit
Credit
Prepaid Insurance
800

Insurance
2000

R.B.D.D.

1000
Discount
800

Postage and telephone
3200

Salaries
56000

Debtors and Creditors
66000
68000
Wages
24000

Opening Stock
48000

Carriage
1000

Purchases and Sales
193200
301600
Return inwards and outwards
5600
9200
Bank overdraft

120800
Plant & Machinery
24000

Land & Building
176000

Capital


Jitesh

52000
Lailesh

48000
Total
600600
600600

Adjustments:
1. Write off Rs. 2000 for bad debts and provide R.B.D.D. 5% on debtors.
2. Goods worth Rs. 4000 were distributed as free samples.
3. Closing stock on 31.03.2013 was valued at the cost Rs. 56000 while its market price was Rs. 60,000.
4. Salaries were outstanding Rs. 2000.
5. Depreciate :
Land and Building @ 5% p.a. and
Plant & Machinery @ 10% p.a.
Solution:
In the Books of Partnership Firm
Trading A/c For the Year Ended 31st March, 20136
Particulars
Amount
Amount
Particulars
Amount
Amount
To Opening Stock

48000
By Sales
301600

To Purchases
193200

Less: Return Inwards
5600
296000
Less: Return Outwards
9200
184000
By Goods distributed as Free Samples

4000
To Wages

24000
By Closing Stock

56000
To Carriage

1000



To Gross Profit C/d

99000





356000


356000

Profit and Loss A/c For the year ended 31st March, 2013
Particulars
Amount
Amount
Particulars
Amount
Amount
To Salaries
56000

By Gross Profit b/d

99000
Add: Outstanding
2000
58000



To Insurance

2000



To Discount

800



To Postage & Telephones

3200



To Depreciation





On Plant and Machinery
2400




On Land and Building
8800
11200



To Advertisement A/c

4000



To Bad debts
-




Add: F.B.D.
2000




Add: N.R.D.D.
3200




Less: O.R.D.D.
1000
4200



To Net Profit Transferred to Partners Capital A/c





Jitesh
10400




Lailesh
5200
15600





99000


99000
Partners’ Capital Account
Particulars
Jitesh
Lailesh
Particulars
Jitesh
Lailesh
To Balance c/d
62400
53200
By Balance b/d
52000
48000



By Profit & Loss A/c
[Net Profit]
10400
5200

62400
53200

62400
53200
Balance Sheet as on 31st March, 2013
Liabilities
Amount
Amount
Assets
Amount
Amount
Partners’ Capital A/c


Land & Building
176000

Jitesh
62400

Less: Depreciation @5%
8800
167200
Lailesh
53200
115600
Plant & Machinery
24000

Bank Overdraft

120800
Less: Depreciation @ 10%
2400
21600
Creditors

68000
Debtors
66000

Outstanding Salaries

2000
Less: F.B.D.
2000





64000




Less: N.R.D.D.
-3200
60800



Closing Stock

56000



Prepaid Insurance

800


306400


306400

Working Notes:
1. Prepaid insurance Rs. 800 given in the trial balance is shown only on the asset side of Balance Sheet.
2. Closing stock is shown at cost price of Rs. 56000 which is lower than its market price of Rs. 60000.
3. Goods costing Rs. 4000 distributed as free samples are first shown on the credit side of Trading A/c and then again they are shown on the debit side of Profit and Loss A/c.
4. Outstanding salaries of Rs. 2000 are first added to salaries on the debit side of profit and loss account and then shown the same on the liabilities side of balance sheet.
5. N.R.D.D. = 5% on Net Debtors = 5% × 64000 = 3200
6. Division of Net Profit:
Jitesh = (2/3)× 15600 = 10400

Lailesh = (1/3) × 15600 = 5200