From the following Trial Balance and Adjustments of Kumbhar and Maroti you are required to prepare Trading and Profit and Loss Account for the year ended on 31st March, 2005 and Balance Sheet as on that date. [March 2009]

Trial Balance as on 31^st March, 2005

Debit Balance	Rs.	Credit Balance	Rs.
Stock (1.4.2004) Salary and Wages Cash Purchases Sundry expenses Wages Bills Receivable Travelling Expenses Bad Debts Factory Expenses Commission Investments Debtors Tools and Equipments Furniture Goodwill Building	35000 4200 10000 225200 13600 12000 6000 2000 3000 8000 4000 20000 40000 6000 12000 21000 50000	Sales Discount Creditors Bank Overdraft Interest on Investment Capitals: Kumbhar Maroti	330000 4000 20000 10000 8000 60000 40000
Total	472000	Total	472000

Adjustments

1. Partners share Profits and Losses in the ratio of their capitals. (Kumbhar: 60,000, Maroti: 40,000 => Ratio 3:2)
2. Closing stock is valued at Cost Price Rs. 40,000 and at Market Price Rs. 45,000. (Valued at Rs. 40,000 - lower of cost or market price)
3. Kumbhar has withdrawn goods worth Rs. 1,200 for his own use, but no entry is made in the books.
4. Uninsured goods worth Rs. 12,000 were lost by fire.
5. Rs. 450 is to be written off as bad debts.
6. Unpaid expenses:
   • Salary and Wages Rs. 800
   • Rent Rs. 1,200 (New item)
7. Depreciate building @ 7 ½ % p.a.

Trading Account for the year ended 31^st March, 2005

Particulars (Debit)	Amount (Rs.)	Particulars (Credit)	Amount (Rs.)
To Opening Stock	35,000	By Sales	330,000
To Purchases	225,200	By Closing Stock	40,000
Less: Goods withdrawn by Kumbhar	(1,200)
Less: Goods lost by fire	(12,000)
To Net Purchases	212,000
To Wages	12,000
To Factory Expenses	8,000
To Gross Profit c/d	103,000
Total	370,000	Total	370,000

Profit and Loss Account for the year ended 31^st March, 2005

Particulars (Debit)	Amount (Rs.)	Particulars (Credit)	Amount (Rs.)
To Salary and Wages (4,200 + O/s 800)	5,000	By Gross Profit b/d	103,000
To Sundry Expenses	13,600	By Discount Received	4,000
To Travelling Expenses	2,000	By Interest on Investment	8,000
To Bad Debts (3,000 + New 450)	3,450
To Commission (Paid)	4,000
To Loss of Goods by Fire	12,000
To Outstanding Rent	1,200
To Depreciation on Building (50,000 @ 7.5%)	3,750
To Net Profit transferred to Capital A/cs:
Kumbhar (3/5)	42,000
Maroti (2/5)	28,000
Net Profit Total	70,000
Total	115,000	Total	115,000

Partners' Capital Accounts

Particulars (Debit)	Kumbhar (Rs.)	Maroti (Rs.)	Particulars (Credit)	Kumbhar (Rs.)	Maroti (Rs.)
To Drawings (Goods)	1,200	-	By Balance b/d	60,000	40,000
To Balance c/d (Closing Capital)	100,800	68,000	By Net Profit (Share)	42,000	28,000
Total	102,000	68,000	Total	102,000	68,000

Balance Sheet as on 31^st March, 2005

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capitals:		Goodwill	21,000
Kumbhar	100,800	Building	50,000
Maroti	68,000	Less: Depreciation (7.5%)	(3,750)
Total Capitals	168,800	Net Building	46,250
Creditors	20,000	Furniture	12,000
Bank Overdraft	10,000	Tools and Equipments	6,000
Outstanding Salary and Wages	800	Investments	20,000
Outstanding Rent	1,200	Debtors	40,000
		Less: Further Bad Debts	(450)
		Net Debtors	39,550
		Bills Receivable	6,000
		Closing Stock	40,000
		Cash	10,000
Total Liabilities	200,800	Total Assets	200,800

Quick Solution Summary

• Gross Profit: Rs. 103,000
• Net Profit: Rs. 70,000
• Partners' Closing Capital Balances:
  • Kumbhar: Rs. 100,800
  • Maroti: Rs. 68,000
• Balance Sheet Total: Rs. 200,800

Difficult Words & Meanings

Trial Balance: A statement showing the debit and credit balances of all ledger accounts on a specific date to check the arithmetical accuracy of the books.

Debit Balance: An amount recorded on the left side of an account, typically representing assets or expenses.

Credit Balance: An amount recorded on the right side of an account, typically representing liabilities, equity, or income.

Stock (Inventory): Goods held by a business for sale or for use in production. "Opening Stock" is stock at the beginning of an accounting period, "Closing Stock" is at the end.

Purchases: Goods bought by a business for resale or for use in operations.

Sundry Expenses: Miscellaneous small expenses that don't fit into specific categories.

Wages: Payments made to employees for labor, especially manual or direct labor involved in production (typically a Trading Account item).

Salary: Fixed regular payment, typically paid to administrative or office staff (typically a Profit & Loss Account item).

Bills Receivable: A formal written promise from a customer to pay a specific amount of money at a future date (an asset).

Bad Debts: Amounts owed to a business that are not expected to be collected from customers.

Factory Expenses: Costs incurred in the factory related to production (e.g., factory rent, power, lighting for factory).

Commission: A fee paid to an agent or employee for transacting a piece of business or performing a service. If it's a debit balance, it's an expense; if credit, it's income.

Investments: Assets acquired with the intention of generating income or appreciation in value.

Debtors (Accounts Receivable): Customers who owe money to the business for goods or services sold on credit.

Tools and Equipments: Assets used in the operation of the business.

Furniture: Assets like tables, chairs, desks used in the business.

Goodwill: An intangible asset representing the non-physical value of a business, such as its reputation or customer base.

Building: A fixed asset representing the physical structure owned by the business.

Sales: Revenue generated from selling goods or services.

Discount: A reduction in price. "Discount Allowed" (expense) appears as a debit, "Discount Received" (income) as a credit.

Creditors (Accounts Payable): Suppliers or other entities to whom the business owes money for goods or services purchased on credit.

Bank Overdraft: A facility allowing a bank account holder to withdraw more money than is actually in the account, up to an agreed limit (a liability).

Interest on Investment: Income earned from investments.

Capital: The owner's or partners' investment in the business.

Adjustments: Entries made at the end of an accounting period to accurately reflect revenues and expenses, and assets and liabilities for that period.

Withdrawn (Drawings): When an owner or partner takes cash or goods from the business for personal use.

Uninsured: Not covered by an insurance policy.

Written Off (Bad Debts): Recognized as uncollectible and removed from the books as an expense.

Unpaid Expenses (Accrued/Outstanding Expenses): Expenses that have been incurred during the accounting period but not yet paid.

Depreciate: To allocate the cost of a tangible asset over its useful life, reflecting its wear and tear, usage, or obsolescence.

p.a. (per annum): Yearly or annually.

Trading Account: An account prepared to determine the Gross Profit or Gross Loss of a business during an accounting period.

Gross Profit: The profit a company makes after deducting the costs directly associated with making and selling its products, or providing its services (Sales - Cost of Goods Sold).

Profit and Loss Account (P&L Account): An account prepared to determine the Net Profit or Net Loss of a business by considering all indirect revenues and expenses.

Net Profit: The actual profit after all operating and non-operating expenses are deducted from all revenues (Gross Profit - Indirect Expenses + Indirect Incomes).

Partners' Capital Account: An account maintained for each partner showing their investment, share of profits/losses, drawings, interest on capital/drawings, etc.

Balance Sheet: A financial statement that reports a company's assets, liabilities, and equity at a specific point in time, showing the financial position of the business.

c/d (carried down): An entry made to close an account for the current period, with the balance being brought down to the next period.

b/d (brought down): An opening balance in an account, brought forward from the previous period.