OMTEX CLASSES: From the following Trial Balance of Somnath and Ambadas being equal partners, you are required to prepare Trading and Profit & Loss A/c for the year ended 31st March, 2005 and Balance Sheet as on that date after taking into consideration the additional information.

From the following Trial Balance of Somnath and Ambadas being equal partners, you are required to prepare Trading and Profit & Loss A/c for the year ended 31st March, 2005 and Balance Sheet as on that date after taking into consideration the additional information.

Trial Balance as on 31^st March, 2005

Particulars (Debit)	Amount (Rs.)	Particulars (Credit)	Amount (Rs.)
Opening Stock	60000	Capital A/c
Drawings:		Somnath	22000
Somnath	1000	Ambadas	18000
Ambadas	1500	Reserve Fund	21600
Insurance	600	Sales	130000
Salaries and Wages	4500	Bills Payable	1000
Carriage	2500	Creditors	16000
Purchase	65000	Reserve for Bad and Doubtful Debts	800
Bills Receivable	600	Returns	500
Rent	3500
Debtors	18000
Returns	1000
Machinery	12000
Travelling Expenses	3000
Cash at Bank	1000
Building	30000
Office Expenses	2700
Advertisement (for 3 years)	3000
Total	209900	Total	209900

Adjustments:

Closing stock: cost Rs. 25,000 and market price Rs. 30,000. (Cost price Rs. 25,000 will be taken)
Allow interest on capital at 10% p.a.
Prepaid insurance Rs. 50.
Provide for R.B.D.D. at 5% on debtors.
Uninsured goods costing Rs. 3000 were destroyed by fire.
Outstanding expenses: Salaries Rs. 1000; Rent Rs. 500.
Provide depreciation on Machinery at 20%; Building 2.5%.

Key Figure	Amount (Rs.)
Gross Profit	30,000
Net Profit (distributable)	3,000
Partners Capital Account Balance (Somnath)	24,700
Partners Capital Account Balance (Ambadas)	19,800
Balance Sheet Total	84,600

Solution:

In the books of M/s Somnath and Ambadas

Trading Account for the year ended 31.03.2005

Particulars	Amt. (Rs.)	Amt. (Rs.)	Particulars	Amt. (Rs.)	Amt. (Rs.)
To Opening Stock		60000	By Sales	130000
To Purchases	65000		(-) Returns	(1000)	129000
(-) Returns	(500)	64500	By Goods lost by fire		3000
To Carriage		2500	By Closing Stock		25000
To Gross Profit c/d		30000
Total		157000	Total		157000

Profit and Loss Account for the year ended 31.03.2005

Particulars	Amt. (Rs.)	Amt. (Rs.)	Particulars	Amt. (Rs.)
To Insurance	600		By Gross Profit b/d	30000
(-) Prepaid	(50)	550
To Salaries and Wages	4500
(+) Outstanding	1000	5500
To Rent	3500
(+) Outstanding	500	4000
To Travelling Expenses		3000
To Office Expenses		2700
To Bad Debts (Old)	-
(+) New R.D.D. (5% on 18000)	900
	900
(-) Old R.D.D.	(800)	100
To Advertisement	3000
(-) Prepaid (2/3 of 3000)	(2000)	1000
To Goods lost by fire		3000
To Interest on Capital:
Somnath (10% on 22000)	2200
Ambadas (10% on 18000)	1800	4000
To Depreciation on:
Building (2.5% on 30000)	750
Machinery (20% on 12000)	2400	3150
To Net Profit c/d (Equally):
Somnath	1500
Ambadas	1500	3000
Total		30000	Total	30000

Partners' Capital Account

Particulars	Somnath (Rs.)	Ambadas (Rs.)	Particulars	Somnath (Rs.)	Ambadas (Rs.)
To Drawings	1000	1500	By Balance b/d	22000	18000
To Balance c/d	24700	19800	By Interest on Capital	2200	1800
			By Net Profit (Share)	1500	1500
Total	25700	21300	Total	25700	21300

Balance Sheet as on 31.03.2005

Liabilities	Amt. (Rs.)	Amt. (Rs.)	Assets	Amt. (Rs.)	Amt. (Rs.)
Capital A/c:			Bills Receivable		600
Somnath	24700		Debtors	18000
Ambadas	19800	44500	(-) New R.D.D.	(900)	17100
Reserve Fund		21600	Machinery	12000
Bills Payable		1000	(-) Depreciation	(2400)	9600
Creditors		16000	Cash at Bank		1000
Outstanding Expenses:			Building	30000
Salaries	1000		(-) Depreciation	(750)	29250
Rent	500	1500	Closing Stock		25000
			Prepaid Insurance		50
			Prepaid Advertisement		2000
Total		84600	Total		84600

Difficult Words & Meanings:

Trial Balance: A list of all the debit and credit balances of accounts in a ledger to check arithmetic accuracy.
Trading Account: A financial statement that shows the gross profit or gross loss of a business from its main trading activities (buying and selling goods).
Profit & Loss A/c (Account): A financial statement that summarizes revenues, costs, and expenses incurred during a specific period, showing the net profit or net loss.
Balance Sheet: A financial statement that reports a company's assets, liabilities, and owners' equity at a specific point in time.
Debit (Dr.): An accounting entry that results in either an increase in assets or a decrease in liabilities and equity on a company's balance sheet. (Typically the left side of an account).
Credit (Cr.): An accounting entry that either decreases assets or increases liabilities and equity on the company's balance sheet. (Typically the right side of an account).
Opening Stock: The value of goods available for sale at the beginning of an accounting period.
Drawings: Money or goods withdrawn by the owner(s) from the business for personal use.
Carriage/Carriage Inwards: Cost of transporting goods purchased into the business.
Bills Receivable: A written promise from a customer to pay a specific sum of money on a future date (an asset for the business).
Debtors (Sundry Debtors): Persons or entities who owe money to the business, usually for goods or services sold on credit.
Returns (Sales Returns/Returns Inward): Goods returned by customers to the business.
Returns (Purchase Returns/Returns Outward): Goods returned by the business to its suppliers.
Capital A/c (Account): The account representing the owner's or partners' investment in the business.
Reserve Fund: An amount set aside out of profits to strengthen the financial position of the business or for specific future needs.
Bills Payable: A written promise by the business to pay a specific sum of money to a creditor on a future date (a liability for the business).
Creditors (Sundry Creditors): Persons or entities to whom the business owes money, usually for goods or services purchased on credit.
R.B.D.D. (Reserve for Bad and Doubtful Debts): An amount set aside from profits to cover potential losses from customers who may not pay their debts. Also called Provision for Doubtful Debts.
Closing Stock: The value of unsold goods remaining at the end of an accounting period.
p.a.: Per annum (meaning per year).
Prepaid Expenses: Expenses paid in advance for benefits or services that will be received or used in the future (e.g., prepaid insurance). It's an asset.
Uninsured Goods: Goods that are not covered by an insurance policy against loss or damage.
Outstanding Expenses: Expenses that have been incurred (used or benefited from) by the business during an accounting period but have not yet been paid. It's a liability.
Depreciation: The systematic reduction in the recorded cost of a fixed asset until the value of the asset becomes zero or negligible, reflecting its wear and tear, use, or obsolescence.
Gross Profit: The profit a company makes after deducting the direct costs associated with making and selling its products, or providing its services (Calculated as Sales - Cost of Goods Sold).
Net Profit: The actual profit of the business after all operating expenses, interest, and taxes are deducted from the gross profit. This is the amount available for distribution to owners or for reinvestment.
c/d (carried down): An entry made in an account to indicate that its balance is being transferred to the next accounting period or to another account. It closes the account for the current period.
b/d (brought down): An opening balance in an account that has been transferred from the previous accounting period or from another account.
Assets: Resources owned or controlled by a business that have future economic value and can be measured in monetary terms.
Liabilities: Obligations or debts owed by the business to external parties (creditors) that are expected to be settled in the future.