Mr. Ganesh keeps his books by single entry method. His financial position on 1.01.04 and 31.12.04 was as under.


Particulars
1.4.13
31.3.14
Cash
Bank
Stock
Debtors
Creditors
Plant and machinery
Furniture and fitting
10,000
20,000
16,000
24,000
15,000
60,000
18,000
16,000
36,000
24,000
30,000
18,000
90,000
18,000


During the year Mr. Ganesh withdrew Rs.8,000 for his private purpose and he had used 2,000 worth of stock also for his private purpose. On 1.10.13 he sold some of his house hold furniture for Rs.2,000 and paid this amount into his Bank A/c of business. Prepare a statement of profit & loss for the year ended 31.3.14 and a statement of affairs after taking into consideration the following:
1.      Provide interest on  capital  @ 5% p.a on opening balance and Interest on drawing ( only on cash drawings) @10% p.a. (on an average of 6 months)
2.      Depreciate plant and machinery @10 %( assuming addition were made on 1.10.13) and furniture at 5%. 
3.      stock on 31.12.04 was overvalued by Rs.2,000.
4.      Write off bad debts Rs.2,000 and provide Reserve for Doubtful debts at 10 % on debtors.


Solution: In the books of Mr. Ganesh
Statement of Affairs as on 1-4-16 and 31.03.14
Liability
1-4-13
31.3.14
Assets
1.4.13
31.3.14
Capital
(Bal. Fig.)
133000
196000
Cash
10000
16000
Creditors
15000
18000
Bank
20000
36000



Stock
16000
24000



Debtors
24000
30000



Plant and Machinery
60000
90000



Furniture and Fittings
18000
18000

148000
214000

148000
214000

Statement of Profit or Loss for the year ended 31.03.2014
Particulars
Rs.
Rs.
Capital at the end of the year

196000
Add: Drawings:


Cash Withdrawn
Stock
8000
2000

10000


206000
Less: Additional Capital Introduced


Household furniture sold and proceeds utilized for business

-2000


204000
Less: Capital at the beginning of the year

 -133000
Trading Profit

71000
Less: Depreciation


On Plant and Machinery
On Opening Machinery
60000 × 10%× 12 months
6000

On Additional Machinery
30000 × 10% ×  6 months
1500

On Furniture
18000 × 5%
900
-8400


62600
Less: Bad debts

-2000


60600
Less: R.D.D. @ 10% on debtors
(30000 – 2000) × 10%

-2800


57800
Less: Stock overvalued

-2000


55800
Less: Interest on Capital


On Opening Capital
133000 × 5%

-6650


49150
Add: Interest on Drawings
On Cash drawings
8000 × 10% × 6 months

400
Net Profit

49550