Sharma and Varma are in partnership sharing profit and losses in the ratio of 2: 1 from the following information of Trial balance and adjustments you are required to prepare profit and loss account, trading account and Balance sheet as on 31st March 2014.


Trial Balance as on 31st March, 2014

Particulars
Debit (Rs.)
Credit (Rs.)
Prepaid Insurance
Insurance
R.B.D.D
Discount
Postage and Telephones
Salaries
Debtors
Creditors
Wages
Opening Stock
Carriage
Return Inward
Return Outward
Purchase and sales
Bank Overdraft
Plant and Machinery
Land and Building
Drawings:-
Sharma
Varma
Capitals:-
Sharma
Varma
400
1, 000

400
1, 600
28, 000
33, 000

12, 000
24, 000
500
2,800

96, 600

12, 000
88, 000

4,000
2,000


500




34, 000




4, 600
1, 50, 800
60, 400






30, 000
26, 000
3, 06, 300
3, 06, 300

1.      Write off Rs. 1,000 for bad debts  and provide for R.B.D.D @ 5% on debtors.
2.      Goods worth Rs. 2,000 were distributed as free samples.
3.      Closing Stock 31 – 03- 2014 was  valued at cost Rs. 28, 000 while its  market value is Rs. 30,000/-.
4.      Salaries were outstanding Rs. 1,000.
5.      Depreciate Land and Building @ 5%  p.a. and Plant and Machinery @ 10% p.a.
6.      Goods worth Rs. 3,000 were destroyed by fire, but insurance company admitted  the claim for Rs. 400 only.
7.      Varma had taken goods worth Rs. 1000 for his own use, but no entry is made in the books.


Solution: In the books of Sharma & Varma

Trading A/c for the year ended 31.03.14

Particulars
Amount
Amount
Particulars
Amount
Amount
To Opening Stock

24000
By Sales
150800

To Purchases
96600

(-) Returns
-2800
148000
(-) Returns
-4600
92000
By Goods Distributed as free sample

2000
To Wages

12000
By Goods Destroyed by fire

3000
To Carriage

500
By Goods Withdrawn by Partner Varma

1000






To Gross Profit c/d

53500
By Closing Stock

28000


182000


182000


Profit and Loss A/c for the year ended 31 – 3 – 14

Particulars
Amount
Amount
Particulars
Amount
Amount
To Insurance

1000
By Gross Profit b/d

53500
To Bad Debts
-




(+) F.B.D.
1000




(+) N.R.D.D.
1600




(-) O.R.D.D.
-500
2100



To Discount

400



To Postage and Telephone

1600



To Salaries
28000




(+) Outstanding
1000
29000



To Advertisement

2000



To Depreciation





On land and building
4400




On Plant and Machinery
1200
5600



To Goods lost by fire

2600



To Net Profit C/d





Sharma
6133




Varma
3067
9200





53500


53500


Partners Capital A/c

Particulars
Sharma
Varma
Particulars
Sharma
Varma
To Drawings
4000
2000
By Balance b/d
30000
26000
To Drawings
[Goods]

1000
By Net Profit b/d
6133
3067
To Balance c/d
32133
26067




36133
29067

36133
29067


Balance Sheet as on 31.3.14


Liabilities
Amount
Amount
Assets
Amount
Amount
Capital A/c


Prepaid Insurance

400
Sharma
32133

Debtors
33000

Varma
26067
58200
(-) F.B.D.
-1000

Creditors

34000

32000

Bank Overdraft

60400
(-) N.R.D.D.
-1600
30400
Outstanding Salaries

1000
Plant & Machinery
12000




(-) Depreciation
-1200
10800



Land & Building
88000




(-) Depreciation
-4400
83600



Closing Stock

28000



Insurance Claim

400


153600


153600

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