Amitbhai and Narendrabhai are in Partnership Sharing Profits and Losses equally. Year ended 31st March, 2019 and Balance Sheet as on that date.Trial Balance as on 31st March, 2019 - Book Keeping and Accountancy

Balbharati solutions for Book-keeping and Accountancy 12th Standard Hsc Maharashtra State Board

Chapter 1: Introduction to Partnership and Partnership Final Accounts

Practise Problem [Pages 54 - 61]

Practise Problem | Q 1 | Page 54

1. Amitbhai and Narendrabhai are in Partnership Sharing Profits and Losses equally. From the following Trial Balance and Adjustments given below, you are required to prepare Trading and Profit and Loss Account for the year ended 31st March 2019 and Balance Sheet as on that date.

Trial Balance as on 31st March 2019

Debit Balance Amount ₹ Credit Balance Amount ₹
Plant & Machinery 2,80,000 Capital A/c :
Factory Building 75,000 Amitbhai 3,50,000
Sundry Debtors 28,700 Narendrabhai 3,00,000
Purchases 85,500 Sales 1,80,000
Bad Debts 500 Bills Payable 8,500
Sales Return 2,200 Discount 1,200
10% Govt. Bond (Purchased on 1st Oct 2018) 40,000 Creditors 38,500
Import Duty 1,800 R.D.D (Reserve for Doubtful Debts) 2,700
Legal Charges 2,000 Bank Loan 15,000
Motive Power 12,000 Purchases Return 2,000
Warehouse Rent 1,800
Cash in Hand 20,000
Cash at Bank 70,000
Advertisement (for 2 years, w.e.f 1st Jan 2019) 10,000
Salaries 3,800
Rent 1,500
Drawings :
Amitbhai 2,400
Narendrabhai 3,200
Furniture 1,95,800
Bills Receivable 20,700
Freehold Property 41,000
Total 8,97,900 Total 8,97,900

Adjustments:

1) Stock on hand on 31st March 2019 was valued at ₹ 43,000.

2) Uninsured goods worth ₹ 8,000 were stolen.

3) Create R.D.D at 2% on Sundry debtors.

4) Mr. Patil, our customer became insolvent and could not pay his debts of ₹ 500.

5) Outstanding Expenses - Rent ₹ 800 and Salaries ₹ 300.

6) Depreciate Factory Building by ₹ 2,500 and Furniture by ₹ 1,800.

SOLUTION:

In the books of Amitbhai and Narendrabhai
Trading and Profit and Loss Account for the year ended on 31st March 2019

Dr. Particulars Amount ₹ (Inner) Amount ₹ (Outer) Cr. Particulars Amount ₹ (Inner) Amount ₹ (Outer)
To Purchases 85,500 By Sales 1,80,000
Less: Purchase Return 2,000 83,500 Less: Sales Return 2,200 1,77,800
To Import Duty 1,800 By Closing Stock 43,000
To Motive Power 12,000 By Goods Stolen Away 8,000
To Depreciation - Factory Building 2,500
To Gross Profit c/d 1,29,000
Total 2,28,800 Total 2,28,800
To Warehouse Rent 1,800 By Gross Profit b/d 1,29,000
To R.B.D.D. A/c By Discount 1,200
Bad debts (Old) 500 By O/s Interest on Govt. Bonds 2,000
Add: New Bad debts 500 By R.B.D.D. A/c (Excess Reserve)
Add: New Reserve (R.D.D) 564 (Old RDD 2,700 – Required 1,564) 1,136
1,564
Less: Old Reserve (R.D.D) (2,700) NIL
To Legal Charges 2,000
To Advertisement Expenses 10,000
Less: Prepaid Adv. Exp. 8,750 1,250
To Salaries 3,800
Add: O/s Salaries 300 4,100
To Rent 1,500
Add: O/s Rent 800 2,300
To Depreciation on Furniture 1,800
To Loss due to Theft 8,000
To Net Profit Transferred to Capital A/c:
Amitbhai 56,043
Narendrabhai 56,043 1,12,086
Total 1,33,336 Total 1,33,336

Balance Sheet as on 31st March 2019

Liabilities Amount ₹ (Inner) Amount ₹ (Outer) Assets Amount ₹ (Inner) Amount ₹ (Outer)
Capital Account: Amitbhai Plant & Machinery 2,80,000
Opening Balance 3,50,000 Factory Building 75,000
Add: Net Profit 56,043 Less: Depreciation 2,500 72,500
4,06,043 Closing Stock 43,000
Less: Drawings (2,400) 4,03,643 Sundry Debtors 28,700
Capital Account: Narendrabhai Less: New Bad Debts (500)
Opening Balance 3,00,000 28,200
Add: Net Profit 56,043 Less: New R.D.D. (2%) (564) 27,636
3,56,043 10 % Govt. Bond 40,000
Less: Drawings (3,200) 3,52,843 Add: O/s Interest on Govt. Bond 2,000
Bills Payable 8,500 Cash in Hand 20,000
Creditors 38,500 Cash at Bank 70,000
Bank Loan 15,000 Prepaid Advertisement Expense 8,750
Outstanding expenses: Furniture 1,95,800
Rent 800 Less: Depreciation (1,800) 1,94,000
Salaries 300 1,100 Bills Receivable 20,700
Freehold Property 41,000
Total Liabilities 8,19,586 Total Assets 8,19,586

Notes:

(1) Import duty, Motive power, and Depreciation on Factory building are recorded in the Trading A/c.

(2) 10 % govt. bond is an investment. It was purchased on 1 – 10 – 2018. Interest is calculated for six months.
Interest on Govt. Bond = ₹ 40,000 X (6/12) X 10% = ₹ 2,000

(3) Adv. exp. paid for 2 years from 01 – 01 – 2019. Up to 31 – 3 – 2019, 3 months adv. exp. is written off to Profit and Loss A/c. It is calculated as below:
Advertisement Expense for current year = ₹ 10,000 X (3/24) = ₹ 1,250
Prepaid Advertisement Expense = ₹ 10,000 – ₹ 1,250 = ₹ 8,750

(4) Calculation of R.D.D. (Reserve for Doubtful Debts):
Sundry Debtors = ₹ 28,700
Less: New Bad Debts (Mr. Patil) = ₹ (500)
Debtors after new Bad Debts = ₹ 28,200
New R.D.D. @ 2% on ₹ 28,200 = ₹ 564
Total required for Bad and Doubtful Debts (New Bad Debts + New RDD) = ₹ 500 + ₹ 564 = ₹ 1,064
Add: Old Bad Debts (from Trial Balance) = ₹ 500
Total requirement = ₹ 1,064 + ₹ 500 = ₹ 1,564
Old R.D.D. (from Trial Balance) = ₹ 2,700
Since Old R.D.D. (₹ 2,700) is more than total requirement (₹ 1,564), the excess amount (₹ 2,700 - ₹ 1,564 = ₹ 1,136) is credited to Profit and Loss Account.

Balbharati Solutions for Book-keeping and Accountancy 12th Standard Hsc Maharashtra State Board.

Chapter 1: Introduction to Partnership and Partnership Final Accounts

Difficult Words & Accounting Terms:

  • Partnership: A business owned and run by two or more individuals who share profits or losses.
  • Final Accounts: Financial statements prepared at the end of an accounting period to show the financial performance (Trading and Profit & Loss Account) and financial position (Balance Sheet) of a business.
  • Trial Balance: A list of all a company's accounts (debits and credits) to check if the total debits equal total credits.
  • Adjustments: Changes made to account balances at the end of an accounting period to reflect transactions that have occurred but not yet been recorded, or to correct errors.
  • Trading Account: An account prepared to find out the gross profit or gross loss made from buying and selling goods.
  • Profit and Loss Account (P&L A/c): An account prepared to find out the net profit or net loss of the business after considering all operating and non-operating incomes and expenses.
  • Balance Sheet: A statement showing the assets, liabilities, and capital of a business at a specific point in time. It shows what a business owns and owes.
  • Debit Balance: An amount recorded on the left side of an account, typically representing assets or expenses.
  • Credit Balance: An amount recorded on theright side of an account, typically representing liabilities, income, or capital.
  • Plant & Machinery: Long-term assets used in the production process.
  • Factory Building: A building used for manufacturing or production.
  • Sundry Debtors: Customers who owe money to the business for goods or services sold on credit.
  • Purchases: Goods bought by the business for resale or for use in production.
  • Bad Debts: Debts owed to a company that are unlikely to be paid by the debtor.
  • Sales Return (Returns Inward): Goods returned by customers to the business.
  • Govt. Bond: A type of investment where you lend money to the government, which pays you interest.
  • Import Duty: A tax charged on goods imported into a country.
  • Legal Charges: Expenses incurred for legal services.
  • Motive Power: Expenses for power used to run machinery in a factory (e.g., electricity, fuel).
  • Warehouse Rent: Rent paid for storing goods.
  • Cash in Hand: Physical money (notes and coins) held by the business.
  • Cash at Bank: Money held in the business's bank account(s).
  • Advertisement: Expenses incurred to promote products or services.
  • w.e.f (with effect from): Indicates the date from which something starts.
  • Salaries: Payments made to employees for their work.
  • Rent: Payment for using property or equipment owned by someone else.
  • Drawings: Money or goods withdrawn by the owner(s) from the business for personal use.
  • Furniture: Long-term assets like tables, chairs, cupboards used in the business.
  • Bills Receivable: A formal written promise from a customer to pay a specific amount of money at a future date. It's an asset.
  • Freehold Property: Land or buildings owned outright by the business, without a time limit on ownership.
  • Capital A/c (Capital Account): An account representing the owner's investment in the business.
  • Sales: Revenue generated from selling goods or services.
  • Bills Payable: A formal written promise by the business to pay a specific amount of money to a supplier at a future date. It's a liability.
  • Discount (received): A reduction in price received from a supplier (an income). (If it was Discount allowed, it would be an expense on the Debit side).
  • Creditors (Sundry Creditors): Suppliers to whom the business owes money for goods or services purchased on credit.
  • R.D.D (Reserve for Doubtful Debts): An amount set aside from profits to cover potential future bad debts. It is also known as Provision for Doubtful Debts.
  • Bank Loan: Money borrowed from a bank, which needs to be repaid with interest. A liability.
  • Purchases Return (Returns Outward): Goods returned by the business to its suppliers.
  • Stock on hand (Closing Stock): The value of goods remaining unsold at the end of an accounting period.
  • Uninsured goods: Goods for which no insurance cover was taken. If lost or stolen, the full value is a loss.
  • Insolvent: Unable to pay debts owed.
  • Outstanding Expenses: Expenses that have been incurred during the accounting period but have not yet been paid.
  • Depreciate (Depreciation): The decrease in the value of an asset over time due to wear and tear, usage, or obsolescence.
  • Gross Profit c/d (carried down): The excess of sales revenue over the cost of goods sold, transferred from the Trading Account to the Profit and Loss Account.
  • Gross Profit b/d (brought down): The gross profit figure brought forward to the credit side of the Profit and Loss Account.
  • Net Profit: The final profit remaining after all expenses (both operating and non-operating) have been deducted from all revenues and gains.
  • Liabilities: What a business owes to outsiders (e.g., loans, creditors).
  • Assets: What a business owns (e.g., machinery, buildings, cash, debtors).
  • Opening Balance: The balance of an account at the beginning of an accounting period.
  • Prepaid Expenses: Expenses paid in advance for a future period, considered an asset.
  • O/s (Outstanding): Not yet paid or received.