Question

Please be kind enough to show your workings

The following balances were extracted from the a company on 30th December 2018. prepare the following. i. Profit and Loss account for the year ended 31 December 2018. ii. Balance sheet as at that date. Notes: * salaries and rent accrued but not paid RS.820,000.00 and RS.150,000.00 respectively. *Insurance paid in advance is Rs.40,000.00 * Maintain the reserve for doubtful debts at Rs.300,000.00 *Depreciation on Motor van to be made at 10% * Closing stock on 31st December 2018 was valued Rs. 5,040,000.00 Balances as at 31st December 2018. Debit Credit (Rs'000) (Rs'000) Capital 19,400 Purchases 41,400 Sales 55,140 Trade debtors 7250 Trade creditors 3,860 Stock on 15 January 2018 4,120 Purchase returns 100 Balances at bank 3,920 Drawings 4,600 Motor van expenses 510 Motor van 6,250 Rent and rates 750 Salaries 8,120 Reserve for doubtful debts 250 Bad debts 230 General expenses 1,120 Discount allowed 1,050 Discount received 930 Insurance Sales return 240 120 79,680 79,680

Answer 1

(i)

Trading and Profit & Loss Account
For the year ended 31 December 2018

Particulars	Details (Rs '000)	Amount (Rs '000) Dr	Particulars	Details (Rs '000)	Amount (Rs '000) Cr
To Opening stock		4120	By Sales	55140
To Purchases	41400		Less: Returns	(120)	55020
Less: Returns	(100)	41300	By Closing stock		5040
To Gross Profit C/F		14640
Total		60060	Total		60060
To Motor Van expenses		510	By Gross Profit B/F		14640
To Rent & Rates	750		By Discount received		930
Add: Rent accrued	150	900
To Salaries	8120
Add: Salaries Accrued	820	8940
To Reserve for Doubtful Debts (Increase)		50
To Bad debts		230
To General Expenses		1120
To Discount allowed		1050
To Insurance	240
Less: Prepaid	(40)	200
To Depreciation		625
To Net profit C/F		1945
Total		15570	Total		15570

(ii)

Balance Sheet as at 31 December 2018

Liabilities	Details (Rs '000)	Amount (Rs '000)	Assets	Details (Rs '000)	Amount (Rs '000)
Capital	19400		Motor Van	6250
Add: Net profit	1945		Less: Depreciation	(625)	5625
Less: Drawings	(4600)	16745	Debtors	7250
To Creditors		3860	Less: Reserve for doubtful debts	(300)	6950
To Accrued Rent & Rates		150	Stock		5040
To Accrued Salaries		820	Balance at Bank		3920
			Prepaid Insurance		40
Total		21575	Total		21575

(While preparing Profit & loss and Balance sheet, 1 thing to be kept in mind that everything in Trial balance will be taken to either Profit & Loss A/c or Balance sheet as has been done, But for every additional adjustments, double entry needs to be done in both of them.)

1- Accrued salaries and Rent expenses are Outstanding liabilities, So will be added with their respective accounts in Profit & Loss Account and will also be separately disclosed in Liability side of Balance sheet
2- Insurance paid in advance is a current asset and therefore will be deducted from it's respective expense in Profit & loss Account as the respective amount has already been paid . Same will be disclosed
3- Reserve for doubtful debt is already existing so won't appear in Profit & Loss Account. Will simply be deducted from Debtors in Balance sheet , however whatever changes (Increase in this case = $300000- $250000 = $50000) will be reflected in both Profit & Loss account and Balance sheet
4- Depreciation on Motor van = ($6250000 - 10% of $6250000) = ($6250000 - $625000) = $5625000
5- CLosing stock will appear both in Trading Account as well as asset side of balance sheet

(If you have any questions, kindly let me know in in comments)