Question

From the following Trial Balance and adjustments given below of Reena and Aarti, 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

Adjustments :

1) Closing Stock valued at ₹ 22,000.

2) Write off  ₹ 900 for Bad & doubtful debts and create a provision for Reserve for doubtful debts ₹ 1,000.

3) Create a provision for Discount on Debtors @ 3% and creditors @ 5%.

4) Outstanding Expenses - Wages ₹ 700 and Salaries ₹ 800.

5) Insurance is paid for 15 months, w.e.f. 1^st April 2018 

6) Depreciate Land and Building @ 5%

7) Reena & Aarti are Sharing Profits & Losses in their Capital Ratio.

Answer 1

Balance Sheet as on 31st March 2019

Working Notes:

(1) Insurance premium ₹ 1,500 is paid for 15 months i.e. prepaid insurance premium for 3 months = ₹ 300.

(2) Reserve for Discount on Debtors

= 3% on (Debtors – New Bad debts – New Reserve)

= ₹ 1,143

(3) Reserve for Discount on Creditors = 5% on (Value of Creditors)

= \(\frac5{100}\times{25,700}\) 

 = ₹ 1,285

(4) Profit and Loss ratio = Capital ratio
= 50,000: 30,000
= 5: 3.