Answered

THAKUR & COMPANY

From the following trial balance and information, prepare a trading and profit and loss account for Mr. Mishabh for the year ended 31/08/10 and a balance sheet as on that date.

Information:
1. Stock of general goods on 31/03/10 valued at Rs. 27,300.
2. Fire occurred on 23/03/10 and Rs. 10,000 worth of general goods were destroyed. The insurance company accepted a claim for Rs. 6,000 only and paid the claim money on 10/04/10.
3. Bad debt amounting to Rs. 400 is to be written off. Provision for bad and doubtful debt is to be made at [tex]$5\%$[/tex] and for discount at [tex]$2\%$[/tex] on debtors. Make a provision of [tex]$2\%$[/tex] on creditors for discount.
4. Received Rs. 6,000 worth of goods on 27/03/10 but the invoice of purchase was not recorded in the purchase day book.
5. Rishabh took away goods worth Rs. 2,000 for personal use but no record was made thereof.
6. Charge depreciation at [tex]$2\%$[/tex] on land and building, [tex]$20\%$[/tex] on plant and machinery, and [tex]$5\%$[/tex] on furniture.



Answer :

GinnyAnswer
### Solution:

To prepare the Trading and Profit & Loss Account and Balance Sheet, we need to incorporate all the given information and adjustments step-by-step.

#### 1. Adjustments and Calculations:

1. Stock on 31.3.10:
- Value of stock on 31.3.10: ₹27,300

2. Fire Loss and Insurance Claim:
- General goods destroyed by fire: ₹10,000
- Insurance claim received: ₹6,000
- Loss due to fire = Goods destroyed by fire - Insurance claim received = ₹10,000 - ₹6,000 = ₹4,000

3. Bad Debt Adjustments:
- Bad debt to be written off: ₹400
- Provision for bad and doubtful debts at 5% of ₹400: 5% of ₹400 = ₹20
- Provision for discount on debtors at 2% of ₹400: 2% of ₹400 = ₹8
- Provision for discount on creditors at 2% of ₹400: 2% of ₹400 = ₹8

4. Unrecorded Purchase:
- Goods received unrecorded purchase on 27.3.10: ₹6,000

5. Goods for Personal Use:
- Goods taken away for personal use: ₹2,000

6. Depreciation:
- Land and Building:
- Depreciation at 2% on ₹100,000 (assumed value): 2% of ₹100,000 = ₹2,000
- Plant and Machinery:
- Depreciation at 20% on ₹50,000 (assumed value): 20% of ₹50,000 = ₹10,000
- Furniture:
- Depreciation at 5% on ₹20,000 (assumed value): 5% of ₹20,000 = ₹1,000
- Total Depreciation:
- Total = ₹2,000 (Land and Building) + ₹10,000 (Plant and Machinery) + ₹1,000 (Furniture) = ₹13,000

#### 2. Trading and Profit & Loss Account for the year ended 31.3.10:

Trading Account:
To calculate the Gross Profit:
```
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---------------------------------------|------------|---------------------------------------|------------|
| To Opening Stock | XXX | By Sales | XXX |
| To Purchases | XXX | By Closing Stock | 27,300 |
| Add: Unrecorded Purchase | 6,000 | | |
| Less: Goods taken for personal use | (2,000) | | |
| Less: Goods destroyed by fire | (10,000) | | |
| To Gross Profit c/d | XXX | | |
| | | | |
```

Profit & Loss Account:
```
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---------------------------------------|------------|---------------------------------------|------------|
| To Gross Profit b/d | XXX | By Gross Profit b/d | XXX |
| To Depreciation: | | | |
| Land and Building | 2,000 | | |
| Plant and Machinery | 10,000 | | |
| Furniture | 1,000 | | |
| To Bad Debt | 400 | | |
| To Provision for Bad Debt | 20 | | |
| To Provision for Discount (Debtors) | 8 | | |
| To Loss due to fire | 4,000 | | |
| To Net Profit c/d | XXX | | |
| | | | |
```

#### 3. Balance Sheet as on 31.3.10:

Liabilities:
```
| Particulars | Amount (₹) |
|---------------------------------------|------------|
| Capital | XXX |
| Add: Net Profit | XXX |
| Less: Drawings | 2,000 |
| Provision for Bad Debt | 20 |
| Provision for Discount on Creditors | 8 |
```

Assets:
```
| Particulars | Amount (₹) |
|---------------------------------------|------------|
| Land and Building (after depreciation)| XXX |
| Plant and Machinery (after depreciation)| XXX |
| Furniture (after depreciation) | XXX |
| Closing Stock | 27,300 |
| Debtors (net of bad debt and provisions)| XXX |
| Insurance Claim Receivable | 6,000 |
| Goods received unrecorded | 6,000 |
```

Overall, we would prepare the Trading and Profit & Loss Account and Balance Sheet by including all these adjustments and calculations as demonstrated above.

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