ILLUSTRATION:

Prepare Trading and Profit and Loss Account for the year ending 31st December, 1980 and Balance
Sheet as at that date from the following particulars:-
Rs. Rs.
Capital 20,500 Cash in hand 55
Creditors 15,00 Drawings 2,500
Outstanding Expenses 3,400 Purchases 85,500
Rent Received 300 Carriage Inward 750
Purchase Returns 2,000 Wages 11,500
Sales 1,44,800 Power 4,000
Depreciation of
Provision for Bad-Debts 300 Machinery 500
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Development 4,000 Salary 17,200
Plant and Machinery 10,000 Discount Recd. 900
Goodwill 2,500 General Expenses 4,100
Agents Samples 1,350 Prepaid Expenses 200
Opening Stock 16,000 Salary to Agent 4,550
Debtors 7,300 Rent and Insurance 9,950
Cash at Bank 1,000 Discount allowed 2,500
Sales Returns 300
Commission to Agent 1,445

Adjustments:
1. Closing Stock was valued at Rs. 15,700. Goods costing Rs. 1,000 was destroyed by fire. The
Insurance Company admitted the claim for Rs. 790 only.
2. Write off Rs. 500 as Bad-Debts and create a provision for Doubtful Debts on Debtors at 5%.
3. Depreciate Agents samples by 33 1/3 %.
4. Write off Advertisement Development by 25%.
5. Change 5% Manager’s Commission on Net profits after charging his Commission.
6. Proprietor withdrew Rs. 100 for his private use. This amount was included in general
expenses.
7. There is a contingent liability of Rs.6,000 in respect of a court case.

ILLUSTRATION:
Merchant keeps his accounts on single entry system. During 1980 the analysis of his cash book was
as under:
Rs. Rs.
Bank overdraft (1-1-
Receipts from Debtors 4,000 1980) 600
Additional Capital Introduced on 1-9-1980 300 Payments to Creditors 2,700
Loan from C on 1-7-1980 @ 6% interest
p.a. 1,500 General Expenses 900
Salaries 300
Drawings 400
Bank Balance (31-12-
1980) 900
5,800 5,800

On 1st January, 1980, the following balances were recording: Building Rs. 2,500; Stock Rs.1,800;
Debtors Rs 5,300 and Creditors Rs. 1,500.
The Balances on 31st Dec.1980 were: Debtors Rs. 6,000; Building Rs.2,500; Creditors Rs. 1,900 and
Stock Rs. 2,600.
Allow 5% depreciation on Building. Provide interest on C’s loan for six months. Prepare Trading,
Profit and Loss Account and Balance Sheet on 31-12-1980.