Question

From the following Trial Balance and Adjustments prepare Trading and Profit and Loss Account and Balance Sheet as on 31st March 2019 for Mr. A and B.

Trial Balance as of 31st March, 2019

Adjustments:

1. Closing stock: Cost price ₹ 60,000, Market price ₹ 52,500.

2. Interest on fixed deposit ₹ 1800 is still outstanding.

3. Provide R.D.D. at 2.5 % on sundry debtors. 

4. Depreciate furniture by 5 %. 

5. Goods of ₹ 12,000 were destroyed by fire and the insurance company accepted the claim of ₹ 9,000 only.

Answer 1

In the books of Mr. A and Mr. B

Balance Sheet as of 31st March 2019

Working Notes:

1. Closing stock is to be considered at a cost price or market price whichever is less. It is valued at ₹ 52,500.

2. Goods of ₹ 12,000 were destroyed and the insurance company accepted a claim of ₹ 9,000, which means ₹ 3,000 is a loss for the firm. The insurance company accepted the claim, (not yet paid the amount) therefore, it is recorded on the Asset side of the Balance Sheet.

3. Advertisement expense ₹ 45,000 is given for 3 years means for one year, we have to take 45000/3 = ₹ 15,000 as advt. exp. and ₹ 30,000 (45,000 – 15,000) is to be taken as prepaid advt. exp. (Asset side)