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Meaning
CHAPTER 4
Final Accounts
Preparation of final account is the last stage of the accounting cycle. The basic objective of every concern maintaining the book of accounts is to find out the profit or loss in their business at the end of the year. Every businessman wishes to ascertain the financial position of his business firm as a whole during the particular period. In order to achieve the objectives for the firm, it is essential to prepare final accounts which include Manufacturing and Trading, Profit and Loss Account and Balance Sheet. The determination of profit or loss is done by preparing a Trading, Profit and Loss Account. The purpose of preparing the Balance Sheet is to know the financial soundness of a concern as a whole during the particular period. The following procedure and important points to be considered for preparation of Trading, Profit and Loss Account and Balance Sheet. (1) Manufacturing Account Manufacturing Account is the important part which is required to preparing Trading, Profit and Loss Account. Accordingly, in order to calculate the Gross Profit or Gross Loss, it is essential to determine the Cost of Goods Manufactured or Cost of Goods Sold. The main purpose of preparing Manufacturing Account is to ascertain the cost of goods manufactured or cost of goods sold, which is transferred to the Trading Account. This account is debited with opening stock and all items of costs including purchases related to production and credited with closing balance of work in progress and cost of goods produced transferred to Trading Account. The term "Cost of Goods Sold" refers to cost of raw materials consumed plus direct related expenses. Components of Manufacturing Account The following are the important components to be considered for preparation of Manufacturing Accounts: (1) Opening Stock of Raw Materials. (2) Purchase of Raw Materials. (3) Purchase Returns. (4) Closing Stock of Raw Materials.
Final Accounts (5) Work in Progress (semi-finished goods). (6) Factory Expenses. (7) Opening Stock of Finished Goods. (8) Closing Stock of Finished Goods.
91
(1) Opening Stock: The term Opening Stock refers to stock on hand at the beginning of the year which include raw materials, work-in-progress and finished goods. (2) Purchases: Purchases include both cash and credit purchase of goods. If any purchase is returned, the same will be deducted from gross purchases. (3) Direct Expenses: Direct expenses are chargeable expenses or productive expenses which include factory rent, wages, freight on purchases, manufacturing expenses, factory lighting, heating, fuel, customs duty, dock duty and packing expenses. In short, all those expenses incurred in bringing the raw materials to the factory and converting them'into finished goods will constitute the direct expenses that are to be shown on the debit side of the trading account. Calculation of Cost of Goods Sold Cost of Goods Sold can be calculated as under : Cost of Goods Sold = Value of Opening Stock + Cost of Purchases + Direct Expenses
- Value of Closing Stock Illustration: 1 From the following information, calculate cost of goods sold :
Solution:
Stock of materials on 1.1. Stock of materials on 31.12. Purchases of materials Purchase Returns Wages Factory expenses Freight and Carriage Other direct expenses
Rs. 35, 5, 62, 2, 10, 3, 4, 2,
Calculation of Cost of Goods Sold Particulars Opening Stock of raw materials Add: Purchases Less: Purchase Return Freight and Carriage
Less: Closing stock of raw materials Cost of Raw Materials Consumed Add: Direct Expenses : Wages Factory Expenses Other direct expenses Cost of Goods Sold
Rs. Rs. 35, 62, 2,000 60, 4, 99, 5, 94,
10, 3, 2,500 16, 1,10,
..
Final Accounts 93
accounts but it is credited to Trading Account and also recorded in the assets side of the Balance Sheet. The value of closing stock is ascertained by means of stock taking and the value is brought in the books by means of an adjusting entry as
Closing Stock Account To Trading Account
Dr. * * *
The closing stock is valued at cost price or market price whichever is less. Gross Loss: Gross Loss refers to excess of cost of sales over the sales revenue.
Equation of Trading Account
The purpose of preparing the Trading Account is to calculate the Gross Profit or Gross Loss of a concern during a particular period. The following equations are highly useful for determination of Gross Profit or Gross Loss :
Calculation of Gross Profit or Loss
Gross Profit Sales
Sales
=
=
Sales - Cost of Sales Cost of Sales + Gross Profit (or)
Stock in the beginning + Purchases + Direct Expenses
- Stock at the end + Gross Profit (or) Stock in the beginning + Purchases + Direct Expenses
- Gross Profit = Sales + Stock at the end
PROFIT AND LOSS ACCOUNT
The determination of Gross Profit or Gross Loss is done by preparation of Trading Account. But it does not reveal the Net Profit or Net Loss of a concern during the particular period. This is the second part of the income statement and is called as Profit and Loss Account. The purpose of preparing the profit and loss account to calculate the Net Profit or Net Loss of a concern. Net profit refers to the surplus which remains after deducting related trading expenses from the Gross Profit. The trading expenses refer to inclusive of office and administrative expenses, selling and distribution expenses. In other words, all operating expenses such as office and administrative expenses, selling and distribution expenses and non- operating expenses are shown on the debit side and all operating and non operating gains and incomes are shown on the credit side of the Profit and Loss Account. The difference of two sides is either Net Profit or Net Loss. Accordingly, when total of all operating and non-operating expenses is more than the Gross Profit and other non-operating incomes, the difference is the Net Profit and in the reverse case it is known as Net Loss. This Net Profit or Net Loss is transferred to the Capital Account of Balance Sheet. Specimen Proforma of a Profit and Loss Account The following Specimen Proforma which is used for preparation of Trading, Profit and Loss Account.
94 A Textbook of Financial Cost and Management Accounting
Particulars To Opening Stock To Purchases Less : Purchases Returns To Carriage Inwards To Wages To Gross Profit c/d
To Gross Loss bId To Office & Administrative Expenses: Office Salaries Office Rent and Rates Printing and Stationery Telephone Charges Legal Charges Audit fees General Expenses To Selling Expenses: Advertisement Discount Allowed Commission Paid Salesmen Salaries Godown Rent Carriage Outward Agent Commission Traveling Expenses To Distribution Expenses: Depreciation on Vehicle Upkeep of Motor Van Travelers' Salaries Repairs and Maintenance To Non-Operating Expenses: Discount on Issue of Shares Preliminary Expenses
Trading, Profit and Loss Account for the year ending 31 st^ Dec •••• Amount Rs. Particulars ••• By^ Sales Less : Sales Returns ••• By Closing^ Stock
•••
- •• By Gross Profit^ bId
- • • By Non-Operating Incomes: Interest Received Discount Received Dividend Received Income from Investment Interest on Debenture Any other incomes
By Net Loss c/d ••• (Transferred to Capital Account)
•••
To Net Profit c/d } • • • (Transferred to Capital Nc) •••
Components appearing on Debit Side of the P & L Alc
Amount Rs.
•••
•••
Those expenses incurred during the manufacturing process of conversion of raw materials into finished goods will be treated as direct expenses which are recorded in the debit side of Trading Account. Any expenditure incurred subsequent to that will be known as indirect expenses to be shown in the debit side of the Profit and Loss Account. The indirect expenses may be classified into: (1) Operating Expenses and (2) Non-Operating Expenses.
(1) Operating Expenses: It refers to those expenses as the day-to-day expenses of operating a business include office & administrative expenses, selling and distribution expenses.
96 A Textbook of Financial Cost and Management Accounting Balance Sheet (I) as on •••• Liabilities Amount Rs. Assets Amount Rs.
Current Liabilities : *** Current Assets : * * *
Sundry Creditors Cash in Hand Bills Payable (^) Cash at Bank Bank Overdraft Sundry Debtors Outstanding Expenses Short Term Investments
Long-Term Liabilities : * * * Stock in Trade
Loan from Bank Bills Receivable Loan from Mortgage Prepaid Expenses Debenture Accrued Incomes
Any other Long Term Fixed Assets : * * *
Total Liabilities *** Plant and Machinery
Capital Account : * * * Furniture & Fixtures
Add: Net Profit Buildings Add : Interest on Capital Loose Tools Less : Drawings Motor Cars
Reserves and Surplus : *** Intangible Assets : * * *
General Reserve Goodwill Reserve for Contingency Patents Reserve for Sinking Fund Copy Rights Trade Marks
; Fictitious Assets :^ * * *
Preliminary Expenses Advertisement Misc. Expenses
(b) In the order of Performance: This method is commonly used by the companies. The specimen fonn of Balance Sheet arranged in the order of Perfonnance is given below : Balance Sheet (II) as on •••• Liabilities Amount Rs. Current Liabilities Fixed Liabilities Long-Term Liabilities Capital, Reserves and Surplus
Classification of Assets and Liabilities I. Assets
Assets Current Assets Fixed Assets Fictitious Assets Any other Investments
Amount Rs.
Business assets are resources or items of values owned by the business and which are utilized in the nonnal course of business operations to produce goods for sale in order to yield a profit. The assets are grouped into:
(1) Fixed Assets (2) Current Assets or Floating Assets (3) Fictitious Assets (4) Liquid Assets (5) Contingent Assets
Final Accounts 97
(1) Fixed Assets: This class of assets include those of a tangible nature having a specific value and which are not consumed during the normal course of business and trade but provide the means for producing saleable goods or providing services.
Components of Fixed Assets
(1) Goodwill (2) Land and Buildings (3) Plant and Machinery (4) Furniture and Fixtures (5) Patents and Copy Rights (6) Livestock (7) Leaseholds (8) Long-term Investments (9) Vehicles (2) Current Assets or Floating Assets : The assets of a business of a transitory nature which are used for resale or conversion into a cash during the course of business operation. In other words, those assets which are easily converted into cash in normal course of business during the shorter period say, less than one year are treated as current or floating assets.
Components of Current Assets
(1) Cash in hand (2) Cash at Bank (3) Inventories: Stock of raw materials Stock of work-in-progress Stock of finished goods. (4) Sundry Debtors (5) Bills Receivable (6) Short-Term Marketable Securities (7) Short-Term Investments (8) Prepaid Expenses (3) Fictitious Assets : Fictitious Assets refer to any deferred charges. They are really not assets. Preliminary expenses, Share issue expenses, discount on issue of shares and debentures, and debit balance of profit and loss account etc. are the important components of fictitious assets.
(4) Contingent Assets : It refers to a right to property which may come into existence on the happening of some future event. For example, a right to obtain for shares in another company on favourable terms, a right to sue for infringement of patents and copy rights etc.
(5) Liquid Assets: Liquid Assets which are immediately converted into cash. In other words, these assets are easily encashable in the normal course of business. Cash in hand, Cash at bank, Bills Receivable,
Final Accounts 99
ADJUSTMENT ENTRIES
The preparation of income statements, i.e., Trading, Profit and Loss Account and Balance Sheet is the last stage of accounting process. According to the principles of double entry system of accounting all the expenses and incomes relating to a particular period whether incurred or not should be taken into account. In order to give the true and fair view of the state of affairs of the business concern, it is essential to consider various adjustments while preparing Trading, Profit and Loss Account and Balance Sheet. The following are the various adjustments usually related to :
(1) Closing Stock (2) Outstanding Expenses (3) Prepaid Expenses
(4) Accrued Income
(5) Income Received in Advance
(6) Depreciation
(7) Interest on Capital
(8) Interest on Drawings
(9) Bad Debts
(10) Provision for Doubtful Debts (11) Provision for Discount on Debtors (12) Provision for Discount on Creditors (1) Closing Stock: The term Closing Stock refers to stock of raw materials, work in progress and finished goods at the end of the year valued at cost price or market price whichever is less. The following adjustment entry is
Closing Stock Account - Dr. * * *
To Trading Account * * *
The stock at the end appears in the balance sheet and the balance in the stock is carried forward to the next year as opening stock. The opening stock account balance will appear in the Trial Balance and would be closed and transferred to the debit of the Trading Account.
(2) Outstanding Expenses: Outstanding expenses refer to those expenses incurred and remain unpaid during the accounting period. For example, salary, rent, interest etc. are expenses which are incurred but remain unpaid during the accounting period. In order to ascertain the correct profit and loss made during the year, it is essential that such related expenses are treated as Salary Outstanding, Interest Outstanding and Rent Outstanding etc. The following necessary adjustment entry is :
Expenses (Salaries) Account Dr. * * *
To Outstanding Expenses (Salaries) Nc * * *
As per the rules, respective expenses are nominal account therefore it be charged to profit and loss account and also shown in the balance sheet on the liability side.
(3) Prepaid Expenses: Prepaid expenses are also known as unexpired expenses. Those expenses which are incurred and paid in advance. Such expenses are actually related to a future period. In order to
]00 A Textbook of Financial Cost and Management Accounting ascertain the correct picture of the profit and loss accounts the following adjustment entry is required for adjusting such prepaid expenses.
Prepaid Expenses Account To Expenses Account
Dr * * *
The amount paid in advance will be deducted from the actual amount paid because it is related to the future accounting period. And the net amount will be debited to profit and loss account and the balance in the prepaid expenses account is shown the advance payment indicates as an amount due to the business concern. (4) Accrued Income: Accrued Income otherwise known as Outstanding Income. Such incomes are accrued during the accounting period but not actually received in cash during that period. The adjustment entry will be as follows :
Accrued Income Account Dr. * * *
To Concerned Income Account * * *
The accrued income is added to the respective income account. And the total accrued amount will be credit to profit and loss account and is shown on the asset side of the balance sheet. (5) Income Received in Advance: Any income received in advance which is not earned during the accounting period. Therefore, if any income received in advance, it should be treated as income for the subsequent year. The adjustment entry will be :
Income Account Dr. * * *
To Income Received in Advance Account * * *
The Income Received in Advance is treated as a liability because an amount due to the party. Therefore, it shown on the liability side of the balance sheet. The income actually earned alone will appear on the credit side of Profit and Loss Account. (6) Depreciation: The term depreciation refers to loss on account of reduced value of assets due to wear and tear, obsolescence, effluxion of time or accident. Depreciation is treated as the cost or loss arised when the asset is used in the normal course of time. In order to ascertain the correct value of the assets in the balance sheet, it is essential to make to following adjustment entry as :
Depreciation Account Dr. * * *
To Fixed Assets Account * * *
The amount of depreciation is charged to debit side of the profit and loss account and is deducted from the respected assets shown on the asset side of the balance sheet. (7) Interest on Capital: In order to ascertain true profitability of the business concern, it is essential that profit is determined after deducting interest on the capital provided by proprietor. Interest on capital is included in the capital expenditure and thus the adjustment entry will be : Interest on Capital Account To Capital Account
Dr. * * *
Interest on Capital is an expenditure charged to debit side of profit and loss account and it is added to capital shown on the liability side of the balance sheet.
102 A Textbook of Financial Cost and Management Accounting
(b) For Provision for Discount on Creditors:
Provision for Discount on Creditor's Account Dr. * * *
To Profit and Loss Account * * *
The provision for discount on creditors treated as an anticipated profit charged to the credit side of profit and loss account. And it is deducted from sundry creditors shown on the liability side of the balance sheet.
Summary of Adjustment Entries : (1) For Closing Stock:
Closing Stock Nc Dr. * * *
To Trading Account * * *
(2) (^) For Outstanding Expenses:
Expenses Account Dr. ***
To Outstanding Expenses Account * * *
(3) For Prepaid Expenses:
Prepaid Expenses Account Dr. * * *
To Expenses Account ***
(4) (^) For Accrued Incomes:
Accrued Income Account Dr. * * *
To Concerned Income Account * * *
(5) For Income Received in Advance: Income Account (^) .. Dr. (^) * * *
To Income Received in Advance Account * * *
(6) For Depreciation on Fixed Assets:
Depreciation Account Dr. * * *
To Fixed Assets Account ***
(7) (^) For Interest on Capital:
Interest on Capital Account Dr. ***
To Capital Account ***
(8) (^) For Interest Oil Drawillgs:
Capital Account Dr. * * *
To Interest on Drawing Account * * *
(9) (^) For Bad Debts:
Bad Debts Account Dr. * * *
To Debtor's Personal Account * * *
Final Accounts /
(10) (^) For Provision for Doubtful Debts:
Profit and Loss Account Dr. * * *
To Provision for Bad and Doubtful Debts Account * * *
(11) For Provision for Discount on Debtor:
Discount Allowed Account Dr. * * *
To Debtors Personal Account ***
(12) Provision for Discount on Creditors:
(a) For Receipt of Discount:
Sundry Creditor Account Dr. * * *
To Discount Received Account * * *
(b) For Provision for Discount on Creditors:
Provision for Discount on Creditor's Account Dr. * * *
To Profit and Loss Account * * *
Difference between Profit and Loss Account and Balance Sheet Profit and Loss Account (^) Balance Sheet
(1) (^) It is prepared with the debit or credit balance of (1) (^) It shows the assets and liabilities on a Nominal Account. particular date.
(2) Profit and Loss Account reveals the Net Profit or (2) It is a statement of financial position on a Net Loss of a concern during the particular period. particular date. (3) (^) The difference between the two sides of Trading (3) (^) The difference between the two sides of profit Account will be gross profit and loss account will be Net Profit or Net Loss transferred to Profit and Loss Account. transferred to liability side of Balance Sheet.
(4) The debit or credit balances of nominal accounts (4) It is the statement of static in nature thus, are closed by transferring Profit and Loss Account. accounts do not require to close them.
Illustration: 2
From the following informations of Jansons Ltd. on 31 sl March, 2003 you are required to prepare the Trading, Profit and Loss Nc and Balance Sheet:
Rs. Rs. Opening Stock 5,000 Capital 89, Bills Receivable 22,500 Commission (Cr.) 2, Purchases 1,95,000 Return Outward 2, Wages (^) 14,000 Trade Expenses 1, Insurance 5,500 Office Fixtures 5, Sundry Debtors 1,50,000 Cash in Hand 2, Carriage Inward (^) 4,000 Cash at Bank 23, Commission (Dr.) (^) 4,000 Rent & Rates 5, Interest on Capital (^) 3,500 Carriage Outward 7, Stationery (^) 2,250 Sales (^) 2,50, Return Inward 6,500 Bills Payable 15, Creditors 98, Closing Stock 12,
Final Accounts 105 Solution: Dr. Trading, Profit and Loss Account for the year ending 31.4.2003 (Rs. in lakhs) Cr. Particulars Amount Rs. Particulars Amount Rs. To Purchase 1,500^ By^ Sales^ 1, Less: Sales Return 100 1, To Gross Loss cld 350 1,500 1. To Gross Loss bId 350 By Discount 2 To Telephone Rent 40 By Net Loss cld^758 To Stationery 20 (Balancing figure) To Rent 100 To Salaries 250 760 760
Balance Sheet as on 31.4. Liabilities Amount Rs. Assets Amount Rs. Capital 4,500 Cash 1, Less : Net Profit 758 Bank^ 1, 3,742 Furniture (^500) Less: Drawings 100 3,642 Sundry Debtors 600 Sundry Creditors 100 3,742 3,
Illustration: 4 From the Trial Balance in illustration 14 of Chapter on Trial Balnce you are required to Prepare Trading, Profit and Loss Account and Balance Sheet :
Solution: Dr. Trading, Profit and Loss Account for the year ending 31.3.2003 Cr. Particulars Amount Rs. Particulars Amount Rs.
To Purchases 6.000 By Sales 11, To Freights (^500) To Gross Profit cld 5,
11,500 11. To Discount allowed (^150) By Gross Profit bId 5, To Rent Paid 400 By Dividend Received 300 To Salaries 1.000 By Interest on Investment 1, To Depreciation 1, To Net Profit cld 4. (Balancing figure) 6,800 (^) 6.
/06 A^ Textbook^ of^ Financial^ Cost^ and^ Management Accounting Balance Sheet as on 31.3. Liabilities Amount Rs. Assets Amount Rs.
Capital 65,000 Cash Account^ 33, Add: Net Profit 4,250 Stock 10, 69,250 Machinery 9, Less: Drawings 500 68,750 Furniture 5,
Sundry Creditors 5,000 Building^ 5, Share Capital 970 Bank 4,
Sundry Debtors 7, 74,720 74,
IIIustration: 5
From the following particulars of Mrs. Raman & Co., you are required to prepare Trading, Profit and Loss Account and Balance Sheet for the year ended 31 st Dec. 2003 :
Sales Sales Return Stock at the beginning Purchases Purchases Return Direct Wages Direct Expenses Carriage Inwards Capital at the beginning Drawings Sundry Debtors Sundry Creditors
Additional Information
(1) Outstanding Salaries Rs. 500 (2) Interest on Capital at 10% P.A.
Rs. 65,000 Discount Allowed 500 Discount Received 8,000 Salaries 29,000 Interest paid 300 Furniture 5,000 Buildings 5,000 Plant and Machinery 4,000 Cash in Hand 30,000 Bills Payable 5,000 Reserve for Bad and Doubtful Debts 10,000 Bad Debts 12,000 Closing stock at the end
(3) Depreciation on Plant and Machinery at 10% P.A. and Buildings at 5% P.A. (4) Prepaid of Interest Rs. 100 (5) Provision for Bad and Doubtful Debts at 10% on Debtors
Rs. 100 500 3, 400 3, 20, 20, 1, 6, 500 300 8,
108 Illustration: 6
A Textbook of Financial Cost and Management Accounting
From the foIl owing transactions of Mrs. Sharma & Co., you are required to Prepare Trading, Profit and Loss Account and Balance Sheet for the year ended 31 st^ Dec. 2003 : Rs. Sales 3,55,000 Sundry Debtors Sales Return 5,000^ Rent Received Purchases 2,52,000 Discount Received Return Outwards 2,000 Discount Allowed Carriage Outward 1,000 Commission Allowed Carriage Inward 5,000 Taxes and Insurance Opening Stock 40,000^ Provision for Doubtful Debts Direct Expenses Capital Furniture Bank Overdraft Buildings Plant and Machinery Sundry Creditors Bills Payable
Additional Informations
(1) Stock at the end Rs. 42, (2) Depreciation made on Plant and Machinery Buildings
Rs.2oo Rs. 1000
5,000 Bad Debts 60,000 Salaries 5,000 Dividend Paid 10,000 General Expenses 45,000 Rent Paid 40,000 Bills Receivable 25, 30,
(3) Provision for Doubtful Debts at 5% on Sundry Debtors (4) Outstanding Rent Rs. 1000 (5) Prepaid Salaries Rs. 1000 (6) Interest on Capital at 5% Solution: Trading, Profit and Loss Account for the year ended 31st^ Dec. 2003 Particulars Amount Rs. Particulars To Opening Stock 40,000 Sales 3,55, To Purchases 2,52,000 (^) Less " Sales Return 5, Less " Purchase Return 2,000^ 2,50,000^ By Closing^ Stock To Carriage Inward 5, To Direct Expenses 5, To Gross Profit cld (^) 92,
3,92, To Carriage outward 1,000 By Gross Profit bid To Discount allowed 2,000 By Rent Received To Commission allowed (^) 1,000 By Discount Received To Dividend Paid 5, To General Ex pe nses 5000
Rs. 30, 3, 3, 2, 1, 3, 2, 1, 20, 5, 5, 3, 21,
Amount Rs.
3,50, 42,
3,92, 92, 3, 3,
Liabilities Amount Rs. Assets Amount Rs.
- Final Accounts
- To Opening Stock 8,000 By Sales 65, Particulars Amount Rs. Particulars Amount Rs.
- To Purchases 29,000 Less: Sales Return 590 64, - Less : Purchases Return 300 28,700 By Closing Stock 8,
- To Carriage Inward 4,
- To Dintct Wages 5,
- To Direct Expenses 5,
- To Gross Profit cld 21, - 72,500 72,
- To Discount allowed
- To Salaries 3,000 By Gross Profit bId 21, - Add : Outstanding 500 3,500 By Discount Received
- To Interest paid - Less: Prepaid Expenses 100
- To Bad Debts - For Doubtful Debts 1, Add : 10% of ProviSiOn} - 1, - Doubtful Debits } Less : Existing of - at 10% P.A } 3, To Interest on Capital - Machinery } 2, 10% on Plant and - 5% on Buildings 1,
- To Net Profit cld 11, - 22,300 22, - Balance Sheet as on 31 51 Dec.
- Capital 30,000 Cash in hand 1, Liabilities Amount Rs. Assets Amount Rs. - Add: Net Profit 11,600 Furniture 3, - 41,600 Closing Stock - 8, - Add: Interest on Capital 3,000 Plant and Mach. 20, - 44,600 Less : Depreciation 2,000 18, - Less : Drawings 5,000 39,600 Buildings 20,
- Sundry Creditors 12,000 Less : Depreciation 1,000 19,
- Outstanding Salary 500 Prepaid Interest
- Bills Payable 6,200 Sundry Debtors 10, - Doubtful Debts 800 9, Less : Provision for} - 58,300 58,
- Final Accounts /
- To Depreciation on Plant & Machinery 2,
- Buildings 1,
- To Salaries 20, - Less: Prepaid 1,000 19,
- To Rent Paid 3, - Add : Outstanding Rent 1,000 4,
- To Bad Debts 1, - Add : Bad & Doubtful Debts 1, - 3, - Less : Existing Doubtful Debts 2,000 1,
- To Taxes and Insurance 3,
- To Interest on Capital 3,
- To Net Profit c/d 51, - 98,000 98, - Balance Sheet as on 31 s1 Dec.
- Capital 60,000 Sundry Debtors 30, - 1,11,000 Bad & Doubtful Debts 1,500 28, Add: Net Profit 51,000 Less : Provision for - Add : Interest on Capital 3,000 1,14,000 Furniture 5,
- Bank Overdraft 10,000 Buildings 45,
- Sundry Creditors 25,000 Less : Depreciation 1,000 44,
- Bills Payable 30,000 Plant & Machinery 40,
- Outstanding Rent 1,000 Less: Depreciation 2,000 38, - Prepaid Salaries 1, - Stock at end 42, - Bills Receivable 21, - 1,80,000 1,80,
- Illustration: - Capital 1,00,000 Sundry Creditors 50, The following are the particulars of Mr. I. M. Pandey for the year ended 31 51 Dec. 2003 : - Land & Building 1,00,000 Plant & Machinery 30, - Goodwill 30,000 Investments 25, - Furniture & Fixtures 15,000 Cash in Hand 20, - Bills Receivable 15,000 Cash at Bank 5, - Bills Payable 24,000 Drawings 20, - Sundry Debtors 40,000 Long-Term Loan 2,00, - Commission Paid 5,000 Salaries 20, - Dividend Paid 4,000 Coal and Fuel 15, - Bank Overdraft 23,000 Factory rent & rates 20, - Discount Allowed 3,000 General Expenses 4, - Carriage Inwards 15,000 Advertisement 5, - Opening Stock: Doubtful Debts 2, Carriage Outwards 7,000 Provision for Bad & } - Raw Materials 1,50,000 Sales 8,50, - Finished goods 75,000 Sales Return 10, - Purchase of Raw Materials 5,00,
