Question

Rajan and Rohit are partners in a partnership firm sharing profits and losses equally. You are required to prepare the Profit and Loss Account for the year ended 31st March 2020 and the Balance Sheet as on that date with the help of the following information: Trial Balance as on 31st March 2020 \[ \begin{array}{|c|c|c|} \hline Debit Balances & Amount (₹) & Credit Balances & Amount (₹)
\hline \text{Insurance} & 30,000 & \text{Capital Account:} &
\text{Land and Building (Addition of ₹40,000 w.e.f. 1st July 2019)} & 1,00,000 & \text{Rajan} & 1,00,000
\text{Salaries} & 10,000 & \text{Rohit} & 1,00,000
\text{Export Duty} & 5,000 & \text{10% Bank Loan (taken on 1st October 2019)} & 60,000
\text{Interest} & 2,000 & \text{Bills Payable} & 19,000
\text{Furniture} & 80,000 & &
\text{Debtors} & 52,000 & &
\hline \text{Total} & 2,79,000 & \text{Total} & 2,79,000
\hline \end{array} \] Additional information :
(1) Gross profit amounted to ` 69,000.
(2) Insurance paid for 15 months w.e.f. 1st April 2019.
(3) Depreciate land and building at 10% p.a. and furniture at 5% p.a.
(4) Write off ` 2,000 for bad debts and maintain R.D.D. at 5% on sundry debtors.
(5) Closing stock is valued at ` 69,000.

Hint:

Ensure to account for depreciation, bad debts, and other adjustments to ensure the accurate preparation of Profit and Loss Account and Balance Sheet.

Answer 1

Step 1: Prepare the Profit and Loss Account for the year ended 31st March 2020.
We begin with the gross profit, which is already given as ₹69,000. Adjustments like depreciation, bad debts, and interest will be made as we proceed. Expenses: - Salaries: ₹10,000 - Insurance: ₹30,000 (paid for 15 months from 1st April 2019) The portion relating to the current year (12 months) = \(\frac{12}{15} \times 30,000 = ₹24,000\) - Depreciation on Land and Building: 10% of ₹1,00,000 (since the addition is made on 1st July 2019, we take half-year depreciation) = ₹5,000 - Depreciation on Furniture: 5% of ₹80,000 = ₹4,000 - Bad Debts (₹2,000) and R.D.D. (5% of ₹52,000 Debtors = ₹2,600) Profit and Loss Account for the year ended 31st March 2020 \[ \begin{array}{|c|c|c|} \hline Particulars & Dr. (₹) & Cr. (₹)
\hline \text{To Salaries} & 10,000 &
\text{To Insurance (current year)} & 24,000 &
\text{To Depreciation on Land and Building} & 5,000 &
\text{To Depreciation on Furniture} & 4,000 &
\text{To Bad Debts and R.D.D.} & 4,600 &
\text{Gross Profit b/d} & & 69,000
\hline \text{Net Profit} & & \boxed{41,400}
\hline \end{array} \]

Step 2: Prepare the Balance Sheet as on 31st March 2020.
The Balance Sheet includes assets and liabilities adjusted for depreciation, bad debts, and capital balances. Balance Sheet as on 31st March 2020 \[ \begin{array}{|c|c|c|} \hline Liabilities & Amount (₹) & Assets & Amount (₹)
\hline \text{Capital Accounts:} & & \text{Land and Building (after depreciation)} & 95,000
\text{Rajan} & 1,00,000 & \text{Furniture (after depreciation)} & 76,000
\text{Rohit} & 1,00,000 & \text{Debtors (after bad debts and R.D.D.)} & 49,400
\text{Bank Loan} & 60,000 & \text{Cash at Bank} & 10,000
\text{Bills Payable} & 19,000 & \text{Cash in Hand} & 1,000
\hline \text{Total Liabilities} & 2,79,000 & \text{Total Assets} & 2,79,000
\hline \end{array} \]

Final Answer: \text{(a) The Profit and Loss Account shows a net profit of ₹41,400.} \text{(b) The Balance Sheet as on 31st March 2020 is balanced at ₹2,79,000.}