Question

The following balances were received from the Books of Prayag Electronics on 31st March, 2021:
Stock Rs. 60,000, Sales Rs. 4,25,000, Wages Rs. 50,000, Purchases Rs. 2,10,000, Salaries Rs. 25,000, Sundry Creditors Rs. 35,000, Bad Debts Rs. 3,000, Cash Rs. 2,000, Insurance and General Expenses Rs. 7,500, Profit and Loss Account (Credit) Rs. 13,500, Debtors Rs. 50,000, Share Capital Rs. 1,00,000, Machine and Plant Rs. 1,00,000, Reserve Rs. 30,000, Building Rs. 50,000, Rent Rs. 6,000, Investment Rs. 30,000, Interim dividend Rs. 10,000.
Adjustments:
1. Prepare provisions for Bad Debts on debtors @ 5%.
2. Charge depreciation on machinery @ 10%.
3. The value of stock on 31st March, 2021 was Rs. 75,000.
4. Make provision of Rs. 10,000 for reserve and Rs. 15,000 for dividend.
On the basis of the above particulars and adjustments, prepare the Profit and Loss Account and the Profit and Loss Appropriation Account.

Hint:

The provision for bad debts, depreciation, and reserves must be deducted from profits to provide an accurate picture of the company’s financial health.

Answer 1

Profit and Loss Account for the Year Ending 31st March, 2021

Profit and Loss Account

Particulars	Amount (Rs.)
To Opening Stock	60,000
To Purchases	2,10,000
To Wages	50,000
To Salaries	25,000
To Insurance and General Expenses	7,500
To Bad Debts (Provision)  (5% of 50,000)	2,500
To Depreciation on Machinery  (10% of 1,00,000)	10,000
To Rent	6,000
To Net Profit (Transferred to P & L Appropriation Account)  (balancing figure)	1,31,000
Total	5,02,000

Profit and Loss Appropriation Account

Particulars	Amount (Rs.)
By Net Profit (Transferred from Profit and Loss Account)	1,31,000