Financial Accounting Lecture 34 Example The following trial

Financial Accounting Lecture – 34 Example • The following trial balance was extracted from A, B & Co. books on June 30, 2002. Title of Account Dr. Rs. Building Cost 750, 000 Furniture and Fixtures Cost 110, 000 Cr. Rs. Accumulated Dep. Building 250, 000 Accumulated Dep. Furniture 33, 000 Debtors 162, 430 Creditors 111, 500 Cash at Bank 6, 770 Stock on Jun 30, 2002 563, 400 Sales 1, 236, 500 Cost of goods Sold 710, 550 Carriage outward 12, 880 Discounts Allowed 1, 150 1

Financial Accounting Lecture – 34 Example Title of Account Dr. Rs. Markup on Bank Loan 40, 000 Office Expenses 24, 160 Salaries and Wages Cr. Rs. 189, 170 Bad Debts 5, 030 Provision for Bad Debts 4, 000 Bank Loan (Long Term) 400, 000 Capital – A 350, 000 B 295, 000 Current Account – A 13, 060 B 2, 980 Drawings – A 64, 000 B 56, 500 2, 696, 040 2 2, 696, 040

Financial Accounting Lecture – 34 Example Notes: • Expenses to be accrued, Office Expenses Rs. 960, Wages Rs. 2, 000. • Depreciate Fixtures 10% and Building 5% on straight line. • Reduce provision for doubtful debts to Rs. 3, 200 • Partnership salary of A Rs. 8, 000 is to be accrued. • A and B share profit and loss equally. 3

Financial Accounting Lecture – 34 Solution A, B, & Co Profit and Loss Account for the Year Ending June 30, 20 -2 Particulars Rs. Note Sales Less: Cost of Goods Sold (material consumed) Gross Profit Less: Expenses Wages and Salaries 1 Office Expenses 2 Carriage Out Discount Allowed Markup on Loan Provision for Doubtful Debt 1, 236, 500 (710, 550) 525, 950 4 191, 170 25, 120 12, 880 1, 150 40, 000 4, 230 48, 500 (323, 050)

Financial Accounting Lecture – 34 Solution A, B, & Co Profit and Loss Account for the Year Ending June 30, 20 -2 Particulars Rs. Note Sales Less: Cost of Goods Sold (material consumed) Gross Profit Less: Expenses Wages and Salaries 1 Office Expenses 2 Carriage Out Discount Allowed Markup on Loan Bad Debts 1, 236, 500 (710, 550) 525, 950 5 191, 170 25, 120 12, 880 1, 150 40, 000 5, 030 (800) 48, 500 (323, 050)

Financial Accounting Lecture – 34 Solution A, B, & Co Profit Distribution Account Particulars Rs. Note Net Profit Less: Partner’s Salary – A 202, 900 (8, 000) Distributable Profit Less: Partner’s Share in Profit A (50% of 194, 900) B (50% of 194, 900) 194, 900 97, 450 (194, 900) 0 6

Financial Accounting Lecture – 34 Solution A, B, & Co Balance Sheet As At June 30, 2002 Particulars Note Amount Rs. Fixed Assets at WDV 4 Current Assets Current Liabilities 528, 500 5 6 Working Capital 729, 400 (114, 460) 614, 940 Total 614, 940 1, 143, 440 Financed By: Capital – A B Current Account – A 7 B 8 Amount Rs. 7 350, 000 295, 000 645, 000 54, 510 43, 930 98, 440

Financial Accounting Lecture – 34 Solution • Notes • (1) Salaries and Wages Debit side. Paid Credit side. 189, 170 Payable 2, 000 • (2) Office Expenses Bal. Office Exp. Debit side. Paid Payable 191, 170 Credit side. 24, 160 960 Balance 25, 120 8

Financial Accounting Lecture – 34 Solution • Notes • (3) Provision for Doubtful Debts Provision Debit side. Credit side. B. Debt 5, 030 O/B Balance 3, 200 P&L A/c 4, 230 9 4, 000

Financial Accounting Lecture – 34 Solution • Notes • (3 -a) Provision for Doubtful Debts Provision Debit side. Prov. not required 800 Balance 3, 200 Credit side. O/B 4, 000 (4) Acc. Dep. Cost Closing Building 462, 500 Furniture 66, 000 WDV Rate Opening For the Yr 750, 000 5% 250, 000 37, 500 110, 000 10% 33, 000 11, 000 10 287, 500 44, 000

Financial Accounting Lecture – 34 Solution • Notes • (5) Current Assets Stocks 563, 400 Debtors 162, 430 11

Financial Accounting Lecture – 34 Solution • Notes • (7) A’s current Account A’s Current A/c Debit side. Drawing 64, 000 Balance 54, 510 Credit side. O/B 13, 060 Profit 97, 450 Salary 8, 000 • (8) B’s Current Account B’s Current A/c Debit side. Credit side. Drawing 56, 500 O/B Balance 43, 930 Profit 12 2, 980 97, 450

Financial Accounting Lecture – 34 Presentation of Partners’ Accounts Partners’ Capital Account Dr. Side A Cr. Side B Bal. On Jul 01 Bal. June 30 350, 000 295, 000 13 A B 350, 000 295, 000

Financial Accounting Lecture – 34 Presentation of Partners’ Accounts Partners’ Current Account Dr. Side A Drawings 64, 000 Cr. Side B A 56, 500 Bal. On Jul 01 13, 060 Salary Share of Profit Bal. June 30 54, 510 43, 930 14 B 2, 980 8, 000 97, 450