Financial Accounting

1

Lecture – 34

Example• The following trial balance was extracted from A, B & Co.

books on June 30, 2002.Title of Account Dr. Rs. Cr. Rs.

Building Cost 750,000

Furniture and Fixtures Cost 110,000

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

Financial Accounting

2

Lecture – 34

Example

Title of Account Dr. Rs. Cr. Rs.

Markup on Bank Loan 40,000

Office Expenses 24,160

Salaries and Wages 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 2,696,040

Financial Accounting

3

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.

Financial Accounting

4

Lecture – 34

Solution

A, B, & Co

Profit and Loss Account for the Year Ending June 30, 20-2

Particulars Note Rs. Rs.

SalesLess: Cost of Goods Sold (material consumed)

1,236,500(710,550)

Gross ProfitLess: ExpensesWages and Salaries 1Office Expenses 2Carriage OutDiscount AllowedMarkup on LoanProvision for Doubtful Debt 3Depreciation 4

191,17025,12012,8801,150

40,0004,230

48,500

525,950

(323,050)

Net Profit 202,900

Financial Accounting

5

Lecture – 34

Solution

A, B, & Co

Profit and Loss Account for the Year Ending June 30, 20-2

Particulars Note Rs. Rs.

SalesLess: Cost of Goods Sold (material consumed)

1,236,500(710,550)

Gross ProfitLess: ExpensesWages and Salaries 1Office Expenses 2Carriage OutDiscount AllowedMarkup on LoanBad DebtsProvision for Doubtful Debts not required 3(a)Depreciation 4

191,17025,12012,8801,150

40,0005,030(800)

48,500

525,950

(323,050)

Net Profit 202,900

Financial Accounting

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Lecture – 34

Solution

A, B, & Co

Profit Distribution Account

Particulars Note Rs. Rs.

Net ProfitLess: Partner’s Salary – A

202,900(8,000)

Distributable ProfitLess: Partner’s Share in Profit

A (50% of 194,900)B (50% of 194,900)

97,45097,450

194,900

(194,900)

0

Financial Accounting

7

Lecture – 34

Solution

A, B, & Co

Balance Sheet As At June 30, 2002

Particulars Note Amount Rs. Amount Rs.

Fixed Assets at WDV 4Current Assets 5Current Liabilities 6

729,400(114,460)

528,500

Working Capital 614,940 614,940

Total 1,143,440

Financed By:

Capital – A B

350,000295,000 645,000

Current Account – A 7 B 8

54,51043,930 98,440

Long Term Loan 400,000

Total 1,143,440

Financial Accounting

8

Lecture – 34

Solution

• Notes

• (1) Salaries

• (2) Office Expenses

Salaries and Wages

Debit side.

Paid 189,170

Payable 2,000

Credit side.

Bal. 191,170

Office Exp.

Debit side.

Paid 24,160

Payable 960

Credit side.

Balance 25,120

Financial Accounting

9

Lecture – 34

Solution

• Notes

• (3) Provision for Doubtful Debts

Provision

Debit side.

B. Debt 5,030

Balance 3,200

Credit side.

O/B 4,000

P&L A/c 4,230

Financial Accounting

10

Lecture – 34

Solution

• Notes

• (3-a) Provision for Doubtful Debts

(4) Acc. Dep. WDV

Cost Rate Opening For the Yr Closing

Building 750,000 5% 250,000 37,500 287,500 462,500

Furniture 110,000 10% 33,000 11,000 44,000 66,000

48,500 528,500

Provision

Debit side.

Prov. not required 800

Balance 3,200

Credit side.

O/B 4,000

Financial Accounting

11

Lecture – 34

Solution

• Notes

• (5) Current Assets

Stocks 563,400

Debtors 162,430

Less: Provision (note3) 3,200 159,230

Bank 6,770

729,400

• (6) Current Liabilities

Creditors 111,500

Exp. Payable: Salaries 2,000

Off. Exp 960 2,960

114,460

Financial Accounting

12

Lecture – 34

Solution

• Notes

• (7) A’s current Account

• (8) B’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

B’s Current A/c

Debit side.

Drawing 56,500

Balance 43,930

Credit side.

O/B 2,980

Profit 97,450

Financial Accounting

13

Lecture – 34

Presentation of Partners’ Accounts

Partners’ Capital Account

Dr. Side Cr. Side

A B A B

Bal. On Jul 01 350,000 295,000

Bal. June 30

350,000 295,000

Financial Accounting

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Lecture – 34

Presentation of Partners’ Accounts

Partners’ Current Account

Dr. Side Cr. Side

A B A B

Drawings 64,000 56,500 Bal. On Jul 01 13,060 2,980

Salary 8,000

Share of Profit 97,450 97,450

Bal. June 30 54,510 43,930