Financial Accounting

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Lecture – 32Question

• Following trial balance has been extracted from the books of Arif Traders on June 30, 2002

Financial Accounting

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Lecture – 32Trial Balance

Arif Traders

Trial Balance as At June 30 2002

Title of Account Dr. Rs. Cr. Rs.

Sales 987,000 P

Stock on 30 June, 2002 175,500 B

Material Consumed 537,000 P

Cash in Hand 10,500 B

Cash at Bank 57,000 B

Capital Account July 01, 2001 495,000 B

Drawings 142,500 B

Furniture 72,000 B

Financial Accounting

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Lecture – 32Trial Balance

Title of Account Dr. Rs. Cr. Rs.

Rent Paid 51,000 P

Wages Paid 129,000 P

Discounts Allowed 34,500 P

Discounts Received 18,000 P

Debtors 246,000 B

Creditors 124,500 B

Provision for Doubtful Debts Jul. 01 2001 13,500 B

Vehicles 120,000 B

Vehicle Running Costs 22,500 P

Bad Debts Written off 40,500 P

TOTAL 1,638,000 1,638,000

Financial Accounting

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Lecture – 32

• Further information available: Wages and salaries payable on June 30, 2002 Rs. 4,500 Rent prepaid on June 30, 2002 Rs. 7,000 Vehicle running costs payable on June 30 Rs. 3,000 Increase in provision for doubtful debts Rs. 3,000 Depreciation rate is 12.5% for furniture and 20% for

vehicle.

• Required You are required to prepare Profit and Loss Account for

the year and Balance Sheet as on June 30, 2002

Financial Accounting

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Lecture – 32Solution

Arif Traders

Profit and Loss Account for the Year Ending June 30, 2002

Particulars Working Rs. Rs.

SalesLess: Cost of Goods Sold (material consumed)

987,000(537,000)

Gross ProfitDiscount Received

450,00018,000

Less: ExpensesWages and Salaries 1Rent 2Discount AllowedVehicle Running Cost 3Provision for Doubtful Debt 4Depreciation 5

(133,500)(44,000)(34,500)(25,500)(43,500)(33,000)

468,000

(314,000)

Net Profit 154,000

Financial Accounting

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Lecture – 32Solution

Particulars Working Rs. Rs.

SalesLess: Cost of Goods Sold (material consumed)

987,000(537,000)

Gross ProfitDiscount Received

450,00018,000

468,000

Financial Accounting

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Lecture – 32Solution

Less: ExpensesWages and Salaries 1Rent 2Discount AllowedVehicle Running Cost 3Provision for Doubtful Debt 4Depreciation 5

(133,500)(44,000)(34,500)(25,500)(43,500)(33,000)

468,000

(314,000)

Net Profit 154,000

Financial Accounting

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Lecture – 32Solution

Arif Traders

Profit and Loss Account for the Year Ending June 30, 2002

Particulars Working Rs. Rs.

SalesLess: Cost of Goods Sold (material consumed)

987,000(537,000)

Gross ProfitDiscount Received

450,00018,000

Less: ExpensesWages and Salaries 1Rent 2Discount AllowedVehicle Running Cost 3Bad DebtsProvision for Doubtful Debt 4Depreciation 5

(133,500)(44,000)(34,500)(25,500)(40,500)(3,000)

(33,000)

468,000

(314,000)

Net Profit 154,000

Financial Accounting

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Lecture – 32Solution

Particulars Working Rs. Rs.

SalesLess: Cost of Goods Sold (material consumed)

987,000(537,000)

Gross ProfitDiscount Received

450,00018,000

468,000

Financial Accounting

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Lecture – 32Solution

Less: ExpensesWages and Salaries 1Rent 2Discount AllowedVehicle Running Cost 3Bad DebtsProvision for Doubtful Debt 4Depreciation 5

(133,500)(44,000)(34,500)(25,500)(40,500)(3,000)

(33,000)

468,000

(314,000)

Net Profit 154,000

Financial Accounting

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Lecture – 32Solution

Arif traders

Balance Sheet As At June 30, 2002

Particulars Working Amount Rs. Amount Rs.

AssetsFixed Assets 5Current Assets

StocksDebtors 6Prepaid ExpensesCash at BankCash in Hand

175,500229,500

7,00057,00010,500

159,000

479,500

Total 638,500

LiabilitiesCapitalProfitLess: Drawings

495,000154,000

(142,500) 506,500

Current LiabilitiesCreditorsExpenses Payable 7

124,5007,500 132,000

Total 638,500

Financial Accounting

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Lecture – 32Solution

Particulars Working Amount Rs. Amount Rs.

AssetsFixed Assets 5Current Assets

StocksDebtors 6Prepaid ExpensesCash at BankCash in Hand

175,500229,500

7,00057,00010,500

159,000

479,500

Total 638,500

Financial Accounting

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Lecture – 32Solution

LiabilitiesCapitalProfitLess: Drawings

495,000154,000

(142,500) 506,500

Current LiabilitiesCreditorsExpenses Payable 7

124,5007,500 132,000

Total 638,500

Financial Accounting

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Lecture – 32Solution

• Working• (1) Salaries

Salaries and Wages

Debit side.

Paid 129,000

Payable 4,500

Credit side.

P&L Account 133,500

Financial Accounting

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Lecture – 32Solution

• Working• (2) Rent

Rent

Debit side.

Paid 51,000

Credit side.

Prepaid 7,000

P&L Account 44,000

Financial Accounting

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Lecture – 32Solution

• Working• (3) Vehicle Running Cost

Vehicle Running Cost

Debit side.

Paid 22,500

Payable 3,000

Credit side.

P&L Account 25,500

Financial Accounting

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Lecture – 32Solution

• Working• (4) Provision for Doubtful Debts

Provision for Doubtful Debts

Debit side.

Bad Debts 40,500

Bal. C/F 16,500

Credit side.

Bal. B/F 13,500

P&L Account 43,500

Financial Accounting

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Lecture – 32Solution

• Working• (4) Provision for Doubtful Debts

Provision for Doubtful Debts

Debit side.

Bal. C/F 16,500

Credit side.

Bal. B/F 13,500

P&L Account 3,000

Financial Accounting

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Lecture – 32Solution

• Working• (5) Fixed Assets at WDV

Cost Rate Dep.WDVFurniture 72,000 12.5% 9,000 63,000

Vehicle 120,000 20% 24,00096,000

33,000 159,000

Financial Accounting

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Lecture – 32Solution

• Working• (6) Debtors

Debtors 246,000Less: Provision for Doubtful

Debts (note 4) (16,500) 229,500

Financial Accounting

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Lecture – 32Solution

• Working• (7) Expenses Payable

Expenses Payable

Debit side.

Bal. C/F 7,500

Credit side.

Salaries 4,500

Veh. Running 3,000