Sharma and Varma are in partnership sharing profit and losses in the ratio of 2: 1 from the following information of Trial balance and adjustments you are required to prepare profit and loss account, trading account and Balance sheet as on 31st March 2014.

Trial Balance as on 31^st March, 2014

Particulars	Debit (Rs.)	Credit (Rs.)
Prepaid Insurance Insurance R.B.D.D Discount Postage and Telephones Salaries Debtors Creditors Wages Opening Stock Carriage Return Inward Return Outward Purchase and sales Bank Overdraft Plant and Machinery Land and Building Drawings:- Sharma Varma Capitals:- Sharma Varma	400 1, 000 400 1, 600 28, 000 33, 000 12, 000 24, 000 500 2,800 96, 600 12, 000 88, 000 4,000 2,000	500 34, 000 4, 600 1, 50, 800 60, 400 30, 000 26, 000
	3, 06, 300	3, 06, 300

1.      Write off Rs. 1,000 for bad debts  and provide for R.B.D.D @ 5% on debtors.

2.      Goods worth Rs. 2,000 were distributed as free samples.

3.      Closing Stock 31 – 03- 2014 was  valued at cost Rs. 28, 000 while its  market value is Rs. 30,000/-.

4.      Salaries were outstanding Rs. 1,000.

5.      Depreciate Land and Building @ 5%  p.a. and Plant and Machinery @ 10% p.a.

6.      Goods worth Rs. 3,000 were destroyed by fire, but insurance company admitted  the claim for Rs. 400 only.

7.      Varma had taken goods worth Rs. 1000 for his own use, but no entry is made in the books.

Solution: In the books of Sharma & Varma

Trading A/c for the year ended 31.03.14

Particulars	Amount	Amount	Particulars	Amount	Amount
To Opening Stock		24000	By Sales	150800
To Purchases	96600		(-) Returns	-2800	148000
(-) Returns	-4600	92000	By Goods Distributed as free sample		2000
To Wages		12000	By Goods Destroyed by fire		3000
To Carriage		500	By Goods Withdrawn by Partner Varma		1000
To Gross Profit c/d		53500	By Closing Stock		28000
		182000			182000

Profit and Loss A/c for the year ended 31 – 3 – 14

Particulars	Amount	Amount	Particulars	Amount	Amount
To Insurance		1000	By Gross Profit b/d		53500
To Bad Debts	-
(+) F.B.D.	1000
(+) N.R.D.D.	1600
(-) O.R.D.D.	-500	2100
To Discount		400
To Postage and Telephone		1600
To Salaries	28000
(+) Outstanding	1000	29000
To Advertisement		2000
To Depreciation
On land and building	4400
On Plant and Machinery	1200	5600
To Goods lost by fire		2600
To Net Profit C/d
Sharma	6133
Varma	3067	9200
		53500			53500

Partners Capital A/c

Particulars	Sharma	Varma	Particulars	Sharma	Varma
To Drawings	4000	2000	By Balance b/d	30000	26000
To Drawings [Goods]		1000	By Net Profit b/d	6133	3067
To Balance c/d	32133	26067
	36133	29067		36133	29067

Balance Sheet as on 31.3.14

Liabilities	Amount	Amount	Assets	Amount	Amount
Capital A/c			Prepaid Insurance		400
Sharma	32133		Debtors	33000
Varma	26067	58200	(-) F.B.D.	-1000
Creditors		34000		32000
Bank Overdraft		60400	(-) N.R.D.D.	-1600	30400
Outstanding Salaries		1000	Plant & Machinery	12000
			(-) Depreciation	-1200	10800
			Land & Building	88000
			(-) Depreciation	-4400	83600
			Closing Stock		28000
			Insurance Claim		400
		153600			153600