Sun and Moon are partners in a firm sharing profits and losses in the ratio of 3:2.

TEXTUAL PROBLEM NO. 7

SINGLE ENTRY

Sun and Moon are partners in a firm sharing profits and losses in the ratio of 3:2.

7. Sun and Moon are partners in a firm sharing profit and losses in the ratio of 3:2. They kept their books under Single Entry System. On 1^stApril 2010 the following statement of affairs was extracted from their books.  [Textbook Problem No. 7]

Statement of Affairs as on 1^stApril, 2010

Liabilities	Amount	Assets	Amount
Capitals: Sun	12500	Plant and Machinery	15000
Moon	10000	Stock	10000
Creditors	15000	Debtors	17500
Bills Payable	12500	Cash in Hand	7500
	50000		50000

On 31^stMarch 2011 their assets and liabilities were as follows: Plant and Machinery Rs. 44000, Stock Rs. 32000, Cash in Hand Rs. 12,000, Creditors Rs. 8000, Debtors Rs. 20,000 and Bills Payable Rs. 15000. Drawing during the year: Sun Rs. 5000 and Moon Rs. 3000. 

Prepare Closing Statement of affairs and statement of profit or loss for the year ended 31^stMarch 2011 after considering the following adjustments. 

(1) Plant is overvalued by 10% and stock is undervalued by 20%. 

(2) R.D.D. is to be created at 10% on Debtors. 

(3) Interest on Capital is to be allowed at 10% p.a. and at 10% p.a. on Drawings.