Jitesh and Lailesh are in partnership sharing profits and losses in the ratio of 2:1. From the following Trial Balance and adjustments given below, you are required to prepare Trading and Profit and Loss A/c for the year ended 31st March, 2013 and the Balance Sheet as on that date: [15]

Trial Balance as on 31^st March, 2013.

Particulars	Debit	Credit
Prepaid Insurance	800
Insurance	2000
R.B.D.D.		1000
Discount	800
Postage and telephone	3200
Salaries	56000
Debtors and Creditors	66000	68000
Wages	24000
Opening Stock	48000
Carriage	1000
Purchases and Sales	193200	301600
Return inwards and outwards	5600	9200
Bank overdraft		120800
Plant & Machinery	24000
Land & Building	176000
Capital
Jitesh		52000
Lailesh		48000
Total	600600	600600

Adjustments:

1. Write off Rs. 2000 for bad debts and provide R.B.D.D. 5% on debtors.

2. Goods worth Rs. 4000 were distributed as free samples.

3. Closing stock on 31.03.2013 was valued at the cost Rs. 56000 while its market price was Rs. 60,000.

4. Salaries were outstanding Rs. 2000.

5. Depreciate :

Land and Building @ 5% p.a. and

Plant & Machinery @ 10% p.a.

Solution:

In the Books of Partnership Firm

Trading A/c For the Year Ended 31^st March, 20136

Particulars	Amount	Amount	Particulars	Amount	Amount
To Opening Stock		48000	By Sales	301600
To Purchases	193200		Less: Return Inwards	5600	296000
Less: Return Outwards	9200	184000	By Goods distributed as Free Samples		4000
To Wages		24000	By Closing Stock		56000
To Carriage		1000
To Gross Profit C/d		99000
		356000			356000

Profit and Loss A/c For the year ended 31^st March, 2013

Particulars	Amount	Amount	Particulars	Amount	Amount
To Salaries	56000		By Gross Profit b/d		99000
Add: Outstanding	2000	58000
To Insurance		2000
To Discount		800
To Postage & Telephones		3200
To Depreciation
On Plant and Machinery	2400
On Land and Building	8800	11200
To Advertisement A/c		4000
To Bad debts	-
Add: F.B.D.	2000
Add: N.R.D.D.	3200
Less: O.R.D.D.	1000	4200
To Net Profit Transferred to Partners Capital A/c
Jitesh	10400
Lailesh	5200	15600
		99000			99000

Partners’ Capital Account

Particulars	Jitesh	Lailesh	Particulars	Jitesh	Lailesh
To Balance c/d	62400	53200	By Balance b/d	52000	48000
			By Profit & Loss A/c [Net Profit]	10400	5200
	62400	53200		62400	53200

Balance Sheet as on 31^st March, 2013

Liabilities	Amount	Amount	Assets	Amount	Amount
Partners’ Capital A/c			Land & Building	176000
Jitesh	62400		Less: Depreciation @5%	8800	167200
Lailesh	53200	115600	Plant & Machinery	24000
Bank Overdraft		120800	Less: Depreciation @ 10%	2400	21600
Creditors		68000	Debtors	66000
Outstanding Salaries		2000	Less: F.B.D.	2000
				64000
			Less: N.R.D.D.	-3200	60800
			Closing Stock		56000
			Prepaid Insurance		800
		306400			306400

Working Notes:

1. Prepaid insurance Rs. 800 given in the trial balance is shown only on the asset side of Balance Sheet.

2. Closing stock is shown at cost price of Rs. 56000 which is lower than its market price of Rs. 60000.

3. Goods costing Rs. 4000 distributed as free samples are first shown on the credit side of Trading A/c and then again they are shown on the debit side of Profit and Loss A/c.

4. Outstanding salaries of Rs. 2000 are first added to salaries on the debit side of profit and loss account and then shown the same on the liabilities side of balance sheet.

5. N.R.D.D. = 5% on Net Debtors = 5% × 64000 = 3200

6. Division of Net Profit:

Jitesh = (2/3)× 15600 = 10400

Lailesh = (1/3) × 15600 = 5200