AccountancyNEB 2081
The following financial transactions of a company is given below : Particulars Rs. (Rs.) : : Opening stock 2,00,000 Purchase 17,50,000 Carriage inward 40,000 Factory expenses 4,00,000 Pre paid…
5The following financial transactions of a company is given below :
| Particulars | Rs. (Rs.) |
|---|---|
| Opening stock | 2,00,000 |
| Purchase | 17,50,000 |
| Carriage inward | 40,000 |
| Factory expenses | 4,00,000 |
| Pre-paid insurance | 50,000 |
| Salaries | 1,75,000 |
| Stationary | 25,000 |
| Sales | 25,00,000 |
| Capital | 3,00,000 |
| Interest on investment | 2,00,000 |
Additional information: i) Closing stock Rs. 2,00,000 ii) Pre-paid insurance expired Rs. 20,000 iii) Bad debt Rs. 5,000
Required:
- a) Trading Account [2]
- b) Profit & Loss Account [3]
Answer
a) Trading Account
| Particulars | Rs. (Rs.) |
|---|---|
| To Opening Stock | 2,00,000 |
| To Purchases | 17,50,000 |
| To Carriage Inward | 40,000 |
| To Factory Expenses | 4,00,000 |
| To Pre-paid Insurance (Net) | 30,000 |
| Less: Closing Stock | (2,00,000) |
| Gross Profit | 11,75,000 |
Explanation:
- Opening Stock (2,00,000) and Purchases (17,50,000) are added to find the total cost of goods available for sale.
- Carriage Inward (40,000) and Factory Expenses (4,00,000) are added as they are direct costs of production.
- Pre-paid Insurance (50,000) is adjusted by deducting the expired amount (20,000), leaving 30,000 as an expense.
- Closing Stock (2,00,000) is deducted to find the Gross Profit (11,75,000).
b) Profit & Loss Account
| Particulars | Rs. (Rs.) |
|---|---|
| To Salaries | 1,75,000 |
| To Stationary | 25,000 |
| To Bad Debts | 5,000 |
| To Net Profit | 9,50,000 |
| By Gross Profit (Transferred) | 11,75,000 |
| By Interest on Investment | 2,00,000 |
Explanation:
- Gross Profit (11,75,000) is transferred from the Trading Account.
- Salaries (1,75,000) and Stationary (25,000) are deducted as operating expenses.
- Bad Debts (5,000) is also deducted as an expense.
- Interest on Investment (2,00,000) is added as income.
- The final Net Profit is calculated as 9,50,000.
Note: The Capital (3,00,000) is not included in the Profit & Loss Account as it is a financing activity and not an operating expense or revenue.
Discussion
Loading…