X & Y Company

The trial balance of X & Y Company, as on 30th June is given below:

$ $
Cash in hand 680 -
Sundry debtors 46000 -
Discount 300 -
Drawings 11000 -
Opening stock 30000 -
Purchases 75000 -
Sales returns 2700 -
Miscellaneous trade expenses 755 -
Labor wages 3500 -
Salaries 5600 -
Traveling expenses 850 -
Advertising 500 -
Rent and insurance 2800 -
Interest and bank charges 215 -
Bad debts 400 -
Buildings 6000 -
Plant and machinery 10000 -
Furniture 5000 -
Capital - 35000
Purchases returns - 1300
Sales (gross) - 125000
Creditors - 30000
Bank overdraft - 10000
Total $201300 $201300

Following additional information is also available:

(i) Closing stock on 30th June is $45,000

(ii) Charge depreciation at 10% on (a) Plant and machinery (b) Furniture.

(iii) Make provision for bad and doubtful debts at 5% of sundry debtors.

(iv) $150 on account of insurance are prepaid.

Required:

Prepare:

(a) Trading and P & L Account.

(b) Balance sheet as on 30th June.

Solution:

X & Y Company
Trading, Profit & Loss Account
For the year ended 30th June

Opening stock 30000 Sales 125000

Purchases 75000 Less returns
Less returns 1300 Net sales 2700
Net Purchase Closing stock 122300
Labor charges 73700 45000
Gross profit (carried down) 3500
60100
Total 167300 Total 167300

Expenses: Gross profit B/d 60100

Discount 300
Salaries 5600
Advertising 500
Rent insurance 2650
Interest & bank charges 215
Bad debts 400
Depreciation (machinery) 1000
Depreciation (furniture) 500
Provision for bad debts 2300
Miscellaneous trade expenses 755
Traveling expenses 850

Net profit carried to balance Sheet 45030

60100 60100
 X & Y Company
Balance Sheet as on 30th June

Capital and Liabilities Assets

Capital 35000 Cash in hand 680
Add: Profit 45030 Prepaid insurance 150
80030 Sundary Debtors 46000
Less: Drawings 11000 69030 Less: Provision 2300 43700
Creditors 30000 Stocks 45000
Bank Overdraft 10000 Plant & Machinery 10000
Less: Depreciation 1000 9000
Furniture 5000
Less: Depreciation 500
Building 4500
6000

109030 109030
Example-(B):

This solved problem illustrates the use of a work sheet where the columns of trading and profit & loss account has been substituted by Income Statement column .

The trial balance for the B & M Delivery Company as on December 31, was as follows:

B & M Delivery Company

Debit $ Credit $
Cash 10650
Accounts receivable 6400
Supplies on hand 1400
Prepaid insurance 2400
Prepaid rent 40000
Accounts payable 3130
Service Fee received in advance 4500
Capital stock 50000
Dividends (drawings) 3000
Service revenue 10700
Advertising expenses 50
Gas & oil expenses 680
Salaries expenses 3600
Utilities expenses 150
Total 68330 68330

Additional Data:

(a) Insurance expense for the month of December $200

(b) Rent expense for the month of December $400

(c) Supplies used during the month $500

(d) Depreciation for December $50

(e) One-third of the fees-received in advance account has been earned by 31stDecember.
(f) Interest earned but not yet received $600

(g) Unbilled service $1000

(h) Accrued salaries $180

 B & M Delivery Company Worksheet as on 31st December

Account Title Trail Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 10650 10650 10650
Account receivable 6400 6400 6400
Supplies on hand 1400 500 900 900
Prepaid insurance 2400 200 2200 2200
Prepaid rent 40000 400 39600 39600
Account payable 3130 3130 3130
Service fee received in advance 4500 1500 3000 3000
Capital stock 50000 50000 50000
Dividends (drawings) 3000 3000 3000
Service revenue 10700 2500 13200 13200
Advertising expenses 50 50 50
Gas and oil expenses 680 680 680
Salaries; expenses 3600 180 3780 3780
Utilities expenses 150 150 150
Insurance expense 200 200 200
Rent expense 400 400 400
Supplies expense 500 500 500
Depreciation 750 750 750
Accumulated Depreciation 750 750 750
Interest receivable 600 600 600
Interest revenue 600 600 600
Salaries payable 180 180 180
Service revenue receivable 1000 1000 1000
Net profit 7290 7290

Total 68330 68330 5130 5130 70860 70860 13800 13800 64350 64350