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## Balance Sheet \$type=three\$count=6\$author=hide\$comment=hide\$label=hide\$date=hide\$show=home\$s=0

In corporate accounting, you have to learn final accounts of company in which you have to prepare trading and profit and loss account and balance sheet. These statements are advance than final accounts of individual. You have to spend your brain to understand its adjustments. I am taking one of following question and tell you how to solve it. This question came in my M.Com.'s higher Accounts.

Problem

The alfa manufacturing company ltd. was registered with a nominal capital of Rs. 60,00,000 in equity shares of Rs. 10 each. The following is the list of balances extracted from its books on 31st March , 2009.

Calls in arrears Rs 75,000

Premises Rs. 30,00,000

Plant and machinery Rs. 33,00,000

Interim Dividend paid on Ist Nov. , 2009  Rs. 3,92,500

Stock, 1st April, 1988 Rs. 7,50,000

Fixtures Rs. 72,000

Sundry Debtors Rs. 8,70,000

Goodwill Rs. 2,50,000

Cash in hand Rs. 7,500

Cash at Bank Rs. 3,99,000

Purchases Rs. 18,50,000

Preliminary Expenses Rs. 50,000

Wages Rs. 8,48,650

General Expenses Rs. 68,350

Freight and Carriage Rs. 1,31,150

Salaries Rs. 1,45,000

Directors' Fees Rs. 57,250

Debenture Interest Paid Rs. 1,80,000

Share Capital Rs. 40,00,000

12% Debentures Rs. 30,00,000

Profit and loss account ( credit balance) Rs. 2,62,500

Bill Payable Rs. 3,70,000

Sundry Creditors Rs. 4,00,000

Sales Rs. 41,50,000

General Reserve Rs. 2,50,000

Bad Debts provision 1st April 2009 Rs. 35,000

Prepare trading and profit and loss account and balance sheet in proper form after making the following adjustments

i) Depreciation plant and machinery by 15%

ii) Write off Rs. 5,000 from preliminary expenses

iii) Provide for half year's debenture interest due.

iv) Leave bad and doubtful debts provision at 5% on sundry debtors.

v) Provide for income tax @ 50%

vi) Stock on 31st march, 2010 was Rs. 9,50,000

Solution

In first step of solving this problem, you have to read the question and write small sign in list of balances relating to adjustment. With this, you can treat correctly.

2st Step : Make Working Notes for Adjustments

Working Notes :-

1. ) Depreciation on plant and machinery by 15%

33,00,000 X 15% = 4,95,000

2. Rs. 5,000 written off preliminary expenses will show in the debit side of profit and loss account. And rest Rs. 45,000 will show in the asset side in balance sheet.

3.) Show half year debenture interest due as outstanding interest in the debit side of profit and loss account.

4) Provision for Doubtful Debts Account

Credit Side :

Bad debts provision 1st April, 1988 Rs. 35,000

Transfer to Profit and loss account (Balancing figure) Rs 29,600

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Total = Rs. 64,600
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Debit Side

8,70,000 X 5% = Rs. 43,500

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Total Rs. 64,600
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Now, balancing figure of Rs. 29600 will go to debit side of profit and loss account and new provision of Rs. 43500 will deduct from sundry debtors in balance sheet.

5) Provide  for Income Tax @ 50%

Calculate net profit before charging income tax in profit and loss account and then calculate its 50% and it will be shown as provision for income tax in the debit side of profit and loss account and also it will be shown in the liability side in balance sheet.

6) Closing stock of Rs. 9,50,000 will go to the credit side of trading account. We will also show it in asset side in balance sheet.

7) Interim dividend paid will go to the debit side of profit and loss appropriation account. 15% dividend distribution tax and surcharge of 3% is paid by companies before distribution. It means it will also be debited in profit and loss appropriation account. In balance sheet, dividend distribution tax and surcharge will be shown in the liability side in balance sheet.

8.) Call in arrears will deduct from equity share capital in liability side of balance sheet.

After this, you have to make trading, profit and loss account, profit and loss appropriation account and balance sheet.

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