The books of Gupta, a tea merchant, showed the following balances as of March 31, 2019:

Initial stock of tea 1,00,000 

Commission to sales manager 32,400

Purchases: Tea 4,00,000 

Furniture and accessories 35,000

Salaries paid 80,000 

Air conditioners 30,000

Constructions 95,000 

Various debtors 1,00,000

Cash on hand 2,000 

Various creditors 80,000

Cash in bank 1,35,000 

Mortgage loan 70,000

Rent, fees and taxes 15,000 

Interest paid over 3,000

Insurance premium paid 3,000 

Expenses paid in advance 4,000

Miscellaneous receipts 10,000 

Money orders 18,000

Sales 7,20,000 

Invoices payable 30,000

Discount for prompt payment allowed 4,750 

Bank charges 2,000

Bad debts 3,250 

Legal fees 6,000

Repairs ---- Buildings 2,900 

Motor vehicles 80,000

Miscellaneous expenses 8,700 

Travel and transportation 10,000

Advertising 20,000 

Capital 2,80,000

The following additional information was obtained:

1. Closing stock ~ 55,000.

2. Legal charges include ~5,000 for the cost of stamps and registration for new buildings acquired during the year.

3. The purchases include 4,000 kg of tea valued at ~20,000 that was found totally spoiled. The insurance claim filed in this regard is expected to reach ~15,000.

4. Travel and transportation includes the owner's personal travel for which you will be charged ~4,800. 

5. Mortgage loan accrues interest of 12% per year. The loan was taken on June 1, 2016. An installment of ~10,000 was paid on December 1, 2019.

6. The sales manager is entitled to a commission of 7.5% of the total sales. However, actual bad debts incurred during the year are deductible from such commission entitlements.

7. Debtors include: (a) ~10,000 owed by M. & Co. (creditors include ~18,000 owed to the same party); (b) ~5,000 due to the sale of furniture; (c) Bad debts of ~2,000;

8. A provision for bad debts will be created at 2% of the outstanding net debtors.

9. Depreciation is attributable as follows: (a) Buildings at 2.5%; (b) Furniture and fixtures at 10%; (c) Air conditioners at 15%; d) Motor vehicles at 20%.

10. Miscellaneous receipts represent the proceeds from the sale of furniture, the noted value of which was ~ 12,000.

11. Prepaid expenses include an insurance premium of ~1000 for the period from April 1, 2011 to September 30, 2019 paid in 2018-19.

12. Bills Payable includes a bill of ~10,000 that was due on March 31, 2019 and was paid by the bank as per current instructions. The bank charges in this regard amounted to ~100.

13. The balance per bank as of March 31, 2019 was ~1,24,900.

Required: 

Prepare the trading account with the help of the information provided.

Prepare the Profit and Loss Account for the year ended March 31, 2019.

Prepare the balance sheet as of that date from the above information.

Answer rating: 100% (QA)

Trading Account for the year ended March 31 2019 Particulars Amount Rs Opening Stock 100000 Purchase... View the full answer