Question 3

Final accounts of a sole trader with GST

18 marks

Time to write
About 36 minutes
Topic
Final accounts of a sole proprietor
Notes
Crux notes

Question

Question 3 · 18 marks

The following is the Trial Balance of Mr. Rajat as at 31.12.2024.

ParticularDebit (₹)Credit (₹)
Mr. Rajat’s Capital A/c1,04,028
Stock as on 01.01.202456,160
Sales4,67,520
Return inward10,320
Purchases3,86,040
Return outward6,960
Freight and carriage22,320
Rent and taxes6,840
Salaries and wages11,160
Sundry debtors28,800
Sundry creditors17,760
Bank loan at the rate 6% per annum24,000
Bank interest1080
Printing and advertising17,520
Miscellaneous income300
Cash at bank9,600
Discount earned5,028
Furniture and fitting6,000
Discount allowed2,160
General expenses13,740
Insurance1,560
Postage and telegram2,796
Cash in hand456
Travelling expenses1044
Drawings48,000
Input CGST3,600
Input SGST3,600
Output CGST2,400
Output SGST4,800
6,32,7966,32,796

These adjustment should be made:

  1. Included among the debtors is Rs. 3,600 due from Suresh, and included among the creditors is Rs. 1200 due to him.

  2. A provision for doubtful debts is to be created at 5%, and a discount on debtors at 2% on sundry debtors.

  3. Depreciation @ 10% on the Furniture & Fitting shall be written off.

  4. Mr. Rajat has withdrawn goods worth ₹720 during the year, which had been purchased with 5% SGST and 5% CGST.

  5. Interest on the Bank Loan shall be provided for the full year.

  6. A quarter of the printing & advertising amount is to be carried forward to the next year.

  7. A credit purchase invoice amounting to Rs. 480 had been omitted from the books.

  8. Stock on 31.12.2024 was Rs. 94,320

Prepare the Trading and P&L A/c for the year that ended 31.12.2024 and the Balance Sheet as on 31.12.2024.

Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

36 minfor 18 marks

Read from the question

  • Prepare … SheetProper formats (heading, date, both sides): post the plain items, then each adjustment, and balance last.

What the paper leaves open

  1. The amounts due from and to Suresh are set off to the smaller amount (₹1,200 in our version).
  2. The discount on debtors (2%) is provided on debtors after the provision for doubtful debts.
  3. The goods withdrawn are taken at cost, and the input CGST and SGST claimed on them are reversed and added to drawings.
  4. No GST is stated on the omitted credit purchase invoice, so it adds only to purchases and creditors.
  5. Bank interest already paid is part of the year's 6% charge; the rest is outstanding.

Write it in this order

Working notes first: they feed the statements.

  1. Read the data; tick every adjustment as you plan it 2 min
  2. 1 Adjustments (a)–(h) correctly applied 4 marks 7 min
  3. 2 GST netting input credit / payable 1 mark 2 min
  4. 3 Trading Account and gross profit 4 marks 7 min
  5. 4 Profit & Loss Account and net profit 5 marks 9 min
  6. 5 Balance Sheet balances 4 marks 7 min
  7. Check: every adjustment used, both sides agree, dates in 2 min

Final answer

Check your own figures against these.

Gross profit
₹94,200
Net profit
₹43,143.60
Balance-sheet total
₹1,41,015.60
balances

Try it first. About 36 minutes for 18 marks. Write it out, then open the solution and check your figures against the final answer.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Trading and Profit & Loss Account for the year ended 31 December 2024

Dr₹Cr₹
To Opening Stock56,160By Sales 4,67,520 − Return inward 10,3204,57,200
To Purchases (WN1)3,78,840By Closing Stock94,320
To Freight and carriage22,320
To Gross Profit c/d94,200
5,51,5205,51,520
To Salaries and wages11,160By Gross Profit b/d94,200
To Rent and taxes6,840By Miscellaneous income300
To Interest on bank loan (WN3)1,440By Discount earned5,028
To Printing & advertising (17,520 − ¼)13,140
To Discount allowed2,160
To General expenses13,740
To Insurance1,560
To Postage and telegram2,796
To Travelling expenses1,044
To Depreciation on furniture600
To Provision for doubtful debts (WN2)1,380
To Provision for discount on debtors (WN2)524.40
To Net Profit transferred to Capital43,143.60
99,52899,528
Dr₹
To Opening Stock56,160
To Purchases (WN1)3,78,840
To Freight and carriage22,320
To Gross Profit c/d94,200
5,51,520
To Salaries and wages11,160
To Rent and taxes6,840
To Interest on bank loan (WN3)1,440
To Printing & advertising (17,520 − ¼)13,140
To Discount allowed2,160
To General expenses13,740
To Insurance1,560
To Postage and telegram2,796
To Travelling expenses1,044
To Depreciation on furniture600
To Provision for doubtful debts (WN2)1,380
To Provision for discount on debtors (WN2)524.40
To Net Profit transferred to Capital43,143.60
99,528
Cr₹
By Sales 4,67,520 − Return inward 10,3204,57,200
By Closing Stock94,320
5,51,520
By Gross Profit b/d94,200
By Miscellaneous income300
By Discount earned5,028
99,528

Balance Sheet as on 31 December 2024

Liabilities₹Assets₹
Capital 1,04,028 + Net profit 43,143.60 − Drawings 48,792 (WN4)98,379.60Furniture & fitting 6,000 − Dep 6005,400
Sundry creditors (WN5)17,040Sundry debtors 27,600 − PDD 1,380 − Discount 524.4025,695.60
Bank loan24,000Closing stock94,320
Outstanding bank-loan interest360Cash at bank9,600
GST payable: SGST (WN6)1,236Cash in hand456
Prepaid printing & advertising4,380
GST receivable: CGST input credit (WN6)1,164
1,41,015.601,41,015.60

Result: Gross profit ₹94,200 · Net profit ₹43,143.60 · Balance-sheet total ₹1,41,015.60 (balances).

Working notes

Working notes
  • WN1: Net purchases. 3,86,040 − return outward 6,960 − goods withdrawn 720 + omitted invoice 480 = ₹3,78,840.
  • WN2: Debtors, PDD and discount. After the mutual set-off (a) of the smaller amount, ₹1,200, debtors = 28,800 − 1,200 = 27,600. PDD = 5% × 27,600 = 1,380. Provision for discount on debtors = 2% × (27,600 − 1,380) = 524.40. Net debtors carried = 27,600 − 1,380 − 524.40 = 25,695.60.
  • WN3: Bank-loan interest. 6% × 24,000 = 1,440 for the year; 1,080 already paid, so 360 outstanding; the full 1,440 is charged in the P&L. The outstanding amount, and the prepaid printing below, are brought in by adjusting entries (expense Dr, To Expenses Outstanding A/c; Expenses Prepaid A/c Dr, To expense) and the balances are carried forward, as in the DU text's worked example.
  • WN4: Drawings. Cash drawings 48,000 + goods withdrawn 720 + input GST reversed (5% + 5% of 720 = 72) = ₹48,792 deducted from capital. The goods withdrawal also reduces purchases by 720 and input CGST and SGST by 36 each.
  • WN5: Creditors. 17,760 − mutual set-off 1,200 + omitted invoice 480 = ₹17,040.
  • WN6: GST. After reversing the drawings input GST, input CGST = input SGST = 3,564. CGST: input 3,564 − output 2,400 = 1,164 input credit (asset). SGST: output 4,800 − input 3,564 = 1,236 payable (liability).

Where the 18 marks sit

#ComponentMarks
1Trading Account and gross profit4
2Profit & Loss Account and net profit5
3Balance Sheet (balances)4
4Adjustments (a)–(h) correctly applied4
5GST netting (input credit / payable)1
Total18
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