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

From the trial balance and the additional information of M/s. Vikrant & Sons. given below, prepare the Trading and Profit and Loss Account for the year that ended 31st March, 2024 and the Balance Sheet as at the same date:

ParticularsL.FDr. (Rs.)Cr. (Rs.)
Opening Stock3,84,000-----
Purchases and Sales26,40,00046,80,000
Debtors and Creditors6,67,6803,60,000
Wages1,68,000-----
Factory and Lighting36,000-----
Power and Fuel48,000-----
Income Tax84,000-----
Salaries2,64,000-----
Life Insurance fees24,000-----
Bills Receivable and Bills Payables96,00036,000
Plant and Machinery6,00,000-----
Furniture (Including furniture of Rs. 1,20,000 purchased on Oct 1, 2023)6,00,000-----
10% Investment (Invested on April 1, 2023)1,44,000-----
Interest on investment-----9,600
Rent1,44,000-----
General Expenses60,000-----
Bad Debts24,000
Commission received14,400
Rent Outstanding24,000
Cash in Hand40,320
Cash at Bank84,000
Capital11,04,000
Input CGST2,42,400
Input SGST2,42,400
Input IGST1,15,200
Output CGST1,44,000
Output SGST1,44,000
Output IGST1,92,000
Total67,08,00067,08,000

Additional Information:

  1. Closing stock valued at Rs. 6,00,000 as at 31st March 2024.

  2. Goods worth Rs. 24,000 plus IGST @ 18% were sold on credit to Rohit and dispatched on 28th March, 2024, but this transaction was not entered.

  3. Goods costing Rs. 36,000 plus IGST@ 18% were purchased on credit from Sushant and included in stock, but no entry was made to record it.

  4. Salaries outstanding on 31st March, 2024 came to Rs. 24,000.

  5. Write off further bad debts Rs. 12,000.

  6. Make a provision for doubtful debt @ 5% on debtors

  7. Provide 2% on debtors as a provision for discount on debtors.

  8. Of the commission received in the year, one third relates to the next accounting period.

  9. Machinery is to be depreciated @ 10% p.a. and furniture @15% p.a., on the WDV basis.

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

What the paper leaves open

  1. Income tax and life insurance fees are the proprietor's personal payments and are treated as drawings.
  2. The unrecorded credit sale and credit purchase are brought in with their IGST, and the input tax credit is set off against the output tax.
  3. Depreciation on the furniture bought on 1 October is charged for six months.
  4. The provision for discount is calculated on the debtors left after the provision for doubtful debts.
  5. Interest on the 10% investment, held from April 1, 2023, is for the full year; the part not received is shown as accrued.
  6. The GST balances are set off head by head: input IGST first against output IGST, and any shortfall from the input CGST and SGST credits; the unused credit is carried forward.

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 GST set-off and drawings 3 marks 5 min
  3. 2 Trading Account, with the unrecorded sale and purchase 4 marks 7 min
  4. 3 Profit and Loss Account, with every adjustment 6 marks 11 min
  5. 4 Balance Sheet 5 marks 9 min
  6. Check: every adjustment used, both sides agree, dates in 2 min

Final answer

Check your own figures against these.

Gross profit
₹19,92,000
Net profit
₹12,99,804
Balance sheet total
₹27,87,084

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 and Loss Account for the year that ended 31st March, 2024

Dr₹Cr₹
To Opening Stock3,84,000By Sales (46,80,000 + unrecorded credit sale 24,000)47,04,000
To Purchases (26,40,000 + unrecorded credit purchase 36,000)26,76,000By Closing Stock6,00,000
To Wages1,68,000
To Factory and Lighting36,000
To Power and Fuel48,000
To Gross Profit c/d19,92,000
53,04,00053,04,000
To Salaries (2,64,000 + outstanding 24,000)2,88,000By Gross Profit b/d19,92,000
To Rent1,44,000By Commission received (14,400 − one-third in advance 4,800)9,600
To General Expenses60,000By Interest on investment (9,600 + accrued 4,800)14,400
To Bad Debts (24,000 + further 12,000)36,000
To Provision for doubtful debts (5% of 6,84,000)34,200
To Provision for discount on debtors (2% of 6,49,800)12,996
To Depreciation on Plant and Machinery (10%)60,000
To Depreciation on Furniture (72,000 + 9,000)81,000
To Net Profit → Capital12,99,804
20,16,00020,16,000
Dr₹
To Opening Stock3,84,000
To Purchases (26,40,000 + unrecorded credit purchase 36,000)26,76,000
To Wages1,68,000
To Factory and Lighting36,000
To Power and Fuel48,000
To Gross Profit c/d19,92,000
53,04,000
To Salaries (2,64,000 + outstanding 24,000)2,88,000
To Rent1,44,000
To General Expenses60,000
To Bad Debts (24,000 + further 12,000)36,000
To Provision for doubtful debts (5% of 6,84,000)34,200
To Provision for discount on debtors (2% of 6,49,800)12,996
To Depreciation on Plant and Machinery (10%)60,000
To Depreciation on Furniture (72,000 + 9,000)81,000
To Net Profit → Capital12,99,804
20,16,000
Cr₹
By Sales (46,80,000 + unrecorded credit sale 24,000)47,04,000
By Closing Stock6,00,000
53,04,000
By Gross Profit b/d19,92,000
By Commission received (14,400 − one-third in advance 4,800)9,600
By Interest on investment (9,600 + accrued 4,800)14,400
20,16,000

Balance Sheet as at 31st March, 2024

5 marks
Liabilities₹Assets₹
Capital (11,04,000 + net profit 12,99,804 − drawings 1,08,000)22,95,804Cash in Hand40,320
Creditors (3,60,000 + Sushant 42,480)4,02,480Cash at Bank84,000
Bills Payable36,000Debtors 6,84,000 less provisions 34,200 and 12,9966,36,804
Rent Outstanding24,000Bills Receivable96,000
Salaries Outstanding24,000Closing Stock6,00,000
Commission received in advance4,800Plant and Machinery (6,00,000 − 60,000)5,40,000
Furniture (6,00,000 − 81,000)5,19,000
10% Investment1,44,000
Interest accrued on investment4,800
GST input credit carried forward (CGST 23,760 + SGST 98,400)1,22,160
27,87,08427,87,084

Working notes

Working notes
  1. Unrecorded transactions. Sale to Rohit: sales +24,000, output IGST +4,320, debtors +28,320 (the goods were dispatched, so they are not in the closing stock). Purchase from Sushant: purchases +36,000, input IGST +6,480, creditors +42,480 (the goods are already in the closing stock).
  2. Debtors. 6,67,680 + 28,320 − further bad debts 12,000 = 6,84,000. Provision for doubtful debts 5% = 34,200; provision for discount 2% of (6,84,000 − 34,200) = 12,996. A provision is kept for debts that may not be recovered.
  3. Outstanding and advance items. Salaries unpaid for the year are an expense and a liability; one-third of the commission (4,800) is income received in advance, a liability.
  4. Interest accrued. The 10% investment of 1,44,000, held all year, earns 14,400; 9,600 is received, so 4,800 is accrued: Accrued Interest A/c Dr, To Interest A/c.
  5. Depreciation. Plant 10% of 6,00,000 = 60,000. Furniture: old 4,80,000 × 15% = 72,000; new 1,20,000 × 15% × 6/12 = 9,000.
  6. Drawings. Income tax 84,000 and life insurance 24,000 are the proprietor's personal payments: drawings 1,08,000.
  7. GST set-off. Output: CGST 1,44,000, SGST 1,44,000, IGST 1,92,000 + 4,320 = 1,96,320. Input: CGST 2,42,400, SGST 2,42,400, IGST 1,15,200 + 6,480 = 1,21,680. IGST credit first: 1,96,320 − 1,21,680 = 74,640 still due, paid from the CGST credit left after CGST (98,400), leaving CGST credit 23,760. SGST credit after SGST: 98,400. No GST is payable; credit carried forward 23,760 + 98,400 = ₹1,22,160.

Result: gross profit ₹19,92,000; net profit ₹12,99,804; balance sheet total ₹27,87,084.

Where the 18 marks sit

#ComponentMarks
1Trading Account, with the unrecorded sale and purchase4
2Profit and Loss Account, with every adjustment6
3Balance Sheet5
4GST set-off and drawings3
Total18
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