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FINANCIAL STATEMENTS OF PARTNERSHIP

Example # 1

The following trial balance was extracted from A, B & Co. books on June 30, 2002.

A B & company
Trial balance As on June 30, 2002
Particulars	Amount Dr. (Rs.)	Amount Cr. (Rs.)
Building Cost	750,000
Furniture and Fixtures Cost	110,000
Accumulated Dep. Building		250,000
Accumulated Dep. Furniture		33,000
Debtors	162,430
Creditors		111,500
Cash at Bank	6,770
Stock on Jun 30, 2002	563,400
Sales		1,236,500
Cost of goods Sold	710,550
Carriage outward	12,880
Discounts Allowed	1,150
Markup on Bank Loan	40,000
Office Expenses	24,160
Salaries and Wages	189,170
Bad Debts	5,030
Provision for Bad Debts		4,000
Bank Loan (Long Term)		400,000
Capital – A		350,000
B		295,000
Current Account – A		13,060
B		2,980
Drawings – A	64,000
B	56,500
Total	2,696,040	2,696,040

Notes:

• Expenses to be accrued, Office Expenses Rs. 960, Wages Rs.2,000.
• Depreciate Fixtures 10% and Building 5% on straight line.
• Reduce provision for doubtful debts to Rs. 3,200
• Partnership salary of A Rs. 8,000 is to be accrued.
• A and B share profit and loss equally.

You are required to prepare profit & loss account and the balance sheet as at June 30, 2002.

Solution

Profit & Loss Account

A, B, & Co
Profit and Loss Account For the Year Ending June 30, 20-_____
Particulars	Note	Amount Rs.	Amount Rs.
Sales Less: Cost of Goods Sold (material consumed)			1,236,500 (710,550)
Gross Profit Less: Expenses Wages and Salaries Office Expenses Carriage Out Discount Allowed Markup on Loan Provision for Doubtful Debt Depreciation	1 2 3 4	191,170 25,120 12,880 1,150 40,000 4,230 48,500	525,950       (323,050)
Net Profit			202,900

In above solution, bad debts are grouped with provision for doubtful debts. In the following solution, bad debts and provision for doubtful debts are shown separately.

A, B, & Co
Profit and Loss Account For the Year Ending June 30, 20-_______
Particulars	Note	Amount Rs.	Amount Rs.
Sales Less: Cost of Goods Sold (material consumed)			1,236,500 (710,550)
Gross Profit Less: Expenses Wages and Salaries Office Expenses Carriage Out Discount Allowed Markup on Loan 0Bad Debts Provision for Doubtful Debts not required Depreciation	1 2   3 4	191,170 25,120 12,880 1,150 40,000 5,030 (800) 48,500	525,950       (323,050)
Net Profit			202,900

Profit & Loss Appropriation Account

A, B, & Co
Profit Distribution Account
Particulars	Note	Amount Rs.	Amount Rs.
Net Profit Less: Partner’s Salary – A			202,900 (8,000)
Distributable Profit Less: Partner’s Share in Profit A (50% of 194,900) B (50% of 194,900)		97,450 97,450	194,900     194,900)
Net Profit			202,900

Balance Sheet

A, B, & Co
Balance Sheet As At June 30, 2002
Particulars	Note	Amount Rs.	Amount Rs.
Fixed Assets at WDV Current Assets Current Liabilities	4 5 6		528,500 729,400 (114,460)
Working Capital			614,940
Total			1,143,440
Financed By: Capital – A B		350,000 295,000	645,000
Current Account – A B	7 8	54,510 43,930	98,440
Long Term Loan			400,000
Total			1,143,440

Notes to the Accounts:

Note # 1 Salaries account

Salaries Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Salaries paid Salaries payable	189,170 2,000	Balance b/d	191,170
Total	191,170	Total	191,170

Note # 2 Office Expenses

Office Expenses Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Salaries paid Salaries payable	24,160 960	Balance b/d	25,120
Total	25,120	Total	25,120

Note # 3 Provisions for Doubtful Debts

Provision for Doubtful Debts Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Bad Debts Balance c/d	5,030 3,200	Opening Balance Transfer to Profit & Loss Account	4,000 4,230
Total	8,230	Total	8,230

Note # 3(a) Provision for Doubtful Debts

Provision for Doubtful Debts Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Provision not required Balance c/d	800 3,200	Opening Balance	4,000
Total	4,000	Total	4,000

Note # 4 Fixes Assets at WDV

	Cost	Rate	Opening	For the Yr.	Closing	WDV
Building	750,000	5%	250,000	37,500	287,500	462,500
Furniture	110,000	10%	33,000	11,000	44,000	66,000
				48,500		528,500

Note # 5 Current Assets

Stocks

563,400 Debtors 162,430 Less: Provision (note3) 3,200
159,230 Bank 6,770 Total 729,400

Note # 6 Current Liabilities

Creditors

6,770 Exp. Payable:
Salaries 2,000 Off. Exp 2,960 Total 114,460

Note # 7 A’s Current Account

A’s Current Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Drawings Balance c/d	64,000 54,510	Opening Balance Profit for the year Salary	13,060 97,450 8,000
Total	118,510	Total	118,510

Note # 8 B’s Current Account

B’s Current Account Account Code ---------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Drawings Balance c/d	56,500 43,930	Opening Balance Profit for the year	2,980 97,450
Total	100,430	Total	100,430

Example # 2

Atif, Amir and Babar are partners in a firm. They share profit and losses in the ratio 5: 3: 2 respectively. Their trial balance as on June 30, 2002 is as follows:

Atif, Amir, Babar & company
Trial balance As on June 30, 2002
Particulars	Amount Dr. (Rs.)	Amount Cr. (Rs.)
Sales		210,500
Returns inward	6,800
Purchases	137,190
Carriage inward	1,500
Opening stock	42,850
Discount allowed	110
Salaries and Wages	18,296
Bad debts	1,234
Provision for bad debts		800
General expenses	945
Rent and rates	2,565
Postages	2,450
Motor expenses	3,940
Motor van at cost	12,500
Office equipment at cost	8,400
Accumulated depreciation Motor van		4,200
Accumulated depreciation Office equipment		2,700
Creditors		24,356
Debtors	37,178
Cash at bank	666
Drawings: Atif	12,610
Amir	8,417
Babar	6,216
Current accounts: Atif		1,390
Amir	153
Babar		2,074
Capital accounts: Atif		30,000
Amir		16,000
Babar		12,000
Total	304,020	304,020

The following notes are relevant to June 30, 2002

• Stock on June 30,2002 is Rs. 51,060.
• Rent in advance Rs. 120.
• Increase provision for bad debts to Rs. 870.
• Salaries: Amir Rs.1,200, Babar Rs. 700.
• Interest on capital @ 10%.
• Depreciate Motor van Rs. 2,500 and office equipment Rs. 1,680.

You are required to draw up a set of final accounts as on June 30, 2002.

Solution

Profit & Loss Account

Atif, Amir, Babar & company
Profit and Loss Account For the Year Ending June 30, 20-2
Particulars	Note	Amount Rs.	Amount Rs.
Sales Less: Cost of Goods Sold	1 2		203,700 (130,480)
Gross Profit Less: Expenses Wages and Salaries General Expenses Rent and Rates 3 Postages Motor Expenses Discount Allowed Provision for Doubtful Debt 4 Depreciation	3   4 5	18,296 945 2,445 2,450 3,940 110 1,304 4,180	73,220       (33,670)
Net Profit			39,550

Profit & Loss Appropriate Account

Atif, Amir, Babar & company
Profit Distribution Account
Particulars	Note	Amount Rs.	Amount Rs.
Net Profit Less: Partner’s Salary – Amir Babar Less: Interest on capital – Atif (10% of 30,000) Amir (10% of 16,000) Babar (10% of 12,000)			39,550 (1,200) (700) (3,000) (1,600) (1,200)
Distributable Profit Less: Partner’s Share in Profit Atif (5/10 of 31,850) Amir (3/10 of 31,850) Babar (2/10 of 31,850)		15,925 9,555 6,370	(31,850)
			0

Balance Sheet

Atif, Amir, Babar & company
Balance Sheet As At June 30, 2002
Particulars	Note	Amount Rs.	Amount Rs.
Fixed Assets at WDV Current Assets Current Liabilities	5 6 7		9,820 88,154 (24,356)
Working Capital			63,798
Total			73,618
Financed By: Capital – Atif Amir Babar		30,000 16,000 12,000	58,000
Current Account – Atif Amir Babar	8 9 10	7,705 3,785 4,128	15,618
Total			73,618

Notes to the Accounts

Note # 1 Sales

Sales

210,500 Less: Return inward (6,800) Net Sales 203,700

Note # 2 Cost of goods sold

Opening Stock

42,850 Add: Purchases 137,190 Add: Carriage inward 1,500 Less: Closing Stock ( (51,060) 130,480

Note # 3 Rent and Rates

Rent and Rates Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Office Expenses paid	2,565	Advance Rent Balance b/d	120 2,445
Total	2,565	Total	2,565

Note # 4 Provisions for Doubtful Debts

Provision for Doubtful Debts Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Bad Debts Balance c/d	1,234 870	Opening Balance Transfer to Profit & Loss Account	800 1,304
Total	2,104	Total	2,104

Note # 5 Fixed Assets at WDV

	Cost	Opening	For the Yr.	Closing	WDV
Motor Van	12,500	4,200	2,500	6,700	5,800
Office Equipment	8,400	2,700	1,680	4,380	4,020
			4,180		9,820

Note # 6 Current Assets

Stock

51,060 Debtors 37,178 Less: Provision for doubtful debts (870) Cash at bank 666 Advance rent 120 88,154

Note # 7 Current Liabilities

Creditors

24,356

Note # 8 Atif’s Current Account

Atif’s Current Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Drawings Balance c/d	12,610 7,705	Opening Balance Interest on Capital Profit for the year	1,390 3,000 15,925
Total	20,315	Total	20,315

Note # 9 Amir’s Current Account

Amir’s Current Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Opening Balance Drawings Balance c/d	153 8,417 3,785	Salary Interest on Capital Profit for the year	1,200 1,600 9,555
Total	12,355	Total	12,355

NOTE # 10 Babar’s Current Account

Babar’s Current Account Account Code --------
Particulars	Amount Dr. (Rs.)	Particulars	Amount Cr. (Rs.)
Drawings Balance c/d	6,216 4,128	Opening Balance Salary Interest on Capital Profit for the year	2,074 700 1,200 6,370
Total	10,344	Total	10,344

Related Content: MGT101 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Financial Accounting

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