Spread Knowledge

MGT101 - Financial Accounting - I - Lecture Handout 34

User Rating:  / 0
PoorBest 

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