omtex.co.in : Nana and Nani Practise Problem | Q: 8 | Page no. 60 Chapter 1: Introduction to Partnership and Partnership Final Accounts

Chapter 1: Introduction to Partnership and Partnership Final Accounts

Practise Problem | Q: 8 | Page no. 60

Nana and Nani are Partners in Partnership Firm sharing Profits and Losses equally. You are required to give effects of Adjustments in Profit & Loss A/c and Balance Sheet with the help of the following information.

Trial Balance as on 31st March 2019

Debit Balance	Amount ₹	Credit Balance	Amount ₹
Insurance	15,000	Capital A/c
Land and building	50,000	Nana	50,000
(Addition of 20,000 w.e.f 1st July 2018)		Nani	50,000
Salaries	5,000	10% Bank loan taken on 1st Oct. 2018	30,000
Export Duty	2,500	Interest	1,500
Interest	1,000	Bills Payable	8,000
Furniture	40,000
Debtors	26,000
	1,39,500		1,39,500

Adjustments :

1) Gross profit amounted to ₹ 34,500.

2) Insurance Paid for 15 months w.e.f. 1.4.2018.

3) Depreciate Land and Building at 10% p.a. and Furniture at 5% p.a.

4) Write off ₹ 1,000 for Bad Debts and maintain R.D.D at 5% on Sundry Debtors.

5) Closing Stock is valued at ₹34,500.

Solution:

In the books of Nana and Nani Profit and Loss Account for the year ended on 31st March 2019

Particulars	Amount ₹	Amount ₹	Particulars	Amount ₹	Amount ₹
To Insurance	15,000		By Gross Profit b/d		34,500
Less: Prepaid Insurance	3,000	12,000	By Interest		1,500
To Depreciation
Land & Building	4,500
Furniture	2,000	6,500
To Salaries		5,000
To Export Duty		2,500
To Interest		1,000
To O/s Interest on Bank Loan		1,500
To R.B.D.D A/c
New Bad debts	1,000
Add: New Reserve	1,250	2,250
To Net Profit (Transferred to Capital A/c)
Nana	2,625
Nani	2,625	5,250

		36,000			36,000

Balance Sheet as on 31st March 2019

Liabilities	Amount ₹	Amount ₹	Assets	Amount ₹	Amount ₹
Capital Account: Nana	50,000	52,625	Land and Building	30,000
Opening Balance	2,625		Add: Purchased on 1/07/18	20,000
Capital Account: Nani				50,000
Opening Balance	50,000		Less: Depreciation	4,500	45,500
Add: Net Profit	2,625	52,625	Furniture	40,000
10 % Bank Loan	30,000		Less: Depreciation	2,000	38,000
Add: O/s Interest on Bank Loan	1,500		Debtors	26,000
Bills Payable			Less: Bad Debts (New)	1,000
				25,000
			Less : R.D.D. (New) @ 5%	1,250	23,750
			Closing Stock		34,500
			Prepaid Insurance		3.000

		1,44,750			1,44,750

Working Notes:

(1) Here, Profit and Loss Account and Balance Sheet are to be prepared. Therefore, the Trading Account is not prepared. Gross profit (given) is recorded on the Credit side of Profit and Loss Account.

(2) Land and Building:

Opening Balance = ₹ 30000	Addition on 1st July 2018 = ₹ 20000
Depreciation = 30000 x 10% = ₹ 3000	Depreciation = 20000 x 10% x 9 months (9/12) = ₹ 1500

Total Depreciation = ₹ 3000 + ₹ 1500 = ₹ 4500

(3) Interest on a 10% bank loan is calculated for 6 months. (From 1/10/2018 to 31/3/2019)

Interest = (PNR/100) = ₹ 30000 x 10% x 6months (6/12) = ₹ 1500

(4) Prepaid Insurance = (3/15) x Insurance Amount = (3/15) x ₹ 15000 = ₹ 3000

(5) RDD = 5% on (Debtors – New Bad debts) = (5/100) x (₹ 26000 - ₹ 1000) = (5/100) x ₹ 25000 = ₹ 1250.

Balbharati Solutions for Book-keeping and Accountancy 12th Standard Hsc Maharashtra State Board.

Chapter 1: Introduction to Partnership and Partnership Final Accounts

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