PROBLEM 4 From the following trial balance and information, prepare Trading and Profit and Loss Account of Mr Rishabh for the year ended 31st March, 2018 and a Balance Sheet as on that date: Particulars Debit Credit Balance Balance Capital & Drawings Land and Buildings Plant and Machinery Furniture Sales & Return Inward Debtors & Creditors Loan from Gajanand on 1.7.2017 @ 6% p.a. Purchases & Return Outward Carriage Sundry Expenses 12,000 1,00,000 90,000 20,000 5,000 5,000 1,40,000 18,400 12,000 30,000 80,000 4,000 10,000 600 Printing and Stationery 500 Insurance Expenses 1,000 Provision for Doubtful Debts Provision for Discount on Debtors Bad Debts Profit of Textile Deptt. 1,000 380 400 10,000 Stock of General Goods on 1.4.2017 21,300 Salaries and Wages Trade Expenses 18,500 800 Stock of Textile Goods on 31.3.2018 8,000 Cash & Bank 5,880 2,97,380 2,97,380 Information: (a) Stock of General goods on 31.3.2018 valued at 27,300. (b) Fire occurred on 23rd March, 2018 and 10,000 worth of general goods were destroyed. The Insurance Company accepted claim for 6,000 only and paid the claim money on 10th April, 2018. (c) Bad Debts amounting to 400 are to be written off. Provision for Bad and Doubtful debts is to be made at 5% and for discount at 2% on debtors. (d) Received 6,000 worth of goods on 27th March, 2018 but the invoice of purcha in Purchases Book. was not recorded (e) Rishabh took away goods worth 2,000 for personal use but no record was made thereof. (0 Charge depreciation at 2% on Land and Buildings, 20% on Plant and Machinery, and 5% on Furniture. (R) . Insurance prepaid amounts to' 200. PABI
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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