Professional Documents
Culture Documents
Mr. NarainShanker of Delhi won ` 30,00,000 after the payment of tax from a money
Out of the net amount received after tax, he donated ` 15,00,000 to a charitable
institutionbeing run for the welfare of old people and orphans as per the wish of his mother.
In addition, hespent ` 2,50,000 on his daughter‟s marriage. The remaining amount of`
12,50,000 was investedin his own newly started business of manufacturing Superior quality
“Electronic Toys” on 1.1.2017.
Mr. Narain deposited ` 10 Lakh in PNB in the firm‟s name and remaining amount
was
He hired a premise for which he paid a rent of ` 15,000 per month. The factory and
shopoccupied the ground floor and he used the upper story for residential purpose. Wages,
runningexpenses of van and petty expenses are to be paid in cash while all other payments
and expenseare to be made through bank.
One fourth of all expenditure on rent, electricity and insurance was attributed to
residentialportion and the balance for business purpose.
He also purchased a delivery van on 1.1.2017 for `2,50,000. The estimated useful life
ofthe van is 10 years with an anticipated residual value of `30,000. The monthly running
expensesof the van is ` 1,000. The delivery van was used to the extent of 2/5 for delivering
goods tocustomers and 3/5 for collecting raw materials from suppliers. Mr. Narain Shankar
use his privatetelephone for business call but has paid the total bill from the business bank
account. He estimatesthat the business calls account for 4/5th of the total charge. The total
charge amounted to ` 25,550.
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Installation charges amounted to `15,000 on the above machinery were wrongly
includedin wages.
Following figures are extracted from his books at the end of the first year 2017.
Total sales during the year amounted to 2,000 Toys sold @ ` 460 each. One-fourth of
thetotal sales are on credit and balance for cash. Out of the total cash sales 3/5th of the
receipts wererealized by cheques.
`
Wages (inclusive of installation charges to toy machine) 18,000
Advertisement 20,750
Insurance 20,000
Rent 1,80,000
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Discount received from suppliers during the year amounted to`15,500.
a) Amount due from credit customers was `50,000 including `2,000 recovered from
acustomer who already had returned the goods and this amount was to be adjusted
againstsubsequent purchases by customers.
c) Closing stock valued at ` 2,35,800. This includes goods costing that are
worthlessbecause of some technical defects in them.
e) Closing stock also includes stock‟ of finished goods along with stock of raw materials.
a) - Cash received during the year from debtors assuring that they pay only through
cheque.
- Credit purchases of raw materials.
- Bank Balance at the end of the year 2017.
- Cash in hand at the end of the year 2017.
- Drawings made during the year and also prepare a Trial Balance.
b) Prepare financial statement of Mr. Narain for the year ending 2017.
c) Calculate the relevant ratios so to ascertain whether Mr. Narain Shankar‟s business
hasbeen well managed and also whether it has been efficiently managed in terms of
profitability.
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SOLUTION
CASH BOOK
Working Notes :
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2/5 th of the cash sales is received in cash i.e. 2/5 x ` 6,75,000 = ` 2,70,000
Sales collected through cheque = ` 6,75,000 - ` 2,70,000 = ` 4,05,000
Debtors A/c
Dr. Cr.
Particulars ` Particulars `
2,25,000 2,25,000
To Balance c/d
48,000
Note : Returns include ` 2000/- which have also been deducted from ` 50,000.
Creditors A/c
Dr. Cr.
Particulars ` Particulars `
4,20,500 4,20,500
1,30,000
By Balance b/d
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(ii) Total purchase = Cash purchases + Credit purchases
= `2,36,000 + `4,20,500 = `6,56,500
(iii) Depreciation on „Delivery Van‟ = =
2,50,000−30,000 2,20,000
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(vii) Value of closing stock after including the cost of goods sent on approval basis and
excluding the defective goods will be `2,42,200
(i.e. `2,35,800 + 7,500 – 1100)
= 2,30,000
= ¼ x `2,30,000 = `57,500
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Rent , Electricity and Insurance used for business purpose
=`2,30,000 - `57,500
=`1,72,500
=`5,110
Depreciation = `22,000
`34,000
th
Carriage outward = 2/5 x `34,000 = `13,600
Total `34,000
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TRIAL BALANCE
As on 31.12.2017
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TRADING A/C
For the year ended 31.12.2017
Dr. Cr.
Particulars ` Particulars `
To Purchase A/c 6,56,500 By Sales A/c 9,00,000
Less: Purchases Less: Sales Returns A/c (11,000)
Returns A/c 45,000 6,11,500 Less : Sales on
To Wages A/c(18,000-15,000) 3,000 Approval Basis (10,000) 8,79,000
To Expenses on Delivery Van A/c 20,400 By Closing Stock A/c 2,42,200
(Carriage inward)
To Gross Profit transferred to P and L 4,86,300
A/c
11,21,200 11,21,200
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PROFIT AND LOSS A/C
For the year ended 31.12.2017
Dr. Cr.
Particulars ` Particulars `
To Advertisement Expenses A/c 20,750 By Gross Profit 4,86,300
To Petty Expenses A/c 15,000 By Interest from PNB A/c 75,000
To General Expenses A/c 23,250 By Discount Received A/c 15,500
To, Rent, Electricity and Insurance
(3/4) of `2,30,000 A/c 1,72,500
To Depreciation on Delivery Van and
Running Expenses A/c 13,600
To Telephone Expenses A/c 20,440
To Discount Allowed A/c 23,500
To Salary A/c 72,000
To Bad Debts A/c 12,500
To Dep. On Toy Machine A/c 19,000
To Net Profit 1,84,260
5,76,800 5,76,800
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BALANCE SHEET
As on 31 December 2017
Liabilities ` Assets `
Creditors 1,30,000 Cash in hand 4,75,000
Cash at Bank 2,97,000
Capital 12,50,000 Debtors*(See working note given
below) 38,000
Less : Drawings:
a) Telephone 5,110 Delivery Van
b) Rent, Electricity (Working Note-VI) 2,28,000
Insurance Furniture 25,450
Premium + 57,50062,610 To machine
11,87,390 (Working Note-viii) 1,96,000
+ Net Profit + 1,84,260 13,71,650 Stock(See Working Note-IX) 2,42,200
15,01,650 15,01,650
(C) Following ratios are calculated so as to ascertain the profitability of Mr. Narain’s
business 100
= 55.32%
X 100
b) Net Profit Ratio =
1,84,260 X 100
= 8,79,000
= 21.02%
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c) Return on Capital Employed :
X 100= 1,84,260 X 100 = 13.43%
13,71,650
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COMMENT ON THE PROFITABILITY POSITION :
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CONCLUSION
Through the Cash Book I know the methods and techniques of recovering cash
transaction bitterly.
And also I know how to entry in Journal, Posting in Ledger & Preparation of Final
Account.
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BIBLIOGRAPHY
Kalyani Publishers
C. Mohan Juneja
J.S. Arora
R.C. Chowla
P.C.Sahoo
www.kalyanipublishers.co.in
V.K. Publisher
A.K. Jain
Vareen Jain
www.google.com
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