ZeePedia

Financial Statements of Partnership firms

<< Financial Statements Of Manufacturing Concern
INTEREST ON CAPITAL AND DRAWINGS >>
img
Financial Accounting (Mgt-101)
VU
Lesson-34
Financial Statements of Partnership firms
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
Amount
Dr. (Rs.)
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.
.
225
img
Financial Accounting (Mgt-101)
VU
SOLUTION
PROFIT & LOSS ACCOUNT
A, B, & Co
Profit and Loss Account for the Year Ending June 30, 20-2
Particulars
Note
Amount Rs. Amount Rs
Sales
1,236,500
Less: Cost of Goods Sold (material consumed)
(710,550)
Gross Profit
525,950
Less: Expenses
Wages and Salaries
1
191,170
Office Expenses
2
25,120
Carriage Out
12,880
Discount Allowed
1,150
Markup on Loan
40,000
Provision for Doubtful Debt
3
4,230
Depreciation
4
48,500
(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, 20-2
Particulars
Note
Amount Rs. Amount Rs.
Sales
1,236,500
Less: Cost of Goods Sold (material consumed)
(710,550)
Gross Profit
525,950
Less: Expenses
Wages and Salaries
1
191,170
Office Expenses
2
25,120
Carriage Out
12,880
Discount Allowed
1,150
Markup on Loan
40,000
0Bad Debts
5,030
Provision for Doubtful Debts not required
3(a)
(800)
Depreciation
4
48,500
(323,050)
Net Profit
202,900
PROFIT & LOSS APPROPRIATION ACCOUNT
226
img
Financial Accounting (Mgt-101)
VU
A, B, & Co
Profit Distribution Account
Particulars
Note
Amount Rs. Amount Rs.
Net Profit
202,900
Less: Partner's Salary ­ A
(8,000)
Distributable Profit
194,900
Less: Partner's Share in Profit
A (50% of 194,900)
97,450
B (50% of 194,900)
97,450
(194,900)
0
BALANCE SHEET
A, B, & Co
Balance Sheet As At June 30, 2002
Particulars
Note
Amount Rs. Amount Rs.
Fixed Assets at WDV
4
528,500
Current Assets
5
729,400
Current Liabilities
6
(114,460)
Working Capital
614,940
Total
1,143,440
Financed By:
Capital ­ A
350,000
B
295,000
645,000
Current Account ­ A
7
54,510
B
8
43,930
98,440
Long Term Loan
400,000
Total
1,143,440
227
img
Financial Accounting (Mgt-101)
VU
NOTES TO THE ACCOUNTS:
NOTE # 1
Salaries
Salaries Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Salaries paid
189,170
Salaries payable
2,000
Balance b/d
191,170
Total
191,170 Total
191,170
NOTE # 2
Office Expenses
Office Expenses Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Office Expenses paid
24,160
Office Expenses payable
960
25,120
Balance b/d
Total
25,120 Total
25,120
NOTE # 3
Provision for Doubtful Debts
Provision for Doubtful Debts Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Bad Debts
5,030 Opening Balance
4,000
Balance c/d
3,200
Transfer to Profit & Loss
Account
4,230
Total
8,230 Total
8,230
NOTE # 3(a) Provision for Doubtful Debts
Provision for Doubtful Debts Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Provision not required
800 Opening Balance
4,000
Balance c/d
3,200
Total
4,000 Total
4,000
NOTE # 4
Fixes Assets at WDV
228
img
Financial Accounting (Mgt-101)
VU
Acc. Dep.
WDV
Cost
Rate  Opening For the Yr. Closing
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
159,230
Less: Provision (note3)
3,200
Bank
6,770
Total
729,400
NOTE # 6
Current Liabilities
Creditors
111,500
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
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Drawings
64,000 Opening Balance
13,060
Profit for the year
97,450
Salary
8,000
Balance c/d
54,510
Total
118,510 Total
118,510
NOTE # 8
B's Current Account
B's Current Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Drawings
56,500 Opening Balance
2,980
Profit for the year
97,450
Balance c/d
43,930
Total
100,430 Total
100,430
229
img
Financial Accounting (Mgt-101)
VU
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
Amount
Dr. (Rs.)
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
230
img
Financial Accounting (Mgt-101)
VU
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
1
203,700
Less: Cost of Goods Sold
2
(130,480)
Gross Profit
73,220
Less: Expenses
Wages and Salaries
18,296
General Expenses
945
Rent and Rates
3
2,445
Postages
2,450
Motor Expenses
3,940
Discount Allowed
110
Provision for Doubtful Debt
4
1,304
Depreciation
5
4,180
(33,670)
Net Profit
39,550
231
img
Financial Accounting (Mgt-101)
VU
PROFIT & LOSS APPROPRIATION ACCOUNT
Atif, Amir, Babar & company
Profit Distribution Account
Particulars
Note
Amount Rs. Amount Rs.
Net Profit
39,550
Less: Partner's Salary ­ Amir
(1,200)
Babar
(700)
Less: Interest on capital ­ Atif (10% of 30,000)
(3,000)
Amir (10% of 16,000)
(1,600)
Babar (10% of 12,000)
(1,200)
Distributable Profit
31,850
Less: Partner's Share in Profit
Atif (5/10 of 31,850)
15,925
Amir (3/10 of 31,850)
9,555
Babar (2/10 of 31,850)
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
5
9,820
Current Assets
6
88,154
Current Liabilities
7
(24,356)
Working Capital
63,798
Total
73,618
Financed By:
Capital ­ Atif
30,000
Amir
16,000
Babar
12,000
58,000
Current Account ­ Atif
8
7,705
Amir
9
3,785
Babar
10
4,128
15,618
Total
73,618
232
img
Financial Accounting (Mgt-101)
VU
NOTES TO THE ACCOUNTS
Note # 1
Sales
Rs.
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
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Office Expenses paid
2,565 Advance Rent
120
2,445
Balance b/d
Total
2,565 Total
2,565
NOTE # 4
Provision for Doubtful Debts
Provision for Doubtful Debts Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Bad Debts
1,234 Opening Balance
800
Balance c/d
870
Transfer to Profit & Loss
Account
1,304
Total
2,104 Total
2,104
Note # 5
Fixed Assets at WDV
Acc. Dep.
WDV
Cost
Opening For the Yr. Closing
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
233
img
Financial Accounting (Mgt-101)
VU
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
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Drawings
12,610 Opening Balance
1,390
Interest on Capital
3,000
Profit for the year
15,925
Balance c/d
7,705
Total
20,315 Total
20,315
NOTE # 9
Amir's Current Account
Amir's Current Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Opening Balance
153 Salary
1,200
Drawings
8,417 Interest on Capital
1,600
Profit for the year
9,555
3,785
Balance c/d
Total
12,355 Total
12,355
NOTE # 10
Babar's Current Account
Babar's Current Account
Account Code --------
Particulars
Amount
Particulars
Amount
Dr. (Rs.)
Cr. (Rs.)
Drawings
6,216 Opening Balance
2,074
Salary
700
Interest on Capital
1,200
Profit for the year
6,370
Balance c/d
4,128
Total
10,344 Total
10,344
234
Table of Contents:
  1. Introduction to Financial Accounting
  2. Basic Concepts of Business: capital, profit, budget
  3. Cash Accounting and Accrual Accounting
  4. Business entity, Single and double entry book-keeping, Debit and Credit
  5. Rules of Debit and Credit for Assets, Liabilities, Income and Expenses
  6. flow of transactions, books of accounts, General Ledger balance
  7. Cash book and bank book, Accounting Period, Trial Balance and its limitations
  8. Profit & Loss account from trial balance, Receipt & Payment, Income & Expenditure and Profit & Loss account
  9. Assets and Liabilities, Balance Sheet from trial balance
  10. Sample Transactions of a Company
  11. Sample Accounts of a Company
  12. THE ACCOUNTING EQUATION
  13. types of vouchers, Carrying forward the balance of an account
  14. ILLUSTRATIONS: Ccarrying Forward of Balances
  15. Opening Stock, Closing Stock
  16. COST OF GOODS SOLD STATEMENT
  17. DEPRECIATION
  18. GROUPINGS OF FIXED ASSETS
  19. CAPITAL WORK IN PROGRESS 1
  20. CAPITAL WORK IN PROGRESS 2
  21. REVALUATION OF FIXED ASSETS
  22. Banking transactions, Bank reconciliation statements
  23. RECAP
  24. Accounting Examples with Solutions
  25. RECORDING OF PROVISION FOR BAD DEBTS
  26. SUBSIDIARY BOOKS
  27. A PERSON IS BOTH DEBTOR AND CREDITOR
  28. RECTIFICATION OF ERROR
  29. STANDARD FORMAT OF PROFIT & LOSS ACCOUNT
  30. STANDARD FORMAT OF BALANCE SHEET
  31. DIFFERENT BUSINESS ENTITIES: Commercial, Non-commercial organizations
  32. SOLE PROPRIETORSHIP
  33. Financial Statements Of Manufacturing Concern
  34. Financial Statements of Partnership firms
  35. INTEREST ON CAPITAL AND DRAWINGS
  36. DISADVANTAGES OF A PARTNERSHIP FIRM
  37. SHARE CAPITAL
  38. STATEMENT OF CHANGES IN EQUITY
  39. Financial Statements of Limited Companies
  40. Financial Statements of Limited Companies
  41. CASH FLOW STATEMENT 1
  42. CASH FLOW STATEMENT 2
  43. FINANCIAL STATEMENTS OF LISTED, QUOTED COMPANIES
  44. FINANCIAL STATEMENTS OF LISTED COMPANIES
  45. FINANCIAL STATEMENTS OF LISTED COMPANIES