Virtual University Course MGT101 - Financial Accounting Lecture No 32 Instructor's Name: Mr. Mujahid Eshai Course Email: mgt101@vu.edu.pk

1. Financial Accounting
1
Lecture – 32
Question
• Following trial balance has been extracted from the books of
Arif Traders on June 30, 2002

2. Financial Accounting
2
Lecture – 32
Trial Balance
Arif Traders
Trial Balance as At June 30 2002
Title of Account Dr. Rs. Cr. Rs.
Sales 987,000 P
Stock on 30 June, 2002 175,500 B
Material Consumed 537,000 P
Cash in Hand 10,500 B
Cash at Bank 57,000 B
Capital Account July 01, 2001 495,000 B
Drawings 142,500 B
Furniture 72,000 B

3. Financial Accounting
3
Lecture – 32
Trial Balance
Title of Account Dr. Rs. Cr. Rs.
Rent Paid 51,000 P
Wages Paid 129,000 P
Discounts Allowed 34,500 P
Discounts Received 18,000 P
Debtors 246,000 B
Creditors 124,500 B
Provision for Doubtful Debts Jul. 01 2001 13,500 B
Vehicles 120,000 B
Vehicle Running Costs 22,500 P
Bad Debts Written off 40,500 P
TOTAL 1,638,000 1,638,000

4. Financial Accounting
4
Lecture – 32
• Further information available:
 Wages and salaries payable on June 30, 2002 Rs. 4,500
 Rent prepaid on June 30, 2002 Rs. 7,000
 Vehicle running costs payable on June 30 Rs. 3,000
 Increase in provision for doubtful debts Rs. 3,000
 Depreciation rate is 12.5% for furniture and 20% for
vehicle.
• Required
 You are required to prepare Profit and Loss Account for
the year and Balance Sheet as on June 30, 2002

5. Financial Accounting
5
Lecture – 32
Solution
Arif Traders
Profit and Loss Account for the Year Ending June 30, 2002
Particulars Working Rs. Rs.
Sales
Less: Cost of Goods Sold (material consumed)
987,000
(537,000)
Gross Profit
Discount Received
450,000
18,000
Less: Expenses
Wages and Salaries 1
Rent 2
Discount Allowed
Vehicle Running Cost 3
Provision for Doubtful Debt 4
Depreciation 5
(133,500)
(44,000)
(34,500)
(25,500)
(43,500)
(33,000)
468,000
(314,000)
Net Profit 154,000

6. Financial Accounting
6
Lecture – 32
Solution
Particulars Working Rs. Rs.
Sales
Less: Cost of Goods Sold (material consumed)
987,000
(537,000)
Gross Profit
Discount Received
450,000
18,000
468,000

7. Financial Accounting
7
Lecture – 32
Solution
Less: Expenses
Wages and Salaries 1
Rent 2
Discount Allowed
Vehicle Running Cost 3
Provision for Doubtful Debt 4
Depreciation 5
(133,500)
(44,000)
(34,500)
(25,500)
(43,500)
(33,000)
468,000
(314,000)
Net Profit 154,000

8. Financial Accounting
8
Lecture – 32
Solution
Arif Traders
Profit and Loss Account for the Year Ending June 30, 2002
Particulars Working Rs. Rs.
Sales
Less: Cost of Goods Sold (material consumed)
987,000
(537,000)
Gross Profit
Discount Received
450,000
18,000
Less: Expenses
Wages and Salaries 1
Rent 2
Discount Allowed
Vehicle Running Cost 3
Bad Debts
Provision for Doubtful Debt 4
Depreciation 5
(133,500)
(44,000)
(34,500)
(25,500)
(40,500)
(3,000)
(33,000)
468,000
(314,000)
Net Profit 154,000

9. Financial Accounting
9
Lecture – 32
Solution
Particulars Working Rs. Rs.
Sales
Less: Cost of Goods Sold (material consumed)
987,000
(537,000)
Gross Profit
Discount Received
450,000
18,000
468,000

10. Financial Accounting
10
Lecture – 32
Solution
Less: Expenses
Wages and Salaries 1
Rent 2
Discount Allowed
Vehicle Running Cost 3
Bad Debts
Provision for Doubtful Debt 4
Depreciation 5
(133,500)
(44,000)
(34,500)
(25,500)
(40,500)
(3,000)
(33,000)
468,000
(314,000)
Net Profit 154,000

11. Financial Accounting
11
Lecture – 32
Solution
Arif traders
Balance Sheet As At June 30, 2002
Particulars Working Amount Rs. Amount Rs.
Assets
Fixed Assets 5
Current Assets
Stocks
Debtors 6
Prepaid Expenses
Cash at Bank
Cash in Hand
175,500
229,500
7,000
57,000
10,500
159,000
479,500
Total 638,500
Liabilities
Capital
Profit
Less: Drawings
495,000
154,000
(142,500) 506,500
Current Liabilities
Creditors
Expenses Payable 7
124,500
7,500 132,000
Total 638,500

12. Financial Accounting
12
Lecture – 32
Solution
Particulars Working Amount Rs. Amount Rs.
Assets
Fixed Assets 5
Current Assets
Stocks
Debtors 6
Prepaid Expenses
Cash at Bank
Cash in Hand
175,500
229,500
7,000
57,000
10,500
159,000
479,500
Total 638,500

13. Financial Accounting
13
Lecture – 32
Solution
Liabilities
Capital
Profit
Less: Drawings
495,000
154,000
(142,500) 506,500
Current Liabilities
Creditors
Expenses Payable 7
124,500
7,500 132,000
Total 638,500

14. Financial Accounting
14
Lecture – 32
Solution
• Working
• (1) Salaries
Salaries and Wages
Debit side.
Paid 129,000
Payable 4,500
Credit side.
P&L Account 133,500

15. Financial Accounting
15
Lecture – 32
Solution
• Working
• (2) Rent
Rent
Debit side.
Paid 51,000
Credit side.
Prepaid 7,000
P&L Account 44,000

16. Financial Accounting
16
Lecture – 32
Solution
• Working
• (3) Vehicle Running Cost
Vehicle Running Cost
Debit side.
Paid 22,500
Payable 3,000
Credit side.
P&L Account 25,500

17. Financial Accounting
17
Lecture – 32
Solution
• Working
• (4) Provision for Doubtful Debts
Provision for Doubtful Debts
Debit side.
Bad Debts 40,500
Bal. C/F 16,500
Credit side.
Bal. B/F 13,500
P&L Account 43,500

18. Financial Accounting
18
Lecture – 32
Solution
• Working
• (4) Provision for Doubtful Debts
Provision for Doubtful Debts
Debit side.
Bal. C/F 16,500
Credit side.
Bal. B/F 13,500
P&L Account 3,000

19. Financial Accounting
19
Lecture – 32
Solution
• Working
• (5) Fixed Assets at WDV
Cost Rate Dep. WDV
Furniture 72,000 12.5% 9,000 63,000
Vehicle 120,000 20% 24,000 96,000
33,000 159,000

20. Financial Accounting
20
Lecture – 32
Solution
• Working
• (6) Debtors
Debtors 246,000
Less: Provision for Doubtful
Debts (note 4) (16,500)
229,500

21. Financial Accounting
21
Lecture – 32
Solution
• Working
• (7) Expenses Payable
Expenses Payable
Debit side.
Bal. C/F 7,500
Credit side.
Salaries 4,500
Veh. Running 3,000