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Financial Accounting (MGT101) Assignment 03
Summer Semester 2007
Question # 1: Marks 10
Consider the Trial Balance given here under:
ABC Company
Trial Balance
As on December 31, 2005
Title of Account Debit Rupees Credit Rupees
Cash 17,500
Bank 65,000
Capital 100,000
Building 7,500
Plant & Machinery 25,000
Purchases 30,000
Creditors 7,500
Sales 47,500
Debtors 7,500
Salaries 2,500
Expenses 10,000
Expenses Payables 10,000
Total 165,000 165,000
Adjustments:
1. Closing stock as on December 31, 2005 is Rs. 500.
2. The useful life of an asset is 25 months and considered that there is no residual
value. Calculate the depreciation.
Required:
1. Prepare the Trading and Profit & Loss Account and Balance Sheet as at
December 31, 2005.
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Financial Accounting (MGT101) Assignment 03
Summer Semester 2007
2. Also show the necessary Accounting Equations, with the help of Balance Sheet as
at December 31, 2005.
SOLUTION:
ABC Company
Trading and Profit & Loss Account
For the year ended December 31, 2005
Rupees Rupees
Sales 47,500
Less: Cost of Goods Sold
Purchases 30,000
Closing Stock (500) 29,500
Gross Profit 18,000
Less : Administrative Expenses
Salaries 2,500
Expenses 10,000
Depreciation(1300*12) 15,600 28,100
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Financial Accounting (MGT101) Assignment 03
Summer Semester 2007
Net loss (10,100)
ABC Company
Balance Sheet
As at December 31, 2005
Assets Amount Rupees Liabilities & Owner Equity Amount Rupees
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Financial Accounting (MGT101) Assignment 03
Summer Semester 2007
Fixed Assets Current Liabilities
Building (7,500) Creditors 7,500
Plant & Machinery Expense Payable 10,000
(25,000)
Less Depreciation (1,300 * 16,900 Liabilities 17,500
12 = 15,600)
Current Assets Capital 100,000
Debtors 7,500 Less: Net loss 10,100
Closing stock 500 Owner’s Equity 89,900
Bank 65,000
Cash 17,500
Total Assets 107,400 Total liabilities & Owner’s 107,400
Equity
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Financial Accounting (MGT101) Assignment 03
Summer Semester 2007
The Accounting Equation:
Assets = Liabilities + Owner’s Equity
Assets:
Cash 17,500
Bank 65,000
Building +
Plant & machinery 16,900(w-1)
Debtors 7,500
Closing stock 500
Assets = 107,400
Liabilities:
Creditors 7,500
Expense payable 10,000
17,500
Owner’s Equity
Capital 100,000
Less: Net loss 10,100
89,900
Liabilities + Owner’s Equity = 17500 + 89,900
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Financial Accounting (MGT101) Assignment 03
Summer Semester 2007
= 107,400
Assets = Liabilities + Owner’s Equity
107,400= 107,400
Workings:
W-1:
Building + Plant & Machinery = 7,500 + 25,000
= 32,500
Less Depreciation = 32,500 / 25 = 1,300 per month
Net Fixed Assets = 32,500 – 15,600(1300*12)
= 16,900
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Financial Accounting (MGT101) Assignment 03
Summer Semester 2007