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Financial Statements of a Proprietorship Firm

BOOKS OF NITA
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Adjustments
* Inventory at 31 December 2011 K20 000.00
* Provision for doubtful debts is 1% on account receivable
* Sales salaries still owing K80.00
* Commission still to be received K190.00
* Prepaid Insurance K70.00
* Rent received in advance K200.00
*Depreciation on building at 10% on cost
* Depreciation on delivery van at 22.5% reducing balance

Prepare: a: Trading and profit/loss statement
b: Balance sheet- in statement form

asked Feb 26, 2016 in Trial Balance, Profit & Loss Account and Balance Sheet by toemanil (14 points) 430 views

1 Answer

0 votes

 

In case of any doubt, please don't hesitate to discuss further.

answered Feb 29, 2016 by jbsclasses (3,971 points)
My pleasure.
How do we calculate the net profit? In the case of 5% of depreciation of building,what is its net profit of the profit and loss a/c,apart from this .
I would like to go the basics to make my point clear.  When amount of depreciation was K2500 (@10%), profit was K10155.  You know when expenses decrease, profit increase.  So when depreciation will be K1250 (@5%), profit will increase to K11405.  This is so because depreciation has reduced by K1250, resulting in increase of profit by K1250.
By looking and studying the trading and profit and loss account,I am still of how you get 2025 as depreciation on van and 11405 as the net profit using the 5%  on cost of depreciation on building..And on the trial balance which mention the Acc.dep on building, 2500 and Acc.dep on van 3000.Can you further explain and re-enter the figures into the trading and profit and loss account using the 5% depreciation on building?
Please check the necessary changes have been made in the answer above.
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