Virtual University Course MGT101 - Financial Accounting Lecture No 34 Instructor's Name: Mr. Mujahid Eshai Course Email: mgt101@vu.edu.pk

1. Financial Accounting
1
Lecture – 34
Example
• The following trial balance was extracted from A, B & Co.
books on June 30, 2002.
Title of Account 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

2. Financial Accounting
2
Lecture – 34
Example
Title of Account Dr. Rs. Cr. Rs.
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
2,696,040 2,696,040

3. Financial Accounting
3
Lecture – 34
Example
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.

4. Financial Accounting
4
Lecture – 34
Solution
A, B, & Co
Profit and Loss Account for the Year Ending June 30, 20-2
Particulars Note Rs. Rs.
Sales
Less: Cost of Goods Sold (material consumed)
1,236,500
(710,550)
Gross Profit
Less: Expenses
Wages and Salaries 1
Office Expenses 2
Carriage Out
Discount Allowed
Markup on Loan
Provision for Doubtful Debt 3
Depreciation 4
191,170
25,120
12,880
1,150
40,000
4,230
48,500
525,950
(323,050)
Net Profit 202,900

5. Financial Accounting
5
Lecture – 34
Solution
A, B, & Co
Profit and Loss Account for the Year Ending June 30, 20-2
Particulars Note Rs. Rs.
Sales
Less: Cost of Goods Sold (material consumed)
1,236,500
(710,550)
Gross Profit
Less: Expenses
Wages and Salaries 1
Office Expenses 2
Carriage Out
Discount Allowed
Markup on Loan
Bad Debts
Provision for Doubtful Debts not required 3(a)
Depreciation 4
191,170
25,120
12,880
1,150
40,000
5,030
(800)
48,500
525,950
(323,050)
Net Profit 202,900

6. Financial Accounting
6
Lecture – 34
Solution
A, B, & Co
Profit Distribution Account
Particulars Note Rs. Rs.
Net Profit
Less: Partner’s Salary – A
202,900
(8,000)
Distributable Profit
Less: Partner’s Share in Profit
A (50% of 194,900)
B (50% of 194,900)
97,450
97,450
194,900
(194,900)
0

7. Financial Accounting
7
Lecture – 34
Solution
A, B, & Co
Balance Sheet As At June 30, 2002
Particulars Note Amount Rs. Amount Rs.
Fixed Assets at WDV 4
Current Assets 5
Current Liabilities 6
729,400
(114,460)
528,500
Working Capital 614,940 614,940
Total 1,143,440
Financed By:
Capital – A
B
350,000
295,000 645,000
Current Account – A 7
B 8
54,510
43,930 98,440
Long Term Loan 400,000
Total 1,143,440

8. Financial Accounting
8
Lecture – 34
Solution
• Notes
• (1) Salaries
• (2) Office Expenses
Salaries and Wages
Debit side.
Paid 189,170
Payable 2,000
Credit side.
Bal. 191,170
Office Exp.
Debit side.
Paid 24,160
Payable 960
Credit side.
Balance 25,120

9. Financial Accounting
9
Lecture – 34
Solution
• Notes
• (3) Provision for Doubtful Debts
Provision
Debit side.
B. Debt 5,030
Balance 3,200
Credit side.
O/B 4,000
P&L A/c 4,230

10. Financial Accounting
10
Lecture – 34
Solution
• Notes
• (3-a) Provision for Doubtful Debts
(4) 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
Provision
Debit side.
Prov. not
required 800
Balance 3,200
Credit side.
O/B 4,000

11. Financial Accounting
11
Lecture – 34
Solution
• Notes
• (5) Current Assets
Stocks 563,400
Debtors 162,430
Less: Provision (note3) 3,200 159,230
Bank 6,770
729,400
• (6) Current Liabilities
Creditors 111,500
Exp. Payable: Salaries 2,000
Off. Exp 960 2,960
114,460

12. Financial Accounting
12
Lecture – 34
Solution
• Notes
• (7) A’s current Account
• (8) B’s Current Account
A’s Current A/c
Debit side.
Drawing
64,000
Balance 54,510
Credit side.
O/B 13,060
Profit 97,450
Salary 8,000
B’s Current A/c
Debit side.
Drawing
56,500
Balance 43,930
Credit side.
O/B 2,980
Profit 97,450

13. Financial Accounting
13
Lecture – 34
Presentation of Partners’ Accounts
Partners’ Capital Account
Dr. Side Cr. Side
A B A B
Bal. On Jul 01 350,000 295,000
Bal.
June 30
350,000 295,000

14. Financial Accounting
14
Lecture – 34
Presentation of Partners’ Accounts
Partners’ Current Account
Dr. Side Cr. Side
A B A B
Drawings 64,000 56,500 Bal. On Jul 01 13,060 2,980
Salary 8,000
Share of Profit 97,450 97,450
Bal. June 30 54,510 43,930