The balance sheet of Gagan on 1st April, 2025 was as follows: Particulars Amount (₹) Particulars Amount (₹) Trade Payables 6,50,000 Furniture and…

CA Foundation · Accounting · MTP · September 2026
The balance sheet of Gagan on 1st April, 2025 was as follows: Particulars Amount (₹) Particulars Amount (₹) Trade Payables 6,50,000 Furniture and Fixtures 6,50,000 Expenses Payable 75,000 Vehicle 2,75,000 Capital 22,00,000 Trade Receivable 11,00,000 Cash at Bank 4,75,000 Inventories 4,25,000 29,25,000 29,25,000 During 2025-26, his profit and Loss Account revealed a net profit of ₹ 6,70,000. This was after allowing for the following: (i) Commission paid to selling agent ₹ 65,000 (ii) Discount received from creditor ₹ 75,000 (iii) Purchased a vehicle of ₹ 50,000 on 31st March, 2026 and Depreciation on Vehicle @ 20% (iv) A provision for doubtful debts @ 3% of the trade receivables as at 31st March, 2026 But while preparing the Profit and Loss Account he had forgotten to provide for (1) prepaid expenses ₹ 15,000 and (2) outstanding commission ₹ 35,000. His current assets and liabilities on 31st March, 2026 were: Inventories ₹ 5,85,000. Trade Receivables ₹ 13,00,000 (before provision for doubtful debts), cash at Bank ₹ 5,50,000 and Trade Payables ₹ 1,46,000. During the year he introduced further capital of ₹ 3,00,000 into the business. You are required to prepare the Balance Sheet as of March 31, 2026.

Suggested Answer and Working Notes:

Balance Sheet of Gagan as on 31st March, 2026 Liabilities ₹ Assets ₹ Capital 22,00,000 Cash at Bank 5,50,000 Add: Net Profit (WN.1) 6,50,000 Trade receivables (WN. 2) 12,61,000 28,50,000 Vehicles (WN.3) 2,70,000 Add: Introduction of capital 3,00,000 Furniture & Fixtures 6,50,000 31,50,000 Inventories 5,85,000 Outstanding commission 35,000 Prepaid expenses 15,000 Trade payables 1,46,000 33,31,000 33,31,000 Working Note 1 Profit and Loss Account (Revised) Particulars Particulars ₹ To Outstanding Commission 35,000 By Balance b/d 6,70,000 To Net profit 6,50,000 By Prepaid expenses 15,000 6,85,000 6,85,000 Working Note 2 Trade Receivables Particulars Particulars ₹ To Balance b/d 13,00,000 By Provision for Doubtful Debts 39,000 By Balance c/d (b/f) 12,61,000 13,00,000 13,00,000 Working Note 3 Vehicles A/c Particulars ₹ Particulars ₹ To Balance b/d 2,75,000 By Depreciation 55,000 To Bank A/c 50,000 By Balance c/d (b/f) 2,70,000 3,25,000 3,25,000 * Since the new vehicle is purchased for ₹ 50,000, no depreciation is charged on new Vehicle.

Topics: Preparation of Final Accounts of Sole Proprietors

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