Dinesh does not keep systematic books of account due to lack of Knowledge about the double entry system of accounting. He supplies you the following information :
(i) Assests and liabilities March 31, 2017


iii) Transaction during the year:
Cash received from debtors = Rs 80,000
Discount allowed to debtors = Rs 1,400
Bad debts written off = Rs 1,800
Cash paid to creditors = Rs 63,000
Discount allowed by creditors = Rs 1,000
Sales return =Rs 3,000
Purchases return = Rs 2,000
Expenses paid Rs 6,000
Drawings = Rs 5,000
Rent paid = Rs 2,500
(iii) Other information
Outstanding expenses Rs 1,200. Charge 10 per cent depreciation on furniture and 5 per cent on motor van.Dinesh informs that he sells goods at cost plus 40 per cent. A provision of 5 per cent on debtors is to be created. Prepare his trading and profit and loss account and balance sheet as on March 31, 2017

Explanation

v) Calculation of closing Stock
Total Sales = Rs 89,800
Less Sales return = Rs 3,500
Net Sales = Rs 86,800
Total purchases = Rs 69,000
Less Purchases returns = Rs (2,000) , Rs (67,000)
Rate of gross profit on cost = `40%`
Suppose of cost of good sold is 100
Then, Gross profit equals to = 40
Sales equals to = 140
Hence, cost of goods sold will be
Sales = Rs `86,800 = 100/140 xx 86,800 = 62,000`
The amount of closing stock will be calculated as:
Net purchase = Rs 67,000
Add Closing stock = Rs 25,000
Cost of goods available for sale = Rs 92,000
Less cost of goods sold = Rs 62,000
Closing Stock = Rs 30,000