2.         You are required to prepare a Profit & Loss 
Account for the year ending 31st December, 2007 and the 
Balance Sheet on that date. The Trial Balance of XYZ Ltd. 
for the year ended 31st December 2007 is as follows:- 

  

Trial Balance of XYZ Ltd. as on 31st Dec. 2007 

  

Debit Balances 

 Rs.

 Credit Balances
 Rs.
 
Materials used
   3,50,000
 Sales(including 2% Sales tax)
   9,18,000
 
Cost of Labour
   1,50,000
 Sale of Scrap
           100
 
Stock, finished and work in process on 31st December, 2006
      50,000
 Rent received
        2,000
 
Wages : Factory Staff
      15,000
 Discounts
        2,750
 
Directors Remuneration
      50,000
 Recovered against fire claim re : Stock
        5,000
 
Salaries : Clerical Staff
      75,000
 Capital : Equity
      25,000
 
Insurances : Workmen’s                       Compensation
        1,500
                Preference- 9%
        8,000
 
                General, fire etc.
        2,000
 Creditors
   1,56,000
 
             Directors’ Life Insurance
        1,500
 Provision for Taxation
   1,05,000
 
Maintenance : Buildings
        1,000
 Profit & Loss Account
      13,750
 
         Plant and Machinery
      12,500
  
  
 
Rent and Rates of premises and hire of plant
      20,000
  
  
 
Heat, Light and Power
      15,000
  
  
 
Experimental and Laboratory Expenses
      10,000
  
  
 
Canteen Expenses
        5,000
  
  
 
Staff Welfare expenses
        2,500
  
  
 
Motor Expenses
      12,500
  
  
 
Professional Charges
        2,800
  
  
 
Postage and Telephone
        3,500
  
  
 
Books, Printing and Stationery
      11,000
  
  
 
Sundry expenses
      10,000
  
  
 
Carriage and Packing on Sales
        3,300
  
  
 
Discounts
        5,000
  
  
 
Debtors
   1,78,000
  
  
 
Freehold Property
      50,000
  
  
 
Plant and Machinery
      12,500
  
  
 
Fixtures and Fittings – Offices
        3,500
  
  
 
Office machinery and Equipment
        3,000
  
  
 
Motor Car and Van
        6,500
  
  
 
Stock of materials on 31st Dec. 2007
   1,20,000
  
  
 
Bank
      38,000
  
  
 
Sales Tax Paid
      15,000
  
  
 
 
 12,35,600
  
 12,35,600
 

  

Depreciation is to be provided at the following rates: 

                        Plant and Machinery              
10% 

                        Fixture and 
Fittings                   05% 

                        Office Machinery, etc.              
10% 

                        Motor Vans and Cars              
25% 

  

The stock of finished goods and work in progress as on 31st 
December, 2007 was Rs. 35,000. Provide for preference 
dividend and ordinary dividend at 10%. The total taxation 
liability is estimated at Rs.1,50,000 of which Rs. 75,000 
relates to the current year. 

  

Debtors include Rs. 10,000 deposited as security against 
government contracts. 

  

The Works Manager is paid partly by salary and partly by a 
commission; he is entitled to a commission of 5% on the 
amount by which the surplus in the factory cost exceeds 20% 
of the sales for the period. Charge the commission if any 
in the Profit and Loss Account.