Question: Mr. Ali is running “Hyper Star Traders” a soleproprietorship business

Question

Question:
Mr. Ali is running “Hyper Star Traders” a soleproprietorship business located at the Mall Road, Lahore. At theyear end the business has:
Furniture Rs. 40,000
Plant 200,000
Capital 280,000
On 30th November 2009 Mr. Ali submitted a tender for sale of goodsof Rs. 20,000 which is likely to be confirmed shortly. Bank debitedservice charges Rs. 150 and interest on loan Rs. 500 and crediteddividend for Rs. 2,000 in the month of December (intimation frombank was received on 7th January 2010). Mr. Ali also estimates that5% of the amount will not be collectable from sundry debtors. Houserent allowance Rs. 5,000 has been paid on 31st December from hispersonal account, on the same date stock was valued at Rs. 200,000and plant Rs. 160,000 because of its wear and tear.
The following balances (in the books of Hyper Star Traders) arealso given along with above information as on 31st December2009:
Particulars Rs. Particulars Rs.
Opening stock 120,000 Bank balance 36,000
Sundry Debtors 100,000 Bills payable 20,000
Long term Investments 60,000 Returns outwards 4,800
Returns inwards 8,000 Commission 2,000
Purchases 680,000 Sales 924,000
Cash in hand 4,000 Interest received 800
Bills receivable 44,000 Sundry Creditors 160,000
Carriage out 3,600 Salaries 48,000
Insurance paid 2,800 Wages 45,200

Required:
A. Pass necessary adjusting entries.
B. Prepare the Income statement of Hyper Star Traders for the yearending on 31st December, 2009.
C. Prepare the Balance sheet of Hyper Star Traders as on 31stDecember, 2009.

Explanation / Answer

IncomeStatement Sales 924,000 Less: Return Inward -8,000 916,000 InterestReceived 800 Dividend 2,000 Commission Earned 2,000 Closing Stock 200,000 1,120,800 Opening Stock 120,000 Purchases 680,000 Less: Return Outward -4,800 675,200 Wages 45,200 Salaries 48,000 Insurance 2,800 Carriage Outward 3,600 Bank Service Charges 150 Interest On Loan 500 House rent Allowance 5,000 Bad Debts 5,000 Depreciation 40,000 945,450 Excess Of Income OverExpenditure 175,350 Balance Sheet Assets Cash 4,000 Bank (36000+2000-150-500) 37,350 S.Debtors 100000 Less Bad Debts -5000 95,000 Closing Stock 200,000 Bills Receivables 44,000 Plant 200000 Less: Depreciation -40000 160,000 Furniture 40,000 Long Term Investment 60,000 640,350 Liabilities Capital (280000 + 5000 HRA) 285,000 Excess Of Income…. 175,350 S.Creditors 160,000 Bills Payable 20,000 640,350

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