BCOM 1st Year Final Accounts Manufacturing Account Long Study Material Notes
7. Interest on Drawing
It is profit of business.
Accounting Treatment:
It will be shown on the Cr. side of profit & loss A/c because it is an income to the business.
8. Bad Debts
Bad debts means those dues from debtors which cannot be realised or of which there is no possibility of being realised.
Accounting Treatment:
(a) Bad debts will be shown on the Dr. side of profit & loss A/c because it is a business loss.
(b) It will be deducted from sundry debtors on assets side of balance sheet.
9. Accounting Treatment of Provision for Bad and Doubtful Debts
BCOM 1st Year Final Accounts Manufacturing Account Long Question Answer Study Material Notes
(a) The amount of provision for bad debts is provision against probable loss, so it will go to side of profit & loss A/c.
(b) The amount of provision for bad debts is deducted from sundry debtor on the assets side the balance sheet, so the debtor may appear at their net realisable value in the balance shee
Q.4. From the following trial balance of Mr. Manish Agarwal, prepare a trading and profit & los account for the year ended on 31st December, 2013 and a balance sheet as on that date:
| Name of accounts | Dr. Balances | Cr. Balances |
| Manish Agarwal’s capital | 4,50,000 | |
| Manish Agarwal’s drawings | 35,000 | |
| Land and buildings | 60,00 | |
| Debtors and creditors | 30,000 | 40,000 |
| Purchases | 2,35,000 | |
| Sales returns and sales | 6,900 | 3,65,000 |
| Discount on purchases | 900 | |
| Fire insurance premium | 2,800 | |
| Apprentice premium | 5,000 | |
| Cash in hand | ||
| Cash at bank | 30,000 | |
| Stock on 31st December, 2013 | 35,000 | |
| Bad debts | 12,000 | |
| Bad debts provision | 10,000 | |
| Carriage | 6,300 | |
| Wages | 27,700 | |
| Plant and machinery | 2,30,000 | |
| Furniture and fixtures | 60,000 | |
| Salaries | 23,000 | |
| Bank charges | 200 | |
| Coal, gas and water | 12,000 | |
| Rates and taxes | 8,000 | |
| Bills receivable and bills payable | 60,000 | 29,100 |
| Trade charges | 200 | |
| 9,00,000 | 9,00,000 |
Adjustments:
1. Carry forward the following unexpired amounts:
(a) Fire insurance premium 700,
(b) Rates and taxes * 2,000,
(c) Apprentice premium 2,500.
2. Wages include 2,000 spent on installation of a new machine on 1st January, 2013.
3. Depreciate plant and machinery @ 5% and furniture and fixtures @10%.
4. Make a provision of 5% on sundry debtors for doubtful debts.
5. Trade charges 400 and wages * 1,500 have not yet been paid.
6. Allow 5% Interest on capital.
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