Analysis of Trial Balance Elements

The first step in preparing financial statements is to classify each item in the trial balance as either an element of the Trading and Profit & Loss Account (Revenue/Expense) or an element of the Balance Sheet (Asset/Liability/Equity).

Trading and Profit and Loss Account of Ankit

for the year ended March 31, 2017

Computation of Cost of Goods Sold

Trading Account for the year ended March 31, 2017

Working Notes:

1. Calculation of Net Purchases:

$Net\ Purchases = Purchases - Purchase\ Returns = \text{₹} \ 4,20,000 - \text{₹} \ 20,000 = \text{₹} \ 4,00,000$

2. Calculation of Net Sales:

$Net\ Sales = Sales - Sales\ Returns = \text{₹} \ 6,50,000 - \text{₹} \ 30,000 = \text{₹} \ 6,20,000$

Computation of Cost of Goods Sold

Trading Account of M/s Modern Traders

for the year ended December 31, 2023

Working Notes:

1. Calculation of Net Purchases:

$Net\ Purchases = Purchases - Purchase\ Returns = \text{₹} \ 3,50,000 - \text{₹} \ 10,000 = \text{₹} \ 3,40,000$

2. Calculation of Net Sales:

$Net\ Sales = Sales - Sales\ Returns = \text{₹} \ 6,20,000 - \text{₹} \ 20,000 = \text{₹} \ 6,00,000$

Trading and Profit and Loss Account of M/s. Gupta & Sons

for the year ended March 31, 2024

Closing Journal Entries

Journal Entries

We can calculate the Operating Profit using both methods to verify the result.

Method 1: Using Gross Profit

First, identify all the operating indirect expenses from the P&L Account:

• Salaries: $\text{₹} \ 50,000$
• Rent & Insurance: $\text{₹} \ 20,000$
• Advertising: $\text{₹} \ 15,000$

Method 2: Using Net Profit

First, identify all the non-operating items from the P&L Account:

• Non-Operating Expenses: Interest on Loan ($\text{₹} \ 12,000$), Loss by Fire ($\text{₹} \ 8,000$)
• Non-Operating Incomes: Interest on Investments ($\text{₹} \ 10,000$), Profit on Sale of Machinery ($\text{₹} \ 5,000$)

Both methods yield the same result, confirming that the profit from the core business operations was $\text{₹} \ 1,15,000$.

(a) Balance Sheet in Order of Liquidity

Balance Sheet of Ankit as at March 31, 2017

(b) Balance Sheet in Order of Permanence

Balance Sheet of Ankit as at March 31, 2017

Working Notes:

1. Calculation of Closing Capital:

Balance Sheet in Order of Permanence

Balance Sheet of M/s. Gupta & Sons as at March 31, 2024

Journal

Journal

(i) False.

Reason: Gross Profit is the excess of revenue (Net Sales) over the Cost of Goods Sold ($Gross \ Profit = Net \ Sales - Cost \ of \ Goods \ Sold$). It is not the total revenue itself.

(ii) True.

Reason: The Trading Account is prepared to calculate the gross profit. Its debit side shows all direct expenses related to the purchase or production of goods. Opening stock represents the cost of unsold goods from the previous period which are available for sale in the current period, thus it is a part of the Cost of Goods Sold for the current year.

(iii) False.

Reason: Rent, rates, and taxes are indirect expenses related to the overall administration and operation of the business, not directly to the purchase or manufacturing of goods. They are shown in the Profit and Loss Account, not the Trading Account. Direct expenses include items like wages, freight inwards, and carriage inwards.

(iv) True.

Reason: The credit side of the Profit and Loss Account records all indirect incomes and gains (including gross profit transferred from the Trading Account). The debit side records all indirect expenses and losses. If the total of the credit side (incomes) is more than the total of the debit side (expenses), the resulting balancing figure is the Net Profit.

(i) Closing stock is credited to - (b) Trading account

Explanation: Closing stock is shown on the credit side of the Trading Account. This is done to adjust the cost of goods sold, as the closing stock represents goods that were purchased but remain unsold at the end of the year. Crediting it removes its cost from the current year's calculation of gross profit.

(ii) Arithmetical accuracy of book of account is tested by - (a) Trial balance

Explanation: A trial balance is a statement that lists all ledger account balances. Its primary purpose is to verify that the total of all debit balances equals the total of all credit balances, thus testing the arithmetical accuracy of the bookkeeping.

(iii) On returning the goods to seller, the buyer sends - (e) Debit note

Explanation: When a buyer returns goods, they are reducing the amount they owe to the seller. To inform the seller that their (the seller's) account has been debited in the buyer's books, the buyer sends a Debit Note.

(iv) The financial position is determined by - (d) Balance sheet

Explanation: The Balance Sheet is a statement that lists the assets, liabilities, and capital of a business on a specific date. It provides a snapshot of the financial position or health of the enterprise.

(v) On receiving the returned goods from the buyer, the seller sends - (c) Credit note

Explanation: When a seller receives returned goods, they must reduce the amount receivable from the buyer. To inform the buyer that their (the buyer's) account has been credited in the seller's books, the seller sends a Credit Note.

(v) (ii) & (iii)

Explanation: Financial statements are the end products of the accounting process, designed to show the financial performance and position of a business. The primary financial statements are the Profit and Loss Account (which shows performance) and the Balance Sheet (which shows position). A trial balance is a working paper prepared before the financial statements to check arithmetical accuracy.

(iii) Gross Profit, Operating Profit, Net Profit

Explanation: The ascertainment of profit follows a specific sequence:

1. Gross Profit is calculated first in the Trading Account by deducting the cost of goods sold from sales.
2. The Gross Profit is brought down to the Profit and Loss Account. Then, all operating expenses (like salaries, rent, advertising) are deducted to arrive at the Operating Profit.
3. Finally, non-operating incomes are added and non-operating expenses are deducted from the Operating Profit to arrive at the Net Profit.

(iv) (ii) & (iii)

Explanation: Operating profit is the profit earned from the main, normal operating activities of the business. Therefore, to calculate it, we exclude items that are not related to the core business operations. These include:

• Abnormal items: Such as profit or loss from the sale of fixed assets or from events like fire.
• Expenses of a purely financial nature: Such as interest paid on loans or interest received on investments.

Normal operating transactions are, by definition, included in the calculation.

(iii) Operating profit = Net profit + Non-operating Expenses – Non-operating incomes

Explanation: The relationship between Net Profit and Operating Profit is as follows:

$Net \ Profit = Operating \ Profit - Non\text{-}operating \ Expenses + Non\text{-}operating \ Incomes$

To find the Operating Profit, we need to reverse this calculation, starting from the Net Profit. We add back the non-operating expenses that were deducted and subtract the non-operating incomes that were added. This gives us the correct formula:

$Operating \ Profit = Net \ Profit + Non\text{-}operating \ Expenses - Non\text{-}operating \ Incomes$

The grouping and arrangement of assets and liabilities in the Balance Sheet is known as 'Marshalling'. There are two primary orders for this: the order of permanence and the order of liquidity.

1. In Order of Permanence

In this order, assets are arranged from the least liquid (most permanent) to the most liquid. Liabilities are arranged from the most long-term (owner's capital) to the most current. This format is prescribed for companies in India under Schedule III of the Companies Act, 2013.

Balance Sheet (in order of Permanence)

2. In Order of Liquidity

In this order, assets are arranged from the most liquid (easiest to convert to cash) to the least liquid. Liabilities are arranged from the most urgent (current liabilities) to the least urgent (owner's capital). This format is commonly followed by sole proprietorships and partnership firms.

Balance Sheet (in order of Liquidity)

Financial statements are the final output of the accounting process, providing a summary of a business's financial activities. Their primary objectives are:

1. To Present a True and Fair View of Financial Performance: The Profit and Loss Account is prepared to ascertain the operational results of the business during an accounting period. It shows whether the business has earned a net profit or incurred a net loss.
2. To Present a True and Fair View of Financial Position: The Balance Sheet is prepared to show the financial health of the business on a specific date. It lists all the assets, liabilities, and capital of the firm.
3. To Provide Information for Decision Making: They provide structured financial information to various stakeholders (like owners, investors, creditors, and management) to help them make rational economic decisions.
4. To Facilitate Comparison: Properly prepared financial statements allow for comparison of the firm's performance over different time periods (intra-firm comparison) and with other firms in the same industry (inter-firm comparison).

The Trading and Profit and Loss Account is an income statement prepared to determine the financial performance of a business over an accounting period. It is prepared in two parts:

Purpose of Trading Account:

The primary purpose of the Trading Account is to ascertain the Gross Profit or Gross Loss arising from the main trading activities of the business (buying and selling of goods). It matches the revenue from sales against the direct costs of those sales (Cost of Goods Sold).

Purpose of Profit and Loss Account:

The primary purpose of the Profit and Loss Account is to ascertain the Net Profit or Net Loss of the business for the period. It starts with the gross profit (or gross loss) from the Trading Account and then accounts for all indirect revenues (like commission received) and all indirect expenses (like salaries, rent, advertising) to arrive at the final net result.

The Cost of Goods Sold (COGS) represents the direct costs attributable to the production or purchase of the goods that were sold by a company during an accounting period. It includes the cost of materials and direct labour used to create the goods. It excludes indirect expenses such as distribution costs and sales force costs.

For a trading concern, the formula to calculate COGS is:

$COGS = Opening \ Stock + Net \ Purchases + Direct \ Expenses - Closing \ Stock$

Where:

• Opening Stock: The value of inventory at the beginning of the period.
• Net Purchases: Total purchases less purchases returns.
• Direct Expenses: Expenses incurred to bring the goods to a saleable condition or location, e.g., wages, freight inwards, carriage inwards.
• Closing Stock: The value of unsold inventory at the end of the period.

The concept is crucial as it is matched against sales revenue in the Trading Account to determine the Gross Profit.

A Balance Sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It is a statement of assets, liabilities, and owner's equity. It is based on the fundamental accounting equation: $Assets = Liabilities + Capital$.

Its main characteristics are:

1. It is a Statement, Not an Account: It does not have debit or credit sides but is presented with liabilities and capital on one side and assets on the other.
2. Prepared on a Specific Date: It shows the financial position 'as at' a particular date (e.g., as at March 31, 2023), not for a period.
3. Reflects Financial Position: It reveals what the business owns (assets) and what it owes (liabilities and capital), thereby indicating its solvency and financial health.
4. Equality of Both Sides: The total of the Assets side must always be equal to the total of the Liabilities and Capital side.
5. Basis for Financial Analysis: It serves as the basis for calculating various financial ratios (e.g., current ratio, debt-equity ratio) to analyse the firm's liquidity and solvency.

Distinction:

Classification of Items:

(a) Capital Expenditure: Any expense incurred to bring a newly purchased old asset into usable condition is capitalized.

(b) Capital Expenditure: The expenditure enhances the value of the cinema hall and provides a long-term benefit.

(c) Capital Expenditure: Registration fees are a necessary cost incurred to acquire the legal title to the building and are added to its cost.

(d) Deferred Revenue Expenditure: This expenditure is of a revenue nature but is incurred to generate future income. Its benefit will accrue over several years, so it is written off over the period when the garden starts producing tea.

(e) Revenue Expenditure: Depreciation is the part of the cost of a capital asset allocated as an expense to the current period.

(f) Capital Expenditure: This is an installation expense necessary to make the machine operational and is added to the cost of the machine.

(g) Deferred Revenue Expenditure: Heavy advertising provides benefits over several years. The total cost is treated as a deferred revenue expenditure and is written off over the four-year period.

Operating Profit is the profit earned by a business from its primary, normal, and core business operations. It is a measure of a company's operational efficiency before considering the effects of its financing and investing activities.

It is calculated by taking the Gross Profit and deducting all operating indirect expenses, such as:

• Office and administrative expenses (e.g., salaries, rent, printing & stationery)
• Selling and distribution expenses (e.g., advertising, carriage outwards, sales staff commission)

Operating profit specifically excludes non-operating incomes (like interest received, profit on sale of assets) and non-operating expenses (like interest on loans, loss on sale of assets). The formula is:

$Operating \ Profit = Gross \ Profit - Operating \ Expenses$

Alternatively,

$Operating \ Profit = Net \ Profit + Non\text{-}operating \ Expenses - Non\text{-}operating \ Incomes$

Financial Statements are the formal, structured reports that summarize the financial activities and position of a business over a period of time and at a specific point in time. They are the end-product of the accounting cycle, prepared by following established accounting principles and standards to ensure consistency and comparability. In India, for companies, their format and content are governed by Schedule III of the Companies Act, 2013.

The complete set of financial statements primarily consists of:

• The Trading and Profit and Loss Account (or Statement of Profit and Loss)
• The Balance Sheet (or Statement of Financial Position)

Additionally, for companies, it also includes a Cash Flow Statement and Notes to Accounts.

Information Provided by Financial Statements:

Financial statements provide a wealth of information that is crucial for various stakeholders (investors, creditors, management, government, etc.) to make informed economic decisions.

1. Information on Financial Performance (from the Profit and Loss Account):

• Profitability: It reveals the net result of business operations over an accounting period – whether the business has earned a Net Profit or incurred a Net Loss.
• Revenue and Expenses: It provides a detailed breakdown of the revenues earned and expenses incurred. This helps in analysing the sources of income and areas of expenditure.
• Operational Efficiency: By calculating key figures like Gross Profit and Operating Profit, it helps in assessing the efficiency of the core trading and operating activities of the business.
• Basis for Future Projections: Past performance data from the P&L account is often used to forecast future earnings and performance.

2. Information on Financial Position (from the Balance Sheet):

• Assets: It shows the economic resources owned by the business, such as land, buildings, machinery, stock, and cash. This indicates the firm's capacity to generate future cash flows.
• Liabilities: It lists the financial obligations of the business to outsiders, such as loans and creditors.
• Equity: It shows the owner's claim on the assets of the business, representing the funds invested by the owners.
• Liquidity and Solvency: The Balance Sheet provides crucial information to assess the firm's ability to meet its short-term obligations (liquidity) and long-term debts (solvency). This is vital for lenders and creditors.

In essence, financial statements provide a comprehensive picture of a business's profitability and financial health, which is indispensable for accountability, stewardship, and effective decision-making.

Closing Entries are journal entries that are passed at the end of an accounting period to close all temporary or nominal accounts (i.e., all revenue, expense, gain, and loss accounts).

The purpose of these entries is two-fold:

1. To transfer the balances of all income and expense accounts to the Trading and Profit and Loss Account to ascertain the Gross Profit/Loss and Net Profit/Loss for the period.
2. To reset the balances of these temporary accounts to zero, so that they can start accumulating data for the next accounting period without mixing it with the previous period's data.

The final net profit or loss is then transferred to the Capital account (in case of a proprietorship/partnership) or Retained Earnings (in case of a company).

Four examples of closing entries are as follows:

Example 1: Entry to close direct expense and revenue accounts to Trading Account
This entry transfers the balances of all accounts related to the direct cost of goods (like purchases, wages) and sales to the Trading Account.

Journal Entries

Example 2: Entry to close Gross Profit to Profit and Loss Account
After the first entry, the Trading Account is balanced. If there is a Gross Profit (Credit side > Debit side), it is transferred to the P&L Account.

Journal Entries

Example 3: Entry to close indirect expense accounts to Profit and Loss Account
All indirect expenses like salaries, rent, and advertising are closed by transferring their balances to the debit side of the P&L Account.

Journal Entries

Example 4: Entry to close Net Profit to Capital Account
The final balance of the P&L Account, if it's a Net Profit, is transferred to the credit of the Capital Account.

Journal Entries

The Balance Sheet is a cornerstone of financial reporting, and its preparation is essential for any business entity. It is a statement that presents a snapshot of the company's assets, liabilities, and owner's equity at a specific point in time. The need for its preparation is multifaceted and vital for various stakeholders.

The key needs are discussed below:

1. To Ascertain the Financial Position:
The primary need for a balance sheet is to understand the true financial position or health of the business. It answers two fundamental questions: What does the business own (Assets)? And what does it owe (Liabilities and Equity)? This provides a clear picture of the company's net worth.

2. To Assess Solvency:
The balance sheet is crucial for assessing a company's ability to meet its financial obligations.

• Short-term Solvency (Liquidity): By comparing current assets to current liabilities, stakeholders can judge if the business has enough liquid resources to pay its short-term debts as they fall due.
• Long-term Solvency: The relationship between total debt and equity reveals the company's long-term financial stability and its ability to meet its long-term obligations.

3. To Provide a Basis for Economic Decisions:
Various users rely on the balance sheet to make informed decisions:

• Investors use it to assess the financial strength and risk of the company before investing.
• Creditors and Lenders analyze it to determine the creditworthiness of the business before granting loans or credit.
• Management uses it for internal analysis, planning future operations, and making strategic decisions.

4. To Comply with Legal Requirements:
For registered companies, preparing and filing a balance sheet is a statutory requirement under the Indian Companies Act, 2013. Failure to do so can result in legal penalties.

5. To serve as a Basis for the Following Year:
The balance sheet provides the closing balances of all real and personal accounts. These closing balances become the opening balances for the next accounting period, thus ensuring continuity in the accounting process.

Grouping and Marshalling are the principles that govern the presentation and arrangement of items in a Balance Sheet to make it more logical, understandable, and useful for its users.

Grouping:
Grouping refers to the process of classifying and putting together items of a similar nature under a common, logical heading. For example, instead of listing Cash in Hand, Cash at Bank, and Cheques in Hand separately, they are grouped under the head 'Cash and Cash Equivalents'. Similarly, Land, Building, and Machinery are grouped under 'Property, Plant, and Equipment'. Grouping makes the Balance Sheet more concise and easier to interpret.

Marshalling:
Marshalling refers to the specific order or sequence in which the grouped assets and liabilities are arranged and presented in the Balance Sheet. The way items are marshalled can highlight different aspects of the financial position.

There are two primary ways in which a Balance Sheet may be marshalled:

1. In Order of Permanence:

Under this method, assets and liabilities are arranged based on their permanency in the business.

• Assets are listed from the most permanent (least liquid) to the least permanent (most liquid). The order is typically: Non-Current Assets (like Land, Building, Goodwill) followed by Current Assets (like Stock, Debtors, Cash).
• Liabilities are listed from the most permanent to the least permanent. The order is: Owner's Equity (Capital), followed by Non-Current Liabilities (like Long-term Loans), and finally Current Liabilities (like Creditors, Bank Overdraft).

This method is generally adopted by joint stock companies in India, as it is the format prescribed under Schedule III of the Companies Act, 2013.

2. In Order of Liquidity:

This method is the reverse of the order of permanence. Assets and liabilities are arranged based on their liquidity or the urgency of payment.

• Assets are listed from the most liquid (easiest to convert to cash) to the least liquid. The order is typically: Current Assets (like Cash in Hand, Cash at Bank, Debtors) followed by Non-Current Assets (like Furniture, Building, Land).
• Liabilities are listed in the order of their urgency of payment. The order is: Current Liabilities (like Bank Overdraft, Bills Payable, Creditors), followed by Non-Current Liabilities (Long-term Loans), and finally Owner's Equity (Capital).

This method is commonly used by sole proprietorships and partnership firms as it clearly shows the working capital position and the firm's ability to meet its immediate obligations.

Gross Profit represents the profit a company makes from its core business operations, i.e., from buying and selling goods. It is calculated by deducting the cost of goods sold from the net sales.

The calculation involves two main steps:

1. Calculation of Cost of Goods Sold (COGS)

2. Calculation of Gross Profit

Step 1: Computation of Cost of Goods Sold (COGS)

COGS is the direct cost attributable to the production or purchase of the goods sold by a company. The formula is:

$ \text{COGS} = \text{Opening Stock} \ + \ \text{Net Purchases} \ + \ \text{Direct Expenses} \ - \ \text{Closing Stock} $

Computation of Cost of Goods Sold

Step 2: Calculation of Gross Profit

Once the Cost of Goods Sold is determined, Gross Profit can be calculated as follows:

$ \text{Gross Profit} = \text{Net Sales} \ - \ \text{Cost of Goods Sold} $

$ \text{Gross Profit} = \textsf{₹ } \ 40,00,000 \ - \ \textsf{₹ } \ 28,30,000 $

$ \textbf{Gross Profit} = \textbf{\textsf{₹ } \ 11,70,000} $

Alternate Solution (Trading Account Method)

Gross Profit is ascertained by preparing a Trading Account. The same result can be derived by presenting the information in the format of a Trading Account.

Trading Account of Simmi and Vimmi Ltd.

for the year ended March 31, 2017

To calculate the required figures, we first need to compute the Net Purchases and Net Sales from the given data. It is important to note that 'Wages' are a direct expense and are included in the calculation, while 'Salaries' are an indirect expense and are excluded.

Preliminary Calculations

1. Calculation of Net Purchases:

$ \text{Net Purchases} = (\text{Credit Purchases} \ + \ \text{Cash Purchases}) \ - \ \text{Purchases Return} $

$ \text{Net Purchases} = (\textsf{₹ } \ 7,50,000 \ + \ \textsf{₹ } \ 3,00,000) \ - \ \textsf{₹ } \ 10,000 = \textsf{₹ } \ 10,40,000 $

2. Calculation of Net Sales:

$ \text{Net Sales} = (\text{Credit Sales} \ + \ \text{Cash Sales}) \ - \ \text{Sales Return} $

$ \text{Net Sales} = (\textsf{₹ } \ 12,00,000 \ + \ \textsf{₹ } \ 4,00,000) \ - \ \textsf{₹ } \ 50,000 = \textsf{₹ } \ 15,50,000 $

(a) Calculation of Cost of Goods Available for Sale

This represents the total cost of all goods that the business had available to sell during the period.

(b) Calculation of Cost of Goods Sold (COGS)

This is the cost of the goods that were actually sold during the period.

(c) Calculation of Gross Profit

This is the difference between the revenue from sales and the cost of the goods sold.

The solution requires the calculation of two key profitability figures: Gross Profit and Operating Profit.

1. Calculation of Gross Profit

Gross Profit is calculated by preparing a Trading Account, which considers revenues and direct costs related to goods.

Cost of Goods Sold (COGS) = Opening Stock + Net Purchases + Direct Expenses - Closing Stock

$ \text{COGS} = \textsf{₹ } \ 50,000 + \textsf{₹ } \ 6,00,000 + \textsf{₹ } \ 60,000 - \textsf{₹ } \ 70,000 = \textsf{₹ } \ 6,40,000 $

Gross Profit = Net Sales - Cost of Goods Sold

$ \text{Gross Profit} = \textsf{₹ } \ 11,00,000 - \textsf{₹ } \ 6,40,000 = \textbf{\textsf{₹ } \ 4,60,000} $

2. Calculation of Operating Profit

Operating Profit is derived by subtracting all operating indirect expenses from the Gross Profit. Operating expenses are those incurred for the normal day-to-day running of the business.

In this case, the operating expenses are:

• Administration expenses: $\textsf{₹ } \ 45,000$

• Selling and distribution expenses: $\textsf{₹ } \ 65,000$

Note: 'Loss due to fire' is an abnormal, non-recurring, and non-operating expense, so it is not considered while calculating operating profit.

The calculation is as follows:

Net Profit is the final profit of the business after all expenses, both operating and non-operating, have been deducted from all incomes, both operating and non-operating.

It can be calculated by adjusting the Operating Profit for non-operating items. The relationship is as follows:

$ \text{Net Profit} = \text{Operating Profit} \ + \ \text{Non-operating Incomes} \ - \ \text{Non-operating Expenses} $

Calculation of Net Profit

Using the given values, we can compute the Net Profit.

Therefore, the Net Profit earned by M/s Arora & Sachdeva for the year 2016-17 is $\textsf{₹ } \ 14,75,000$.

The preparation of final accounts involves passing closing entries to transfer the balances of nominal accounts (incomes and expenses) to the Trading and Profit and Loss Account.

1. Journal Entries (Closing Entries)

These entries are passed at the end of the accounting year to close the books.

Journal Entries

2. Presentation in Final Accounts

Trading and Profit and Loss Account of M/s Bhola & Sons

for the year ended March 31, 2017

Balance Sheet of M/s Bhola & Sons (Extract)

as at March 31, 2017

Trading and Profit and Loss Account

for the year ended March 31, 2017

Balance Sheet as at March 31, 2017

Note: In the given Trial Balance, 'Loan' appears on both the debit and credit sides. Loan on the debit side ($\textsf{₹ } \ 6,000$) is a Loan given (Asset), and on the credit side ($\textsf{₹ } \ 10,000$) is a Loan taken (Liability). 'Income Tax' is treated as personal drawings.

Trading and Profit and Loss Account of M/s Ram

for the year ended March 31, 2017

Balance Sheet of M/s Ram as at March 31, 2017

Note: 'Returns' on the debit side are Sales Returns ($\textsf{₹ } \ 200$), and on the credit side are Purchases Returns ($\textsf{₹ } \ 600$). 'Sales tax collected' is a liability.

Trading and Profit and Loss Account of Manju Chawla

for the year ended March 31, 2017

Balance Sheet of Manju Chawla as at March 31, 2017

Trading and Profit and Loss Account of Mr. Deepak

for the year ended March 31, 2017

Balance Sheet of Mr. Deepak as at March 31, 2017

Trading and Profit and Loss Account

for the year ended March 31, 2017

Balance Sheet as at March 31, 2017

Trading and Profit and Loss Account of Mr. A. Lal

for the year ended March 31, 2017

Balance Sheet of Mr. A. Lal as at March 31, 2017

Trading and Profit and Loss Account of M/s Royal Traders

for the year ended March 31, 2017

Balance Sheet of M/s Royal Traders as at March 31, 2017

Trading and Profit and Loss Account of M/s Neema Traders

for the year ended March 31, 2017

Trading and Profit and Loss Account of M/s Nilu Sarees

for the year ended March 31, 2017

Balance Sheet of M/s Nilu Sarees as at March 31, 2017

Note: The trial balance provided in the question is arithmetically incorrect, as the total of debits ($\textsf{₹ } \ 3,64,700$) does not match the total of credits ($\textsf{₹ } \ 3,43,370$). This discrepancy is the reason the Balance Sheet does not tally. The solution above is based on the figures as given.

Trading and Profit and Loss Account of M/s Sports Equipments

for the year ended March 31, 2017

Balance Sheet of M/s Sports Equipments as at March 31, 2017