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CASE STUDY- BRAMPTON HOME MAKERS Mr.

Mill Mouse started a new Business naming it BRAMPTON HOME MAKERS for manufacture and sale of various home kitchen machines. He planned to sell 12,000 coffee makers, 5,000 microwave ovens and 10,000 mixer-cum-grinders in the first year of its operation. For this got a project report prepared from a Chartered Accountant Mr. Charlton to get the required funds from his Bank BBN BAMRO. His Bankers agreed for the required credit facilities and asked him to open a Bank Account in its White Market Branch. For this purpose Mr. Mill arranged Rs. 20,00,000 on 1st January, 2007 out of which Rs.12,00,000 was from his past savings and Rs.4,00,000 each as interest free loan from his wife Mrs. Jeniffer and his father Mr. Think Tank. On the same day he opened a current account with the Bank with Rs.1.8 million. On the next day, the Bank completed the formalities for giving the credit facilities and also got the equitable mortgage of a house owned by Mrs. Jeniffer costing Rs.3.00 million having market value of Rs.15.50 million (as certified by the Registered Valuers M/s Cartol & Cartol). The Bank sanctioned a term loan of Rs. 25,00,000 and a cash credit limit of Rs.15,00,000. On the same day the Bank disbursed the sanctioned funds in the favour of the firm. Mr. Mill, on 3.1.2007, made the following transactions: a) Paid a deposit of Rs.3,00,000 and rent for three months till 31.3.2007 to Mr. Dave Potter, the landlord of the factory who had agreed for a lease agreement for 15 years at initial rent of Rs.1,20,000 per annum and the refundable deposit for which the tenant will be receiving interest @ 10% per annum at the end of each Quarter. b) Received the Plant & Machinery required for the project costing a total of Rs.35,00,000 including cost of plant Rs.29,50,000 supplied by M/s Daffodil Industries, freight Rs.75,000 and remaining as installation expenses. The freight was paid to transporters by cheque whereas the installation expenses were payable to the suppliers and were included in the bill. The suppliers M/s Daffodil Industries were paid 50% of their invoice value and were informed that the remaining payment will be made with in a week of commencement of the production. The production was started after 10 days and the payment was made on the next day of commencement of production. c) Recruited 100 workers, 12 clerks and 6 officers. The officers and clerks were interviewed by him but the workers were engaged with

the help of a recruiting agency which sent a bill @ Rs.600 per worker as its charges. This amount was paid after seven days of receipt of the Bill. d) Purchased furniture of invoice value of Rs.2,25,000 from M/s Bell Furnitures for which the payment was made immediately after negotiations in which the bill amount was reduced to Rs.2,10,000. On 10th January, the raw materials, consumable stores, oils and lubricants were purchased from suppliers M/s Almighty Enterprises, M/s Not-so-good Enterprises and M/s Down-the-Well Distributors for Rs.10,00,000 , Rs.2,00,000 and Rs.80,000 respectively. All the goods supplied were on (2/10, net 30) basis. The payment was made on the last day when the discount offer was to close. The first lot of 200 Mixers, 300 Coffee makers and 250 ovens was dispatched to its customers M/s Balloons & Parachutes on 18th of the month on (5/10, net 30) basis. The freight of Rs.10,000 was to be paid by the buyers. The customers could not enjoy the discount but paid on the last date as agreed. On 19th January Mr. Charlton visited the factory and his dues of Rs.25,000 were duly paid to him. On 7th February and on 7th March the salary and wages was paid to the employees. Apart from above, Printing & Stationery of Rs.5,000 was paid on 5.1.2007 and Rs2000 on 6.3.2007 ; travelling Exp of Rs.10,000 was paid on 12.1.07 and of Rs. 15000 on 15.3.07; telephone exp of Rs.12000 and Rs.20000 were paid on 10.2.07 and 10.3.07. Other Purchases were made as follows: -On 25.1.07 raw material for Rs.3,00,000 purchased in cash from Dew Enterprises. -On 4.2.07 consumable stores purchased from Mr. Big Mouth for Rs.20,000 but payment made on 14.3.07. - On 28.2.07 Raw Material from M/s Almighty Enterprises for Rs.800000. Other Sales were as follows: -On 30.1.07, 300 Coffee Makers and 400 Mixers sold to M/s Bulls & Bulls Limited on (3/10, net 30 basis). They availed the discount offer. -On 15.2.07, 500 Coffee Makers and 1000 ovens were sold to Mr. Loud Mouth. -On 23rd March,2007, 200 Coffee Makers, 500Grinders and 400 ovens were sold to M/s Balloons & Parachutes on (5/10, net 30) basis. The

freight of Rs.15,000 was to be paid by the buyers. The customers could not enjoy the discount but paid on the last date as agreed. Cash withdrawl from Bank of Rs.400000 each were made on 6 th of February and 6th March to pay the salary and wages. Note: 1.The Sale Price of Oven, Mixer and Coffee Maker is Rs.1,600, Rs.850 and Rs.560 respectively. 2. All Receipts and Payments in excess of Rs.20,000 per person are by cheque only. 3. Wages per worker-Rs.4000; Salary per officer-Rs12000 and per clerk-Rs6500; 4. Power Bill for three months till 31st March of Rs.255000 was received on 05.04.07 and paid on 07.04.07. You are required to a) Arrange all transactions and events in chronological order; b) State which accounting concept or convention is applicable in each transaction and event. c) Journalise the same.

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