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INTRODUCTION AND NECESSITY OF PREPARATION' OF

FINAL ACCOUNTS
Introduction :
Partnership is the relation that exists between or among persons
carrying on business in common with a view to earn profit. In. India
partnership is governed by The Indian Partnership Act, 1932. Section
4 of this Act defines partnership act the relationship between
persons who have agreed to share the profit ol a business earned
on by all or
any of them acting for all.
PersortQ who enter into a partnership are individually called partners,
and collectively, a firm.
A partnership may be formed when a sole proprietor of an existing
business agrees with one or more persons to combine assets and/or
skills. Persons may also start a new business that has not existed
before.
Partnerships are common in wholesale businesses, in small retail
stores, and in personal service businesses. Partnerships are also often
used for professional businesses such as accounting and audit firms,
law offices and medical clinics.
Accounting has evolved and emerged, as have medicine, law and
most oilier fields of human activity, in response to the social, and
economic peeds of society. 'The end of the final accounting process is
a set reports that are called'Final Accounts or Financial Statements.
The following generally constitute the financial statements of a
Partnership firm -

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i) Trading Account.
ii) Profit and Loss Account and,
iii) Balance Sheet.

Need and Importance of Preparation of final Accounts of


partnership
The need of preparing Partnership Final Accounts can be described
(1) The measurement of income occupies a central position in
accounting. Income measurement probably the most important
objective and function, of accounting. Generally speaking, income
represents wealth increase the income, the greater will be. the success
of business enterprise.
(2) Certain law's the business houses to maintain books of accounts.'
Therefore, every Bill has to maintain books of accounts in order to
comply with' the provisions of certain " laws. Accordingly, even firm
has to dose The of accounts in every financial year and to prepare
Final Accounts tor ascertaining the financial results of a: firm;
(3) The financial accounts are prepared by every partnership firm to
meet its requirements such as the data planning, decision-making;
and control of Business operations
(4) The Final Accounts are regarded as a prominent accounting report.
The various interested parties may derive different information for
their own use.
Importance of preparing partnership Final Account
1) Final Accounts enables the outsiders to ascertain the
proprietory interest of each and every partner of a firm '"
2) Financial Statements enables us to calculate the actual capita
employed in the business.
3) The lender can ascertain the financial position of the business.
4) Final Accounts may serve as the basis for determining purchase
consideration of the business.
5) The trends of working capital of the business can be determined by
comparing the Final Accounts of successive years and corrective
measures can be taken wherever necessary.
6) Different financial ratios can be calculated from the Final Accounts
and these ratios can be utilised for better management of the firm.
7) The Government which enacts taxation is deep!y interested in tire
working of a firm. The Government has to depend on the Filial
Accounts for administering any kind of control over the -business
organisation.
8) The fundamental problem in the process of measuring periodic
income is the division of costs incurred between the present and.
future accounting periods.. The Profit and Loss Account and the
Balance Sheet are the two technical instruments used in reporting this
division. Both are necessary, because the absence of one will not
exhibit the picture clearly.

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"

FIXED CAPITAL AND FLUCTUATING CAPITAL


METHODS
Generally, ail the partners the firm contribute capital for running the
business. In the books of firm the capital accounts are maintained.
There are two methods of maintaining capital, accounts of
partners i.e. Fixed Capital Method and (2) Fluctuating or Floating
C a p i t a 1 Me th od.
The following chart shown in Fieure 1.2 will give you better
understanding about the methods of maintaining capital accounts of
partners.

Fig. 1.2 : Methods of maintaining Capful Accounts of partners

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1. Fixed Capital Method :
Under this method, for each partner, two accounts are opened. The
first account, Partners Capital Account shows the Partners original
contribution to the Kliiness as capital. This method is adopted when
it is desired to keep Partners capital Account at the original figure.
The balance oi this account is only chanced when there is a change in
the constitution or when n partner draws money from the business
against his cap The other account known as Partners' Current account
is opened to record the transactions, between the partners and me
farm, that is, salary, interest on capital, drawings, and so on.
Under Fixed Capital Method the balance of capital account of each
partner is to be retained fixed and therefore, all the adjustments
regarding interest on capital and drawing, salary, commission, net
profit or loss are recorded in separate account namely "Current
Account". The balances of Capital Accounts and Current Accounts
are separately in the Balance Sheet" of the firm. If Current Account
shows a debit balance, it will be recorded on asset side of the Balance
Sheet and the credit balance shown on the liabilities of me.
Balance Sheet. Hence, it is very important to note that when Current
Accounts are given together .with Capital Accounts of the partners in
the Trial Balance it is assumed to be Fixed Capital Method of
maintaining capital accounts or partners.
Under Fixed Capital Method, the capital and current accounts of a
partner will appear as follows .


Example
Akash & Badal were partners sharing profit & losses as 3:2
The following provisions were made in partnership deed.
1. Akash to salary Rs.3,000 p.a.
2. Interest on capital to be allowed @ 10% p.a.
3. Interest on drawings to be charged on personal withdrawals
made by partners.
The profit before making above provision was Rs.18,650.
The capital of Akash and Badal were Rs.40,000 and Rs.30,000
respectively and they have withdraw Rs.3000 & Rs.2000 respectively.
The interest on drawing of Akash amount to Rs.200 & Badal Rs.150.
Prepare Partners capital A/c. When their capitals are fixed .
Ans-
In the Books of M/S- Akash & Badal
Partners Capital A/c
Particulars A B Particulars A B
Rs. Rs. Rs. Rs.
To Balance c/d 40,000 30,000 By Balance b/d 40,000 30,000

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By Balance b/d
40,000 30,000 40,000 30,000

40,000 30,000

Dr. Partner’s Current A/c Cr.


Particulars A B Particulars A B
Rs. Rs. Rs. Rs.
To Drawings 3,000 2,000 By Interest on
To Interest on Capital 4000 3000
Drawing 200 150 By Salary 3000 -
To Balance c/d 9,200 4,450 By Net Profit 5400 3600
Adjusted

12,400 6,600
12,400 6,600
2. Fluctuating or Floating Capital Method :
If all entries relating to the partners are made in the Capital
Account itself, the Capita! will he said to be fluctuating. Under this
method a capital account for each partner is opened in the boos of
accounts. All the adjustments regarding drawings, interest on capital./
interest on drawings, salary or commission payable to
partner, . additional capital contributed, net profit or net loss allotted
to the partner etc. are known as Internal Adjustments or Partners' and
are recorded in Capital Account of that partner.
When the partnership firm decides not to keep separate current
accounts tor the partners, all the entries with regard to partners
drawings, salaries, interest and share of profit are passed through the
Capital Accounts of the partners. In such a case, the Capital Accounts
of the partners keep on fluctuating. There is one danger in this
method, if a partner draws more than what he is entitled, regarding
share of profit salaries, etc. there will be. When the partners maintain
the fluctuating capital method, no maximum limit can be put on the
partners' drawings by the division between the Capital Accounts,
Current Accounts.

Example
Joshi and Doshi are partners in a business sharing profits and losses
equally. Their capitals were Rs. 40,000 and Rs. 20,000 respectively.
The partnership deed provided the following terms :
1. Interest on Capital at 5% p.a. should be given..
2. Interest on Drawing at 10% p.a. should be charged for six months
only.
3. joshi is to get a monthly salary of Rs. 1,000.
4. Doshi is to get 1% commission on profits before appropriation.
5. The profits before making above appropriation was Rs. 30,000.
6. The drawings of joshi and Doshi were Rs. 4,000 and Rs. 10,000
respectively.
Prepare Partners' Capital Account when their capitals are
fluctuating.
[ANSWER]
In the books of M/s Joshi and Doshi
Dr. Partner's Capital Account Cr.

Particulars J D Particulars J D
Rs. Rs. Rs. Rs.

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To Drawings 4,000 10,000 By Balance B/D 40,000 20,000
To Interest on By Interest on
Drawings @ 10% 200 500 Capital @ 5% 2,000 1,000
p.a. p.a.
To Balance C/D 57,500 18,500 By Salary 12,000
By Com miss ion 300

By Net Profit 7,700 7,700


Adjusted
61,700 29,000 61,700 29,000
By Balance B/D 57,500 18,500

PREPARATION OF TRAIL BALANCE

Trading Account
Trading account is prepared to find out the Gross Profit and in turn
the percentage of gross profit to Sales. Gross profit is the excess of
sales price over cost or purchase price of goods. Here cost/purchase price
does not mean the price paid for goods to the supplier of goods but it
also considers all incidental expenses incurred t i ll the goods are
received and made saleable, such as carriage/freight on purchases,
wages paid to workers, customs duty, octroi, packing and forwarding
charges. However, expenses incurred on sale are not taken in the
Trading A/c.
It is already seen that the goods account is split up into four separate
accounts viz-
Purchases account to record both cash and credit purchases of goods,
Sales Account to record cash as well as credit sales of goods.
Purchases Returns or Returns Outwards Account to record the goods
returned out of the goods purchases, and Sales Returns or Returns
Inwards Account to record the goods returned by the customers out of the goods
sold to them. Similarly for the goods remained unsold ie. the goods on
hand at the end of the trading year a separate 'Stock Account' is
opened. The stock at the end of the year is termed as 'Closing Stock1.
As this stock is on hand at the beginning of the next year it becomes
the 'Opening stock/ It means closing stock of the last year forms the
opening stock of the current year.
A trader prepares a Trading Account to ascertain the result of buying
and selling of goods i.e. Gross Profit or Gross Loss. Gross Profit is
the excess of selling price over the cost price of the goods sold i.e.
Selling price Less Cost of goods sold = Gross profit

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Therefore, the balances of the above mentioned accounts are taken in
the Trading Account.

Opening stock, Purchases, Returns Inwards are taken on the debit side
of the Trading Account and Sales, Returns Outwards and closing
stock are taken to the credit side.
In addition to above, all expenses incurred on purchases till the goods
are reached at the location of the trader (Le. purchaser) and they are
made ready for re-sale (Such as wages of coolies, freight, carriage,
custom duty clearing charges, packing & forwarding charges etc.) are
debited to the Trading Account because they increases the cost of the
goods purchased.
The balance of the Trading Account is the Gross Profit or Gross Loss
- if it is a credit balance, it is Gross Profit, and if it is a debit balance,
it is
gross loss.

Profit & Loss A/c


Trading A/c shows only Gross Profit. It does not take into
consideration expenses incurred to conduct the business, such as
administrative or management expenses, (like staff salaries, office
expenses, rent, rates, taxes, insurance, telephone, lighting, repairs of
building, furniture, machinery etc., depreciation) Selling and
Distribution expenses (like carriage outwards, salesmen's salaries,
advertisement, discount allowed, bad debts, delivery Van expenses
etc.) and financial expenses (like interest paid, legal charges etc.)
Net Profit : All incomes and gains, such as interest, commission,
discount etc. received, profit on sale of asset etc. are added to the
Gross Profit : From this total income, all administrative, selling &
distribution and financial expenses & other expenses are deducted. The
remaining amount is the Net Profit, which belongs to the proprietor. If
total of expenses is more than the G. P. & other incomes, the
remaining balance is Net Loss, which reduces the capital of the
proprietor.
Thus the Profit & Loss A/c shows net profit or net loss. If the profit
shown by the Profit & Loss A/c is not adequate, the trader can take steps
to improve the profit. He can study the various items of expenses and
take decision to curtail heavy expenses. He can compare various items
of expenses and study various ratios to improve the position. He can find
out the causes of reduction in net profit and take corrective steps.
Profit & Loss A/c is credited with Gross Profit and all income & gain
items. It is debited with all expenses as stated above. If the total of credit
side exceeds the total of debit side, the difference is Net Profit & if the
total of debit side exceeds the total of credit side, the difference is Net
Loss. Net Profit is added to capital, whereof the Net Loss is deducted
from capital in the Balance Sheet. /

Balance Sheet
All Nominal Accounts are closed by transferring their balances to the
Trading and profit and Loss Account. But Real Accounts and personal
Accounts are closed by carrying forward balance for next year. These
balances are grouped in a separate statement called Balance Sheet. Thus,
Balance Sheet is a statement of the Ledger balances remaining after having
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the Nominal accounts closed by transferring them to the Trading and Profit
and Loss Account.
The Balance Sheet has also two sides; but they are not headed as ‘Dr.’ and
‘Cr.’ sides because the Balance Sheet is a statement and not an account The
left-hand side is headed as 'Liabilities' and the right-hand side is headed as
'Assets'. All Real Accounts and the Personal Accounts with debit balances
are shown on the 'Assets' side, whereas the Personal Accounts having credit
balances, including Capital A/c, are shown on the 'Liabilities' side. The
Balance Sheet is, therefore, defined as a statement of assets and
Liabilities. Since the Balance Sheet is not an account, there is no ‘To’ or ‘By’
proceeding the names of the Accounts recorded in the Balance Sheet.

Adjustments
These are certain additional adjusting entries passed in journal proper
before preparing the final accounts of a partnership firm, to find out
the accurate and exact amount of net profit together with the
appropriate valuations of various assets and liabilities. Following is
the summary of certain adjustments, their accounting; entries and
accounting treatment in partnership final accounts.

Sr. Adjustment Adjusting Entry Accounting Treatment in

a) Trading Account Profit and Loss Acco

b) Closing Stock (Cost or Closing Stock A/c Dr. Shown on the Credit
Market Price whichever To Trading A/c Side.
is lower)
c) Outstanding Expenses Expenses A/c Dr. Added to direct expenses Added to the indirect
To Outstanding Expenses A/c on the debit side. expenses on the Debi
Side.
d) Prepaid Expenses Prepaid Expenses A/c Dr. Deducted from direct Deducted from the
To Expenses A/c expenses on the debit indirect expenses on
side. debit side.
e) income Received in income A/c Dr. Deducted from the
Advance To Pre-Received Income A/c income on the Credit

f) Income Receivable Income Receivable A/c Dr. Added to the income


To income A/c the credit side.
g) Bad Debts Bad Debts A/c Dr. To Added to Bad Debts
Sundry Debtors A/c the Debit Side

h) Provision for Doubtful Profit and Loss A/c Dr. Shown on the Debt s
To reserve for Discount on Debtors (To be compared wit
A/c R.D.D.)
i) Reserve for Discount on Profit and loss A/c Dr. Shown on the Debit S
Debtors To Reserve for Discount on Debtors
A/c
Reserve for discount on Reserve for discount on creditors A/c Shown on the Credit
Creditors Dr.
To Profit and Loss A/c

Depreciation Depredation A/c Dr. To Shown on the Debit S


Asset A/c

Adjustment Adjusting Entry Accounting Treatment in ....

Trading Account Profit and Loss Balance Sheet


Account
Interest on Capital Profit and Loss A/c Dr. Shown on the Shown on the liabilit
To P's Capital A/c Debit Side. way of additions to

Interest on P's Capita! A/c Dr. Shown on the Shown on the liabilit
Drawings To Profit and Loss A/c Credit Side. way of deduction fro
Capital
Interest due on loan Profit and Loss A/c Dr. Shown on the Shown on the liabilit
taken from Bank To Bank Loan A/c Debit Side. way of addition to B

( interest due on Outstanding Interest on investment A/c Dr. To Shown on the Shown on the asset s
Investment Profit and Loss A/c Credit Side. Current Asset.
interest aue on Loan Outstanding interest on Party's Loan Dr. Shown on the Shown on the asset s
given to Party To Profit and Loss A/c Credit of addition to Party's

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Goods destroyed by Insurance Company A/c Dr. Shown on the credit side 1 Shown on the Shown on the asset s
fire / accident Profit and Loss A/c Dr. with total goods debit side with outstanding claims
(insured) To Trading A/c destroyed by fire actual loss by fire / Insurance Company.
/accident. accident.
Goods destroyed by Profit and Loss A/c Dr. Shown on the credit side Shown on the
fire / accident To Trading A/c with total goods debit side with
(uninsured) destroyed by fire actual loss by fire /
accident. accident.

Goods stolen (i.e. Profit and Loss A/c Dr. Shown on the Credit Shown on the
Loss by Theft) To Trading A/c Side. Debit Side.

Sr. Adjustment Adjusting Entry accounting Treatment in

No. Trading Account Profi


Acco
n) Goods distributed as free Profit and Loss A/'c Dr Shown on the Credit Side. Show
sample To Trading A/c Debit
(i.e. Advertisement)
o) Goods withdrawn by P's Capital A/c Dr. Deducted from Purchases on
partners for persona! use To Trading A/c the Debit Side.
(i.e. P's Drawings)
p) i) Unrecorded Purchases Trading A/c Dr. Added to Purchases on the
To Sundry Creditors A/c Debit Side. ,

p) ii) Unrecorded Sales Sundry Debtors A/c Dr. Added to Sales on the Credit
To Trading Side.
q) i) Capital expenditure Capital Expenditure A/c Dr. To Deducted from Revenue Dedu
included in Revenue Revenue Expenses A/c Expenses on the Debit Reve
Expenditure on th
q) ii) Revenue expenditure Revenue Expenses A/c Dr. Added to Revenue Expenses Adde
included in Capital To Capital Expenditure A/c on the Debit Side. Reve
Expenditure on
Side.
r) Bills Receivable dishonored Sundry Debtors A/c Dr
To Bills Receivable A/c
Sr. No. Adjustment Adjusting Entry Accounting Treatment in

s) Trading Account Profit and Loss Balance Sheet


Account
t) i) Bills Payable Bills Payable A/c Dr. Shown on the liability side by way of addition to
dishonoured To Sundry Creditors Sundry Creditors to
A/c Shown on the liability side by way of deduction
from Bills Payable.
t) ii) Deferred Deferred Expenses Deducted from Deducted from Shown on the asset side by way of addition to
Expenses included A/c Dr. Revenue Expenses Revenue Expenses Deferred Expenses.
in Revenue To Revenue Expenses on the Debit Side. on the debit side.
Expenses A/c

u) i) Revenue Expenses Revenue Expenses Added to Revenue Added to Revenue Shown on the asset side by wav of deduction from
included in A/c Dr. Expenses on the Expenses on the Deferred Expenses.
Deferred To Deferred Expenses Debit Side. debit side.
Expenses A/c

u) ii) Capital Receipts Revenue Receipts A/c Deducted from Deducted from Shown the liability side by way of addition to
included in Dr. Revenue Receipts on Revenue Receipts on Capita! Receipts.
Revenue Receipts To Capita! Receipts the Credit Side. the Credit Side.
A/c
v) Revenue Receipts Capita! Receipts A/c Added to Revenue Added to Revenue Shown on the liability side by way of deduction
included in Dr. Receipts on the Receipts on the from Capital Receipts
Capita! Receipts To Revenue Receipts Credit Side. Credit Side.
A/c
Commission to Profit and Loss A/c Shown on the Debit Shown on the liability side by
working Dr. Side. way of addition to P's Capital
partners as a To P's Capital A/c
percentage on
Gross Profit or
Sales

Illustration : After considering the under mentioned information,


prepare a Trading and Profit and Loss Account for the year ended 31st March
2004 and a Balance Sheet as on that date from the following Trial
Balance of a manufacturer.
Trial Balance.
Particular Dr. Rs. Cr. Rs.

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Capital Account 2,03,000
Drawings Account . 15,000
Freehold Land and Premises 90,000
Plant and Machinery . 40,000
Loose Tools 3,000
Bills Receivable 3,000
Stock 45,000
Purchases 51,000
Wages 20,000
Carriage 1,500
Salaries 5,000
Rent, Rates and Taxes 2,800
Discount and Allowances 1,500
Bills Payable
National Bank 20,000 3,800
Cash in hand 400
Sundry Debtors 45,000
Sundry Creditors
Repairs and Replacements 1,800
Purchases Returns 40,000
Extension to Premises 7,500
Bad Debts 1,200 2,650
Advertisement 500
Goods Sold
Sales Returns 2,000
Gas and Water _ 800 1,15,000
Furniture and Fixtures
1,200
General Expenses 800
Printing and Stationery 450
Income-Tax 5,000
3,64.450 3,64,450

Write depreciation of Plant and Machinery at 5% of Loose Tools at 15% and


Furniture at 5%. The Stock on hand on 31st March, 2004 amount Rs.
60,000. Provide
2
0100090000030603000000005202000000005202000026060f009a0
4574d464301000000000001003392000000000100000078040000000
0000078040000010000006c0000000000000000000000070000001e0
000000000000000000000ba000000d202000020454d4600000100780
400000c0000000100000000000000000000000000000056050000000
3000040010000b300000000000000000000000000000000e2040038b
b0200460000002c00000020000000454d462b014001001c000000100
000000210c0db01000000600000006000000046000000e0010000d40
10000454d462b224004000c000000000000001e4009000c000000000
00000244001000c00000000000000304002001000000004000000000
0803f214007000c00000000000000084000052c010000200100000210
c0db0100000000000000000000000000000000000000010000008950
4e470d0a1a0a0000000d49484452000000080000001f080200000055b
e1bff000000017352474200aece1ce9000000097048597300000ec4000
00ec401952b0e1b000000a949444154384f63fcffff3f0336c084551428
8890b83a879171ce55b83a90c4ebddc58c8c8c3aa9289ac13a0c2a8036
bdda55842c0392101515c5b48908cbd1342174bc7ad8872287696dd1a
e574041460a7c8ed372622570052ec380ba8adc600725042880a787fff
fafcc6680843498096333800560009420a08a502c7f7d6107c3ae0a574
8d24028079a33fb0a9c0b95009981240a8a56a89d70d12bb3214ca004
c829c800220100d60f97f48bd9960a0000000049454e44ae426082084
0010824000000180000000210c0db010000000300000000000000000
00000000000001b40000040000000340000000100000002000000000
000bf000000bf000000410000f84103000000000000b3000000b3ffffff
40000000b3000000b3fffff7412100000008000000620000000c000000
01000000150000000c00000004000000150000000c00000004000000
51000000340100000000000000000000070000001e00000000000000
000000000000000000000000080000001f0000005000000068000000
b80000007c000000000000002000cc00080000001f000000280000000
80000001f00000001000400000000000000000000000000000000001
19
00000000000000000000000ffffff00009bd400d49b000072baea00eaea
ea00eaba7200d4ffff0000009b0072009b00ffeaba009bd4ff0072000000
baeaff0072007200ffd49b00780000f11b311bf111431111111b311111
1146111111dea179a1bca117800311111111111111111111111111111
11111111111111111111111111111000000001111111111111111111
11111111111111111111114000061111231111114311111143111111
4311115143111140031111112311111111111111111114c000000640
000000000000000000000070000001e0000000000000000000000080
000001f0000002900aa0000000000000000000000803f000000000000
00000000803f00000000000000000000000000000000000000000000
00000000000000000000220000000c000000ffffffff460000001c00000
010000000454d462b024000000c000000000000000e0000001400000
00000000010000000140000000400000003010800050000000b02000
00000050000000c021f000800030000001e0004000000070104000400
0000070104007f000000410b2000cc001f000800000000001f0008000
000000028000000080000001f0000000100040000000000000000000
000000000000000100000000000000000000000ffffff00009bd400d49
b000072baea00eaeaea00eaba7200d4ffff0000009b0072009b00ffeaba0
09bd4ff0072000000baeaff0072007200ffd49b00780000f11b311bf111
431111111b3111111146111111dea179a1bca11780031111111111111
11111111111111111111111111111111111111111111100000000111
11111111111111111111111111111111111111400006111123111111
43111111431111114311115143111140031111112311111111111111
111110c00000040092900aa000000000000001f000800000000000400
% for Discount on Sundry Debtors and
00002701ffff030000000000
5% for Doubtful Debts. Rs. 1,500 were due for wages and Rs. 450 for
salaries for the month of March 2004. The last Bill of Rs. 400 for Taxes was for the
half-year ending 30th June 2004.
Solution
Dr. Trading and Profit & Loss A/c Cr.
for the year ending 31-3-2004
Particulars Rs. Particulars Rs.
To Stock (Opening) 45,000 By Sales 1,15.000
To Purchases 51,000 Less : Ret Inwards 2,000 1,13,000
Less :R. 0. 2,650 48,350
To Wages 20,000 By Stock (Closing) 60,000
Add : Outstanding 1,500 21,500
To Carriage Inward 1,500
To Gas and Water 800
To Gross Profit c/d 55,850

By Gross Profit b/d

To Salaries 5000
Add : Outstanding 450
To Rent, Rates 2,800
& Taxes
Less: Pre-paid taxes 200
To General Expanses
To Printing &Stationery
To Advertisement
To Bad Debts
To R. D. D.
To Reserve for Discount on
Debtors
Discount and Allowances
To Repairs Replacement
To Depreciation
Plant & Machinery 2,000
Loose Tools 450
Furniture 60

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To Net Profit transferred
to Capital

1,73,000 1,73,000

55,850
5,450

2,600
800
450
500
1,200
2,250

1,069
1,500
1,800

2,510

35,721
55,850 55,850
Balance Sheet
As at 31st March, 2004
Liabilities Rs. Assets Rs.

Sundry Creditors 40,000 Cash in Hand 400


Bills Payable 3,800 Cash at National Bank 20,000
Outstanding Expenses : 1,950 Stock 60,000
Wages 1,500 Debtors 45,000
2,18,721
Salaries 450 Less : R. D. D, 2.250
Capital : 2,03,000 Res. for
Add Net Profit 35,721 Discount 1,069 41,681
2,38,721 Bills Receivable 3,000
Less: Drawings 15,000 Prepaid Taxes 200

Income tax 5,000 Loose Tools 3,000


2,550
Less : Depr. 450
Furniture 1,200
1,140
Less : Depr. 60
Plant & Machinery 40,000
38,000
Less : Depr. 2,000
Freehold Premises 90,000
Add : Extension 7,500 97,500
2,64,471 2,64,471

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CONCLUSION

1)Partnership Final Accounts are the important financial statements


prepared at the accounting close to disclose the financial status and
performance of a firm.
2)Income statements, i.e. Trading Account and Profit and Loss,
Account are prepared to know the financial performances of the firm's
business operations.
3)Position statement i.e. Balance Sheet is prepared to know the
financial, position of the partnership firm.
4)The important accounting effects of various unrecorded transactions
i.e. adjustments on financial statements are necessary to record for
showing the true and fair views of the firm's books of accounts.
5)The analysis of financial information dicloseci by final accounts
gives better insight into the financial strengths and weaknesses of the
partnership firm.
BIBLIOGRAPHY

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