Prepare trading, profit and loss account and balance sheet as on 31st Dec 2022 based on the provided trial balance and additional information.

Steps to Solve

1. Calculate Gross Profit To calculate the Gross Profit, use the formula:

$$ \text{Gross Profit} = \text{Sales} - \text{Cost of Goods Sold (COGS)} $$

COGS includes Purchases and Opening Stock, adjusted by Closing Stock:

• COGS = Purchases + Opening Stock - Closing Stock
• COGS = ( 4000 + 31000 - 1250 = 31750 )

Now calculate Gross Profit:

• Gross Profit = ( 29000 - 31750 = -2750 ) (This is a Gross Loss)

2. Calculate Operating Expenses Identify and sum the Operating Expenses from the trial balance and additional information:

• Operating Expenses = Wages + Carriage Charges + Rent & Taxes + Depreciation on Machinery + Outstanding Rent and Taxes - Prepaid Wages
• Depreciation on Machinery = ( 7000 \times 12% = 840 )
• Outstanding Rent and Taxes = 150
• Prepaid Wages = 300
• Operating Expenses = ( 19000 + 300 + 900 + 840 + 150 - 300 = 19590 )

3. Calculate Net Profit or Loss Use the formula:

$$ \text{Net Profit/Loss} = \text{Gross Profit} - \text{Operating Expenses} $$

• Net Profit/Loss = ( -2750 - 19590 = -22340 )

4. Prepare Trading and Profit & Loss Account Format the Trading and Profit & Loss Account:

Trading Account for the Year Ended 31st Dec 2022

Sales                                  29000
Less: COGS                            31750
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Gross Loss                            -2750

Profit & Loss Account

Gross Loss                           -2750
Less: Operating Expenses             19590
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Net Loss                            -22340

5. Prepare the Balance Sheet Format the Balance Sheet as of 31st Dec 2022, using the trial balance and additional adjustments:

Balance Sheet as on 31st Dec 2022

Liabilities
Capital                                   51400
Sundry Creditors                           10000
Outstanding Rent and Taxes                  150
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Total Liabilities                   61550

Assets
Sundry Debtors                            1800
Machinery (net of depreciation)        6160
Stock                                  1250
Bank Balance                           400
Prepaid Wages                          300
----------------------------------------------
Total Assets                       70060 

6. Adjust for Losses in Capital Since there is a net loss, adjust the capital:

• New Capital = Initial Capital + Net Loss = ( 51400 - 22340 = 29060 )

Recalculate the liabilities and assets accordingly.

Trading Account for the Year Ended 31st Dec 2022
Sales                                  29000
Less: COGS                            31750
----------------------------------------------
Gross Loss                            -2750

Profit & Loss Account
Gross Loss                           -2750
Less: Operating Expenses             19590
----------------------------------------------
Net Loss                            -22340

Balance Sheet
Liabilities
Capital                                   29060
Sundry Creditors                           10000
Outstanding Rent and Taxes                  150
----------------------------------------------
Total Liabilities                   39110

Assets
Sundry Debtors                            1800
Machinery (net of depreciation)        6160
Stock                                  1250
Bank Balance                           400
Prepaid Wages                          300
----------------------------------------------
Total Assets                       70060