Recall Exercise 1 of Chapter 4. The MD, Mr. G.C. Gupta, having understood the gist of the
Question:
Recall Exercise 1 of Chapter 4. The MD, Mr. G.C. Gupta, having understood the gist of the conceptual framework of financial statements, is now interested in the understanding of GAAPs, because of their obvious influence on the financial statements. He requests the CFO, Mr. Lokesh Gupta, to prepare in a brief report, containing, not exceeding four A4-size pages with adequate margin and normal space between the paragraphs.
Required Suppose that you are the CFO. Please make the report. Business reports need to be brief, concise and precise. They also need to be drafted in a simple language, devoid of any jargon to the best possible extent. Keep these considerations in mind while preparing the gist.
Exercise 1
The following is the trial balance of Sanjay Industries Ltd. as on 31st March 2006.
Further information
1. Outstanding rent amounted to ₹7,200 while outstanding salaries ₹8,100 at the end of the year.
2. Make a provision for doubtful debts amounting to ` 4,590.
3. Stock on 31st March 2006 was valued at ₹7,92,000.
4. Depreciate plant & machinery @ 14% and furniture & fittings @18%.
5. Amortise patents & trademarks @ 5%.
6. Provide for managerial remuneration @ 10% of the net profits before tax.
7. Make a provision for income tax @ 35%.
8. The Board of Directors proposes a dividend @ 10% for the year ended 31st March 2006 after transfer to General Reserve @ 5% of profit after tax.
Required
1. Prepare the following financial statements of Sanjay Industries Ltd.:
a. Profit and loss account for the year ended 31st March 2006.
b. Profit and loss appropriation account for the year ended 31st March 2006.
c. Balance sheet as on 31st March 2006.
2. Briefly comment upon the performance of the company.
Step by Step Answer:
