Statement of Affairs Method for Calculation of Profit or Loss under Single Entry System

A trader may keep his accounting records under the single entry systemdue to lack of resources or expertise. However he would be equally eager to calculate his profit or loss from his business in comparison to a trader who keeps proper records under double entry system. In this post we will see how can this trader find out his profit or loss for a period (using the Statement of Affairs Method).

It is well understood that due to absence of proper records under the single entry system of accounting, it is not possible to prepare a Profit and Loss Account to ascertain the amount of profit or loss. So we will have to employ some other method to calculate profit or loss here. I will show you how its done. Just read on to find out. Also if you are conversant with the Hindi language, you can watch our video on the topic here.

APPROACHES FOR CALCULATION OF PROFIT AND LOSS UNDER THE SINGLE ENTRY SYSTEM

There are two approaches to calculate profit or loss under the single entry system:

1. Balance Sheet Approach – Statement of Affairs Method; and
2. The Transaction Approach – Conversion Method

In this article we will cover the first approach.

BALANCE SHEET APPROACH OR STATEMENT OF AFFAIRS METHOD

Under this method, a trader can ascertain his profit or loss for a particular period by comparing the capital at the beginning of the period with the capital at the end of the period.

The basic assumption behind this approach is that the increase/decrease in capital of a business during an accounting period is due to the profit earned/loss sustained by it during that accounting period.

For this purpose two comparative Statement of Affairs are prepared, one giving the capital at the commencement and other at the end of the period. Capital in both cases is being represented by Net Worth i.e. excess of Assets over Liabilities.

WHAT IS STATEMENT OF AFFAIRS?

Statement of Affairs is a statement of Assets and Liabilities prepared to find out the financial position (or Capital) of a business where accounts are not maintained on the double entry system.

IF IT IS A STATEMENT OF ASSETS AND LIABILITIES THEN WHY WE CALL IT A STATEMENT OF AFFAIRS AND NOT A BALANCE SHEET?

Although a Statement of Affairs shows a collection of assets and liabilities, it cannot be called a Balance Sheet. This is because the values of such assets and liabilities are not taken from ledger accounts but are estimates made by the owner of the business.

The balancing figure of the statement of affairs on a particular date = Total Assets – Total Liabilities = Capital as on that date

SO HOW TO FIND PROFIT OR LOSS UNDER THE STATEMENT OF AFFAIRS METHOD?

Profit or Loss is calculated using the following formula:

Profit or (Loss) = Closing Capital + Drawings during the period – Opening Capital – Further Capital introduced

LET US TAKE A SMALL PROBLEM TO UNDERSTAND THE ABOVE

• Capital as on 1st January, 2017 Rs. 25600
• Capital as on 31st December, 2017 Rs. 30400
• Drawings during the year 2017 Rs. 12600
• Additional Capital introduced on 30th Sept, 2017 Rs.  4000

Calculate the Profit or Loss for the year 2017.

Solution:

Calculation of Profit or Loss for 2017

(Applying the above formula: Profit or (Loss) = Closing Capital + Drawings during the period – Opening Capital – Further Capital introduced)

Profit = 30,400 + 12,600 – 25,600 – 4,000 = Rs 13,400

If the result was negative, it would have meant a loss.

LET US TAKE ANOTHER ILLUSTRATION

Problem:

Mr D started a business by investing Rs 9000 in cash into the business with no other assets and no liabilities to outsiders. At the end of the first year, his records showed the following assets and liabilities:

• Furniture Rs 4000
• Cash Rs 3600
• Equipment Rs 4000
• Creditors Rs 6000
• Debtors Rs 5000

1. Prepare a Statement of Affairs as of the close of the first year.
2. Assuming that he did not make any drawings from the business nor did he introduce any further capital during the year, calculate his profit in the first year.

At the end of the second year, the records of D showed the following assets and liabilities:

• Furniture  Rs 8000
• Creditors  Rs 16000
• Cash  Rs 5000
• Equipment  Rs 6000
• Debtors Rs 4000
• Building  Rs 20000
• Loan  Rs 10000

1. Prepare a Statement of Affairs as of the close of the second year;
2. Assuming that during the year he had introduced Rs 3000 as additional capital and had withdrawn Rs 600 per month for personal use, calculate his profit for the second year.

Solution:

First Year

First of all let us prepare the Statement of Affairs for the first year as asked by the problem.

Capital at the beginning of the first year = cash invested by Mr D = Rs 9000 ( as mentioned in the problem)

Since there is no drawings or capital introduction in the first year, profit will be calculated as follows:

Capital at the end of the first year	10600
Less: Capital at the beginning of the first year	9000
Profit during the first year	1600

Second Year

So from the above we got Capital at the end of the Second year = Rs 17000

Now let us calculate the profit or loss for the second year:

Capital at the end of the Second year	17000
Less: Capital at the beginning of the Second year	10600
Add: Drawing during second year (600×12)	7200
Less: Capital introduced in Second Year	3000
Profit in the second year	10600

From the above Statement of Affairs, we could find out the Capital at the end of the first year which is the balancing figure i.e. Total Assets – Total Liabilities = 16600- 6000 = Rs 10600.

Written Communication Tools for Employees

Written Communication Tools for Employees Messages that are exchanged in written form are called written communication. Organizations use different tools or methods for communication with the executives and with the employees. The methods or tools of written communication as applicable for written communication tools for management and employees are discussed below-

Management is to communicate with the employees to make them aware and informed about different matters. The written communication tools for employees are discussed below-

Written Communication Tools for Employees

• Job Schedule: Employees are given job schedule so that they can better understand their work area, authority and responsibility. Sometimes, management also reminds the employees about their job areas by supping job schedule.
• Pay-roll Envelope: In many organizations salaries or wages are paid to employees in envelope. The envelope also contains a statement of salary showing the basic or gross payment, allowance, deduction etc. business communication 
• 

• Notice Book: Sometimes managers use notice book to communicate urgent message to the employees. Normally, the office peon brings the notice book to the concerned employees and makes the notice signed for acknowledgement.
• Employee Newsletter: Employee Newsletter is used to communicate less important or less urgent messages. It contains the recent activities / programs of the organization, progress about projects, etc. It is published at a certain time intervals, such as weekly, fortnightly or monthly.
• Monthly House Organ: Monthly house organ is published by large organizations. It contains information about various organizational aspects.
• Letter to New Employees: Welcome letters are written to newly appointed employees by the managers that contain congratulatory messages for their joining in the organization. It helps the authority to build a good relationship with the employees.
• Reading Racks: Large organizations arrange reading racks for their employees. Reading racks contain different books, journals, booklets, papers, periodicals, etc. so that employees can read them during the leisure time. It helps the employees t increase their reading habit and to gain knowledge in different areas.
• Employee Bulletin: Bulletins are used for communicating important messages on emergency basis. Supervisors prepare and disseminate employee bulletins and normally these are released within hours.
• Employee Handbook / Booklet: Employee handbook or booklet contains company profile, policies, procedures, plans, rules-regulations, etc. It helps the employees to know about the organization in details.
• Complaint and Suggestion Box: Organizations practicing participative management install complaint and suggestion box at the convenient place. Employees are encouraged to drop their complaints, suggestions, opinions, questions etc. in this box from where management can get valuable information on different matters.
• Memorandum: Memorandum is a widely used technique of internal communication. General information or message is circulated to all of an organization by memorandum. For example, promotion of employees, notice of meeting, increase in salary, gratuity, changes in policy etc. are taken to the notice of the employees by memorandum.
• Notice Board: Notice board is used to communicate day to day or routine information with the employees. Employee work schedule, day’s programs, usual message etc are pasted on the notice board for the attention of the employees.
• Special Report: Special report is used to convey special information to the employees. This type of report takes short form and usually prepared for special purpose or on special occasion.
• Internal Circular: Internal circulars are used to communicate emergency message with the employees. Circulars may be hanged on the notice board or given to the departmental heads for making others informed.
• Annual Report: Annual report is prepared at the end of the financial year and from it employees can get information related to various matters. By reading annual report, employees also can know their strengths and weaknesses and try to improve their performances in different areas.

From the above discussion, we find that there are different methods or tools for communicating with managers and employees in written way. All of these tools act as the evidence for further reference. There are also information about written communication tools for management.

EM: The 7 Ps of Marketing

Once you've developed your marketing strategy, there is a "Seven P Formula" you should use to continually evaluate and reevaluate your business activities. These seven are: product, price, promotion, place, packaging, positioning and people. As products, markets, customers and needs change rapidly, you must continually revisit these seven Ps to make sure you're on track and achieving the maximum results possible for you in today's marketplace.

Product

To begin with, develop the habit of looking at your product as though you were an outside marketing consultant brought in to help your company decide whether or not it's in the right business at this time. Ask critical questions such as, "Is your current product or service, or mix of products and services, appropriate and suitable for the market and the customers of today?"

Whenever you're having difficulty selling as much of your products or services as you'd like, you need to develop the habit of assessing your business honestly and asking, "Are these the right products or services for our customers today?"

Is there any product or service you're offering today that, knowing what you now know, you would not bring out again today? Compared to your competitors, is your product or service superior in some significant way to anything else available? If so, what is it? If not, could you develop an area of superiority? Should you be offering this product or service at all in the current marketplace?

Prices

The second P in the formula is price. Develop the habit of continually examining and reexamining the prices of the products and services you sell to make sure they're still appropriate to the realities of the current market. Sometimes you need to lower your prices. At other times, it may be appropriate to raise your prices. Many companies have found that the profitability of certain products or services doesn't justify the amount of effort and resources that go into producing them. By raising their prices, they may lose a percentage of their customers, but the remaining percentage generates a profit on every sale. Could this be appropriate for you?

Sometimes you need to change your terms and conditions of sale. Sometimes, by spreading your price over a series of months or years, you can sell far more than you are today, and the interest you can charge will more than make up for the delay in cash receipts. Sometimes you can combine products and services together with special offers and special promotions. Sometimes you can include free additional items that cost you very little to produce but make your prices appear far more attractive to your customers.

In business, as in nature, whenever you experience resistance or frustration in any part of your sales or marketing plan, be open to revisiting that area. Be open to the possibility that your current pricing structure is not ideal for the current market. Be open to the need to revise your prices, if necessary, to remain competitive, to survive and thrive in a fast-changing marketplace.

Promotion

The third habit in marketing and sales is to think in terms of promotion all the time. Promotion includes all the ways you tell your customers about your products or services and how you then market and sell to them.

Small changes in the way you promote and sell your products can lead to dramatic changes in your results. Even small changes in your advertising can lead immediately to higher sales. Experienced copywriters can often increase the response rate from advertising by 500 percent by simply changing the headline on an advertisement.

Large and small companies in every industry continually experiment with different ways of advertising, promoting, and selling their products and services. And here is the rule: Whatever method of marketing and sales you're using today will, sooner or later, stop working. Sometimes it will stop working for reasons you know, and sometimes it will be for reasons you don't know. In either case, your methods of marketing and sales will eventually stop working, and you'll have to develop new sales, marketing and advertising approaches, offerings, and strategies.

Place

The fourth P in the marketing mix is the place where your product or service is actually sold. Develop the habit of reviewing and reflecting upon the exact location where the customer meets the salesperson. Sometimes a change in place can lead to a rapid increase in sales.

You can sell your product in many different places. Some companies use direct selling, sending their salespeople out to personally meet and talk with the prospect. Some sell by telemarketing. Some sell through catalogs or mail order. Some sell at trade shows or in retail establishments. Some sell in joint ventures with other similar products or services. Some companies use manufacturers' representatives or distributors. Many companies use a combination of one or more of these methods.

In each case, the entrepreneur must make the right choice about the very best location or place for the customer to receive essential buying information on the product or service needed to make a buying decision. What is yours? In what way should you change it? Where else could you offer your products or services?

Packaging

The fifth element in the marketing mix is the packaging. Develop the habit of standing back and looking at every visual element in the packaging of your product or service through the eyes of a critical prospect. Remember, people form their first impression about you within the first 30 seconds of seeing you or some element of your company. Small improvements in the packaging or external appearance of your product or service can often lead to completely different reactions from your customers.

With regard to the packaging of your company, your product or service, you should think in terms of everything that the customer sees from the first moment of contact with your company all the way through the purchasing process.

Packaging refers to the way your product or service appears from the outside. Packaging also refers to your people and how they dress and groom. It refers to your offices, your waiting rooms, your brochures, your correspondence and every single visual element about your company. Everything counts. Everything helps or hurts. Everything affects your customer's confidence about dealing with you.

When IBM started under the guidance of Thomas J. Watson, Sr., he very early concluded that fully 99 percent of the visual contact a customer would have with his company, at least initially, would be represented by IBM salespeople. Because IBM was selling relatively sophisticated high-tech equipment, Watson knew customers would have to have a high level of confidence in the credibility of the salesperson. He therefore instituted a dress and grooming code that became an inflexible set of rules and regulations within IBM.

As a result, every salesperson was required to look like a professional in every respect. Every element of their clothing-including dark suits, dark ties, white shirts, conservative hairstyles, shined shoes, clean fingernails-and every other feature gave off the message of professionalism and competence. One of the highest compliments a person could receive was, "You look like someone from IBM."

Positioning

The next P is positioning. You should develop the habit of thinking continually about how you are positioned in the hearts and minds of your customers. How do people think and talk about you when you're not present? How do people think and talk about your company? What positioning do you have in your market, in terms of the specific words people use when they describe you and your offerings to others?

In the famous book by Al Reis and Jack Trout, Positioning, the authors point out that how you are seen and thought about by your customers is the critical determinant of your success in a competitive marketplace. Attribution theory says that most customers think of you in terms of a single attribute, either positive or negative. Sometimes it's "service." Sometimes it's "excellence." Sometimes it's "quality engineering," as with Mercedes Benz. Sometimes it's "the ultimate driving machine," as with BMW. In every case, how deeply entrenched that attribute is in the minds of your customers and prospective customers determines how readily they'll buy your product or service and how much they'll pay.

Develop the habit of thinking about how you could improve your positioning. Begin by determining the position you'd like to have. If you could create the ideal impression in the hearts and minds of your customers, what would it be? What would you have to do in every customer interaction to get your customers to think and talk about in that specific way? What changes do you need to make in the way interact with customers today in order to be seen as the very best choice for your customers of tomorrow?

People

The final P of the marketing mix is people. Develop the habit of thinking in terms of the people inside and outside of your business who are responsible for every element of your sales, marketing strategies, and activities.

It's amazing how many entrepreneurs and businesspeople will work extremely hard to think through every element of the marketing strategy and the marketing mix, and then pay little attention to the fact that every single decision and policy has to be carried out by a specific person, in a specific way. Your ability to select, recruit, hire and retain the proper people, with the skills and abilities to do the job you need to have done, is more important than everything else put together.

In his best-selling book, Good to Great, Jim Collins discovered the most important factor applied by the best companies was that they first of all "got the right people on the bus, and the wrong people off the bus." Once these companies had hired the right people, the second step was to "get the right people in the right seats on the bus."

To be successful in business, you must develop the habit of thinking in terms of exactly who is going to carry out each task and responsibility. In many cases, it's not possible to move forward until you can attract and put the right person into the right position. Many of the best business plans ever developed sit on shelves today because the [people who created them] could not find the key people who could execute those plans.

EM: Difference Between HRM and HRD

HRM vs HRD

HRM stands for human resources management, which refers to the art of managing all aspects of the human work force at a company or organization. HRM aims at providing an optimal working environment for employees to fully and freely utilize their skills to their best to achieve the company’s intended output. As human resources management usually applies to big companies and organizations, it has sub categories, among which is HRD, which stands for human resources development. This is a component of HRM that focuses on ‘nurturing’ employee’s skills. Because the process of hiring new employees can be long, expensive and cumbersome, most companies employ the strategy of HRD to promote longevity of employees within the company because through this an employee is likely to progressively scale up the managerial ladder.

Human resources management of a company is often an independent department of its own composed of various sections including recruitment and retention, performance and appraisal management, HRD and compensation sections. But HRD does not only focus on development of skills but also focuses on the personal development of employees. Because peoples’ needs and expectations are ever growing and changing this section of HRM is specifically there to help employees cope with such and prepare them for future uncertainties.

Generally speaking, professionals working within the HRM department must have excellent people skills although this is more so with those particularly working in the HRD section. The HRD section needs to have professionals with impeccable people management skills as they need to be able to realize talent within people from a cross section of backgrounds. The HRD section is concerned with identifying strengths and weaknesses among different employees and devising training means that aim at making those skills complement the other.

HRD aims at developing a superior workforce so that the company and individual employees may achieve their work goals in the customers’ service. It can take on a formal approach as in a classroom or laboratory training in a case where it may apply. It may also take the informal route where an employee receives coaching or simple mentorship from his superior, usually a manager.

Summary:
1. HRD is a sub section of HRM, i.e. HRD is a section with the department of HRM.
2.HRM deals with all aspects of the human resources function while HRD only deals with the development part.
3.HRM is concerned with recruitment, rewards among others while HRD is concerned with employee skills development.
4.HRM functions are mostly formal while HRD functions can be informal like mentorships.

BRANCH ACCOUNTING: STOCK AND DEBTORS SYSTEM

Stock and Debtors System of Accounting for Branch

This method is applicable particularly where there are large numbers of transaction and they are numerous. This method helps the Head Office to make efficient control on branches as there are a few more accounts are to be opened viz:

(a) Branch Stock Account;

(b) Branch Debtors Account;

(c) Branch Stock Adjustment Account;

(d) Goods Sent to Branch Account;

(e) Branch Profit and loss Account.

Sometimes in addition to above, Branch Cash Account, Branch Expenses; Branch Fixed Assets Account etc. may also be opened. It may be recalled that Branch Stock Account, Branch Debtors Account, Branch Cash Account, Branch Expenses Account, Goods Sent to Branch Account have been explained in detail, So, in order to avoid repetition we will only explain here in detail, the most significant and important account under Stock-Debtors System i.e., Branch (Stock) Adjustment Account.

Practically Branch (stock) Adjustment Account deals with the loading on the respective items of goods relating to Branch Stock Account. In short, loading is to be computed on Opening Stock at Branch, Closing Stock at Branch, Goods sent to Branch, Goods Returned by Branch, Shortage of Stock, Surplus of Stock, Lost-in-Transit, Pilferage of Stock, Wastage of Stock, or any Normal and Abnormal Losses.

Branch Stock Adjustment Account is prepared at Invoice Price. The difference between the two sides of this account reveals either gross profits (if credit side to greater than the debit side) or gross loss (if debit side is greater than the credit side).

Entries:

After ascertaining gross profit or gross loss from Branch Stock Adjustment Account, a Branch Profit and Loss Account is to be prepared which will exhibit the net result of the business and the same is transferred to General Profit and Loss Account.

Branch Profit and Loss Account:

Branch Profit and Loss Account exhibits the net result of the operations, i.e., net profit or net loss. This account is credited with the amount of gross profit which is transferred from Branch Adjustment Account, Cost of surplus of stock or any revenue income and this account is debited with all branch expenses, depreciation, cost of abnormal loss of stock, etc. If credit side is greater than the debit side, there will be net profit and vice versa in the opposite case.

Special Note:

It must be remembered that the loss which is related to branch and which is within the jurisdictions and control of branch, the same should be charged against Branch Profit and Loss Account. Otherwise the same should be charged to General Profit and Loss.

Fixed Assets/Liabilities Account:

A separate fixed asset account and liabilities account may be maintained by the Head Office as per usual double entry principle, i.e., in case of fixed asset, with the opening balance of fixed assets, purchase of fixed asset will be added and appear in the debit side and depreciation on fixed asset will appear on the credit side to find out the closing balances of fixed assets.

Treatment of some special Items:

Apparent Profit/Loss:

Sometimes Branch Stock account shows an unusual increase or decrease in the value of stock. This is the result of inaccurate prediction of the possible selling prices of the goods invoiced by Head Office. The goods are invoiced by Head Office after charging a certain expected percentage of profit although the goods are sold, in practice, at either more or less than the expected percentage of profit.

As a result, Branch Stock Account reveals either a ‘surplus’ of stock which is called ‘Apparent Profit’ or a ‘deficit’ of Stock which is called ‘Apparent Loss’ — these are not to be treated as ordinary surplus of shortage of stock.

The entries for this purpose are:

In the case of Apparent Loss, the entries will be reversed.

The students should remember that even after adjusting Normal Loss if their is a surplus in Branch Stock Account, the same should be treated as Apparent Profit and not Surplus of Stock.

Loss-in-transit:

Sometimes a part of the goods may be lost during transit, i.e., before the actual receipt of branch.

The entries for this purpose will be:

Pilferage/Shortage/Wastages of Stock or any Abnormal Loss:

The treatment of these items will be similar to Lost-in-transit stated above.

Surplus of Stock:

Sometimes there may be a surplus of stock, i.e., credit side of Branch Stock Account is higher than the debit side showing a surplus of stock.

The entries are:

Illustration 1:

Red & Co. of Mumbai started a business at Bangalore on 1.4.2006 to which goods were sent at 20% above cost. The branch makes both Cash Sales and Credit Sales. Branch expenses are met from branch cash and balance money returned to H.O. The branch does not maintain double entry books of accounts and necessary accounts relating to branch are maintained by H.O.

Following from the details are given for the year ending 31st March 2007.

Draw up the necessary ledger accounts like Branch Debtors Account, Branch Stock Account, Goods Sent to Branch Account, Branch Cash Account, Branch Expenses Account and Branch Adjustment Account for ascertaining gross profit and Branch Profit and Loss Account for ascertaining branch net profit.

Illustration 2:

Y Ltd. opened a new Branch at Vadodara on 1st Jan. 2009 where goods are sent by H.O. at 25% above cost. All expenses of Branch are met from branch cash and the balance remitted to H.O. Branch sells goods both for cash and credit.

From the following particulars, prepare the necessary accounts in the books of H.O. and ascertain the profit or loss made by Branch for the year ended 31st Dec. 2009 assuming that the branch does not maintain double entry books of accounts:

Illustration 3:

Mithu-Mon Ltd. has two branches, one at Kolkata and the other at Chennai Goods are invoiced to branches at cost plus 50%. Branch remits all cash received to the Head Office and all expenses are met by Head Office.

From the following particulars, prepare the necessary accounts, under the Stock-Debtors System, to show the profit earned at the Branches:

Illustration 4:

A Head Office in Patna has two branches at Kolkata and at Chennai. Goods are consigned to them at loaded figures of 10% and 20% on cost, respectively. During the year, invoices to the Branches are Rs. 44,000 and Rs. 60,000, respectively.

Included in the item Rs. 44,000 are invoiced for goods costing Rs. 12,000 invoiced to Kolkata Branch at Rs. 13,200 which should have been invoiced to Chennai Branch. Sales are all for cash, being Kolkata Branch Rs. 22,000 and Chennai Branch Rs. 50,400. It may be assumed that closing stocks are correct.

Prepare the (i) Branch Stock, (ii) Goods Sent to Branch, and (iii) Branch Adjustment Accounts in the books of Head Office.

Illustration 5:

Sankha Trader Ltd. sends goods to its Gauhati Branch at cost plus 25%. From the following particulars you are required to show the necessary ledger accounts in the Head Office books:

Illustration 6:

Columnar Branch Stock Account (where there are two branches):

Pure Silk Company of Mursidabad has two Branches, one at Kolkata and the other at Delhi. Goods are invoice by the Murshidabad Head Office to its branches at cost plus 50% on Cost Both Cash and Credit Sales are made by the Branches and all cash collected by the Branches is sent to the Head Office and the Branch expenses are met by the Head Office.

The following particulars are supplied by the Branches for the year ended 31st March 2011:

Note:

When Branch Stock Account is prepared under Double Column, there is no necessity of preparing Branch Adjustment Account as Gross Profit can easily be ascertained from Branch Stock Account under Cost Price Column. Students are advised to complete the Invoice Price column at first.

Illustration 7:

Janata Traders, at Salt Lake, has a number of branch shops at different places of Kolkata All accounts are maintained by H.O. Goods are invoiced to branches at cost plus the expected mark up to 33⅓% and the accounting system is designed in such a manner which gives the H.O. as much control as possible over the branch stocks.

At Park Circus Branch at 1st Jan. 2009, goods costing Rs. 4,800 were in stock, apart of those goods costing Rs. 600 had been reduced in selling price to Rs. 675 and the balance of Debtors at the same time was Rs. 2,500.

The following particulars relating to Park Circus Branch at 31st Dec. 2009 were:

Illustration 8:

D Ltd with their Head Office at Delhi, invoiced goods to its Branch at Ghaziabad at 20% less than the list price which is cost plus 100% with instruction that cash sales were to be made at invoice price and credit sales at catalogue price (i.e., list price).

From the following particulars available from the Branch, prepare Branch Stock Account, Branch Adjustment Account, Branch Profit and Loss Account and Branch Debtors Account for the year ending 31st Dec. 2008:

Illustration 9:

Multi-chained Stores Ltd., Delhi, has its branches at Luck-now and Chennai. It charges goods to its Branches at cost plus 25%.

Following information is available of the transactions of the Luck-now Branch for the year ended on 31st March 2012:

Goods worth Rs. 15,000 (included above) sent by Luck-now Branch to Chennai Branch was in- transit on 31.3.2012.

Show the following accounts in the books of Multi-chained Stores Ltd.:

(a) Luck-now Branch Stock Account;

(b) Luck-now Branch Debtors Account;

(c) Luck-now Branch Adjustment Account;

(d) Luck-now Branch Profit and Loss Account and;

(e) Stock Reserve Account;

(f) Stock Lost by Fire Account; and

(g) Petty Cash Account.