Final Accounts for Narmada Co Ltd.

Comprehensive Preparation as per Companies Act 2013

Key Highlights

Accurate Adjustments: Inventory, outstanding rent, depreciation, and doubtful debt provisions are carefully adjusted.
Structured Format: The Profit and Loss Account and Balance Sheet are prepared in full compliance with Companies Act 2013 (Schedule III).
Integrated Financials: All trial balance entries have been appropriately included to ensure a balanced final account presentation.

Overview

The final accounts of Narmada Co Ltd. for the year ended 31st March 2024 are prepared on the basis of the given trial balance. Following the guidelines of the Companies Act 2013, the accounts are divided into the Profit and Loss Account and the Balance Sheet. During the preparation, several adjustments were made, including:

Closing Inventory adjustment.
Provision for doubtful debts adjusted against Trade Receivables.
Adjustment for outstanding rent and recognition of prepaid expenses.
Depreciation on machinery at 10%.

Step-by-Step Final Accounts

A. Preparation of the Profit and Loss Account

1. Determination of Net Sales

From the trial balance, the Sales figure is shown as ₹35,000 (credit side). There are two discount entries – a credit entry of ₹700 and a debit entry of ₹500. The net effect is a credit discount of ₹200. Hence, the net sales are calculated as:

Net Sales = Sales - (Discount (Credit) – Discount (Debit)) = ₹35,000 - ₹200 = ₹34,800

2. Calculation of Cost of Goods Sold (COGS)

The Cost of Goods Sold is computed using the opening and closing inventories along with purchases and wages incurred during the accounting period:

COGS = Opening Inventory + Purchases + Wages - Closing Inventory

= ₹7,500 + ₹24,500 + ₹5,000 - ₹8,200 = ₹28,800

3. Computation of Gross Profit

Gross Profit is the difference between Net Sales and COGS:

Gross Profit = ₹34,800 - ₹28,800 = ₹6,000

4. Listing of Operating Expenses

The following expenses are recorded from the trial balance:

Salaries: ₹750
Rent: ₹495; with an outstanding adjustment of ₹45, bringing Rent to ₹540
General Expenses: ₹1,705
Bad Debts: ₹483
Depreciation on Machinery: 10% of ₹2,900 = ₹290

Total Operating Expenses = 750 + 540 + 1,705 + 483 + 290 = ₹3,768

5. Arriving at Net Profit for the Year

Subtracting the total operating expenses from the gross profit results in:

Net Profit (before appropriation) = Gross Profit - Total Expenses = ₹6,000 - ₹3,768 = ₹2,232

Note: Dividend paid of ₹900 is not treated as an expense but is an appropriation of profit. Therefore, the profit available for retention is adjusted by deducting the dividend when preparing the Balance Sheet.

B. Preparation of the Balance Sheet

The Balance Sheet classifies the items into Assets and Liabilities, maintaining the balance required by the Companies Act 2013.

1. Assets

The Assets are segregated as follows:

Fixed Assets: Machinery is shown at its gross value of ₹2,900, and after accounting for 10% depreciation (₹290), its net value is:
Net Machinery = ₹2,900 - ₹290 = ₹2,610
Current Assets:
- Cash: ₹1,620
- Trade Receivables: ₹3,750. However, an opening provision for doubtful debts of ₹500 is deducted. Hence, Net Trade Receivables = ₹3,750 - ₹500 = ₹3,250
- Inventories (Closing Inventory): ₹8,200
Total Current Assets = 1,620 + 3,250 + 8,200 = ₹13,070

Total Assets = Fixed Assets + Current Assets = ₹2,610 + ₹13,070 = ₹15,680

2. Liabilities and Equity

The Liabilities comprise Equity and Current Liabilities.

Equity:
- Capital: ₹9,500
- Reserves: ₹1,550
- Profit and Loss Account: The trial balance shows a statement balance of ₹1,503 (assumed to be carried forward from the previous year). With the current year’s net profit of ₹2,232, and after deducting the dividend paid of ₹900, the profit available for retention is:
  Retained Profit = Previous P&L Balance + Current Year Profit - Dividend Paid = ₹1,503 + ₹2,232 - ₹900 = ₹2,835
Total Equity = 9,500 + 1,550 + 2,835 = ₹13,885
Current Liabilities:
- Trade Payables: ₹1,750
- Outstanding Rent: ₹45
Total Current Liabilities = 1,750 + 45 = ₹1,795

Total Liabilities = Equity + Current Liabilities = ₹13,885 + ₹1,795 = ₹15,680

Final Accounts Tables

Profit and Loss Account for the Year Ended 31st March 2024

Particulars	Amount (₹)	Particulars	Amount (₹)
Net Sales		34,800
Less: Cost of Goods Sold		28,800
Gross Profit		6,000
Salaries	750	Total Operating Expenses	3,768
Rent (495 + Outstanding 45)	540
General Expenses	1,705
Bad Debts	483
Depreciation on Machinery	290
Net Profit (before appropriation)		2,232
(Dividend Paid ₹900 is appropriated from the profit, not an expense.)

Balance Sheet as on 31st March 2024

Assets		Equity and Liabilities
Non-Current Assets		Shareholders' Funds
Machinery (Gross)	2,900	Capital	9,500
Less: Depreciation	(290)	Reserves	1,550
Net Machinery	2,610	P&L Account	2,835
Total Non-Current Assets		Total Shareholders' Funds
2,610		13,885
Current Assets		Current Liabilities
Cash	1,620	Trade Payables	1,750
Trade Receivables (₹3,750 less Provision ₹500)	3,250	Outstanding Rent	45
Closing Inventory	8,200	Total Current Liabilities: 1,795
Total Current Assets = 1,620 + 3,250 + 8,200 = 13,070		Total Equity & Liabilities = 13,885 + 1,795 = 15,680
Total Assets = 2,610 + 13,070 = 15,680		Total Liabilities = 15,680