Question

The following trial balance has been extracted from the books of Shafi Traders as on March 31, 2018. Purchases Sales Marketing expenses Administrative expenses Interest expense Building Allowance (provision) for depreciation - Building Machinery Allowance (provision) for depreciation - Machinery Inventory on April 01, 2017 Particulars Trade receivables (accounts receivable) Bank Trade payables (accounts payable) Capital Total Data for adjustment i. ii. pored po customer Debit iii. Prepaid interest amounted to Rs 6,000 at the end of the year. iv. Depreciation is charged as follows: 914,000 90,000 140,000 40,000 850,000 450,000 280,000 106,000 2,870,000 Credit 1,340,000 90,000 130,000 410,000 180,000 720,000 2,870,000 Inventory on March 31, 2018 is valued at Rs 339,000. A customer account was written off at the end of the year. The amount outstanding from him was Rs 4,000. Building is depreciated at 10% under straight line method. Machine is depreciated at 10% under diminishing balance method (reducing balance method). Prepare an income statement in a classified form for Shafi Traders for the year ended March 31, 2018 on page 12.​

Answer 1

An income statement in a classified form for Shafi Traders for the year ended March 31, 2018 is:

• Sales: Rs 90,000
• Cost of goods sold: Rs 1,425,000
• Marketing expenses: Rs 140,000
• Administrative expenses: Rs 40,000
• Interest expenses: Rs 106,000

Step-by-step explanation:

To prepare an income statement for Shafi Traders for the year ended March 31, 2018, we need to categorize the expenses into various accounts.

The income statement will include sales, cost of goods sold, and various expenses such as marketing expenses, administrative expenses, and interest expenses. We will subtract the total expenses from the sales to find the net income.

Using the given trial balance, we can determine the cost of goods sold as follows:

Opening inventory on April 01, 2017: Rs 914,000

Purchases: Rs 850,000

Inventory on March 31, 2018: Rs 339,000

Cost of goods sold = Opening inventory + Purchases - Inventory on March 31, 2018

= Rs 914,000 + Rs 850,000 - Rs 339,000

= Rs 1,425,000

We can now prepare the income statement:

• Sales: Rs 90,000
• Cost of goods sold: Rs 1,425,000
• Marketing expenses: Rs 140,000
• Administrative expenses: Rs 40,000
• Interest expenses: Rs 106,000

To find the net income, we subtract the total expenses from the sales: Rs 90,000 - (Rs 1,425,000 + Rs 140,000 + Rs 40,000 + Rs 106,000) = Rs -1,621,000.

Since the net income is negative, it means Shafi Traders incurred a loss for the year ended March 31, 2018.