This is a CBSE project Shared by Dr Vinod Kumar -- Free of cost -- for accountancy teachers

No commercial use

PROJECT NO. 1
PROJECT STATEMENT
M/s Sunil Computers
Rahul and Manoj are two brothers. Rahul was interested in computers and often found time to
work on computer. Due to his keen interest in computers and its applications made him to take
up computer software subject for his degree course. On the other hand Manoj's core interest
was in sitting at his father's shop nearby at market place selling electrical appliances after
college hours.

Their father Mr. Sunil was happy that Manoj showed interest in his business, but was so
worried about the brothers drifting apart after college due to varied interests. Mr. Sunil decided
that this is the time for him to intervene and make decisions for them. He felt that the interest of
his two sons be put together and they could start a flourishing business of their own – Sunil
Computers

The boom in the Information Technology (IT) Industry made him find ways to satisfy his sons'
dreams.

Finally he decided to start a computer business for both his sons. He asked Manoj, a commerce
graduate to draw up a proposal for the same.

Manoj came out with the following:

The area they lived in and run shop consisted of middle income group families and many of
them did not possess computers at home.
Their shop could be used to provide the following services :
 Computer classes for various age groups.

 Computer using facilities on payment per hourly basis and printing of documents from
computers.
 Internet access facilities at the prevailing market rates by entering into contract with the
Videsh Sanchar Nigam Limited (VSNL).
 Computer game corner for children.

The shop they had in the market place was a single story building. On 1st April, 2014, Rahul and
Manoj borrowed ` 1,75,000/- each from their father and introduced it as their capital in the
firm. They brought in capital as follows : ` 10,000/- each in cash ` 1,65,000/- each by cheque.
They constructed first floor of the building owned by their father spending ` 1,00,000. They put
up their proposal to the bank and managed to get the bank loan of ` 3,00,000.

7
The bank advanced the loan of ` 3,00,000 as per the favourable credit worthiness of their father.

Repayment structure of the loan was as follows :

 End of the 1st year = ` 1,30,000 (` 1,00,000 + ` 30,000 interest)

 End of the 2nd year = ` 1,20,000 (` 1,00,000 + ` 20,000 interest)

 End of the 3rd year = ` 1,10,000 (` 1,00,000 + ` 10,000 interest)

Total amount to be repaid including interest in three annual installments will be ` 3,60,000

They purchased 10 computers amounting to ` 4,00,000. The details of the expenditures to start
their business is as follows :

 For Electricity Connection—Security deposit of ` 1,000

 For Internet Connection—Security deposit of ` 1,00,000

 For printing and distribution of pamphlets in the surrounding colonies for advertisement
purpose amounting to ` 4,500
 Computer Café furnished amounting to ` 45,000.

The students on an average paid a monthly fee of ` 500 for three months computer evening
classes.

There were a number of internet subscribers and receipts on account of internet facility was `
10,000 a month in the first quarters on an average. They also decided to buy and sell computer
stationery like floppy disc, CDs, mouse, keyboard, etc.

At the end of the year, their results showed the following:

 Total Revenue Amount in `

— Fees from Computer Students 2,70,000

— Sale from Computer Stationery 3,10,000

— Income from Internet Subscribers 3,50,000

 Purchases of Computer Stationery 2,55,000

 Internet Expenses 1,70,000

 Electricity Expenses payable 1,24,000

 Telephone Expenses 35,000

 General Expenses 12,000

8
  Business Promotion Expenses 15,000

 Repair & Maintenance Expenses

— Computers 14,000

— Building 8,000

There was a helper at their father's shop, who agreed to clean up the Computer Café and fetch
water to visitors. For this additional service, he was paid a salary of ` 500 per month.

They both withdrew ` 5,000 each from bank every month for their personal expenses. They paid
the bank loan regularly. All the payments were made by cheques.

Father was pleased for this sons efficiency and wanted to expand their business.
Closing stock at the end of the year was valued ` 20,000
Provide depreciation on Building at the rate of 5%, on Computers at the rate 25% and on
furniture at the rate 10%.

You are required to prepare the following:

i) Journalise the above transactions. Post them into ledger accounts and prepare the trial
balance.
ii) Prepare Trading and Profit & Loss account for the year ended 31st March, 2015 and Balance
Sheet as at 31st March, 2015.
They approached the bank for further loan. Compute the ratios that the banker will require
before granting the loan.

Processing the Source Material

Journal entries and ledger accounts will be prepared from the information given in the project
statement. After preparing the Trial Balance, Trading and Profit and Loss Account and Balance
Sheet will be prepared. Lastly necessary ratios will be calculated to take a decision.

9
 Journal Register
1 April, 2014 to 31 March 2015

Date Particulars Folio Debit Credit

(`) (`)

2014 Cash A/c Dr. 20,000

1-April Bank A/c Dr. 3,30,000
To Rahul's Capital A/c 1,75,000
To Manoj's Capital A/c 1,75,000
(Being Capital invested in the business)

1-April Building A/c Dr. 1,00,000

To Bank A/c 1,00,000
(Being Building constructed and capitalized)

1-April Bank A/c Dr. 3,00,000

To Bank Loan A/c 3,00,000
(Being Loan received from bank)

1-April Computers A/c Dr. 4,00,000

To Bank A/c 4,00,000
(Being Computers purchased)

1-April Security Deposit-Electricity Board A/c Dr. 1,000

Security Deposit-VSNL A/c Dr. 1,00,000
To Bank A/c 1,01,000
(Being Security deposits paid with Electricity
Board and VSNL)

1-April Furniture & Fixtures A/c Dr. 45,000

To Bank A/c 45,000
(Being furniture and fixtures purchased)

1-April Advertisement A/c Dr. 4,500

To Bank A/c 4,500
(Being Payment made for Advertisement)

10
2015 Bank A/c Dr. 9,30,000
31-Mar To Sales (Computer Stationery) A/c 3,10,000
To Income (Internet subscribers) A/c 3,50,000
To Fee (Computer Students) A/c 2,70,000
(Being sales proceeds from floppy disks, CDs fee from
computer students and receipts of internet subscribers
received)

31-Mar Computer Stationery A/c Dr. 2,55,000

To Bank A/c 2,55,000
(Being computer stationery purchased)

31-Mar Telephone Expenses A/c Dr. 35,000

General Expenses A/c Dr. 12,000
Business Promotion Expenses A/c Dr. 15,000
Repair & Maintenance-Computer A/c Dr. 14,000
Repair & Maintenance-Building A/c Dr. 8,000
Salary A/c Dr. 6,000
To Bank A/c
(Being expenses paid) 90,000

31-Mar Rahul's Drawings A/c Dr. 60,000

Manoj's Drawings A/c Dr. 60,000
To Bank A/c 1,20,000
(Being amount withdrawn for personal use of ` 5,000
each per month)

31-Mar Interest on Bank Loan A/c Dr. 30,000

To Bank Loan A/c 30,000
(Being Interest on Bank Loan for the year 2014-15
provided)

31-Mar Bank Loan A/c Dr. 1,30,000

To Bank A/c 1,30,000
(Being installment for the 2014-15 paid)

11
31-Mar Depreciation A/c Dr. 1,07,500
To Buildings A/c 5,000
To Computers A/c 1,00,000
To Furniture and Fixtures A/c 2,500
(Being Depreciation on building @ 5%, Computer @
25% and Furniture & Fixture @ 10% provided)

31-Mar Internet Expenses A/c Dr. 1,70,000

To Bank A/c 1,70,000
(Being internet expenses paid to VSNL)

31-Mar Electricity Expenses A/c Dr. 1,24,000

To Electricity Expenses Payable A/c 1,24,000
(Being Electricity expenses payable)

31-Mar Trading A/c Dr. 2,55,000

To Computer Stationery A/c 2,55,000
(Closing entry for computer stationery)

31-Mar Sales (Computer Stationery) A/c Dr. 3,10,000

Closing Stock A/c Dr. 20,000
To Trading A/c 3,30,000
(Closing entry for sales and closing stock)

31-Mar Trading A/c Dr. 75,000

To Profit and Loss A/c 75,000
(Gross Profit for the year)

31-Mar Profit and Loss A/c Dr. 5,26,000

To Advertisement 4,500
To Business Promotion Expenses A/c 15,000
To Depreciation A/c 1,07,500
To Electricity Expenses A/c 1,24,000
To General Expenses A/c 12,000
To Interest on Bank Loan A/c 30,000
To Internet Expenses A/c 1,70,000
To Repairs and Maintenance-Computer A/c 14,000

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 To Repairs and Maintenance - Building A/c 8,000
To Salary A/c 6,000
To Telephone Expenses A/c 35,000
(Closing entry for indirect expenses)

Fees (Computer Students) A/c Dr. 2,70,000

Income (Internet Subscribes) A/c Dr. 3,50,000
To Profit and Loss A/c 6,20,000
(Closing entry for incomes other than Sales)

Profit & Loss A/c Dr. 1,69,000

To Rahul's Capital A/c 84,500
To Manoj's Capital A/c 84,500
(Net profit of the year transferred to the capital m/s of
Rahul & Manoj)

Total 52,32,000 52,32,000

Advertisement A/c

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2014 To Bank A/c 4,500 2015 By Profit & Loss A/c 4,500
April Mar, 31

4,500 4,500

Dr. Bank A/c Cr.

Date Particulars Foli Amount Date Particulars Folio Amount

o

2014 2014
Apr.01 To Rahul's Capital A/c 1,65,000 Apr.01 By Buildings A/c 1,00,000
To Manoj's Capital A/c 1,65,000 By Computers A/c 4,00,000
By Security

2015 3,00,000 Deposit-

To Bank Loan A/c
Electricity Board
Mar,31 To Sales (Computer 3,10,000 1,000
A/c
Stationery) A/c

13
 To Income (Internet 3,50,000 By Security 1,00,000
subscribers) A/c Deposit-VSNL
To Fee (Computer A/c
2,70,000
Students) A/c By Furniture &
45,000
Fixture A/c
By
Advertisement 4,500
A/c
By Computer 2,55,000
Stationery A/c
By Telephone 35,000
Charges A/c
By General 12,000
Expenses A/c
Business
Promotion Exp. 15,000
A/c
By R & M
14,000
Computer A/c
By R & M
Building A/c 8,000
By Salary A/c 6,000

By Rahul's
Drawings A/c 60,000

By Manoj's
Drawings A/c 60,000

By Bank Loan
A/c 1,30,000
By Internet
Expenses A/c 1,70,000

By Balance c/d 1,44,500

15,60,000 15,60,000
2015 1,44,500
To Balance b/d
Apr.01

14
Dr. Building A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`)

2014 2015 By Depreciation A/c 5,000

April 01 To Bank A/c 1,00,000 Mar. 31 By Balance c/d 95,000

2015 1,00,000 1,00,000

April 01 To Balance 95,000
b/d

Dr. Business Promotion Expenses A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

2015 2015

Mar. 31 To Bank A/c 15,000 Mar. 31 By Profit & Loss A/c 15,000

15,000 15,000

Dr. Bank Loan A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2014
Mar.31 To Bank A/c By Bank A/c
1,30,000 Apr. 01 3,00,000

To Balance 2015 By Interest on Bank 30,000

2015
Mar.15 c/d Mar. 31 Loan A/c
2,00,000

3,30,000 3,30,000
2015
Apr. 01 By Balance b/d 2,00,000

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Dr. Cash A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2014
Apr. 01 To Rahul's Capital A/c 10,000
To Manoj's Capital A/c 10,000 2015
Mar. 31 By Balance 20,000
2015 20,000 c/d 20,000
Apr.01 To Balance b/d 20,000 20,000

Dr. Computer A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2014 2015
April 01 To Bank A/c 4,00,000 Mar. 31 By Depreciation
A/c 1,00,000
Mar. 31 By Balance c/d 3,00,000
4,00,000
'

4,00,000
2015 To Balance 3,00,000
April 01 b/d

Dr. Depreciation A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2015
Mar. To Building A/c 5,000 Mar. 31 Profit & Loss 1,07,500
31 To Computers A/c 1,00,000 A/c

To Furniture &
Fixtures A/c 2,500

1,07,500 1,07,500

16
Dr. Electricity Expenses A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 To Electricity 1,24,000 2015 By Profit & 1,24,000

Mar. 31 Payable A/c Mar. 31 Loss A/c

1,24,000 1,24,000

Dr. Electricity Expenses Payable A/c Cr.

Date Particular Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2015 By Electricity

Mar. 31 Mar. 31 Expenses A/c 1,24,000
To Balance
c/d 1,24,000 2015 1,24,000
1,24,000 Apr. 01 By Balance b/d 1,24,000

Dr. Furniture & Fixtures A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2014 2015 By Depreciation

Apr. 01 To Bank A/c 45,000 Mar. 31 A/c 2,500
Mar. 31 By Balance c/d 42,500

2015 45,000 45,000

Apr. 01 To Balance b/d 42,500

Dr. Fee (Computer Students) A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 To Profit & 2,70,000 2015 By Bank A/c 2,70,000

Mar. 31 Loss A/c Mar. 31

2,70,000 2,70,000

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Dr. General Expenses A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 12,000 2015 By Profit & Loss 12,000

Mar. 31 To Bank A/c Mar. 31 A/c

12,000 12,000

Dr. Interest on Bank Loan A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 To Bank Loan 30,000 2015 By Profit & Loss 30,000

Mar. 31 A/c Mar. 31 A/c

30,000 30,000

Dr. Internet Expenses A/c

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 1,70,000 2015 By Profit & Loss 1,70,000

Mar. 31 To Bank A/c Mar. 31 A/c

1,70,000 1,70,000

Dr. Income (Internet Subscribers) A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 To Profit & 3,50,000 2015 3,50,000

Mar. 31 Loss A/c Mar. 31 By Bank A/c

3,50,000 3,50,000

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Dr. Manoj's Capital A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 To Manoj's 2014

Mar. 31 Drawings A/c 60,000 April 01 By Cash A/c 10,000
By Bank A/c 1,65,000
2015 2015
Mar. 31 To Balance c/d 1,99,500 Mar. 31 By P & L A/c 84,500
2,59,500 2,59,500
2015
April 01 By Balance b/d 1,99,500

Dr. Manoj's Drawings A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2015
Mar. 31 To Bank A/c 60,000 Mar. 31 By Manoj's Capital 60,000
A/c

60,000 60,000

Dr. Computer Stationery A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 To Bank 2,55,000 2015 By Profit & Loss 2,55,000

Mar. 31 A/c Mar. 31 A/c

2,55,000 2,55,000

Dr. Repair & Maintenance Computer A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 To Bank 14,000 2015 By Profit & Loss 14,000

Mar. 31 A/c March 31 A/c

14,000 14,000

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Dr. Rahul's Capital A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)
2015 2014 By Cash A/c 10,000
March, 31 To Rahul's Apr. 01 By Bank A/c 1,65,000
Drawings A/c 60,000 2015
March, 31 To Balance c/d 1,99,500 March 31 By P & L A/c 84,500
2,59,500 2,59,500
2015 By Balance 1,99,500
Apr. 01 b/d

Dr. Rahul's Drawings A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2015
March, 31 To Bank A/c 60,000 March, 31 By Rahul's 60,000
Capital A/c

60,000 60,000

Dr. Repair & Maintenance Building A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2015
March, 31 To Bank A/c 8,000 March, 31 By Profit & Loss A/c 8,000

8,000 8,000

Dr. Security Deposit-Electricity Board A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2014 1,000 2015 By Balance c/d 1,000

April 01 To Bank A/c Mar. 31

2015 1,000 1,000

April 01 To Balance b/d 1,000

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Dr. Security Deposit-VSNL A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2014 2015
Apr.01 To Bank A/c 1,00,000 Mar. 31 By Balance 1,00,000
2015 1,00,000 c/d
1,00,000
Apr.01 To Balance b/d 1,00,000

Dr. Sales (Computer Stationery) A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2015
March, 31 To Profit & 3,10,000 March, 31 By Bank 3,10,000
Loss A/c A/c

3,10,000 3,10,000

Dr. Salary A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2015
March, 31 To Bank A/c 6,000 March, 31 By Profit & Loss 6,000
A/c

6,000 6,000

Dr. Telephone Expenses A/c Cr.

Date Particulars Folio Amount Date Particulars Folio Amount

(`) (`)

2015 2015
Mar, 31 To Bank A/c 35,000 March, 31 Profit & Loss 35,000
A/c

35,000 35,000

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 TRIAL BALANCE OF RAHUL AND MANOJ
01 April, 2014 to 31 March, 2015

S. No. Particulars Ledger Debit Credit

Folio (`) (`)
1. Advertisement A/c 4,500 —
2. Bank A/c 1,44,500 —
3. Building 95,000 —
4. Business Promotion Expenses A/c 15,000 —
5. Bank Loan A/c — 2,00,000
6. Cash A/c 20,000 —
7. Computer A/c 3,00,000 —
8. Depreciation A/c 1,07,500 —
9. Electricity Expenses A/c 1,24,000 —
10. Electricity Expenses Payable A/c — 1,24,000
11. Furniture & Fixtures A/c 42,500 —
12. Fees (Computer Students) A/c — 2,70,000
13. General Expenses A/c 12,000 —
14. Interest on Bank Loan A/c 30,000 —
15. Internet Expenses A/c 1,70,000 —
16. Income (Internet Subscribers) A/c — 3,50,000
17. Manoj's Capital A/c — 1,15,000
18. Computer Stationery A/c 2,55,000 —
19. Repair & Maintenance Computer A/c 14,000 —
20. Rahul's Capital A/c — 1,15,000
21. Repair & Maintenance Building A/c 8,000 —
22. Security Deposit-Electricity Board A/c 1,000 —
23. Security Deposit-VSNL A/c 1,00,000 —
24. Sales (Computer Stationery) A/c — 3,10,000
25. Salary A/c 6,000 —
26. Telephone Expenses A/c 35,000 —
Total 14,84,000 14,84,000

Closing Stock of Computer Stationery was ` 20,000

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 TRADING AND PROFIT & LOSS ACCOUNT OF RAHUL AND MANOJ
For the year ended 31 March, 2015

Particulars Amount Particulars Amount

(`) (`)

To Computer Stationery A/c 2,55,000 By Sales (Computer Stationery) A/c 3,10,000

To Gross Profit c/d 75,000 By Closing Stock 20,000

3,30,000 3,30,000

To Advertisement A/c 4,500 By Gross Profit b/d 75,000

To Business Promotion Expenses A/c 15,000 By Fees (Computer Students) A/c 2,70,000
To Depreciation A/c 1,07,500 By Income (Internet Subscribers) A/c 3,50,000
To Electricity Expenses A/c 1,24,000
To General Expenses A/c 12,000
To Interest on Bank Loan A/c 30,000
To Internet Expenses A/c 1,70,000
To Repair & Maintenance 14,000
Computer A/c
To Repair & Maintenance Building 8,000
A/c
To Salary A/c 6,000

To Telephone Expenses A/c 35,000

To Net Profit t/f to Capital A/c

Rahul's Capital A/c 84,500

Manoj's Capital A/c 84,500 1,69,000

6,95,000 6,95,000

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 RAHUL AND MANOJ BALANCE SHEET
as at 31 March, 2015

Liabilities Amount Assets Amount

(`) (`)

CAPITAL ACCOUNT FIXED ASSETS

Rahul's Capital Computers 4,00,000

Capital Introduced 1,75,000 Less : Depreciation 1,00,000 3,00,000

Add : Net Profit 84,500 Building 1,00,000

2,59,500 Less : Depreciation 5,000 95,000

Less : Drawings 60,000 1,99,500 Furniture & Fixtures 45,000

Manoj's Capital Less : Depreciation 2,500 42,500

Capital Introduced 1,75,000 DEPOSITS
Add : Net Profit 84,500 Security Deposit-Electricity Board 1,000
2,59,500 Security Deposit-VSNL 1,00,000

Less : Drawings 60,000 1,99,500 CURRENT ASSETS

LONG TERM LIABILITIES Stock 20,000

Bank Loan 2,00,000 Cash in hand 20,000

CURRENT LIABILITIES Cash at Bank 1,44,500
Electricity Expenses Payable 1,24,000

7,23,000 7,23,000

Bank will analyse the following ratios before granting the loan.

(a) Current Ratios 1.33 : 1

(Current Assets/Current Liabilities)

(b) Quick Ratio 1.17 : 1

(Curent assets-stock/Current Liabilities)

(c) Debt equity Ratio 0.50

(Total debt/owner's fund)

24
Conclusion
1. On the basis of glance at the ratios it can be concluded that the business is a success.

2. The bank should grant loan as the ratios are favourable.

Working Notes (`)

Net Profit 1,69,000

Total Revenue 9,30,000

Fixed Assets 4,37,500

Current Assets 1,64,500

Current Liabilities 1,24,000

Working Capital (CA-CL) 40,500

Stock 20,000

Quick Assets 1,44,500

Total Debt 2,00,000

Owner's Fund 3,99,000

25