Calim receivable will be shown as asset in balance sheet.

The provision for doubtful debts is identical to the allowance for doubtful accounts. The provision is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. The provision is used under accrual basis accounting, so that an expense is recognized for probable bad debts An increase in provision for bad debts is recorded as follows:
DEBIT the difference (new provision minus old one) to Income Statement
CREDIT provision for bad debts
Here opening Provision for Bad Debts is Rs. 2,500
Closing Provision for Bad Debts = 5% on (trade receivables – bad debts) = 5% on 20,000 = 1,000
Opening provision less bad debts = 2,500 – 1,870 = 630
increase in provision for bad debts = 1,000 – 630 = 370
Provision for bad debts in Profit and Loss A/c will be Rs. 370.

Gross profit is a company’s revenue minus its cost of goods sold. Gross profit is a company’s residual profit after selling a product or service and deducting the cost associated with its production and sale.

Cost of goods sold is the direct costs attributable to the production or purchase of the goods sold by a company. It excludes indirect expenses such as distribution costs and sales force cost. Salaries and wages given here will not be included in cost of goods sold as it is assumed to be an indirect cost.

Cost of goods sold in the above case = opening inventory + purchases during the year + carriage inward – closing inventory = 9,600 + 11,850 + 200 – 3,500 = 18,150
Gross profit = sales – cost of goods sold = 24,900 – 18,150 = Rs. 6,750

Net worth method is also called statement of affairs method or capital comparison method. According to this method profit or loss of the business is determined by making comparison between the capital of two dates of a period. If there are other capital related items such as drawing, additional capital, interest on capital etc. are to be adjusted to ascertain the amount of profit or loss.
These items include:
Drawing: If the drawing is made during the year, it should be added to the amount of closing capital.
Additional capital: If additional capital is introduced in the business during the year, it should be deducted from the amount of closing capital.
Interest on capital: If the interest is provided on capital, it should be deducted from the amount of closing capital.
Closing capital = Profit for the year –income tax + Opening capital + additional capital – drawings + interest on capital – interest on drawings
Profit or loss for the year = 2,770 – 550 + 5,000 – 650 + 500 – 120 = 6,950 (profit)

The inventory adjustments in respect of opening and closing inventory appear in the Cost of Goods Sold
as follows:
Opening Inventory
Add: Purchases
Less: Closing Inventory
Cost of Goods Sold
Note that the cost of goods sold is not simply the cost of purchases during the period. This is the application of the Matching Concept which requires expenses to be recognized against periods from which associated revenue from the expense is expected to be earned. Therefore, as closing inventory is not consumed at any given accounting period end, it must not be part of expense which is why it is deducted from the cost of sale. Similarly, as opening inventory is consumed in the current accounting period, it must therefore be added to the cost of goods sold.
So here purchases = cost of goods sold + closing inventory – opening inventory = 1,58,600 + 25,400 – 44,000 = Rs. 1,40,000

Amount of stationery used for own business will be credited to purchases.

Payment of wages is a transaction.

A commission is a fee that a business pays to a manager in exchange for his or her services in either facilitating or completing a sale. Manager’s commission is calculated in two ways
1. On Profits before charging such commission:
Manager’s commission = Net Profits × (Percentage of commission / 100)
2. On Profits after charging such commission:
Manager’s commission = Net Profits × (Percentage of commission / 100 + % of commission)
3. Or in any other manner agreed through agreement
Here gross profit = Rs. 48,000
Net profit = 48,000 – 6,000 = Rs. 42,000
Managers commission = 42,000 × 5/105 = Rs. 2,000

A commission is a fee that a business pays to a manager in exchange for his or her services in either facilitating or completing a sale. Manager’s commission is calculated in two ways
1. On Profits before charging such commission:
Manager’s commission = Net Profits X (Percentage of commission / 100)
2. On Profits after charching such commission:
Manager’s commission = Net Profits X (Percentage of commission / 100 + % of commission)
3. Or in any other manner agreed through agreement
Here the managers commission is 5% of sales
Sales = cost + 20% on sales
Let the sales = x
So x = 40,000 + 20% of x
Or 0.8x = 40,000
Or x = Rs. 50,000
So the commission = 5% of 50,000 = Rs. 2,500