PGP - 2021 QUIZ 1 Time: 40 Minutes

Name: ___Pulkit Sethia___________________ Section: ______C___________ Roll No:

_PGPGC202100249________

During the 2020 lockdown, Varun and his four childhood friends (Ishant, Nikhil, Diti, and Yousuf) decided to
start a new online business in sportswear and sports equipment. The venture was named “VINDY” based on
the first letter of the partners’ name. While Varun and Ishant focused on the procurement of goods and
managing the website, Nikhil and Diti looked mainly after the sales and delivery function of the organization.
Yousuf looked after the remaining functions, including finance and reporting. The business was set up as a
platform, and along with their line of private-label collections, they permitted third-party vendors to advertise
their products and trade on their site. Third-party vendors paid an agreed rate of commission to VINDY along
with the delivery charges. The five partners brought in 1,000 each (total 5,000) as capital, and they decided to
share the profits equally among themselves. They took a long-term bank loan of 10,000 from SBI. While the
bank loan was to be repaid after five years, the interest of 10% per annum was to be paid annually starting
from December 31, 2021. The following transactions were made immediately before the commencement of
the business:

1. Purchase of fixed assets along with its estimated life (estimated salvage value was zero for all the assets):
a. Furniture: 2000 (10 years)
b. Computer systems: 1500 (3 years)
c. One Honda City Car: 1000 (5 years)
2. Building: An office space was leased for two years by paying a non-refundable security deposit (NRSD) of
2,000. The monthly rental of 100 was to be paid at the end of each month.
3. An annual Insurance policy for the calendar year 2021 was subscribed by paying a premium of 200.

Assume that all the above transactions took place on January 1, 2021, the same date when the website went
live. The partners were happy with their business growth, and by June, it ranked as one of the top online
sports goods’ platforms in India. The partners estimated the value of goodwill to be around 10,000. On June
30, they wanted to raise funds, and their banker had asked them to submit the Income statement for the six
months ending on June 30 and the Balance sheet as of June 30, 2021. The accountant provided them with the
following information about bank receipts and payments:

Bank Receipts Amount 

Sales of private-label items 40,000
Commission received from third-party vendors 10,000
Advertising income (received from third-party vendors) 2,000
Sale of the Vehicle (June 30) 300
   
Bank Payments  
Suppliers of inventory 20,000
Salary paid (June salary of 1000 not paid) 5,000
Rent paid 600
Drawings by partners (1000 x 5) 5,000
Electricity expenses 1,200
Misc. expenses 4,000
The following additional information was shared by the accountant about outstanding and advances on June
30, 2021:

1. All purchases were on credits. The balance of accounts payable on June 30 was 4,000.
2. Inventory in hand: 5,000
3. Commission receivable: 2,000
4. Advertising received in advance: 400
5. The electricity bill for June has not been received. The management estimated it to be around 300.
Required: Prepare the Income statement of VINDY for the six months ending on June 30 and Balance Sheet as
of June 30, 2021, in the format given below:

Name: ________Pulkit Sethia______________ Section: ___C____________________ Roll No:

___PGPGC202100249______

VINDY

INCOME STATEMENT ____________for a period from Jan 1, 2021 to June 30, 2021_______________

REVENUES Amount (₹)

Private label Sales Revenue 40000
Commission Revenue 12000
Advertising Revenue 1600
Other revenue from sale 300
Total 53900
EXPENSES
Cost of Goods sold 19000
Salary 6000
Rent 600
Electricity 1500
Miscellaneous 4000
Vehicle dep. expenses 100
Annual ins. Policy dep. expenses 100
Furniture dep. expenses 100
Computer system exp 250
Non ref NRSD 2000
Total 33650

Profit (Revenue – Expenses) 20250

 BALANCE SHEET __30 june 2021__________________

LIABILITIES AND OWNERS’ EQUITY Amount (₹) ASSETS Amount (₹)

Long term loan 10000 Cash 24800
Unearned liability adv 400 Commission rec. 2000
Owner equity Furniture 2000
Dep. (-)100
Nett. 1900
V eq 0 Computer system 1500
Dep. (-) 250
Nett 1250
I eq 0 Annual ins policy 100
N eq 0 Inventory 19000
D eq 0 Total 49050
Y eq 0

Retained earnings