Tapaswini Book Store

M/s Tapaswini Book Store was started as a sole proprietorship firm by Suvam in January 1998 to carry on retail business in book market. Mr Suvam succeeded in getting a shop floor of 500 square feet at Sahid Nagar, a premium location at Bhubaneswar, that required Rs 1, 00,000 security deposit with a monthly rent of Rs 6,000. The restructuring also required Rs 50,000 for interior decoration and book shelves. The balance of money he had was deposited into a bank account. To assist him in business Mr Suvam decided to keep Mr Radheshyam after being satisfied with his personal history and felt that an amount of Rs.2500 per month will be the compensation he can afford to pay for the kind of work to be performed by Radheshyam. The business went on well during the first three months. Since there were plethora of technical institutes launched during 1997-1998 and demand for variety of books increased, Suvam wanted to expand his business. On 15th April 1998, he approached Punjab National Bank for a loan of Rs 10, 00,000 with a mortgage on the shop. In granting the mortgage however, the bank official suggested that Suvam should maintain proper accounting records that not only help in future bank dealings but also the records would help in tax returns and management of his business. Soon after launch of the business he felt that though the most important aspect of his business is to develop the customer and supplier relationships, a basic understanding of accounting is of vital importance. Suvam has shown additional interest in understanding the basics of accounting viz. he learnt how to prepare vouchers and then writing out into the day book. He could not understand the other mechanics of accounting like preparation of trial balance, passing the adjustments and preparing the financial statements. Suvam followed certain policies with regard to purchases and sales. No out-of-pocket cash purchase was to be made and distributors are to be paid only by cheque. Credit sales are meant for institutions which are all noted in a diary. All unpaid bills to be paid to creditors were kept in a separate file. Likewise, all bills that are to be collected by the brothers were kept in a separate file. He maintains 25% margin on sales.

Transactions with Bank over the period are given below: 01-01-1998 31.01.1998 28.02.1998 12.03.1998 30.03.1998 Cash Deposit Cash deposit Cash deposit Utkal University Cash deposit 1,80,000 58,800 50,000 1,35,600 60,000 03.01.1998 31.01.1998 05.02.1998 28.02.1998 Padmalaya Agencies Withdrawal Rent Padmalaya Agencies Granthalaya Withdrawal Rent Withdrawal Rent Padmalaya Balance Granthalaya 170000 7500 6000 18000 75000 7500 6000 5000 6000 80000 103400 60000

31.03.1998

03.04.1998

Xavier Institute

50000 05.04.1998

Every month end, Mr. Suvam withdrew Rs.7500 for his family expenses and Radeshyams salary through cheque. Other expenses per month paid in cash were Rs.1500, 1480 and 1260 for three months respectively. Monthly counter sales were deposited in bank after deducting these miscellaneous expenses. Details of Credit Dairy: On 1st January books procured from Padmalaya Agencies Rs 189000. Padmalaya would allow a discount of Rs 1000 if 70% of the payment is made within a week. On 31st January, books supplied to Utkal University Rs 180000 On 12th February books procured from Granthalaya Agencies Rs 135000 On 14th March books procured from Padmalaya Agencies Rs 150000 On 15th March books supplied to Xavier Institute of Management Rs 78200 On 10th April books procured from Granthalaya Rs 25000.

In the market book sellers normally use 10% rate for depreciating their assets. Provide your assistance to Mr Suvam in completing the accounting process and preparing financial statements of Tapaswini book store.