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Question No 09 Chapter No 14 - USHA Publication 11 Class

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Question No 09 Chapter No 14

Sinking fund for Repayment of Loan

9. On 1srt April 2015 a company abstained a loan of Rs 60,000 from a finance company, which was repayable after three years. A sinking fund was created for the repayment of the loan and every year the amount provided was invested in an investment earning 5% p.a. Sinking Fund table shows that Re. 0.317200 invested each year at 5% will amount to Re. 1 after three years at compound interest. The investment was sold for Rs 39,000 at the and of third year and loan being repaid.
Given necessary accounts in the books of the company

The solution of Question No 09 Chapter No 14: -

Dat	Particulars	Amount	Date	Particulars	Amount
Dr.	Sinking Fund Account				Cr.
			31/03/15	By Profit/Loss A/c	19,032
31/03/15	By Balance C/d	19,032
		19,032			19,032
			01/04/15	By Balance b/d	19,032
			31/03/16	By Interest A/c (19,032 x 5%)	952
			31/03/16	By Profit/Loss A/c	19,032
31/03/16	By Balance C/d	39,016
		39,016			39,016
31/03/16	To Sinking Fund Investment A/c (Loss on Sale)	16	01/04/16	By Balance b/d	39,016
			31/03/17	By Interest A/c (39,016 x 5%)	1,951
31/03/17	By General Reserve	59,983	31/03/17	By Profit/Loss A/c	19,032
		59,999			59,999

Dat	Particulars	Amount	Date	Particulars	Amount
Dr.	Sinking Fund Investment Account				Cr.
31/03/15	To Bank A/c	19,032
			31/03/16	By Balance c/d	19,032
		19,032			19,032
01/04/16	To Balance b/d	19,032
31/03/17	To Bank A/c	19,032
			31/03/17	By Balance c/d	39,016
		39,016			39,016
31/03/17	To Bad debts A/c	39,016	31/03/18	By Bank A/c	39,000
			31/03/18	By Sinking fund A/c	16
		39,016			39,016